<PAGE>

                                                                    EXHIBIT 10.3

                        FORM OF NON-COMPETITION AGREEMENT

     This Non-Competition Agreement (this "Agreement") is made and entered into
as of the ______ day of ____________, 2004, by and among COMMUNITY BANK SYSTEM,
INC., a Delaware corporation ("CBSI"), COMMUNITY BANK, N.A., a national banking
association ("CBNA"), and __________________, an individual residing at the
address set forth on the signature page hereof (the "Subject Party").

                                   WITNESSETH:

     WHEREAS, CBSI, CBNA and First Heritage Bank, a Pennsylvania chartered bank
("First Heritage"), are parties to an Agreement and Plan of Merger, dated as of
January 6, 2004 (the "Merger Agreement"), pursuant to which CBSI is acquiring
First Heritage through the merger of First Heritage with and into CBNA;

     WHEREAS, the Subject Party is a director or significant shareholder of
First Heritage;

     WHEREAS, the Subject Party will receive substantial economic benefit from
the transactions contemplated by the Merger Agreement, and CBSI and CBNA desire
to preserve the value of the acquired business of First Heritage;

     WHEREAS, it is a condition to the obligations of CBSI and CBNA to
consummate the transactions contemplated by the Merger Agreement that the
Subject Party enter into this Agreement;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

     1. Prohibited Activities.

          (a) Non-Competition. During the Non-Compete Period (as hereafter
defined), the Subject Party shall not Participate (as defined below) in any
entity which is engaged in the business of a banking or thrift entity,
commercial lending entity, or mortgage company and which is headquartered in
Luzerne or Lackawanna County, Pennsylvania ("Competitive Entity"). As used in
this Agreement, a person shall be deemed to "Participate" in a Competitive
Entity if that person, whether directly for himself or herself or indirectly
through an entity or business: (1) owns, manages, operates or controls (or
participates in the ownership, management, operation or control of) a
Competitive Entity or any stock or other equity interest therein, (2) is or
serves as an officer, director, employee, consultant (relating to advice
regarding the banking or mortgage industry), or partner of a Competitive Entity,
or (3) aids or assists, by providing financial support or advice pertaining to
the banking or mortgage industry, anyone in the start-up or formation of a
Competitive Entity. Nothing contained in this Agreement shall be construed to
prohibit (a) the Subject Party's ownership of less than five percent (5%) of the
outstanding shares of any class of voting capital stock of a corporation that is
publicly traded on a national securities exchange or

<PAGE>

the over-the-counter market, so long as the Subject Party has no active
participation of any kind in such corporation, or (b) the Subject Party's right
to continue to Participate in any pre-existing business activity that is
identified on the attached Schedule 1(a). For purposes of this Agreement, the
term "Non-Compete Period" shall mean the period beginning on the date hereof and
ending on the second (2nd) anniversary of the date of this Agreement.

          (b) Non-Solicitation. During the Non-Compete Period, the Subject Party
shall not, directly or indirectly (i) hire any employee of CBSI or any of its
subsidiaries or affiliates (collectively with CBSI, "CBSI Affiliates") who was
an employee of First Heritage on the date hereof or induce or attempt to induce
any such employee to leave the employ of the applicable CBSI Affiliate, or (ii)
induce or attempt to induce any customer, supplier or vendor with a business
relation with First Heritage on the date hereof to cease doing business with the
applicable CBSI Affiliate or make any negative statements or communications
about any of the CBSI Affiliates to any such customer, supplier and vendor.
Nothing contained in this Agreement shall prohibit the Subject Party, directly
or indirectly, from running employment advertisements directed to the general
population or to specific industries other than the banking industry or hiring
any employee who responds to such an advertisement.

          (c) Permitted Activities. Nothing contained in this Section 1 shall
prohibit the Subject Party from conducting his or her personal banking, or the
commercial banking of any entity in which the Subject Party has a significant
interest, with any bank chosen by the Subject Party.

     2. Injunctive Relief. Without limiting the right of CBSI or CBNA to pursue
all other legal and equitable rights available for violation of this Agreement,
it is agreed that other remedies cannot fully compensate CBSI or CBNA for
violation of this Agreement and CBSI and CBNA shall be entitled to injunctive
relief to prevent a violation or threatened violation thereof, without posting a
bond or proving actual damages.

     3. Acknowledgement. The Subject Party acknowledges and agrees that the
terms and provisions of this Agreement are reasonable in scope, geographical
area and duration. The Subject Party further acknowledges that the provisions
contained in this Agreement are critical to CBSI and CBNA in their decision to
enter into the Merger Agreement and consummate the transactions contemplated
thereby and that a portion of the merger consideration is being paid to the
Subject Party in consideration of such provisions. The provisions contained in
this Agreement are intended to operate independently of any employment or
consulting agreement between CBSI, CBNA and the Subject Party. As such, the
provisions herein shall survive the termination of the Subject Party's
consulting or employment relationship with CBSI or CBNA, if any, and this
Agreement shall not be adversely affected by the limitations imposed by, or the
expiration of, any covenant not to compete in any employment or consulting
agreement between the Subject Party and CBSI or CBNA.

     4. Modification. Notwithstanding the foregoing, if any term, restriction,
covenant or promise contained herein is found to be unreasonable and/or
unenforceable by a court of competent jurisdiction such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court and, if determined by such court to be

<PAGE>

wholly unenforceable, shall be severed in its entirety from this Agreement as
though it never existed.

     5. Binding Effect. This Agreement shall inure to the benefit of CBSI, CBNA
and their respective successors and assigns.

     6. No Waiver. The waiver by Company of any failure on the part of Subject
Party to perform any of its obligations under this Agreement shall not be
construed as a waiver of any future continuing failure or failures.

     7. Amendment. This Agreement may only be amended or modified by a written
agreement signed by all parties.

     8. Governing Law. The Agreement shall be governed by the laws of the State
of New York.

     9. Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the subject matter of this Agreement and supersedes all
agreements and understandings between the parties concerning the subject matter,
other than any employment or consulting agreement among CBSI, CBNA and the
Subject Party. This Agreement is expressly intended to operate independently of
any other such agreements.

     10. Waiver of Jury Trial. EACH OF THE PARTIES HEREBY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING AND COUNTERCLAIMS ARISING OUT OF OR
RELATED TO THIS AGREEMENT.

<PAGE>

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

                                   SUBJECT PARTY:


                                   _____________________________________________
                                                     [NAME]

                                   Address:_____________________________________

                                   _____________________________________________

                                   _____________________________________________


                                   CBSI:

                                   COMMUNITY BANK SYSTEM, INC.

                                   By:__________________________________________
                                   Name:
                                   Title:

                                   CBNA:

                                   COMMUNITY BANK, N.A.

                                   By:__________________________________________
                                   Name:
                                   Title: