Form of Non-competition Agreement BY And BTWN Registrant And Certain Shareholder

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


the over-the-counter market, so long as the Subject Party has no active participation of ...