**Exhibit 10 (vii)**

 

EMPLOYMENT AGREEMENT

 

 

THIS AGREEMENT, made as ofthe 11th day of January 1999, among PENNS WOODS BANCORP, INC. (“PennsWoods”), a Pennsylvania business corporation having a place of business at115 South Main Street, Jersey Shore, Pennsylvania, JERSEY SHORE STATE BANK(“Bank”), a Pennsylvania banking institution having a place of business at115 South Main Street, Jersey Shore, Pennsylvania, and WILLIAM H.ROCKEY (“Executive”), an adult individual.

 

WITNESSETH:

 

WHEREAS, Bank is the whollyowned banking subsidiary of Penns Woods;

 

WHEREAS, Penns Woods andBank desire to employ Executive to serve in the capacity of Senior VicePresident of each of Penns Woods and Bank on the terms and conditions set forthherein;

 

WHEREAS, Executive desiresto accept employment with each of Penns Woods and Bank on the terms andconditions set forth herein.

 

AGREEMENT:

 

NOW, THEREFORE, the partieshereto, intending to be legally bound, agree as follows:

 

1.             Employment.  Penns Woods and Bank each hereby employExecutive, and Executive hereby accepts employment with each of Penns Woods andBank, on the terms and conditions set forth in this Agreement.

 

2.             Duties ofEmployee.  Executiveshall perform and discharge well and faithfully such duties as an executive officerof Penns Woods and of Bank as may be assigned to Executive from time to time bythe respective Boards of Directors of Penns Woods and of Bank.  Executive shall be employed as Senior VicePresident of Penns Woods and of Bank, and shall hold such other titles as maybe given to him from time to time by the respective Boards of Directors ofPenns Woods and of Bank.  Executive shalldevote his full time, attention and energies to the business of Penns Woods andof Bank during the Employment Period (as defined in Section 3 of thisAgreement); provided, however, that this Section 2 shall not be construedas preventing Executive from (a) investing Executive’s personal assets inenterprises that do not compete with Penns Woods or Bank or (b) beinginvolved in any 

 

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other activity with the prior approval of theBoard of Directors of Penns Woods and Bank.

 

3.             Term of Agreement.

 

(a)           This Agreementshall be for a three (3) year period (the “Employment Period”) commencingon January 11, 1999 and ending on January 10, 2002; provided,however, that the Employment Period shall be automatically extended on January 11,2000 and on January 1 of each subsequent year thereafter (each an “AnnualRenewal Date”) for a period ending three (3) years from each AnnualRenewal Date unless either party shall give written notice of nonrenewal to theother party at least ninety (90) days prior to an Annual Renewal Date, in whichevent this Agreement shall terminate at the end of the then existing EmploymentPeriod.

 

(b)           Notwithstandingthe provisions of Section 3(a) of this Agreement, this Agreementshall terminate automatically for Cause (as defined herein) upon written noticefrom the Board of Directors of each of Penns Woods and Bank to Executive.  As used in this Agreement, “Cause” shall meanany of the following:

 

(i)            Executive’sconviction of or plea of guilty or nolo contendere to a felony, a crime offalsehood, or a crime involving moral turpitude, or the actual incarceration ofExecutive for a period of forty-five (45) consecutive days or more;

 

(ii)           Executive’scontinued failure to follow the good faith lawful instructions of the Board ofDirectors of Penns Woods or Bank with respect to its operations, for a materialperiod of time following written notice to Executive of such instructions; or

 

(iii)          Executive’swillful failure to substantially perform Executive’s duties to Penns Woods orBank, other than a failure resulting from Executive’s incapacity because ofphysical or mental illness, which willful failure results in demonstrablematerial injury and damage to Penns Woods or Bank.

 

If this Agreement is terminated for Cause,Executive’s rights under this Agreement shall cease as of the effective date ofsuch termination.

 

(c)           Notwithstandingthe provisions of Section 3(a) of this Agreement, this Agreementshall terminate automatically upon Executive’s voluntary termination ofemployment (other than in accordance with Section 5 of this Agreementrelating to termination for Good Reason following a Change in Control),retirement at Executive’s election, or

 

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Executive’s death, and Executive’s rightsunder this Agreement shall cease as of the date of such voluntary termination,retirement at Executive’s election, or death; provided, however, that, ifExecutive dies after Executive delivers a Notice of Termination (as defined in Section 5(a) ofthis Agreement), the provisions of Section 14(b) of this Agreementshall apply.

 

(d)           Notwithstanding theprovisions of Section 3(a) of this Agreement, this Agreement shallterminate automatically upon Executive’s disability and Executive’s rightsunder this Agreement shall cease as of the date of such termination; provided,however, that, if Executive becomes disabled after Executive delivers a Noticeof Termination (as defined in Section 5(a) of this Agreement),Executive shall nevertheless be absolutely entitled to receive all of thecompensation and benefits provided for in, and for the term set forth in, Section 6of this Agreement.  For purposes of thisAgreement, disability shall mean Executive’s incapacitation by accident,sickness, or otherwise which renders Executive mentally or physically incapableof performing the services required of Executive for three hundred sixty (360)consecutive days.

 

(e)           Executive agrees that, inthe event his employment under this Agreement is terminated, Executive shallconcurrently resign as a director of Penns Woods or Bank, or any subsidiary oraffiliate of Penns Woods or Bank, if he is then serving as a director of any ofsuch entities.

 

4.             Employment PeriodCompensation.

 

(a)           Salary.  For services performed by Executive underthis Agreement, Bank shall pay Executive a salary during the Employment Periodat the rate of $96,700 per year (the “Base Salary”), payable at the same timesas salaries are payable to other executive employees of Bank.  Bank may, from time to time, increaseExecutive’s salary, and any and all such increases shall be deemed to constituteamendments to this Section 4(a) to reflect the increased amounts,effective as of the date established for such increases by the Board ofDirectors of Bank or any committee of such Board in the resolutions authorizingsuch increases.

 

(b)           Vacation.  During the Employment Period, Executive shallbe entitled to paid annual vacation in accordance with the policies asestablished from time to time by the Boards of Directors of Penns Woods andBank plus such other personal or bonus days as may be set forth in the policiesof Penns Woods and Bank.  Executive shallnot be entitled to receive any additional compensation from Penns Woods andBank for failure to take a vacation, nor shall Executive be able to accumulateunused vacation time from one year to the next, except to the extent authorizedby the Boards of Directors or the policies of Penns Woods and Bank.

 

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(c)           Employee Benefit Plans.  During the Employment Period, Executive shallbe entitled to participate in and receive the benefits of any pension or otherretirement benefit plan, profit sharing, stock option, incentive bonus,employee stock ownership, or other plans, benefits and privileges given toemployees and executive officers of Penns Woods and Bank, to the extentcommensurate with Executive’s then existing duties and responsibilities asfixed by the Boards of Directors of Penns Woods or Bank, in the same manner asother executive officers.  Penns Woodsand Bank shall not make any changes in such plans, benefits or privileges whichwould adversely affect Executive’s rights or benefits thereunder, unless suchchange occurs pursuant to a program applicable to all executive officers ofPenns Woods and Bank and does not result in a proportionately greater adversechange in the rights of or benefits to Executive as compared with any otherexecutive officer of Penns Woods and Bank. Nothing paid to Executive under any plan or arrangement presently ineffect or made available in the future shall be deemed to be in lieu of thesalary payable to Executive pursuant to Section 4(a) hereof.

 

5.             Termination of EmploymentFollowing Change in Control.

 

(a)           If a Change in Control (asdefined in Section 5(b) of this Agreement) shall occur and ifthereafter, at any time during the term of this Agreement, there shall be:

 

(i)            any involuntary terminationof Executive’s employment (other than for the reasons set forth in Section 3(b) or3(d) of this Agreement relating to termination for Cause or disability);

 

(ii)           any reduction in Executive’stitle, responsibilities, including reporting responsibilities, or authority,including such title, responsibilities, or authority as such title,responsibilities, or authority may be increased from time to time during theterm of this Agreement;

 

(iii)          the assignment to Executiveof duties inconsistent with Executive’s office on the date of the Change inControl or as the same may be increased from time to time after the Change inControl;

 

(iv)          any reassignment ofExecutive to a location greater than twenty-five (25) miles from the locationof Executive’s office on the date of the Change in Control;

 

(v)           any reduction in Executive’sannual base salary in effect on the date of the Change in Control or as

 

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the same may be increasedfrom time to time after the Change in Control;

 

(vi)          any failure to continueExecutive’s participation in any of Penns Woods’ incentive compensation orbonus plans in which Executive participated at the time of the Change inControl or any change or amendment to any provisions of any of such plans whichwould materially decrease the potential benefits to Executive under any of suchplans;

 

(vii)         any failure to provideExecutive with benefits at least as favorable as those enjoyed by Executiveunder any of Penns Woods’ retirement or pension, life insurance, medical,health and accident, disability or other employee plans in which Executiveparticipated at the time of the Change in Control, or the taking of any actionthat would materially reduce any of such benefits in effect at the time of theChange in Control;

 

(viii)        any requirement thatExecutive travel in performance of his duties on behalf of Penns Woods or Bankfor a significantly greater period of time during any year than was required ofExecutive during the year preceding the year in which the Change in Controloccurred;

 

(ix)           any sustained pattern ofinterruption or disruption of Executive for matters substantially unrelated toExecutive’s discharge of Executive’s duties on behalf of Penns Woods and Bank;or

 

(x)            any breach of this Agreementof any nature whatsoever on the part of Penns Woods or Bank;

 

then, at the option of Executive, exercisableby Executive within ninety (90) days of the occurrence of any of the foregoingevents, Executive may resign from employment with Penns Woods and Bank (or, ifinvoluntarily terminated, give notice of intention to collect benefits underthis Agreement) by delivering a notice in writing (the “Notice of Termination”)to Penns Woods and Bank and the provisions of Section 6 of this Agreementshall apply.

 

(b)           As used in this Agreement, “Changein Control” shall mean the occurrence of any of the following:

 

(i) (A)     a merger, consolidation, ordivision involving Penns Woods, (B) a sale, exchange, transfer, or otherdisposition of substantially all of the assets of Penns Woods or Bank, or (C) apurchase by Penns Woods of substantially all of the assets of another entity,unless (x) such merger, consolidation, division, sale, exchange, transfer,purchase or disposition is approved in advance by eighty percent (80%) or moreof the members of the Board of

 

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Directors of Penns Woods whoare not interested in the transaction and (y) a majority of the members ofthe Board of Directors of the legal entity resulting from or existing after anysuch transaction (and of the Board of Directors of such entity’s parentcorporation, if any) are former members of the Board of Directors of PennsWoods; or

 

(ii)           any other change in controlof Penns Woods similar in effect to any of the foregoing.

 

6.             Rights in Event ofTermination of Employment.

 

(a)           In the event that (i) Executive’semployment is involuntarily terminated by Penns Woods and Bank without Cause inthe absence of a Change in Control at the date of such termination or (ii) Executivedelivers a Notice of Termination pursuant to Section 5(a) of thisAgreement following a change in Control, Penns Woods and Bank shall pay (orcause to be paid), in the aggregate, to Executive in cash, within thirty (30)days following termination of Executive’s employment, an amount equal to thegreater of (x) the Executive’s then current Base Salary multiplied by two (2) or(y) the aggregate amount of Base Salary due and payable to Executive overthe remaining Employment Period in effect at the time of termination ofExecutive’s employment.  Notwithstandingthe preceding sentence, in the event that the lump-sum payment described in thepreceding sentence, when added to all other amounts or benefits provided to oron behalf of Executive in connection with termination of Executive’semployment, would result in the imposition of an excise tax under Section 4999of the Internal Revenue Code of 1986, as amended, such lump-sum shall bereduced (retroactively, if necessary) to the extent necessary to avoid suchimposition.  Penns Woods’ independentauditors shall be responsible for calculating any potential excise tax under Section 4999and the amount of reduction in the payments to be made to Executive, if any,necessary to avoid imposition of such excise tax, and all such calculationsshall be final and binding on all parties.

 

(b)           Executive shall not berequired to mitigate the amount of any payment provided for in this Section 6by seeking other employment or otherwise. The amount of payment or the benefit provided for in this Section 6shall not be reduced by any compensation earned by Executive as the result ofemployment by another employer or by reason of Executive’s receipt of or rightto receive any retirement or other benefits after the date of termination ofemployment or otherwise.

 

(c)           The amounts payable pursuantto this Section 6 shall constitute Executive’s sole and exclusive remedyin the event of involuntary termination of Executive’s employment by PennsWoods and Bank.

 

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7.             Covenant Not to Compete.

 

(a)           Executive herebyacknowledges and recognizes the highly competitive nature of the business of PennsWoods and Bank and accordingly agrees that, during and for the applicableperiod set forth in Section 7(c) hereof, Executive shall not:

 

(i)            be engaged, directly orindirectly, either for his own account or as agent, consultant, employee,partner, officer, director, proprietor, investor (except as an investor owningless than 5% of the stock of a publicly owned company) or otherwise of anyperson, firm, corporation, or enterprise engaged, in (1) the banking orfinancial services industry or (2) any other activity in which Penns Woodsor any of its subsidiaries is engaged during the Employment Period, in anycounty in which, at any time during the Employment Period or at the date oftermination of the Executive’s employment, a branch office or other facility ofPenns Woods or Bank, or any of their respective subsidiaries, is located, or inany county contiguous to such a county, including contiguous counties locatedoutside of the Commonwealth of Pennsylvania (the “Non-Competition Area”); or

 

(ii)           provide financial or otherassistance to any person, firm, corporation, or enterprise engaged in (1) thebanking or financial services industry, or (2) any other activity in whichPenns Woods or Bank or any of their respective subsidiaries, is engaged duringthe Employment Period, in the Non-Competition Area.

 

(b)           It is expressly understoodand agreed that, although Executive, Penns Woods, and Bank consider therestrictions contained in Section 7(a) hereof reasonable for thepurpose of preserving for Penns Woods, Bank, and their respective subsidiaries,their good will and other proprietary rights, if a final judicial determinationis made by a court having jurisdiction that the time or territory or any otherrestriction contained in Section 7(a) hereof is an unreasonable orotherwise unenforceable restriction against Executive, the provisions of Section 7(a) hereofshall not be rendered void but shall be deemed amended to apply as to suchmaximum time and territory and to such other extent as such court may judiciallydetermine or indicate to be reasonable.

 

(c)           The provisions of this Section 7shall be applicable commencing on the date of this Agreement and ending on oneof the following dates, as applicable:

 

(i)            if Executive’s employmentterminates in accordance with the provisions of Section 3 (other than 

 

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Section 3(b) relatingto termination for Cause), the effective date of termination of employment;

 

(ii)           if Executive’s employmentterminates in accordance with the provisions of Section 3(b) of thisAgreement (relating to termination for Cause) or the Executive voluntarilyterminates his employment other than in accordance with the provisions of Section 5hereof, the first anniversary date of the effective date of termination ofemployment; or

 

(iii)          if the Executive voluntarilyterminates his employment in accordance with the provisions of Section 5hereof, the effective date of termination of employment.

 

8.             No Disclosure ofConfidential Information.  TheExecutive agrees that all customer lists and information, files and records nowor hereafter used by the Penns Woods or Bank are the property of Penns Woodsand Bank and constitute trade secrets. Accordingly, the Executive acknowledges that the trade secrets of PennsWood and Bank as they may exist from time to time and other confidentialinformation concerning the business, products, technical information, salesactivities, procedures, promotion, pricing techniques, business plans, customerlists and credit and financial data concerning customers of Penns Wood and Bankare valuable, special and unique assets of Penns Wood and Bank, access to andknowledge of which are essential to the performance of the Executive’s dutiesunder this Agreement.  Executive furtheragrees that all knowledge and information described in the preceding sentencenot in the public domain and heretofore or in the future obtained by theExecutive as a result of employment by the Bank shall be consideredconfidential information and shall not be disclosed without the consent ofPenns Wood and Bank.  Nothing containedherein shall be deemed to preclude the Executive from responding to requestsfor information or inquiries from federal or state banking regulations orcomplying with applicable laws and regulations.

 

9.             Equitable Relief.  Executive acknowledges that the restrictionscontained in Sections 7 and 8, in view of the nature of the business inwhich Penns Woods and Bank are engaged, are reasonable and necessary in orderto protect the legitimate interests of Penns Woods and Bank and that anyviolation thereof would result in irreparable injury to Penns Woods and Bank,and Executive therefore acknowledges that, in the event of Executive’sviolation of any of these restrictions, Penns Woods or Bank shall be entitledto obtain from any court of competent jurisdiction preliminary and permanentinjunctive relief as well as damages and an equitable accounting of allearnings, profits and other benefits arising from such violation, which rightsshall be cumulative and in addition to any other remedies to which Penns Woodsor Bank may be entitled.

 

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10.           Notices.  Except as otherwise provided in thisAgreement, any notice required or permitted to be given under this Agreementshall be deemed properly given if in writing and if mailed by registered orcertified mail, postage prepaid with return receipt requested, to Executive’sresidence, in the case of notices to Executive, and to the principal executiveoffices of Penns Woods and Bank, in the case of notices to Penns Woods andBank.

 

11.           Waiver. No provisionof this Agreement may be modified, waived, or discharged unless such waiver,modification, or discharge is agreed to in writing and signed by Executive andan executive officer specifically designated by the Boards of Directors ofPenns Woods and Bank.  No waiver byeither party hereto at any time of any breach by the other party hereto of, orcompliance with, any condition or provision of this Agreement to be performedby such other party shall be deemed a waiver of similar or dissimilarprovisions or conditions at the same or at any prior or subsequent time.

 

12.           Assignment. ThisAgreement shall not be assignable by any party, except by Penns Woods and Bankto any successor in interest to their respective businesses.

 

13.           Entire Agreement.  This Agreement contains the entire agreementof the parties relating to the subject matter of this Agreement.

 

14.           Successors; BindingAgreement.

 

(a)           Penns Woods and Bank willrequire any successor (whether direct or indirect, by purchase, merger,consolidation, or otherwise) to all or substantially all of the businessesand/or assets of Penns Woods and Bank to expressly assume and agree to performthis Agreement in the same manner and to the same extent that Penns Woods andBank would be required to perform it if no such succession had takenplace.  Failure by Penns Woods and Bankto obtain such assumption and agreement prior to the effectiveness of any suchsuccession shall constitute a breach of this Agreement.  As used in this Agreement, “Penns Woods” and “Bank”shall mean Penns Woods and Bank as defined previously and any successor totheir respective businesses and/or assets as aforesaid which assumes and agreesto perform this Agreement by operation of law or otherwise.

 

(b)           This Agreement shall inureto the benefit of and be enforceable by Executive’s personal or legalrepresentatives, executors, administrators, heirs, distributees, devisees, andlegatees.  If Executive should die aftera Notice of Termination is delivered by Executive, or following termination ofExecutive’s employment without Cause, and any amounts would be payable toExecutive under this Agreement if Executive had continued to live, all suchamounts shall be paid 

 

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in accordance with the terms of thisAgreement to Executive’s devisee, legatee, or other designee, or, if there isno such designee, to Executive’s estate.

 

15.           Legal Fees.  Penns Woods shall reimburse Executive forlegal fees and expenses incurred by Executive in connection with any legalaction necessary to enforce any provision of this Agreement.

 

16.           Arbitration. Penns Woods,Bank and Executive recognize that, in the event a dispute should arise betweenthem concerning the interpretation or implementation of this Agreement, lengthyand expensive litigation will not afford a practical resolution of the issueswithin a reasonable period of time. Consequently, each party agrees that all disputes, disagreements andquestions of interpretation concerning this Agreement other than mattersrelating to Section 7 (Covenant Not to Compete) are to be submitted forresolution to the American Arbitration Association (the “Association”) inaccordance with the Association’s National Rules for the Resolution ofEmployment Disputes or other applicable rules then in effect (“Rules”) ata location selected by Penns Woods. Penns Woods and Bank or Executive may initiate an arbitration proceedingat any time by giving notice to the other in accordance with the Rules.  Penns Woods and Bank and Executive, may, as amatter of right, mutually agree on the appointment of a particular arbitratorfrom the Association’s pool.  Thearbitrator shall not be bound by the rules of evidence and procedure ofthe courts of the Commonwealth of Pennsylvania but shall be bound by thesubstantive law applicable to this Agreement. The decision of the arbitrator, absent fraud, duress, incompetence orgross and obvious error of fact, shall be final and binding upon the partiesand shall be enforceable in courts of proper jurisdiction.  Following written notice of a request forarbitration, Penns Woods, Bank and Executive shall be entitled to an injunctionrestraining all further proceedings in any pending or subsequently filedlitigation concerning this Agreement, except as otherwise provided herein.

 

17.           Validity.  The invalidity or unenforceability of anyprovision of this Agreement shall not affect the validity or enforceability ofany other provision of this Agreement, which shall remain in full force andeffect.

 

18.           Applicable Law.  This Agreement shall be governed by andconstrued in accordance with the domestic, internal laws of the Commonwealth ofPennsylvania, without regard to its conflicts of laws principles.

 

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19.           Headings.  The section headings of this Agreement arefor convenience only and shall not control or affect the meaning orconstruction or limit the scope or intent of any of the provisions of thisAgreement.

 

IN WITNESS WHEREOF, theparties have executed this Agreement as of the date first above written.

 

PENNS WOODS BANCORP, INC.

 
|   | By      | /s/                      | Theodore  Reich | (SEAL) |
|--------|---------|--------------------------|-----------------|--------|
|   |    |                     |
|   | Attest: | /s/                      | Ronald  Walko   |
|   |    |                     |
|   |    | “Penns  Woods” |            |
|        |         |                          |                 |        |  |  |  |

 

JERSEY SHORE STATE BANK

 
|   | By      | /s/     Theodore Reich | (SEAL)        |
|--------|---------|----------------------------------|---------------|
|   |    |                             |
|   | Attest: | /s/                              | Ronald  Walko |
|   |    |                             |          |   |
|   |    | “Bank”                 |          |   |
|        |         |                                  |               |  |  |  |  |  |

 

Witness:

 
| /s/    Carolyn  Wolfanger |   | /s/    William H. Rockey | (SEAL)                |
|-----------------------------------------------|--------|-----------------------------------------|-----------------------|
|                                          |   | William H. Rockey                       |                  |   |
|                                          |   |                                    |                  |   |
|                                          |   |                                    | “Executive” |
|                                               |        |                                         |                       |  |  |  |

 

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