Exhibit 10.1


Susquehanna Bancshares, Inc. 


Short-Term Incentive Plan  


 


Introduction



Susquehanna
Bancshares, Inc. (the “Company”) has adopted this Short-Term Incentive Plan
(the “Plan”) to provide a vehicle to reward eligible employees for their
contributions to the Company’s financial success. 


Effective
Date 


The Plan
was originally effective as of January 1, 2011 and was amended and restated
effective as of January 1, 2012.  The Plan is now amended and restated
effective as of January 1, 2013.  Each January 1 to December 31 period will be
the “Plan Year.” The Plan will be reviewed annually by the Compensation
Committee of the Board of Directors of the Company (the “Compensation
Committee”) to ensure proper alignment with the Company’s business objectives.
The Compensation Committee retains the rights, as described below, to amend or
modify the Plan at any time.


Purpose 


The Plan’s
objectives are to: 


·        
Align executives, management and
employees with the Company’s strategic plan and critical performance goals. 


·        
Encourage teamwork and
collaboration across all areas of the Company - our collective contributions
will drive improved business results. 


·        
Motivate and reward the
achievement of core performance objectives. 


·        
Provide payouts commensurate with
Company, affiliate, region, function, unit and/or employee performance – as
defined by each participating role. 


·        
Provide competitive total
compensation opportunities.


·        
Enable the Company to attract,
motivate and retain talented employees. 


·        
Ensure our incentives are
appropriately risk-balanced (i.e., do not unintentionally motivate
inappropriate risk taking). 


·        
Provide a program that is simple
and easy to understand and administer. 


The Plan is
intended to meet the requirements for “qualified performance-based
compensation” under section 162(m) of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (the “Code”) with respect
to any “covered employee” of the Company, as such term is defined under section
162(m) of the Code. The Compensation Committee may, but is not required to,
structure awards under the Plan to meet the requirements for “qualified
performance-based compensation” under section 162(m) of the Code.


Plan
Administration 


The Plan
has been approved by the Compensation Committee, and the Compensation Committee
will administer the Plan. The Compensation Committee has the sole authority to
interpret the Plan and to make or nullify any rules and procedures, as
necessary, for proper administration of 


the Plan.
The Compensation Committee will make all final determinations regarding cash
compensation paid to executive officers of the Company. Except as required by
applicable law, determinations for other employees 







 




 










 








  








will
be made by senior management subject to review and approval by the Compensation
Committee. Any determination by the Compensation Committee will be final and
binding.  


Participation
and Eligibility 


Selected
employees are eligible to participate in the Plan. Employees will be nominated
by senior management to be eligible to participate in the Plan.  The
Compensation Committee will approve all executive officers for participation in
the Plan and will approve all other employees as recommended by management for
participation in the Plan. 


Unless the
Compensation Committee determines otherwise, other criteria for participation
in the Plan will include: 


·        
An employee must be employed by
September 30 of the Plan Year to be eligible to participate in the Plan for the
Plan Year. An employee hired after September 30 of the Plan Year must wait
until the next applicable Plan Year to be eligible to participate in the Plan.


·        
An employee must have one or more
approved goals in the “MyPerformance” system as of April 30 of a Plan Year (or
such other date as is set by the Compensation Committee for the Plan Year) or
within 30 days after commencement of employment, if later, unless otherwise
determined by the Compensation Committee.


·        
An employee must not be on a
Performance Improvement Plan, receive a performance rating of “Meets
Expectations” (or such equivalent) or better for the Plan Year, and remain in
good standing throughout the Plan Year. If an employee is placed on probation
during the Plan Year, any Award earned will be reduced on a pro-rata basis to
reflect the time on probation. 


·        
An employee must be current with
all regulatory and compliance requirements.


·        
An employee generally must be an
active employee as of the Award payout date to receive an Award.


For
purposes of the Plan “employee” shall mean an employee of the Company or a
subsidiary of the Company (including an officer or director who is also an
employee), but excluding any individual (a) employed in a casual or temporary
capacity (i.e., those hired for a specific job of limited duration), (b) whose
terms of employment are governed by a collective bargaining agreement that does
not provide for participation in the Plan, (c) any individual characterized as
a “leased employee” within the meaning of section 414(n) of the Code, (d)
classified by the Company as a “contractor” or “consultant,” no matter how
characterized by the Internal Revenue Service, other governmental agency or a
court, (e) employed as a mortgage loan originator as defined by TILA and
Regulation Z, or (f) who participates in a different incentive plan sponsored
by a subsidiary of the Company. Any change of characterization of an individual
by any court or government agency shall have no effect upon the classification
of an individual as an employee for purposes of the Plan, unless the
Compensation Committee determines otherwise. Whether an employee is exempt or
non-exempt shall be determined by the Company’s Human Resource Department based
on the employee’s status as of the end of the Plan Year for which an Award is
earned. Unless otherwise specified herein, all references to employee in the
Plan shall include both exempt and non-exempt employees. 


Performance Period 


The performance period for the Plan is the Plan Year. 


Incentive
Targets 


Each
eligible employee will have a specified target annual cash incentive award (the
“Target Award”) or will be eligible to receive a percentage of a pool created
based on level of attainment of the applicable performance goals, in each case,
based on his or her role at the Company. Except as required by applicable law,
the Target Award for executive officers is determined by the Compensation
Committee and by senior management for all other eligible employees, in each
case, in their sole discretion.  Target Awards are based on competitive 







 




 










 








  








practices and reflect the amount of the Award to be paid
for meeting predefined performance goals at the 100% level. Target Awards will
be defined as a percentage of base earnings. Base earnings includes straight
time pay, and does not include overtime, commissions, bonuses, incentives,
special premiums and allowances, or other non-salary items, actually earned by
an eligible employee for a Plan Year, determined as of the last day of the Plan
Year. This allows for an automatic conversion for part-time employees,
employees who receive salary increases during the year, and employees who are
employed after the start of the year. 


Actual
awards (“Awards”) can range from 0% to 200% of the Target Award established for
an eligible employee for the Plan Year or be subject to such other cap or
limitation as the Compensation Committee may set for a Plan Year, depending on
performance and may be based on achievement of threshold (i.e. baseline),
target and stretch (i.e. superior) performance which will be determined by the
Compensation Committee; provided that for Awards intended to qualify as
“qualified performance-based compensation” for purposes of section 162(m) of
the Code the maximum amount payable to any covered employee under the Plan is
200% of base earnings. Performance below threshold will result in no payout. 


If an
employee changes his or her role or is promoted during the Plan Year, and that
promotion results in a higher Target Award opportunity, he or she will be
eligible for the new role’s Target Award opportunity on a pro-rata basis. 


In the
event of an approved leave of absence, the Target Award opportunity level for
the year will be adjusted to reflect the time in active status.


Performance
Goals 


For each
Plan Year, each eligible employee will have predefined performance goals that
will be used, in part, to determine his or her Award. 


There may
be up to four categories of performance goals for each eligible employee: 


·        
Corporate; 


·        
Division; 


·        
Unit; and/or


·        
Individual (defined for each
role).


All
employees will have a portion of their incentive opportunity tied to Corporate
performance. 


To the
extent Awards are intended to qualify as “qualified performance based
compensation” for purposes of section 162(m) of the Code, performance goals
will be set by the Compensation Committee no later than the earlier of (i) 90
days after the beginning of the Plan Year or (ii) the date on which 25% of the
Plan Year has been completed, or such other date as may be required or
permitted under applicable regulations under section 162(m) of the Code and may
be based on earnings or earnings growth (including but not limited to earnings
per share or net income); economic profit, shareholder value added or economic
value added; return on equity, assets or investment; revenues; expenses; stock
price or total shareholder return; regulatory compliance; satisfactory internal
or external audits; improvement of financial or credit ratings; achievement of
asset quality objectives; achievement of balance sheet or income statement
objectives, including, without limitation, capital and expense management;
efficiency ratio; non-interest income to total revenue ratio; net interest
margin; credit quality measures (including non-performing asset ratio, net
charge-off ratio, and reserve coverage of non-performing loans); net operating
profit; loan growth; deposit growth; non-interest income growth; market share;
productivity ratios; or achievement of risk management objectives. Such
performance goals may also be particular to an eligible employee or the
division, department, branch, line of business, subsidiary or other unit in
which the employee works, or may be based on attaining a specified absolute
level of the performance goal, or a percentage increase or decrease in the
performance goal compared to a pre-established target, previous 







 




 










 








  








years’ results, or a designated market index or comparison
group, all as determined by the Compensation Committee. 


Performance
targets and ranges for each corporate performance goal will be recommended by
management and approved by the Compensation Committee. Target Awards may
provide for differing amounts to be paid based on differing thresholds of
performance. The Company will notify each eligible employee of the employee’s
Target Award and the applicable performance goals for the Plan Year. The
specific allocation of goals, including how the performance goals are weighted,
will be determined at the discretion of the Compensation Committee and may be
based on the eligible employee’s role, key area of contribution or such other
factor as determined by the Compensation Committee. 


For Awards
intended to meet the requirements for “qualified performance-based
compensation” under section 162(m) of Code, the Compensation Committee will
specify in the minutes (i) each employee’s Target Award, (ii) the performance
goals for each eligible employee, and (iii) how the financial calculations for
the performance goals will be made, including what, if any, adjustments will be
made in accordance with the Plan. The maximum dollar amount that may be paid to
an eligible employee for a Plan Year is 200% of base earnings. For decisions
with respect to Awards not intended to be “qualified performance-based
compensation,” the Compensation Committee will have flexibility in establishing
the Target Award opportunity, performance goals and Award level for each
eligible employee under the Plan. 


Award
Levels 


At the end
of the Plan Year (December 31st), or as soon as practical thereafter,
performance is assessed against the specific goals established at the start of
the Plan Year. An eligible employee will earn an Award for the Plan Year based
on the level of achievement of the performance goals established by the
Compensation Committee for the Plan Year; provided that for Awards intended to
qualify as “qualified performance based compensation,” the Compensation
Committee may reduce (but not increase) an Award below the level determined
based on the Performance Goals.  Unless the Compensation Committee determines
otherwise, Awards will be interpolated based on performance between the
applicable performance levels. 


Payout for
each goal is determined independently in arriving at the overall incentive
payout. As a result, an eligible employee may not achieve baseline (threshold)
performance on one goal but may still receive an Award based upon the level of
attainment of other performance goals (assuming the eligible employee maintains
a minimum performance rating of “satisfactory” (or such equivalent) or better).



Awards
under the Plan are based on the performance results for the Plan Year.
Achieving higher levels of performance above target up to stretch will increase
the Plan payouts to the eligible employee. Similarly, achieving less than
target performance will reduce the Plan payouts.


Adjustment
to Target Awards and Performance goals 


Except with
respect to Awards to named executive officers that are structured to satisfy
the requirements for “qualified performance based compensation” under section
162(m) of the Code, the Compensation Committee may at any time prior to the
final determination of Awards change the Target Award opportunity of any
eligible employee or assign a different Target Award opportunity to an eligible
employee to reflect any change in the employee’s responsibility level or
position during the course of the performance period. 


In
addition, the Compensation Committee may, but only to the extent consistent
with the requirements of section 162(m) of the Code for Awards intended to meet
the requirements for “qualified performance-based compensation,” at any time
prior to the financial determination of Awards, change the performance goals to
reflect a change in corporate capitalization, such as a stock split or stock
dividend, or a corporate transaction, such as a merger, consolidation,
separation, reorganization or partial or complete liquidation, or to equitably
reflect the occurrence of any extraordinary event, any change in applicable
accounting rules or principles, any change in the Company’s method of
accounting, any change in applicable law, any change due to any merger, 







 




 










 








  








consolidation, acquisition, reorganization, stock split,
stock dividend, combination of shares or other changes in the Company’s
corporate structure or shares, or any other change of a similar nature. 


Application
of Section 162(m) of the Internal Revenue Code 


Awards
structured to satisfy the requirements for “qualified performance based
compensation” under section 162(m) of the Code will be based on performance
goals, including the requirement that the achievement of the performance goals
be substantially uncertain at the time they are established and that the
performance goals be established in such a way that a third party with
knowledge of the relevant facts could determine whether and to what extent the
performance goals have been met. An Award that is designated as “qualified
performance based compensation” under section 162(m) of the Code may not be
awarded as an alternative to any other award that is not designated as
“qualified performance based compensation,” but instead must be separate and
apart from all other awards made. The Compensation Committee is authorized to
reduce an Award for the Plan Year based upon its assessment of personal
performance or other factors, but not to increase the Award beyond the amount
determined based on achievement of the performance goals for that employee. Any
reduction of an eligible employee’s Award will not result in an increase in any
other eligible employee’s Award. 


Incentive
Award Payments 


For Awards
structured to satisfy the requirements for “qualified performance based
compensation” under section 162(m) of the Code and for Awards to named
executive officers, the Compensation Committee will certify the performance
goals for the Plan Year and the Awards that will be paid by the Company to each
employee following the final determination of the Company’s financial results
for the Plan Year. Except as required by applicable law or as otherwise
determined by the Compensation Committee, all other Awards will be approved by
the Compensation Committee based on the achievement of the performance goals by
the employee. 


Except as
provided below, and subject to the requirements of applicable law, employees
who terminate during the Plan Year will not be eligible to receive an Award for
that Plan Year. Further, to encourage employees to remain in the employment of
the Company, except as set forth herein, an employee must be an active employee
of the Company on the date the applicable portion of the Award is paid in
accordance with the payment schedule set forth below. 


Unless the
Compensation Committee determines otherwise, Awards will be paid out to selected
exempt employees in three installments following the end of the Plan Year;
provided that the employee remains employed through the applicable payment
date, as follows: 50% of the Award will be paid out within two and one half
months following the end of the Plan Year (i.e. no later than March 15) (such
actual date the “Payment Date”), 25% of the Award will be paid out on the first
anniversary of the Payment Date and the remaining 25% of the Award will be paid
out on the second anniversary of the Payment Date.  Payment of the installments
may be subject to attainment of additional performance criteria as determined
by the Compensation Committee.  All Awards to non-exempt employees will be paid
as a single lump sum cash payment on the Payment Date.  Awards may be paid in
cash or equity, or a combination of the two, as determined by the Compensation
Committee.  If Awards are paid in equity, such Awards shall be made under the
Amended and Restated Susquehanna Bancshares, Inc. 2005 Equity Compensation Plan.


If an
employee ceases to be employed by the Company prior to the end of the Plan Year
for which an Award may be earned due to death, disability (within the meaning
of section 22(e)(3) of the Code) or on account of an early or normal retirement
(as defined by Susquehanna Bancshares, Inc. Cash Balance Pension Plan), his or
her Award under the Plan will be pro-rated based on actual performance for the
applicable Plan Year. Such pro-rated amount will be calculated by multiplying
the amount of the Award that the employee would have received had he remained
employed through the end of the Plan Year by a fraction, the numerator of which
is the number of completed calendar months during which the employee was
employed by the Company during the Plan Year 







 




 










 








  








and the denominator
of which is 12. Any Award owed to the employee will be paid to the employee, or
the employee’s estate, as applicable, in a lump sum on the Payment Date at the
time Awards earned for the applicable Plan Year are paid under the Plan to
other employees, but in any event not later than March 15 of the Plan Year
following the Plan Year for which the Award was earned. 


If an
exempt employee ceases to be employed by the Company due to death, disability
or on account of an early or normal retirement, at any time following the
Payment Date but prior to one or both of the subsequent payment dates on the
first or second anniversary of the Payment Date, the remaining amount of the
Award not yet paid will be paid in full within 30 days following the date of the
exempt employee’s death, termination due to disability or early or normal
retirement, as applicable. 


If
a change of control (as defined the Company’s [Key Employee Severance Pay
Plan/2013 Omnibus Equity Compensation Plan]) occurs prior to the end of a performance
period and the eligible employee is employed on the date of the change of
control, then the performance period will end on the date of the change of
control and Awards under the Plan will be paid based on the greater of
(i) the Company’s actual performance level achieved with respect to the
performance goals as of the date of the change of control or (ii) 100% of the
Target Award.


 


Awards will
be considered taxable income to employees in the year paid and will be subject
to withholding for required income and other applicable taxes. 


Discretionary Awards 


In addition to Awards that are designated “qualified
performance-based compensation” under section 162(m) of the Code, as described
above, the Compensation Committee may grant to employees such other incentive
awards as the Compensation Committee deems appropriate, which may be based on
Unit/Individual goals, Corporate/Company goals or such other criteria as the
Compensation Committee determines. Decisions with respect to such incentive
awards will be made separate and apart from the Awards intended to be
“qualified performance-based compensation.” 


Taxes 


The Company
is authorized to withhold from any payment under the Plan, amounts of
withholding and other taxes due in connection with a payment made under the
Plan, and to take such other action as the Compensation Committee may deem
advisable to enable the Company and employees to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any payment 


Application
of Section 409A of the Internal Revenue Code 


The Plan is
intended to comply with the requirements of section 409A of the Code, and shall
in all respects be administered in accordance with section 409A of the Code or
an exception thereto. Notwithstanding anything in the Plan to the contrary,
payments may only be made upon an event and in a manner permitted by section
409A of the Code or an exception thereto. If a payment is not made by the
designated payment date under the Plan, the payment shall be made by December
31 of the calendar year in which the designated date occurs. For purposes of
section 409A of the Code, all payments to be made upon an employee ceasing to
be employed by, or providing service to, the Company may only be made upon the
employee’s “separation from service” (within the meaning of such term under
section 409A of the Code). 


Notwithstanding
anything in the Plan to the contrary, if an employee is a “key employee” under
section 409A of the Code and payment of any amount under the Plan is required
to be delayed for a period of six months after separation from service pursuant
to section 409A of the Code, payment of such amount will be delayed as required
by section 409A of the Code and will be paid within 10 days after the end of
the six-month period. If the employee dies during such six-month period, the
amounts withheld on account of section 409A of the Code 







 




 










 








  








will
be paid to the personal representative of the employee’s estate within 60 days
after the date of the employee’s death. 


Limitations
on Rights Conferred under Plan 


Nothing
contained in the Plan or in any documents related to the Plan will confer upon
any employee any right to continue as an employee or in the employ of the
Company or constitute any contract or agreement of employment, or interfere in
any way with the right of the Company to reduce such person’s compensation, to
change the position held by such person or to terminate the employment of such
employee, with or without cause, but nothing contained in this Plan or any
document related thereto will affect any other contractual right of any
employee. No benefit payable under, or interest in, this Plan will be
transferable by an employee except by will or the laws of descent and
distribution or otherwise be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge. 


Plan
Changes or Discontinuance 


The
Compensation Committee may add to, amend, modify or discontinue any of the
terms or conditions of the Plan at any time; provided, however, that the
Compensation Committee will not amend the Plan without shareholder approval if
such approval is required by section 162(m) of the Code. The Plan must be
re-approved by the Company’s shareholders no later than the first shareholders’
meeting that occurs in the fifth year following the year in which the
shareholders previously approved the Plan, if additional Awards are to be paid
under the Plan and if required by section 162(m) of the Code or the regulations
thereunder. 


Ethics,
Interpretation and Clawback 


If there is
any ambiguity as to the meaning of any terms or provisions of this Plan or any
questions as to the correct interpretation of any information contained
therein, the Company’s interpretation expressed by the Compensation Committee
will be final and binding. 


The
altering, inflating, and/or inappropriate manipulation of performance/financial
results or any other infraction of recognized ethical business standards, will
subject the employee to disciplinary action up to and including termination of
employment. In addition, any incentive compensation as provided by this Plan to
which the employee would otherwise be entitled will be revoked. 


All Awards
under the Plan will be subject to any compensation, clawback and recoupment
policies that may be applicable to the employees of the Company, as in effect
from time to time and as approved by the Board of Directors or a duly
authorized committee thereof, whether or not approved before or after the
effective date of the Plan. 


Severability



Each
provision in this Plan is severable, and if any provision is held to be
invalid, illegal, or unenforceable, the validity, legality and enforceability
of the remaining provisions will not, in any way, be affected or impaired
thereby. 


Successors
and Assigns 


The
provisions of the Plan will be binding upon the Company and its successors and
upon the employees and their legal representatives. 


Governing
Law 


The
validity, construction, and effect of the Plan, any rules and regulations
relating to the Plan, and any payment made under the Plan will be determined in
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of laws, and applicable federal law.