**Exhibit10(vii)**

 

**AMENDMENTAND RESTATEMENT OF THE**

**JERSEYSHORE STATE BANK**

# **DIRECTORDEFERRED FEE AGREEMENT**

# ** **

THIS AGREEMENTis made this 1st day of October, 2004, by JERSEY SHORE STATE BANK aPennsylvania-chartered commercial bank located in Jersey Shore, Pennsylvania(the “Company”), and Lynn S. Bowes (the “Director”) selected to participate inthis Amendment and Restatement of the Jersey Shore State Bank Director DeferredFee Agreement (the “Agreement”), intending to be legally bound hereby.

 

### **BACKGROUND**

###  

On October 14,1999, the Company and the Director entered into the Jersey Shore State BankDirector Deferred Fee Agreement (the “1999 Agreement”).  The Company and the Director now wish toamend and restate the 1999 Agreement to update the terms and provisionscontained therein.  This new Agreementshall rescind and replace the existing 1999 Agreement.

 

**INTRODUCTION**

 

To encouragethe Director to remain a member of the Company’s Board of Directors (the “Board”),the Company is willing to provide to the Director the opportunity to deferFees.  The Company will pay the benefitsfrom its general assets.

 

**AGREEMENT**

 

The Directorand the Company agree as follows:

 

**Article 1**

**Definitions**

 

*Definitions*. Whenever used in this Agreement, the following words and phrases shallhave the meanings specified:

 

1.1                                 *“Beneficiary”* means each designated person, or the estate ofa deceased Director, entitled to benefits, if any, upon the death of a Directordetermined pursuant to Article 6.

 

1.2                                 *“Beneficiary Designation Form”* means the form establishedfrom time to time by the Plan Administrator that a Director completes, signsand returns to the Plan Administrator to designate one or more beneficiaries.

 

1.3                                 *“Change in Control”*means any of the following:

 

----

 

(A)  any person (as such term is used inSections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended(the “Exchange Act”), other than the Corporation, a subsidiary of theCorporation, an employee benefit plan (or related trust) of the Corporation ora direct or indirect subsidiary of the Corporation, or affiliates of theCorporation (as defined in Rule 12b-2 under the Exchange Act), becomes thebeneficial owner (as determined pursuant to Rule 13d-3 under the Exchange Act),directly or indirectly, of securities of the Corporation representing more than20% of the combined voting power of the Corporation’s then outstandingsecurities or announces a tender offer or exchange offer for securities of theCorporation representing more than 20% of the combined voting power of theCorporation’s then outstanding securities; or

 

(B)  the liquidation or dissolution of theCorporation or the Company or the occurrence of, or execution of an agreementproviding for, a sale of all or substantially all of the assets of the Corporationor the Company to an entity which is not a direct or indirect subsidiary of theCorporation; or

 

(C)  the occurrence of, or execution of anagreement providing for, a reorganization, merger, consolidation or othersimilar transaction or connected series of transactions of the Corporation as aresult of which either (a) the Corporation does not survive or (b) pursuant towhich shares of the Corporation common stock (“Common Stock”) would beconverted into cash, securities or other property, unless, in case of either(a) or (b), the holders of Corporation Common Stock immediately prior to suchtransaction will, following the consummation of the transaction, beneficiallyown, directly or indirectly, more than 50% of the combined voting power of thethen outstanding voting securities entitled to vote generally in the electionof directors of the corporation surviving, continuing or resulting from suchtransaction; or

 

(D)  the occurrence of, or execution of anagreement providing for, a reorganization, merger, consolidation, or similartransaction of the Corporation, or before any connected series of suchtransactions, if, upon consummation of such transaction or transactions, thepersons who are members of the Board of Directors of the Corporation immediatelybefore such transaction or transactions cease or, in the case of the executionof an agreement for such transaction or transactions, it is contemplated insuch agreement that upon consummation such persons would cease, to constitute amajority of the Board of Directors of the Corporation or, in a case where theCorporation does not survive in such transaction, of the corporation surviving,continuing or resulting from such transaction or transactions; or

 

(E)  any otherevent which is at any time designated as a “Change in Control”forpurposes of this Agreement by a resolution adopted by the Board of Directors ofthe Corporation with the affirmative vote of a majority of the non-employeedirectors in office at the time the resolution is adopted; in the event anysuch resolution is adopted, the Change in Control event specified thereby shallbe deemed incorporated herein by reference and thereafter may not be amended,modified or revoked without the written agreement of Director.

 

2

----

 

Notwithstanding anything else to the contrary setforth in this Agreement, if (i) an agreement is executed by the Companyproviding for any of the transactions or events constituting a Change inControl as defined herein, and the agreement subsequently expires or isterminated without the transaction or event being consummated, and (ii)Director’s service did not terminate during the period after the agreement andprior to such expiration or termination, for purposes of this Agreement itshall be as though such agreement was never executed and no Change in Controlevent shall be deemed to have occurred as a result of the execution of suchagreement.

 

1.4                                 *“Code”* means the Internal Revenue Code of 1986, as amended.

 

1.5*                                 “Corporation”*means Penns Woods Bancorp, Inc.

 

1.6                                 *“Disability”* means (a) the Director’s suffering a sickness,accident or injury which has been determined by the carrier of any individualor group disability insurance policy covering the Director, or by the Social SecurityAdministration, to be a disability rendering the Director totally andpermanently disabled.  The Director mustsubmit proof to the Plan Administrator of the carrier’s or Social SecurityAdministration’s determination upon the request of the Plan Administrator; or(b) such definition of Disability promulgated by the Secretary of the Treasurypursuant to legislation affecting non-qualified deferred compensation plans, inwhich case such definition shall supersede any other definition of Disability inthis Agreement and shall control the terms of this Agreement.

 

1.7                                 *“Election Form A”*means the form attached as Exhibit A.

 

1.8                                 *“Election Form B”*means the form attached as Exhibit B.

 

1.9                                 *“Election Form C”* means the form attached as Exhibit C.

 

1.10                           *“Exhibit D”* means the chart attached entitled Planned FeeDeferrals.

 

1.11                           *“Fees”* means the total directors fees payable to theDirector.

 

1.12                           *“Normal Benefit Age”* means the benefit distribution agespecified by the Director in Election Form B.

 

1.13                           *“Plan Administrator”* means the plan administrator describedin Section 10.10.

 

1.14                           *“Plan Year”*means the calendar year.  In the initialyear, it shall mean the period from the date of execution of this Agreementthrough December 31 of the same year.

 

1.15                           *“ROE”*means return on equity, measured by dividingannualized net income

 

3

----

 

of the Corporation by averagetotal equity of the Corporation for the applicable period.

 

1.16                           *“Termination of Service”* means that the Director ceases tobe a member of the Company’s Board for any reason whatsoever other than byreason of a leave of absence which is approved by the Company.  For purposes of this Agreement, if there is adispute over the service status of the Director or the date of the Director’sTermination of Service, the Company shall have the sole and absolute right todecide the dispute.

 

1.17                           *“Unforeseeable Financial Emergency**”* means a severe financial hardship to a Director, resultingfrom a sudden and unexpected illness or accident of the Director, the Director’sspouse, or a dependent (as defined in Section 152(a) of the Code) of theDirector, loss of the Director’s property due to casualty, or other similarextraordinary and unforeseeable circumstances arising as a result of eventsbeyond the control of the Director.

 

**Article 2**

**Deferral Election**

 

2.1*                                 InitialElection*.  The Director shall make aninitial deferral election under this Agreement by filing with the Companysigned Election Forms A, B and C within thirty (30) days after the date of thisAgreement.  The Election Forms shall beeffective to defer only Fees earned after the date the Election Forms arereceived by the Company.

 

2.2                                 *Election Changes*.  TheDirector may modify the amount of Fees to be deferred annually by filing a newElection Form A with the Company.  Themodified deferral shall not be effective until the calendar year following theyear in which the subsequent Election Form A is received by the Company.  Any changes to the form of benefit payment mustbe in accordance with Election Form C. Any changes to the Normal Benefit Age or Timing of Payout must be inaccordance with Election Form B.

 

**Article 3**

**Deferral Account**

 

3.1                                 *Establishing and Crediting*. The Company shall establish a Deferral Account on its books for theDirector, and shall credit to the Deferral Account the following amounts:

 

3.1.1                        *Rollovers*.  The Director’s rollover balance from theJersey Shore State Bank Director Deferred Fee Agreement dated October 14, 1999.

 

3.1.2                        *Deferrals*.The Fees deferred by the Director as of the time the Fees would have otherwisebeen paid to the Director.

 

3.1.3                        *Interest*.  On or around the first business day of eachPlan Year and immediately prior to the payment of any benefits, interest is tobe credited to the Deferral Account. While in the service of the Company, interest shall be credited

 

4

----

 

at an annual rate equal to fifty percent (50%) of the Corporation’sprior year ROE, compounded monthly, on the first business day on or before saidanniversary date. ** **After Termination of Service,interest shall be credited to the Deferral Account at a rate based on the yieldon the 10 Year Treasury Note as specified in the applicable section of Article4 or 5.

 

3.2*                                 Statementof Accounts*.  The Company shallprovide to the Director, within one hundred twenty (120) days after each PlanYear, a statement setting forth the Deferral Account balance.

 

3.3                                 *Accounting Device Only*. The Deferral Account is solely a device for measuring amounts to be paidunder this Agreement.  The DeferralAccount is not a trust fund of any kind. The Director is a general unsecured creditor of the Company for thepayment of benefits.  The benefitsrepresent the mere Company promise to pay such benefits.  The Director’s rights are not subject in anymanner to anticipation, alienation, sale, transfer, assignment, pledge,encumbrance, attachment, or garnishment by the Director’s creditors.

 

**Article 4**

**Benefits During Lifetime**

 

4.1                                 *Normal Benefit Age*.  If the Director terminates service as aDirector on or after Normal Benefit Age, the Company shall pay to the Directorthe benefit described in this Section 4.1 in lieu of any other benefit underthis Agreement.

 

4.1.1                        *Amount ofBenefit*.  The benefit underthis Section 4.1 is the Deferral Account balance at the date specified inElection Form B.

 

4.1.2                        *Payment ofBenefit*.  The Company shallpay the benefit to the Director in the form specified in Election Form C.  If installment payments are elected, the Companyshall continue to credit interest to the Deferral Account at a rate based onthe yield on the 10 Year Treasury Note, compounded monthly, using the averageyield in effect for the month immediately prior to commencement of benefitpayments.

 

4.2                                 *Early Termination Benefit*. If the Director terminates service as a Director before the NormalBenefit Age for reasons other than death, Disability or following a Change inControl,****the Company shall pay to the Directorthe benefit described in this Section 4.2 in lieu of any other benefit underthis Agreement.

 

4.2.1                        *Amount ofBenefit*.  The benefit underthis Section 4.2 is Deferral Account balance at the date specified in ElectionForm B.  If there is a delay of more thanthirty (30) days between the Director’s Termination of Service and the datepayout commences, the Company shall continue to credit interest to the DeferralAccount balance, as specified in Section 4.2.2, based on the yield on the 10Year Treasury Note until payments commence.

 

5

----

 

4.2.2                        *Payment ofBenefit*.  The Company shallpay the benefit to the Director in the form specified in Election Form C.  If the Director terminates service as aDirector and has elected payment to be distributed at Normal Benefit Age, theCompany shall credit interest to the Deferral Account at a rate based on theyield on the 10 Year Treasury Note, compounded monthly.  The initial rate shall be based on theaverage yield in effect for the month immediately prior to Termination ofService.  This rate will reset on January1st of each calendar year based on the average yield in effect forDecember of the prior year.  Ifinstallment payments are elected, the Company shall continue to credit intereston the undistributed account balance during any applicable installment periodat a rate based on the yield on the 10 Year Treasury Note, compounded monthly,using the average yield in effect for the month immediately prior tocommencement of payments.

 

4.3                                 *Disability Benefit*. Upon Termination of Service for Disability prior to the Normal BenefitAge, the Company shall pay to the Director the benefit described in thisSection 4.3 in lieu of any other benefit under this Agreement.

 

4.3.1                        *Amount ofBenefit*.  The benefit underthis Section 4.3 is the Deferral Account balance at the date specified inElection Form B.  If there is a delay ofmore than thirty (30) days between the Director’s Termination of Service andthe date payout commences, the Company shall continue to credit interest to theDeferral Account balance, as specified in Section 4.3.2, based on the yield onthe 10 Year Treasury Note until payments commence.

 

4.3.2                        *Payment ofBenefit*.  The Company shallpay the benefit to the Director in the form specified in Election Form C.  If the Director has elected payment to bedistributed at Normal Benefit Age, the Company shall credit interest to theDeferral Account at a rate based on the yield on the 10 Year Treasury Note,compounded monthly.  The initial rateshall be based on the average yield in effect for the month immediately priorto Termination of Service.  This ratewill reset on January 1st of each calendar year based on the averageyield in effect for December of the prior year. If installment payments are elected, the Company shall continue tocredit interest on the undistributed account balance during any applicableinstallment period at a rate based on the yield on the 10 Year Treasury Note,compounded monthly, using the average yield in effect for the month immediatelyprior to commencement of payments.

 

4.4                                 *Change in Control Benefit*. If the Director is in the active service of the Company when the changeoccurs, the Company shall pay to the Director the benefit described in thisSection 4.4 in lieu of any other benefit under this Agreement.

 

4.4.1                        *Amount ofBenefit*.  The benefit underthis Section 4.4 is Deferral Account balance at the date specified in ElectionForm B.  If there is a delay of more thanthirty (30) days between the Director’s Termination of Service and the

 

6

----

 

date payout commences, the Company shall continue to credit interest tothe Deferral Account balance, as specified in Section 4.4.2, based on the yieldon the 10 Year Treasury Note until payments commence.

 

4.4.2                        *Payment ofBenefit*.  The Company shallpay the benefit to the Director in the form specified in Election Form C.  If the Director has elected payment to bedistributed at Normal Benefit Age, the Company shall credit interest to theDeferral Account at a rate based on the yield on the 10 Year Treasury Note,compounded monthly.  The initial rateshall be based on the average yield in effect for the month immediately priorto Termination of Service.  This ratewill reset on January 1st of each calendar year based on the averageyield in effect for December of the prior year. If installment payments are elected, the Company shall continue tocredit interest on the undistributed account balance during any applicableinstallment period at a rate based on the yield on the 10 Year Treasury Note,compounded monthly, using the average yield in effect for the month immediatelyprior to commencement of payments.

 

4.5                                 *Hardship Distribution*.  If the Director experiences an UnforeseeableEmergency, the Director may petition the Board to suspend Deferrals required tobe made by such Director, to the extent deemed necessary by the Board tosatisfy the Unforeseeable Emergency.  Ifsuspension of Deferrals is not sufficient to satisfy the Director’sUnforeseeable Emergency, or if

 

(i)                                     Reimbursement or compensation by insurance orotherwise; or

(ii)                                  Liquidation of Director’s assets (to theextent the liquidation would not itself cause severe financial hardship)

 

cannot satisfy the Director’s UnforeseeableEmergency, then the Director may further petition the Board to receive apartial or full payout from the Agreement. The Director shall only receive a payout from the Agreement to theextent such payout is deemed necessary by the Board to satisfy the Director’sUnforeseeable Emergency, plus an amount necessary to pay taxes reasonablyanticipated as a result of the distribution, up to a maximum of theDirector’s Deferral Account balance, calculated as of the close of business onor around the date on which the amount becomes payable, as determined by theBoard in its sole discretion.

 

**Article 5**

**Death Benefits**

 

5.1                                 *Death While in Service, but Prior to Commencement of Benefit Payments.*  If the Director dies while in service, butprior to commencement of benefit payments, the Company shall pay to theDirector’s beneficiary the benefit described in this Section 5.1 in lieu of anyother benefit under this Agreement.

 

5.1.1                        *Amount ofBenefit*.  The benefit amountunder Section 5.1 is the

 

7

----

 

greater of: (a) the Deferral Account balance or (b) One Hundred NineThousand Two Hundred Ninety Dollars ($109,290) multiplied by the ratiorepresenting the actual cumulative Fees deferred at the date of death as apercentage of the planned cumulative Fee deferrals at the inception of thisAgreement as detailed in Exhibit D, provided such ratio shall not exceed onehundred percent (100%).  In calculatingthis ratio, the amount shall be interpolated to the nearest month as of thedate of death.

 

5.1.2                        *Payment ofBenefit*.  The Company shallpay the benefit to the beneficiary in the form specified in Election Form C,with payment made or commencing within 90 days following the receipt ofDirector’s death certificate.  Ifinstallment payments are elected, the Company shall continue to credit intereston the undistributed account balance during any applicable installment periodat a rate based on the yield on the 10 Year Treasury Note, compounded monthly,using the average yield in effect for the month immediately prior tocommencement of payments.

 

5.2                                 *Death During Benefit Period*. If the Director dies after benefit payments have commenced under thisAgreement but before receiving all such payments, the Company shall pay theremaining benefits to the Director’s beneficiary at the same time and in thesame amounts they would have been paid to the Director had the Directorsurvived.

 

5.3                                 *Death After Termination of Service But Before BenefitPayments**Commence*. If the Director is entitled to benefit payments under this Agreement,but dies prior to the commencement of said benefit payments, the Company shallpay to the Beneficiary the Deferral Account balance as elected by the Directoron Election Form C within ninety (90) days following receipt of the Director’sdeath certificate.

 

**Article 6**

**Beneficiaries**

 

6.1                                 *Beneficiary*.  EachDirector shall have the right, at any time, to designate a Beneficiary(ies) toreceive any benefits payable under the Agreement to a beneficiary upon thedeath of a Director.  The Beneficiarydesignated under this Agreement may be the same as or different from theBeneficiary designation under any other plan of the Company in which theDirector participates.

 

6.2                                 *Beneficiary Designation; Change*.  A Director shall designate a Beneficiary bycompleting and signing the Beneficiary Designation Form, and delivering it tothe Plan Administrator or its designated agent. The Director’s beneficiary designation shall be deemed automaticallyrevoked if the beneficiary predeceases the Director or if the Director names aspouse as beneficiary and the marriage is subsequently dissolved.  A Director shall have the right to change aBeneficiary by completing, signing and otherwise complying with the terms ofthe Beneficiary Designation Form and the Plan Administrator’s rules andprocedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new BeneficiaryDesignation Form, all

 

8

----

 

Beneficiary designations previously filed shall be cancelled.  The Plan Administrator shall be entitled torely on the last Beneficiary Designation Form filed by the Director andaccepted by the Plan Administrator prior to the Director’s death.

 

6.3                                 *Acknowledgment*.  Nodesignation or change in designation of a Beneficiary shall be effective untilreceived, accepted and acknowledged in writing by the Plan Administrator or itsdesignated agent.

 

6.4                                 *No Beneficiary Designation*. If the Director dies without a valid beneficiary designation, or if all designatedBeneficiaries predecease the Director, then the Director’s spouse shall be thedesignated Beneficiary.  If the Directorhas no surviving spouse, the benefits shall be made to the personalrepresentative of the Director’s estate.

 

6.5                                 *Facility of Payment*.  If the Plan Administrator determines in itsdiscretion that a benefit is to be paid to a minor, to a person declaredincompetent, or to a person incapable of handling the disposition of thatperson’s property, the Plan Administrator may direct payment of such benefit tothe guardian, legal representative or person having the care or custody of suchminor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority orguardianship as it may deem appropriate prior to distribution of thebenefit.  Any payment of a benefit shallbe a payment for the account of the Director and the Beneficiary, as the casemay be, and shall be a complete discharge of any liability under the Agreementfor such payment amount.

 

**Article 7**

**General Limitations**

 

7.1                                 *Termination for Cause*. The Director will forfeit the interest credited since the date ofexecution of this agreement if the Director’s service is terminated forcause.  For purposes of this Section 7.1,“for cause” shall mean:

 

(i)                       Anymaterial breach of this Agreement by the Director; or

 

(ii)                    The Director’sconviction of a crime, either federal or state, evidencing moral turpitude ordishonesty; or

 

(iii)                 The Director’sfraud, dishonesty, gross neglect of duties or gross misfeasance.

 

7.2                                 *Removal. *Notwithstandingany provision of this Agreement to the contrary, the interest credited to thedeferred amounts since the date of execution of this Agreement shall beforfeited if the Director is subject to a final removal or prohibition orderissued by an appropriate federal banking agency pursuant to Section 8(e) of theFederal Deposit Insurance Act (“FDIA”).

 

7.3                                 *Competition after Termination of Employment*.  The Director shall forfeit his right to theinterest credited to the deferred amounts since the date of execution of this

 

9

----

 

Agreement if the Director,without the prior written consent of the Company, violates the followingdescribed restrictive covenants.

 

7.4                                 *Non-compete Provision*. The Director shall forfeit any undistributed interest credited to thedeferred amounts since the date of execution of this Agreement under thisAgreement if during the term of this Agreement, and before all benefits havebeen paid, the Director, directly or indirectly, either as an individual or asa proprietor, stockholder, partner, officer, director, employee, agent,consultant or independent contractor of any individual, partnership,corporation or other entity (excluding an ownership interest of three percent(3%) or less in the stock of a publicly-traded company):

 

(i)                                     becomesemployed by, participates in, or becomes connected in any manner with theownership, management, operation or control of any bank, savings and loan orother similar financial institution if the Director’s responsibilities willinclude providing banking or other financial services within the fifty (50)miles of any office maintained by the Company as of the date of the terminationof the Director’s service;

 

(ii)                                  participatesin any way in hiring or otherwise engaging, or assisting any other person orentity in hiring or otherwise engaging, on a temporary, part-time or permanentbasis, any individual who was employed by the Company as of the date oftermination of the Director’s service;

 

(iii)                               assists,advises, or serves in any capacity, representative or otherwise, any thirdparty in any action against the Company ortransaction involving the Company;

 

(iv)                              sells,offers to sell, provides banking or other financial services, assists any otherperson in selling or providing banking or other financial services, or solicitsor otherwise competes for, either directly or indirectly, any orders, contract,or accounts for services of a kind or nature like or substantially similar tothe financial services performed or financial products sold by the Company (thepreceding hereinafter referred to as “Services”), to or from any person orentity from whom the Director or the Company, to the knowledge of the Directorprovided banking or other financial services, sold, offered to sell orsolicited orders, contracts or accounts for Services during the three (3) yearperiod immediately prior to the termination of the Director’s service;

 

(v)                                 divulges,discloses, or communicates to others in any manner whatsoever, any confidentialinformation of the Company, to the knowledge of the Director, including, butnot limited to, the names and addresses of customers or prospective customers,of the 

 

10

----

 

Company, as they may have existed fromtime to time, of work performed or services rendered for any customer, anymethod and/or procedures relating to projects or other work developed for theCompany, earnings or other information concerning the Company. The restrictionscontained in this subparagraph (v) apply to all information regarding theCompany, regardless of the source who provided or compiled suchinformation.  Notwithstanding anything tothe contrary, all information referred to herein shall not be disclosed unlessand until it becomes known to the general public from sources other than theDirector.

 

7.5                                 *Judicial Remedies*.  Inthe event of a breach or threatened breach by the Director of any provision ofthese restrictions, the Director recognizes the substantial and immediate harmthat a breach or threatened breach will impose upon the Company or any of itssubsidiaries or Affiliates, and further recognizes that in such event monetarydamages may be inadequate to fully protect the Company or any of itssubsidiaries or Affiliates. Accordingly, in the event of a breach or threatenedbreach of the provisions of this Agreement, the Director consents to theCompany’s or any of its subsidiaries’ entitlement to such exparte,preliminary, interlocutory, temporary or permanent injunctive, or any otherequitable relief, protecting and fully enforcing the Company’ or any of itssubsidiaries’ rights hereunder and preventing the Director from furtherbreaching any of his obligations set forth herein.  The Director expressly waives anyrequirement, based on any statute, rule of procedure, or other source, that theCompany or any of its subsidiaries or Affiliates post a bond as a condition ofobtaining any of the above-described remedies. Nothing herein shall be construed as prohibiting the Company or any ofits subsidiaries or Affiliates from pursuing any other remedies available tothe Company or any of its subsidiaries or Affiliates at law or in equity forsuch breach or threatened breach, including the recovery of damages from theDirector.  The Director expresslyacknowledges and agrees that: (i) the restrictions set forth in Section 7.4 arereasonable, in terms of scope, duration, geographic area, and otherwise, (ii)the protections afforded the Company or any of its subsidiaries or Affiliatesin Section 7.4 are necessary to protect its legitimate business interest, (iii)the restrictions set forth in Section 7.4 will not be materially adverse to theDirector’s service with the Company, and (iv) his agreement to observe suchrestrictions forms a material part of the consideration for this Agreement.

 

7.6                                 *Overbreadth of Restrictive Covenant.*  It is the intention of the parties that ifany restrictive covenant in this Agreement is determined by a court ofcompetent jurisdiction to be overly broad, then the court should enforce suchrestrictive covenant to the maximum extent permitted under the law as to area,breadth and duration.

 

7.7                                 *Change in Control*.  The non-compete provision detailed in Section7.4 shall not apply if there is a Change in Control.

 

7.8                                 *Suicide or Misstatement*.  The Director shall forfeit all interestcredited since the date of execution of this Agreement if the Director commitssuicide within two years

 

11

----

 

after the date of thisAgreement, or if the insurance company denies coverage for (i) materialmisstatements of fact made by the Director on any application for lifeinsurance purchased by the Company, or (ii) any other reason.  The Company shall have no liability to theDirector for any denial of coverage by the insurance company.

 

**Article 8**

**Claims and Review Procedures**

 

8.1                                 *Claims Procedure*.  ADirector or Beneficiary (“claimant”) who has not received benefits under theAgreement that he or she believes should be paid shall make a claim for suchbenefits as follows:

 

8.1.1                        *Initiation –Written Claim*.  The claimantinitiates a claim by submitting to the Plan Administrator a written claim forthe benefits.

 

8.1.2                        *Timing ofPlan Administrator Response.*  The Plan Administrator shall respond to suchclaimant within 90 days after receiving the claim.  If the Plan Administrator determines thatspecial circumstances require additional time for processing the claim, thePlan Administrator can extend the response period by an additional 90 days bynotifying the claimant in writing, prior to the end of the initial 90-dayperiod, that an additional period is required. The notice of extension must set forth the special circumstances and thedate by which the Plan Administrator expects to render its decision.

 

8.1.3                        *Notice ofDecision*.  If the PlanAdministrator denies part or all of the claim, the Plan Administrator shallnotify the claimant in writing of such denial. The Plan Administrator shall write the notification in a mannercalculated to be understood by the claimant. The notification shall set forth:

 

(a)          Thespecific reasons for the denial;

(b)         Areference to the specific provisions of the Agreement on which the denial isbased;

(c)          A description of any additional informationor material necessary for the claimant to perfect the claim and an explanationof why it is needed, and

(d)         Anexplanation of the Agreement’s review procedures and the time limits applicableto such procedures.

 

8.2                                 *Review Procedure*.  Ifthe Plan Administrator denies part or all of the claim, the claimant shall havethe opportunity for a full and fair review by the Plan Administrator of thedenial, as follows:

 

8.2.1                        *Initiation –Written Request*.  To initiatethe review, the claimant, within 60 days after receiving the Plan Administrator’snotice of denial, must file with the Plan Administrator a written request forreview.

 

12

----

 

8.2.2                        *AdditionalSubmissions – Information Access*. The claimant shall then have the opportunity to submit written comments,documents, records and other information relating to the claim.  The Plan Administrator shall also provide theclaimant, upon request and free of charge, reasonable access to, and copies of,all documents, records and other information relevant to the claimant’s claimfor benefits.

 

8.2.3                        *Considerationson Review*.  In considering thereview, the Plan Administrator shall take into account all materials andinformation the claimant submits relating to the claim, without regard towhether such information was submitted or considered in the initial benefitdetermination.

 

8.2.4                        *Timing ofPlan Administrator Response*. The Plan Administrator shall respond in writing to such claimant within60 days after receiving the request for review. If the Plan Administrator determines that special circumstances requireadditional time for processing the claim, the Plan Administrator can extend theresponse period by an additional 60 days by notifying the claimant in writing,prior to the end of the initial 60-day period, that an additional period isrequired.  The notice of extension mustset forth the special circumstances and the date by which the Plan Administratorexpects to render its decision.

 

8.2.5                        *Notice ofDecision*.  The PlanAdministrator shall notify the claimant in writing of its decision onreview.  The Plan Administrator shallwrite the notification in a manner calculated to be understood by theclaimant.  The notification shall set forth:

 

(a)          The specific reasons for the denial;

(b)         A reference to the specific provisions of theAgreement on which the denial is based, and

(c)          A statement that the claimant is entitled toreceive, upon request and free of charge, reasonable access to, and copies of,all documents, records and other information relevant to the claimant’s claimfor benefits.

 

**Article 9**

**Amendments and Termination**

 

No provisions of thisAgreement may be modified, waived or discharged unless such waiver,modification or discharge is agreed to in writing signed by the Director andsuch officer or officers as may be specifically designated by the Board to signon their behalf.  Provided, however, inresponse to legislative or regulatory changes affecting nonqualified deferredcompensation plans that would otherwise cause the Director to be deemed inconstructive receipt of benefits under this Agreement, the Company can amendthis Agreement for the sole purpose of complying with such legislative orregulatory changes.

 

13

----

 

**Article 10**

**Miscellaneous**

 

10.1                           *Binding Effect*.  ThisAgreement shall bind the Director and the Company, and their beneficiaries,survivors, executors, successors, administrators and transferees.

 

10.2                           *No Guarantee of Service*. This Agreement is not a service policy or contract.  It does not give the Director the right toremain as a member of the Company’s Board, nor does it interfere with theCompany’s right to terminate the Director’s service.  It also does not require the Director toremain in service nor interfere with the Director’s right to terminate serviceat any time.

 

10.3                           *Non-Transferability*. Benefits under this Agreement cannot besold, transferred, assigned, pledged, attached or encumbered in any manner.

 

10.4                           *Tax Withholding*.  TheCompany shall withhold any taxes that are required to be withheld from thebenefits provided under this Agreement.

 

10.5                           *Applicable Law*.  TheAgreement and all rights hereunder shall be governed by the laws of theCommonwealth of Pennsylvania, except to the extent preempted by the laws of theUnited States of America.

 

10.6                           *Unfunded Arrangement*. The Director and beneficiary are general unsecured creditors of theCompany for the payment of benefits under this Agreement.  The benefits represent the mere promise bythe Company to pay such benefits.  Therights to benefits are not subject in any manner to anticipation, alienation,sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment bycreditors.  Any insurance on the Director’slife is a general asset of the Company to which the Director and beneficiaryhave no preferred or secured claim.

 

10.7                           *Entire Agreement. *ThisAgreement constitutes the entire agreement between the Company and the Directoras to the subject matter hereof.  Norights are granted to the Director by virtue of this Agreement other than thosespecifically set forth herein.

 

10.8                           *Reorganization.*  The Company shall not merge or consolidateinto or with another company, or reorganize, or sell substantially all of itsassets to another company, firm or person unless such succeeding or continuingcompany, firm or person agrees to assume and discharge the obligations of theCompany under this Agreement.  Upon theoccurrence of such event, the term “Company” as used in this Agreement shall bedeemed to refer to the successor or survivor company.

 

10.9                           *Administration. *TheCompany shall have powers which are necessary to administer this Agreement,including but not limited to:

 

10.9.1                  Interpreting the provisions of theAgreement;

 

10.9.2                  Establishing and revising the methodof accounting for the

 

14

----

 

Agreement;

 

10.9.3                  Maintaining a record of benefitpayments; and

 

10.9.4                  Establishing rules and prescribing anyforms necessary or desirable to administer the Agreement.

 

10.10                     *Named Fiduciary and Plan Administrator.*  The Company shall be the named fiduciary andPlan Administrator under this Agreement. The named fiduciary may delegate to others certain aspects of themanagement and operation responsibilities of the Agreement including theservice of advisors and the delegation of ministerial duties to qualifiedindividuals.

 

INWITNESS WHEREOF, the Director and a duly authorized officer of the Company havesigned this Agreement as of the date indicated above.

 
| **DIRECTOR:**     | ** ** | **COMPANY:**                                                |
|-------------------|------------|-------------------------------------------------------------|
| ** **        | ** ** | **JERSEY SHORE STATE BANK**                                 |
| ** **        | ** ** | ** **                                                  |
| /s/ Lynn S. Bowes |       |                                                        | By | /s/ Ronald A. Walko |   |
| LYNN S. BOWES     |       |                                                        |
|              |       | Title**  **President  and Chief Executive Officer |
|                   |            |                                                             |  |  |  |

 

By execution hereof, PennsWoods Bancorp, Inc. consents to and agrees to be bound by the terms andcondition of this Agreement.

 
| **ATTEST:**            | ** ** | **CORPORATION:**                                           |
|------------------------|------------|------------------------------------------------------------|
| ** **             | ** ** | **PENNS WOODS BANCORP, INC.**                              |
|                   |       |                                                       |
| /s/ Hubert A. Valencik |       |                                                       | By | /s/ Ronald A. Walko |   |
|                   |       |                                                       |   |   |   |
| ** **             | ** ** | **Title**  President and Chief Executive Officer |

 

15

----

** **

**EXHIBIT A**

 

### **JERSEY SHORE STATE BANK**

**DIRECTOR DEFERRED FEE AGREEMENT**

 

**Election Form A**

 

**Deferral Election:**

I elect to defer 80% of my annual CashAllowance (or $                     per year.)

 

I understand that I may change the deferralamount provided I make an election in writing prior to the calendar year forwhich the change will become effective.

 

 
| Signature | /s/ Lynn S. Bowes |   |
|-----------|-------------------|--------|

 

Date  October 1, 2004

 

Accepted by the Company this 1st day of October 2004.

 

 

JERSEY SHORE STATE BANK

 
| By | /s/  Ronald A. Walko |   |
|----|---------------------------|--------|

 

Title  President and ChiefExecutive Officer

 

16

----

 

**EXHIBIT B**

 

### **JERSEY SHORE STATE BANK**

**DIRECTOR DEFERRED FEE AGREEMENT**

 

**Election Form B**

 

**Normal Benefit Age:****                **I elect aNormal Benefit Age of 70.

 

**Timing of Payout:**

 

**If I terminate service before Normal Benefit Age for reasons other thanDeath, Disability or following a Change in Control, I elect to have my benefitsdistributed commencing within 30 days of (Initial One):**

 

o                                    Normal Benefit Age

 

ý                                    Terminationof Service

 

**If I terminate service before Normal Benefit Age due to Disability, Ielect to have my benefits distributed commencing within 30 days of (InitialOne):**

 

o                                    NormalBenefit Age

 

ý                                    Terminationof Service

 

**If a Change in Control occurs, while I am in active service, but priorto Normal Benefit Age, I elect to have my benefits distributed commencingwithin 30 days of (Initial One):**

 

o                                    NormalBenefit Age

 

ý                                    Terminationof Service

 

o                                    thedate the Change in Control occurs

 
| Signature | /s/ Lynn S. Bowes |   |
|-----------|-------------------|--------|

 

Date  October 1, 2004

 

 

Accepted by the Company this 1st day of October 2004.

 

JERSEY SHORE STATE BANK
| By | /s/  Ronald A. Walko |   |
|----|---------------------------|--------|

 

Title  President and ChiefExecutive Officer

 

----

 

**EXHIBIT C**

 

### **JERSEY SHORE STATE BANK**

**DIRECTOR DEFERRED FEE AGREEMENT**

 

**Election Form C**

 

**Form of Payment:**

 

I elect to have mybenefits paid in the following form (initial (a), (b), (c) or (d) for eachcategory):

 
| **Section Reference** | ** ** | **Triggering  Event** | ** ** | **Lump  Sum**    | ** ** | **Annuitized  Over  24 Months** | ** ** | **Annuitized  Over  60 months** | ** ** | **Annuitized  Over  120 months** |
|-----------------------|------------|-----------------------|------------|------------------|------------|---------------------------------|------------|---------------------------------|------------|----------------------------------|
| 4.1.2                 |       | Normal Benefit Age    |       | (a)  o |       | (b)  o                |       | (c)  ý           |       | (d)  o                 |
| 4.2.2                 |       | Early Termination     |       | (a)  o |       | (b)  o                |       | (c)  ý           |       | (d)  o                 |
| 4.3.2                 |       | Disability            |       | (a)  o |       | (b)  o                |       | (c)  ý           |       | (d)  o                 |
| 4.4.2                 |       | Change in Control     |       | (a)  o |       | (b)  o                |       | (c)  ý           |       | (d)  o                 |
| 5.1.2                 |       | Death                 |       | (a)  o |       | (b)  o                |       | (c)  ý           |       | (d)  o                 |

 

 
| Signature | /s/ Lynn S. Bowes |   |
|-----------|-------------------|--------|

 

Date  October 1, 2004

 

 

Accepted by the Company this 1st day of October 2004.

 

JERSEY SHORE STATE BANK

 
| By | /s/  Ronald A. Walko |   |
|----|---------------------------|--------|

 

Title  President and Chief ExecutiveOfficer

 

----

 

**EXHIBIT D**

 

### **JERSEY SHORE STATE BANK**

**DIRECTOR DEFERRED FEE AGREEMENT**

 

**Planned Fees Deferrals**

** **

| **Plan Year** | ** ** | **Planned Annual  Deferrals** | ** ** | **Planned Cumulative  Deferrals** | ** ** |
|---------------|------------|-------------------------------|------------|-----------------------------------|------------|
| 1             |       | 3,120                         |       | 3,120                             |       |
| 2             |       | 12,854                        |       | 15,974                            |       |
| 3             |       | 13,240                        |       | 29,214                            |       |
| 4             |       | 13,637                        |       | 42,851                            |       |
| 5             |       | 3,512                         |       | 46,363                            |       |

 

----