AGREEMENT AND PLAN OF MERGER

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER
between
CITIZENS & NORTHERN CORPORATION
and
CITIZENS BANCORP, INC.
December 21, 2006

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of December 21, 2006, is made by and between CITIZENS & NORTHERN CORPORATION (“C&N”), a Pennsylvania corporation having its principal place of business in Wellsboro, Pennsylvania, and CITIZENS BANCORP, INC. (“Citizens”), a Pennsylvania corporation having its principal place of business in Coudersport, Pennsylvania.

BACKGROUND

1. C&N and Citizens desire for Citizens to merge with and into C&N, with C&N surviving such merger, in accordance with the laws of the Commonwealth of Pennsylvania and the plan of merger set forth herein.

2. The respective Boards of Directors of C&N and Citizens have each approved this Agreement (as hereinafter defined) and the Merger (as hereinafter defined) in accordance with their respective articles of incorporation and bylaws and the provisions of the Pennsylvania Business Corporation Law of 1988, as amended (the “BCL”) and determined that the Merger is advisable.

3. Simultaneously with the execution and delivery of this Agreement, the directors and executive officers of Citizens are executing and delivering to C&N a Letter Agreement in the form attached hereto as Exhibit 2.

4. It is the intention of the parties to this Agreement that the Merger provided for herein be treated as a “reorganization” under Section 368(a) of the Internal Revenue Code.

5. Concurrently with the Merger, the Parties desire to merge Citizens Trust Company (“CTC”), a Pennsylvania bank and trust company and wholly-owned subsidiary of Citizens, with and into Citizens & Northern Bank (“C&N Bank”), a Pennsylvania bank and trust company and wholly-owned subsidiary of C&N, with C&N Bank surviving such merger in accordance with the Bank Plan of Merger (as hereinafter defined).

6. C&N and Citizens desire to provide the terms and conditions governing the transactions contemplated herein.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and of the mutual covenants, agreements, representations and warranties herein contained, the parties hereto, intending to be legally bound, do hereby agree as follows:

ARTICLE I

THE MERGERS

Section  1.01 — Definitions .   As used in this Agreement, the following terms shall have the indicated meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

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Section  1.02 — The Merger.   

(a)  Closing .   The closing will take place at the offices of Rhoads & Sinon LLP, counsel to C&N, in Harrisburg, Pennsylvania, on the Closing Date or at such other place, and at such time, as are agreed to by the Parties; provided, in any case, that all conditions to closing set forth in Article V (other than the delivery of certificates, opinions and other instruments and documents to be delivered at the closing) have been satisfied or waived at or prior to the Closing Date. On the Closing Date, C&N and Citizens shall cause the Articles of Merger to be duly executed and filed with the PDS.

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(b)  The Merger .   Subject to the terms and conditions of this Agreement, at the Effective Time: Citizens shall merge with and into C&N; the separate existence of Citizens shall cease; C&N shall be the surviving corporation in the Merger (C&N, as the surviving corporation in the Merger, is sometimes referred to herein as the “Surviving Corporation”); and all of the property (real, personal and mixed), rights, powers and duties and obligations of Citizens shall be taken and deemed to be transferred to and vested in C&N, as the Surviving Corporation in the Merger, without further act or deed; all debts, liabilities and duties of each of Citizens and C&N shall thereafter be the responsibility of C&N, all in accordance with the applicable Laws.

(c)  C&N’s Articles of Incorporation and Bylaws .   At and after the Effective Time, the articles of incorporation and the bylaws of C&N, as in effect immediately prior to the Effective Time, shall automatically be and remain the articles of incorporation and bylaws of C&N, as the Surviving Corporation in the Merger, until thereafter altered, amended or repealed.

(d)  Board of Directors and Officers of the Surviving Corporation .

(e)  Effect on Shares .   At the Effective Time, by virtue of the Merger and without any action on the part of C&N, Citizens or the holders of any of the following securities, the following shall occur:

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(f)  Election Procedures .   C&N shall cause the Exchange Agent to mail an Election Form to holders of Citizens Common Stock not more than fifty (50) Business Days and not less than twenty (20) Business Days prior to the Election Deadline. Each Election Form shall permit the holder (or in the case of nominee record holders, the beneficial owner through proper instructions and documentation):

The Exchange Agent shall use reasonable efforts to make the Election Form available to all persons who become holders of Citizens Common Stock during the period between the record date for the mailing of the Election Form and the Election Deadline. If a holder of Citizens Common Stock: (i) does not submit a properly completed

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Election Form before the Election Deadline; (ii) revokes an Election Form prior to the Election Deadline and does not resubmit a properly completed Election Form prior to the Election Deadline; or (iii) fails to perfect his, her or its dissenters’ rights pursuant to Section 1.02(e)(v) of this Agreement, the shares of Citizens Common Stock held by such holder shall be deemed “No Election Shares”. Nominee record holders who hold Citizens Common Stock on behalf of multiple beneficial owners shall be required to indicate how many of the shares held by them are Stock Election Shares, Cash Election Shares and No Election Shares. For purposes of Section 1.02(h), any Dissenting Citizens Shares shall be deemed to be Cash Election Shares, provided that Dissenting Citizens Shares shall not under any circumstance be converted into Reallocated Stock Shares.

(g)  Effective Election .   Any Election shall be properly made only if the Exchange Agent shall have actually received a properly completed Election Form by the Election Deadline. Any Election Form may be revoked or changed by the person submitting such Election Form to the Exchange Agent by written notice to the Exchange Agent only if such written notice is actually received by the Exchange Agent at or prior to the Election Deadline. The Exchange Agent shall have reasonable discretion to (i) determine whether any Election, modification or revocation is received, (ii) determine whether any Election, modification or revocation has been properly made, and (iii) disregard immaterial defects in any Election Form. Good faith determinations made by the Exchange Agent regarding such matters shall be binding and conclusive. Neither C&N, Citizens nor the Exchange Agent shall be under any obligation to notify any person of any defect in an Election Form.

(h)  Allocation .   All Elections shall be subject to the following allocation rules. The Exchange Agent shall effect the allocation of the aggregate Merger Consideration among the holders of Citizens Common Stock in accordance with their respective Election Forms, but subject to the following allocation rules:

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(i)  Surrender and Exchange of Citizens Stock Certificates .   

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(j)  Anti-Dilution Provisions .   If C&N shall, at any time before the Effective Date, (A) declare a dividend in shares of C&N Common Stock payable to shareholders of record before the Effective Date, (B) combine the outstanding shares of C&N Common Stock into a smaller number of shares, (C) subdivide or split the outstanding shares of C&N Common Stock, or (D) reclassify the shares of C&N Common Stock, then, in any such event, the number of shares of C&N Common Stock to be delivered to Citizens shareholders who are entitled to receive shares of C&N Common Stock in exchange for shares of Citizens Common Stock shall be adjusted so that each Citizens shareholder shall be entitled to receive such number of shares of C&N Common Stock as such shareholder would have been entitled to receive if the Effective Date had occurred immediately prior to the happening of such event; provided, however, that notwithstanding the foregoing, the shares of C&N Common Stock to be delivered to Citizens shareholders who are entitled to receive shares of C&N Common Stock in exchange for shares of Citizens Common Stock shall not be adjusted to reflect the 1% stock dividend declared by C&N in December, 2006, with a payment date in January, 2007. In addition, in the event that, prior to the Effective Date, C&N enters into an agreement pursuant to which shares of C&N Common Stock would be converted into shares or other securities or obligations of another corporation, proper provision shall be made in such agreement so that each Citizens shareholder entitled to receive shares of C&N Common Stock in the Merger shall be entitled to receive such number of shares or other securities or amount of obligations of such other corporation as such shareholder would be entitled to receive if the Effective Date had occurred immediately prior to the happening of such event.

Section  1.03 — The Bank Merger .   C&N and Citizens shall use their best efforts to cause CTC to merge with and into C&N Bank on the Effective Date, concurrently with, or as soon as practicable after the Merger, with C&N Bank surviving such merger. Concurrently with, or as soon as reasonably practicable after, the execution and delivery of this Agreement, C&N shall cause C&N Bank, and Citizens shall cause CTC, to execute and deliver the Bank Plan of Merger.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF CITIZENS

Citizens hereby represents and warrants to C&N that, except as specifically set forth in the Citizens Disclosure Schedule delivered to C&N by Citizens on the date hereof:

Section  2.01 — Organization .   

(a) Citizens is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Citizens is a bank holding company duly registered under the BHC Act. Citizens has the corporate power and authority to carry on its business and operations as now being conducted and to own and operate the properties and assets now owned and being operated by it. Citizens is qualified or licensed to do business as a foreign corporation in each jurisdiction in which it is required to be so qualified or licensed as the result of the ownership or leasing of property or the conduct of its business, except where the failure to be so qualified or licensed would not have a Material Adverse Effect on Citizens.

(b) CTC is a Pennsylvania bank and trust company duly organized and validly existing under the laws of the Commonwealth of Pennsylvania. CTC has the corporate power and authority to carry on its business and operations as now being conducted and to own and operate the properties and assets now owned and being operating by it. CTC is qualified or licensed to do business in each jurisdiction in which it is required to be so qualified or licensed as a result of the ownership or leasing of property or the conduct of its a business, except where the failure to be so qualified or licensed would not have a Material Adverse Effect on CTC.

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(c) There are no Citizens Subsidiaries other than CTC.

(d) The deposits of CTC are insured by the FDIC to the extent provided in the FDIA.

(e) The respective minute books of Citizens and CTC accurately record, in all material respects, all material corporate actions of its shareholders and board of directors (including committees) through the date hereof.

(f) Prior to the date of this Agreement, Citizens has delivered to C&N true and correct copies of the articles of incorporation and bylaws of Citizens and CTC, each as in effect on the date hereof.

Section  2.02 — Capitalization .   

(a) The authorized capital stock of Citizens consists exclusively of (i) 3,000,000 shares of common stock, no par value (“Citizens Common Stock”), of which 4,273 shares have been issued and are held by Citizens as treasury stock and 1,016,824 shares are outstanding, validly issued, fully paid and nonassessble, and (ii) 100,000 shares of preferred stock, no par value, of which, at the date of this Agreement, no shares are issued or outstanding. No shares of Citizens Common Stock were issued in violation of any preemptive rights. Except as set forth in the Citizens Disclosure Schedule, Citizens has no Rights authorized, issued or outstanding, other than the Letter Agreements.

(b) The authorized capital stock of CTC consists of 500,000 shares of common stock, $1.25 par value per share, of which 305,060 shares are outstanding, validly issued, fully paid and nonassessable. All such shares are owned by Citizens free and clear of any lien, security interests, pledges, charges and restrictions of any kind or nature. No shares of CTC common stock were issued in violation of any preemptive rights. CTC has no Rights authorized, issued or outstanding.

(c) Except as set forth in the Citizens Disclosure Schedule, CTC owns no equity interest, directly or indirectly, in any other Person except for equity interests held in the investment portfolios of CTC, equity interests held by CTC in a fiduciary capacity, and equity interests held in connection with the commercial loan activities of CTC. There are no Rights outstanding and held by Citizens or CTC with respect to any equity of any other Person.

(d) To the Knowledge of Citizens, except as disclosed in Citizens Disclosure Schedule 2.02, no person or “group” (as that term is used in Section 13(d)(3) of the Exchange Act), is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5% or more of the outstanding shares of Citizens Common Stock.

Section  2.03 — Authority; No Violation .   

(a) Subject to (i) approval by the shareholders of Citizens of this Agreement and (ii) receipt of the required approvals from Regulatory Authorities described in Section 3.04 hereof and compliance with such approvals, Citizens has full corporate power and authority to execute and deliver this Agreement and to complete the transactions contemplated hereby. CTC has full corporate power and authority to execute and deliver the Bank Plan of Merger and to complete the Bank Merger, subject to receipt of all necessary approvals of Regulatory Authorities described in Section 3.04 hereof and compliance with such approvals. The execution and delivery of this Agreement by Citizens and the completion by Citizens of the transactions contemplated hereby and thereby have been unanimously and duly and validly approved by the board of directors of Citizens, at a meeting duly called and held, and, except for approval by the shareholders of Citizens, no other corporate proceedings on the part of Citizens are necessary to complete the transactions contemplated hereby (other than the Bank Merger). This Agreement has been duly and validly executed and delivered by Citizens and, subject to (i) approval of the shareholders of Citizens of this Agreement and (ii) receipt of the required approvals from Regulatory Authorities described in Section 3.04 hereof and compliance with such required approvals, constitutes the valid and binding obligation of Citizens, enforceable against Citizens in accordance with its terms, subject further to applicable bankruptcy, insolvency and similar Laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity. The Bank Plan of Merger, upon its execution and delivery by CTC, will constitute the valid and binding obligation of CTC, enforceable against CTC in accordance with its terms, subject to applicable conservatorship or receivership provisions of the FDIA, or insolvency and similar Laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity.

(b) None of (A) the execution and delivery of this Agreement by Citizens, (B) the execution and delivery of the Bank Plan of Merger by CTC, (C) subject to receipt of approvals from the Regulatory Authorities referred to in

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Section 3.04 hereof and Citizens’ and C&N’s compliance with any conditions contained therein, the completion of the transactions contemplated hereby, and (D) compliance by Citizens or CTC with any of the terms or provisions hereof or of the Bank Plan of Merger, will (i) conflict with or result in a breach of any provision of the articles of incorporation or association or bylaws of Citizens or CTC; (ii) violate any Law applicable to Citizens or CTC or any of its respective properties or assets; or (iii) violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of Citizens or CTC under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement, commitment or other instrument or obligation to which Citizens or CTC is a party, or by which they or any of their respective properties or assets may be bound or affected, except for such violations, conflicts, breaches or defaults under clause (ii) or (iii) hereof which, either individually or in the aggregate, will not have a Material Adverse Effect on Citizens or Citizens’ or CTC’s ability to consummate the transactions contemplated herein.

Section  2.04 — Consents .    Except for the consents, approvals, filings and registrations from or with the Regulatory Authorities referred to in Section 3.04 hereof and compliance with any conditions contained therein, and the approval of this Agreement by the shareholders of Citizens under the BCL, Citizens’ articles of incorporation and bylaws, and the approval of the Bank Plan of Merger by Citizens as the sole shareholder of CTC and by the board of directors of CTC, no consents or approvals of, or filings or registrations with, any public body or authority are necessary, and no consents or approvals of any third parties are necessary, or will be, in connection with the execution and delivery of this Agreement and the completion by Citizens and CTC of the transactions contemplated hereby or by the Bank Plan of Merger. As of the date hereof, to the Knowledge of Citizens, there is no reasonable basis to expect that (i) any required consents or approvals will not be received or will be received with conditions, limitations or restrictions unacceptable to it or which would adversely impact Citizens’ ability to complete the transactions contemplated by this Agreement or that (ii) any public body or authority, the consent or approval of which is not required or any filing with which is not required, will object to the completion of the transactions contemplated by this Agreement.

Section  2.05 — Financial Statements .   

(a) Except as disclosed in Citizens Disclosure Schedule 2.05, Citizens has previously delivered to C&N the Citizens Regulatory Reports filed through November 30, 2006 and will deliver to C&N the Citizens Regulatory Reports for any dates or periods after November 30, 2006 through the Closing Date as soon as they are available. The Citizens Regulatory Reports, as amended (provided such amendments have been filed with the appropriate Regulatory Authority) have been prepared in all material respects in accordance with applicable regulatory accounting principles and practices, including, but not limited to, all applicable rules, regulations and pronouncements of applicable Regulatory Authorities, throughout the periods covered by such statements, and fairly present in all material respects, the consolidated financial position, results of operations and changes in shareholders’ equity of Citizens or CTC, as the case may be, as of and for the periods ended on the dates thereof, in accordance with applicable regulatory accounting principles, including, but not limited to, all applicable rules, regulations and pronouncements of applicable Regulatory Authorities, applied on a consistent basis.

(b) Citizens has previously delivered to C&N the Citizens Financials through November 30, 2006 and will deliver to C&N the Citizens Financials for any dates or periods thereafter through the Closing Date as soon as they are available. The Citizens Financials have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered by such statements, except as noted therein, and fairly present the financial position, results of operations and cash flows of Citizens as of and for the periods ended on the dates thereof, in accordance with GAAP applied on a consistent basis, except as noted therein.

(c) At the date of the most recent balance sheet included in the Citizens Financials or the Citizens Regulatory Reports, neither Citizens nor CTC had any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such Citizens Financials or Citizens Regulatory Reports or in the footnotes thereto which are not fully reflected or reserved against therein or fully

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disclosed in a footnote thereto, subject, in the case of any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.

Section  2.06 — Taxes .   Citizens and CTC are members of the same affiliated group within the meaning of IRC Section 1504(a) of which Citizens is a common parent. Citizens has duly filed, all federal, state and local tax returns and all tax filings required to be filed by or with respect to Citizens and CTC (all such returns being accurate and correct in all material respects) and has duly paid or made, provisions and related balance sheet accruals (if required) for the payment of all federal, state and local taxes which have been incurred by or are due or claimed to be due from Citizens or CTC by any taxing authority or pursuant to any tax sharing agreement or arrangement (written or oral) other than taxes which (x) (i) are not delinquent or (ii) are being contested in good faith and (y) (i) are adequately reserved for, (ii) have not resulted in the imposition of any lien and (iii) if adversely determined would not be reasonably expected to result in a Material Adverse Effect as to Citizens or CTC.

Section  2.07 — No Material Adverse Effect .   Except as disclosed in Citizens Disclosure Schedule 2.07, neither Citizens nor CTC has suffered any Material Adverse Effect since September 30, 2006.

Section  2.08 — Contracts .   

(a) Except for this Agreement, as set forth in its respective articles of incorporation or bylaws, or as disclosed on the Citizens Disclosure Schedules, neither Citizens nor CTC is a party to or subject to: (i) any agreement, contract, arrangement, commitment or understanding (whether written or oral) that is a “material contract” within the meaning of Item 601(b)(10) of the SEC’s Regulation S-K; (ii) any real estate lease; (iii) any employment, consulting, severance, “change-in-control,” termination or similar contract or arrangement with any past or present officer, director, employee, or independent contractor except for oral “at will” arrangements; (iv) any plan, arrangement or contract providing for bonuses, pensions, options, restricted stock, deferred compensation, retirement payments, profit sharing or similar arrangements for or with any past or present officers, directors, employees or independent contractors of Citizens or CTC; (v) any collective bargaining agreement with any labor union relating to employees of Citizens or CTC; (vi) any agreement which by its terms limits the payment of dividends by Citizens or CTC; (vii) any instrument evidencing or related to indebtedness for borrowed money whether directly or indirectly, by way of purchase money obligation, conditional sale, lease purchase, guaranty or otherwise, in respect of which Citizens or CTC is an obligor to any person, which instrument evidences or relates to indebtedness for borrowed money other than deposits, repurchase agreements, bankers acceptances and “treasury tax and loan” accounts established in the ordinary course of business and transactions in “federal funds,” or which contains financial covenants or other restrictions (other than those relating to the payment of principal and interest when due) which would become applicable on or after the Closing Date to C&N or C&N Bank; (viii) any contract limiting the freedom of Citizens or CTC to engage in any type of banking or bank-related or other business permissible under Law; (ix) any contract relating to the acquisition of any business that has not been fully performed, including where contingent compensation remains to be paid; or (x) any contract or agreement pursuant to which Citizens or CTC is obligated to make payments in excess of $100,000 on an annual basis that cannot be terminated by Citizens or CTC without financial penalty upon 90 days or less notice (collectively, the “Material Contracts”).

(b) Except as disclosed in the Citizens Disclosure Schedules, neither Citizens nor CTC leases any real property.

(c) Neither Citizens nor CTC is in default in any material respect under any Material Contract, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default.

(d) True and correct copies of all Material Contracts have been provided to C&N on or before the date hereof and are in full force and effect and neither Citizens nor, to the Knowledge of Citizens, any other party to any such Material Contract has breached any provision of, or is in default in any respect under any term of, any such Material Contract. Except as described in this Agreement or as set forth in the Citizens Disclosure Schedule, (i) no party to any Material Contract will have the right to terminate any or all of the provisions of any such Material Contract as a result of the transactions contemplated by this Agreement, (ii) other than “at-will” employees, none of the employees (including officers) of Citizens or CTC, possess the right to terminate their employment as a result of the execution of this Agreement, (iii) no Material Contract contains provisions which permit an employee or

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independent contractor to terminate it without cause and continue to accrue future benefits thereunder, and (iv) no such Material Contract (x) provides for acceleration in the vesting of benefits or payments due thereunder upon the occurrence of a change in ownership or control of Citizens or CTC absent the occurrence of a subsequent event; (y) provides for benefits which may cause the disallowance of a federal income tax deduction under IRC Section 280G; or (z) requires Citizens or CTC to provide a benefit in the form of Citizens Common Stock or determined by reference to the value of Citizens Common Stock.

Section  2.09 — Ownership of Property; Insurance Coverage .   

(a) Each of Citizens and CTC has, or will have as to property acquired after the date hereof, good and, as to real property, marketable title to all assets and properties owned by Citizens or CTC in the conduct of its business, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the balance sheets contained in the Citizens Regulatory Reports and in the Citizens Financials or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business since the date of such balance sheets), subject to no encumbrances, liens, mortgages, security interests or pledges, except (i) statutory liens for amounts not yet delinquent or which are being contested in good faith (ii) liens securing obligations reflected in the Citizens Regulatory Reports or Citizens Financials, (iii) liens that do not have a Material Adverse Effect on Citizens or CTC, or (iv) items permitted under Article IV. The real property leases to which Citizens or CTC are a party constitute operating leases for both tax and financial accounting purposes and the lease expense and minimum rental commitments with respect to such leases and lease commitments are as disclosed in the notes to the Citizens Financials.

(b) With respect to all agreements pursuant to which Citizens or CTC has purchased securities subject to an agreement to resell, if any, Citizens or CTC, as the case may be, has a valid, perfected first lien or security interest in the securities or other collateral securing the repurchase agreement.

(c) Citizens and CTC currently maintain insurance considered by Citizens to be reasonable for its operations and similar in scope and coverage to that maintained by other businesses similarly engaged. Neither Citizens nor CTC has received notice from any insurance carrier that (i) such insurance will be cancelled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be materially increased. Except as disclosed on Citizens Disclosure Schedule 2.09, there are presently no material claims pending under such policies of insurance and no notices have been given by Citizens or CTC under such policies during the past two years. All such insurance is valid and enforceable and in full force and effect, and within the last three years Citizens and CTC have received each type of insurance coverage for which any of them has applied and during such periods have not been denied indemnification for any material claims submitted under any of their insurance policies.

Section  2.10 — Legal Proceedings .   Except as disclosed on Citizens Disclosure Schedule 2.10, neither Citizens nor CTC is a party to any, and there are no pending or, to the Knowledge of Citizens, threatened, legal, administrative, arbitration or other proceedings, claims (whether asserted or unasserted), actions or governmental investigations or inquiries of any nature (i) against Citizens or CTC, (ii) to which Citizens’ or CTC’s assets are or may be subject, (iii) challenging the validity or propriety of any of the transactions contemplated by this Agreement, or (iv) which could adversely affect the ability of Citizens or CTC to perform under this Agreement.

Section  2.11 — Compliance With Applicable Law .   

(a) Each of Citizens and CTC holds all licenses, franchises, permits and authorizations necessary for the lawful conduct of its businesses under, and, are in compliance in all material respects with, all applicable Laws, other than where such failure to hold or such noncompliance will neither result in a limitation in any material respect on the conduct of their businesses nor otherwise have a Material Adverse Effect on Citizens.

(b) Except as disclosed on Citizens Disclosure Schedule 2.11, (i) each of Citizens and CTC is in substantial compliance with all of the Laws which each Regulatory Authority applicable to it enforces; (ii) no Regulatory Authority has threatened to revoke any license, franchise, permit or governmental authorization which is material to Citizens or CTC, or required or threatened to require Citizens or CTC to enter into a cease and desist order, consent order, memorandum of understanding, or written agreement with it; and (iii) no Regulatory Authority has restricted or limited the operations of Citizens or CTC, including, without limitation, any restriction on the payment of

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dividends (any such memorandum, agreement or order described in this sentence is hereinafter referred to as a “Regulatory Agreement”). Except as disclosed on Citizens Disclosure Schedule 2.11, neither Citizens nor CTC has consented to or entered into any Regulatory Agreement. CTC received a rating of at least “Satisfactory” in connection with its last CRA examination.

Section  2.12 — ERISA .   Citizens has previously delivered to C&N true and complete copies of all employee pension benefit plans within the meaning of ERISA Section 3(2), including profit sharing plans, employee stock ownership plans, stock purchase plans, deferred compensation and supplemental income plans, supplemental executive retirement plans, employment agreements, annual executive and administrative incentive plans or long term incentive plans, severance plans, policies and agreements, group insurance plans, and all other employee welfare benefit plans within the meaning of ERISA Section 3(1) (including vacation pay, sick leave, short-term disability, long-term disability, and medical plans) and all other employee benefit plans, policies, agreements and arrangements, all of which are set forth in the Citizens Disclosure Schedule, sponsored or contributed to for the benefit of the employees or former employees (including retired employees) and any beneficiaries thereof or directors or former directors of Citizens or any entity (a “Citizens ERISA Affiliate”) that, together with Citizens, is treated as a single employer under IRC Sections 414(b), (c), (m) or (o), together with (i) the most recent actuarial (if any) and financial reports relating to those plans which constitute “qualified plans” under IRC Section 401(a), (ii) the most recent annual reports relating to such plans filed with any government agency, and (iii) all rulings and determination letters which pertain to any such plans. Neither Citizens or any Citizens ERISA Affiliate, nor any pension plan maintained or previously maintained by Citizens or any Citizens ERISA Affiliate, has incurred, directly or indirectly, within the past six (6) years any liability under Title IV of ERISA (including to the Pension Benefit Guaranty Corporation) or to the IRS with respect to any pension plan qualified under IRC Section 401(a) except liabilities to the Pension Benefit Guaranty Corporation pursuant to ERISA Section 4007, all of which have been fully paid, nor has any reportable event under ERISA Section 4043 occurred with respect to any such pension plan. With respect to each of such plans that is subject to Title IV of ERISA, the present value of the accrued benefits under such plan, based upon the actuarial assumptions used for funding purposes in the plan’s most recent actuarial report did not, as of its latest valuation date, exceed the then current value of the assets of such plan allocable to such accrued benefits. Neither Citizens nor any Citizens ERISA Affiliate has incurred is subject to any liability under ERISA Section 4201 for a complete or partial withdrawal from a multiemployer plan. All “employee benefit plans,” as defined in ERISA Section 3(3), of Citizens or any Citizens ERISA Affiliate comply and within the past six (6) years have complied in all material respects with (i) relevant provisions of ERISA and (ii) in the case of plans intended to qualify for favorable income tax treatment, provisions of the IRC relevant to such treatment. No prohibited transaction (which shall mean any transaction prohibited by ERISA Section 406 and not exempt under ERISA Section 408 or any transaction prohibited under IRC Section 4975) has occurred within the past six (6) years with respect to any employee benefit plan maintained by Citizens or any Citizens ERISA Affiliate which would result in the imposition, directly or indirectly, of an excise tax under IRC Section 4975 or other penalty under ERISA or the IRC. Citizens provides continuation coverage under group health plans for separating employees and “qualified beneficiaries” in accordance with the provisions of IRC Section 4980B(f). Such group health plans are in material compliance with Section 1862(b)(1) of the Social Security Act.

Section  2.13 — Brokers, Finders and Financial Advisors; Fairness Opinion .   Except for Citizens’ engagement of Ryan Beck & Co. (“RB”) in connection with transactions contemplated by this Agreement, neither Citizens nor CTC nor any of their respective officers, directors, employees or agents, has employed any broker, finder or financial advisor in connection with the transactions contemplated by this Agreement or in connection with any transaction other than the Merger, or, except for its commitments disclosed in the Citizens Disclosure Schedule, incurred any liability or commitment for any fees or commissions to any such person in connection with the transactions contemplated by this Agreement or in connection with any transaction other than the Merger, which has not been reflected in the Citizens Financials. The Citizens Disclosure Schedule contains as an exhibit the engagement letter between Citizens and RB. RB has provided Citizens with its opinion to the effect that, as of the date of approval of this Agreement by the board of directors of Citizens, the Merger Consideration is fair to shareholders of Citizens from a financial point of view.

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Section  2.14 — Environmental Matters .   

(a) To the Knowledge of Citizens, neither Citizens nor CTC, nor any properties now or formerly owned or operated by Citizens or CTC or on which Citizens or CTC holds or held a mortgage or other security interest or has foreclosed or taken a deed in lieu of foreclosure, has been or is in violation of or liable under any Environmental Law. There are no actions, suits or proceedings, or demands, claims, notices or investigations (including without limitation notices, demand letters or requests for information from any environmental agency) instituted or pending, or to the Knowledge of Citizens, threatened, relating to the liability of any property owned or operated by Citizens or CTC under any Environmental Law.

(b) To the Knowledge of Citizens, no property, now or formerly owned or operated by Citizens or CTC or on which Citizens or CTC holds or held a mortgage or other security interest or has foreclosed or taken a deed in lieu of foreclosure, has been listed or proposed for listing on the National Priority List under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (“CERCLA”), on the Comprehensive Environmental Response Compensation and Liabilities Information System, or any similar state list, or which is the subject of federal, state or local enforcement actions or other investigations which may lead to claims against Citizens or CTC for response costs, remedial work, investigation, damage to natural resources or for personal injury or property damage claims, including, but not limited to, claims under CERCLA.

(c) To the Knowledge of Citizens, there has been no release nor is there the threat of release of any substance described in clause (ii) of the definition of Environmental Law set forth in Section 1.01 hereof on, at or from any property, now or formerly owned or operated by Citizens or CTC or on which Citizens or CTC holds or held a mortgage or other security interest or has foreclosed or taken a deed in lieu of foreclosure, or any property adjacent to or in the immediate vicinity of any such properties.

Section  2.15 — Allowance for Losses .   The allowance for loan and lease losses shown on Citizens’ consolidated statement of financial condition contained in the most recent Citizens Financials and included in the most recent Citizens Regulatory Report was, and for periods ending after the date of this Agreement, will be, adequate as of the date thereof and in accordance with GAAP and all other applicable regulatory requirements.

Section  2.16 — Information to be Supplied .   The information to be supplied by Citizens for inclusion in the Registration Statement (including the Prospectus/Proxy Statement) will not, at the time the Registration Statement is declared effective pursuant to the Securities Act and as of the date the Prospectus/Proxy Statement is mailed to shareholders of Citizens and up to and including the date of the meeting of shareholders of Citizens to which such Prospectus/Proxy Statement relates, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein not misleading. The information supplied, or to be supplied, by Citizens for inclusion in the Applications will, at the time such documents are filed with any Regulatory Authority and up to and including the date of the attainment of any required regulatory approvals or consents, be accurate in all material respects.

Section  2.17 — Related Party Transactions .   Neither Citizens nor CTC is a party to any transaction (including any loan or other credit accommodation, but excluding deposits in the ordinary course of business) with any Affiliate of Citizens or CTC, except transactions (a) made in the ordinary course of business, (b) made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other Persons, (c) do not involve more than the normal risk of collectability or present other risks or unfavorable features, and are reflected in the Citizens Financials to the extent required to be so reflected and, (d) to the extent required by GAAP, disclosed in the footnotes of the Citizens Financials. No loan or credit accommodation currently being extended to any Affiliate of Citizens or CTC is presently in default or, during the three year period prior to the date of this Agreement, has been in default or has been restructured, modified or extended. Neither Citizens or CTC has been notified that principal and interest with respect to any such loan or other credit accommodation will not be paid when due or that the loan grade classification accorded such loan or credit accommodation by Citizens or CTC is inappropriate.

Section  2.18 — Schedule of Termination Benefits .   The Citizens Disclosure Schedule 2.18 includes a true and correct schedule of the maximum amount of termination benefits and related payments which currently are or would be payable as a result of the transactions contemplated by this Agreement to the individuals identified

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thereon, under any and all written agreements, supplemental executive retirement plans, deferred bonus plans, deferred compensation plans, salary continuation plans, or any other pension benefit or welfare benefit plan maintained by Citizens or CTC for the benefit of executive officers or directors of Citizens or CTC (the “Benefits Schedule”), assuming that the Closing Date would occur on December 31, 2006 and that the employment of such individuals already has or will terminate immediately thereafter. No other individuals are entitled to benefits under any such plans. Except as set forth in Citizens Disclosure Schedule 2.18, as of the date of this Agreement, no director or executive officer of Citizens or CTC had deferred any compensation accrued by Citizens or CTC.

Section  2.19 — Loans .   

(a) Except as disclosed on Citizens Disclosure Schedule 2.19, each loan reflected as an asset in the Citizens Financials (i) is evidenced by notes, agreements or other evidences of indebtedness which are true, genuine and correct, (ii) to the extent secured, has been secured by valid liens and security interests which have been perfected, and (ii) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles, in each case other than loans as to which the failure to satisfy the foregoing standards, individually or in the aggregate, would not have a Material Adverse Effect on Citizens.

(b) The Citizens Disclosure Schedule includes a list of (i) all outstanding commercial loans, commercial loan commitments and commercial letters of credit, of CTC in excess of $500,000, (ii) all loans of CTC classified by CTC or any Regulatory Au