Document:

Exhibit 10.5

 

 

 

2018
Annual Performance Incentive Award Plan – Mortgage Lenders

 

Section 1: Purpose
of the Plan

 

The purpose of the Performance Incentive Award
Plan ("the Plan") is to provide variable compensation to Citizens & Northern employees who are actively engaged in
interviewing residential real estate applicants, processing the applications and closing the loans. The Plan is designed to reward
mortgage lending employees who attain and sustain consistently high levels of performance by meeting and exceeding defined goals
and to provide a component of the compensation package essential to retaining and attracting quality employees in mortgage lending
positions. Incentive awards are not directly tied to Company/mortgage business profits nor the terms of the closed-end mortgage
transaction or a proxy for a transaction term. The expense of the plan is incorporated into the Company’s operating budget.
The objective is to align the interests of these employees with the interests of the Company in obtaining superior performance
results while being in compliance with the SAFE Act and 12 CFR Part 1026.36 (Regulation Z).

 

Section 2: General
Description

 

There are two components of the Plan: (1) unit/functional performance;
and (2) individual performance. The individual performance component will be subject to an evaluation of the participants’
overall contributions to the “team”. To earn the individual component, the participant must attain at least the threshold
performance level.The unit/functional component is based on the attainment of pre-established goals by the applicable branch
or mortgage lending business unit,. To receive the unit/functional bonus payout, the participant must achieve at least the
threshold level.

 

In addition to goals based on production, the
Plan requires management to consider non-financial goals designed to improve operational and risk management effectiveness, as
appropriate for each participant’s position. The Plan permits future inclusion of additional positions during a Plan year,
if the need arises.

 

The incentive formulas ensure a level of incentive
award that is competitive with comparable positions and job levels in similar financial institutions, thus enabling Citizens &
Northern to attract, retain, and motivate high-performing mortgage lending employees.

 

The Plan is established to augment regular
salary and benefit programs already in existence. The Incentive Plan is not meant to be a substitute for salary increases but supplemental
to salary and as stated earlier, a reward for “exceptional" performance.

 

The Plan has been developed to recognize
that the amount of incentive bonus award attainable by key mortgage lending employees should vary depending upon the
employee’s position with the company and the competitive levels of incentive bonus for those positions within the
banking and financial service industry. Thus threshold, target and maximum Incentive Opportunities are established for each
position.

 

     

     

    

 

Section 3: Other Payment
Conditions

 

Termination for Reasons Other Than Death, Permanent
Disability or Retirement – In the event of termination of employment for reasons other than death, permanent
disability or retirement, the participant, at the discretion of the committee, may forfeit all unpaid incentive awards.

 

In the event a participant becomes disabled
for a period greater than two (2) weeks, any salary continuation as a result of the Corporation’s short and long-term disability
programs will not be included in the base salary used for the incentive bonus calculation.

 

Section 4: Administration
of the Plan

 

Throughout this Plan, reference to the actions and authority of
the Compensation Committee of the Board of Directors ("the Committee") presumes that the Committee will recommend, and
the board of directors will approve or disapprove, final disposition of all matters pertaining to administration of the Plan. The
Committee, with board approval, has the responsibility to interpret, administer, and amend the Plan as necessary. The recommendations
of the Committee as approved by the board, affecting the construction, interpretation, and administration of the Plan shall be
final and binding on all parties, including the Corporation, its subsidiaries and employees.

 

At or before the beginning of each Plan year,
the Committee will review and may revise the operating rules. The Incentive Opportunity levels for individual and unit/functional
awards for attaining those targets may be changed in order to maintain a competitive incentive program. However, it is expected
that the Plan will require modification only when significant changes in the organization, goals, personnel, or performance occur.
The Chief Executive Officer shall be the Plan czar with the power to control and oversee proper administration of the Plan, and
may recommend to the Committee proposed changes to the operating rules. Additionally, the Committee may engage a third party expert
to review and amend the plan.

 

An individual or individuals designated by
the Chief Executive Officer will perform the computation of incentive awards. Maintenance of participant payment records shall
be the responsibility of the Human Resource Director.

 

Section 5: Plan Participants

 

Executive management shall select and recommend
for participation in the Plan employees in those job positions that are responsible for mortgage lending functions. Those job positions
which are selected for participation in the Plan will be in positions that normally include an incentive bonus component in the
compensation package offered by similar financial institutions.

 

At or before the beginning of each Plan year,
the Committee shall review the recommendations of management on the selection of those positions eligible for participation in
the Plan for that year.

 

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Additionally, management shall recommend a threshold, target and
maximum Incentive Opportunity percentage of base salary for each position. Participants shall be notified of their eligibility
as soon as selection is completed and the board of directors has adopted the Plan. The Committee shall review and recommend the
inclusion of participants to the full board for their approval.

 

Positions and thus participants may be added
during the Plan year at the discretion of management and the Committee, and the incentive award will be prorated from date of entry
into the Plan.

 

Section 6: Payment
of Individual Incentive Compensation Awards

 

Within 60 days following the end of the Plan
year and as soon as the participant’s performance has been evaluated, participants will receive their incentive payment.

 

Section 7: Incentive
Compensation Plan Operating Rules

 

Before the beginning of each Plan year, the
Committee may review and revise, if deemed appropriate, the operating rules of the Plan for the year then beginning. The operating
rules shall include the following:

 

		a)	Identification of positions selected for participation in the Plan

 

		b)	The method for determining the amount of the total bonus to be paid to Plan participants.

 

		c)	Schedules and formulas for determining the amount of the incentive compensation awards to Plan participants for the Plan year
then beginning, including threshold, target and maximum performance measures and the percentage of bonus award determined by functional/unit
and individual performances. Participants will be informed at or before the Plan year of the manner in which performance will be
evaluated.

 

		d)	Other administrative and procedural rules, which the Committee considers appropriate.

 

After approval by the Committee and the board
of directors, management shall, as soon as practical, inform each of the participants of the operating rules for the Plan year
then beginning.

 

Section 8: Performance
Progress Reporting

 

Participants and their direct supervisors will
meet periodically to review their performance relative to the established unit/functional and individual goals.

  

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Section 9: Amendment
or Termination of Plan

 

The Committee, with concurrence of the board
of directors, may terminate, amend, or modify this Plan at any time. The termination, amendment, or modification of the Plan will
not affect a participant's right to unpaid incentive compensation awards under this Plan.

 

Section 10: Other Considerations

 

Recoupment-  Amounts allocated or paid pursuant to this
Plan shall be subject to recovery by the Corporation under any claw back, recovery, recoupment or similar policy hereafter adopted
by the Corporation, whether in connection with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as
amended from time to time, or otherwise, whether or not required by law.

 

Active Employment Contingency- Except in the case of a retirement,
if a participant voluntarily is not actively employed by the Corporation prior to the date of bonus payout, the bonus will be forfeited.

 

Right of Assignment - No right or interest of any participant
in the Plan shall be assignable or transferable, or subject to any lien, directly, by operation of law, or otherwise, including
levy, garnishment, attachment, pledge, or bankruptcy.

 

Right of Employment - The participation in or the receipt
of an award under this Plan shall not guarantee any employee any right to continued employment; the right to dismiss any employee
is specifically reserved to the organization. The receipt of an award for any one year shall not guarantee an employee the right
to receive an award for any subsequent year.

 

Change of Position – If a participant transfers to
another position in the organization that is not included in the Incentive Compensation Plan, they will cease being a Plan participant.
At the time of the position change a determination will be made as to whether the participant will be eligible for a bonus for
the period during which they were a participant.

 

Withholding for Taxes - The organization shall have the right
to deduct from all payments under this Plan any federal, state or local taxes required by law to be withheld with respect to such
payments.

 

Salary - Salary is defined as base earnings for the year,
which includes any increase in weekly rate of pay but not including any referral awards, brokerage or insurance commissions, golden
nugget payments, taxable fringe benefits or prior bonus payments.

 

Board Prerogatives – It will be the right of the Board
of Directors to amend, alter and/or terminate the plan in its sole discretion at any time. Any Incentive Bonus earned by the Participant
at the time of amendment, alteration and/or termination shall remain due and payable as stated.

 

    	Page
                                         4
                                         of 4Exhibit 10.6

 

INDEMNIFICATION AGREEMENT

 

This Agreement made this
9th day of January, 2018, between Citizens & Northern Corporation, a bank
holding company registered under the Bank Holding Company Act of 1956, as amended, and a Pennsylvania corporation (the “Company”)
and Tracy E. Watkins, a director, officer or representative (as hereinafter defined) of the Company (the “Indemnitee”);

 

WHEREAS, the Company and
the Indemnitee are each aware of the exposure to litigation of officers, directors and representatives of the Company as such persons
exercise their duties to the Company;

 

WHEREAS, the Company and
the Indemnitee are also aware of conditions in the insurance industry that have affected and may continue to affect the Company’s
ability to obtain appropriate directors’ and officers’ liability insurance on an economically acceptable basis;

 

WHEREAS, the Company desires
to continue to benefit from the services of highly qualified, experienced and competent persons such as the Indemnitee;

 

WHEREAS, the Indemnitee
desires to serve or to continue to serve the Company as a director, officer or as a director, officer or trustee of another corporation,
joint venture, trust or other enterprise in which the Company has a direct or indirect ownership interest, for so long as the Company
continues to provide on an acceptable basis adequate and reliable indemnification against certain liabilities and expenses which
may be incurred by the Indemnitee.

 

NOW, THEREFORE, in consideration
of the foregoing premises and the mutual covenants herein contained, the parties hereto agree as follows:

 

1.       Indemnification.
Subject to the terms of this Agreement, the Company shall indemnify the Indemnitee with respect to his or her activities as a director
or officer of the Company and/or as a person who is serving or has served on behalf of the Company (“representative”)
as a director, officer, or trustee of another corporation, joint venture, trust or other enterprise, domestic or foreign, in which
the Company has a direct or indirect ownership interest (an “affiliated entity”) against expenses (including, without
limitation, attorneys’ fees, judgments, fines, and amounts paid in settlement) actually and reasonably incurred by him or
her (“Expenses”) in connection with any claim against Indemnitee which is the subject of any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative, investigative or otherwise and whether formal or
informal (a “Proceeding”), to which Indemnitee was, is, or is threatened to be made a party by reason of facts which
include Indemnitee’s being or having been such a director, officer or representative, to the extent of the highest and most
advantageous to the Indemnitee, as determined by the Indemnitee, of one or any combination of the following:

 

		(a)	The benefits provided by the Company’s Articles of Incorporation in effect on the date hereof;

 

		(b)	The benefits provided by the Articles of Incorporation or By-Laws or their equivalent of the Company
in effect at the time Expenses are incurred by Indemnitee;

 

		(c)	The benefits allowable under Pennsylvania law in effect at the date hereof;

 

		(d)	The benefits allowable under the law of the jurisdiction under which the Company exists at the time
Expenses are incurred by the Indemnitee;

 

		(e)	The benefits available under liability insurance obtained by the Company;

 

    	  

     

    

 

		(f)	The benefits available under the Company’s Directors and Officers Liability Insurance Policy
in effect at the time of the claim; and

 

		(g)	Such other benefits as are or may be otherwise available to Indemnitee.

 

Combination of two or
more of the benefits provided by (a) through (g) shall be available to the extent that the Applicable Document, as hereafter defined,
does not require that the benefits provided therein be exclusive of other benefits. The document or law providing for the benefits
listed in items (a) through (g) above is called the “Applicable Document” in this Agreement. Company hereby undertakes
to use its best efforts to assist Indemnitee, in all proper legal ways, to obtain the benefits selected by Indemnitee under items
(a) through (g) above.

 

For purposes of this Agreement,
references to “other enterprises” shall include employee benefit plans for employees of the Company or of any affiliated
entity without regard to ownership of such plans; references to “fines” shall include any excise taxes assessed on
the Indemnitee with respect to any employee benefit plan; references to “serving on behalf of the company” shall include
any services as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, the Indemnitee
with respect to an employee benefits plan, its participants or beneficiaries; references to the singular shall include the plural
and vice versa; and if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan Indemnitee shall be deemed to have acted in a manner consistent
with the standards required for indemnification by the Company under the Applicable Documents.

 

2.       Insurance.
The Company shall maintain directors’ and officers’ liability insurance for so long as Indemnitee’s services
are covered hereunder, provided and only to the extent that such insurance is available in amounts and on terms and conditions
determined by the Company to be acceptable. However, the Company agrees that the provisions hereof shall remain in effect regardless
of whether liability or other insurance coverage is at any time obtained or retained by the Company; except that any payments in
fact made to Indemnitee under an insurance policy obtained or retained by the Company shall reduce the obligation of the Company
to make payments hereunder by the amount of the payments made under any such insurance policy.

 

3.       Payment
of Expenses. At Indemnitee’s request, the Company shall pay the Expenses as and when incurred by Indemnitee, after receipt
of written notice pursuant to Section 6 hereof and an undertaking in the form of Exhibit I attached hereto by or on behalf of Indemnitee
(i) to repay such amounts so paid on Indemnitee’s behalf if it shall ultimately be determined under the Applicable Document
or applicable law that Indemnitee is required to repay such amounts and (ii) to reasonably cooperate with the Company concerning
such Proceeding. That portion of Expenses which represents attorneys’ fees and other costs incurred in defending any Proceeding
shall be paid by the Company within thirty (30) days of its receipt of such request, together with reasonable documentation (consistent,
in the case of attorneys’ fees, with Company practice in payment of legal fees for outside counsel generally) evidencing
the amount and nature of such Expenses, subject to its also having received such notice and undertaking.

 

It is understood and agreed
before the Company pays the Expenses incurred in a Proceeding brought by a banking agency in which a final order has not been entered,
the following conditions must be met:

 

		(a)	The Board of Directors, in good faith, shall determine in writing after due investigation and consideration
that the Indemnitee acted in a manner believed to be in the best interests of the Company;

 

		(b)	The Board of Directors, in good faith, shall determine after due investigation and consideration that
the payment of such Expenses will not materially or adversely affect the Company’s safety and soundness.

 

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		(c)	The Indemnitee shall agree in writing to reimburse the Company for Expenses which subsequently are
deemed “prohibited indemnification payments”, as defined in 12 C.F.R. § 359.1(1).

 

The Indemnitee shall not
participate in any way in the Board’s discussion and approval of Expenses, provided however, that the Indemnitee may present
his or her request to the Board and respond to any inquiries from the Board concerning his or her involvement in the circumstances
giving rise to the banking agency Proceeding or civil action.

 

4.       Escrow.
The Company may dedicate such amounts as the Board of Directors of the Company may from time to time authorize, as collateral security
for the funding of its obligations hereunder (and under similar agreements with other directors, officers and representatives)
by depositing assets or bank letters of credit in escrow or reserving lines of credit that may be drawn down by an escrow agent
in the dedicated amount (the “Escrow Reserve”). The Company shall promptly provide Indemnitee with a true and complete
copy of the agreement relating to the establishment and operation of the Escrow Reserve, together with such additional documentation
or information with respect to the escrow as Indemnitee may from time to time reasonably request. The Company shall promptly deliver
an executed copy of the Agreement to the escrow agent for the Escrow Reserve to evidence to that agent that Indemnitee is a beneficiary
of that Escrow Reserve and shall deliver to Indemnitee the escrow agent’s signed receipt evidencing that delivery.

 

5.       Additional
Rights. The indemnification provided in this Agreement shall not be exclusive of any other indemnification or right to which
Indemnitee may be entitled and shall continue after Indemnitee has ceased to occupy a position as an officer, director or representative
as described in Paragraph 1 above with respect to Proceedings relating to or arising out of Indemnitee’s acts or omissions
during his or her service in such position.

 

6.       Notice
to Company. Indemnitee shall provide to the Company prompt written notice of any Proceeding brought, threatened, asserted or
commenced against Indemnitee with respect to which Indemnitee may assert a right to indemnification hereunder; provided that failure
to provide such notice shall not in any way limit Indemnitee’s rights under this Agreement.

 

7.       Cooperation
in Defense and Settlement. Indemnitee shall not make any admission or effect any settlement of any Proceeding without the Company’s
written consent unless Indemnitee shall have determined to undertake his or her own defense in such matter and has waived the benefits
of this Agreement. The Company shall not settle any Proceeding to which Indemnitee is a party in any manner which would impose
any Expense on Indemnitee without his or her written consent. Neither Indemnitee nor the Company will unreasonably withhold consent
to any proposed settlement. Indemnitee and the Company shall cooperate to the extent reasonably possible with each other and with
the Company’s insurers, in attempts to defend and/or settle such Proceeding.

 

8.       Assumption
of Defense. Except as otherwise provided below, to the extent that it may wish, the Company (jointly with any other indemnifying
party similarly notified), will be entitled to assume Indemnitee’s defense in any Proceeding, with counsel mutually satisfactory
to Indemnitee and the Company. Indemnitee shall have the right to employ counsel in such Proceeding, but the fees and expenses
of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at Indemnitee’s
expense unless:

 

		(a)	the employment of counsel by Indemnitee has been authorized by the Company;

 

		(b)	counsel employed by the Company initially is unacceptable or later becomes unacceptable to Indemnitee
and such unacceptability is reasonable under then existing circumstances;

 

		(c)	Indemnitee shall have reasonably concluded that there may be a conflict of interest between Indemnitee
and the Company in the conduct of the defense of such Proceeding; or

 

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		(d)	the Company shall not have employed counsel promptly to assume the defense of such Proceeding,

 

in each of which case fees and expenses of
counsel shall be at the expense of the Company and subject to payment pursuant to this Agreement. The Company shall not be entitled
to assume the defense of Indemnitee in any Proceeding brought on behalf of the Company or as to which Indemnitee shall have drawn
either of the conclusions provided for in clauses (b) or (c) above.

 

9.       Enforcement.
In the event that any dispute or controversy shall arise under this Agreement between Indemnitee and the Company with respect to
whether the Indemnitee is entitled to indemnification in connection with any Proceeding or with respect to the amount of Expenses
incurred, then with respect to each such dispute or controversy Indemnitee may seek to enforce the Agreement through legal action
or, at Indemnitee’s sole option and written request, through arbitration. If arbitration is requested, such dispute or controversy
shall be submitted by the parties to binding arbitration in the Borough of Wellsboro in the Commonwealth of Pennsylvania, before
a single arbitrator agreeable to both parties. If the parties cannot agree on a designated arbitrator within fifteen (15) days
after arbitration is requested in writing by Indemnitee, the arbitration shall proceed in the Borough of Wellsboro in the Commonwealth
of Pennsylvania, before an arbitrator appointed by the American Arbitration Association. In either case, the arbitration proceeding
shall commence promptly under the rules then in effect of that Association and the arbitrator agreed to by the parties or appointed
by that Association shall be an attorney other than an attorney who has, or is associated with a firm having associated with it
an attorney which has been retained by or performed services for the Company or Indemnitee at any time during the five years preceding
the commencement of arbitration. The award shall be rendered in such form that judgment may be entered thereon in any court having
jurisdiction thereof. The prevailing party shall be entitled to prompt reimbursement of any costs and expenses (including, without
limitation, reasonable attorneys’ fees) incurred in connection with such legal action or arbitration; provided that Indemnitee
shall not be obligated to reimburse the Company unless the arbitrator or court which resolves the dispute determines that Indemnitee
acted in bad faith in bringing such action or arbitration.

 

10.       Exclusions.
Notwithstanding the scope of indemnification which may be available to Indemnitee from time to time under any Applicable Document,
no indemnification, reimbursement or payment shall be required of the Company hereunder with respect to:

 

		(a)	Any claim or any part thereof as to which Indemnitee shall have been determined by a court of competent
jurisdiction from which no appeal is or can be taken, by clear and convincing evidence, to have acted or failed to act with deliberate
intent to cause injury to the Company or with reckless disregard for the best interest of the Company;

 

		(b)	Any claim or any part thereof arising under Section 16(b) of the Securities Exchange Act of 1934 pursuant
to which Indemnitee shall be obligated to pay any penalty, fine, settlement or judgment;

 

		(c)	Any civil money penalty or judgment resulting from any Proceeding instituted by any federal banking
agency, or any other liability or legal expense with regard to any administrative proceeding or civil action by any banking agency
that results in a final order or settlement pursuant to which Indemnitee:

 

		(1)	is assessed a civil money penalty;

		(2)	is removed from office or prohibited from participating in the conduct of the affairs of the Company
or its affiliates;

		(3)	is required to cease and desist from taking any affirmative action described under the Federal Deposit
Insurance Act or other applicable banking laws with respect to the Company and its affiliates;

 

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		(d)	Any obligation of Indemnitee based upon or attributable to the Indemnitee gaining in fact any personal
gain, profit or advantage to which he or she was not entitled; or

 

		(e)	Any Proceeding initiated by Indemnitee without the consent or authorization of the Board of Directors
of the Company, provided that this exclusion shall not apply with respect to any claims brought by Indemnitee (i) to enforce his
or her rights under this Agreement or (ii) in any Proceeding initiated by another person or entity whether or not such claims were
brought by Indemnitee against a person or entity who was otherwise a party to such Proceeding.

 

Nothing in this Section
10 shall eliminate or diminish Company’s obligations to advance that portion of Indemnitee’s Expenses which represent
attorneys’ fees and other costs incurred in defending any Proceeding pursuant to Section 3 of this Agreement; subject however
to the undertaking by Indemnitee in the form attached hereto as Exhibit 1 and incorporated by reference herein.

 

11.       Extraordinary
Transactions. The Company covenants and agrees that, in the event of any merger, consolidation or reorganization in which the
Company is not the surviving entity, any sale of all or substantially all of the assets of the Company or any liquidation of the
Company (each such event is hereinafter referred to as an “extraordinary transaction”), the Company shall:

 

		(a)	have the obligations of the Company under this Agreement expressly assumed by the survivor, purchaser
or successor, as the case may be, in such extraordinary transaction; or

 

		(b)	otherwise adequately provide for the satisfaction of the Company’s obligations under this Agreement
in a manner acceptable to Indemnitee.

 

12.       No
Personal Liability. Indemnitee agrees that neither the directors nor any officer, employee, representative or agent of the
Company shall be personally liable for the satisfaction of the Company’s obligations under this Agreement, and Indemnitee
shall look solely to the assets of the Company and the escrow the Company may establish, as referred to in Section 4 hereof, for
satisfaction of any claims hereunder.

 

13.       Severability.
If any provision, phrase, or other portion of this Agreement should be determined by any court of competent jurisdiction to be
invalid, illegal or unenforceable, in whole or in part, and such determination should become final, such provision, phrase or other
portion shall be deemed to be severed or limited, but only to the extent required to render the remaining provisions and portions
of the Agreement enforceable, and the Agreement as thus amended shall be enforced to give effect to the intention of the parties
insofar as that is possible.

 

14.       Subrogation.
In the event of any payment under this Agreement, the Company shall be subrogated to the extent thereof to all rights to indemnification
or reimbursement against any insurer or other entity or person vested in the Indemnitee, who shall execute all instruments and
take all other actions as shall be reasonably necessary for the Company to enforce such rights.

 

15.       Governing
Law. The parties hereto agree that this Agreement shall be construed and enforced in accordance with and governed by the laws
of the Commonwealth of Pennsylvania.

 

16.       Notices.
All notices, requests, demands and other communications hereunder shall be in writing and shall be considered to have been duly
given if delivered by hand and receipted for by the party to whom the notice, request, demand or other communication shall have
been directed, or mailed by certified mail, return receipt requested, with postage prepaid:

 

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		(a)	If to the Company, to:

Citizens & Northern Corporation

90-92 Main Street

P.O. Box 58

Wellsboro, PA 16901

 

		(b)	If to Indemnitee, to:

Tracy E. Watkins

1972 N. Williamson Road

Covington, PA 16917

 

or to such other or further address as shall
be designated from time to time by the Indemnitee or the Company to the other.

 

17.       Termination.
This Agreement may be terminated by either party upon not less than sixty (60) days prior written notice delivered to the other
party, but such termination shall not in any way diminish the obligations of Company hereunder with respect to the Indemnitee’s
activities prior to the effective date of termination.

 

18.       Amendments
and Binding Effect. This Agreement and the Undertaking and the rights and duties of Indemnitee and the Company hereunder and
thereunder may not be amended, modified or terminated except by written instrument signed and delivered by the parties hereto.
This Agreement is and shall be binding upon and shall inure to the benefits of the parties thereto and their respective heirs,
executors, administrator, successors and assigns.

 

In
Witness Whereof, the undersigned have executed this Agreement in triplicate as of the date first above written.

 

	INDEMNITEE	 	CITIZENS & NORTHERN CORPORATION
	 	 	 
	By: 	/s/ Tracy E.
    Watkins	 	By: 	/s/ J. Bradley
    Scovill
	 	 	 
	Title: 	Executive Vice President and Director of Human Resources	 	Title: 	President and Chief Executive Officer

 

    	 -6- 

     

    

 

EXHIBIT - 1

 

FORM OF UNDERTAKING

 

THIS UNDERTAKING has been
entered into by ___________________ (hereinafter “Indemnitee”) pursuant to an Indemnification Agreement dated ___________
___, 20__ (the “Indemnification Agreement”), by and between Citizens & Northern
Corporation, a bank holding company registered under the Bank Holding Company Act of 1956, as amended, and a Pennsylvania
corporation (the “Company”), and Indemnitee.

 

WITNESSETH:

 

WHEREAS, pursuant to the
Indemnification Agreement, Company agreed to pay Expenses (within the meaning of the Indemnification Agreement) as and when incurred
by Indemnitee in connection with any claim against Indemnitee which is the subject of any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative, to which Indemnitee was, is, or is threatened to
be made a party by reason of facts which include Indemnitee’s being or having been a director, officer or representative
(within the meaning of the Indemnification Agreement) of the Company;

 

WHEREAS, such a claim
has arisen against Indemnitee and Indemnitee has notified Company thereof in accordance with the terms of Section 6 of the Indemnification
Agreement (hereinafter the “Proceeding”);

 

NOW, THEREFORE, Indemnitee
hereby agrees that in consideration of Company’s advance payment of Indemnitee’s Expenses incurred prior to a final
disposition of the Proceeding, Indemnitee hereby undertakes to reimburse Company for any and all Expenses paid by Company on behalf
of Indemnitee prior to a final disposition of the Proceeding in the event that Indemnitee is determined under the Applicable Document
(within the meaning of the Indemnification Agreement) or applicable law to be required to repay such amounts to the Company, provided
that if Indemnitee is entitled under the Applicable Document or applicable law to indemnification for some or a portion of such
Expenses, Indemnitee’s obligation to reimburse Company shall only be for those Expenses for which Indemnitee is determined
to be required to so repay such amounts to the Company pursuant to the Indemnification Agreement or applicable law.

 

If the Indemnitee is involved
in an administrative proceeding or action instituted by an appropriate banking agency and requests the Company to pay the Expenses
incurred before a final order is entered, the Indemnitee shall reimburse the Company for all Expenses paid by the Company if a
final order is entered (i) assessing civil money penalties; (ii) removing Indemnitee from office or prohibiting Indemnitee from
participating in the conduct of the affairs of the Company or its affiliates; or (iii) requiring Indemnitee to cease and desist
from taking any affirmative action described under the Federal Deposit Insurance Act or other applicable banking laws with respect
to the Company and its affiliates. The Indemnitee hereby agrees to reimburse the Company for Expenses which subsequently are deemed
“prohibited indemnification payments”, as defined in 12 C.F.R. § 359.1(1).

 

Further, the Indemnitee
agrees to reasonably cooperate with the Company concerning such Proceeding.

 

In
Witness Whereof, the undersigned has set his hand this _____ day of ______________, 20__.

 

	 	INDEMNITEE
	 	 
	 	The Form Provided for Informational Purposes Only 
	 	(In the event this form is needed, a blank to be signed and returned will be provided upon request.)

 

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