Document:

EX-10.6

 

EXHIBIT 10.6

Summary of Incentive Compensation Plan

of

Park National Corporation

     The Compensation Committee of the Board of Directors of Park National Corporation (“Park”)
administers Park’s incentive compensation plan which enables the officers of Park’s subsidiaries to
share in any above-average return on equity (as defined below) which Park and Park’s subsidiaries
on a consolidated basis may generate during each twelve-month period ending September 30. During
the fiscal year ended December 31, 2006 (the “2006 fiscal year”), all officers of Park’s
subsidiaries (including each of Park’s executive officers) were eligible to participate in the
incentive compensation plan. For the fiscal year ending December 31, 2007 (the “2007 fiscal
year”), all officers of Park’s subsidiaries (including each of Park’s executive officers) will also
be eligible to participate.

     Above-average return on equity is defined as the amount by which the net income to average
shareholders’ equity ratio of Park and Park’s subsidiaries on a consolidated basis for a
twelve-month period ended September 30 exceeds the median net income to average shareholders’
equity ratio of all U.S. bank holding companies of similar asset size ($3 billion to $10 billion).
A historically applied formula determines the amount, if any, by which Park’s return on equity
ratio exceeds the median return on equity ratio of these peer bank holding companies.
Approximately twenty percent (20%) of any such excess amount on a before-tax equivalent basis is
then available for incentive compensation. If Park’s return on equity ratio is equal to or less
than that of the peer group, no incentive compensation will be available with respect to that
twelve-month period. The Chairman of the Board and Chief Executive Officer and the President of
Park and Park National Bank historically received a fixed percentage of the total amount available
for incentive compensation as determined by the Board of Directors and, more recently, the
Compensation Committee of the Board of Directors (the “Compensation Committee”).

     Park’s accumulation of capital over the recent several years, while enhancing the safety and
soundness of Park, has put increasing pressure on Park’s ability to generate superior levels of
return on equity ratio. The Compensation Committee has monitored this development and carefully
considered the impact of increasing levels of capital relative to Park’s peer group, and the
attendant negative impact on Park’s return on equity ratio. As a result, Park’s management
provided alternatives for the Compensation Committee’s consideration, including an adjusted capital
formula that caused Park’s capital level to be equal to the median of Park’s peer group’s capital
level. This adjusted formula then reduced Park’s net income and Park’s adjusted return on equity
ratio was then compared to the median return on equity ratio of its peer group.

     The incentive compensation amounts in recent years, computed by using both the original 20%
historic ratio formula as well as the adjusted capital formula, have fluctuated significantly.
These fluctuations may have been caused largely by changing levels of capital at peer companies as
well as at Park. As a result, the Compensation Committee has attempted to utilize both the

 

 

historic 20% ratio formula as well as the adjusted capital formula and exercised its discretion in
order to arrive at a total pool amount that it determined to be fair and appropriate in recent
years, including the 2006 fiscal year.

     The Compensation Committee met on December 27, 2006 to determine the amount of incentive
compensation to be paid to each of Messrs. C. Daniel DeLawder (who served as Chairman of the Board
and Chief Executive Officer of Park and The Park National Bank during the 2006 fiscal year and
continues to so serve during the 2007 fiscal year), David L. Trautman (who served as President and
Secretary of Park and as President of The Park National Bank during the 2006 fiscal year and
continues to so serve during the 2007 fiscal year) and John W. Kozak (who served as Chief Financial
Officer of Park and as Senior Vice President and Chief Financial Officer of The Park National Bank
during the 2006 fiscal year and continues to so serve during the 2007 fiscal year) in respect of
the twelve-month period ended September 30, 2006 (the “2006 Incentive Compensation Period”). The
Compensation Committee computed 17.5% of Park’s computed return on equity advantage to arrive at a
total incentive compensation pool of $9,792,000. The following schedule sets forth the incentive
compensation paid on January 26, 2007 to them for the 2006 Incentive Compensation Period:

	 	•	 	C. Daniel DeLawder — $473,525
	 
	 	•	 	David L. Trautman — $313,250
	 
	 	•	 	John W. Kozak — $214,455

     After deducting the incentive compensation to be paid to Messrs. DeLawder, Trautman and Kozak,
the remaining amount available for incentive compensation pay was distributed to the officers of
Park’s subsidiaries on the basis of their respective contributions to Park’s achieving its
short-term and long-term financial goals during the 2006 Incentive Compensation Period, which
contributions were subjectively determined by the Chairman of the Board and Chief Executive Officer
and the President and Secretary of Park and approved by Park’s Board of Directors, upon
recommendation of the Compensation Committee. Recommendations of the presidents of Park’s
subsidiaries were considered when determining incentive compensation amounts for officers (other
than the internal audit staff) of those subsidiaries. The incentive compensation paid to the
internal audit staff of Park’s subsidiaries was determined by the Audit Committee of Park’s Board
of Directors. The incentive compensation paid to staff employees who perform independent loan
review functions was determined by the Executive Committee of Park’s Board of Directors.

     The Compensation Committee will determine the 2007 fiscal year incentive compensation for each
of Messrs. DeLawder, Trautman and Kozak and the total incentive compensation pool for the officers
of Park and Park’s subsidiaries. The determination will be made during the fourth quarter of
2007. The Compensation Committee will review the comparison of Park’s return on equity ratio for
the twelve-month period ending September 30, 2007 compared to the return on equity of Park’s peer
group for the same period of time. The Compensation Committee will not award incentive
compensation to any officer if Park’s return on equity ratio for the 12-month period ending
September 30, 2007 does not exceed that of Park’s peer groups.

2

 

     For the five years ended December 31, 2006, Park’s return on equity has averaged 17.11%
compared to 13.41% for its peer group, defined as all U.S. Bank holding companies between $3
billion and $10 billion in assets. The Compensation Committee anticipates that the 2007 officer
incentive compensation pool will be determined by computing 17.5% of Park’s computed return on
equity advantage and further increasing this pool based upon the increase in Park’s fully diluted
earnings per share for twelve-month period ended September 30, 2007 compared to the twelve-month
period ended September 30, 2006. The following table indicates by how much the computed return on
equity advantage would be increased for an increase in fully diluted earnings per share.

	 	 	 
	Increase in Fully	 	Increase in Incentive
	Diluted EPS	 	Compensation Pool
	0 to 1.99%
	 	0%
	2 to 2.99%
	 	.5%
	3 to 3.99%
	 	1.5%
	4 to 4.99%
	 	2.4%
	5 to 5.99%

6 to 6.99%
	 	3.5%

4.8%
	7 to 7.99%
	 	6.3%
	8% and over
	 	Equivalent to actual

percentage (or portion thereof) increase

     The Compensation Committee will determine the 2007 incentive compensation for Messrs.
DeLawder, Trautman and Kozak based on the Compensation Committee’s determination of how well Park
performed in 2007 and the Compensation Committee’s evaluation of the performance of each of Messrs.
DeLawder, Trautman and Kozak.

3EX-10.7

 

Exhibit 10.7

Summary of Certain Compensation for

Directors of Park National Corporation

     Annual Retainer and Meeting Fees

     Each director of Park National Corporation (“Park”) who is not an employee of Park or one of
Park’s subsidiaries (a “non-employee director”) receives, on the date of the regular meeting of the
Park Board of Directors held during the fourth fiscal quarter, an annual retainer in the form of
120 common shares awarded under the Park National Corporation Stock Plan for Non-Employee Directors
of Park National Corporation and Subsidiaries (the “Directors’ Stock Plan”). At the January 17,
2006 meeting of the Park Board of Directors, the Board of Directors approved an increase in the
cash compensation to be paid to non-employee directors from that which had been paid during the
fiscal year ended December 31, 2005. Since January 18, 2006, each non-employee director has
received $1,000 for each meeting of the Park Board of Directors attended and $400 for each meeting
of a committee of the Park Board of Directors attended. If the date of a meeting of the full Board
of Directors is changed from that provided for by resolution of the Board and a non-employee
director is not able to attend the rescheduled meeting, he or she receives the meeting fee as
though he or she attended the meeting. In addition, since January 18, 2006, each member of the
Executive Committee of the Park Board of Directors has received a $2,500 annual cash retainer and
each member of the Audit Committee of the Park Board of Directors (other than the Chair) has
received a $2,000 annual cash retainer. Since January 18, 2006, the Chair of the Audit Committee
has received a $5,000 annual cash retainer.

     Each non-employee director of Park also serves on the board of directors of one of Park’s
subsidiary banks and receives, on the date of the regular meeting of the Park Board of Directors
held during the fourth fiscal quarter, an annual retainer in the form of 60 common shares of Park
awarded under the Directors’ Stock Plan and, in some cases, a specified amount of cash for such
service as well as fees for attendance at meetings of the board of directors of the appropriate
Park subsidiary bank (and committees of that board).

     C. Daniel DeLawder, William T. McConnell, William A. Phillips, J. Daniel Sizemore and David L.
Trautman receive no compensation for serving as members of the Board of Directors of Park or of any
subsidiary of Park since each one of them is employed by one or more of Park’s subsidiaries.

     Other Compensation

     William T. McConnell is employed by The Park National Bank, a subsidiary of Park, in a
non-executive officer capacity. In such capacity, he received the amount of $33,000 during the
fiscal year ended December 31, 2006 (the “2006 fiscal year) and is expected to receive a similar
amount during the fiscal year ending December 31, 2007 (the “2007 fiscal year”). William A.
Phillips is employed by Century National Bank, a subsidiary of Park, in a non-executive officer
capacity. In such capacity, he also received the amount of $33,000 during the 2006 fiscal year and is expected to receive a similar amount during the 2007 fiscal
year.

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