Document:

INCENTIVE STOCK OPTION AGREEMENT

OPTION AGREEMENT dated as of the 4th day of January 2011, 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 $15.06 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 ora 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 theOption 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 CorporationCITIZENS & NORTHERN CORPORATION

1995 STOCK INCENTIVE PLAN (As Amended)

 

RESTRICTED STOCK AGREEMENT

RESTRICTED STOCK AGREEMENT dated as of the 4th day of January, 2011, 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 Compensation Committee of the Board of Directors (the "Committee") has determined that the Recipient is to be granted, on the terms and conditions set forth herein, «Restricted_Shares» 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 and 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 Agreement, a Recipient of shares 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 Agreement. Cash dividends shall be paid out and shall not participate in Dividend
Reinvestment.  Stock dividends resulting in whole shares shall be added to the shares held in the Restricted Account and shall be distributed to the Recipient with subsequent distributions of any Award for which they accrued.  Partial shares that result from any stock dividend shall be paid to the Recipient in cash at the time of the payment of the stock dividend.  If the Restricted Shares expire prior to the satisfaction of performance standards set forth in section 4 or due to forfeiture as set forth in section 5, all shares accrued by virtue of stock dividends shall be forfeited.

	
  

	
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.  One-third of the total shares will be distributed on the anniversary date of this award based on the Recipient’s satisfactory performance of his or her job and the Corporation’s attainment of an earnings-based performance standard. For the first year of this award, the performance standard will be based on achieving 100% or more of the Return on Equity of a defined peer group of bank holding companies, herein defined (adjusting for the difference between the Corporation’s and the peer group’s equity to asset ratios), for the four consecutive calendar quarters ending with the third quarter of each calendar year following the Award Date, until all Restricted Shares
awarded herewith are distributed.  If all the Restricted Shares awarded by this agreement are not distributed within the ten (10) year period following the date of this Agreement, they shall expire and revert back to the Corporation.   No partial shares may be released, thus an amount equal to the next whole share amount will be released subject to the specified performance criteria 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.  The peer group of holding companies to be used for this award is as follows:

 

  

Page 1 of 3

  

 

	
Bank Holding Company

	  
	
Citizens & Northern Corporation

	
First Keystone Corporation

	
ACNB Corporation

	
First National Community Bancorp Inc.

	
American Bank Incorporated

	
Franklin Financial Services Corporation

	
AmeriServ Financial, Inc.

	
IBT Bancorp, Inc.

	
Bryn Mawr Bank Corporation

	
Leesport Financial Corp

	
CNB Financial Corporation

	
Orrstown Financial Services, Inc.

	
Chemung Financial Corporation

	
Penns Woods Bancorp, Inc.

	
Citizens Financial Services, Inc.

	
Penseco Financial Services Corporation

	
Comm Bancorp, Inc.

	
QNB Corp

	
Fidelity D & D Bancorp, Inc.

	
Republic First Bancorp, Inc.

	
First Chester County Corporation

	
Royal Bancshares of Pennsylvania, Inc.

The Committee reserves the right to change the composition of the peer group, as well as the method of evaluating the Corporation’s earnings performance as compared to the peer group, based on mergers or acquisitions involving members of the peer group, changes in size of the Corporation or members of the peer group, or other factors deemed appropriate by the Committee.

	
  

	
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 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.

	
Change in Control.  If any of the change in control events described in Section 11 of the Plan occur, all shares of Restricted Stock shall fully vest and all restrictions on the shares of Restricted Stock shall lapse as follows:  In the case of an event specified in clause (a) of the second sentence of the third paragraph of Section 11, the lapse of all restrictions on the shares of Restricted Stock shall occur immediately prior to the consummation of the described transaction and, in the case of an event specified in clause (b) or (c) of said sentence, the full vesting and lapse of restrictions shall occur upon occurrence of the described event.

 

	
  

	
8.

	
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.

 

	
  

	
9.

	
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.

 

	
  

	
10.

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

 

  

  

  

	
  

	
11.

	
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.

 

	
  

	
12.

	
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

	  
	  
	
Charles H. Updegraff, Jr., 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 – «name»

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