Exhibit
10(vii)


 


AMENDMENT
AND RESTATEMENT OF THE


JERSEY
SHORE STATE BANK


DIRECTOR
DEFERRED FEE AGREEMENT


 


THIS AGREEMENT
is made this 1st day of October, 2004, by JERSEY SHORE STATE BANK a
Pennsylvania-chartered commercial bank located in Jersey Shore, Pennsylvania
(the “Company”), and Lynn S. Bowes (the “Director”) selected to participate in
this Amendment and Restatement 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 the Director entered into the Jersey Shore State Bank
Director Deferred Fee Agreement (the “1999 Agreement”).  The Company and the Director now wish to
amend and restate the 1999 Agreement to update the terms and provisions
contained therein.  This new Agreement
shall rescind and replace the existing 1999 Agreement.


 


INTRODUCTION


 


To encourage
the 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 defer
Fees.  The Company will pay the benefits
from its general assets.


 


AGREEMENT


 


The Director
and the Company agree as follows:


 


Article 1


Definitions


 


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


 


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


 


1.2                                 “Beneficiary Designation Form” means the form established
from time to time by the Plan Administrator that a Director completes, signs
and returns to the Plan Administrator to designate one or more beneficiaries.


 


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


 





















 


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


 


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


 


(C)  the occurrence of, or execution of an
agreement providing for, a reorganization, merger, consolidation or other
similar transaction or connected series of transactions of the Corporation as a
result of which either (a) the Corporation does not survive or (b) pursuant to
which shares of the Corporation common stock (“Common Stock”) would be
converted into cash, securities or other property, unless, in case of either
(a) or (b), the holders of Corporation Common Stock immediately prior to such
transaction will, following the consummation of the transaction, beneficially
own, directly or indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors of the corporation surviving, continuing or resulting from such
transaction; or


 


(D)  the occurrence of, or execution of an
agreement providing for, a reorganization, merger, consolidation, or similar
transaction of the Corporation, or before any connected series of such
transactions, if, upon consummation of such transaction or transactions, the
persons who are members of the Board of Directors of the Corporation immediately
before such transaction or transactions cease or, in the case of the execution
of an agreement for such transaction or transactions, it is contemplated in
such agreement that upon consummation such persons would cease, to constitute a
majority of the Board of Directors of the Corporation or, in a case where the
Corporation 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 designated as a “Change in Control”  for
purposes of this Agreement by a resolution adopted by the Board of Directors of
the Corporation with the affirmative vote of a majority of the non-employee
directors in office at the time the resolution is adopted; in the event any
such resolution is adopted, the Change in Control event specified thereby shall
be deemed incorporated herein by reference and thereafter may not be amended,
modified or revoked without the written agreement of Director.


 


2





















 


Notwithstanding anything else to the contrary set
forth in this Agreement, if (i) an agreement is executed by the Company
providing for any of the transactions or events constituting a Change in
Control as defined herein, and the agreement subsequently expires or is
terminated without the transaction or event being consummated, and (ii)
Director’s service did not terminate during the period after the agreement and
prior to such expiration or termination, for purposes of this Agreement it
shall be as though such agreement was never executed and no Change in Control
event shall be deemed to have occurred as a result of the execution 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 individual
or group disability insurance policy covering the Director, or by the Social Security
Administration, to be a disability rendering the Director totally and
permanently disabled.  The Director must
submit proof to the Plan Administrator of the carrier’s or Social Security
Administration’s determination upon the request of the Plan Administrator; or
(b) such definition of Disability promulgated by the Secretary of the Treasury
pursuant to legislation affecting non-qualified deferred compensation plans, in
which case such definition shall supersede any other definition of Disability in
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 Fee
Deferrals.


 


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


 


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


 


1.13                           “Plan Administrator” means the plan administrator described
in Section 10.10.


 


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


 


1.15                           “ROE” means return on equity, measured by dividing
annualized net income


 


3





















 


of the Corporation by average
total equity of the Corporation for the applicable period.


 


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


 


1.17                           “Unforeseeable Financial Emergency” means a severe financial hardship to a Director, resulting
from a sudden and unexpected illness or accident of the Director, the Director’s
spouse, or a dependent (as defined in Section 152(a) of the Code) of the
Director, loss of the Director’s property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Director.


 


Article 2


Deferral Election


 


2.1                                 Initial
Election.  The Director shall make an
initial deferral election under this Agreement by filing with the Company
signed Election Forms A, B and C within thirty (30) days after the date of this
Agreement.  The Election Forms shall be
effective to defer only Fees earned after the date the Election Forms are
received by the Company.


 


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


 


Article 3


Deferral Account


 


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


 


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


 


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


 


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


 


4





















 


at an annual rate equal to fifty percent (50%) of the Corporation’s
prior year ROE, compounded monthly, on the first business 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 yield
on the 10 Year Treasury Note as specified in the applicable 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 setting forth the Deferral Account balance.


 


3.3                                 Accounting Device Only. 
The Deferral Account is solely a device for measuring amounts to be paid
under this Agreement.  The Deferral
Account is not a trust fund of any kind. 
The Director is a general unsecured creditor of the Company for the
payment of benefits.  The benefits
represent the mere 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, or garnishment 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 Normal Benefit Age, the Company shall pay to the Director
the benefit described in this 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 at the date specified in
Election Form B.


 


4.1.2                        Payment of
Benefit.  The Company shall
pay the benefit to the Director in the form specified in Election Form C.  If installment payments are elected, the Company
shall continue to credit interest to the Deferral 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 immediately prior to commencement of benefit
payments.


 


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


 


4.2.1                        Amount of
Benefit.  The benefit under
this Section 4.2 is Deferral Account balance at the date specified in Election
Form B.  If there is a delay of more than
thirty (30) days between the Director’s Termination of Service and the date
payout commences, the Company shall continue to credit interest to the Deferral
Account balance, as specified in Section 4.2.2, based on the yield on the 10
Year Treasury Note until payments commence.


 


5





















 


4.2.2                        Payment of
Benefit.  The Company shall
pay the benefit to the Director in the form specified in Election Form C.  If the Director terminates service as a
Director and has elected payment to be distributed at Normal Benefit Age, the
Company shall credit interest to the Deferral Account at a rate based on the
yield on the 10 Year Treasury Note, compounded monthly.  The initial rate shall be based on the
average yield in effect for the month immediately prior to Termination of
Service.  This rate will reset on January
1st of each calendar year based on the average yield in effect for
December of the prior year.  If
installment payments are elected, the Company shall continue to credit interest
on the undistributed account balance during any applicable installment 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 immediately prior to
commencement of payments.


 


4.3                                 Disability Benefit. 
Upon Termination of Service for Disability prior to the Normal Benefit
Age, the Company shall pay to the Director the benefit described in this
Section 4.3 in lieu 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 at the date specified in
Election Form B.  If there is a delay of
more than thirty (30) days between the Director’s Termination of Service and
the date payout commences, the Company shall continue to credit interest to the
Deferral Account balance, as specified in Section 4.3.2, based on the yield on
the 10 Year Treasury Note until payments commence.


 


4.3.2                        Payment of
Benefit.  The Company shall
pay the benefit to the Director in the form specified in Election Form C.  If the Director has elected payment to be
distributed at Normal Benefit Age, the Company shall credit interest to the
Deferral Account at a rate based on the yield on the 10 Year Treasury Note,
compounded monthly.  The initial rate
shall be based on the average yield in effect for the month immediately prior
to Termination of Service.  This rate
will reset on January 1st of each calendar year based on the average
yield in effect for December of the prior year. 
If installment payments are elected, the Company shall continue to
credit interest on the undistributed account balance during any applicable
installment 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 immediately
prior to commencement of payments.


 


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


 


4.4.1                        Amount of
Benefit.  The benefit under
this Section 4.4 is Deferral Account balance at the date specified in Election
Form B.  If there is a delay of more than
thirty (30) days between the Director’s Termination of Service and the


 


6





















 


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


 


4.4.2                        Payment of
Benefit.  The Company shall
pay the benefit to the Director in the form specified in Election Form C.  If the Director has elected payment to be
distributed at Normal Benefit Age, the Company shall credit interest to the
Deferral Account at a rate based on the yield on the 10 Year Treasury Note,
compounded monthly.  The initial rate
shall be based on the average yield in effect for the month immediately prior
to Termination of Service.  This rate
will reset on January 1st of each calendar year based on the average
yield in effect for December of the prior year. 
If installment payments are elected, the Company shall continue to
credit interest on the undistributed account balance during any applicable
installment 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 immediately
prior to commencement of payments.


 


4.5                                 Hardship Distribution.  If the Director experiences an Unforeseeable
Emergency, the Director may petition the Board to suspend Deferrals required to
be made by such Director, to the extent deemed necessary by the Board to
satisfy the Unforeseeable Emergency.  If
suspension of Deferrals is not sufficient to satisfy the Director’s
Unforeseeable Emergency, or if


 


(i)                                     Reimbursement or compensation by insurance or
otherwise; or


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


 


cannot satisfy the Director’s Unforeseeable
Emergency, then the Director may further petition the Board to receive a
partial or full payout from the Agreement. 
The Director shall only receive a payout from the Agreement to the
extent such payout is deemed necessary by the Board to satisfy the Director’s
Unforeseeable Emergency, plus an amount necessary to pay taxes reasonably
anticipated as a result of the distribution, up to a maximum of the
Director’s Deferral Account balance, calculated as of the close of business on
or around the date on which the amount becomes payable, as determined 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, but
prior to commencement of benefit payments, the Company shall pay to the
Director’s beneficiary the benefit described in this Section 5.1 in lieu of any
other benefit under this Agreement.


 


5.1.1                        Amount of
Benefit.  The benefit amount
under Section 5.1 is the


 


7





















 


greater of: (a) the Deferral Account balance or (b) One Hundred Nine
Thousand Two Hundred Ninety Dollars ($109,290) multiplied by the ratio
representing the actual cumulative Fees deferred at the date of death as a
percentage of the planned cumulative Fee deferrals at the inception of this
Agreement as detailed in Exhibit D, provided such ratio shall not exceed one
hundred percent (100%).  In calculating
this ratio, the amount shall be interpolated to the nearest month as of the
date of death.


 


5.1.2                        Payment of
Benefit.  The Company shall
pay the benefit to the beneficiary in the form specified in Election Form C,
with payment made or commencing within 90 days following the receipt of
Director’s death certificate.  If
installment payments are elected, the Company shall continue to credit interest
on the undistributed account balance during any applicable installment 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 immediately prior to
commencement of payments.


 


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


 


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


 


Article 6


Beneficiaries


 


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


 


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


 


8





















 


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


 


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


 


6.4                                 No Beneficiary Designation. 
If the Director dies without a valid beneficiary designation, or if all designated
Beneficiaries predecease the Director, then the Director’s spouse shall be the
designated Beneficiary.  If the Director
has no surviving spouse, the benefits shall be made to the personal
representative of the Director’s estate.


 


6.5                                 Facility of Payment.  If the Plan Administrator determines in its
discretion that a benefit is to be paid to a minor, to a person declared
incompetent, or to a person incapable of handling the disposition of that
person’s property, the Plan Administrator may direct payment of such benefit to
the guardian, legal representative or person having the care or custody of such
minor, incompetent person or incapable person. 
The Plan Administrator may require proof of incompetence, minority or
guardianship as it may deem appropriate prior to distribution of the
benefit.  Any payment of a benefit shall
be a payment for the account of the Director and the Beneficiary, as the case
may be, and shall be a complete discharge of any liability under the Agreement
for such payment amount.


 


Article 7


General Limitations


 


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


 


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


 


(ii)                    The Director’s
conviction of a crime, either federal or state, evidencing moral turpitude or
dishonesty; or


 


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


 


7.2                                 Removal.  Notwithstanding
any provision of this Agreement to the contrary, the interest credited to the
deferred amounts since the date of execution of this Agreement shall be
forfeited if the Director is subject to a final removal or prohibition order
issued by an appropriate federal banking agency pursuant to Section 8(e) of the
Federal Deposit Insurance Act (“FDIA”).


 


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


 


9





















 


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


 


7.4                                 Non-compete Provision. 
The Director shall forfeit any undistributed interest credited to the
deferred amounts since the date of execution of this Agreement under this
Agreement if during the term of this Agreement, and before all benefits have
been paid, the Director, directly or indirectly, either as an individual or as
a 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
employed by, participates in, or becomes connected in any manner with the
ownership, management, operation or control of any bank, savings and loan or
other similar financial institution if the Director’s responsibilities will
include providing banking or other financial services within the fifty (50)
miles of any office maintained by the Company as of the date of the termination
of the Director’s service;


 


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


 


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


 


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


 


(v)                                 divulges,
discloses, or communicates to others in any manner whatsoever, any confidential
information of the Company, to the knowledge of the Director, including, but
not limited to, the names and addresses of customers or prospective customers,
of the 


 


10





















 


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


 


7.5                                 Judicial Remedies.  In
the event of a breach or threatened breach by the Director of any provision of
these restrictions, the Director recognizes the substantial and immediate harm
that a breach or threatened breach will impose upon the Company or any of its
subsidiaries or Affiliates, and further recognizes that in such event monetary
damages may be inadequate to fully protect the Company or any of its
subsidiaries or Affiliates. Accordingly, in the event of a breach or threatened
breach of the provisions of this Agreement, the Director consents to the
Company’s or any of its subsidiaries’ entitlement to such ex  parte,
preliminary, interlocutory, temporary or permanent injunctive, or any other
equitable relief, protecting and fully enforcing the Company’ or any of its
subsidiaries’ rights hereunder and preventing the Director from further
breaching any of his obligations set forth herein.  The Director expressly waives any
requirement, based on any statute, rule of procedure, or other source, that the
Company or any of its subsidiaries or Affiliates post a bond as a condition of
obtaining any of the above-described remedies. 
Nothing herein shall be construed as prohibiting the Company or any of
its subsidiaries or Affiliates from pursuing any other remedies available to
the Company or any of its subsidiaries or Affiliates at law or in equity for
such breach or threatened breach, including the recovery of damages from the
Director.  The Director expressly
acknowledges and agrees that: (i) the restrictions set forth in Section 7.4 are
reasonable, in terms of scope, duration, geographic area, and otherwise, (ii)
the protections afforded the Company or any of its subsidiaries or Affiliates
in Section 7.4 are necessary to protect its legitimate business interest, (iii)
the restrictions set forth in Section 7.4 will not be materially adverse to the
Director’s service with the Company, and (iv) his agreement to observe such
restrictions forms a material part of the consideration for this Agreement.


 


7.6                                 Overbreadth of Restrictive Covenant.  It is the intention of the parties that if
any restrictive covenant in this Agreement is determined by a court of
competent jurisdiction to be overly broad, then the court should enforce such
restrictive 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 Section
7.4 shall not apply if there is a Change in Control.


 


7.8                                 Suicide or Misstatement.  The Director shall forfeit all interest
credited since the date of execution of this Agreement if the Director commits
suicide within two years


 


11





















 


after the date of this
Agreement, or if the insurance company denies coverage for (i) material
misstatements of fact made by the Director on any application for life
insurance purchased by the Company, or (ii) any other reason.  The Company shall have no liability to the
Director for any denial of coverage by the insurance company.


 


Article 8


Claims and Review Procedures


 


8.1                                 Claims Procedure.  A
Director or Beneficiary (“claimant”) who has not received benefits under the
Agreement that he or she believes should be paid shall make a claim for such
benefits as follows:


 


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


 


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


 


8.1.3                        Notice of
Decision.  If the Plan
Administrator denies part or all of the claim, the Plan Administrator shall
notify the claimant in writing of such denial. 
The Plan Administrator shall write the notification in a manner
calculated 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 the Agreement on which the denial is
based;


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


(d)         An
explanation of the Agreement’s review procedures and the time limits applicable
to such procedures.


 


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


 


8.2.1                        Initiation –
Written Request.  To initiate
the review, the claimant, within 60 days after receiving the Plan Administrator’s
notice of denial, must file with the Plan Administrator a written request for
review.


 


12





















 


8.2.2                        Additional
Submissions – 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 the
claimant, upon request and free of charge, reasonable access to, and copies of,
all documents, records and other information relevant to the claimant’s claim
for benefits.


 


8.2.3                        Considerations
on Review.  In considering the
review, the Plan Administrator shall take into account all materials and
information the claimant submits relating to the claim, without regard to
whether such information was submitted or considered in the initial benefit
determination.


 


8.2.4                        Timing of
Plan Administrator Response. 
The Plan Administrator shall respond in writing to such claimant within
60 days after receiving the request for review. 
If the Plan Administrator determines that special circumstances require
additional time for processing the claim, the Plan Administrator can extend the
response 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 is
required.  The notice of extension must
set forth the special circumstances and the date by which the Plan Administrator
expects to render its decision.


 


8.2.5                        Notice of
Decision.  The Plan
Administrator shall notify the claimant in writing of its decision on
review.  The Plan Administrator shall
write the notification in a manner calculated 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 the
Agreement on which the denial is based, and


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


 


Article 9


Amendments and Termination


 


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


 


13





















 


Article 10


Miscellaneous


 


10.1                           Binding Effect.  This
Agreement 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 to
remain as a member of the Company’s Board, nor does it interfere with the
Company’s right to terminate the Director’s service.  It also does not require the Director to
remain in service nor interfere with the Director’s right to terminate service
at 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 Withholding.  The
Company shall withhold any taxes that are required to be withheld from the
benefits provided under this Agreement.


 


10.5                           Applicable Law.  The
Agreement and all rights hereunder shall be governed by the laws of the
Commonwealth of Pennsylvania, except to the extent preempted by the laws of the
United States of America.


 


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


 


10.7                           Entire Agreement.  This
Agreement constitutes the entire agreement between the Company and the Director
as to the subject matter hereof.  No
rights are granted to the Director by virtue of this Agreement other than those
specifically set forth herein.


 


10.8                           Reorganization.  The Company shall not merge or consolidate
into or with another company, or reorganize, or sell substantially all of its
assets to another company, firm or person unless such succeeding or continuing
company, firm or person agrees to assume 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 survivor company.


 


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


 


10.9.1                  Interpreting the provisions of the
Agreement;


 


10.9.2                  Establishing and revising the method
of accounting for the


 


14





















 


Agreement;


 


10.9.3                  Maintaining a record of benefit
payments; and


 


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


 


10.10                     Named Fiduciary and Plan Administrator.  The Company shall be the named fiduciary and
Plan Administrator under this Agreement. 
The named fiduciary may delegate to others certain aspects of the
management and operation responsibilities of the Agreement including the
service of advisors and the delegation of ministerial duties to qualified
individuals.


 


IN
WITNESS WHEREOF, the Director and a duly authorized officer of the Company have
signed this Agreement as of the date indicated above.


 


	
  DIRECTOR:

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
  JERSEY SHORE STATE BANK

  
	
   

  	
   

  	
   

  
	
  /s/ Lynn S. Bowes

  	
   

  	
   

  	
  By 

  	
  /s/ Ronald A. Walko

  	
   

  
	
  LYNN S. BOWES

  	
   

  	
   

  
	
   

  	
   

  	
  Title  President
  and Chief Executive Officer

  
						



 


By execution hereof, Penns
Woods Bancorp, Inc. consents to and agrees to be bound by the terms 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

  



 


15





















 


EXHIBIT A


 


JERSEY SHORE STATE BANK


DIRECTOR DEFERRED FEE AGREEMENT


 


Election Form A


 


Deferral Election:


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


 


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


 


 


	
  Signature

  	
  /s/ Lynn S. Bowes

  	
   

  



 


Date  October 1, 2004


 


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


 


 


JERSEY SHORE STATE BANK


 


	
  By

  	
  /s/  Ronald A. Walko

  	
   

  



 


Title  President and Chief
Executive Officer


 


16





















 


EXHIBIT B


 


JERSEY SHORE STATE BANK


DIRECTOR DEFERRED FEE AGREEMENT


 


Election Form B


 


Normal Benefit Age:                 I elect a
Normal Benefit Age of 70.


 


Timing of Payout:


 


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


 


o                                    Normal Benefit Age


 


ý                                    Termination
of Service


 


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


 


o                                    Normal
Benefit Age


 


ý                                    Termination
of Service


 


If a Change in Control 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 (Initial One):


 


o                                    Normal
Benefit Age


 


ý                                    Termination
of Service


 


o                                    the
date the Change in Control occurs


 


	
  Signature

  	
  /s/ Lynn S. Bowes

  	
   

  



 


Date  October 1, 2004


 


 


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


 


JERSEY SHORE STATE BANK


	
  By

  	
  /s/  Ronald A. Walko

  	
   

  



 


Title  President and 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)  ý

  	
   

  	
  (d)  o

  
	
  4.2.2

  	
   

  	
  Early Termination

  	
   

  	
  (a)  o

  	
   

  	
  (b)  o

  	
   

  	
  (c)  ý

  	
   

  	
  (d)  o

  
	
  4.3.2

  	
   

  	
  Disability

  	
   

  	
  (a)  o

  	
   

  	
  (b)  o

  	
   

  	
  (c)  ý

  	
   

  	
  (d)  o

  
	
  4.4.2

  	
   

  	
  Change in Control

  	
   

  	
  (a)  o

  	
   

  	
  (b)  o

  	
   

  	
  (c)  ý

  	
   

  	
  (d)  o

  
	
  5.1.2

  	
   

  	
  Death

  	
   

  	
  (a)  o

  	
   

  	
  (b)  o

  	
   

  	
  (c)  ý

  	
   

  	
  (d)  o

  



 


 


	
  Signature

  	
  /s/ Lynn S. Bowes

  	
   

  



 


Date  October 1, 2004


 


 


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


 


JERSEY SHORE STATE BANK


 


	
  By

  	
  /s/  Ronald A. Walko

  	
   

  



 


Title  President and Chief Executive
Officer


 





















 


EXHIBIT D


 


JERSEY SHORE STATE BANK


DIRECTOR DEFERRED FEE AGREEMENT


 


Planned Fees Deferrals


 




	
  Plan Year

  	
   

  	
  Planned Annual

  Deferrals

  	
   

  	
  Planned Cumulative

  Deferrals

  	
   

  
	
  1

  	
   

  	
  3,120

  	
   

  	
  3,120

  	
   

  
	
  2

  	
   

  	
  12,854

  	
   

  	
  15,974

  	
   

  
	
  3

  	
   

  	
  13,240

  	
   

  	
  29,214

  	
   

  
	
  4

  	
   

  	
  13,637

  	
   

  	
  42,851

  	
   

  
	
  5

  	
   

  	
  3,512

  	
   

  	
  46,363