**Exhibit10(viii)**

 

**AMENDMENT AND RESTATEMENT OF THEJERSEY SHORE STATE BANKDIRECTOR DEFERRED FEE AGREEMENT**

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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 Michael J. Casale (the “Director”) selected to participatein this Amendment and Restatement of the Jersey Shore State Bank DirectorDeferred Fee 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 1Definitions**

 

*Definitions*.  Whenever used in this Agreement, thefollowing words and phrases shall have 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:

 

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(A)  any person (as such term isused in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, asamended (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 ordissolution of the Corporation or the Company or the occurrence of, orexecution of an agreement providing for, a sale of all or substantially all ofthe assets of the Corporation or the Company to an entity which is not a director indirect subsidiary of the Corporation; or

 

(C)  the occurrence of, orexecution of an agreement providing for, a reorganization, merger,consolidation or other similar transaction or connected series of transactionsof the Corporation as a result of which either (a) the Corporation does notsurvive or (b) pursuant to which shares of the Corporation common stock (“CommonStock”) would be converted into cash, securities or other property, unless, incase of either (a) or (b), the holders of Corporation Common Stock immediatelyprior to such transaction will, following the consummation of the transaction,beneficially own, directly or indirectly, more than 50% of the combined votingpower of the then outstanding voting securities entitled to vote generally inthe election of directors of the corporation surviving, continuing or resultingfrom such transaction; or

 

(D)  the occurrence of, orexecution of an agreement providing for, a reorganization, merger,consolidation, or similar transaction of the Corporation, or before anyconnected series of such transactions, if, upon consummation of suchtransaction or transactions, the persons who are members of the Board ofDirectors of the Corporation immediately before such transaction ortransactions cease or, in the case of the execution of an agreement for suchtransaction or transactions, it is contemplated in such agreement that uponconsummation such persons would cease, to constitute a majority of the Board ofDirectors of the Corporation or, in a case where the Corporation does notsurvive in such transaction, of the corporation surviving, continuing orresulting from such transaction or transactions; or

 

(E)  any other event which is atany time designated as a “Change in Control” for purposes of this Agreement bya resolution adopted by the Board of Directors of the Corporation with theaffirmative vote of a majority of the non-employee directors in office at thetime the resolution is adopted; in the event any

 

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suchresolution is adopted, the Change in Control event specified thereby shall bedeemed incorporated herein by reference and thereafter may not be amended,modified or revoked without the written agreement of Director.

 

Notwithstandinganything else to the contrary set forth in this Agreement, if (i) an agreementis executed by the Company providing for any of the transactions or eventsconstituting a Change in Control as defined herein, and the agreementsubsequently expires or is terminated without the transaction or event beingconsummated, and (ii) Director’s service did not terminate during the periodafter the agreement and prior to such expiration or termination, for purposesof this Agreement it shall be as though such agreement was never executed andno Change in Control event shall be deemed to have occurred as a result of theexecution of such agreement.

 

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 SocialSecurity Administration, 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 Disabilityin this 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 Agreement throughDecember 31 of the same

 

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year.

 

1.15                           *“ROE”*means return on equity, measured by dividingannualized net income of the Corporation by average total equity of theCorporation 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 2Deferral 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 paymentmust be 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 3Deferral 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.

 

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3.1.2                        *Deferrals*. The Fees deferred by the Director as ofthe time the Fees would have otherwise been 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 at anannual rate equal to fifty percent (50%) of the Corporation’s prior year ROE,compounded monthly, on the first business day on or before said anniversarydate. ** **AfterTermination of Service, interest shall be credited to the Deferral Account at arate based on the yield on the 10 Year Treasury Note as specified in theapplicable section of Article 4 or 5.

 

3.2                                 *Statement of Accounts*.  The Company shall provide to the Director,within one hundred twenty (120) days after each Plan Year, a statement settingforth 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 the paymentof benefits.  The benefits represent themere Company promise to pay such benefits. The Director’s rights are not subject in any manner to anticipation,alienation, sale, transfer, assignment, pledge, encumbrance, attachment, orgarnishment by the Director’s creditors.

 

**Article 4Benefits During Lifetime**

 

4.1                                 *Normal Benefit Age*. If the Director terminates service as a Director on or after NormalBenefit Age, the Company shall pay to the Director the benefit described inthis Section 4.1 in lieu of any other benefit under this 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, theCompany shall continue to credit interest to the Deferral Account at a ratebased on the yield on the 10 Year Treasury Note, compounded monthly, using theaverage yield in effect for the month immediately prior to commencement ofbenefit payments.

 

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.

 

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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.

 

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 under thisSection 4.3 is the 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 4.3.2, based on the yield on the 10Year 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

 

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the monthimmediately prior 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 under thisSection 4.4 is Deferral Account balance at the date specified in Election FormB.  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 4.4.2, based on the yield on the 10Year Treasury Note until payments commence.

 

4.4.2*                        Payment ofBenefit*.  The Company shall pay thebenefit 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’s UnforeseeableEmergency, 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

 

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which the amount becomes payable, as determined by the Board in itssole discretion.

 

**Article 5Death 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 greater of:  (a)the Deferral Account balance or (b) Five Hundred Fifty Thousand One HundredSixteen Dollars ($550,116) multiplied by the ratio representing the actualcumulative Fees deferred at the date of death as a percentage of the plannedcumulative Fee deferrals at the inception of this Agreement as detailed inExhibit D, provided such ratio shall not exceed one hundred percent(100%).  In calculating this ratio, theamount shall be interpolated to the nearest month as of the date 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 Benefit PaymentsCommence.*  If the Director isentitled to benefit payments under this Agreement, but dies prior to the commencement of said benefitpayments, the Company shall pay to the Beneficiary the Deferral Account balanceas elected by the Director on Election Form C within ninety (90) days followingreceipt of the Director’s death certificate.

 

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**Article 6Beneficiaries**

 

6.1           *Beneficiary*.  Each Director shall have the right, at anytime, to designate a Beneficiary(ies) to receive any benefits payable under theAgreement to a beneficiary upon the death of a Director.  The Beneficiary designated under thisAgreement may be the same as or different from the Beneficiary designationunder any other plan of the Company in which the Director participates.

 

6.2           *Beneficiary Designation;Change*.  A Director shalldesignate a Beneficiary by completing and signing the Beneficiary DesignationForm, and delivering it to the Plan Administrator or its designated agent.  The Director’s beneficiary designation shallbe deemed automatically revoked if the beneficiary predeceases the Director orif the Director names a spouse as beneficiary and the marriage is subsequentlydissolved.  A Director shall have theright to change a Beneficiary by completing, signing and otherwise complying withthe terms of the Beneficiary Designation Form and the Plan Administrator’srules and procedures, as in effect from time to time.  Upon the acceptance by the Plan Administratorof a new Beneficiary Designation Form, all Beneficiary designations previouslyfiled shall be cancelled.  The PlanAdministrator shall be entitled to rely on the last Beneficiary DesignationForm filed by the Director and accepted by the Plan Administrator prior to theDirector’s death.

 

6.3           *Acknowledgment*.  No designation or change in designation of aBeneficiary shall be effective until received, accepted and acknowledged inwriting by the Plan Administrator or its designated agent.

 

6.4           *No Beneficiary Designation*.  If the Director dies without a validbeneficiary designation, or if all designated Beneficiaries predecease theDirector, then the Director’s spouse shall be the designated Beneficiary.  If the Director has no surviving spouse, thebenefits shall be made to the personal representative 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 7General 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)                                     Any materialbreach of this Agreement by the Director; or

 

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

 

(iii)                               The Director’s fraud,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 thisAgreement if the Director, without the prior written consent of the Company,violates the following described 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)                                     becomes employedby, participates in, or becomes connected in any manner with the ownership,management, operation or control of any bank, savings and loan or other similarfinancial institution if the Director’s responsibilities will include providingbanking or other financial services within the fifty (50) miles of any officemaintained by the Company as of the date of the termination of the Director’sservice;

 

(ii)                                  participates in anyway in hiring or otherwise engaging, or assisting any other person or entity inhiring or otherwise engaging, on a temporary, part-time or permanent basis, anyindividual who was employed by the Company as of the date of termination of theDirector’s service;

 

(iii)                               assists, advises, orserves in any capacity, representative or otherwise, any third party in anyaction against the Company or transaction involving the Company;

 

(iv)                              sells, offers to sell,provides banking or other financial services, assists any other person inselling or providing banking or other

 

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financial services, or solicits or otherwise competes for, eitherdirectly or indirectly, any orders, contract, or accounts for services of akind or nature like or substantially similar to the financial servicesperformed or financial products sold by the Company (the preceding hereinafterreferred to as “Services”), to or from any person or entity from whom theDirector or the Company, to the knowledge of the Director provided banking orother financial services, sold, offered to sell or solicited orders, contractsor accounts for Services during the three (3) year period immediately prior tothe 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 Company, as they may have existed from time to time, of work performedor services rendered for any customer, any method and/or procedures relating toprojects or other work developed for the Company, earnings or other informationconcerning the Company. The restrictions contained in this subparagraph (v)apply to all information regarding the Company, regardless of the source whoprovided or compiled such information. Notwithstanding anything to the contrary, all information referred to hereinshall not be disclosed unless and until it becomes known to the general publicfrom sources other than the Director.

 

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

 

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Section 7.4 are necessary toprotect its legitimate business interest, (iii) the restrictions set forth inSection 7.4 will not be materially adverse to the Director’s service with theCompany, and (iv) his agreement to observe such restrictions forms a materialpart 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 Directorshall forfeit all interest credited since the date of execution of thisAgreement if the Director commits suicide within two years after the date ofthis Agreement, 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 8Claims and Review Procedures**

 

8.1           *ClaimsProcedure*.  A Director orBeneficiary (“claimant”) who has not received benefits under the Agreement thathe or she believes should be paid shall make a claim for such benefits asfollows:

 

8.1.1        *Initiation – Written Claim*.  The claimant initiates a claim by submittingto the Plan Administrator a written claim for the benefits.

 

8.1.2        *Timing of Plan Administrator Response.*  The PlanAdministrator shall respond to such claimant within 90 days after receiving theclaim.  If the Plan Administratordetermines that special circumstances require additional time for processingthe claim, the Plan Administrator can extend the response period by anadditional 90 days by notifying the claimant in writing, prior to the end ofthe initial 90-day period, that an additional period is required.  The notice of extension must set forth thespecial circumstances and the date by which the Plan Administrator expects torender its decision.

 

8.1.3        *Notice of Decision*. If the Plan Administrator denies part or all of the claim, the PlanAdministrator shall notify the claimant in writing of such denial.  The Plan Administrator shall write thenotification in a manner calculated 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

 

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the denial is based;

(c)          Adescription of any additional information or material necessary for theclaimant to perfect the claim and an explanation of why it is needed, and

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

 

8.2           *Review Procedure*.  If the Plan Administrator denies part or allof the claim, the claimant shall have the opportunity for a full and fairreview by the Plan Administrator of the denial, as follows:

 

8.2.1        *Initiation – Written Request*.  To initiate the review, the claimant, within60 days after receiving the Plan Administrator’s notice of denial, must filewith the Plan Administrator a written request for review.

 

8.2.2        *Additional Submissions – Information Access*.  The claimant shall then have the opportunityto submit written comments, documents, records and other information relatingto the claim.  The Plan Administratorshall also provide the claimant, upon request and free of charge, reasonableaccess to, and copies of, all documents, records and other information relevantto the claimant’s claim for benefits.

 

8.2.3        *Considerations on R*eview. In considering the review, the Plan Administrator shall take intoaccount all materials and information the claimant submits relating to theclaim, without regard to whether such information was submitted or consideredin the initial benefit determination.

 

8.2.4        *Timing of Plan Administrator Response.*  The Plan Administrator shall respond inwriting to such claimant within 60 days after receiving the request forreview.  If the Plan Administratordetermines that special circumstances require additional time for processingthe claim, the Plan Administrator can extend the response period by anadditional 60 days by notifying the claimant in writing, prior to the end ofthe initial 60-day period, that an additional period is required.  The notice of extension must set forth thespecial circumstances and the date by which the Plan Administrator expects torender its decision.

 

8.2.5        *Notice of Decision.* The Plan Administrator shall notify the claimant in writing of itsdecision on review.  The PlanAdministrator shall write the notification in a manner calculated to be understoodby the claimant.  The notification shallset forth:

 

(a)          Thespecific reasons for the denial;

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

(c)          Astatement that the claimant is entitled to receive, upon request and free ofcharge, reasonable access to, and copies of, all documents,

 

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records and other information relevant to the claimant’s claim forbenefits.

 

**Article 9Amendments 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.

 

**Article 10Miscellaneous**

 

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 be sold,transferred, assigned, pledged, attached or encumbered in any manner.

 

10.4                           *Tax Withhol*ding.  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 the Commonwealthof Pennsylvania, except to the extent preempted by the laws of the UnitedStates 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.

 

14

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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*.  TheCompany shall not merge or consolidate into or with another company, orreorganize, or sell substantially all of its assets to another company, firm orperson unless such succeeding or continuing company, firm or person agrees toassume and discharge the obligations of the Company under this Agreement.  Upon the occurrence of such event, the term “Company”as used in this Agreement shall be deemed to refer to the successor or survivorcompany.

 

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 Agreement;

 

10.9.3                  Maintaining a record of benefitpayments; and

 

10.9.4                  Establishing rules and prescribingany forms 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/ Michael J. Casale |                        | By | /s/ Ronald A. Walko |   |
| MICHAEL J CASALE      |                        |   |
|                  | Title** **             | President and Chief Executive Officer |
|                       |                             |  |  |  |  |

 

15

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By executionhereof, Penns Woods Bancorp, Inc. consents to and agrees to be bound by theterms and condition of this Agreement.

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

 

16

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**EXHIBIT A**

 

### **JERSEY SHORE STATE BANKDIRECTOR DEFERRED FEE AGREEMENT**

 

**Election Form A**

 

**DeferralElection:**

I elect to defer 100% of my annual CashAllowance (or $                per year.)

 

I understand that I may changethe deferral amount provided I make an election in writing prior to thecalendar year for which the change will become effective.

 

 
| Signature                                             | /s/ Michael J. Casale                 |   |   |
|-------------------------------------------------------|---------------------------------------|--------|--------|
|                                                  |                                  |   |
| Date                                                  | October 1, 2004                       |   |
|                                                  |                                  |   |
|                                                  |                                  |   |
| Accepted by the Company this 1st day of October 2004. |                                  |
|                                                  |                                  |   |
| JERSEY SHORE STATE BANK                               |                                  |
|                                                  |                                  |   |
| By                                                    | /s/ Michael J. Casale                 |   |   |
|                                                  |                                  |   |
| Title                                                 | President and Chief Executive Officer |   |
|                                                       |                                       |        |        |  |  |  |

 

17

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**EXHIBIT B**

 

### **JERSEY SHORE STATE BANKDIRECTOR DEFERRED FEE AGREEMENT**

 

**Election Form B**

 

**Normal Benefit Age:****                              **Ielect a Normal Benefit Age of 70.

 

**Timing of Payout:**

 

If I terminate service beforeNormal Benefit Age for reasons other than Death, Disability or following aChange in Control, I elect to have my benefits distributed commencing within 30days of (Initial One):

 

o                                    Normal Benefit Age

 

ý                                    Termination ofService

 

If I terminate service beforeNormal Benefit Age due to Disability, I elect to have my benefits distributedcommencing within 30 days of (Initial One):

 

o                                    Normal Benefit Age

 

ý                                    Termination ofService

 

**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                                    Normal Benefit Age

 

ý                                    Termination ofService

 

o                                    the date the Changein Control occurs

 
| Signature                                             | /s/ Michael J. Casale                 |   |   |
|-------------------------------------------------------|---------------------------------------|--------|--------|
|                                                  |                                  |   |
| 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 Executive Officer |   |
|                                                       |                                       |        |        |  |  |  |

 

----

 

**EXHIBIT C**

 

### **JERSEY SHORE STATE BANK**

**DIRECTOR DEFERRED FEE AGREEMENT**

 

**Election Form C**

 

**Form of Payment:**

 

I elect to have my benefits paid in the following form (initial (a),(b), (c) or (d) for each category):

 
| **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)  o                |       | (d)  ý            |
| 4.2.2                  |       | Early Termination     |       | (a)  o      |       | (b)  o                |       | (c)  o                |       | (d)  ý            |
| 4.3.2                  |       | Disability            |       | (a)  o      |       | (b)  o                |       | (c)  ý           |       | (d)  o                 |
| 4.4.2                  |       | Change in Control     |       | (a)  ý |       | (b)  o                |       | (c)  o                |       | (d)  o                 |
| 5.1.2                  |       | Death                 |       | (a)  o      |       | (b)  o                |       | (c)  o                |       | (d)  ý            |

 

 
| Signature                                             | /s/  Michael J. Casale           |   |   |
|-------------------------------------------------------|---------------------------------------|--------|--------|
|                                                  |                                  |   |
| 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 Executive Officer |   |
|                                                       |                                       |        |        |  |  |

 

----

 

**EXHIBIT D**

 

### **JERSEY SHORE STATE BANKDIRECTOR DEFERRED FEE AGREEMENT**

 

**Planned Fees Deferrals**

 

| **Plan Year** | ** ** | **Planned Annual  Deferrals** | ** ** | **Planned Cumulative  Deferrals** | ** ** |
|---------------|------------|-------------------------------|------------|-----------------------------------|------------|
| 1             |       | 3,900                         |       | 3,900                             |       |
| 2             |       | 16,068                        |       | 19,968                            |       |
| 3             |       | 16,550                        |       | 36,518                            |       |
| 4             |       | 17,047                        |       | 53,565                            |       |
| 5             |       | 17,558                        |       | 71,123                            |       |
| 6             |       | 18,085                        |       | 89,208                            |       |
| 7             |       | 18,627                        |       | 107,835                           |       |
| 8             |       | 19,186                        |       | 127,021                           |       |
| 9             |       | 19,762                        |       | 146,783                           |       |
| 10            |       | 20,354                        |       | 167,137                           |       |
| 11            |       | 20,965                        |       | 188,102                           |       |
| 12            |       | 21,594                        |       | 209,696                           |       |
| 13            |       | 22,242                        |       | 231,938                           |       |
| 14            |       | 22,909                        |       | 254,847                           |       |
| 15            |       | 23,596                        |       | 278,443                           |       |
| 16            |       | 24,304                        |       | 302,747                           |       |
| 17            |       | 25,033                        |       | 327,780                           |       |
| 18            |       | 25,784                        |       | 353,564                           |       |
| 19            |       | 6,639                         |       | 360,203                           |       |

 

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