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EXHIBIT 10.3

INCENTIVE STOCK OPTION AGREEMENT

 

OPTION AGREEMENT dated as of the 4th day of January 2012, by and between
Citizens & Northern Corporation (the "Corporation") and «name», an employee of
the Corporation or of a subsidiary (the "Optionee").

 

Pursuant to the Citizens & Northern Corporation 1995 Stock Incentive Plan (the
"Plan"), as amended, the Compensation Committee of the Board of Directors (the
"Committee") has determined that the Optionee is to be granted, on the terms and
conditions set forth herein, an option (the "Option") to purchase shares of the
Corporation's common stock and hereby grants such Option. It is intended that
the Option qualify as an "Incentive Stock Option" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). 

  

1.Number of Shares and Option Price. The Option is to purchase «Options» shares
of the Corporation's common stock (the "Option Shares") at a price (the "Option
Price") of $18.54 per share, which is not less than the fair market value of the
Option Shares of the date hereof as determined in accordance with the Plan
rules.

 

2.Period of Option and Conditions of Exercise.

 

a.Period of Option. Unless the option is previously terminated pursuant to this
Option Agreement, the term of the Option and of this Option Agreement shall
commence on the date hereof (the "Date of Grant") and terminate upon the
expiration of ten (10) years from the Date of Grant. Upon the termination of the
Option, all rights of the Optionee hereunder shall cease.

 

b.Conditions of Exercise. The Option shall not be exercisable during the six
months following the Date of Grant. Thereafter, subject to the following
provisions of this paragraph and section 3 of this Agreement, the Option shall
become exercisable as follows: one hundred percent (100%) of the shares optioned
hereunder may be exercised, provided, however, that the Option may be exercised
only to purchase whole shares, and in no case may a fraction of a share be
purchased. The right of the Optionee to purchase shares with respect to which
this Option has become exercisable as herein provided may be exercised in whole
or in part at any time or from time to time, prior to the tenth anniversary of
the Date of Grant.

 

3.Termination of Employment.

 

a.Except as provided in this Section 3, the Option may not be exercised after
the holder thereof has ceased to be employed by the Corporation or a subsidiary
thereof.

 

b.If the Optionee ceases to be employed by the Corporation or a subsidiary
thereof for any reason other than death, disability, or termination of
employment by the Corporation or a subsidiary for cause, (as determined by the
Committee), the Optionee or his or her legal representative may exercise the
Option at any time within three (3) months after such cessation of employment to
the extent that the Option was then and remains exercisable.

 

c.If the Optionee ceases to be employed by the Corporation or a subsidiary
thereof by reason of death or disability as defined by in Section 22(e)(3) of
the Code, the Optionee or his or her legal representative may exercise the
Option at any time within one year after such cessation of employment to the
extent that that the Option was then and remains exercisable.

 

d.Notwithstanding anything to the contrary in this Section 3, the option shall
not be exercisable later than ten years from the Date of Grant.

 

e.For the purposes of this agreement, “cessation of employment” or “ceases to be
employed” will mean, in the case of termination of employment other than for
cause, death or disability, the last day the Optionee actively performed his or
her job for the Corporation or a subsidiary of the Corporation. In the event of
the Optionee’s death,“cessation of employment” or “ceases to be employed” will
mean the last day the employee actively performed work for the Corporation or a
subsidiary of the Corporation. In the event of disability, as defined by in
Section 22(e)(3) of the Code, “cessation of employment” or “ceases to be
employed” will mean the last business day for which the Corporation’s short-term
disability benefit is paid.

 

 

 

 

4.Non-Transferability of Option. The Option and this Option Agreement shall not
be transferable otherwise than by will or by the laws of descent and
distribution; and the Option may be exercised, during the lifetime of the
Optionee, only by the Optionee or, in the event of the Optionee’s death, by his
or her legal representative.

 

5.Exercise of Option. The Option shall be exercised in the following manner: the
Optionee, or the person(s) having the right to exercise the Option upon the
death of the Optionee, shall deliver to the Corporation written notice, in
substantially the form of the notice attached hereto, specifying the number of
Option Shares which he or she elects to purchase, together with either:

 

i.Cash;

 

ii.A number of shares of the Corporation's common stock having a fair market
value (as of the date of exercise) equal to the price to be paid upon the
exercise of the Option; or

 

iii.Any combination of cash and shares of the Corporation's common stock, the
sum of which equals the total price to be paid upon the exercise of the Option,
and the stock purchased shall thereupon be promptly delivered; provided,
however, that the Corporation may, in its discretion, require that the Optionee
pay to the Corporation, at the time of exercise, any such additional amount as
the Corporation deems necessary to satisfy its liability to withhold Federal,
state, or local income or other taxes incurred by reason of the exercise or the
transfer of shares thereupon. The Optionee will not be deemed to be a holder of
any shares pursuant to exercise of the Option until the date of the issuance of
a stock certificate to him or her for such shares and until the shares are paid
for in full.

 

6.Change of Control. If any of the change in control events described in Section
11 of the Plan occur, all Options shall fully vest as provided in Section 11;
any Options that vest as a result of the execution of an agreement described in
clause (a) of the second sentence of the third paragraph of Section 11 shall
remain fully vested upon consummation of the described transaction and , in the
case of an event described in clause (b) or (c) of said sentence, the full
vesting shall occur upon occurrence of the described event.

 

7.Notices. Any notice required or permitted under this Option Agreement shall be
deemed given when delivered personally, or when deposited in a United States
Post Office, postage prepaid, addressed, as appropriate, to the Optionee either
at his address herein above set forth or such other address as he or she may
designate in writing to the Corporation.

   

8.Failure to Enforce Not a Waiver. The failure of the Corporation to enforce at
any time any provision of this Option Agreement shall in no way be construed to
be a waiver of such provision or of any other provision hereof.

 

9.Governing Law. This Option Agreement shall be governed by and construed
according to the laws of the State of Pennsylvania.

 

10.Incorporation of Plan. The Plan is hereby incorporated by reference and made
a part hereof, and the Option and this Option Agreement are subject to all terms
and conditions of the Plan.

 

11.Amendments. This Option Agreement may be amended or modified at any time by
an instrument in writing signed by the parties hereto, provided that no such
amendment or modification shall be made which would cause the option to fail to
continue to qualify as an "incentive stock option."

 

IN WITNESS WHEREOF, the parties have executed this Option Agreement on the day
and year first above written.

 

  By           Charles H. Updegraff, Jr., Chairman, President & CEO       The
undersigned hereby accepts and agrees to all the terms and provisions of the
foregoing Option Agreement and to all the terms and provisions of the Citizens &
Northern Corporation 1995 Stock Incentive Plan herein incorporated by reference.
          Optionee – «name»

 

Signed in duplicate - one set to Optionee - Return one to Corporation