Document:

Exhibit 10.2

    

     

      FIRST CITIZENS COMMUNITY BANK

      ANNUAL INCENTIVE PLAN

      (as amended and restated effective January 1, 2021)

      

      

      
        	
                I.

              	
                Introduction and Objectives

              

      

      

      

      The Annual Incentive Plan (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 Plan are to:

      

      

      	

            	•	
              Reward results, not effort.

            

       

      	

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

            

       

      	

            	•	
              Motivate and reward participants for achieving /exceeding performance goals.

            

       

      	

            	•	
              Align incentive pay with performance.

            

       

      	

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

            

       

      	

            	•	
              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 and Departmental/Branch performance. (See Section IV – Performance Measures.)

      

      

      B.          Appendix B, attached hereto, sets forth the Incentive Award Opportunities for the various positions at the Bank and the Company level. These incentive opportunities are reviewed
        annually by the Committee to ensure the awards remain competitive, based on industry standards and Company objectives.  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).

      

      

      
        1

        
          

      

      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 two primary categories in which performance is measured under the Plan: Corporate/Bank goals and Branch/Department goals.  Goals and weightings will be tailored to each Participant’s
        position, branch or department, as applicable.

      

      

      The Committee takes into consideration the budget, strategic plan and other relevant items when setting specific performance measures. Weightings for the categories are subject to review and
        adjustment by the Committee on an annual basis. (See Appendix C.)

      

      

      A.          Corporate/Bank Performance Measures:   The Company/Bank
        goals focus on overall bank performance such as Company returns, income and other similar measures. These goals will reflect core measures of profitability and efficiency of Bank and Company resources.  The Committee generally establishes these
        performance measures based on three-year averages as compared to the Company’s peer group. The current peer group is set forth on Appendix A to this Plan and is reviewed annually.  In calculating performance results, the Compensation Committee
        reviews public peer data compiled by the President/Chief Executive Officer and Chief Operating Officer of the Bank.

      

      

      B.          Branch/Department Performance Measures:   The
        Branch/Department goals focus on key discipline areas of the Branch or Department and may include items such as deposit growth, asset quality, strategic planning and other similar projects/initiatives. Specific goals are set annually by Executive
        Management and the Committee.

      

      

      
        	
                V.

              	
                Determining Payouts and the Distribution of Incentive Awards

              

      

      

      

      A.          At the beginning of each performance period, Participants will be given a performance scorecard for the Plan Year, setting forth Company/Bank performance goals and Branch or
        Departmental performance goals, as applicable to each Participant. At the end of the performance period, the President/Chief Executive Officer and Chief Operating Officer of the Company will evaluate the achievement of the Bank/Company performance
        goals, utilizing peer group performance when applicable, and review the results with the Committee. Executive Management, in consultation with Senior Management, will evaluate the achievement of the Department/Branch Performance goals and review
        such results with the Committee.  The Chief Operating Officer will then complete a scorecard for each Participant and provide the scorecards to the Committee for final review.

      

      

      
        2

        
          

      

      B.          Incentive Award amounts are calculated based on a percentage of base salary (as defined in Section III (C)) as of December 31st for the applicable Plan Year. Incentive Awards are considered ordinary income to Participants in the year distributed and are subject to income tax and other
        applicable tax withholding.

      

      

      C.          Incentive Awards may be paid in cash or Company common stock (“Restricted Stock”), as determined by the Committee on an annual basis. Any such Restricted Stock shall be granted under
        the Citizens Financial Services, Inc. 2016 Equity Incentive Plan and shall be subject to the terms and conditions thereof. (See Appendix D for specific Award allocations.)

      

      

      D.          The Committee, in its sole discretion, determines the payments to be made under this Plan based on the scorecards and the overall financial performance of the Bank and the Company.

      

      

      
        	
                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. Eligibility in the Plan does not guarantee an Incentive Award will be paid.

      

      

      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, 2021.

      

      

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

      

      

      D.        Program Changes or Discontinuance. The Bank developed the Plan based on current business, market and economic conditions; current services; and
        staff assignments. If changes occur that affect these conditions, services, assignments, or forecasts, the Bank 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 each respective position.)

       

      

      
        3

        
          

      

      F.          Termination of Employment

      

      

      Unless otherwise noted in this Plan, a Participant must be actively employed by the Bank or the Company on the date an Incentive Award is paid in order to be eligible to receive the award. In
        addition, if you have given notice of termination, any incentive award not yet paid will be forfeited. (See exceptions for death and retirement below.)

      

      

      G.          Death, Retirement or a Change in Control

      

      

      Death. 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.  Such 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.

      

      

      Retirement. 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. Such 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.

      

      

      Change in Control. In the event of a Change in Control (as defined herein) followed by a separation from service, Participants will receive a pro rata payout based on the period of active employment with the Employer. Performance
          results will be determined according to the results for the current year on a pro rata period basis and applied to the pro rata base salary earned. Adjustments may be made by Executive Management and/or Committee in their sole discretion. 
          Performance results that are based on peer company results not yet reported will be assumed to have been 100% achieved. Incentive Awards will be distributed within ten (10) business days of the date of separation from service.

      

      

      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.

      

      

      
        4

        
          

      

      
        	
                VII.

              	
                Ethics and Interpretation

              

      

      

      

      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.

      

      

      
        5

        
          

      

      APPENDIX A

      

      

      PEER GROUP

      (Updated Annually)

      

      

      	
              Bank

            	
              Location

            	
              State

            
	 	 	 
	
              Adams County National Bank

            	
              Gettysburg

            	
              PA

            
	
              Chemung Canal Trust Company

            	
              Elmira

            	
              NY

            
	
              Citizens and Northern

            	
              Wellsboro

            	
              PA

            
	
              First Keystone Community Bank

            	
              Berwick

            	
              PA

            
	
              F&M Trust

            	
              Chambersburg

            	
              PA

            
	
              Orrstown Bank

            	
              Shippensburg

            	
              PA

            
	
              Jersey Shore State Bank

            	
              Williamsport

            	
              PA

            
	
              Peoples Security Bank & Trust

            	
              Hallstead

            	
              PA

            
	
              QNB Bank

            	
              Quakertown

            	
              PA

            
	
              AmeriServ Financial

            	
              Johnstown

            	
              PA

            
	
              Ephrata National Bank

            	
              Ephrata

            	
              PA

            
	
              First National Community Bank

            	
              Dunmore

            	
              PA

            
	
              PeoplesBank

            	
              York

            	
              PA

            
	
              Bank of Delmarva

            	
              Salisbury

            	
              MD

            
	
              ESSA Bank & Trust

            	
              Stroudsburg

            	
              PA

            
	
              First Citizens Community Bank

            	
              Mansfield

            	
              PA

            

      

      

      
        6

        
          

      

      APPENDIX B

      

      

      INCENTIVE AWARD OPPORTUNITY

      (Subject to Annual Review by the Committee)

      

      

      	
              Position

            	
              Incentive Award 

              Opportunity as a 

              

              Percentage of Base 

              Salary

              (up to)

            
	 	 
	
              CEO/President

            	
              100.0%

            
	
              Executive Management:

            	 
	
              Chief Operating Officer

            	
              75.0%

            
	
              EVP – Chief Market Dev Officer

            	
              35.0%

            
	
              Senior Management

            	
              25.0%

            

      

      

      Incentive Award Opportunities for all other Participants will be provided to each Participant by Management at the beginning of each Plan Year.

      

      

      
        7

        
          

      

      APPENDIX C

      

      

      PERFORMANCE MEASURE WEIGHTINGS

      (Subject to Annual Review by the Committee)

      

      

      	
               

              Position

            	
              Company/Bank

              Measures

            	
              Department/

              Branch Measures

            
	 	 	 
	
              CEO/President

            	
              85%

            	
              15%

            
	
              Executive Management:

            	 	 
	
              Chief Operating Officer

            	
              80%

            	
              20%

            
	
              EVP – Chief Market Dev Officer

            	
              50%

            	
              50%

            

      

      

      Performance Measure Weightings for Senior Management and all other Participants will be provided by Management at the beginning of each Plan Year.

      

      

      The specific performance measures and the weighting for each measure are reviewed annually by the Committee in order to reflect the Employer’s strategic priorities and financial objectives. 
        Notwithstanding the foregoing, the Committee may elect, in its sole discretion, to amend or modify these measures at any time (See Section VI (D) – Program Changes or Discontinuance.)

      

      

      
        8

        
          

      

      APPENDIX D

      

      

      DISTRIBUTION OF INCENTIVE AWARDS

      (Subject to Annual Review by the Committee)

      

      

      CEO, Executive Management and Senior Management

      

      

      	
              Event *

            	
              Cash

            	
              Restricted Stock/Stock

            
	 	 	 
	
              Plan Year Prior to Attaining Retirement Eligibility

            	
              70%

            	
              30% Restricted Stock

            
	
              Year of Attaining Retirement Eligibility and Each Year Thereafter

            	
              Option of

              70% to 100%

            	
              Option of

              30% to 0% Stock

            

      

      

      * Retirement eligibility as defined in the Bank’s tax-qualified retirement plan

      

      

      All shares of Restricted Stock awarded are provided through the Company’s 2016 Equity Incentive Plan, approved by Company shareholders. Restricted Stock will vest ratably over the three-year period
        commencing on the date of the first anniversary of each award.  For employees who have reached Retirement Eligibility, stock awards will be granted with no restrictions (i.e., fully vested) and fully taxable in the year of the grant.

      

      

      Income Tax Withholding. For Participants who have attained Retirement Eligibility, a Participant may satisfy the income tax withholding obligation by electing to use cash or a combination of cash and stock, by requesting the
          Company withhold a portion of a Stock Award (between 0% and 30% of the incentive award) based on the current fair market value.

      

      

      All Other Participants

      

      

      The Committee determines cash and stock percentages, unless otherwise stated elsewhere.

      

      

      

      

      9exhibit10a

Exhibit 10.(a)  1      EIGHTEENTH AMENDMENT TO THE  FIRST AMENDED AND RESTATED  AGREEMENT OF LIMITED PARTNERSHIP OF   SAUL HOLDINGS LIMITED PARTNERSHIP   THIS EIGHTEENTH AMENDMENT TO THE FIRST AMENDED AND RESTATED  AGREEMENT OF LIMITED PARTNERSHIP OF SAUL HOLDINGS LIMITED  PARTNERSHIP (this “Amendment”), dated as of October 18, 2021, is entered into by the  undersigned parties.  W  I  T  N  E  S  S  E  T  H:   WHEREAS, Saul Holdings Limited Partnership (the “Partnership”) was formed as a  Maryland limited partnership pursuant to that certain Certificate of Limited Partnership dated  June 16, 1993 and filed on June 16, 1993 among the partnership records of the Maryland State  Department of Assessments and Taxation, and that certain Agreement of Limited Partnership  dated June 16, 1993 (the “Original Agreement”);  WHEREAS, the Original Agreement was amended and restated in its entirety by that  certain First Amended and Restated Agreement of Limited Partnership of the Partnership dated  August 26, 1993, which was further amended by that certain First Amendment dated August 26,  1993, by that certain Second Amendment dated March 31, 1994, by that certain Third  Amendment dated July 21, 1994, by that certain Fourth Amendment dated December 1, 1996, by  that certain Fifth Amendment dated July 6, 2000, by that certain Sixth Amendment dated  November 5, 2003, by that certain Seventh Amendment dated November 26, 2003 , by that  certain Eighth Amendment dated December 31, 2007, by that certain Ninth Amendment dated  March 27, 2008, by that Tenth Amendment dated April 4, 2008, by that certain Eleventh  Amendment dated September 23, 2011, by that certain Twelfth Amendment dated February 12,  2013, by that certain Thirteenth Amendment dated November 12, 2014, by that certain  Fourteenth Amendment dated January 23, 2018, by that certain Fifteenth Amendment dated May  9, 2018, by that certain Sixteenth Amendment dated September 17, 2019, and by that certain  Seventeenth Amendment dated June 29, 2021 (as amended, the “Agreement”);   WHEREAS, pursuant to a Contribution Agreement, dated November 5, 2019, as  amended by that certain First Amendment to the Contribution Agreement dated March 5, 2021   (as amended, the “Contribution Agreement”), among the Partnership and 1592 Rockville Pike  LLC, an affiliate of the Partnership (the “Company”), the Company agreed to contribute certain  fee and leasehold interests in certain land and the improvements located thereon known as  Twinbrook Quarter to the Partnership in exchange (at a time and on the terms and conditions set  forth in the Contribution Agreement) for Partnership Units;    WHEREAS, the undersigned parties, constituting all of the Partners of the Partnership,  desire to amend Exhibit A to the Agreement to reflect such additional Capital Contribution and  to consent to the issuance of additional Partnership Units in accordance with the terms set forth  in the Contribution Agreement.    

 

Exhibit 10.(a)  2       NOW, THEREFORE, in consideration of the mutual covenants and agreements herein  contained and other good and valuable consideration, the receipt, adequacy and sufficiency of  which are hereby acknowledged, the undersigned parties, intending legally to be bound, hereby  agree as follows:  1. The Exhibit A attached to the Agreement is hereby deleted in its entirety and replaced  as contemplated by the Exhibit A attached hereto.  2. Notwithstanding anything in the Agreement to the contrary, the General Partner and  the Limited Partners party hereto, who hold in the aggregate more than fifty percent  (50%) of the total Partnership Interests held by the Limited Partners, hereby consent  to the issuance of additional Partnership Units to the Company in accordance with the  terms set forth in the Contribution Agreement, which Partnership Units shall carry the  Rights set forth in the Agreement. Immediately following the issuance of such  Partnership Units to the Company, the Company shall be a Limited Partner for all  purposes under the Agreement.  3. Except as the context may otherwise require, any terms used in this Amendment that  are defined in the Agreement shall have the same meaning for purposes of this  Amendment as in the Agreement.  4. Except as specifically amended hereby, the terms, covenants, provisions and  conditions of the Agreement shall remain and continue in full force and effect and,  except as amended hereby, all of the terms, covenants, provisions and conditions of  the Agreement are hereby ratified and confirmed in all respects.  5. This Amendment may be executed in counterparts, all of which together shall  constitute one agreement binding on all the parties hereto, notwithstanding that all  such parties are not signatories to the original or the same counterpart.  Each party  shall become bound by this Amendment immediately upon affixing its signature  hereto.    [Signature Page Follows]  

 

Exhibit 10.(a)  3      IN WITNESS WHEREOF, the undersigned parties have executed this Amendment as  of the date first written above.         GENERAL PARTNER       SAUL CENTERS, INC.,       a Maryland corporation         By:     /s/ Carlos L. Heard                      Name:  Carlos L. Heard                  Title:    Senior Vice President and                     Chief Financial Officer           LIMITED PARTNERS         B. F. SAUL REAL ESTATE INVESTMENT         TRUST, a Maryland unincorporated business trust         By:      /s/ B. Francis Saul II                     Name:  B. Francis Saul II                  Title:    Chairman and                     Chief Executive Officer                WESTMINSTER INVESTING, LLC,             a Maryland limited liability company         By:     /s/ B. Francis Saul II                     Name:  B. Francis Saul II                  Title:    President                  VAN NESS SQUARE CORPORATION, a          Maryland corporation          By:     /s/ B. Francis Saul II                     Name:  B. Francis Saul II                  Title:    President                

 

Exhibit 10.(a)  4  DEARBORN, L.L.C.,   a Delaware limited liability company  By:     /s/ B. Francis Saul II             Name:  B. Francis Saul II             Title:    Chief Executive Officer  B.F. SAUL PROPERTY COMPANY,  a Maryland corporation   By:     /s/ B. Francis Saul II             Name:  B. Francis Saul II             Title:    Chairman of the Board  AVENEL EXECUTIVE PARK PHASE II,  L.L.C., a Maryland limited liability company By:     /s/ D. Todd Pearson             Name: D. Todd Pearson             Title:   President  1592 ROCKVILLE PIKE LLC,  a Delaware limited liability company  By:     /s/ B. Francis Saul II             Name:  B. Francis Saul II             Title:    Chief Executive Officer  

 

Exhibit 10.(a)  5  Exhibit A  

 

Exhibit 10.(a) 6

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