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                                                                 EXHIBIT 10 (mm)

                                Eaton Corporation
                         2007 ANNUAL REPORT ON FORM 10-K
                                   ITEM 15 (B)

                      EATON CORPORATION BOARD OF DIRECTORS
                 POLICY ON INCENTIVE COMPENSATION, STOCK OPTIONS
                        AND OTHER EQUITY GRANTS UPON THE
                        RESTATEMENT OF FINANCIAL RESULTS

It is a Policy of the Board of Directors of Eaton Corporation that, if the Board
determines that an Executive engaged in any fraud, misconduct or other bad-faith
action that, directly or indirectly, caused or partially caused the need for a
material accounting restatement for any period as to which a Performance-Based
Award was paid or credited to the Executive, the Performance-Based Award shall
be subject to reduction, cancellation or reimbursement to the Company at the
discretion of the Board. As used in this Policy, the term "Executive" means any
Eaton executive who participates in either the Executive Strategic Incentive
Plan I or the Executive Strategic Incentive Plan II, or both, or any successors
to those plans; and the term "Performance-Based Award" means incentive
compensation (whether awarded under the above Plans or the Executive Incentive
Compensation Plan or any other Eaton incentive compensation plans), stock
options, restricted stock or other equity grant awarded to the Executive
pursuant to any Eaton stock plan or similar plan, or any gain realized by the
Executive from the exercise of any such stock options, or the vesting of any
such restricted stock or other equity grant, during the twelve-month period
following the first public issuance of the incorrect financial statement.EX-10.1

 

EXHIBIT 10.1

INCENTIVE STOCK OPTION AGREEMENT

OPTION AGREEMENT dated as of the 3rd day of January 2007, 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 Salary and Pension Committee of the Board of Directors of the Corporation (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 $22.325 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.

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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 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.

7. 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.

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

9. 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.

10. 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.”

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

	 	 	 	 	 
	 	 	 
	 	By  	
 	 
	 	 	Craig G. Litchfield, 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» 	 
	 	 	 

81EX-10.2

 

	 	 	 	 	 

EXHIBIT 10.2

RESTRICTED STOCK AGREEMENT

OPTION AGREEMENT dated as of the 3rd day of January 2007, by and between Citizens &
Northern Corporation (the “Corporation”) and «name», an employee of the Corporation or of a
subsidiary (the “Recipient”).

Pursuant to the Citizens & Northern Corporation 1995 Stock Incentive Plan (the “Plan”), as amended,
the Salary and Pension Committee of the Board of Directors of the Corporation (the “Committee”) has
determined that the Recipient is to be granted, on the terms and conditions set forth herein,
Restricted Shares of the Corporation’s common stock and hereby grants such Restricted Shares. It is
intended that the Restricted Shares 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 Price. Restricted Stock shall consist of shares of Stock that will
be acquired by and issued to the Recipient at a designated time approved by the board of
directors, for no purchase price, and under and subject to such transfer, forfeiture and
other restrictions, conditions or terms as shall be determined by the Committee, including
but not limited to prohibitions against transfer, substantial risks of forfeiture within
the meaning of Section 83 of the Code,
	 
	 	2.	 	Rights of Recipient. Except as otherwise provided in the Plan or the Restricted Stock
Award, a Recipient of share of Restricted Stock shall have all the rights as does a holder
of Stock, including without limitation the right to vote such shares and receive dividends
with respect thereto; however, during the time period of any restrictions, conditions or
terms applicable to such Restricted Stock, the shares thereof and the right to vote the
same and receive dividends thereon shall not be sold, assigned, transferred, exchanged,
pledged, hypothecated, encumbered or otherwise disposed of except as permitted by the Plan
or the Restricted Stock Award
	 
	 	3.	 	Holding of Restricted Shares. Each certificate for shares of Restricted Stock shall
be deposited with the Secretary of the Corporation, or the office thereof, and shall bear a
legend in substantially the following form and content:
	 
	 	 	 	This Certificate and the shares of Stock hereby represented are subject to the provisions of
the Corporation’s Stock Incentive Plan and a certain agreement entered into between the
owner and the Corporation pursuant to said Plan. The release of the Certificate and the
shares of Stock hereby represented from such provision shall occur only as provided by said
Plan and Agreement, a copy of which are on file in the office of the Secretary of the
Corporation.
	 
	 	 	 	Upon the lapse or satisfaction of the restrictions, conditions and terms applicable to such
Restricted Stock, a certificate for the shares of Stock free thereof with such legend shall
be issued to the Recipient.
	 
	 	4.	 	Release and Lapse of Restricted Shares. Each year for three (3) from the date of this
Agreement, and the Recipient’s satisfactory performance of his or her job, one-third of the
beginning Restricted Shares awarded under this Agreement shall be released to the Recipient
free of restrictions at a fair market value as determined by the Code. No partial shares
may be released, thus an amount equal to the next whole share amount will be released at
each anniversary. The shares released may be in certificate form, or may be directed to be
held in a custodial account designated by the Recipient.
	 
	 	5.	 	Terms of Forfeiture. If a Recipient’s employment with the Corporation, or a
subsidiary, ceases for any reason prior to the lapse of the restrictions, conditions or
terms applicable to his or her Restricted Stock, all of the Recipient’s Restricted Stock
still subject to unexpired restrictions, conditions or terms shall be forfeited absolutely
by the Recipient to the Corporation without payment or delivery of any consideration

82

 

	 		 	or other thing of value by the Corporation or its affiliates, and thereupon and thereafter
neither the Recipient nor his or her heirs, personal or legal representatives, successors,
assigns, beneficiaries, or any claimants under the Recipient’s Last Will or laws of descent
and distribution, shall have any rights or claims to or interests in the forfeited Restricted
Stock or any certificates representing shares thereof, or claims against the Corporation or
its affiliates with respect thereto. Except in the case of disability, employment ceases
with the Corporation, or its Subsidiary, on the day the Recipient’s employment is terminated
with or without cause, or on their date of death. In the event of disability, the
Recipient’s employment is considered terminated on the date for which the Recipient receives
the final payment of the Corporation’s, or Subsidiary’s, short-term disability.
	 
	 	6.	 	Non-Transferability of Restricted Stock. The Restricted Stock and this Restricted
Stock Agreement shall not be transferable.
	 
	 	7.	 	Notices. Any notice required or permitted under this Restricted Stock Agreement shall
be deemed given when delivered personally, or when deposited in a United States Post
Office, postage prepaid, addressed, as appropriate, to the Recipient either at his or her
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 Restricted Stock Agreement shall in no way be construed to be a
waiver of such provision or of any other provision hereof.
	 
	 	9.	 	Governing Law. This Restricted Stock 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 Restricted Stock and this Restricted Stock 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 Restricted Stock to fail to continue to
qualify as “incentive restricted stock.”

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

	 	 	 	 	 
	 	 	 
	 	By  	
 	 
	 	 	Craig G. Litchfield, Chairman, President & CEO

 	 
	 	The undersigned hereby accepts and agrees to all the terms and
provisions of the foregoing Restricted Stock Agreement and to all
the terms and provisions of the Citizens & Northern Corporation
1995 Stock Incentive Plan herein incorporated by reference. 	 
	 
	 	 	 
	 	
 	 
	 	Recipient 	 
	 	 	 

83

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