Exhibit 10 (vii)


 


EMPLOYMENT AGREEMENT


 


 


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


 


WITNESSETH:


 


WHEREAS, Bank is the wholly
owned banking subsidiary of Penns Woods;


 


WHEREAS, Penns Woods and
Bank desire to employ Executive to serve in the capacity of Senior Vice
President of each of Penns Woods and Bank on the terms and conditions set forth
herein;


 


WHEREAS, Executive desires
to accept employment with each of Penns Woods and Bank on the terms and
conditions set forth herein.


 


AGREEMENT:


 


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


 


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


 


2.             Duties of
Employee.  Executive
shall perform and discharge well and faithfully such duties as an executive officer
of Penns Woods and of Bank as may be assigned to Executive from time to time by
the respective Boards of Directors of Penns Woods and of Bank.  Executive shall be employed as Senior Vice
President of Penns Woods and of Bank, and shall hold such other titles as may
be given to him from time to time by the respective Boards of Directors of
Penns Woods and of Bank.  Executive shall
devote his full time, attention and energies to the business of Penns Woods and
of Bank during the Employment Period (as defined in Section 3 of this
Agreement); provided, however, that this Section 2 shall not be construed
as preventing Executive from (a) investing Executive’s personal assets in
enterprises that do not compete with Penns Woods or Bank or (b) being
involved in any 


 


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


 


3.             Term of Agreement.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(e)           Executive agrees that, in
the event his employment under this Agreement is terminated, Executive shall
concurrently resign as a director of Penns Woods or Bank, or any subsidiary or
affiliate of Penns Woods or Bank, if he is then serving as a director of any of
such entities.


 


4.             Employment Period
Compensation.


 


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


 


(b)           Vacation.  During the Employment Period, Executive shall
be entitled to paid annual vacation in accordance with the policies as
established from time to time by the Boards of Directors of Penns Woods and
Bank plus such other personal or bonus days as may be set forth in the policies
of Penns Woods and Bank.  Executive shall
not be entitled to receive any additional compensation from Penns Woods and
Bank for failure to take a vacation, nor shall Executive be able to accumulate
unused vacation time from one year to the next, except to the extent authorized
by the Boards of Directors or the policies of Penns Woods and Bank.


 


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(c)           Employee Benefit Plans.  During the Employment Period, Executive shall
be entitled to participate in and receive the benefits of any pension or other
retirement benefit plan, profit sharing, stock option, incentive bonus,
employee stock ownership, or other plans, benefits and privileges given to
employees and executive officers of Penns Woods and Bank, to the extent
commensurate with Executive’s then existing duties and responsibilities as
fixed by the Boards of Directors of Penns Woods or Bank, in the same manner as
other executive officers.  Penns Woods
and Bank shall not make any changes in such plans, benefits or privileges which
would adversely affect Executive’s rights or benefits thereunder, unless such
change occurs pursuant to a program applicable to all executive officers of
Penns Woods and Bank and does not result in a proportionately greater adverse
change in the rights of or benefits to Executive as compared with any other
executive officer of Penns Woods and Bank. 
Nothing paid to Executive under any plan or arrangement presently in
effect or made available in the future shall be deemed to be in lieu of the
salary payable to Executive pursuant to Section 4(a) hereof.


 


5.             Termination of Employment
Following Change in Control.


 


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


 


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


 


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


 


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


 


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


 


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


 


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the same may be increased
from time to time after the Change in Control;


 


(vi)          any failure to continue
Executive’s participation in any of Penns Woods’ incentive compensation or
bonus plans in which Executive participated at the time of the Change in
Control or any change or amendment to any provisions of any of such plans which
would materially decrease the potential benefits to Executive under any of such
plans;


 


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


 


(viii)        any requirement that
Executive travel in performance of his duties on behalf of Penns Woods or Bank
for a significantly greater period of time during any year than was required of
Executive during the year preceding the year in which the Change in Control
occurred;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


6.             Rights in Event of
Termination of Employment.


 


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


 


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


 


(c)           The amounts payable pursuant
to this Section 6 shall constitute Executive’s sole and exclusive remedy
in the event of involuntary termination of Executive’s employment by Penns
Woods and Bank.


 


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7.             Covenant Not to Compete.


 


(a)           Executive hereby
acknowledges and recognizes the highly competitive nature of the business of Penns
Woods and Bank and accordingly agrees that, during and for the applicable
period set forth in Section 7(c) hereof, Executive shall not:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


8.             No Disclosure of
Confidential Information.  The
Executive agrees that all customer lists and information, files and records now
or hereafter used by the Penns Woods or Bank are the property of Penns Woods
and Bank and constitute trade secrets. 
Accordingly, the Executive acknowledges that the trade secrets of Penns
Wood and Bank as they may exist from time to time and other confidential
information concerning the business, products, technical information, sales
activities, procedures, promotion, pricing techniques, business plans, customer
lists and credit and financial data concerning customers of Penns Wood and Bank
are valuable, special and unique assets of Penns Wood and Bank, access to and
knowledge of which are essential to the performance of the Executive’s duties
under this Agreement.  Executive further
agrees that all knowledge and information described in the preceding sentence
not in the public domain and heretofore or in the future obtained by the
Executive as a result of employment by the Bank shall be considered
confidential information and shall not be disclosed without the consent of
Penns Wood and Bank.  Nothing contained
herein shall be deemed to preclude the Executive from responding to requests
for information or inquiries from federal or state banking regulations or
complying with applicable laws and regulations.


 


9.             Equitable Relief.  Executive acknowledges that the restrictions
contained in Sections 7 and 8, in view of the nature of the business in
which Penns Woods and Bank are engaged, are reasonable and necessary in order
to protect the legitimate interests of Penns Woods and Bank and that any
violation thereof would result in irreparable injury to Penns Woods and Bank,
and Executive therefore acknowledges that, in the event of Executive’s
violation of any of these restrictions, Penns Woods or Bank shall be entitled
to obtain from any court of competent jurisdiction preliminary and permanent
injunctive relief as well as damages and an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
shall be cumulative and in addition to any other remedies to which Penns Woods
or Bank may be entitled.


 


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10.           Notices.  Except as otherwise provided in this
Agreement, any notice required or permitted to be given under this Agreement
shall be deemed properly given if in writing and if mailed by registered or
certified mail, postage prepaid with return receipt requested, to Executive’s
residence, in the case of notices to Executive, and to the principal executive
offices of Penns Woods and Bank, in the case of notices to Penns Woods and
Bank.


 


11.           Waiver. No provision
of this Agreement may be modified, waived, or discharged unless such waiver,
modification, or discharge is agreed to in writing and signed by Executive and
an executive officer specifically designated by the Boards of Directors of
Penns Woods and Bank.  No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.


 


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


 


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


 


14.           Successors; Binding
Agreement.


 


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


 


(b)           This Agreement shall inure
to the benefit of and be enforceable by Executive’s personal or legal
representatives, executors, administrators, heirs, distributees, devisees, and
legatees.  If Executive should die after
a Notice of Termination is delivered by Executive, or following termination of
Executive’s employment without Cause, and any amounts would be payable to
Executive under this Agreement if Executive had continued to live, all such
amounts shall be paid 


 


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in accordance with the terms of this
Agreement to Executive’s devisee, legatee, or other designee, or, if there is
no such designee, to Executive’s estate.


 


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


 


16.           Arbitration. Penns Woods,
Bank and Executive recognize that, in the event a dispute should arise between
them concerning the interpretation or implementation of this Agreement, lengthy
and expensive litigation will not afford a practical resolution of the issues
within a reasonable period of time. 
Consequently, each party agrees that all disputes, disagreements and
questions of interpretation concerning this Agreement other than matters
relating to Section 7 (Covenant Not to Compete) are to be submitted for
resolution to the American Arbitration Association (the “Association”) in
accordance with the Association’s National Rules for the Resolution of
Employment Disputes or other applicable rules then in effect (“Rules”) at
a location selected by Penns Woods. 
Penns Woods and Bank or Executive may initiate an arbitration proceeding
at any time by giving notice to the other in accordance with the Rules.  Penns Woods and Bank and Executive, may, as a
matter of right, mutually agree on the appointment of a particular arbitrator
from the Association’s pool.  The
arbitrator shall not be bound by the rules of evidence and procedure of
the courts of the Commonwealth of Pennsylvania but shall be bound by the
substantive law applicable to this Agreement. 
The decision of the arbitrator, absent fraud, duress, incompetence or
gross and obvious error of fact, shall be final and binding upon the parties
and shall be enforceable in courts of proper jurisdiction.  Following written notice of a request for
arbitration, Penns Woods, Bank and Executive shall be entitled to an injunction
restraining all further proceedings in any pending or subsequently filed
litigation concerning this Agreement, except as otherwise provided herein.


 


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


 


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


 


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


 


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


 


PENNS WOODS BANCORP, INC.


 


	
   

  	
  By

  	
  /s/

  	
  Theodore
  Reich

  	
  (SEAL)

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
  /s/
  

  	
  Ronald
  Walko

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Penns
  Woods”

  	
   

  
								



 


JERSEY SHORE STATE BANK


 


	
   

  	
  By

  	
  /s/
     Theodore Reich

  	
  (SEAL)

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
  /s/

  	
  Ronald
  Walko

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Bank”

  	
   

  	
   

  
									



 


Witness:


 


	
  /s/    Carolyn
  Wolfanger

  	
   

  	
  /s/  
  William H. Rockey

  	
  (SEAL)

  
	
   

  	
   

  	
  William H. Rockey

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  “Executive”

  
							



 


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