**Exhibit 10(xi)**

** **

**AMENDMENTAND RESTATEMENT OF THE**

**JERSEYSHORE STATE BANK**

# **DIRECTORDEFERRED FEE AGREEMENT**

 

THIS AGREEMENT is made this 1st day ofOctober, 2004, by JERSEY SHORE STATE BANK a Pennsylvania-chartered commercialbank located in Jersey Shore, Pennsylvania (the “Company”), and William H.Rockey (the “Director”) selected to participate in this Amendment andRestatement of the Jersey Shore State Bank Director Deferred Fee Agreement (the“Agreement”), intending to be legally bound hereby.

 

### **BACKGROUND**

 

On October 14, 1999, the Company and theDirector entered into the Jersey Shore State Bank Director Deferred FeeAgreement (the “1999 Agreement”).  TheCompany and the Director now wish to amend and restate the 1999 Agreement toupdate the terms and provisions contained therein.  This new Agreement shall rescind and replacethe existing 1999 Agreement.

 

**INTRODUCTION**

 

To encourage the Director to remain a memberof the Company’s Board of Directors (the “Board”), the Company is willing toprovide to the Director the opportunity to defer Fees.  The Company will pay the benefits from itsgeneral assets.

 

**AGREEMENT**

 

The Director and the Company agree asfollows:

 

**Article 1**

**Definitions**

 

*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 is used in Sections 13(d) and 14(d)(2) of the Securities ExchangeAct of 1934, as amended (the “Exchange Act”), other than the Corporation, asubsidiary of the Corporation, an employee benefit plan (or related trust) ofthe Corporation or a direct or indirect subsidiary of the Corporation, oraffiliates of the Corporation (as defined in Rule 12b-2 under the ExchangeAct), becomes the beneficial owner (as determined pursuant to Rule 13d-3 underthe Exchange Act), directly or indirectly, of securities of the Corporationrepresenting more than 20% of the combined voting power of the Corporation’sthen outstanding securities or announces a tender offer or exchange offer forsecurities of the Corporation representing more than 20% of the combined votingpower of the Corporation’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 other event which is at any time designatedas a “Change in Control”for purposes of this Agreement by aresolution 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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such resolution isadopted, the Change in Control event specified thereby shall be deemedincorporated herein by reference and thereafter may not be amended, modified orrevoked without the written agreement of Director.

 

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 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 initial year, it shall mean the periodfrom the date of execution of this Agreement through December 31 of the same

 

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year.

 

1.15                           “*ROE*” means return on equity, measured by dividing annualizednet income of the Corporation by average total equity of the Corporation forthe applicable period.

 

1.16                           “*Termination of Service*” means that the Director ceases to bea member of the Company’s Board for any reason whatsoever other than by reasonof 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 financialhardship to a Director, resulting from a sudden and unexpected illness oraccident of the Director, the Director’s spouse, or a dependent (as defined inSection 152(a) of the Code) of the Director, loss of the Director’s propertydue to casualty, or other similar extraordinary and unforeseeable circumstancesarising as a result of events beyond the control of the Director.

 

**Article 2**

**Deferral Election**

 

2.1                                 *Initial Election*.  TheDirector shall make an initial deferral election under this Agreement by filingwith the Company signed Election Forms A, B and C within thirty (30) days afterthe date of this Agreement.  The ElectionForms shall be effective to defer only Fees earned after the date the ElectionForms are received 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 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*.  TheDirector’s rollover balance from the Jersey Shore State Bank Director DeferredFee Agreement dated October 14, 1999.

 

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3.1.2                        *Deferrals*. The Fees deferred by the Director as of the timethe Fees would have otherwise been paid to the Director.

 

3.1.3                        *Interest*.  On oraround the first business day of each Plan Year and immediately prior to thepayment of any benefits, interest is to be credited to the DeferralAccount.  While in the service of theCompany, interest shall be credited at an annual rate equal to fifty percent(50%) of the Corporation’s prior year ROE, compounded monthly, on the firstbusiness day on or before said anniversary 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 shall provide to the Director, within one hundredtwenty (120) days after each Plan Year, a statement setting forth the DeferralAccount 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 4**

**Benefits 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 of Benefit*. The benefit under this Section 4.1 is the Deferral Account balance atthe date specified in Election Form B.

 

4.1.2                        *Payment of Benefit*. The Company shall pay the benefit to the Director in the form specifiedin Election Form C.  If installmentpayments are elected, the Company shall continue to credit interest to theDeferral Account 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 benefit 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 of Benefit*. The benefit under this Section 4.2 is Deferral Account balance at thedate specified in Election Form B.  Ifthere is a delay of more than thirty (30) days between the Director’sTermination of Service and the date payout commences, the Company shallcontinue to credit interest to the Deferral Account balance, as specified inSection 4.2.2, based on the yield on the 10 Year Treasury Note until paymentscommence.

 

 

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*.  UponTermination of Service for Disability prior to the Normal Benefit Age, theCompany shall pay to the Director the benefit described in this Section 4.3 inlieu of any other benefit under this Agreement.

 

4.3.1                        *Amount of Benefit*. The benefit under this Section 4.3 is the Deferral Account balance atthe date specified in Election Form B. If there is a delay of more than thirty (30) days between the Director’sTermination of Service and the date payout commences, the Company shallcontinue to credit interest to the Deferral Account balance, as specified inSection 4.3.2, based on the yield on the 10 Year Treasury Note until paymentscommence.

 

4.3.2                        *Payment of Benefit*. The Company shall pay the benefit to the Director in the form specifiedin Election Form C.  If the Director haselected payment to be distributed at Normal Benefit Age, the Company shallcredit interest to the Deferral Account at a rate based on the yield on the 10Year Treasury Note, compounded monthly. The initial rate shall be based on the average yield in effect for themonth immediately prior to Termination of Service.  This rate will reset on January 1stof each calendar year based on the average yield in effect for December of theprior year.  If installment payments areelected, the Company shall continue to credit interest on the undistributedaccount balance during any applicable installment period at a rate based on theyield on the 10 Year Treasury Note, compounded monthly, using the average yieldin effect for

 

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the month immediately prior to commencementof 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’sUnforeseeable Emergency, or if

 

(i)                                     Reimbursement or compensation by insurance orotherwise; or

(ii)                                  Liquidationof Director’s assets (to the extent the liquidation would  not itself cause severe financial hardship)

 

cannot satisfy the Director’sUnforeseeable Emergency, then the Director may further petition the Board toreceive a partial or full payout from the Agreement.  The Director shall only receive a payout fromthe Agreement to the extent such payout is deemed necessary by the Board tosatisfy the Director’s Unforeseeable Emergency, plus an amount necessary to paytaxes reasonably anticipated as a result of the distribution, up to a maximumof the Director’s Deferral Account balance, calculated as of theclose of business on or around the date on

 

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which the amount becomes payable, asdetermined by the Board 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 of Benefit*. The benefit amount under Section 5.1 is the greater of:  (a) the Deferral Account balance or (b) FourHundred Twenty Two Thousand Two Hundred Three Dollars ($422,203) multiplied bythe ratio representing the actual cumulative Fees deferred at the date of deathas a percentage of the planned cumulative Fee deferrals at the inception ofthis Agreement as detailed in Exhibit D, provided such ratio shall not exceedone hundred percent (100%).  Incalculating this ratio, the amount shall be interpolated to the nearest monthas of the date of death.

 

5.1.2                        *Payment of Benefit*. The Company shall pay the benefit to the beneficiary in the formspecified in Election Form C, with payment made or commencing within 90 daysfollowing the receipt of Director’s death certificate.  If installment payments are elected, theCompany shall continue to credit interest on the undistributed account balanceduring any applicable installment period at a rate based on the yield on the 10Year Treasury Note, compounded monthly, using the average yield in effect forthe month immediately prior to commencement 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.

 

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**Article 6**

**Beneficiaries**

 

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 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 Beneficiary designations previously filed shall becancelled.  The Plan Administrator shallbe entitled to rely on the last Beneficiary Designation Form filed by theDirector and accepted 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 alldesignated Beneficiaries predecease the Director, then the Director’s spouseshall be the designated Beneficiary.  Ifthe Director has no surviving spouse, the benefits shall be made to thepersonal 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 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

 

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(ii)                                  TheDirector’s conviction of a crime, either federal or state, evidencing moralturpitude or dishonesty; or

 

(iii)                               TheDirector’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)                                     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

 

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financial services, or solicits orotherwise competes for, either directly or indirectly, any orders, contract, oraccounts for services of a kind or nature like or substantially similar to thefinancial 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 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 to protect its legitimate business interest,(iii) the restrictions set forth in Section 7.4 will not be materially adverseto the Director’s service with the Company, and (iv) his agreement to observesuch restrictions forms a material part of the consideration for thisAgreement.

 

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 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)          The specific reasons for the denial;

(b)         A reference to the specific provisions of theAgreement on which

 

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the denial is based;

(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)         An explanation of the Agreement’s reviewprocedures and the time limits applicable to 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.

 

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 PlanAdministrator expects 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 setforth:

 

(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,

 

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records and other information relevant to theclaimant’s claim for benefits.

 

**Article 9**

**Amendments and Termination**

 

No provisions of this Agreement may be modified, waived or dischargedunless such waiver, modification or discharge is agreed to in writing signed bythe Director and such officer or officers as may be specifically designated bythe Board to sign on their behalf.  Provided,however, in response to legislative or regulatory changes affectingnonqualified deferred compensation plans that would otherwise cause theDirector to be deemed in constructive receipt of benefits under this Agreement,the Company can amend this Agreement for the sole purpose of complying withsuch legislative or regulatory changes.

 

**Article 10**

**Miscellaneous**

 

10.1*                           BindingEffect*.  This Agreement shall bindthe 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 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 ofthe Agreement;

 

10.9.2                        Establishing and revising themethod of 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/ William H. Rockey |                                                  | By | /s/ Ronald A. Walko |   |
| WILLIAM H. ROCKEY     |                                                  |
|                  | Title** **President and Chief Executive  Officer |
|                       |                                                       |  |  |  |

 

15

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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 |
|                              |                                                       |  |  |  |

 

16

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**EXHIBIT A**

 

### **JERSEY SHORE STATEBANK**

**DIRECTOR DEFERRED FEE AGREEMENT**

 

**Election Form A**

 

**Deferral Election:**

I elect to defer 100% 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/  William H. Rockey |   |
|-------------------------------------------------------|-----------------------------|--------|
|                                                  |
| 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           |
|                                                       |                             |        |  |  |

 

17

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**EXHIBIT B**

 

### **JERSEY SHORE STATEBANK**

**DIRECTOR DEFERRED FEE AGREEMENT**

 

**Election Form B**

 

**Normal Benefit Age:  **I elect a NormalBenefit Age of 72.

 

**Timing of Payout:**

 

**If I terminateservice before Normal Benefit Age for reasons other than Death, Disability orfollowing a Change in Control, I elect to have my benefits distributedcommencing within 30 days of (Initial One):**

 
| o      |   | Normal Benefit Age     |
|--------|--------|------------------------|
|   |   |                   |
| ý |   | Termination of Service |

 

**If I terminateservice before Normal Benefit Age due to Disability, I elect to have mybenefits distributed commencing within 30 days of (Initial One):**

 
| o      |   | Normal Benefit Age     |
|--------|--------|------------------------|
|   |   |                   |
| ý |   | Termination of Service |

 

**If a Change inControl occurs, while I am in active service, but prior to Normal Benefit Age,I elect to have my benefits distributed commencing within 30 days of (InitialOne):**

 
| o      |   | Normal Benefit Age                    |
|--------|--------|---------------------------------------|
|   |   |                                  |
| o      |   | Termination of Service                |
|   |   |                                  |
| ý |   | the date the Change in Control occurs |

 

 
| Signature                                             | /s/  William H. Rockey |   |
|-------------------------------------------------------|-----------------------------|--------|
|                                                  |
| 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 STATEBANK**

**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)   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)   o    |       | (d)   ý    |
|                   |       |                  |       |                                     |       |                                     |       |                                     |       |                                          |
| 4.4.2                  |       | Change in Control     |       | (a)   o    |       | (b)   o    |       | (c)   o    |       | (d)   ý    |
|                   |       |                  |       |                                     |       |                                     |       |                                     |       |                                          |
| 5.1.2                  |       | Death                 |       | (a)   o    |       | (b)   o    |       | (c)   o    |       | (d)   ý    |

 

 
| Signature                                             | /s/  William H. Rockey |   |
|-------------------------------------------------------|-----------------------------|--------|
|                                                  |
| 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 STATEBANK**

**DIRECTOR 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            |       | 5,560                         |       | 215,256                           |       |

 

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