Document:

mljcic.htm

EXHIBIT 10.4

 

 

AMENDMENT TO THE CHANGE IN CONTROL AGREEMENT

BY AND BETWEEN MICKEY L. JONES, CITIZENS FINANCIAL SERVICES, INC. 

AND FIRST CITIZENS NATIONAL BANK

 

WHEREAS, Mickey L. Jones entered into a change in control agreement with First Citizens National Bank (the “Bank”) and Citizens Financial Service, Inc.(the “Company”); and

 

WHEREAS, the Boards of Directors of the Bank and Company resolved to amend the change in control agreement effective June 29, 2012 to reflect the Bank’s new name.

NOW, THEREFORE, the change in control agreement is amended as follows:

 

Effective as of June 29, 2012, all references in the change in control agreement to First Citizens National Bank shall be replaced with First Citizens Community Bank.

 

IN WITNESS WHEREOF, this Amendment is executed by the parties to the change in control agreement on June 19, 2012.

 

	 	FIRST CITIZENS NATIONAL BANK	 
	 	 	 	 
	
 

	
By: 

	/s/ R. Lowell Coolidge	 
	 	 	R. Lowell Coolidge	 
	 	 	Chairman of the Board of Directors	 
	 	 	 	 

	 	CITIZENS FINANCIAL SERVICES, iNC.	 
	 	 	 	 
	
 

	
By: 

	/s/ R. Lowell Coolidge	 
	 	 	R. Lowell Coolidge	 
	 	 	Chairman of the Board of Directors	 
	 	 	 	 

	 	 	 
	 	 EXECUTIVE	 
	
 

	
By: 

	/s/ Mickey L. Jones	 
	 	 	Mickey L. Jones	 
	 	 	Executive	 
	 	 	 	 

	 	 	 
	 ATTEST:	 	 
	
By:  /s/ Gina Marie Boor

	
 

	 	 
	By:  Gina Marie Boor	 	 	 
	 	 	 	 
	 	 	 	 

 

  

  

  

FORM OF

CHANGE IN CONTROL AGREEMENT

 

This AGREEMENT (“Agreement”) is hereby entered into as of January 19, 2010, by and between FIRST CITIZENS NATIONAL BANK (the “Bank”), Mickey L. Jones (“Executive”), and CITIZENS FINANCIAL SERVICES, INC. (the “Company”), the holding company of the Bank, as guarantor.

 

WHEREAS, the Bank recognizes the importance of Executive to the Bank’s operations and wishes to protect Executive’s position with the Bank in the event of a change in control of the Bank or the Company for the period provided for in this Agreement; and

 

WHEREAS, Executive and the Board of Directors of the Bank (the “Board of Directors”) desire to enter into an agreement setting forth the terms and conditions of payments due to Executive in the event of a Change in Control and the related rights and obligations of each of the parties.

 

NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, it is hereby agreed as follows:

 

1.  Term of Agreement.

 

The initial term of this Agreement shall commence on the Effective Date and continue through January 19, 2013.  This Agreement shall renew automatically on January 19 of each year for successive terms of three years each, unless either party notifies the other party at least 90 (ninety) days prior to such date of such party’s determination not to renew this Agreement beyond the then existing term. It is the intention of the parties that this Agreement be “Evergreen” unless (i) either party gives written notice to the other party of his or its intention not to renew this Agreement as provided above or (ii) this Agreement is terminated by the Company for Cause or due to the Executive’s death, termination of employment due to disability, or executive’s voluntary termination of employment prior to a Change in Control. Each reference herein to “the term of this Agreement” shall include the initial term and any renewal term.

2.  Change in Control.

 

(a)           If a Change in Control (as defined herein) shall occur and if, between the Date of the Change in Control (as defined herein) and one (1) year after the Date of Change in Control (as defined herein), there shall be:

(i)           any involuntary termination of Executive’s employment (other than for death, disability or Cause (as defined herein)); or

(ii)           any failure by the acquiring person or entity to offer employment to Executive as of the Date of Change in Control (as defined herein), in a position having equivalent responsibilities, title, authority, except reporting authority, compensation and benefits as Executive received immediately prior to the Change in Control (as defined herein); or

(iii)           any reduction in Executive’s title, responsibilities, except reporting responsibilities, or authority, including such title, responsibilities or authority as such may be increased from time to time during the term of this Agreement; or

  

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(iv)           the assignment to Executive of duties inconsistent with Executive’s office on the date of the Change in Control or as the same may be increased from time to time after the Change in Control; or

(v)           any reassignment of Executive to a location greater than fifty (50) miles from the location of Executive’s office on the date of the Change in Control; or

(vi)           any reduction in Executive’s annual direct salary in effect on the date of the Change in Control or as the same may be increased from time to time after the Change in Control; or

(vii)           any failure to provide Executive with benefits at least as favorable as those enjoyed by Executive under any of Company or Bank’s retirement or pension, life insurance plans, medical, health and accident, disability or other employee benefit plans in which Executive participated at the time of the Change in Control, or the taking of any action that would materially reduce any of such benefits in effect at the time of the Change in Control, then at the option of Executive, exercisable by Executive within sixty (60)  days of the occurrence of any of the foregoing events, Executive may resign from employment with Company and Bank (or, if involuntarily terminated, give notice of intention to collect benefits under this Agreement) by delivering a notice in writing (the “Notice of Termination”) to Company and Bank and the provisions of Section 2(c) of this Agreement shall apply.

(b)           During the period of time between the execution of an agreement to effect a Change in Control (as defined herein) and the Date of the Change in Control (as defined herein), Executive’s employment may only be terminated for Cause (as defined herein). If, during that period of time, Executive’s employment is terminated for Cause (as defined herein), then all rights of Executive under this Agreement shall cease as of the effective date of such termination.  If, during that period of time, Executive’s employment is terminated other than for Cause (as defined herein), then Executive may give notice of intention to collect benefits under this Agreement by delivering a notice in writing (“Notice of Termination”) to Company and Bank and the provisions of Section 2(c) of this Agreement shall apply.

(c)           In the event that Executive delivers a Notice of Termination (as defined in Section 2(a) of this Agreement) to Company and Bank, following the Change in Control, Executive shall be entitled to receive a lump sum amount equal to one time the Executive’s then current base salary.

 

In addition, for a period of eighteen (18) months from the date of termination of employment, or until Executive secures substantially similar benefits through other employment, whichever shall first occur, Executive shall receive a continuation of health care insurance under the same terms and conditions the Executive received coverage prior to his termination of employment.  In addition the Company shall continue for a period of eighteen (18) months from the date of termination of employment, or until Executive secures substantially similar benefits through other employment, whichever shall first occur Executive’s long term disability coverage to the extent Executive remains eligible under the Company’s long term disability plan.  In the event of a break in service and Executive becomes employed within eighteen (18) months of termination of employment without his new employer offering substantially similar long term disability coverage and Executive would be eligible for the Company’s long term disability coverage but for not being an employee of the Company, the Company shall pay Executive a dollar amount equal to the cost to the Executive of obtaining such benefits in effect with respect to Executive during one (1) year prior to his termination of employment, (or substantially similar benefits) for the remainder of the one year period, not to exceed 125% of the cost to the Company of providing long term disability coverage under its group long term policy.  If Company cannot provide such benefits under the terms of the plans or contracts, Company shall pay to Executive, a dollar amount equal to the cost to the Executive of obtaining such benefits (or substantially similar benefits), not to exceed 125% of the cost to the Company of obtaining such benefits (or substantially similar benefits).  However, in the event the payment described herein, when added to all other amounts or benefits provided to or on behalf of the Executive in connection with his termination of employment, would result in the imposition of an excise tax under Code Section 4999, such payments shall be retroactively (if necessary) reduced to the extent necessary to avoid such excise tax imposition.  Upon written notice to Executive, together with calculations of Company’s independent auditors, Executive shall remit to Company the amount of the reduction, plus such interest, as may be necessary to avoid the imposition of such excise tax. Notwithstanding the foregoing or any other provision of this contract to the contrary, if any portion of the amount herein payable to the Executive is determined to be non-deductible pursuant to the regulations promulgated under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the Company shall be required only to pay to Executive the amount determined to be deductible under Section 280G.

  

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(d)           The parties to this Agreement intend for the payments hereunder to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of continued insurance coverage, not constitute deferred compensation (since such amounts are not taxable to Executive).  However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the event of termination in excess of the “permitted amount” under Section 409A of the Code.  For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an event of termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination.  The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the event of termination.  Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the event of termination.  “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code (without regard to Section 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

 

3.  Definition of Cause.

 

For purposes of this Agreement, “Cause” shall mean: (i) the willful failure by the Executive to substantially perform his duties hereunder (other than a failure resulting from the Executive’s incapacity because of physical or mental illness), after notice from the Company or Bank and a failure to cure such violation within thirty (30) days of said notice; (ii) the willful engaging by the Executive in misconduct injurious to the Company or Bank; (iii) the dishonesty or gross negligence of the Executive in the performance of his duties; (iv) the breach of Executive’s fiduciary duty involving personal profit; (v) the material violation of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority; (vi) conduct on the part of Executive which brings public discredit to the Company or Bank; (vii) unlawful discrimination by the Executive, including harassment against Company or Bank’s employees, customers, business associates, contractors, or visitors; (viii) theft or abuse by Executive of the Company or Bank’s property or the property of Company or Bank’s customers, employees, contractors, vendors, or business associates; (ix) failure of the Executive to follow the good faith lawful instructions of the Board of Directors of Company or Bank with respect to its operations, after notice from the Company or Bank and a failure to cure such violation within thirty (30) days of said notice; (x) the direction or recommendation of a state or federal bank regulatory authority to remove the Executive’s position with Company and/or Bank as identified herein;  (xi) any final removal or prohibition order to which the Executive is subject, by a federal banking agency pursuant to Sections 8(e) and 8(g) of the Federal Deposit Insurance Act; (xii) the Executive’s conviction of or plea of guilty or nolo contendere to a felony,  crime of falsehood or a crime involving moral turpitude, or the actual incarceration of Executive; (xiii) any act of fraud, misappropriation or personal dishonesty; (xiv) insubordination; (xv) misrepresentation of a material fact, or omission of information necessary to make the information supplied not materially misleading, in an application or other information provided by the Executive to the Company or any representative of the Company in connection with the Executive’s employment with Company; (xvi) the existence of any material conflict between the interests of Company and the Executive that is not disclosed in writing by the Executive to the Company and approved in writing by the Board of Directors of Company; or (xvii) the Executive takes action that is clearly contrary to the best interest of the Company.

 

  

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4.  Change in Control Definitions.

 

(a)           For purposes of this Agreement, the term Change in Control shall mean:  A change in control (other than one occurring by reason of an acquisition of the Company or Bank by Executive) of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A and any successor rule or regulation promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) if Company or Bank were subject to the Exchange Act reporting requirements; provided that, without limiting the foregoing, such a change in control shall be deemed to have occurred if the Board of Directors certifies that one of the following has occurred:

(i)           any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company or Bank or any “person” who on the date hereof is a director or officer of the Company or Bank is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company or Bank representing fifty percent (50%) or more of the combined voting power of the Company’s or Bank’s then outstanding securities, or

(ii)           during any period of one (1) year during the term of Executive’s employment under this Agreement, individuals who at the beginning of such period constitute the Board of Directors of the Company or Bank cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period;

(iii)           a merger, consolidation or business combination with the Company and/or Bank occurs.

(iv)           Notwithstanding any other provision in this section, in the event that Executive is determined to be a key employee as that term is defined by Section 409A of the IRC no payment shall be made until one day following six months from the date of separation from service as that term is defined by Section 409A of the IRC.

(b)           For purposes of this Agreement, the Date of Change in Control shall mean:

(i)           the first date on which a single person and/or entity, or group of affiliated persons and/or entities, acquire the beneficial ownership of fifty percent (50%) or more of the Company’s voting securities, or more than fifty percent (50%) of the total fair market value of the Company, or

(ii)           the date of the closing of an Agreement, transferring all or substantially all of the Bank or Company’s assets, or

  

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(iii)           the date on which a merger, consolidation or business combination is consummated, as applicable, or

(iv)           the date on which individuals who formerly constituted a majority of the Board of Directors of the Bank or Company under Section 4(a)(ii) hereof and the replacement Directors otherwise approved under Section 4(a)(ii), ceased to be a majority within a one year period.

5.  Source of Payments.

 

The Bank shall make all payments provided for under this Agreement.  The Company, however, unconditionally guarantees all amounts and benefits due to Executive and, if the Bank does not timely pay or provide such amounts and benefits, the Company shall pay or provide such amounts and benefits.

 

6.  Effect on Prior Agreements and Existing Benefit Plans.

 

This Agreement contains the entire understanding between the parties hereto and supersedes any prior agreement between the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided.  No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to Executive without reference to this Agreement.  Nothing in this Agreement shall confer upon Executive the right to continue in the employ of the Bank or shall impose on the Bank any obligation to employ or retain Executive in its employ for any period.

 

7.  No Attachment.

 

(a)           Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void and of no effect.

(b)           This Agreement shall be binding upon, and inure to the benefit of, Executive, the Bank and their respective successors and assigns.

8.  Modification and Waiver.

(a)           This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

(b)           No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel.  No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

 

9.  Severability.

 

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

 

  

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10.  Headings for Reference Only.

 

The headings of sections and paragraphs are included in this Agreement solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.  In addition, references to the masculine in this Agreement shall apply to both the masculine and the feminine.

 

11.  Governing Law.

 

Except to the extent preempted by federal law, the validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania, without regard to principles of conflicts of law of that state.

 

12.  Arbitration.

 

Company, Bank and Executive recognize that in the event a dispute should arise between them concerning the interpretation or implementation of this Agreement, lengthy and expensive litigation will not afford a practical resolution of the issues within a reasonable period of time. Therefore, each party agrees that all disputes, disagreements and questions of interpretation concerning this Agreement are to be submitted for resolution, in Williamsport, Pennsylvania, to the American Arbitration Association (the “Association”) in accordance with the Association’s National Rules for the Resolution of Employment Disputes or other applicable rules then in effect (“Rules”). Company, Bank or Executive may initiate an arbitration proceeding at any time by giving notice to the other in accordance with the Rules.  Company, Bank and Executive may, as a matter or right, mutually agree on the appointment of a particular arbitrator from the Association’s pool. The arbitrator shall not be bound by the rules of evidence and procedure of the courts of the Commonwealth of Pennsylvania but shall be bound by the substantive law applicable to this Agreement.  The arbitration proceeding and all filing, testimony, documents, and information, relating to or presented during the evaluation proceeding, shall be disclosed exclusively for the purpose of facilitating the arbitration process and for no other purpose and shall be deemed to be information subject to the confidentiality provisions of this Agreement.  The decision of the arbitrator, absent fraud, duress, incompetence or gross and obvious error of fact, shall be final and binding upon the parties and shall be enforceable in courts of proper jurisdiction.  Following written notice of a request for arbitration, Company, Bank and Executive shall be entitled to an injunction restraining all further proceedings in any pending or subsequently filed litigation concerning this Agreement, except as otherwise provided herein.  The Arbitrator or the Court, (which ever is applicable) may award the prevailing party in a dispute reasonable counsel fees not to exceed $25,000.

 

13.  Payment of Legal Fees.

 

All reasonable legal fees and expenses paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Bank, only if Executive is successful in arbitration.

 

14.  Indemnification.

 

The Company or the Bank shall provide Executive (and Executive’s heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense and shall indemnify Executive (and Executive’s heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred in connection with or arising out of any action, suit or proceeding in which Executive may be involved by reason of having been a director or officer of the Company or the Bank (whether or not Executive continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements.

  

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15.  Successors to the Bank and the Company.

 

The Bank and the Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Bank or the Company, expressly and unconditionally to assume and agree to perform the Bank’s and the Company’s obligations under this Agreement, in the same manner and to the same extent that the Bank and the Company would be required to perform if no such succession or assignment had taken place.

 

16.  Miscellaneous.

 

In the event any of the foregoing provisions of this Section 16 are in conflict with the terms of this Agreement, this Section 16 shall prevail.

(a)           Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

(d)           The parties to this Agreement intend for the payments hereunder to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of continued insurance coverage, not constitute deferred compensation (since such amounts are not taxable to Executive).  However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the event of termination in excess of the “permitted amount” under Section 409A of the Code.  For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an event of termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination.  The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the event of termination.  Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the event of termination.  “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code, but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

  

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SIGNATURES

 

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

	 	FIRST CITIZENS NATIONAL BANK	 
	 	 	 	 
	
ATTEST:

	
By: 

	/s/ Randall E. Black	 
	 By:  /s/ Robert W. Chappell	 	Randall E. Black	 
	 By:  Robert W. Chappell	 	For the Entire Board of Directors	 
	 Corporate Secretary	 	 	 

	 	
CITIZENS FINANCIAL SERVICES, iNC.

(Guarantor)

	 
	 	 	 	 
	
ATTEST:

	
By: 

	/s/ Randall E. Blacl	 
	 By:  /s/ Robert W. Chappell	 	Randall E. Black	 
	 By:  Robert W. Chappell	 	For the Entire Board of Directors	 
	 Corporate Secretary	 	 	 

	 	EXECUTIVE	 
	 	 	 	 
	
WITNESS:

	
By: 

	/s/ Mickey L. Jones	 
	 By: /s/ Robert W. Chappell	 	Mickey L. Jones	 
	 By:  Robert W. Chappell	 	Executive	 
	 Corporate Secretary	 	 	 

  

8incentiveplan2012.htm

EXHBIT 10.5

  

  

FIRST CITIZENS COMMUNITY BANK

ANNUAL INCENTIVE PLAN

(as amended and restated effective January 1, 2012)

 

I.           Introduction and Objectives

 

The Annual Incentive Plan (“AIP” or the “Plan”) is designed to recognize and reward participants for their collective and individual contributions to the success of First Citizens Community Bank (the “Bank”) and Citizens Financial Services, Inc. (the “Company”) collectively referred to herein as the “Employer”.  The Plan focuses on performance measures that are critical to the Bank’s growth and profitability.

 

The objectives of the AIP are to:

 

	
  

	
 

	
Ÿ

	
Reward results, not effort.

	
 

	
 

	
  

	
 

	
Ÿ

	
Align the Employer’s strategic plan, budget, and shareholder interests with participant performance.

	
 

	
 

	
  

	
 

	
Ÿ

	
Motivate and reward participants for achieving /exceeding performance goals.

	
 

	
 

	
  

	
 

	
Ÿ

	
Align incentive pay with performance.

	
 

	
 

	
  

	
 

	
Ÿ

	
Enable the Employer to attract and retain talent needed to drive the success of the Bank and the Company.

	
 

	
 

	
  

	
 

	
Ÿ

	
Encourage teamwork across the Bank and the Company.

 

II.           Performance Period/Plan Year

 

The performance period and the Plan operate on a calendar year basis (January 1st - December 31st).

 

III.           Incentive Award Opportunity

 

	
A.

	
The Company’s Compensation/Human Resource Committee (the “Committee”), in consultation with executive management, determines each participant’s Incentive Award Opportunity under the Plan.  Notwithstanding the foregoing, the Company’s named executive officers (as noted in the Company’s annual proxy statement) do not participate in the determination of their annual Incentive Award Opportunities.  As noted in Section III (B) of this Plan, Incentive Award Opportunities are shown as a percentage of “base salary” as such term is defined in Section II (C) of this Plan.  Actual awards vary based on Company, Bank, Departmental/Branch and individual performance (see Section IV – Performance Measures) and range from 0% of base salary (not achieving minimal performance) to 50% of base salary (achieving exceptional performance).   

  

  

  

	
B.

	
The following table sets forth the Incentive Award Opportunities for the various positions at the Bank and the Company level. These incentive targets are reviewed annually by the Committee to ensure the awards remain competitive.  The Committee determines the competitiveness of the Incentive Award Opportunities based on industry standards.  As noted in Section III (A) above, Incentive Award Opportunities are illustrated as a percentage of a participant’s “base salary” (as defined in paragraph C below).

  

	  	
       Incentive Award Opportunities

	
 Position

	
Minimum

	
 Target

	
Maximum

	  	  	  	  
	
CEO/President

	
0.0%

	
25.0%

	
50.0%

	
Executive Management:

	  	  	  
	
    Chief Operating Officer/

       Chief Financial Officer

	
0.0%

	
20.0%

	
40.0%

	
    Senior Credit Officer

	
0.0%

	
15.0%

	
30.0%

	
Senior Management

   (as determined by the Committee)

	
0.0%

	
10.0%

	
25.0%

	
Regional Manager/Branch Administrator

	
0.0%

	
7.5%

	
15.0%

	
Senior Business Development Officers

   (“BDO”)

	
0.0%

	
10.0%

	
20.0%

	
BDO

	
0.0%

	
7.5%

	
15.0%

	
Junior BDO

	
0.0%

	
6.0%

	
12.0%

	
Mid-level Management:

	  	  	  
	
Corporate Managers

	
0.0%

	
5.0%

	
10.0%

	
Branch Managers

	
0.0%

	
5.0%

	
10.0%

	
Staff:

	  	  	  
	
Corporate Staff

	
0.0%

	
4.0%

	
8.0%

	
Branch Staff

	
0.0%

	
4.0%

	
8.0%

	
Internal Auditor

	
0.0%

	
4.0%

	
8.0%

 

	
C.

	
Exclusively for purposes of this Plan, “base salary” is defined as the compensation earned by a participant during the Plan Year for services rendered to the Employer, excluding the following items:

Profit sharing contributions

Other discretionary incentive compensation (such as leadership awards and service awards)

Cash payments received for waiving Employer-paid health insurance

Cell phone allowances

Fringe benefits

IV.           Performance Measures

 

There are three (3) categories in which performance is measured under the Plan: Company/Bank performance, Branch/ Departmental performance and Individual performance.  The Committee takes into consideration the budget, strategic plan and other relevant items when setting the specific performance measures set forth in Section IV (D) of this Plan.  The Committee will review each of the performance categories when determining an Incentive Award payout under this Plan.

 

  

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A.

	
Corporate/Bank Performance Measures:   The Company/Bank goals focus on Return on Equity (ROE), Return on Assets (ROA), Earnings Per Share (EPS) Growth, Total Shareholder Return, Efficiency Ratio, Credit Quality and Bank and Regulatory Ratings (CAMEL rating and SOX compliance).  These goals are core measures of profitability and efficiency of Bank and Company resources.  The Committee generally analyzes these performance measures based on three-year averages as compared to its peer group.  The Committee will review the Bank’s peer group on an annual basis.  The current peer group is set forth on Appendix A to this Plan.  When determining whether the Corporate/Bank Performance Measures have been realized, the Compensation Committee will review public peer data compiled by the President/Chief Executive Officer and Chief Operating Officer/Chief Financial Officer of the Bank.

	
B.

	
Branch/Department Performance Measures:   The Branch/Department goals vary, however they include, but are not limited to: deposit growth, asset quality and loan production.   Executive Management works with the Committee on an annual basis to determine the specific Branch and Department performance measures.

 

	
C.

	
Individual Performance Measures:   Ten percent (10%) of each participant’s Incentive Award Opportunity is based on his or her individual performance.  The Committee uses each participant’s annual employee performance rating to measure individual performance under the Plan.  As noted below, a “distinguished” performance rating will result in 100% credit for the Individual Performance component of a participant’s Incentive Award and a rating below “competent” will result in zero credit for the Individual Performance component of a participant’s Incentive Award.

Unacceptable                                                        0%

Need Improvement                                              0%

Competent                         80%

Commendable                                                      90%

Distinguished                                                      100%

Notwithstanding the foregoing, if a Participant does not receive a “Competent” rating, the Participant will not be eligible for an Incentive Award under the Plan.

  

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D.    The following table sets forth the weighting of the Performance Measures for 2012.

	
Position

	
Company/Bank

Measures

	
Department/

Branch Measures

	
Individual

Measures

	  	  	  	  
	
CEO/President

	
80%

	
10%

	
10%

	
Executive Management:

	  	  	  
	
Chief Operating Officer/

   Chief Financial Officer

	
70%

	
20%

	
10%

	
Senior Credit Officer

	
60%

	
30%

	
10%

	
Senior Management

   (as determined by the

    Committee, excluding Information Systems Manager)

	
50%

	
40%

	
10%

	
Information Systems Manager

	
60%

	
30%

	
10%

	
Regional Manager/Branch Administrator

	
30%

	
60%

	
10%

	
Senior BDO / BDO / Junior BDO

	
30%

	
60%

	
10%

	
Mid-level Management:

	  	  	  
	
Corporate Managers

	
40%

	
50%

	
10%

	
Branch Managers

	
30%

	
60%

	
10%

	
Staff:

	  	  	  
	
Corporate Staff

	
40%

	
50%

	
10%

	
Branch Staff

	
30%

	
60%

	
10%

	
Internal Auditor

	
35%

	
55%

	
10%

The specific performance measures and the weighting for each measure are reviewedannually by the Committee in order to reflect the Employer’s strategic priorities andfinancial objectives.  Notwithstanding the foregoing, the Committee may elect, in its solediscretion, to amend or modify these measures at any time (see Section VI (D) of this Plan).

 

V.           Determining Payouts and the Distribution of Incentive Awards

	
A.

	
Each participant is given a performance scorecard for the Plan Year.  The scorecard sets forth each participant’s Company/Bank performance goals, Branch or Departmental performance goals (as applicable) and the participant’s performance review rating for the applicable Plan year.  The Company/Bank performance goals and the Branch/Department performance goals are established prior to the commencement of the applicable Performance Period.  The President/Chief Executive Officer and Chief Operating Officer/Chief Financial Officer of the Company evaluate the achievement of the Bank/Company performance goals and review the results with the Committee.  The President/Chief Executive Officer and Chief Operating Officer/Chief Financial Officer use the peer group set forth in Appendix A when evaluating the Employer’s achievement of certain Company/Bank performance measures.   Executive Management, in consultation with Senior Management, evaluate the achievement of the Department/Branch Performance goals and reviews the results with the Committee.  Upon review of the satisfaction of the performance measures, the Chief Operating Officer/Chief Financial Officer completes a scorecard for each of the Plan participants and provides the scorecard to the Committee for review.  The Committee, in its sole discretion, determines the payments made under this Plan in light of the results on the scorecards and the overall financial performance of the Bank and the Company.

  

4

  

Generally, Incentive Awards are distributed before the end of the first quarter following the applicable Plan Year.  Awards are calculated based on each participant’s base salary (as defined in Section III (D) of this Plan) as of December 31st for the applicable Plan Year.  Incentive Awards are considered taxable income to participants in the year distributed and are subject to tax withholding for required income and other applicable taxes.

	
B.

	
Awards may be paid out in cash or Company common stock (“Restricted Stock”) at the discretion of the Committee.    However, the President/Chief Executive Officer and members of Executive and Senior Management, as well as Regional Manager/Branch Administrator and Business Development Officers will receive their Incentive Award payouts (if any) as follows:

President/Chief Executive Officer:   Of the first 30% of an Incentive Award Opportunity, 70% will be distributed in cash and 30% in Restricted Stock. Any Incentive Award Opportunity over 30% will be distributed 50% in cash and 50% in Restricted Stock.

Chief Operating Officer/Chief Financial Officer:  Of the first 25% of an Incentive Award Opportunity, 70% will be distributed in cash and 30% in Restricted Stock. Any Incentive Award Opportunity over 25% will be distributed 50% in cash and 50% in Restricted Stock.

Chief Credit Officer:                                           Of the first 20% of an Incentive Award Opportunity, 70% will be distributed in cash and 30% in Restricted Stock. Any Incentive Award Opportunity over 20% will be distributed 50% in cash and 50% in Restricted Stock.

Senior Management/Regional Manager/Branch Administrator/Business Development Officers:  Of the first 15% of an Incentive Award Opportunity, 70% will be distributed in cash and 30% in Restricted Stock. Any Incentive Award Opportunity over 15% will be distributed 50% in cash and 50% in Restricted Stock.

Senior Business Development Officers:  Of the first 20% of an Incentive Award Opportunity, 70% will be distributed in cash and 30% in Restricted Stock. Any Incentive Award Opportunity over 20% will be distributed 50% in cash and 50% in Restricted Stock.

All other Participants shall receive their Incentive Award (if any) in cash, unless otherwise determined by the Committee.  Restricted Stock awarded under this Plan vests ratably over a three-year period commencing on the first anniversary date of the award.

  

5

  

All shares of Restricted Stock distributed from this Plan come from the Company’s 2006 Restricted Stock Plan which was approved by Company shareholders.

 

VI           Terms and Conditions

A.           Eligibility

All employees, other than temporary employees, couriers, interns and those employees in the Investment and Trust Divisions compensated on a commission basis, are eligible to participate in the Plan.

B.           Effective Date

This Plan was originally effective as of January 1, 2010.  The Plan was amended and restated in its entirety effective January 1, 2012.

C.           Program Administration

 

The Program is authorized by the Committee and administered by Executive                                                                                                                                Management.

  

D.           Program Changes or Discontinuance

We have developed the Plan based on existing business, market and economic conditions; current services; and staff assignments.  If changes occur that affect these conditions, services, assignments, or forecasts, we may add to, amend, modify or discontinue any of the terms or conditions of the plan at any time.

 

The Committee may, in its sole discretion, waive, change or amend the Plan as it deems appropriate and at any time.

  

E.           Promotions and Transfers

 

If a participant changes his/her role or is promoted during the Plan year such that the incentive award opportunity changes, he/she will be eligible for the new position’s incentive award opportunity on a pro rata basis (i.e. the award will be prorated based on the number of months employed in the respective positions.)

 

F.           Termination of Employment

 

Unless otherwise noted in this Plan, a participant must be employed by the Bank or the Company on the date an Incentive Award is paid in order to be eligible to receive the award.  (See exceptions for death and retirement below.)

 

  

6

  

G.           Death, Retirement or a Change in Control

 

In the event of a participant’s death, the Employer will pay to the participant’s estate an Incentive Award earned for the Plan Year in which the participant dies.  Said award will be determined based on the participant’s base salary earned as of his or her date of death.  In addition, if a participant dies prior to the distribution of an Incentive Award from a prior Plan Year, the participant’s estate will receive the award that the participant would have received had the participant been employed as of the date of distribution of the Incentive Award payout.

 

If a participant retires upon the attainment of Normal Retirement Age or Early Retirement Age (as defined in the Bank’s tax-qualified retirement plan), the participant will receive an Incentive Award earned for the Plan Year in which he or she retires. Said award will be determined based on the participant’s base salary earned as of his or her retirement date.  In addition, if the participant retires prior to the distribution of an Incentive Award from a prior Plan Year, the participant will receive the award that the participant would have received had the participant been employed as of the date of distribution of the Incentive Award payout.

In the event of a Change in Control (as defined herein), participants will receive a pro-rated payout based on the period of active employment with the Employer.  For purposes of this Plan, the term “Change in Control” shall mean:  a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A and any successor rule or regulation promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) if Company or Bank were subject to the Exchange Act reporting requirements; provided that, without limiting the foregoing, such a Change in Control shall be deemed to have occurred if the Board of Directors certifies that one of the following has occurred: (a)any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company or Bank or any “person” who on the date hereof is a director or officer of the Company or Bank is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company or Bank representing fifty percent (50%) or more of the combined voting power of the Company’s or Bank’s then outstanding securities, or (b) a merger, consolidation or business combination with the Company and/or Bank occurs. Notwithstanding any other provision in this Plan, in the event a participant is determined to be a key employee as that term is defined by Section 409A of the Internal Revenue Code no payment shall be made until one day following six months from the date of separation from service as that term is defined by Section 409A of the Internal Revenue Code.

See Section V for a discussion on the timing of distributions in the event death or retirement.  In the event of a Change in Control, Incentive Awards will be distributed within ten (10) business days of the date of the Change in Control.

 

VII.           Ethics and Interpretation

 

  

7

  

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 Employer’s interpretation expressed by Executive Management and/or 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 the Plan to which the participant would otherwise be entitled will be revoked.

 

Participants who have willfully engaged in any activity injurious to the Bank or the Company, will upon termination of service forfeit any incentive award earned during the award period in which the termination occurred.

 

VIII.           Miscellaneous

 

The Plan will not be deemed to give any participant the right to be retained in the employ of the Bank or the Company, nor will the Plan interfere with the right of the Bank or the Company to discharge any participant at any time.

 

In the absence of an authorized, written employment contract, the relationship between employees and the Bank and the Company is one of at-will employment.  The Plan does not alter the relationship.

 

This Plan and the transactions and payments hereunder shall, in all respect, be governed by, and construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania.

 

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 shall not, in any way, be affected or impaired thereby.

  

8

  

APPENDIX A

	
Bank

	
Location

	
State

	  	  	  
	
Adams County National Bank

	
Gettysburg

	
PA

	
Chemung Canal Trust Company

	
Elmira

	
NY

	
Citizens and Northern

	
Wellsboro

	
PA

	
CNB Bank

	
Clearfield

	
PA

	
Elmira Savings Bank

	
Elmira

	
NY

	
First Keystone National Bank

	
Berwick

	
PA

	
F&M Trust

	
Chambersburg

	
PA

	
VIST Financial

	
Wyomissing

	
PA

	
Orrstown Bank

	
Shippensburg

	
PA

	
Jersey Shore State Bank

	
Williamsport

	
PA

	
Penn Security Bank & Trust

	
Scranton

	
PA

	
Peoples Neighborhood Bank

	
Hallstead

	
PA

	
QNB Bank

	
Quakertown

	
PA

	
3rd Federal Bank

	
Newtown

	
PA

	
AmeriServ Financial

	
Johnstown

	
PA

	
Ephrata National Bank

	
Ephrata

	
PA

	
Mid Penn Bank

	
Millersburg

	
PA

	
First Columbia Bank & Trust Company

	
Bloomsburg

	
PA

	
Dime Bank

	
Honesdale

	
PA

	
First National Community Bank

	
Dunmore

	
PA

	
Fidelity Bank

	
Dunmore

	
PA

	
Citizens Financial Services, Inc.

	
Mansfield

	
PA

  

9

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