Exhibit 10.3

 

NON-QUALIFIED STOCK OPTION AGREEMENT

FOR NON-EMPLOYEE DIRECTORS

 

UNDER THE MASSBANK CORP.

2004 STOCK OPTION AND INCENTIVE PLAN

 

Name of Optionee:                                      
                                No. of Option Shares:
                                                                  
Option Exercise Price per Share: $                            
                                                                            
                              [FMV on Grant Date]      Grant
Date:                                      Expiration
Date:                                                                      
                                         [No more than 10 years]     

 

Pursuant to the MASSBANK Corp. 2004 Stock Option and Incentive Plan as amended
through the date hereof (the “Plan”), MASSBANK Corp. (the “Company”) hereby
grants to the Optionee named above, who is a Director of the Company but is not
an employee of the Company, an option (the “Stock Option”) to purchase on or
prior to the Expiration Date specified above all or part of the number of shares
of Common Stock, par value $1.00 per share (the “Stock”), of the Company
specified above at the Option Exercise Price per Share specified above subject
to the terms and conditions set forth herein and in the Plan. This Stock Option
is not intended to be an “incentive stock option” under Section 422 of the
Internal Revenue Code of 1986, as amended.

 

1. Exercisability Schedule. No portion of this Stock Option may be exercised
until such portion shall have become exercisable. Except as set forth below, and
subject to the discretion of the Administrator (as defined in Section 2 of the
Plan) to accelerate the exercisability schedule hereunder, this Stock Option
shall be exercisable with respect to the following number of Option Shares on
the dates indicated:

 

Incremental Number of

Option Shares Exercisable

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Exercisability Date

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___________      (20%)    ___________ ___________      (20%)    ___________
___________      (20%)    ___________ ___________      (20%)    ___________
___________      (20%)    ___________

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Once exercisable, this Stock Option shall continue to be exercisable at any time
or times prior to the close of business on the Expiration Date, subject to the
provisions hereof and of the Plan.

 

2. Manner of Exercise.

 

(a) The Optionee may exercise this Stock Option only in the following manner:
from time to time on or prior to the Expiration Date of this Stock Option, the
Optionee may give written notice to the Administrator of his or her election to
purchase some or all of the Option Shares purchasable at the time of such
notice. This notice shall specify the number of Option Shares to be purchased.

 

Payment of the purchase price for the Option Shares may be made by one or more
of the following methods: (i) in cash, by certified or bank check or other
instrument acceptable to the Administrator; (ii) through the delivery (or
attestation to the ownership) of shares of Stock that have been purchased by the
Optionee on the open market or that have been beneficially owned by the Optionee
for at least six months and are not then subject to any restrictions under any
Company plan and that otherwise satisfy any holding periods as may be required
by the Administrator; (iii) by the Optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option purchase price, provided that in the event the
Optionee chooses to pay the option purchase price as so provided, the Optionee
and the broker shall comply with such procedures and enter into such agreements
of indemnity and other agreements as the Administrator shall prescribe as a
condition of such payment procedure; or (iv) a combination of (i), (ii) and
(iii) above. Payment instruments will be received subject to collection.

 

The delivery of certificates representing the Option Shares will be contingent
upon the Company’s receipt from the Optionee of full payment for the Option
Shares, as set forth above and any agreement, statement or other evidence that
the Company may require to satisfy itself that the issuance of Stock to be
purchased pursuant to the exercise of Stock Options under the Plan and any
subsequent resale of the shares of Stock will be in compliance with applicable
laws and regulations. In the event the Optionee chooses to pay the purchase
price by previously-owned shares of Stock through the attestation method, the
number of shares of Stock transferred to the Optionee upon the exercise of the
Stock Option shall be net of the Shares attested to.

 

(b) The shares of Stock purchased upon exercise of this Stock Option shall be
transferred to the Optionee on the records of the Company or of the transfer
agent upon compliance to the satisfaction of the Administrator with all
requirements under applicable laws or regulations in connection with such
transfer and with the requirements hereof and of the Plan. The determination of
the Administrator as to such compliance shall be final and binding on the
Optionee. The Optionee shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares of Stock subject to this
Stock Option unless and until this Stock Option shall have been exercised
pursuant to the terms hereof, the Company or the transfer agent shall have
transferred the shares to the Optionee, and the Optionee’s name shall have been
entered as the stockholder of record on the books of the Company. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights with
respect to such shares of Stock.

 

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(c) The minimum number of shares with respect to which this Stock Option may be
exercised at any one time shall be 100 shares, unless the number of shares with
respect to which this Stock Option is being exercised is the total number of
shares subject to exercise under this Stock Option at the time.

 

(d) Notwithstanding any other provision hereof or of the Plan, no portion of
this Stock Option shall be exercisable after the Expiration Date hereof.

 

3. Termination as Director. If the Optionee ceases to be a Director of the
Company, the period within which to exercise the Stock Option may be subject to
earlier termination as set forth below.

 

(a) Termination by Reason of Death. If the Optionee ceases to be a Director by
reason of the Optionee’s death, any portion of this Stock Option outstanding on
such date shall become fully exercisable and may thereafter be exercised by his
or her legal representative or legatee for a period of 12 months from the date
of death or until the Expiration Date, if earlier.

 

(b) Termination Due to Disability. If the Optionee ceases to be a Director by
reason of the Optionee’s disability (as determined by the Administrator), any
portion of this Stock Option outstanding on such date shall become fully
exercisable and may thereafter be exercised by the Optionee for a period of 12
months from the date of termination or until the Expiration Date, if earlier.
The death of the Optionee during the 12-month period provided in this
Section 3(b) shall extend such period for another 12 months from the date of
death until the Expiration Date, if earlier.

 

(c) Retirement. If the Optionee ceases to be a director by reason of the
Optionee’s Retirement, any portion of this Stock Option outstanding on such date
shall become fully exercisable and may thereafter be exercised by the Optionee
for a period of five years from the date of Retirement or until the Expiration
Date, if earlier. For purposes hereof, “Retirement” shall mean that the Optionee
has ceased to serve as a Director of the Company after reaching the mandatory
retirement age of 72.

 

(d) Other Termination. If the Optionee ceases to be a Director for any reason
other than the Optionee’s death, disability or upon the occurrence of the
Director’s Retirement or a Change in Control, any portion of this Stock Option
outstanding on such date may be exercised for a period of three months from the
date of termination or until the Expiration Date, if earlier.

 

4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this
Stock Option shall be subject to and governed by all the terms and conditions of
the Plan, including the powers of the Administrator set forth in Section 2(b) of
the Plan. Capitalized terms in this Agreement shall have the meaning specified
in the Plan, unless a different meaning is specified herein.

 

5. Transferability. This Agreement is personal to the Optionee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution. This
Stock Option is exercisable, during the Optionee’s lifetime, only by the
Optionee, and thereafter, only by the Optionee’s legal representative or
legatee.

 

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6. No Obligation to Continue as a Director. Neither the Plan nor this Stock
Option confers upon the Optionee any rights with respect to continuance as a
Director.

 

7. Notices. Notices hereunder shall be mailed or delivered to the Company at its
principal place of business and shall be mailed or delivered to the Optionee at
the address on file with the Company or, in either case, at such other address
as one party may subsequently furnish to the other party in writing.

 

8. Amendment. Pursuant to Section 16 of the Plan, the Administrator may at any
time amend or cancel any outstanding portion of this Stock Option, but no such
action may be taken that adversely affects the Optionee’s rights under this
Agreement without the Optionee’s consent.

 

MASSBANK CORP. By:  

 

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Title:    

 

The foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned.

 

Dated:  

 

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        Optionee’s Signature         Optionee’s name and address:        

 

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