Shareholder Letter
Wealth Management Expansion
Soon after the merger, we significantly increased
our investment in our Wealth Management Divi-
sion. Bradley Grubb was recruited to lead our
efforts in expanding our product offerings, restruc-
turing the Wealth Management process, execut-
ing on value-enhancing acquisitions and building
a strong, reputable brand. In 2016, gross revenues
increased $483,000 or 17.3% from year-end 2015.
Financial Results
Even with the significant investments in our expan-
sion plan and Wealth Management, the company
was able to report record earnings of $19.6 mil-
lion in 2016 – an increase of $1.9 million or 10.5%
over our performance in 2015. Earnings per share
on a fully diluted basis were $2.65 in the current
year compared to $2.36 in 2015. Dividends paid
to shareholders were $1.24 per share and repre-
sented a very strong dividend yield of 2.6% based
on the year-end closing stock price of $48.70. The
return on average assets for the year was 1.02%
and return on average equity was 7.64%.
Total assets ended the year at $2.0 billion, an
increase over year-ended 2015 of $181 million or
9.9%. Loans totaled $1.5 billion at year-end 2016.
This was an increase of $189 million or 14.2%
from year-ended 2015. Major contributors to this
growth were our expansion into Lehigh Valley and
the growth of our indirect automobile portfolio.
Deposits grew $133 million in 2016 or 9.1% to $1.6
billion. Contributing to this growth was our expan-
sion into Lehigh Valley and the July opening of our
new branch in Kingston, Luzerne County, Pennsyl-
vania. Stockholders’ equity increased $7.9 million
or 3.2% to $257 million as the company continues
to significantly exceed the well capitalized mea-
sures of the Federal Regulators.
Asset quality remains strong. Nonperform-
ing assets totaled $14.2 million or 0.93% of total
loans at year-end 2016 compared to $12.5 million
Craig W. Best
President & CEO
William E. Aubrey II
Chairman of the Board
DEAR SHAREHOLDERS,
This past year has proven to be pivotal in the
development of our company. The growth strate-
gies developed in 2014 have finally begun to gain
traction as 2016 has produced our most significant
performance results since the merger between
Peoples Neighborhood Bank and Penn Security
Bank and Trust Company. Our growth strategy
consists of expansion into high growth markets
and the buildout of our Wealth Management plat-
form. The business model to execute these strate-
gies is simple: 1. Acquire the best available talent,
2. Support their market development initiatives
and 3. Provide the necessary credit management
and operational support.
Market Expansion
In the third quarter of 2014, Peoples Security Bank
recruited a team of lenders in Lehigh Valley. The
Lehigh Valley region is the third largest and fastest
growing Metropolitan Statistical Area in Pennsylva-
nia. Our team in Lehigh Valley is under the man-
agement of Neal Koplin, our Regional President for
the Lehigh Valley market. Our Lehigh Valley team’s
performance under Neal’s direction helped our
company grow our assets $181 million or 9.9% in
2016. The initial success of our expansion into the
Lehigh Valley market allowed us to increase our
investments in the region. In December of 2016,
we converted our Loan Production Office in King
of Prussia to a full service banking office, and we
applied for and received approval for two addition-
al banking locations, one in Bethlehem and one in
West Allentown.
P E O P L E S F I N A N C I A L S E R V I C E S C O R P.
1
Shareholder Letter
or 0.93% of total loans at year-end 2015. The
allowance for loan losses increased to $16 million
or 1.04% of loans compared to $13.0 million or
0.97% of loans at the end of 2015. Net charge-offs
were at $2.0 million in 2016 or 0.14% of average
loans versus charge-offs of $1.1 million or 0.08% of
average loans in 2015.
For the year, net interest income after provi-
sion for loan loss totaled $56.7 million, an increase
of $3.4 million or 6.4%. Our net interest margin
(fully tax equivalent) declined four basis points
from 3.81% in 2015 to 3.77% in 2016. During 2016
we were able to offset this decrease in our net
interest margin with an increase in average assets
causing the increase in our net interest income.
income
Non-interest
increased $169 thou-
sand or 1.1% in 2016 when compared to 2015. The
addition of our Retirement Plan Services Division at
the end of 2015 helped our Wealth Management
income increase $453 thousand, while Merchant
Services income increased $344 thousand or 8.9%.
These increases were offset by lower services
charges on deposits of $129 thousand and a reduc-
tion on gains from security sales of $566 thousand.
Non-interest expenses totaled $48.0 million in
2016, up $1.3 million or 2.7%. Salaries and benefits
increased $901 thousand or 4.2% and occupancy
expenses increased $318 thousand, both primarily
due to investments in our market expansion and
Wealth Management initiatives. These increases
were partially offset by a decrease in other expenses
of $309 thousand.
We strongly encourage you to read the
financial section of this Annual Report for a more
detailed analysis of our results.
On behalf of our Directors, Officers and Employ-
ees, sincere appreciation is expressed to our stock-
holders and customers for their continued support.
The record of progress outlined herein is the result
of the dedicated and effective effort on the part of
our Board of Directors, Officers and Employees. We
extend to our stockholders, customers and employ-
ees the gratitude of the Board of Directors for your
support and confidence.
Sincerely yours,
Craig W. Best
President & CEO
William E. Aubrey II
Chairman of the Board
Established in 1905, Peoples Security Bank and Trust Company is headquartered in Scranton and is one
of the largest community banks in Eastern Pennsylvania, with a footprint stretching from upstate New York
down through the Endless Mountains, Poconos and into the Lehigh Valley and Greater Delaware Valley.
Peoples Security Bank is more than a financial institution in the communities we serve; we are a part of them
as well. We are always looking at the needs of our customers and how we can exceed their expectations as we
continue to make enhancements while maintaining our hometown values. No matter what you do or where you
go, Peoples Security Bank will be here to assist you with your financial needs.
2
PEOPLES FINANCIAL SERVICES CORP.
Board of Directors & Executive Officers
The Board of Peoples Financial Services Corp. is a distinguished group of community leaders and
professionals. Their combined abundance of business and professional expertise helps us to fulfill
our company’s core values that are integral to our success and growth.
FRONT ROW:
BACK ROW:
Joseph T. Wright, Jr., Esq
Attorney at Law | Partner
Wright Reihner PC
Craig W. Best
President & CEO
Peoples Financial Services Corp.
Peoples Security Bank
and Trust Company
William E. Aubrey II
Chairman
President & CEO
Gertrude Hawk Chocolates
Joseph G. Cesare, M.D.
President
Scranton Orthopedic Specialists
James G. Keisling
Treasurer
Northeast Architectural Products, Inc.
Robert W. Naismith, Ph.D.
Chairman
JuJaMa, Inc.
P. Frank Kozik
Chief Executive Officer
Scranton Craftsmen, Inc.
Richard S. Lochen, Jr.
Certified Public Accountant/Partner
Lochen & Chase PC
Emily S. Perry
Retired Insurance Account Executive
Community Volunteer
James B. Nicholas
President
D.G. Nicholas Co.
Ronald G. Kukuchka
President
Ace Robbins, Inc.
Earle A. Wootton
Chairman & CEO | Director
Community Foundation
of the Endless Mountains, Inc.
President & CEO
Mountain Resource Partners, Inc.
George H. Stover, Jr.
Real Estate Appraiser
Steven L. Weinberger
President
G. Weinberger Company
EXECUTIVE OFFICERS
Craig W. Best
President & CEO
Thomas P. Tulaney
Chief Lending Officer
Joseph M. Ferretti
Senior Lending Officer
Michael L. Jake
Chief Risk Officer
Debra E. Dissinger
Chief Operations Officer
Lynn M. Peters Thiel
Chief Retail Officer
Neal D. Koplin
Lehigh Valley Region
President
Bradley S. Grubb
Peoples Security
Wealth Management Group
President
John R. Anderson III
Interim Principal Financial
& Accounting Officer
Timothy H. Kirtley
Chief Credit Officer
Financial Highlights
PEOPLES FINANCIAL SERVICES CORP.
CONSOLIDATED SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)
Year Ended December 31
2016
2015
2014
2013
2012
Condensed statements of financial performance:
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after the provision for loan losses
Noninterest income
Noninterest expense
Income before income taxes
Provision for income tax expense
Net income
Condensed statements of financial position:
$68,984
$63,041
$63,956
$37,370
$37,591
7,251
61,733
5,000
56,733
15,888
48,030
24,591
5,008
6,037
57,004
3,700
53,304
15,719
46,779
22,244
4,521
6,642
57,314
3,524
53,790
15,251
45,933
23,108
5,459
$19,583
$17,723
$17,649
4,169
33,201
2,361
30,840
11,762
36,396
6,206
485
$5,721
5,362
32,229
924
31,305
11,441
29,099
13,647
3,058
$10,589
Investments securities
$269,927
$297,044
$354,251
$317,010
$177,293
8,019
45,397
10,232
132,446
$918,042
$2.37
1.23
$29.65
51.98%
Net loans
Other assets
Total Assets
Deposits
Short-term borrowings
Long-term debt
Other liabilities
Stockholders' equity
1,517,004
1,327,890
1,199,556
1,167,966
212,511
194,124
187,862
203,245
616,580
124,169
$1,999,442
$1,819,058
$1,741,669
$1,688,221
$918,042
$1,588,757
$1,455,810
$1,425,558
$1,379,507
$721,948
82,700
58,134
13,233
38,325
60,354
15,801
19,557
33,140
16,635
22,052
36,743
11,127
256,618
248,768
246,779
238,792
Total liabilities and stockholders' equity
$1,999,442
$1,819,058
$1,741,669
$1,668,221
Per share data:
Net income
Cash dividends declared
Stockholders' equity
Cash dividends as a percentage of net income
$2.65
1.24
$34.71
46.79%
$2.36
1.24
$33.57
52.54%
$2.34
1.24
$32.69
53.03%
$1.21
1.23
$31.62
96.33%
Average common shares outstanding
7,396,716
7,516,451
7,548,825
4,733,059
4,467,261
Selected ratios ( based on average balances):
Net income as a percentage of total assets
Net income as a percentage of stockholders' equity
Stockholders' equity as a percentage of total assets
Tier I capital as a percentage of adjusted total assets
Net interest income as a percentage of earning assets
1.02%
7.64
13.36
10.16
3.77
1.02%
7.13
14.26
10.80
3.81
1.03%
7.29
14.12
10.76
3.86
0.58%
4.01
14.43
10.12
3.91
1.14%
8.07
14.18
11.50
4.08
Loans, net, as a percentage of deposits
95.81%
87.55%
84.13%
87.72%
88.69%
Selected ratios ( based on period end balances):
Tier I capital as a percentage of risk-weighted assets
12.49%
13.52%
14.75%
13.62%
16.80%
Total capital as a percentage of risk-weighted assets
Allowance for loan losses as a percentage of loans, net
Nonperforming loans as a percentage of loans, net
13.51
1.04
0.90%
14.47
0.97
0.86%
15.61
0.85
0.85%
14.29
0.74
1.60%
17.96
1.11
0.50%
Note: Average balances were calculated using average daily balances. Average balances for loans include nonaccrual loans.
Tax-equivalent adjustments were calculated using the prevailing statutory rate of 35.0 percent.
PEOPLES FINANCIAL SERVICES CORP.
PICTURED (L-R): Timothy Smith, AVP, Commercial Services Officer;
Blair Drace, Relationship Assistant; Ian Matlack, VP, Greater Delaware Valley
Division Manager; Lori Santerian, Community Office Manager;
Neal Koplin, Lehigh Valley/Greater Delaware Valley Region President;
Lisa Borek, VP, Corporate Loan Officer;
Larry Worsham, VP, Commercial Loan Officer
KING OF PRUSSIA SIGNALS
FORAY INTO DELAWARE VALLEY
Our King of Prussia location in Pennsylvania was
Kingston Office | 435 Wyoming Avenue | Kingston , PA 18704
KINGSTON OFFICE FORTIFIES
WYOMING VALLEY PRESENCE
Looking to strengthen the base of the northern
region, our new state-of-the-art office in Kings-
ton, Pennsylvania, officially opened on July 25,
initially operating as a Loan Production office
2016. Positioned in the heart of Kingston in the
during the last quarter of 2015. That all changed
Wyoming Valley, the new full-service branch is
in November 2016 when the office opened its
located at the former Kingston Post Office. Both
doors as a full-service banking and business cen-
businesses are now housed in the same build-
ter. Peoples Security Bank is now positioned to
ing. Like the King of Prussia branch, location was
provide a complete range of banking and finan-
a key factor in selecting the Kingston office’s
cial services for the first time to customers in the
placement, and it is highly accessible via I-81, the
Greater Delaware Valley.
Pennsylvania Turnpike (I-476) and Routes 309
The King of Prussia location provides the
and 11.
opportunity to serve a number of major markets
The Kingston branch features a two-lane
within a 45-minute radius including Philadelphia,
drive-thru, full-service teller line, eight offices,
Montgomery, Chester, Bucks, Berks and Dela-
conference room and drive-up ATM. With seven
ware Counties. Located on the ground floor of
employees, the Kingston branch has made a sig-
a Class A office building within a thriving business
nificant impact since its opening. By December
center, Peoples Security Bank is in a strategic
2016, 292 new accounts were opened and 179
position to attract high-value customers through
new customer relationships were formed. The
relationship-driven business.
branch’s financial performance was strong, sur-
Through the dedication and efforts of our
passing a $15 million deposit goal by $1.7 million.
employees, the location surpassed goals by
Additionally, the Kingston market contains a
securing $55 million
in commitments, $38
significant number of auto loan borrowers with
million in outstanding balances & $10 million in
Peoples Security Bank loan relationships, and
deposits by the end of 2016. Dedicated to main-
the new branch provides these customers with
taining this level of growth as they continue to
a physical presence and opportunities to work
build on their position in the Delaware Valley
more closely with the bank.
marketplace, they are poised to serve individu-
Looking to the future, this branch will con-
als and businesses, both small and large, within
tinue to meet the needs of both retail and
the most populated and economically thriving
commercial customers in the Kingston and the
region of Pennsylvania.
Greater Wyoming Valley market.
5
PEOPLES FINANCIAL SERVICES CORP.
PICTURED (L-R): Attorney Frank Bolock, President, Veterans Treatment
Court Advocacy Center of Lackawanna County; Thomas Tulaney,
EVP, Peoples Security Bank & Trust Company; Barbara Durkin, Treat-
ment Court Coordinator, Veterans Treatment Court Advocacy Center
of Lackawanna County; Judge Michael Barrasse, Presiding Judge,
Lackawanna County Veterans Treatment Court
VETERANS SUPPORT PROGRAM
Peoples Security Bank supported the Veterans
Treatment Court with a $20,000 donation to
help further its programs by offering assistance
to military veterans who are facing challenges
after returning home from combat. The donation
was made possible through the Pennsylvania
Department of Community and Economic
Development in conjunction with the Neighbor-
hood Assistance Program.
The Veterans Treatment Court Advocacy
Center of Lackawanna County was established
to support veterans with substance abuse or
mental or physical health issues. Rather than
facing a prison sentence for their charges,
select individuals are chosen to go through
the 15-18 month VTC program to receive
treatment for their addiction or health issue.
individuals also
During that time, selected
receive valuable education and
job train-
ing through the help of the Employment Op-
portunity Training Center (EOTC). The goal of
the program is to offer “a path to productive,
family sustainable employment.” The program
is judicially supervised and individuals are given
the skills they need in order to remain arrest-
free and reintegrate into society after serving in
the military.
COMMUNITY INVESTMENT
On June 7, 2016, Peoples Security Bank and
Trust Company and Lackawanna College an-
nounced their new partnership –– the College’s
theater will be named “Peoples Security Bank
Theater at Lackawanna College.” The new
naming rights advance Peoples Security Bank’s
continuing efforts to support businesses and
organizations which provide critical economic
vitality to downtown Scranton. The Theater
located inside Angeli Hall has been home to
a wide variety of civil, cultural, and political
events during its history.
During a press conference held in the
Theater, dignitaries from both Peoples Security
Bank and Lackawanna College celebrated the
new and exciting future for the Theater. Craig
W. Best, President & CEO of Peoples Security
Bank, said, “Peoples Security Bank & Trust Co.
is committed to making our communities we
serve better places to live. By partnering with
Lackawanna College’s investment in Scran-
ton, we continue that commitment.” Mark
Volk, President of Lackawanna College, said,
“The Theater at Lackawanna College has long
been a venue where members of the com-
munity could enjoy top-quality programming
at affordable prices. Our partnership with
Peoples Security Bank & Trust Co., an orga-
nization equally committed to our communi-
ties, helps ensure the continuation of that vital
mission. We are honored to partner with
such a forward-thinking company and excited
by the possibilities it presents.”
6
PEOPLES FINANCIAL SERVICES CORP.PEOPLES FINANCIAL SERVICES CORP.
Off-site ATMs
THE COMMONWEALTH
MEDICAL COLLEGE
525 Pine Street
Scranton, PA
LACKAWANNA COLLEGE
501 Vine Street
Scranton, PA
MEADOW AVENUE
Meadow Avenue
& Hemlock Street
Scranton, PA
Radisson Lackawanna
Station Hotel
700 Lackawanna Avenue
Scranton, PA
Saint Mary’s Villa
Nursing Home
516 Saint Mary’s Villa Road
Elmhurst Township, PA
Office Locations
BROOME
COUNTY | NY
Binghamton
Westside
273 Main St
Binghamton, NY
13905
(607) 729-3832
Conklin
1026 Conklin Rd
Conklin, NY
13748
(607) 722-2114
LACKAWANNA
COUNTY | PA
Abington
1100 Northern Blvd
S Abington Twp, PA
18411
(570) 587-4898
Central City
Scranton
150 North
Washington Ave
Scranton, PA
18503
(570) 955-1700
East Scranton
968 Prescott Ave
Scranton, PA
18510
(570) 342-9101
Glenburn
494 N Gravel Pond Rd
Clarks Summit, PA
18411
(570) 585-5130
Green Ridge
1901 Sanderson Ave
Scranton, PA
18509
(570) 346-4695
Minooka
420 Davis St
Scranton, PA
18505
(570) 955-1883
Moscow
141 N Main St
Moscow, PA
18444
(570) 842-7626
Old Forge
216 South Main St
Old Forge, PA
18518
(570) 451-7200
Peckville
540 Main St
Peckville, PA
18452
(570) 383-2154
South Scranton
526 Cedar Ave
Scranton, PA
18505
(570) 343-1151
LEHIGH
COUNTY | PA
Bethlehem
2355 City Line Rd
Bethlehem, PA
18017
(610) 691-1202
LUZERNE
COUNTY | PA
Duryea
304 Main St
Duryea, PA
18642
(570) 457-1120
Kingston
435 Wyoming Ave
Kingston, PA
18704
(570) 288-0128
MONROE
COUNTY | PA
Mount Pocono
1322 Pocono Blvd
Mount Pocono, PA
18344
(570) 839-8732
MONTGOMERY
COUNTY | PA
WYOMING
COUNTY | PA
Meshoppen
3487 State Route 6
Meshoppen, PA
18630
(570) 833-5171
Nicholson
42–48 State St
Nicholson, PA
18446
(570) 942-2265
Tunkhannock
83 E Tioga St
Tunkhannock, PA
18657
(570) 836-2135
King of Prussia
610 Freedom
Business Center Dr
Suite 105
King of Prussia, PA
19406
(610) 205-1880
NORTHAMPTON
COUNTY | PA
Emrick Blvd
2151 Emrick Blvd
Bethlehem, PA
18020
(610) 317-4690
SUSQUEHANNA
COUNTY | PA
Hallstead
25109 State Rt 11
Hallstead, PA
18822
(570) 879-2195
Hop Bottom
126 Main St
Hop Bottom, PA
18824
(570) 289-4124
Montrose
695 Grow Ave
Montrose, PA
18801
(570) 278-4100
Susquehanna
215 Erie Blvd
Susquehanna, PA
18847
(570) 853-4901
WAYNE
COUNTY | PA
Gouldsboro
534 Main St
Gouldsboro, PA
18424
(570) 842-6473
PEOPLES FINANCIAL SERVICES CORP. Corporate Information
Peoples Security Bank
and Trust Company
Corporate Headquarters
150 North Washington Avenue
Scranton, PA 18503
(570) 346-7741
(888) 868-3858
psbt.com
Investor Relations Officer
Marie L. Luciani
(570) 346-7741 x2352
(888) 868-3858 x2352
Stock Information
The common stock of
Peoples Financial Services Corp.
is listed on the NASDAQ
Stock Market under
the ticker symbol PFIS.
Stock Transfer
and Registrar Agent
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
(718) 921-8124
(800) 937-5449
Form 10-K Annual Report
A copy of our form 10-K for the
year ended December 31, 2016
is included herein. Copies of the
company’s Annual Report to the
Securities and Exchange
Commission on Form 10-K,
quarterly reports on Form
10-Q and news releases may
be obtained without charge
upon request to:
Marie L. Luciani
Investor Relations Officer
150 North Washington Avenue
Scranton, PA 18503
Annual Meeting
Saturday, May 20, 2017, 9:00am
Shadowbrook Inn and Resort
201 Resort Lane
Tunkhannock, PA 18657
(570) 836-2151
Dividend Calendar
Dividends on Peoples Financial
Services Corp. common stock
are customarily payable on or
about the 15th of March, June,
September and December.
Dividend Reinvestment Plan
American Stock Transfer &
Trust Company, LLC administers
a Dividend Reinvestment Plan
and Stock Purchase Plan.
Additional information may be
obtained on American Stock
Transfer & Trust Company’s
website: amstock.com.
Direct Deposit of Dividends
As a shareholder of Peoples
Financial Services Corp.,
you may have your dividend
payments deposited directly
into a personal checking,
savings, or other account.
Direct deposit of your dividend
eliminates the chance of your
dividend check being lost or
stolen and is credited to your
account on the same day that
the dividend is paid. To begin
direct deposit of your dividend,
please contact Marie L. Luciani,
Investor Relations Officer, at the
Corporate Headquarters address.
Independent Auditors
BDO USA, LLP
945 East Park Drive
Suite 103
Harrisburg, PA 17111
(717) 233-8800
General Counsel
Jerry Weinberger, Esq.
Nogi, Appleton, Weinberger
& Wren, P.C.
415 Wyoming Avenue
Scranton, PA 18510
(570) 963-8880
8
P E O P L E S F I N A N C I A L S E R V I C E S C O R P.
SEC Counsel
Pepper Hamilton, LLP
3000 Two Logan Square
Eighteenth & Arch Streets
Philadelphia, PA 19103
(215) 981-4000
Trust Counsel
James W. Reid, Esq.
Oliver, Price & Rhodes
1212 South Abington Road
Clarks Summit, PA 18411
(570) 585-1200
Market Makers
Boenning & Scattergood, Inc.
4 Tower Bridge
200 Barr Harbor Drive
Suite 300
W Conshohocken, PA 19428
(610) 862-5368
Griffin Financial Group, LLC
440 Monticello Avenue
Suite 1824
Norfolk, VA 23510
(757) 955-8444
Keefe Bruyette & Woods (KBW)
The Equitable Building
787 7th Avenue
New York, NY 10019
(212) 887-8996
Products and Services
Detailed information on our
products and services offered
by Peoples Security Bank
can be obtained by visiting
psbt.com or by calling
(888) 868-3858
or (570) 346-7741
PEOPLES FINANCIAL SERVICES CORP.
150 North Washington Avenue
Scranton, Pennsylvania 18503
April 3, 2017
To Our Shareholders:
You are cordially invited to attend the 2017 Annual Meeting of Shareholders of Peoples Financial
Services Corp. to be held on Saturday, May 20, 2017 at 9:00 a.m. local time at Shadowbrook Inn and
Resort, 201 Resort Lane, Tunkhannock, Pennsylvania.
At the annual meeting, shareholders will be asked to consider and vote upon: the election of four
(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)d of directors, each to serve until the 2020 annual meeting of shareholders
and until his successor has been selected and qualified; a proposal to approve, on an advisory basis, the
compensation of our named executive officers; a proposal to approve the Peoples Financial Services
Corp. 2017 Equity Incentive Plan, and any other business as may properly be brought before the meeting.
On behalf of the board of directors, we urge you to submit your proxy by mail, telephone or
internet as soon as possible, even if you currently plan to attend the annual meeting. This will not prevent
you from voting in person at the meeting, but will assure that your vote is counted if you are unable to
attend the annual meeting.
Your cooperation is appreciated, as shareholders entitled to cast at least a majority of the votes
which all shareholders are entitled to cast must be represented at the annual meeting, either in person or
by proxy, to constitute a quorum for the conduct of business.
Very truly yours,
William E. Aubrey II
Chairman of the Board
Craig W. Best
President and Chief Executive Officer
PEOPLES FINANCIAL SERVICES CORP.
150 North Washington Avenue
Scranton, Pennsylvania 18503
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 2017
Notice is hereby given that the 2017 Annual Meeting of Shareholders of Peoples Financial
Services Corp., referred to as (cid:179)we(cid:180) or the (cid:179)Company,(cid:180) will be held at Shadowbrook Inn and Resort, 201
Resort Lane, Tunkhannock, Pennsylvania on Saturday, May 20, 2017, at 9:00 a.m. local time, for the
purpose of considering and voting upon the following matters:
(cid:135)
(cid:135)
(cid:135)
(cid:135)
Election of four directors to our board of directors, each to serve until the 2020 annual
meeting of shareholders and until his successor has been elected and qualified;
A proposal to approve, on an advisory basis, the compensation of our named executive
officers;
A proposal to approve the Peoples Financial Services Corp. 2017 Equity Incentive Plan;
and
Such other business as may properly come before the meeting.
Shareholders of record at the close of business on February 28, 2017 are entitled to notice of and
to vote at the annual meeting. Whether or not you contemplate attending the annual meeting, the board of
directors of the Company recommends that you execute and return the enclosed proxy by mail or submit
your proxy by telephone or the internet. You may revoke your proxy at any time prior to the exercise of
the proxy by delivering to the Company a later dated proxy, by delivering a later dated written notice of
revocation to the Company, or by voting your shares in person at the annual meeting.
Important Notice Regarding Availability of Proxy Materials for the Annual Meeting of
Shareholders to Be Held on May 20, 2017:
Our proxy statement, annual report to shareholders, proxy card, and directions to attend the
annual meeting are available at http://www.astproxyportal.com/ast/08838/.
BY ORDER OF THE BOARD OF DIRECTORS
April 3, 2017
DEBRA E. DISSINGER
Secretary
PEOPLES FINANCIAL SERVICES CORP.
150 North Washington Avenue
Scranton, Pennsylvania 18503
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON MAY 20, 2017
This proxy statement is being furnished to shareholders of Peoples Financial Services Corp.,
referred to as (cid:179)we(cid:180) or the (cid:179)Company,(cid:180) in connection with the solicitation by the board of directors of the
Company of proxies to be voted at the annual meeting of shareholders to be held at Shadowbrook Inn and
Resort, 201 Resort Lane, Tunkhannock, Pennsylvania at 9:00 a.m. local time on Saturday, May 20, 2017,
or such later date to which the annual meeting may be adjourned or postponed.
At the annual meeting, you will be asked to consider and vote upon the following matters:
(cid:135)
(cid:135)
(cid:135)
(cid:135)
Election of four (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3) (cid:82)(cid:73)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3) (cid:72)(cid:68)(cid:70)(cid:75)(cid:3) (cid:87)(cid:82)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:3) (cid:88)(cid:81)(cid:87)(cid:76)(cid:79)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
2020 annual meeting of shareholders and until his successor has been elected and
qualified;
A proposal to approve, on an advisory basis, the compensation of our named executive
officers;
A proposal to approve the Peoples Financial Services Corp. 2017 Equity Incentive Plan;
and
Such other business as may properly come before the meeting.
Information regarding the election of directors and the other proposals is included in this proxy
statement. Shareholders should carefully read this proxy statement.
The first date on which this proxy statement and the enclosed form of proxy are being sent to the
shareholders of the Company is on or about April 3, 2017.
TABLE OF CONTENTS
A Warning About Forward-Looking Statements ......................................................................................... iii
Information About Voting ............................................................................................................................ 1
Proposal 1 (cid:177) Election of Directors ................................................................................................................ 4
Proposal 2 (cid:177) To Approve, on an Advisory Basis, the Compensation of our Named Executive Officers ..... 8
Proposal 3 (cid:177) To Approve the Peoples Financial Services Corp. 2017 Equity Incentive Plan ...................... 9
Board of Directors and Committees............................................................................................................ 15
Security Ownership of Certain Beneficial Owners and Management ........................................................ 22
Executive Officers and Compensation ........................................................................................................ 23
Certain Relationships and Related Transactions ......................................................................................... 43
Code of Ethics ............................................................................................................................................. 44
Section 16(a) Beneficial Ownership Reporting Compliance ...................................................................... 44
Shareholder Proposals ................................................................................................................................. 44
Reports and Other Documents .................................................................................................................... 45
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A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements, in addition to historical information. Forward
(cid:79)(cid:82)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:92)(cid:83)(cid:76)(cid:70)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:90)(cid:82)(cid:85)(cid:71)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:83)(cid:75)(cid:85)(cid:68)(cid:86)(cid:72)(cid:86)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:68)(cid:86)(cid:3)(cid:179)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:15)(cid:180)(cid:3)(cid:179)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:15)(cid:180)(cid:3)(cid:179)(cid:68)(cid:81)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:72)(cid:15)(cid:180)(cid:3)
(cid:179)(cid:76)(cid:81)(cid:87)(cid:72)(cid:81)(cid:71)(cid:15)(cid:180)(cid:3) (cid:179)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:15)(cid:180)(cid:3) (cid:179)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:15)(cid:180)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:89)(cid:68)(cid:85)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:86)(cid:88)(cid:70)(cid:75)(cid:3) (cid:90)(cid:82)(cid:85)(cid:71)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:86)(cid:76)(cid:80)(cid:76)(cid:79)(cid:68)(cid:85)(cid:3) (cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3) (cid:82)(cid:85)(cid:3) (cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3) (cid:82)(cid:85)(cid:3)
(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:89)(cid:72)(cid:85)(cid:69)(cid:86)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:68)(cid:86)(cid:3)(cid:179)(cid:90)(cid:76)(cid:79)(cid:79)(cid:15)(cid:180)(cid:3)(cid:179)(cid:90)(cid:82)(cid:88)(cid:79)(cid:71)(cid:15)(cid:180)(cid:3)(cid:179)(cid:86)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:15)(cid:180)(cid:3)(cid:179)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:15)(cid:180)(cid:3)(cid:179)(cid:80)(cid:68)(cid:92)(cid:15)(cid:180)(cid:3)(cid:82)(cid:85)(cid:3)(cid:86)(cid:76)(cid:80)(cid:76)(cid:79)(cid:68)(cid:85)(cid:3)(cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:3)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:21)(cid:26)(cid:36)(cid:3)
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, provide a safe harbor in regard to the inclusion of forward-looking statements in this document
and any documents incorporated by reference.
You should note that many factors, some of which are discussed elsewhere in this document and in
documents that are incorporated by reference, could affect the future financial results of Peoples Financial
Services Corp. and its subsidiaries and could cause those results to differ materially from those expressed
in the forward-looking statements contained or incorporated by reference in this document. These factors
include, but are not limited, to the following:
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
changes in interest rates;
economic conditions, particularly in the Peoples Financial Services Corp. market area;
legislative and regulatory changes and the ability to comply with the significant laws and
regulations governing the banking and financial services business;
monetary and fiscal policies of the U.S. government, including policies of the U.S.
Department of Treasury and the Federal Reserve System;
credit risk associated with lending activities and changes in the quality and composition
of our loan and investment portfolios;
demand for loan and other products;
deposit flows;
competition;
changes in the values of real estate and other collateral securing the loan portfolio,
particularly in the Peoples Financial Services Corp. market area;
the ability to achieve the intended benefits of, or other risks associated with, business
combinations;
changes in relevant accounting principles and guidelines;
inability of third party service providers to perform;
the ability to prevent, detect and respond to cyberattacks; and
other factors that may be described in our Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q as filed with the Securities and Exchange Commission from time
to time.
We caution that these forward-looking statements are subject to numerous assumptions, risks and
uncertainties, all of which change over time, and we assume no duty to update forward-looking
statements, except as may be required by applicable law or regulation, and except as required by
applicable law or regulation, we do not undertake, and specifically disclaim any obligation, to publicly
release any revisions to any forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements. We caution readers not to place
undue reliance on any forward-looking statements. These statements speak only as of the date made, and
we advise readers that various factors, including those described above, could affect our financial
performance and could cause actual results or circumstances for future periods to differ materially from
those anticipated or projected.
-iii-
How are proxies being solicited?
INFORMATION ABOUT VOTING
This proxy solicitation is being made by and at the direction of the board of directors of the
Company, and we will pay all expenses relating to the solicitation. Proxies may be solicited by mail,
personally, by telephone or by other electronic means by officers, directors and employees of the
Company and its subsidiary, Peoples Security Bank and Trust Company, or the (cid:179)Bank,(cid:180) who will not be
compensated for such solicitation activities. Arrangements may be made with brokerage houses and other
custodians, nominees and fiduciaries for forwarding solicitation materials to the beneficial owners of
shares held of record by such persons, and the Company will reimburse those persons for their reasonable
expenses.
What is on the agenda for the annual meeting?
The agenda for the annual meeting includes the election of four directors to the Co(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)
of directors, each to serve until the 2020 annual meeting of shareholders and until his successor has been
elected and qualified, a proposal to approve, on an advisory basis, the compensation of our named
executive officers, a proposal to approve the Peoples Financial Services Corp. 2017 Equity Incentive
Plan, and such other business as may properly come before the annual meeting. We are not aware of any
such other business that may properly come before the annual meeting at the present time.
Who can vote?
You can vote at the annual meeting if you were a holder of our common stock at the close of
business on the record date. The record date for the annual meeting is February 28, 2017. Each share of
common stock you own as of the record date entitles you to one vote for each director to be elected in the
election of directors and one vote on any other business as may properly come before the annual meeting.
As of the record date, there were 7,394,143 shares of common stock outstanding and entitled to vote.
How do I vote if shares are held directly in my name?
If you hold your shares in certificate form and not through a bank, brokerage firm or other
nominee, you may vote your shares in one of the following ways:
(cid:135)
(cid:135)
(cid:135)
(cid:135)
By Mail. If you choose to vote by mail, complete the enclosed proxy, date and sign it,
and return it in the postage-paid envelope provided.
In Person. If you choose to vote in person, come to the annual meeting and cast your
vote. If you attend the meeting, you may vote your shares in person even if you have
previously submitted a proxy.
Telephonic voting. If you choose to vote by telephone, call toll-free 1-800-PROXIES
(1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from
any touch-tone telephone and follow the instructions. Have your proxy card available
when you call, and use the company number and account number shown on your proxy
card.
Internet Voting. If you choose internet voting, (cid:68)(cid:70)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:179)(cid:90)(cid:90)(cid:90)(cid:17)(cid:89)(cid:82)(cid:87)(cid:72)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:17)(cid:70)(cid:82)(cid:80)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:3)
the on-screen instructions. Have your proxy card available when you access the web
page, and use the company number and account number shown on your proxy card.
You may submit your proxy by telephone or via internet until 11:59 PM EDT the day before the
meeting.
How do I vote if shares are held in street name or through a bank, brokerage firm or other nominee?
If you hold your shares in street name or through a bank, brokerage firm or other nominee, you
will need to vote your shares by providing voting instructions to your bank, brokerage firm or other
nominee, in accordance with the voting instruction form provided to you by your bank, brokerage firm or
other nominee, or by obtaining a legal proxy from your bank, brokerage firm or other nominee
authorizing you to vote those shares at the annual meeting. Only with a legal proxy from your bank,
brokerage firm or other nominee can you cast your vote in person at the annual meeting.
How will my proxy be voted?
If you hold your shares directly in your name, unless you indicate differently on your proxy, we
plan to vote signed and returned proxies FOR (cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:182)(cid:86)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)(cid:81)(cid:82)(cid:80)(cid:76)(cid:81)(cid:72)(cid:72)(cid:86)(cid:3)(cid:81)(cid:68)(cid:80)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)
proxy statement, FOR the proposal to approve, on an advisory basis, the compensation of our named
executive officers, and FOR the proposal to approve the Peoples Financial Services Corp. 2017 Equity
Incentive Plan.
(cid:44)(cid:73)(cid:3) (cid:92)(cid:82)(cid:88)(cid:3) (cid:75)(cid:82)(cid:79)(cid:71)(cid:3) (cid:92)(cid:82)(cid:88)(cid:85)(cid:3) (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3) (cid:76)(cid:81)(cid:3) (cid:179)street name(cid:180) (that is, through a
broker or other nominee), under applicable rules, brokers have the discretion to vote on routine matters,
such as the ratification of the selection of accounting firms, but do not have discretion to vote on non-
routine matters. Over the past few years, changes in rules applicable to brokers have caused uncontested
elections of directors, matters related to executive compensation, and matters related to corporate
governance to be considered non-routine. If you hold your shares in street name, but do not give your
broker or other nominee instructions on how to vote your shares, votes may not be cast on your behalf. If
your broker or other nominee submits a proxy but does not vote your shares on a particular proposal
because it has not received voting instructions from you, your shares will be considered to be (cid:179)broker
non-votes(cid:180) with regard to that matter.
At or after the annual meeting, a judge of elections will tabulate ballots cast by shareholders
present and voting in person and votes cast by proxy.
What is a broker non-vote?
A broker non-vote occurs when a bank or brokerage firm holding shares on behalf of a
shareholder does not receive voting instructions from the shareholder by a specified date before the
annual meeting and the bank or brokerage firm is not permitted to vote, or otherwise does not vote, those
undirected shares on specified matters. Thus, if you do not give your broker specific instructions, your
shares may not be voted on those matters (so-called (cid:179)broker non-votes(cid:180)) and will not be counted in
determining the number of shares necessary for approval. Broker non-votes are not considered to be
votes cast and, therefore, generally have no effect on the outcome of elections of directors or other
business which are determined based on votes cast. Shares represented by (cid:179)broker non-votes(cid:180) will be
counted, however, in determining the number of shares of common stock represented in person or by
proxy and entitled to vote.
Can I revoke my proxy or change my vote after submitting my proxy?
Yes. Any shareholder giving a proxy has the right to attend the annual meeting and vote in
person. A proxy may be revoked prior to the annual meeting if a later-dated proxy or a written revocation
is sent to the Company at Peoples Financial Services Corp., 150 North Washington Avenue, Scranton,
Pennsylvania 18503, Attn.: Secretary, and received prior to the annual meeting. In addition, a proxy may
-2-
be revoked at the annual meeting by filing a later-dated proxy or by filing a written notice of such
revocation with the Secretary of the Company at the annual meeting prior to the voting of such proxy.
What constitutes a quorum at the annual meeting and how are votes counted?
We need a quorum of shareholders to hold a valid annual meeting. A quorum will be present if
shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast are
represented in person or by proxy at the annual meeting. Abstentions and broker non-votes are counted as
present for the purpose of establishing a quorum.
How many votes are required for the election of directors?
Directors are elected by a plurality vote of shares of common stock cast in person or by proxy at
the annual meeting, provided that a quorum is present. A (cid:179)plurality(cid:180) means that the candidates for
election as directors receiving the highest number of votes, up to the number of directors to be elected,
shall be elected. Because the election of directors is based on a plurality of the votes cast, abstentions and
broker non-votes have no effect on the outcome of the vote. Shareholders are not entitled to cumulative
voting in the election of directors.
How many votes are required to approve, on an advisory basis, the compensation of our named executive
officers?
As long as a quorum is present, the affirmative vote of the holders, present in person or by proxy,
of shares entitled to cast at least a majority of the votes which all shareholders are entitled to cast, is
required to approve, on an advisory basis, the compensation of our named executive officers. Abstentions
and broker non-votes will have the same effect as votes against this proposal.
How many votes are required to approve the Peoples Financial Services Corp. 2017 Equity Incentive
Plan?
As long as a quorum is present, the affirmative vote of the holders, present in person or by proxy,
of shares entitled to cast at least a majority of the votes which all shareholders are entitled to cast, is
required to approve the Peoples Financial Services Corp. 2017 Equity Incentive Plan. Abstentions and
broker non-votes will have the same effect as votes against this proposal.
How many votes are required for any other proposals that may properly come before the annual meeting?
Any other proposals that may properly come before the annual meeting will be approved if the
holders, present in person or by proxy, of shares entitled to cast at least a majority of the votes which all
shareholders are entitled to cast are voted in favor of the action, unless the question is one upon which a
different vote is required by express provision of law or by our articles of incorporation or our bylaws.
Abstentions and broker non-votes will have the same effect as votes against any proposal that requires
approval by a majority of the votes which all shareholders are entitled to cast. Abstentions and broker
non-votes are not considered votes cast, however, and, as such, have no effect on the outcome of any
proposals which would be approved based on votes cast. We are not aware of any such other proposals
that may properly come before the annual meeting at the present time.
-3-
PROPOSAL 1 (cid:177) ELECTION OF DIRECTORS
Our bylaws provide that the number of directors constituting the entire board will be not less than
five nor more than twenty-five, with the exact number to be fixed from time to time by our board of
directors.
Our bylaws also provide that our board of directors will be classified into three classes, each class
to be as nearly equal in number, in respect to the time for which they severally hold office. At each
annual meeting of shareholders, one class of directors is to be elected and each class of directors so
elected will serve for a term of approximately three years. The number of directors currently comprising
the entire board is fourteen. In accordance with our mandatory retirement by bylaw, P. Frank Kozik has
not been nominated for reelection and at the annual meeting, his term as director will expire. Based on
the recommendation of our nominating and governance committee, rather than nominate someone to
succeed Mr. Kozik, our board of directors resolved to decrease the number of directors comprising the
entire board from fourteen to thirteen (cid:88)(cid:83)(cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:91)(cid:83)(cid:76)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:46)(cid:82)(cid:93)(cid:76)(cid:78)(cid:182)(cid:86)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:17) Accordingly, four
nominees will be elected to the 2020 class of directors.
It is intended that the proxies solicited by the board of directors will be voted FOR the four
director nominees named below (unless the shareholder otherwise directs). If, for any reason, any
nominee becomes unavailable for election or service on the board, the proxy solicited by the board of
directors will be voted for such substituted nominee as is selected by the board of directors. The board
has no reason to believe that any of the named nominees are not available or will not serve if elected.
Nominees for Director - Term Expiring In 2020
The board has nominated incumbent directors James G. Keisling, Ronald G. Kukuchka, Robert
W. Naismith, Ph.D. and George H. Stover, Jr. for election to the board of directors at the 2017 annual
meeting of shareholders, each to serve until the 2020 annual meeting of shareholders and until his
successor has been elected and qualified. The names of the director nominees and certain information
about them are set forth below:
James G. Keisling, age 69, was appointed as a director of Peoples Financial Services Corp. and
Peoples Security Bank and Trust Company in connection with the consummation of the Penseco merger
in November 2013. Prior to that, he served as a director of Penseco Financial Services Corporation and
Penn Security Bank and Trust Company since 1984. Our board of directors determined that Mr. Keisling
is qualified to serve as a director of the Company as a result of his substantial small company
management experience, specifically in the region in which the Bank conducts its business, and previous
service as a director of Penseco and other public companies. Mr. Keisling is the Treasurer of Northeast
Architectural Products, Inc., a manufacturer of hardscape masonry products located in Archbald,
Pennsylvania. Through his employment with Northeast Architectural Products, Inc., Mr. Keisling is able
to obtain insight regarding the local business and consumer environment that is valuable to the Board of
(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:74)(cid:75)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:37)(cid:68)(cid:81)(cid:78)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:43)(cid:76)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:51)(cid:72)(cid:81)(cid:86)(cid:72)(cid:70)(cid:82)(cid:3)
and Penn Security has enabled him to develop a knowledge of their former operations, which is beneficial
(cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:17)(cid:3) (cid:44)(cid:81)(cid:3) (cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:46)(cid:72)(cid:76)(cid:86)(cid:79)(cid:76)(cid:81)(cid:74)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:71)(cid:3) (cid:68)(cid:86)(cid:3) (cid:68)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3) (cid:82)(cid:73)(cid:3) (cid:38)(cid:51)(cid:42)(cid:3) (cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:15)(cid:3) (cid:44)(cid:81)(cid:70)(cid:17)(cid:15)(cid:3) (cid:68)(cid:3)
public company that manufactures plastic sheets products, from 2006 to 2008, and Vycom Corp., a public
company that manufactures plastic sheets products, from 2006 to 2008.
Ronald G. Kukuchka, age 63, has been a director of Peoples Financial Services Corp. and
Peoples Security Bank and Trust Company since 2007. He has been President of Ace Robbins, Inc. since
1982. The board has determined that Mr. Kukuchka is qualified to be on the board due to his leadership
skills gained from owning a successful petroleum company in our market area for over 34 years. He also
-4-
brings experience gained by serving as director for the Pennsylvania Marketers & Convenience Store
(cid:36)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:55)(cid:88)(cid:81)(cid:78)(cid:75)(cid:68)(cid:81)(cid:81)(cid:82)(cid:70)(cid:78)(cid:3) (cid:41)(cid:76)(cid:85)(cid:72)(cid:80)(cid:68)(cid:81)(cid:182)(cid:86)(cid:3) (cid:53)(cid:72)(cid:79)(cid:76)(cid:72)(cid:73)(cid:3) (cid:36)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:69)(cid:72)(cid:76)(cid:81)(cid:74)(cid:3) (cid:87)(cid:85)(cid:88)(cid:86)(cid:87)(cid:72)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
Roy Piper Charitable Trust.
Robert W. Naismith, Ph.D., age 72, was appointed as a director of Peoples Financial Services
Corp. and Peoples Security Bank and Trust Company in connection with the consummation of the
Penseco merger in November 2013. Prior to that, he served as a director of Penseco Financial Services
Corporation and Penn Security Bank and Trust Company since 1988. The Company has concluded that
Dr. Naismith is qualified to serve as a director of the Company as a result of his substantial company
management experience, particularly within the region in which the Bank conducts its business, including
his previous experience in the financial and securities industry. Dr. Naismith is Chairman of JUJAMA,
Inc., a web-based software company which provides networking software to the conference industry. The
company is located in Scranton, Pennsylvania. Through his oversight of these companies, Dr. Naismith is
able to obtain insight regarding business to business trends and the local and national business
(cid:72)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:74)(cid:75)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:68)(cid:81)(cid:78)(cid:182)(cid:86) operations.
George H. Stover, Jr., age 70, has been a director of Peoples Financial Services Corp. and
Peoples Security Bank and Trust Company since 1992. He was a real estate appraiser from 1972 until he
retired December 31, 2014. The board has determined that Mr. Stover is qualified to be on the board due
to his leadership skills obtained from successfully operating his own insurance and real estate business for
40 years. In addition, Mr. Stover has expertise of real estate values due to being an experienced real estate
appraiser.
Continuing Directors
The names of our directors, whose current terms will continue after the 2017 annual meeting of
shareholders, and certain information about them, are set forth below:
Term Expiring In 2018
Richard S. Lochen, Jr., age 53, has been a director of Peoples Financial Services Corp. and
Peoples Security Bank and Trust Company since 2003. He has been a Certified Public Accountant with
the firm of Lochen & Chase PC since 1995. He was the former President/Chief Executive Officer of
Peoples and Peoples Security Bank and Trust Company and Former Chief Administrative Officer of
Peoples and Peoples Security Bank and Trust Company. The board has determined that Mr. Lochen is
qualified to be on the board due to his knowledge of auditing publicly-traded financial institutions that he
gained during his career as a CPA, which included assisting in preparation of annual and quarterly filings
with the SEC. He also brings executive leadership experience and understanding of the operations of
Peoples gained from his serving as Chief Executive Officer of Peoples and Peoples Security Bank and
Trust Company for four years.
James B. Nicholas, age 65, was appointed as a director of Peoples Financial Services Corp. and
Peoples Security Bank and Trust Company in connection with the consummation of the Penseco merger
in November 2013. Prior to that, he served as a director of Penseco Financial Services Corporation and
Penn Security Bank and Trust Company since 1981. The Company has concluded that Mr. Nicholas is
qualified to serve as a director of the Company as a result of his substantial small company management
experience, particularly within the region in which the Bank conducts its business, and his familiarity
with the operations of the former Peoples Security Bank and Trust Company. Mr. Nicholas has served as
the President of D.G. Nicholas Co., a wholesale auto parts company located in Scranton, Pennsylvania,
since 1990. Through his oversight of D.G. Nicholas Co., Mr. Nicholas is able to obtain insight regarding
the local business and consumer environment that is valuable to the Board of Directors in its oversight of
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(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:37)(cid:68)(cid:81)(cid:78)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:43)(cid:76)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:51)(cid:72)(cid:81)(cid:86)(cid:72)(cid:70)(cid:82)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:51)(cid:72)(cid:81)(cid:81)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:72)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:71)(cid:3)
him to develop a kn(cid:82)(cid:90)(cid:79)(cid:72)(cid:71)(cid:74)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:17)
Emily S. Perry, age 77, was appointed as a director of Peoples Financial Services Corp. and
Peoples Security Bank and Trust Company in connection with the consummation of the Penseco merger
in November 2013. Prior to that, she served as a director of Penseco Financial Services Corporation and
Penn Security Bank and Trust Company since 1983. The Company has concluded that Ms. Perry is
qualified to serve as a director of the Company as a result of her insurance background, extensive
community activities and familiarly with the operations of Penn Security Bank and Trust Company. Ms.
Perry is a former insurance account executive which provided her with relevant experience, such as
customer service and consideration of client financial needs, in an industry that complements the financial
services provided by the Bank. In addition, through her participation in various community activities such
as the Scranton Public Library and Arc of Northeastern Pennsylvania, Ms. Perry serves as a liaison
between the Bank and the local community and provides the Board of Directors with additional
(cid:82)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:88)(cid:81)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:73)(cid:88)(cid:85)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:75)(cid:68)(cid:85)(cid:76)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:82)(cid:85)(cid:87)(cid:86)(cid:17)(cid:3)(cid:43)(cid:72)(cid:85)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:51)(cid:72)(cid:81)(cid:86)(cid:72)(cid:70)(cid:82)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:51)(cid:72)(cid:81)(cid:81)(cid:3)
Security has enabled her to develop a knowledge of their former operations, which is beneficial to the
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:17)
Steven L. Weinberger, age 69, was appointed as a director of Peoples Financial Services Corp.
and Peoples Security Bank and Trust Company in connection with the consummation of the Penseco
merger in November 2013. Prior to that, he served as a director of Penseco Financial Services
Corporation and Penn Security Bank and Trust Company since 1999. The Company has concluded that
Mr. Weinberger is qualified to serve as a director of the Company as a result of his substantial small
company management experience, particularly within the region in which the Bank conducts its business,
and his familiarity with the operations of Penn Security Bank and Trust Company. Mr. Weinberger has
served as the President of G. Weinberger Company, a mechanical contracting company located in Old
Forge, Pennsylvania, since 1981. Through his oversight of G. Weinberger Company, Mr. Weinberger is
able to obtain insight regarding the local business and consumer environment that is valuable to the Board
(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:74)(cid:75)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:37)(cid:68)(cid:81)(cid:78)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:43)(cid:76)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:51)(cid:72)(cid:81)(cid:86)(cid:72)(cid:70)(cid:82)(cid:3)
and Penn Security has enabled him to develop a knowledge of their former operations, which is beneficial
(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:17)
Earle A. Wootton, age 72, has been a director of Peoples Financial Services Corp. and Peoples
Security Bank and Trust Company since 2010. He is Chairman and Chief Executive Officer of
Community Foundation of the Endless Mountains (formerly known as Community Foundation of
Susquehanna and Wyoming Counties), a position he has held since 2005, and has served as President and
Chief Executive Officer of Mountain Resource Partners, Inc. (formerly Montrose Publishing Company,
Inc.) for approximately 30 years. The board has determined that Mr. Wootton is qualified to be on the
board due to his executive management skills acquired through being chief executive officer of a printing
company for 30 years. He also brings experience gained through being a previous director of First Union
Bank for 18 years, and being the founder and chairman of a community foundation. Mr. Wootton has a
Bachelor of Science degree from the Rochester Institute of Technology and a MBA from the Wharton
School, University of Pennsylvania.
Term Expiring In 2019
William E. Aubrey II, age 54, has been a director of Peoples Financial Services Corp. and
Peoples Security Bank and Trust Company since 2006 and Chairman of the Board since 2008. He has
been President and Chief Executive Officer of Gertrude Hawk Chocolates based in Dunmore, PA since
2003 (cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:85)(cid:72)(cid:90)(cid:182)(cid:86)(cid:3)(cid:36)(cid:79)(cid:79)-Natural based in Chester, VT since 2010. The board has
determined that Mr. Aubrey is qualified to be on the board due to his executive management experience
gained by serving as CEO for two companies. He also brings knowledge gained by serving on the on the
-6-
Board of Directors of United Gilsonite Laboratories in Scranton, PA and Rustic Crust in Pittsfield, NH.
In addition, he has served on many community boards including past Chairman of Geisinger CMC
Hospital, Keystone College, Holy Cross School System and the Everhart Museum. He holds an MBA
and CPA.
Craig W. Best, age 56, was appointed as a director of Peoples Financial Services Corp. and
Peoples Security Bank and Trust Company in connection with the consummation of the Penseco merger
in November 2013. Prior to that, he served as a director of Penseco Financial Services Corporation and
Penn Security Bank and Trust Company since 2006. The Company has concluded that Mr. Best is
qualified to serve as a director of the Company as a result of his leadership and prior experience in the
banking industry. Mr. Best served as President and Chief Executive Officer of Penseco Financial Services
Corporation and Penn Security Bank and Trust Company from 2006 until the Penseco merger, at which
time he was appointed as President and Chief Executive Officer of Peoples Financial Services Corp. and
Peoples Security Bank and Trust Company. Prior to joining Penseco, Mr. Best served as Chief Operating
Officer of First Commonwealth Bank, a $6.2 billion financial services institution headquartered in
Indiana, Pennsylvania, from July 2000 to December 2005. During his employment with First
Commonwealth Bank, Mr. Best was responsible for overseeing the day to day operations of all lines of
business and administrative functions for First Commonwealth Bank. Before serving as Chief Operating
Officer of First Commonwealth Bank, Mr. Best was President of NBOC, a $1.0 billion division of First
Commonwealth Bank. This collective experience, along with his knowledge of all aspects of the
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:37)(cid:68)(cid:81)(cid:78)(cid:182)(cid:86)(cid:3) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3) (cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3) (cid:75)(cid:76)(cid:86)(cid:3) (cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:86)(cid:3) (cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3) (cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)
un(cid:76)(cid:84)(cid:88)(cid:72)(cid:79)(cid:92)(cid:3)(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:73)(cid:92)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:17)
Joseph G. Cesare, M.D., age 79, was appointed as a director of Peoples Financial Services Corp.
and Peoples Security Bank and Trust Company in connection with the consummation of the Penseco
merger in November 2013. Prior to that, he served as a director of Penseco Financial Services
Corporation and Penn Security Bank and Trust Company since 2009. The Company has concluded that
Dr. Cesare is qualified to serve as a director of the Company as a result of his prior experience serving on
the Board of Directors of Old Forge Bank. Dr. Cesare served as a director of Old Forge Bank from 2005
until April 1, 2009, when Old Forge Bank was acquired by Penn Security Bank and Trust Company.
During this time, Dr. Cesare developed a detailed understanding of financial institutions which
contributed to the successful integration of the Old Forge Bank and Penn Security Bank and Trust
Company and which enables him to successfully serve the Company in this position. Additionally, Dr.
Cesare was President of Scranton Orthopedic Specialists and had practiced in the community as an
orthopedic surgeon from 1974 until 2014. (cid:39)(cid:85)(cid:17)(cid:3) (cid:38)(cid:72)(cid:86)(cid:68)(cid:85)(cid:72)(cid:182)(cid:86)(cid:3) (cid:86)(cid:87)(cid:85)(cid:82)(cid:81)(cid:74)(cid:3) (cid:87)(cid:76)(cid:72)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:87)(cid:92)(cid:3) (cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
Board of Directors with valuable insight into the local businesses and the current consumer environment.
Joseph T. Wright, Jr., age 61, has been a director of Peoples Financial Services Corp. and
Peoples Security Bank and Trust Company since 2009. He has been an attorney at law with Wright
Reihner PC since 1980. The board has determined that Mr. Wright is qualified to be on the board due to
his experience and knowledge gained while being a practicing attorney for over thirty years with
involvement in numerous financially complex matters related to disputes involving shareholders,
employment matters, contracts, valuation issues, real estate matters, and general business issues related to
risk assessment.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION OF EACH OF ITS NOMINEES TO THE BOARD OF DIRECTORS OF THE
COMPANY TO SERVE UNTIL THE 2020 ANNUAL MEETING OF SHAREHOLDERS AND
UNTIL HIS SUCCESSOR HAS BEEN ELECTED AND QUALIFIED.
-7-
PROPOSAL 2 (cid:177) TO APPROVE, ON AN ADVISORY BASIS,
THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
As required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended
(cid:11)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:79)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:36)(cid:70)(cid:87)(cid:180)(cid:12), we are providing our shareholders with the opportunity to
vote, on an advisory basis, on the compensation of our named executive officers as described in this
proxy statement. This proposal, commonly known as a (cid:179)say-on-pay(cid:180) proposal, gives our shareholders the
opportunity to express their views on the compensation of our named executive officers. We are
currently soliciting this advisory vote on an annual basis.
Even though this say-on-pay vote is advisory and therefore will not be binding on us, the
members of our compensation committee and board of (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182) value the opinions of our shareholders.
Accordingly, to the extent there is a significant vote against the compensation of our named executive
(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:72)(cid:85)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:3)(cid:90)(cid:75)(cid:68)(cid:87)(cid:3)
actions may be appropriate to address those concerns.
Our executive compensation program is designed to attract, reward, and retain key employees,
including our named executive officers, who are critical to our success. Under this program, our named
executive officers are rewarded for the achievement of specific short-term and long-term goals that
enhance shareholder value. Shareholders are urged to read the (cid:179)Compensation Discussion and Analysis(cid:180)
and (cid:179)Executive Compensation(cid:180) sections of this proxy statement for greater detail about our executive
compensation programs, including information about the fiscal year 2016 compensation of our named
executive officers.
We are asking our shareholders to indicate their support for the compensation of our named
executive officers as described in this proxy statement by voting in favor of the following resolution:
(cid:179)(cid:53)(cid:40)(cid:54)(cid:50)(cid:47)(cid:57)(cid:40)(cid:39)(cid:15)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:83)(cid:68)(cid:76)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:81)(cid:68)(cid:80)(cid:72)(cid:71)(cid:3) (cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3) (cid:68)(cid:86)(cid:3)
disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including the Compensation
Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.(cid:180)
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSAL TO APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS BY THE ADOPTION OF THE FOREGOING
RESOLUTION.
-8-
PROPOSAL 3 (cid:177) TO APPROVE THE PEOPLES FINANCIAL SERVICES CORP.
2017 EQUITY INCENTIVE PLAN
On March 13, 2017, our compensation committee recommended that our board of directors
approve the Peoples Financial Services Corp. 2017 Equity Incentive Plan, sometimes referred to as the
(cid:179)2017 Plan,(cid:180) and submit the 2017 Plan to a vote of our shareholders. On March 31, 2017, our board of
directors approved the 2017 Plan, subject to shareholder approval, and directed that the 2017 Plan be
submitted to our shareholders for their approval at the annual meeting. If approved by our shareholders,
the 2017 Plan will become effective as of the date of approval.
The purposes of the 2017 Plan are to enable the Company to recruit and retain highly qualified
employees, directors and consultants; provide them with an incentive for productivity and to align a
portion of their compensation with the growth and value of the Company.
The Peoples Financial Services Corp. 2008 Long-Term Incentive Plan, (cid:82)(cid:85)(cid:3) (cid:179)(cid:21)(cid:19)(cid:19)(cid:27)(cid:3) (cid:51)(cid:79)(cid:68)(cid:81)(cid:15)(cid:180)(cid:3) as
described (cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:3)(cid:76)(cid:81)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:177) Long-(cid:55)(cid:72)(cid:85)(cid:80)(cid:3)(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:180)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)
expire in January 2018. While the 2008 Plan will remain in effect in accordance with its terms to govern
outstanding awards under that plan, the Company intends to make future grants under the 2017 Plan. The
proposed 2017 Plan, summarized below, will make 100,000 shares of our common stock available for
issuance to eligible participants.
A summary of the 2017 Plan is set forth below. This summary is qualified in its entirety by the
full text of the 2017 Plan, which is attached to this Proxy Statement as Exhibit A.
Summary of the 2017 Plan
The principal provisions of the 2017 Plan are summarized below. This summary is qualified in
its entirety by reference to the actual 2017 Plan proposed in this proxy statement, a copy of which is
attached as Exhibit A.
Administration
The 2017 Plan vests broad powers in a committee to administer and interpret the Plan. Our board
of directors will designate the compensation committee to administer the 2017 Plan. Except when limited
by the terms of the 2017 Plan, the compensation committee has the authority to, among other things:
select the persons to be granted awards; determine the type, size and term of awards; establish
performance objectives and conditions for earning awards; determine whether such performance
objectives and conditions have been met; and accelerate the vesting or exercisability of an award. In its
discretion, the compensation committee may delegate all or part of its authority and duties with respect to
granting awards to one or more of our officers, subject to certain limitations and provided applicable law
so permits.
The board of directors may amend, alter or discontinue the 2017 Plan and the compensation
committee may amend any outstanding award at any time; provided, however, that no such amendment or
(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:80)(cid:68)(cid:92)(cid:3) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92)(cid:3) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3)(cid:68)(cid:90)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:81)(cid:3) (cid:82)(cid:88)(cid:87)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3) (cid:44)(cid:81)(cid:3) (cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)
any amendments seeking to increase the total number of shares reserved for issuance under the 2017 Plan
or modifying the classes of participants eligible to receive awards under the Plan will require ratification
by our stockholders in accordance with applicable law.
-9-
Eligibility
Any of our employees, directors, consultants, and other service providers, or those of our
affiliates, are eligible to participate in the 2017 Plan and may be selected by the compensation committee
to receive an award. As of February 28, 2017, approximately 380 people were eligible to participate in the
2017 Plan.
Vesting
The compensation committee determines the vesting conditions for awards. A time-based
condition requires that the participant be employed or otherwise in the service of the Company or our
affiliates for a certain amount of time in order for the award to vest. A performance-based condition
requires that certain performance criteria be achieved in order for the award to vest. For a discussion of
the performance-based vesting criteria the compensation committee may impose upon an award, see the
(cid:86)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:79)(cid:72)(cid:71)(cid:3)(cid:179)(cid:51)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:17)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:178)
Summary of Plan Provisions(cid:178)Types of Awards(cid:178)(cid:51)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:86)(cid:17)(cid:180)
Shares of Stock Available for Issuance
Subject to certain adjustments, the maximum number of shares of common stock that may be
issued under the 2017 Plan in connection with awards is 100,000, all of which may be utilized toward the
grant of any type of award, including incentive stock options. In any calendar year, no participant may
receive any award or any combination of awards that relate to more than 50,000 shares. In the event of
any merger, consolidation, reorganization, recapitalization, stock split, reverse stock split, split up, spin-
off, combination of shares, exchange of shares, stock dividend, dividend in kind, or other like change in
capital structure (other than ordinary cash dividends) to shareholders of the Company, or other similar
corporate event or transaction that affects our common stock, the compensation committee shall make
appropriate adjustments in the number and kind of shares authorized by the 2017 Plan and covered under
outstanding awards as it determines appropriate and equitable. Shares of our common stock subject to
awards that expire unexercised or are otherwise forfeited shall again be available for awards under the
2017 Plan.
Types of Awards
The 2017 Plan provides for the grant of the following equity-based and cash-based incentive
awards to participants: (i) stock options, (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted
(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:88)(cid:81)(cid:76)(cid:87)(cid:86)(cid:3)(cid:11)(cid:179)(cid:53)(cid:54)(cid:56)(cid:86)(cid:180)(cid:12)(cid:15)(cid:3)(cid:11)(cid:89)(cid:12)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:68)(cid:90)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:11)(cid:89)(cid:76)(cid:12)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:90)(cid:68)(cid:85)(cid:71)(cid:86)(cid:17)
Stock Options. An option entitles the holder to purchase from us a stated number of shares of
common stock. An incentive sto(cid:70)(cid:78)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:179)(cid:44)(cid:54)(cid:50)(cid:180)(cid:12)(cid:15)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:82)(cid:81)(cid:79)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
eligible affiliates. The compensation committee will specify the number of shares of common stock
subject to each option and the exercise price for such option, provided that the exercise price may not be
less than the fair market value of a share of common stock on the date the option is granted.
Notwithstanding the foregoing, if ISOs are granted to any 10% stockholder, the exercise price shall not be
less than 110% of the fair market value of common stock on the date the option is granted.
Generally, options may be exercised in whole or in part through a cash payment. The
compensation committee may, in its sole discretion, permit payment of the exercise price of an option in
the form of previously acquired shares based on the fair market value of the shares on the date the option
(cid:76)(cid:86)(cid:3) (cid:72)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3) (cid:82)(cid:85)(cid:3) (cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:179)(cid:81)(cid:72)(cid:87)(cid:3) (cid:86)(cid:72)(cid:87)(cid:87)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:15)(cid:3) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3) (cid:76)(cid:81)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:68)(cid:81)(cid:70)(cid:72)(cid:79)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:3) (cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
option to cover the cost of exercising the balance of the option.
-10-
All options shall be exercisable in accordance with the terms of the applicable award agreement.
The maximum term of an option shall be determined by the compensation committee on the date of grant
but shall not exceed 10 years (5 years in the case of ISOs granted to any 10% stockholder). In the case of
ISOs, the aggregate fair market value (determined as of the date of grant) of common stock with respect
to which such ISOs become exercisable for the first time during any calendar year cannot exceed
$100,000. ISOs granted in excess of this limitation will be treated as non-qualified stock options.
Stock Appreciation Rights. A stock appreciation right represents the right to receive, upon
exercise, any appreciation in a share of common stock over a particular time period. This award is
intended to mirror the benefit the participant would have received if the compensation committee had
granted the participant an option. The maximum term of a stock appreciation right shall be determined by
the compensation committee on the date of grant but shall not exceed 10 years. Distributions with respect
to stock appreciation rights may be made in cash, shares of common stock, or a combination of both, at
(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:85)(cid:72)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)
Unless otherwise provided in an award agreement or determined by the compensation committee,
if a participant terminates employment with us (or our affiliates) due to death or disability, the
(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:88)(cid:81)(cid:72)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:72)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:76)(cid:74)(cid:75)(cid:87)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:72)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72)(cid:71)(cid:15)(cid:3)(cid:87)(cid:82) the extent they were
exercisable on the termination date, for a period of twelve months from the termination date or until the
expiration of the original award term, whichever period is shorter. If the participant terminates
employment with us (or our affiliates) for cause (as defined in the 2017 Plan), (i) all unexercised options
and stock appreciation rights (whether vested or unvested) shall terminate and be forfeited on the
termination date, and (ii) any shares in respect of exercised options or stock appreciation rights for which
we have not yet delivered share certificates will be forfeited and we will refund to the participant the
(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:72)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72)(cid:3) (cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3) (cid:83)(cid:68)(cid:76)(cid:71)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:87)(cid:75)(cid:82)(cid:86)(cid:72)(cid:3) (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:15)(cid:3) (cid:76)(cid:73)(cid:3) (cid:68)(cid:81)(cid:92)(cid:17)(cid:3) (cid:44)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3)
other reason, any vested but unexercised options and stock appreciation rights may be exercised by the
participant, to the extent exercisable at the time of termination, for a period of ninety days from the
termination date (or such time as specified by the compensation committee at or after grant) or until the
expiration of the original option or stock appreciation right term, whichever period is shorter. Unless
otherwise provided by the compensation committee, any options and stock appreciation rights that are not
exercisable at the time of termination of employment shall terminate and be forfeited on the termination
date.
Restricted Stock. A restricted stock award is a grant of shares of common stock, which may or
may not be subject to forfeiture restrictions during a restriction period. The compensation committee will
determine the price, if any, to be paid by the participant for each share of common stock subject to a
restricted stock award. The compensation committee may condition the expiration of the restriction
peri(cid:82)(cid:71)(cid:15)(cid:3)(cid:76)(cid:73)(cid:3)(cid:68)(cid:81)(cid:92)(cid:15)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:29)(cid:3)(cid:11)(cid:76)(cid:12)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:68)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:88)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:73)(cid:73)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:72)(cid:86)(cid:30)(cid:3)
(ii) the achievement by the participant, us or our affiliates of any other performance goals set by the
compensation committee; or (iii) any combination of the above conditions as specified in the award
agreement. If the specified conditions are not attained, the participant will forfeit the portion of the
restricted stock award with respect to which those conditions are not attained, and the underlying common
stock will be forfeited to us. At the end of the restriction period, if the conditions, if any, have been
satisfied, the restrictions imposed will lapse with respect to the applicable number of shares. During the
restriction period, a participant will have the right to vote the shares underlying the restricted stock.
However, unless otherwise provided by the applicable award agreement or the compensation committee,
all dividends will remain subject to restriction until the stock with respect to which the dividend was
issued lapses. Unless otherwise provided in an award agreement or determined by the compensation
committee, upon termination a participant will forfeit all restricted stock that then remains subject to
forfeiture restrictions.
-11-
Restricted Stock Units. RSUs are granted in reference to a specified number of shares of common
stock and entitle the holder to receive, on the achievement of specific performance goals established by
the compensation committee, after a period of continued service, or any combination of the above as set
forth in the applicable award agreement, an amount equal to the fair market value of one share of
common stock (at the time of distribution) for each such share of common stock covered by the RSU,
which may be settled in shares of common stock, cash, or a combination of both, at the discretion of the
compensation committee. Unless otherwise provided in an award agreement or determined by the
compensation committee, upon termination a participant will forfeit all RSUs that then remain subject to
forfeiture.
Cash Awards. Cash awards may be granted to participants. The compensation committee will
determine the terms and conditions of each cash award, including the applicable performance period and
performance goal(s). No participant may be paid more than $500,000 in any calendar year in respect of
any cash award that is designated as a performance award. Unless otherwise provided in an award
agreement, a participant will only be eligible to receive payment of a cash award if he or she provided
services to us or an affiliated company through the last day of the applicable performance period.
Performance Awards. The compensation committee may grant performance awards in
accordance with the 2017 Plan. Performance awards may be denominated as a number of shares or
specified number of other awards (such as restricted stock, RSUs or cash awards), which may be earned
upon achievement or satisfaction of such performance goals as may be specified by the compensation
committee. Per(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:74)(cid:82)(cid:68)(cid:79)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:79)(cid:76)(cid:81)(cid:78)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:3)(cid:89)(cid:68)(cid:85)(cid:76)(cid:72)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:73)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
of a specified period of employment or service with us or an affiliated company. Additionally,
performance goals can include objectives stated with respect to the Company as a whole or any subsidiary
or other division or business unit but are limited to one or more of the following: pretax operating
contribution; economic value added; consolidated profits of the Company expressed as a percent;
earnings per share; stock price; book value; return on capital; return on investment; return on
(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:30)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:30)(cid:3)(cid:72)(cid:73)(cid:73)(cid:76)(cid:70)(cid:76)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:30)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:30)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:30)(cid:3)
pre-tax segment profit; net profit; net interest margin; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; return on assets; expense to asset ratio; asset quality
(including net charge-offs to average loans ratio; non-performing loans to average loans plus other real
estate owned ratio); asset growth; growth of loans; deposit growth; and any combination of the
foregoing.
The compensation committee may also adjust performance goals to take into account the impact
of the following items: gain or loss from all or certain claims and/or litigation and insurance recoveries;
the impairment of tangible or intangible assets; stock-based compensation expense; restructuring
(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3) (cid:73)(cid:76)(cid:79)(cid:76)(cid:81)(cid:74)(cid:86)(cid:30)(cid:3) (cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3) (cid:71)(cid:76)(cid:86)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) (cid:82)(cid:85)(cid:3) (cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:30)(cid:3) (cid:79)(cid:82)(cid:86)(cid:86)(cid:3) (cid:73)(cid:85)(cid:82)(cid:80)(cid:3)
the disposal of certain assets; gain or loss from the early extinguishment, redemption, or repurchase of
debt; changes in accounting principles; or any other item, event or circumstance that would not cause an
award intended to qualify as performance-based compensation for purposes of deductibility under Section
162(m) of the Code to fail to so qualify. Any adjustments will be determined in accordance with generally
accepted accounting principles and standards or other objective measures designated by the compensation
committee. The compensation committee may also make adjustments as necessary to performance criteria
related to our common stock to reflect changes in corporate capitalization affecting our equity.
Change in Control
In the event of a change in control (as defined in the 2017 Plan), the compensation committee
may, on a participant-by-participant basis: (i) cause any or all outstanding awards to become vested and
immediately exercisable (as applicable), in whole or in part; (ii) cause any outstanding option or stock
-12-
appreciation right to become fully vested and immediately exercisable for a reasonable period in advance
of the change in control and, to the extent not exercised prior to that change in control, cancel that option
or stock appreciation right upon closing of the change in control; (iii) cancel any unvested award or
unvested portion thereof, with or without consideration; (iv) cancel any award in exchange for a substitute
award; (v) redeem any restricted stock or RSU for cash and/or other substitute consideration with value
equal to the fair market value of an unrestricted share on the date of the change in control; (vi) cancel any
outstanding option or stock appreciation right with respect to all common stock for which the award
remains unexercised in exchange for a cash payment equal to the excess (if any) of the fair market value
of the common stock subject to the option or stock appreciation right over the exercise price of the option
or stock appreciation right; (vii) take such other action as the compensation committee shall determine to
be reasonable under the circumstances; and/or (viii) in the case of any award subject to Section 409A of
the Code, such award shall vest and be distributed only in accordance with the terms of the applicable
award agreement and the compensation committee shall only be permitted to use discretion to the extent
that such discretion would be permitted under Section 409A of the Code.
Repricing
Neither the board of directors nor the compensation committee may, without obtaining prior
approval of our stockholders: (i) implement any cancellation/re-grant program pursuant to which
outstanding options or stock appreciation rights under the 2017 Plan are cancelled and new options or
stock appreciation rights are granted in replacement with a lower exercise per share; (ii) cancel
outstanding options or stock appreciation rights under the 2017 Plan with an exercise price per share in
excess of the then current fair market value per share for consideration payable in our equity securities; or
(iii) otherwise directly reduce the exercise price in effect for outstanding options or stock appreciation
rights under the 2017 Plan.
Federal Tax Consequences
Under the Code as currently in effect, a grant under the 2017 Plan of options, stock appreciation
rights, restricted stock or RSUs would have no federal income tax consequence at the time of grant. All
amounts taxable as ordinary income to participants under the 2017 Plan in respect of awards are expected
to be deductible by the Company as compensation at the same time the participant recognizes the ordinary
income, subject to the limitations of Section 162(m) of the Code.
Options and Stock Appreciation Rights. Upon exercise of a nonqualified stock option, the excess
of the fair market value of the stock at the date of exercise over the exercise price is taxable to a
participant as ordinary income. Similarly, upon exercise of a Stock Appreciation Right, the value of the
shares or cash received is taxable to the participant as ordinary income. Upon exercise of an ISO that a
participant has held for at least two years after the date of grant and at least one year after the date of
exercise, the participant will not have taxable income, except that alternative minimum tax may apply.
When there is a disposition of the shares subject to the ISO, the difference, if any, between the sale price
of the shares and the exercise price of the option, is treated as long-term capital gain or loss. If the
participant does not satisfy these holding period (cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3) (cid:68)(cid:3) (cid:179)(cid:71)(cid:76)(cid:86)(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3) (cid:71)(cid:76)(cid:86)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:180)(cid:3) (cid:82)(cid:70)(cid:70)(cid:88)(cid:85)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)
the participant will recognize ordinary income in the year of the disposition in an amount equal to the
excess of the fair market value of the shares at the time the option was exercised over the exercise price of
the option. Any gain realized in excess of the fair market value at the time of exercise will be short or
long-term capital gain, depending on whether the shares were sold more than one year after the option
was exercised.
Restricted Stock. Unless the participant elects to recognize its value as income at the time of the
grant, restricted stock is taxable to a participant as ordinary income when it becomes vested.
-13-
Restricted Stock Units. When shares of common stock or cash with respect to RSU awards are
delivered to the participant, the value of the shares or cash is taxable to the participant as ordinary income.
Miscellaneous
The compensation committee may impose restrictions on the grant, exercise or payment of an
award as it determines appropriate. Generally, awards granted under the 2017 Plan shall be
nontransferable except by will or by the laws of descent and distribution. No participant shall have any
rights as a stockholder with respect to shares covered by options or RSUs, unless and until such awards
are settled in shares of common stock. No option shall be exercisable, no shares of common stock shall be
issued, no certificates for shares of common stock shall be delivered and no payment shall be made under
the 2017 Plan except in compliance with all applicable laws. The awards will be subject to our
recoupment policy, as in effect from time to time. The 2017 Plan will expire ten years after it becomes
effective.
Equity Compensation Plan Information.
The table below sets forth information with respect to compensation plans under which equity
securities of the Company are authorized for issuance as of December 31, 2016.
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of Shares
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding
Securities Reflected
in First Column)
(cid:177)
(cid:177)
(cid:177)
N/A
129,207
N/A
N/A
(cid:177)
129,207
Plan Category
Equity Compensation Plans Equity
compensation plans approved by
security holders: 2008 Long-Term
Incentive Plan
Equity compensation plans not
approved by security holders: None
Total
New Plan Benefits
The future awards that participants may receive under the Plan are discretionary, and therefore,
not determinable at this time.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE PEOPLES FINANCIAL SERVICES CORP. 2017 EQUITY INCENTIVE
PLAN.
-14-
BOARD OF DIRECTORS AND COMMITTEES
Director Independence
Our common stock is listed on The Nasdaq Stock Market, LLC. Accordingly, our board
evaluated the independence of each director and director nominee under the listing standards of The
Nasdaq Stock Market, LLC. During this review, the board considered transactions and relationships
between each director or any member of his or her immediate family and the Company and its
subsidiaries and affiliates. The board also considered whether there were any transactions or relationships
between directors or any member of their immediate family (or any entity of which a director or an
immediate family member is an executive officer, general partner or significant equity holder) and
members of our senior management or their affiliates.
As a result of this review, the board affirmatively determined that William E. Aubrey II, Joseph
G. Cesare, M.D., James G. Keisling, P. Frank Kozik, Ronald G. Kukuchka, Richard S. Lochen, Jr.,
Robert W. Naismith, Ph.D., James B. Nicholas, Emily S. Perry, George H. Stover, Jr., Earle A. Wootton
and Joseph T. Wright, Jr. are independent under the listing standards of The Nasdaq Stock Market, LLC.
In addition, the board determined that each member of our nominating and governance, audit and
compensation committees is independent in accordance with the additional independence criteria
applicable to such committee members under the listing standards of The Nasdaq Stock Market, LLC,
including the additional independence standards applicable to members of the audit and compensation
committees. Craig W. Best, our Chief Executive Officer and President, and Steven L. Weinberger were
determined to be not independent.
In determining the independence of our independent directors, we considered loan transactions, as
more particularly describ(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:179)(cid:38)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:75)(cid:76)(cid:83)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:180)(cid:3) (cid:71)(cid:72)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:51)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)
Security Bank and Trust Company, a lease agreement, pursuant to which we lease space in one of our
branches, and certain (cid:68)(cid:85)(cid:80)(cid:182)(cid:86)-length purchases of products from companies at which some of our directors
or their immediate family members were officers or employees during 2016. The board determined that
none of these relationships impaired the independence of the independent directors.
Board Meetings
During 2016, the board of directors held twelve meetings. Each of our directors attended at least
75 percent of the aggregate number of meetings held by the board of directors and the committees on
which he or she served.
We have no formal policy with respect to director attendance at our annual meeting of
shareholders. All of our then-serving directors attended our 2016 annual meeting of shareholders.
Board Leadership Structure and Role in Risk Oversight
The board of directors of the Company has determined that the separation of the offices of
chairman of the board and chief executive officer enhances board independence and oversight. Moreover,
the separation of the chairman of the board and chief executive officer allows the chief executive officer
to better focus on his responsibilities relating to day-to-day management of the Company, enhancing
(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:83)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:87)(cid:85)(cid:72)(cid:81)(cid:74)(cid:87)(cid:75)(cid:72)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:85)(cid:68)(cid:81)(cid:70)(cid:75)(cid:76)(cid:86)(cid:72)(cid:3)(cid:90)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:3)
to lead the board in its fundamental role of providing advice to and independent oversight of
management. Consistent with this determination, William E. Aubrey II serves as Chairman of the Board
of the Company and Craig W. Best serves as Chief Executive Officer and President of the Company.
-15-
Risk is inherent with every business, and how well a business manages risk can ultimately
determine its success. We face a number of risks, including credit risk, interest rate risk, liquidity risk,
operational risk, strategic risk, legal risk and reputational risk. Management, including our chief risk
officer, is responsible for the day-to-day management of risks we face, while our board of directors, as a
whole and through its committees, has responsibility for the oversight of risk management. In its risk
management oversight role, the board of directors has the responsibility to satisfy itself that the risk
management processes designed and implemented by management are adequate and functioning as
designed. To do this, the Chairman of the Board meets regularly with management to discuss strategy and
risks facing the Company. Senior management attends board meetings and is available to address any
questions or concerns raised by the board on risk management. The Chairman of the Board and
independent members of the board of (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182) work together to provide strong, independent oversight of
(cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:68)(cid:73)(cid:73)(cid:68)(cid:76)(cid:85)(cid:86)(cid:3) (cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3) (cid:76)(cid:87)(cid:86)(cid:3) (cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:15)(cid:3) (cid:90)(cid:75)(cid:72)(cid:81)(cid:3) (cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:15)(cid:3) (cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)
meetings of independent directors.
Primary responsibility for areas of risk oversight is allocated among our standing committees as
follows:
Committee
Audit Committee
Primary Areas of Risk Oversight
Risks and exposures associated with financial matters,
particularly financial reporting, tax, accounting, disclosure,
internal control over financial reporting, financial policies,
investment guidelines and credit and liquidity matters.
Nominating and Governance
Committee
Risks and exposures associated with leadership, succession
planning and corporate governance.
Compensation Committee
Risks and exposures associated with executive compensation
programs and arrangements, including incentive plans.
Compensation Risk Management
Our compensation committee has reviewed the compensation policies and practices of the
Company and has determined that the policies and practices do not motivate imprudent risk taking and are
not reasonably likely to have a material adverse effect on the Company. The compensation committee is
aware that compensation arrangements, if not properly structured, may encourage inappropriate risk-
taking. An long-standing example of how our compensation programs protect against imprudent risk
taking is the clawback provision included in the Peoples Cash Incentive Program. In addition, in
December 2016, we adopted a new compensation recoupment policy effective January 1, 2017, which
applies to all executive officers who receive cash or equity incentive awards.
Board Committees
As noted above, the board of directors of the Company conducts much of its business through
committees of the board. During 2016, the board maintained standing audit, compensation and
nominating committees. The Penseco merger agreement and our amended and restated bylaws provided
that for a period following the Penseco merger, until November 30, 2016, former Penseco directors were
to have pro rata representation on all committees of the board of directors. The composition of these
complied with this requirement during 2016.
-16-
Audit Committee
During the fiscal year ended December 31, 2016, directors Lochen, Keisling, Kukuchka,
Naismith, Weinberger and Wootton comprised the audit committee.
Each member of the audit committee was independent under the requirements of The Nasdaq
Stock Market, LLC relating to audit committee members. Mr. Weinberger resigned from the audit
committee upon a determination that he was no longer independent. The board of directors has
determined that director Richard S. Lochen, Jr. qualifies as an (cid:179)audit committee financial expert,(cid:180) as
defined under the rules of the Securities and Exchange Commission, or (cid:179)SEC.(cid:180) The audit committee met
five times in 2016.
The audit committee is governed by a formal charter approved by the board of directors, a current
(cid:70)(cid:82)(cid:83)(cid:92)(cid:3) (cid:82)(cid:73)(cid:3) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3) (cid:76)(cid:86)(cid:3) (cid:68)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3) (cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:90)(cid:72)(cid:69)(cid:86)(cid:76)(cid:87)(cid:72)(cid:15)(cid:3) psbt.com, at the (cid:179)Governance Documents(cid:180) page
under (cid:179)Investor Relations.(cid:180) The primary purposes, duties and responsibilities of the audit committee
include:
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:82)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:72)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:72)(cid:86)(cid:15)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)
preparation of financial reports and other financial information;
oversee our manageme(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:76)(cid:81)(cid:87)(cid:72)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)
reporting, accounting and financial reporting processes generally;
assist our board of directors Board in its oversight of our compliance with legal and
regulatory requirements;
evaluate the independence and oversee the performance of our independent registered
public accounting firm and oversee the audits of the financial statements of the Company;
assist our board of directors in risk assessment and risk management;
pre-approve all auditing services and permitted non-audit services (including the fees for
such services and terms thereof) to be performed by our independent registered public
accounting firm;
establish and periodically review and, as appropriate, revise, procedures for the receipt,
retention, and treatment of complaints regarding accounting, internal accounting controls,
or auditing matters, and the confidential, anonymous submission by our employees of
concerns regarding questionable accounting or auditing matters;
oversee our internal audit function; and
oversee any related party transactions.
Audit Committee Report
In accordance with SEC regulations, the audit committee has prepared the following report. As
part of its ongoing activities, the audit committee has:
(cid:135)
(cid:135)
(cid:135)
reviewed and discussed the audited consolidated financial statements of the Company at
and for the year ended December 31, 2016, with management;
(cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:37)(cid:39)(cid:50)(cid:3) (cid:56)(cid:54)(cid:36)(cid:15)(cid:3) (cid:47)(cid:47)(cid:51)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3) (cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3) (cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)
accounting firm, the matters required to be discussed by Public Company Accounting
Oversight Board Auditing Standard No. 16, Communications with Audit Committees;
and
received the written disclosures and letter from BDO USA, LLP required by applicable
requirements of the Public Company Accounting Oversight Board regarding the
(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3) (cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3) (cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:73)(cid:76)(cid:85)(cid:80)(cid:182)(cid:86)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)
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(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:72)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:37)(cid:39)(cid:50)(cid:3)(cid:56)(cid:54)(cid:36)(cid:15)(cid:3)(cid:47)(cid:47)(cid:51)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:182)(cid:86)(cid:3)
independence.
Based upon its review and the considerations and discussions referenced above, the audit
committee recommended to the board of directors that our audited consolidated financial statements be
(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K, as filed with the SEC on March 16, 2017.
Submitted by the Audit Committee:
Richard S. Lochen, Jr., Chairman
James G. Keisling
Ronald G. Kukuchka
Robert W. Naismith, Ph.D.
Earle A. Wootton
The foregoing Audit Committee Report shall not be deemed to be incorporated by reference into any filing
made by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, notwithstanding any general statement contained in any such filing incorporating this proxy statement by
reference, except to the extent the Company incorporates such report by specific reference.
Compensation Committee
During the fiscal year ended December 31, 2016, the compensation committee of the board of
directors consisted of directors Aubrey, Keisling, Kozik, Lochen, Naismith, Perry and Wright to comprise
the compensation committee. During 2016, the compensation committee of the board of directors met
eight times.
The compensation committee is governed by a formal charter approved by the board of directors,
(cid:68)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:83)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:90)(cid:72)bsite, psbt.com, at the (cid:179)Governance Documents(cid:180)
page under (cid:179)Investor Relations.(cid:180) The primary purposes, duties and responsibilities of the compensation
committee include:
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
review and approve the annual base salaries and annual incentive opportunities of our
chief executive officer and other executive officers;
review and approve incentive awards and opportunities, including both cash-based and
equity-based awards and opportunities, any employment agreements and severance
arrangements, any change-in-control agreements and change-in-control provisions
affecting any elements of compensation and benefits, and any special or supplemental
compensation and benefits, in each case for our executive officers;
review and make recommendations to our board of directors with respect to new
compensation programs;
review periodically the operation of our compensation programs;
establish and periodically review policies for the administration of compensation
programs;
ensure that our compensation programs comport with our compensation philosophy;
review and make recommendations to our board of directors with respect to director
compensation;
review and make recommendations to our board of directors with respect to our
employee benefit plans;
administer our compensation programs, including equity incentive programs, for all
employees;
-18-
(cid:135)
(cid:135)
(cid:135)
review and provide guidance on our human resource programs, which may include talent
review and leadership development and (cid:179)best place to work(cid:180) initiatives;
oversee all matters relating to the outcome of shareholder advisory votes regarding
executive compensation; and
oversee risks and exposures associated with leadership assessment, and compensation
programs and arrangements, including incentive plans, and reviewing and evaluating our
compensation policies and practices of compensating our employees, including non-
executive officers, as they relate to risk management practices and risk-taking incentives.
Compensation Committee Report
The compensation committee has reviewed and discussed with management the Compensation
Discussion and Analysis that is required by the rules established by the SEC. Based on such review and
discussions, the compensation committee has recommended to the board of directors that the
Compensation Discussion and Analysis be included in this proxy statement. See (cid:179)Compensation
Discussion and Analysis.(cid:180)
Submitted by the compensation committee:
Robert W. Naismith, Ph.D., Chairman
William E. Aubrey II
James G. Keisling
P. Frank Kozik
Richard S. Lochen, Jr.
Emily S. Perry
Joseph T. Wright, Jr.
The foregoing Compensation Committee Report shall not be deemed to be incorporated by reference into
any filing made by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, notwithstanding any general statement contained in any such filing incorporating this proxy
statement by reference, except to the extent the Company incorporates such report by specific reference.
Nominations and Shareholder Communications
During the fiscal year ended December 31, 2016, Aubrey, Cesare, Kukuchka, Nicholas, Perry,
Stover and Weinberger comprised the nominating and corporate governance committee. Mr. Weinberger
resigned from the audit committee upon a determination that he was no longer independent. During 2016,
the nominating and corporate governance committee of the board of directors met two times.
The nominating and corporate governance committee is governed by a formal charter approved
by the board of directors, a current copy of which is available at (cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:90)(cid:72)(cid:69)(cid:86)(cid:76)(cid:87)(cid:72)(cid:15)(cid:3)psbt.com, at the
(cid:179)Governance Documents(cid:180) page under (cid:179)Investor Relations.(cid:180) The primary purposes, duties and
responsibilities of the nominating and corporate governance committee include:
(cid:135)
(cid:135)
(cid:135)
recommend director nominees for selection by our board of directors;
review recommendations from directors, shareholders, management, and other
appropriate third parties for potential director candidates and collect and analyze
information regarding their suitability;
assist our board of directors in determining the size and composition of the board and its
committees, and of the board of directors and committees of our subsidiaries;
-19-
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
(cid:135)
develop and make recommendations to our board of directors with respect to corporate
governance guidelines and other governance policies;
develop and recommend to the Board a policy with regard to the consideration of
diversity in identifying director candidates, implement any approved diversity policy,
evaluate candidates in accordance with such policy, and periodically assess the
effectiveness of such policy;
identify and prioritize with management significant risks that we face and recommend to
our board of directors whether the full board or a particular board committee should have
primary responsibility for oversight of each such identified risk;
keep apprised of requirements, trends and best practices in corporate governance;
review and make recommendations to our board of directors with respect to any proposed
changes to our articles of incorporation, bylaws, or committee charters; and
develop and make recommendations to our board of directors with respect to key
executive succession plans.
Nomination Process
In accordance with the Penseco merger agreement and our bylaws, for our 2014, 2015 and 2016
annual meetings of shareholders, our director nominees were (cid:85)(cid:72)(cid:70)(cid:82)(cid:80)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3) (cid:82)(cid:73)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182)(cid:3)
approval by two subcommittees of our nominating and corporate governance committee. One
subcommittee was comprised of directors who were directors of Peoples prior to the Penseco merger,
(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:51)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)(cid:86)(cid:88)(cid:69)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:15)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)was comprised of directors who were directors
(cid:82)(cid:73)(cid:3) (cid:51)(cid:72)(cid:81)(cid:86)(cid:72)(cid:70)(cid:82)(cid:3) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3) (cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:51)(cid:72)(cid:81)(cid:86)(cid:72)(cid:70)(cid:82)(cid:3) (cid:80)(cid:72)(cid:85)(cid:74)(cid:72)(cid:85)(cid:15)(cid:3) (cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:68)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:179)(cid:51)(cid:72)(cid:81)(cid:86)(cid:72)(cid:70)(cid:82)(cid:3)
(cid:86)(cid:88)(cid:69)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:17)(cid:180)(cid:3) (cid:3)(cid:55)(cid:75)(cid:72)(cid:3) (cid:51)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3) (cid:86)(cid:88)(cid:69)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3) was responsible for recommending director nominees with
respect to each directorship held by an incumbent director who was a director of Peoples immediately
prior to the Penseco merger, or any other incumbent director who was nominated by the Peoples
subcommittee. The Penseco subcommittee was responsible for recommending director nominees with
respect to each directorship held by an incumbent director who was a director of Penseco immediately
prior to the Penseco merger, or any other incumbent director who was nominated by the Penseco
subcommittee. (cid:37)(cid:72)(cid:74)(cid:76)(cid:81)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:182)(cid:86)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:73)(cid:88)(cid:79)(cid:79)(cid:3)nominating and corporate governance
committee is responsible for recommending the entire slate of director nominees.
The board of directors will consider director candidates recommended by shareholders. Any
shareholder who wishes to recommend a director candidate for consideration may send notice to Peoples
Financial Services Corp., 150 North Washington Avenue, Scranton, Pennsylvania 18503, Attention:
Investor Relations Officer. The notice should contain the information described in the section titled
(cid:179)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)(cid:51)(cid:85)(cid:82)(cid:83)(cid:82)(cid:86)(cid:68)(cid:79)(cid:86)(cid:15)(cid:180)(cid:3)(cid:82)(cid:81)(cid:3)(cid:83)(cid:68)(cid:74)(cid:72)(cid:3)44.
Process for Identifying and Evaluating Nominees
In selecting director candidates to be nominated for election at an annual meeting, the nominating
and corporate governance committee begins by determining whether the incumbent directors whose terms
expire at the meeting desire, and are qualified, to continue their service on the board. We are of the view
that the repeated service of qualified incumbents promotes stability and continuity in the boardroom,
giving us the benefit of the familiarity and insight into our affairs that our directors have accumulated
during their tenure. Accordingly, it is the policy of the nominating and corporate governance committee,
absent special circumstances, to nominate qualified incumbent directors who continue to satisfy the
(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3) (cid:70)(cid:85)(cid:76)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3) (cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:30)(cid:3) (cid:90)(cid:75)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3) (cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3) (cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3) (cid:80)(cid:68)(cid:78)(cid:72)
important contributions to the Board; and who consent to stand for re-election and, if re-elected, to
continue their service on the Board.
-20-
If there are Board positions for which the committee will identify and evaluate non-incumbent
directors, it will proceed as follows:
Identification. For purposes of identifying nominees for the board of directors, the nominating
and corporate governance committee relies on personal contacts of the committee and other members of
the board of directors as well as its knowledge of members of the Compan(cid:92)(cid:182)(cid:86)(cid:3) (cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3) (cid:68)(cid:85)(cid:72)(cid:68)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3)
nominating and corporate governance committee will also consider director candidates recommended by
shareholders in accordance with the policy and procedures set forth above. The nominating and corporate
governance committee may use an independent search firm in identifying nominees. However, the
committee did not engage an independent search firm for this purpose during the year ended December
31, 2016 or in connection with the nominees for election at the 2017 annual meeting.
Evaluation. In evaluating potential nominees, the nominating and corporate governance
committee determines whether the candidate is eligible and qualified for service on the board of directors
by evaluating the candidate under the selection criteria set forth belo(cid:90)(cid:3) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:75)(cid:72)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:179)(cid:48)(cid:76)(cid:81)(cid:76)(cid:80)(cid:88)(cid:80)(cid:3)
(cid:52)(cid:88)(cid:68)(cid:79)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:180)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:17)(cid:3)(cid:44)(cid:81)(cid:3)(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:82)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:74)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:3)(cid:68)(cid:3)
background check and may interview the candidate. Candidates proposed by shareholders are considered
under the same criteria, except that the committee may also consider the size and duration of the equity
interest of the recommending shareholder in the Company and the extent to which the recommending
shareholder intends to continue holding this interest.
Minimum Qualifications
Our bylaws include a mandatory retirement policy applicable to our directors. Any director, upon
reaching the mandatory retirement age of 73 years, will be permitted to serve as a director for the
remainder of his or her term, after which he or she shall no longer be eligible to serve as a director.
The nominating and corporate governance committee has not adopted a specific set of minimum
qualifications that must be met by nominees. Nominees are selected on the basis of their integrity,
experience, achievements, judgment, intelligence, personal character and capacity to make independent
analytical inquiries, ability and willingness to devote adequate time to Board duties, and the likelihood of
being able to serve on the Board for a sustained period. In evaluating potential director nominees, our
(cid:81)(cid:82)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3) (cid:74)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3) (cid:11)(cid:68)(cid:81)(cid:71)(cid:3) (cid:76)(cid:87)(cid:86)(cid:3) (cid:86)(cid:88)(cid:69)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:86)(cid:12)(cid:3) (cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:3) (cid:68)(cid:81)(cid:3) (cid:76)(cid:81)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:88)(cid:68)(cid:79)(cid:182)(cid:86)(cid:3)
(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:70)(cid:3)(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:86)(cid:78)(cid:76)(cid:79)(cid:79)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:69)(cid:88)(cid:87)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:88)(cid:68)(cid:79)(cid:182)(cid:86)(cid:29)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)
skill and expertise of the Board; financial, regulatory and business experience, knowledge of the banking
and financial services industries, familiarity with the operations of public companies and ability to read
and understand financial statements; familiarity with our market area and participation in and ties to local
businesses and local civic, charitable and religious organizations; personal and professional integrity,
(cid:75)(cid:82)(cid:81)(cid:72)(cid:86)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:83)(cid:88)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:30)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)lders and the best
interests of the Company and Bank; ability to devote sufficient time and energy to the performance of his
or her duties; independence; and current equity holdings in the Company.
The nominating and corporate governance committee (and its subcommittees) will also consider
any other factors it deems relevant, including competition, size of the board of directors, and regulatory
disclosure obligations. The nominating and corporate governance committee will also consider the extent
to which a (cid:70)(cid:68)(cid:81)(cid:71)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3) (cid:75)(cid:72)(cid:79)(cid:83)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3) (cid:82)(cid:73)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3) (cid:85)(cid:72)(cid:73)(cid:79)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:71)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:87)(cid:92)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3)
employees, customers, and communities. The committee also considers factors such as global experience,
experience as a director of a public company, and knowledge of relevant industries.
-21-
In addition, prior to nominating an existing director for re-election to the board of directors, the
(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)
her satisfaction of any minimum qualifications established by the committee.
In December 2016, we adopted a share ownership policy, which applies to our directors, as well
as our senior executive officers. This policy will require our directors to beneficially own our common
stock in an amount equal to four times their annual retainer for board service, and allows five years for
our directors to reach compliance.
Shareholder Communications
Any shareholder who desires to send communications to our board of directors or to individual
directors may do so by directing his or her communication to the following address: Peoples Financial
Services Corp., 150 North Washington Avenue, Scranton, Pennsylvania 18503, Attention: Investor
Relations Officer. All shareholder communications, other than any communications we believe may pose
a security risk, will be sent directly to board members.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 28, 2017, certain information concerning the
ownership of shares of the common stock by any person who is known by us to own beneficially more
than five percent of the issued and outstanding common stock, each director of the Company, each
(cid:179)named executive officer(cid:180) identified below under the heading (cid:179)Executive Compensation(cid:180) on page 31, and
all directors and executive officers as a group.
Name
William E. Aubrey II
Craig W. Best
Joseph G. Cesare, M.D.
James G. Keisling
P. Frank Kozik
Ronald G. Kukuchka
Richard S. Lochen, Jr.
Robert W. Naismith, Ph.D.
James B. Nicholas
Emily S. Perry
George H. Stover, Jr.
Steven L. Weinberger
Earle A. Wootton
Joseph T. Wright, Jr.
John R. Anderson III
Bradley S. Grubb
Neal D. Koplin
Scott A. Seasock
Thomas P. Tulaney
All directors and executive officers
as a group (24 persons).
Number of Shares
Beneficially Owned(cid:14)
Percentage of Ownership(cid:14)(cid:14)
22,000.000
18,257.270(1)
155,218.000(2)
61,234.000(3)
34,072.000(4)
25,267.862(5)
9,967.266(6)
40,951.000(7)
25,185.700(8)
7,944.000(9)
74,312.000(10)
38,090.000(11)
21,000.000(12)
28,910.711(13)
1,225.000(14)
4.019(15)
472.492(16)
9,691.933(17)
19,029.093(18)
613,031.888
*
*
2.1%
*
*
*
*
*
*
*
1.0%
*
*
*
*
*
*
*
*
8.3%
(cid:14) Any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or
otherwise has or shares: voting power, which includes the power to vote, or to direct the voting of, our common
stock; and/or, investment power, which includes the power to dispose, or to direct the disposition of, our
common stock, is determined to be a beneficial owner of our common stock. All shares are subject to the
(cid:81)(cid:68)(cid:80)(cid:72)(cid:71)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:86)(cid:82)(cid:79)(cid:72)(cid:3)(cid:89)(cid:82)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:83)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:88)(cid:81)(cid:79)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:90)(cid:76)(cid:86)(cid:72)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:17)
-22-
(cid:14)(cid:14) Shares beneficially owned include options to purchase shares which are currently exercisable or which will be
exercisable within 60 days of February 28, 2017. Percentage calculations are based on 7,394,143 shares
outstanding at February 28, 2017, and presume that the identified individual or group exercises all of his, her or
their respective warrants and options and that no other holders of warrants or options exercise their warrants or
options.
* Less than 1.0 percent.
(1)
Includes 1,030.914 shares under (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) employee stock ownership plan (cid:11)(cid:179)(cid:40)(cid:54)(cid:50)(cid:51)(cid:180)(cid:12)(cid:3) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3) (cid:75)(cid:68)(cid:89)(cid:72)(cid:3) (cid:69)(cid:72)(cid:72)(cid:81)(cid:3)
(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)nt, and 17,226 shares in a self-directed IRA.
(cid:44)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:21)(cid:20)(cid:15)(cid:28)(cid:23)(cid:23)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:77)(cid:82)(cid:76)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3)(cid:69)(cid:92)(cid:3)(cid:39)(cid:85)(cid:17)(cid:3)(cid:38)(cid:72)(cid:86)(cid:68)(cid:85)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:90)(cid:76)(cid:73)(cid:72)(cid:15)(cid:3)(cid:25)(cid:20)(cid:15)(cid:20)(cid:24)(cid:25)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:39)(cid:85)(cid:17)(cid:3)(cid:38)(cid:72)(cid:86)(cid:68)(cid:85)(cid:72)(cid:182)(cid:86)(cid:3) (cid:90)(cid:76)(cid:73)(cid:72)(cid:15)(cid:3)
and 68,874 (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:55)(cid:72)(cid:71)(cid:72)(cid:86)(cid:70)(cid:82)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:17)(cid:15)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:39)(cid:85)(cid:17)(cid:3)(cid:38)(cid:72)(cid:86)(cid:68)(cid:85)(cid:72)(cid:182)(cid:86)(cid:3)(cid:90)(cid:76)(cid:73)(cid:72)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:17)
Includes 37,109 shares owned in a self-directed IRA and 24,125 shares in custodial accounts.
Includes 12,522 (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:46)(cid:82)(cid:93)(cid:76)(cid:78)(cid:182)(cid:86)(cid:3)(cid:90)(cid:76)(cid:73)(cid:72), and 5,669 shares owned in a self-directed IRA.
Includes 18,485.522 shares owned jointly by Mr. Kukuchka and his wife.
Includes 1,117 shares in a 401(k) plan, 247.774 shares held by minor children, 5,422.492 shares owned jointly
by Mr. Lochen and his wife, and 1,065 shares in a self-directed IRA.
Includes 25,204 shares owned jointly by Dr. Naismith and (cid:75)(cid:76)(cid:86)(cid:3)(cid:90)(cid:76)(cid:73)(cid:72)(cid:15)(cid:3)(cid:23)(cid:19)(cid:28)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:39)(cid:85)(cid:17)(cid:3)(cid:49)(cid:68)(cid:76)(cid:86)(cid:80)(cid:76)(cid:87)(cid:75)(cid:182)(cid:86)(cid:3)(cid:90)(cid:76)(cid:73)(cid:72)(cid:15)(cid:3)
and 15,338 shares in a self-directed IRA.
Includes 2,013.446 shares in a self-directed IRA, 2,631.695 (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:49)(cid:76)(cid:70)(cid:75)(cid:82)(cid:79)(cid:68)(cid:86)(cid:182)(cid:86)(cid:3)(cid:90)(cid:76)(cid:73)(cid:72)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:20)(cid:19)(cid:15)(cid:26)(cid:21)(cid:28)(cid:3)
shares held in trust accounts.
Includes 1,772 shares owned jointly by Mrs. Perry and her husband, and 1,002 shares in a self-directed IRA,
and 3,193 held in a trust account.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10) Includes 74,312 shares owned jointly by Mr. Stover and his wife.
(11) Includes 1,295 shares held in a trust account, 1,022 shares in a self-directed IRA, and 17,975 shares held in the
following companies of which Mr. Weinberger has an interest: Harold Weinberger, Inc., J. Weinberger
Partners and G. Weinberger Co.
(12) (cid:44)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:20)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:58)(cid:82)(cid:82)(cid:87)(cid:87)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:90)(cid:76)(cid:73)(cid:72)(cid:17)
(13) Includes 723.182 (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:58)(cid:85)(cid:76)(cid:74)(cid:75)(cid:87)(cid:182)(cid:86)(cid:3)(cid:80)(cid:76)(cid:81)(cid:82)(cid:85)(cid:3)(cid:70)(cid:75)(cid:76)(cid:79)(cid:71)(cid:17)
(14) Includes 40 shares owned jointly by Mr. Anderson and his wife, and 1,185 shares under the ESOP which have
been allocated to Mr. Anderson(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:17)
(15) Includes 4.019 shares under the ESOP which have been allocated to Mr. Grubb(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87).
(16) Includes 400 shares in a self-directed IRA and 72.492 shares under the ESOP which have been allocated to Mr.
(cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:17)
(17) Includes 3,978 shares owned jointly by Mr. Seasock and his wife, 4,990 shares in a self-directed IRA, 573.933
shares in a 401(k) plan, and 150 shares under the ESOP allocated to Mr. Seasock(cid:182)(cid:86)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:17) Mr. Seasock(cid:182)(cid:86)(cid:3)
employment ceased on May (cid:27)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:54)(cid:72)(cid:68)(cid:82)(cid:70)(cid:78)(cid:182)(cid:86)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)
may not reflect changes after such date.
(18) Includes 4,892.698 shares in a self-directed IRA, 457.9826 shares under the ESOP which have been allocated to
(cid:48)(cid:85)(cid:17)(cid:3)(cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:20)(cid:26)(cid:26)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:77)(cid:82)(cid:76)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3)(cid:69)(cid:92)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:90)(cid:76)(cid:73)(cid:72)(cid:17)
EXECUTIVE OFFICERS AND COMPENSATION
Executive Officers
Following is information regarding our executive officers other than Craig W. Best, President and
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3) (cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:17)(cid:3) (cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:75)(cid:72)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:179)(cid:40)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3)
Directors (cid:177) Continuing Directors (cid:177) Term Expiring In 2019(cid:15)(cid:180)(cid:3) (cid:69)(cid:72)(cid:74)(cid:76)(cid:81)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3) (cid:82)(cid:81)(cid:3) (cid:83)(cid:68)(cid:74)(cid:72)(cid:3) 6, and additional
information regarding the compensation of our named executive officers is included under the heading
(cid:179)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:180)(cid:3)(cid:69)(cid:72)(cid:74)(cid:76)(cid:81)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:81)(cid:3)(cid:83)(cid:68)(cid:74)(cid:72)(cid:3)31.
John R. Anderson III, Senior Vice President, Interim Principal Financial and Accounting
Officer, of Peoples Security Bank and Trust Company, age 50. Mr. Anderson was appointed to his
current position in April 2016. Prior to that, he served as Senior Vice President/Planning and Statistical
Analyst of Peoples Security Bank and Trust Company. Prior to that he was Vice President/Planning and
-23-
Statistical Analyst, of Penn Security Bank and Trust Company since 2008. Prior to that he was Assistant
Vice President/Financial Reporting Officer at Penn Security Bank since 2002.
Debra E. Dissinger, Executive Vice President, Chief Operations Officer and Secretary of Peoples
Security Bank and Trust Company, age 62. Ms. Dissinger has served in various roles, most recently as
Executive Vice President, Chief Operations Officer, and Chief Risk Officer, of Peoples Neighborhood
Bank and Trust Company since 1990.
Joseph M. Ferretti, Executive Vice President and Senior Lending Officer, age 47. Mr. Ferretti
was appointed to his current position in December 2013. Prior to that, he served as Executive Vice
President/Chief Lending Officer of Peoples Neighborhood Bank and Trust Company and Senior Vice
President/Chief Credit Officer of Peoples Neighborhood Bank and Trust Company since 1997.
Michael L. Jake, Executive Vice President and Chief Risk Officer, age 64. Mr. Jake was
appointed to his current position in connection with the Penseco merger in November 2013. Prior to that,
he was Senior Vice President, Chief Risk Officer, of Penn Security Bank and Trust Company since April
2009. Prior to that, he was Chief Financial Officer at Old Forge Bank since 1994. Prior to 1994 Mr. Jake
was the Northeastern Pennsylvania Region Audit Manager for Mellon Bank and PNC Bank.
Timothy H. Kirtley, Executive Vice President and Chief Credit Officer, age 46. Mr. Kirtley was
appointed to his current position in July, 2016. Prior to joining Peoples Security Bank and Trust
Company, he served as Executive Vice President and Chief Credit Officer of Peoples Bank, Marietta,
Ohio from 2011 to 2016. From 2009 to 2011, Mr. Kirtley served as Executive Vice President, Chief
Credit Officer of Delaware County Bank & Trust Co., in Lewis Center, Ohio. From 2007 to 2009, he
served as Vice President, Regional Credit Officer, Commercial Real Estate for Fifth Third Bank in
Columbus, Ohio. From 1992 to 2007, Mr. Kirtley served in various commercial banking and credit risk
management capacities, the most recent of which was Vice President, Regional Credit Officer,
Community Banking from 2002 to 2007 for U.S. Bank, N.A. in Columbus, Ohio.
Neal D. Koplin, Executive Vice President and Lehigh Valley Division Head, age 56. Mr. Koplin
was appointed to his current position in August 2014. He served as Senior Vice President and Northern
Region Manager of National (cid:51)(cid:72)(cid:81)(cid:81)(cid:3) (cid:37)(cid:68)(cid:81)(cid:78)(cid:182)(cid:86)(cid:3) (cid:38)(cid:82)(cid:80)(cid:80)(cid:72)(cid:85)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:53)(cid:72)(cid:68)(cid:79)(cid:3) (cid:40)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3) (cid:47)(cid:72)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3) (cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:21)(cid:19)(cid:19)(cid:23)(cid:3) (cid:88)(cid:81)(cid:87)(cid:76)(cid:79)(cid:3)
joining Peoples Security Bank. He was with National Penn Bank in various executive positions from
1982 until 2004.
Lynn M. Thiel, Executive Vice President and Chief Retail Officer, age 56. Ms. Thiel was
appointed to her current position in connection with the Penseco merger in November 2013. Prior to that
she was Executive Vice President, Retail Banking Division Head, of Penn Security Bank and Trust
Company since June 2012. Prior to that, she served as Senior Vice President, Planning & Development
Division Head between 2006 and 2012; and as Vice President & Compliance Officer between 2000 and
2006.
Thomas P. Tulaney, Executive Vice President and Chief Lending Officer, age 57. Mr. Tulaney
was appointed to his current position in connection with the Penseco merger in November 2013, and held
the same position with Penseco since March 20, 2012. He joined Penn Security Bank and Trust Company
in April 2011 as Executive Vice President and Deputy Chief Lending Officer. Before that, Mr. Tulaney
was a Senior Executive Vice President and the Corporate Sales Division Manager of First National
Community Bank, a position he held since 2008, when he was promoted from Executive Vice President.
He was an employee of First National Community Bank from 1994 to 2011. Prior to 1994 Mr. Tulaney
was a Senior Vice President of Third National Bank a division of Independence Bank Corp and a
Regional Vice President of PNC Bank.
-24-
Bradley S. Grubb, Executive Vice President and Wealth Management Division President, age 55.
Mr. Grubb was appointed to his current position in February 2015. He served as Managing Director of
Manarin Investment Counsel, Ltd., Omaha NE from March 2014 until joining Peoples Security Bank.
Before that he was President of Carson Wealth Management Group, Omaha, NE from 2010 to 2014. Prior
to that, he was President/CEO of BancWest Investment Services from 2003 to 2010. Prior to that, he was
with CitiGroup (Citibank/Travelers Life & Annuity Company) as Group Financial Executive Vice
President and National Sales Manager, respectively, from 1998 to 2003. Prior to 2003 Mr. Grubb was a
Senior Vice President Managing Director of INVEST Financial Corporation / Kemper Financial
Institutions Group.
Compensation Discussion and Analysis
Overview of Objectives
The executive compensation program of Peoples is designed to provide a competitive base salary
as well as to provide certain incentives to our named executive officers to effectively lead and manage the
Company and its growth strategy. Decisions regarding executive compensation are determined by the
compensation committee. In accordance with the compensation committee charter, the committee may
refer any matter that it has the authority to approve, together wi(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)
recommendation, to the full board for approval, unless such matter is required to be approved by an
independent compensation committee by applicable law, regulation or listing standard.
The compensation program is designed to support annual and long-term Company goals that
create sustainable profitable growth while providing long-term value to our shareholders. The objectives
of our executive compensation programs are to:
(cid:135)
(cid:135)
(cid:135)
attract, motivate and retain highly qualified executives;
link total compensation to both individual performance and the performance of the bank
and holding company; and
appropriately balance short-term and long-term financial objectives, build shareholder
value and reward individual, team and company performances.
We seek to pay for superior performance, both in achieving short-term goals and continuing to
build a growing and sustainable financial institution on a long-term basis.
During the year ended December 31, 2016, we compensated our named executive officers,
identified below, with a combination of base salary, performance-based cash incentive awards,
discretionary bonus payments, equity compensation through the employee stock ownership plan, or
(cid:179)ESOP,(cid:180) and benefit plans and perquisites which the compensation committee believed were comparable
to other financial institutions of similar size in our region. While our compensation program is comprised
of all of the aforementioned primary elements, the performance-based cash incentive awards are intended
to constitute a meaningful portion of the total potential compensation for our named executive officers.
Benchmarking
Periodically, the compensation committee compares our senior management compensation levels
with comparable levels in industry benchmark studies and peer group data to gain a general knowledge of
compensation programs in the industry. To do so, we participate in a survey provided by L.R. Webber
Associates that benchmarks salary and benefits from Pennsylvania financial institutions who participate in
the survey. The survey includes general compensation information and ranges for executives. The results
are reported by bank asset size and geographic region. We use the survey data to compare the base
-25-
salaries of our named executive positions to the range reported for those positions at other banking
institutions with total asset size and geography similar to ours to determine whether we are compensating
our named executive officers within the industry standard range.
During 2016, the compensation committee engaged Meridian Compensation Partners, LLC to
analyze and review compensation of our executive officers. As further described below under the
(cid:75)(cid:72)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:82)(cid:81)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:85)(cid:82)(cid:74)(cid:85)(cid:68)(cid:80)(cid:15)(cid:180)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:71)ata
from the consultant (cid:87)(cid:82)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:3)(cid:71)(cid:72)(cid:70)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:51)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:86)(cid:182)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:85)(cid:68)(cid:70)(cid:87)(cid:76)(cid:70)(cid:72)(cid:86)(cid:17)
The compensation committee also considers salary levels for comparable positions in industries
other than the financial services industry.
Components of the Compensation Program
During 2016, our executive compensation program included three key elements: base salary,
annual cash incentives and benefit plans. At the end of 2016, our compensation committee determined to
increase the use of equity incentive awards in our executive compensation program in 2017 and future
(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:17)(cid:3)(cid:3)(cid:54)(cid:72)(cid:72)(cid:3)(cid:179)(cid:51)(cid:85)(cid:82)(cid:83)(cid:82)(cid:86)(cid:68)(cid:79)(cid:3)(cid:22)(cid:3)(cid:177) (cid:55)(cid:82)(cid:3)(cid:36)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:51)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:17)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:180)(cid:3)
beginning on page 9.
Base Salary
Base salary is the basic element of our executive compensation program and the foundation for
setting incentive compensation target awards. The compensation committee determines the range of base
salary to offer to a new executive by evaluating the duties, complexities and responsibilities of the
respective position; the level of experience required, and the compensation payable for positions having
similar scope and accountability as our peer group of banks. In years prior to 2016, the compensation
committee referred to a peer group of banks and set base salary compensation between 83 and 106
percent of the median salary for comparable positions within the peer group.
For 2016, our compensation committee reviewed (cid:72)(cid:68)(cid:70)(cid:75)(cid:3) (cid:81)(cid:68)(cid:80)(cid:72)(cid:71)(cid:3) (cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3) (cid:76)(cid:81)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:88)(cid:68)(cid:79)(cid:3)
performance, length and nature of experience and competency, and the potential for advancement in
determining the amount of pay adjustments to recommend to the board of directors. In connection with
such review, the base compensation for Craig W. Best remained at $400,000; Thomas P. Tulaney was
increased from $235,000 to $247,000; and Neal D. Koplin was increased from $195,000 to $200,000 for
2016. Mr. Grubb remained at a salary of $275,000. The company has been conducting a search for a
chief financial officer. Since April 8, 2016, Mr. Anderson has served in an interim capacity as principal
financial officer and principal accounting officer. During his interim service, Mr. Anderson has received
his annual base salary of $82,400, plus an additional $5,000 per month.
Annual Cash Incentives
We maintain an annual cash incentive plan (the (cid:179)(cid:38)(cid:68)(cid:86)(cid:75)(cid:3) (cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:51)(cid:79)(cid:68)(cid:81)(cid:180)(cid:12) pursuant to which our
named executive officers have the opportunity to earn performance-based incentive payments. Incentive
(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:68)(cid:86)(cid:75)(cid:3)(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:3)(cid:85)(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:68)(cid:87)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:180)(cid:3)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:182)(cid:86)(cid:3)(cid:83)(cid:68)(cid:92)(cid:3)(cid:86)ubject
to the achievement of performance goals. Annually, the compensation committee sets goals for the named
executive officers to achieve in order to qualify for a cash incentive payment under the Cash Incentive
Plan.
-26-
Cash Incentive Plan
The following table provides information concerning the Cash Incentive Plan awards to our
named executive officers during the year ended December 31, 2016:
Named Executive Officer
Craig W. Best
Thomas P. Tulaney
Bradley S. Grubb
Neal D. Koplin
Target/Maximum
Cash Incentive Plan
Payment
(% of base salary)
35%
30%
30%
25%
Target/Maximum
Cash Incentive Plan
Payment
($)
140,000
74,100
82,500
50,000
The Cash Incentive Plan rewards the attainment of company-wide performance goals, including
growth in assets, loans, deposits, revenues and earnings per share, efficiency and asset quality, as well as
individual performance goals. Our objective is to drive superior annual performance at both the company
and individual levels. Performance goals for our Chief Executive Officer are set solely by the
compensation committee, and performance goals for our other named executive officers are typically set
upon the recommendation of our Chief Executive Officer. Performance goals are typically communicated
to officers during the first quarter of the year, and achievement of goals is evaluated by the compensation
committee after year-end. The following table sets forth the 2016 company performance goals, actual
performance and achievement of company performance goals.
Performance Measure
EPS Growth ($)
Revenue Growth ($000)
Expense to Asset Ratio (%)
Loan Growth ($000)
Deposit Growth ($000)
Asset Growth ($000)
Asset quality
Non-performing loans/Avg. loans
+OREO (%)
Net charge-offs/average loans (%)
Total
2016
Performance
Goal
2.61
70,164
2.37
1,457,541
1,507,229
1,928,706
.91
.20
2016
Actual
Performance
2.65
72,671
2.40
1,532,986
1,588,757
1,999,653
.93
.14
Weighting of
Goal (% of
Total Potential
Payment)
35
10
10
10
10
10
7.5
7.5
100
Earned
35
10
(cid:177)
10
10
10
10
(cid:177)
7.5
82.5
Additional details regarding the Cash Incentive Plan awards are included in the 2016 Summary
Compensation and Grants of Plan-Based Awards tables and the accompany narrative disclosure beginning
on page 31.
Clawback Agreements
Pursuant to the terms of the Cash Incentive Plan, all executives are subject to a clawback
provision. The clawback provision allows us to recover any overpayment under the Cash Incentive Plan
in the event that we are required to restate our financial statements because of any material
noncompliance with a financial reporting requirement. If within the previous three years a participant
received an award based upon erroneous data, the participant is required to return any amount received in
excess of what would have been paid to the participant under the accounting restatement. In the event
(cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:85)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3) (cid:71)(cid:88)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3) (cid:68)(cid:3) (cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:80)(cid:76)(cid:86)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:3) (cid:82)(cid:85)(cid:3) (cid:73)(cid:85)(cid:68)(cid:88)(cid:71)(cid:88)(cid:79)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3)
-27-
required to return the entire amount received based upon the erroneous data. Mr. Best has a substantially
similar provision included in his employment agreement. In addition, in December 2016, we adopted a
new compensation recoupment policy effective January 1, 2017, which applies to all executive officers
who receive cash or equity incentive awards.
Long-Term Incentive Compensation
We maintain the 2008 Long-Term Incentive Plan, which we assumed in the Penseco merger, and
pursuant to which the compensation committee may grant equity awards. Under appropriate
circumstances, we believe that equity incentives and stock-based awards may help to focus employees on
the long-term objectives of building additional shareholder value and promoting our success, will align
(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:182)(cid:3) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:86). No awards were made under the 2008 Long-Term
Incentive Plan in 2016. At the end of 2016, our compensation committee determined to increase the use
of equity incentive awards in our executive compensation program in 2017 and future years. See
(cid:179)(cid:51)(cid:85)(cid:82)(cid:83)(cid:82)(cid:86)(cid:68)(cid:79)(cid:3)(cid:22)(cid:3)(cid:177) (cid:55)(cid:82)(cid:3)(cid:36)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:51)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:17)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:180)(cid:3)(cid:69)(cid:72)(cid:74)(cid:76)(cid:81)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)
on page 9.
Benefits
ESOPs. We (cid:80)(cid:68)(cid:76)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:179)ESOP(cid:15)(cid:180) as a long-term incentive to
focus executives on long-term value creation and to provide balance to the annual Cash Incentive Plan.
The ESOP covers substantially all employees who meet the eligibility requirements and is intended to
incentivize and reward all employees, including the named executive officers, based upon our long-term
success as measured by shareholder return.
401(k) Plans. We maintain a profit sharing plan, the Peoples Security 401(k) Plan, under the
provisions of Section 401(k) of the Internal Revenue Code in an effort to provide employees with a means
by which they can save for retirement and also to provide tax-deferred compensation, not to exceed the
amount allowed under the Internal Revenue Code, as amended, referred to as the (cid:179)Code,(cid:180) as a reward for
saving for retirement. All named executive officers participate in the Peoples Security 401(k) Plan on the
same basis as other employees participating in the plan.
Pension Plan. The Company also maintains the (cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:182)(cid:3) (cid:51)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3) (cid:51)(cid:79)(cid:68)(cid:81), a legacy defined
benefit pension plan assumed in connection with the Penseco merger, which was amended in June 2008
to cease benefit accruals.
Health and Welfare Benefits(cid:17)(cid:3) (cid:49)(cid:68)(cid:80)(cid:72)(cid:71)(cid:3) (cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:3) (cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:72)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)
benefit plans on the same terms as other employees. These plans include medical, dental, vision,
disability, life insurance and flex spending account benefits and are standard in the industry.
Supplemental Employee Retirement Plan. Peoples maintains a supplemental employee retirement
(cid:83)(cid:79)(cid:68)(cid:81)(cid:3)(cid:11)(cid:179)(cid:54)(cid:40)(cid:53)(cid:51)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92), which is intended to retain his services. Under the SERP, Mr. Tulaney
is eligible to receive certain retirement benefits that accrue based on his service to the Company and are
payable at retirement, or earlier under a qualifying termination of employment. See additional discussion
below un(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:75)(cid:72)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:179)(cid:51)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:37)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:86)(cid:17)(cid:180)
Deferred Compensation Plans. We also maintain the (cid:179)Deferred Compensation Plan No. (cid:20)(cid:180) and
(cid:179)Deferred Compensation Plan No. 2(cid:180) under which we make certain contributions for Mr. Best in
accordance with his employment agreement. See additional discussion below under the heading (cid:179)(cid:49)(cid:82)(cid:81)-
(cid:52)(cid:88)(cid:68)(cid:79)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:180)
-28-
Chief Executive Officer Retirement Benefits. We provide our Chief Executive Officer with
certain retirement benefits under an Excess Benefit Plan formerly maintained by Penseco which was
assumed in connection with the Penseco merger. This plan provides Mr. Best with additional benefits in
excess of those accrued under the Peoples Security 401(k) Plan due to the limit on compensation
contained in Section 401(a)(17) of the Code. See additional discussion below under the heading (cid:179)(cid:49)(cid:82)(cid:81)-
(cid:52)(cid:88)(cid:68)(cid:79)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:180)
Split Dollar Insurance Agreements. We provide split-dollar life insurance to Mr. Best. See
(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:75)(cid:72)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:179)(cid:38)(cid:85)(cid:68)(cid:76)(cid:74)(cid:3)(cid:58)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:3)Employment Agreement.(cid:180)
Perquisites
The compensation committee regularly reviews our executive perquisites and believes they are
appropriate and modest when compared to peers and are necessary to attract and retain high-caliber talent.
We provide a vehicle allowance to all named executive officers as they are required to entertain business
clients or otherwise travel in connection with their duties. The compensation committee also believes that
country clubs can serve as appropriate forums for building client relationships and for community
interaction. We reimburse monthly membership expenses for Mr. Tulaney based on demonstrable
business requirements, which are approved monthly and reviewed annually. Additionally, we reimburse
Messrs. Best, Koplin, Tulaney and Grubb for the cost of country and dining club memberships.
The Role of Management in Determining Compensation
For 2016, our compensation committee set performance goals, including company-wide
performance goals under the Cash Incentive Plan. The compensation committee did not set additional
individual performance goals for the Chief Executive Officer, believing that the Chief Executive Officer
should be evaluated on the basis of company performance. Individual performance goals for our other
named executive officers were set upon the recommendation of our Chief Executive Officer. Our Chief
Executive Officer reviewed each of the other named executive officer(cid:182)s annual performance, discusses the
performance review with the compensation committee, and makes recommendations the compensation
committee with respect to the compensation of the other named executive officers. Our Chief Executive
Officer does not participate in discussions on his own compensation.
The Role of the Compensation Committee
In accordance with the compensation committee charter, among other things, the compensation
(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:68)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:81)(cid:68)(cid:80)(cid:72)(cid:71)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
incentive opportunities, the administration of our benefit plans, and the recommendation to our board of
directors of new compensation programs or changes in existing compensation programs. The committee
(cid:80)(cid:68)(cid:92)(cid:3) (cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3) (cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:76)(cid:87)(cid:3) (cid:75)(cid:68)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:88)(cid:87)(cid:75)(cid:82)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3) (cid:87)(cid:82)(cid:3) (cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:15)(cid:3) (cid:87)(cid:82)(cid:74)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)
recommendation, to the full board for approval, unless such matter is required to be approved by an
independent compensation committee by applicable law, regulation or listing standard. As a matter of
practice, the committee routinely refers key items pertaining to executive compensation, such as base
salary increases, the size and performance targets associated with awards under the Cash Incentive Plan,
and the offering of special retirement agreements, to the board with recommendation of the committee.
Operating within the framework of duties and responsibilities established by the board, the
(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3) (cid:85)(cid:82)(cid:79)(cid:72)(cid:3) (cid:76)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:68)(cid:86)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3) our compensation strategy is aligned with the long-term
interests of the shareholders and members; our compensation structure is fair and reasonable; and
compensation reflects both corporate and individual performance.
-29-
Compensation Committee Consultants
(cid:55)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3) (cid:70)(cid:75)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:86)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3) (cid:86)(cid:75)(cid:68)(cid:79)(cid:79)(cid:3) (cid:69)(cid:72)(cid:3)
directly responsible for the appointment, compensation and oversight of the work of any compensation
consultant, legal counsel and other adviser retained by the compensation committee. The Company must
provide for appropriate funding, as determined by the compensation committee, for payment of
reasonable compensation to a compensation consultant, legal counsel or any other adviser retained by the
compensation committee. Prior to engaging any compensation consultant, legal counsel or other adviser
(other than in-house legal counsel), the compensation committee must conduct an independence
assessment with respect to such adviser.
For 2016, the compensation committee did not engage a compensation consultant to review
director compensation.
Accounting and Tax Treatments
All elements of compensation generate charges to earnings under generally accepted accounting
principles (GAAP). Generally, no adjustment is made to compensation based on accounting factors, but
the tax effects of various types of compensation are considered.
Company Stock Ownership
We believe that it is important that our named executive officers and directors own shares of our
common stock. In December 2016, we adopted a share ownership policy to be effective January 1, 2017,
and which is applicable to our executive officers and directors. Under the terms of the policy, executive
officers who receive equity incentive awards are expected to beneficially own shares of our common
stock having a fair market value equal to or greater than twice their respective annual base salaries, and
have five years to achieve compliance. In addition, under the terms of Mr. Best(cid:182)(cid:86)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)
his failure to own shares of our common stock having a fair market value equal to or greater than his
annual base salary (cid:90)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:69)(cid:72)(cid:3)(cid:179)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:180)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)
Severance and Change in Control Benefits
We recognize that an important consideration in our ability to attract, retain and motivate key
personnel is our ability to minimize the impact on our management team of the possible disruption
associated with our exploration of strategic opportunities. Accordingly, we believe that it is in our best
interest and the best interest of our shareholders to provide our key personnel with reasonable financial
arrangements in the event of termination of employment following a change in control or involuntary
termination of employment for reasons other than (cid:179)cause(cid:180) so that they are able to focus fully on the merits
of any potential change in control situation without undue concern for the loss of their jobs. All of our
named executive officers with employment agreements have provisions in their respective agreements
that provide for certain benefits in the event of voluntary or involuntary termination following a change in
control transaction. These provisions, along with certain benefits estimates, are described under the
heading (cid:179)Other Potential Post-Termination Benefits(cid:180) below and under the headings (cid:179)Craig W. Best
Employment Agreement,(cid:180) (cid:179)(cid:55)(cid:75)(cid:82)(cid:80)(cid:68)(cid:86)(cid:3) (cid:51)(cid:17)(cid:3) (cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:3) (cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:15)(cid:3) (cid:179)(cid:37)(cid:85)(cid:68)(cid:71)(cid:79)(cid:72)(cid:92)(cid:3) (cid:54). Grubb
(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:3)and (cid:179)Neal D. Koplin Employment Agreement.(cid:180) Mr. Anderson, who is serving
as our principal financial officer on an interim basis, does not have an employment agreement but is
covered by a severance policy applicable to our employees generally.
Many of the plans that we maintain and in which our named executive officers participate include
provisions which accelerate vesting or payment of benefits upon a change in control and are described
under the heading (cid:179)Other Potential Post-Termination Benefits(cid:180) below.
-30-
Executive Compensation
Our principal executive officer is Craig W. Best, Chief Executive Officer and President and John
R. Anderson III, Senior Vice President, is serving as Interim Principal Financial and Accounting Officer.
Scott A. Seasock is our former principal financial officer, having served in that role until April 8, 2016.
Messrs. Best, Anderson and Seasock, together with Neal D. Koplin, Thomas P. Tulaney and Bradley S.
Grubb, are referred to as our (cid:179)named executive officers.(cid:180) The following tables and narratives set forth
certain information regarding the compensation of our named executive officers.
2016 Summary Compensation Table
Change in
Pension Value
and
Nonqualified
Deferred
Non-Equity
Incentive Plan Compensation
Compensation
($)
115,500
40,000
(cid:177)
Earnings
($)
128,298
112,209
76,699
All Other
Compensation
($)
26,8361
29,225
29,479
Total
($)
695,634
581,434
428,464
468,680
445,154
422,227
288,032
294,639
203,000
37,0702
44,046
45,502
35,7523
15,139
3,000
35,2814
9,166
385,281
430,945
421,0745
24,190
23,875
519,320
230,190
223,731
1,649
9,6166
164,165
65,000
32,075
(cid:177)
43,875
31,687
(cid:177)
_
(cid:177)
(cid:177)
(cid:177)
(cid:177)
(cid:177)
114,610
109,033
103,725
(cid:177)
(cid:177)
(cid:177)
(cid:177)
(cid:177)
(cid:177)
(cid:177)
(cid:177)
Name and Principal Position
Craig W. Best
Chief Executive Officer
and President
Thomas P. Tulaney
Executive Vice President and
Chief Lending Officer
Neal D. Koplin
Executive Vice President and
Lehigh Valley Division
President
Bradley S. Grubb
Executive Vice President and
Wealth Management Division
President
Year
2016
2015
2014
2016
2015
2014
2016
2015
2014
Salary
($)
425,000
400,000
247,286
247,000
235,000
210,000
200,000
195,000
175,000
Bonus
($)
(cid:177)
(cid:177)
75,000
5,000
25,000
63,000
42,400
52,813
25,000
2016
2015
275,000
246,779
75,000
175,000
Scott A. Seasock
Former Principal Financial
Officer
2016
2015
2014
98,246
200,000
166,256
(cid:177)
6,000
33,600
John R. Anderson III
Senior Vice President, Interim
Principal Financial and
Accounting Officer
2016
127,900
25,000
(1) For 2016, includes 401(k) plan safe harbor contribution of $7,950; 401(k) match $5,538; ESOP $2,650; country club $7,486;
automobile allowance $2,625; and life insurance $587.
(2) For 2016, includes country club membership $11,320; automobile allowance $7,200; 401(k) Safe Harbor $7,950; 401(k)
match $7,950; ESOP $2,650.
(3) For 2016, includes country club membership $8,802; automobile allowance $9,000; 401(k) safe harbor $7,950; 401(k)
match $7,350; ESOP $2,650.
(4) For 2016, includes country club membership $7,030; automobile allowance $10,000; 401(k) safe harbor $6,044; 401(k)
match $5,399; ESOP $2,650.
(5) For 2016, includes automobile allowance $3,000; 401(k) safe harbor $3,127; 401(k) match $2,947; and severance $412,000.
(6) For 2016, includes 401(k) plan safe harbor contribution of $4,148; 401(k) match $4,142; and ESOP $1,236.
-31-
The following table provides information concerning grants of plan-based awards made to our
named executive officers during the year ended December 31, 2016.
Grants of Plan-Based Awards
Name
Craig W. Best
Neal D. Koplin
Thomas P. Tulaney
Bradley S. Grubb
Grant Date
March 17, 2016
March 17, 2016
March 17, 2016
March 17, 2016
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
Target
($)
140,000
50,000
74,100
82,500
Maximum
($)
140,000
50,000
74,100
82,500
Threshold
($)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
The table above includes the fiscal 2016 threshold, target and maximum payouts designated under
our Cash Incentive Plan. The target and maximum payouts for Messrs. Koplin, Tulaney and Grubb were
determined as a percentage of their base salaries in accordance with their respective employment
agreements. The target and maximum payout for Mr. Best was set by the compensation committee at 35
percent (cid:82)(cid:73)(cid:3) (cid:75)(cid:76)(cid:86)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:3) (cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:17)(cid:3) (cid:3) (cid:36)(cid:86)(cid:3) (cid:71)(cid:72)(cid:86)(cid:70)(cid:85)(cid:76)(cid:69)(cid:72)(cid:71)(cid:3) (cid:68)(cid:69)(cid:82)(cid:89)(cid:72)(cid:3) (cid:76)(cid:81)(cid:3) (cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:15)(cid:180)(cid:3) (cid:69)ased on
2016 company performance, 82.5 percent of the incentive payments based on company performance
goals were earned under the Cash Incentive Plan. Mr. Anderson did not receive a 2016 award under the
Cash Incentive Plan, but did receive a discretionary bonus for his performance as interim principal
financial and accounting officer. Pursuant to his employment agreement, Mr. Grubb received an amount
to provide minimum cash compensation of $350,000. Mr. Tulaney received an incentive bonus of
$65,000 and a discretionary bonus of $5,000. Mr. Koplin received an incentive bonus of $43,875 along
with a discretionary bonus of $8,400 and a cash contingent bonus of $34,000 on April 15, 2016 in
accordance with his employment agreement. Mr. Grubb received a cash contingent bonus of $75,000 in
accordance with his employment agreement.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
We are a party to employment agreements with certain of our named executive officers. These
agreements are described below under the headings, (cid:179)Craig W. Best Employment Agreement,(cid:180)(cid:3)(cid:179)(cid:55)(cid:75)(cid:82)(cid:80)(cid:68)(cid:86)(cid:3)
(cid:51)(cid:17)(cid:3)(cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:3)(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:15) (cid:179)Neal D. Koplin Employment Agreement(cid:180) (cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:37)(cid:85)(cid:68)(cid:71)(cid:79)(cid:72)(cid:92)(cid:3)(cid:54)(cid:17)(cid:3)(cid:42)(cid:85)(cid:88)(cid:69)(cid:69)
Employment Agreement.(cid:180) The employment agreements control many aspects of the compensation of our
named executive officers.
Craig W. Best Employment Agreement
We are party to an amended and restated employment agreement with our President and Chief
Executive Officer, Craig W. Best dated January 3, 2011, as amended as of December 31, 2016 (the (cid:179)Best
Employment Agreement(cid:180)(cid:12)(cid:17)
The Best Employment Agreement provided for an initial annual base salary of $247,286, which is
subject to annual review by the compensation committee. In 2016, the compensation committee,
(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:7)(cid:23)(cid:19)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:17)(cid:3)(cid:3)(cid:44)(cid:81)(cid:3)the event of an across-the-board salary reduction
(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:71)(cid:72)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:17)
The Best Employment Agreement also provides that Mr. Best will be eligible to:
(cid:135)
(cid:135)
(cid:135)
receive an annual cash incentive payment equal to a percentage of his base salary, which
percentage will be determined by the compensation committee from time to time;
participate in certain deferred compensation plans maintained by the Company; and
participate in our long-term incentive equity-based compensation plans.
-32-
Under the Best Employment Agreement, the Company agreed to purchase and maintain a term
life insurance policy with a death benefit of $500,000 (cid:83)(cid:68)(cid:92)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:68)(cid:87)(cid:75)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)
agrees to provide Mr. Best with the use of an automobile, along with reasonable insurance and
maintenance costs, as well as reimbursement for country and dining club memberships and reasonable
business expenses.
The Best Employment Agreement provides that any (cid:179)excess annual incentive cash payments(cid:180) and
(cid:179)excess long-term incentive awards(cid:180) (each as defined in the Best Employment Agreement) paid to Mr.
Best are subject to clawback provisions in the incentive plans pursuant to which the board of directors
(cid:80)(cid:68)(cid:92)(cid:3) (cid:85)(cid:72)(cid:84)(cid:88)(cid:72)(cid:86)(cid:87)(cid:3) (cid:85)(cid:72)(cid:76)(cid:80)(cid:69)(cid:88)(cid:85)(cid:86)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:86)(cid:88)(cid:70)(cid:75)(cid:3) (cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:37)(cid:68)(cid:81)(cid:78)(cid:182)(cid:86)(cid:3) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)
statements are the subject of a restatement that is required by applicable law.
(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:3)(cid:179)at will(cid:180) basis, and each of the Company, the Bank and Mr. Best
(cid:80)(cid:68)(cid:92)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:87)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:3)(cid:11)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:85)(cid:76)(cid:74)(cid:75)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)
(cid:68)(cid:81)(cid:92)(cid:3) (cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:12)(cid:17)(cid:3) (cid:56)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:3) (cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)
employment is terminated involuntarily without (cid:179)Cause(cid:180) (as defined in the Best Employment Agreement)
or voluntarily for (cid:179)Good Reason(cid:180) (as defined in the Best Employment Agreement), the Company and the
Bank are obligated to, among other things, make monthly payments to Mr. Best for two (2) years
(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:72)(cid:84)(cid:88)(cid:68)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:88)(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:20)(cid:18)(cid:20)(cid:21)(cid:87)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:3)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
and 1/12th of the bonus payment that Mr. Best was then eligible to receive, make monthly payments
equal to the amount of the COBRA continuation premium for a period of two (2) years following
(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:83)(cid:68)(cid:92)(cid:3) (cid:88)(cid:83)(cid:3) (cid:87)(cid:82)(cid:3) (cid:7)(cid:22)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:3) (cid:87)(cid:82)(cid:3) (cid:68)(cid:81)(cid:3) (cid:82)(cid:88)(cid:87)(cid:83)(cid:79)(cid:68)(cid:70)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:73)(cid:76)(cid:85)(cid:80)(cid:3) (cid:82)(cid:73)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3) (cid:70)(cid:75)(cid:82)(cid:76)(cid:70)(cid:72)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:82)(cid:88)(cid:87)(cid:83)(cid:79)(cid:68)(cid:70)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)
(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:17)(cid:3) (cid:3) (cid:44)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3) (cid:179)(cid:38)(cid:68)(cid:88)(cid:86)(cid:72)(cid:180)(cid:3) (cid:82)(cid:85)(cid:3) (cid:85)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:86) (cid:73)(cid:82)(cid:85)(cid:3) (cid:179)(cid:42)(cid:82)(cid:82)(cid:71)(cid:3) (cid:53)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:180)(cid:3) (cid:76)(cid:81)(cid:3)
(cid:70)(cid:82)(cid:81)(cid:81)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:68)(cid:3) (cid:179)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:180)(cid:3) (cid:11)(cid:68)(cid:86)(cid:3) (cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:3) (cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:12)(cid:15)(cid:3) (cid:75)(cid:72)(cid:3) (cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:69)(cid:72)(cid:3)
entitled to the salary and bonus payments described above for a period of three (3) years following
termination (in lieu of two (2) years) and monthly payments equal to the amount of the COBRA
(cid:179)applicable premium(cid:180) for a period of three (3) years following termination (in lieu of two (2) years).
Payment of severance under the Best Employment Agreement is in each case contingent upon Mr. Best(cid:182)(cid:86)(cid:3)
execution and delivery of a release agreement to the Company and the Bank.
The Best Employment Agreement contains customary confidentiality and restrictive covenant
provisions. For a period of 12 months following termination of employment for any reason, Mr. Best has
agreed that he will not: (1) solicit customers, potential customers or suppliers for or on behalf of a
competing business (as defined under the Best Employment Agreement); (2) recruit employees of the
Bank or Company for a competing business; or (3) serve as a director, officer, employee or investor in a
competing business.
Thomas P. Tulaney Employment Agreement
We are party to an employment agreement with our Executive Vice President, Chief Lending
Officer and Head of the Corporate Lending Division, Thomas P. Tulaney, dated May 30, 2012 (the
(cid:179)Tulaney (cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:12)(cid:17) The initial term of the Tulaney Employment Agreement will end on
May 29, 2016. Such term will renew automatically for subsequent one-year terms unless either party
terminates the agreement earlier in accordance with the provisions of the Tulaney Employment
Agreement.
The Tulaney Employment Agreement provided for an initial annual base salary of $210,000,
which is subject to annual review by the compensation committee. In 2016, the compensation committee
(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:182)(cid:86)(cid:3) (cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:3) (cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:3) (cid:87)(cid:82)(cid:3) (cid:7)(cid:21)47,000. In the event of an across-the-board salary
(cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:15)(cid:3) we (cid:80)(cid:68)(cid:92)(cid:3)(cid:71)(cid:72)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:182)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3)
salary. The Tulaney Employment Agreement also provides that Mr. Tulaney will be eligible to:
-33-
(cid:135)
(cid:135)
(cid:135)
receive an annual cash incentive payment targeted at 30 percent of his base salary, with
the actual payment based on achievement of corporate and individual performance goals,
as determined by the compensation committee from time to time;
participate in his SERP arrangement; and
participate in our long-term incentive equity-based compensation plans.
Under the Tulaney (cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:182)(cid:86)(cid:3) (cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3)
termi(cid:81)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3) (cid:179)(cid:38)(cid:68)(cid:88)(cid:86)(cid:72)(cid:180)(cid:3) (cid:11)(cid:68)(cid:86)(cid:3) (cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) Tulaney Employment Agreement), we are obligated to,
among other things, make monthly payments to Mr. Tulaney for one (1) year following the termination
equal to sum of 1/12th (cid:82)(cid:73)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:182)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:3)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72) of termination and 1/12th of the average
incentive payment that Mr. Tulaney had received in the immediately preceding three (3) years, and make
monthly COBRA continuation premium payments for eighteen (18) months. In the event that Mr.
Tulaney is terminated within two (2) years following a Change of Control (as defined in the Tulaney
Employment Agreement), he will be entitled to the salary and incentive payments described above for a
period of two (2) years following termination (in lieu of one (1) year) and COBRA continuation premium
payments for two (2) years (in lieu of eighteen (18) months). Payment of severance under the Tulaney
(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3) (cid:76)(cid:81)(cid:3) (cid:72)(cid:68)(cid:70)(cid:75)(cid:3) (cid:70)(cid:68)(cid:86)(cid:72)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3) (cid:88)(cid:83)(cid:82)(cid:81)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:182)(cid:86)(cid:3) (cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:3)
release agreement to the Company and the Bank.
The Tulaney Employment Agreement contains customary confidentiality and restrictive covenant
provisions. For a period of 12 months following termination of employment for any reason other than a
Change of Control (in which case the applicable period is 24 months), Mr. Tulaney has agreed that he will
not: (1) solicit customers, potential customers or suppliers for or on behalf of a competing business (as
defined under the agreement); (2) recruit employees of the Bank or Company for a competing business; or
(3) serve as a director, officer, employee or investor, or otherwise engage, in a completing business.
Neal D. Koplin Employment Agreement
We are party to an employment agreement dated August 27, 2014, with Neal D. Koplin, our
Executive V(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:47)(cid:72)(cid:75)(cid:76)(cid:74)(cid:75)(cid:3)(cid:57)(cid:68)(cid:79)(cid:79)(cid:72)(cid:92)(cid:3)(cid:39)(cid:76)(cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:43)(cid:72)(cid:68)(cid:71)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:3)(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:12)(cid:17)(cid:3)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)
initial term of the Koplin Employment Agreement will end on August 11, 2017. Such term will renew
automatically for subsequent one-year terms unless either party terminates the agreement earlier in
accordance with the provisions of the Koplin Employment Agreement.
The Koplin Employment Agreement provided for an initial annual base salary of $175,000,
which increased to $200,000 in 2016, and which is subject to annual review by the compensation
committee and potential increases. The Koplin Employment Agreement also provides that Mr. Koplin
will be eligible to:
(cid:120)
(cid:120)
receive an annual cash incentive payment targeted at 25 percent of his base salary, with
the actual payment based on achievement of corporate and individual performance goals,
as determined by the compensation committee from time to time;
receive additional bonus compensation of $39,500, $34,000, $20,000 and $10,000, on
April 15, 2015, 2016, 2017 and 2018, respectively (provided he remains employed); and
(cid:120) participate in our long-term incentive equity-based compensation plans.
Pursuant to his employment agreement, Mr. Koplin received a one-time signing bonus in the
amount of $25,000 in 2014.
Under the Koplin Employment (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:182)(cid:86)(cid:3) (cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3)
(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3) (cid:179)(cid:38)(cid:68)(cid:88)(cid:86)(cid:72)(cid:180)(cid:3) (cid:11)(cid:68)(cid:86)(cid:3) (cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:3) (cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:12)(cid:15)(cid:3) (cid:90)(cid:72)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:15)(cid:3)
-34-
among other things, make monthly payments to Mr. Koplin for one (1) year following the termination
equ(cid:68)(cid:79)(cid:3) (cid:87)(cid:82)(cid:3) (cid:20)(cid:18)(cid:20)(cid:21)(cid:87)(cid:75)(cid:3) (cid:82)(cid:73)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:182)(cid:86)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:3) (cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:3) (cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:87)(cid:76)(cid:80)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3) (cid:44)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:3) (cid:76)(cid:86)(cid:3)
terminated within 24 months following a Change of Control (as defined in the Koplin Employment
Agreement) or resigns for Good Reason (as defined in the Koplin Employment Agreement), he will be
entitled to the salary payments described above for a period of three (3) years following termination (in
lieu of one (1) year). Payment of severance under the Koplin Employment Agreement is in each case
contingent up(cid:82)(cid:81)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:182)(cid:86)(cid:3) (cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:3) (cid:85)(cid:72)(cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
Bank.
The Koplin Employment Agreement contains customary confidentiality and non-solicitation
provisions. For a period of 12 months following termination of employment for any reason other than a
Change of Control (in which case the applicable period is 36 months), Mr. Koplin has agreed that he will
not solicit customers, potential customers or suppliers for or on behalf of a competing business (as
defined under the agreement), and will not recruit employees of the Bank or Company for a competing
business.
The Company also agrees to provide Mr. Koplin with a monthly automobile allowance, as well as
reimbursement for a country club membership and reasonable business expenses.
Bradley S. Grubb Employment Agreement
We are party to an employment agreement dated February 4, 2015, with Bradley S. Grubb, our
Executive Vice President and Wealth Management Division Head (the (cid:179)(cid:42)(cid:85)(cid:88)(cid:69)(cid:69)(cid:3) Employment
Agreement(cid:180)). The initial term of the Grubb Employment Agreement will end on February 4, 2018. Such
term will renew automatically for subsequent one-year terms unless either party terminates the agreement
earlier in accordance with the provisions of the Grubb Employment Agreement.
The Grubb Employment Agreement provides for an initial annual base salary of $275,000, which
is subject to annual review by the compensation committee and, in the event of an across-the-board salary
reduction affecting all of the Company's management employees, we may decrease Mr. (cid:42)(cid:85)(cid:88)(cid:69)(cid:69)(cid:182)(cid:86)(cid:3) base
salary. The Grubb Employment Agreement also provides that Mr. Grubb will be eligible to:
(cid:135)
(cid:135)
(cid:135)
receive an annual cash incentive payment equal to a percentage of his salary, which
percentage will be determined by the compensation committee from time to time,
provided that the target percentage for 2015 and 2016 was thirty percent;
receive commissions equal to two percent of incremental gross revenue of our Wealth
Management Division and seven percent of the incremental net profit before tax of the
Wealth Management Division; and
participate in our long-term incentive equity-based compensation plans.
Pursuant to his employment agreement, Mr. Grubb received a one-time signing bonus in the
amount of $100,000 in 2015 and reimbursement of relocation expenses up to $75,000. For 2015 and
2016, his gross compensation from base salary, incentive payments and commissions, is guaranteed to be
no less than $350,000.
Under the Grubb Employment Agreement, in the event that Mr. (cid:42)(cid:85)(cid:88)(cid:69)(cid:69)(cid:182)(cid:86)(cid:3) employment is
term(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3) (cid:179)Cause(cid:180)(cid:3) (as defined in the Grubb Employment Agreement), we are obligated to,
among other things, make monthly payments to Mr. Grubb for one (1) year following the termination
equal to 1/12th of Mr. (cid:42)(cid:85)(cid:88)(cid:69)(cid:69)(cid:182)(cid:86)(cid:3) base salary at the time of termination. In the event that Mr. Grubb is
terminated within twelve (12) months following a Change of Control (as defined in the Grubb
Employment Agreement), he will be entitled to the salary payments described above for a period of two
-35-
(2) years following termination (in lieu of one (1) year). Payment of severance under the Grubb
Employment Agreement is in each case contingent upon Mr. (cid:42)(cid:85)(cid:88)(cid:69)(cid:69)(cid:182)(cid:86)(cid:3)execution and delivery of a release
agreement to the Company and the Bank.
The Grubb Employment Agreement contains customary confidentiality and restrictive covenant
provisions. For a period of 12 months following termination of employment for any reason other than a
Change of Control (in which case the applicable period is 24 months), Mr. Grubb has agreed that he will
not: (1) solicit customers, potential customers or suppliers for or on behalf of a competing business (as
defined under the agreement); (2) recruit employees of the Bank or Company for a competing business; or
(3) serve as a director, officer, employee or investor, or otherwise engage, in a completing business.
The Company also agrees to provide Mr. Grubb with a monthly automobile allowance, as well as
reimbursement for a country club membership and reasonable business expenses.
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information concerning equity awards outstanding as of December
31, 2016.
Name
Thomas P. Tulaney
Number of Shares or Units
of Stock That Have Not
Vested (#)(1)
10,542
1,820
Market Value of Shares or
Units of Stock That Have
Not Vested ($)(1)
513,395
88,634
(1) Represents restricted stock awards under the Penseco Financial Services Corporation 2008 Long-Term
Incentive Plan. Awards remain subject to a vesting period of five years from the date of grant. The
award for 10,542 shares to Mr. Tulaney is scheduled to vest on May 31, 2017, and the award for 1,820
shares to Mr. Tulaney will vest on March 8, 2018. Market value is based on a closing price of $48.70
per share of our common stock on December 30, 2016.
The following table sets forth information concerning our plans that provide for payments or
other benefits at, following, or in connection with, retirement for each of the named executive officers.
Pension Benefits
Number of
Years of
Credited
Service
(#)(1)
3
18
5
Present Value
of Accumulated
Benefit
($)(2)
81,779
60,055
489,147
Payment
During Last
Fiscal
Year ($)(3)
(cid:178)
(cid:178)
(cid:178)
Plan Name
Name
Craig W. Best
John R. Anderson III
Thomas P. Tulaney
(1) Represents the number of benefit years of service credited to the executive officer under the plan, computed as of the same
pension plan measurement date used for financial statement reporting p(cid:88)(cid:85)(cid:83)(cid:82)(cid:86)(cid:72)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)
financial statements for the last completed fiscal year. The Penseco (cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:182)(cid:3)(cid:51)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81) was frozen as of June 2008,
and no additional years of services are being credited under such plan.
(cid:51)(cid:72)(cid:81)(cid:86)(cid:72)(cid:70)(cid:82)(cid:3)(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:182)(cid:3)(cid:51)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)
(cid:51)(cid:72)(cid:81)(cid:86)(cid:72)(cid:70)(cid:82)(cid:3)(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:182)(cid:3)(cid:51)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)
Executive Supplemental Retirement Plan
(2) Reflects (cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:68)(cid:80)(cid:72)(cid:71)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:88)(cid:80)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:11)(cid:86)(cid:12)(cid:15)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:80)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:88)(cid:85)(cid:83)(cid:82)(cid:86)(cid:72)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)
statements for the last completed fiscal year.
(3) Represents the dollar amount of any payments and benefits paid to the named executive officer during the 2016 fiscal year.
The information in the foregoing table for Mr. Best includes information related to the Penseco
E(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:182)(cid:3)(cid:51)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81), a qualified defined benefit retirement plan. As of June 2008, no further benefits
are being accrued in this plan. The plan provided for fixed benefits payable for life upon retirement at the
-36-
age of 65, based on length of service and compensation levels as defined in the plan. The information in
the table has been determined using interest rate and mortality rate assumptions consistent with those used
(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:182)(cid:3)(cid:51)(cid:72)(cid:81)(cid:86)(cid:76)on Plan on the same
basis as all other former Penseco employees who were participants as of June 2008, and he receives only
those benefits that are available to all such other employees.
Under his SERP arrangement, Mr. Tulaney is eligible to earn a benefit of $114,600 per year
commencing upon his retirement at age 65 and continuing for twenty years. Mr. Tulaney may receive
lesser or equal benefits upon a qualifying termination of employment that occurs prior to Mr. Tulaney
reaching age 65.
Non-Qualified Deferred Compensation
The following table sets forth non-qualified deferred compensation contributions during the year
ended December 31, 2016.
Name
Craig W. Best
Craig W. Best
Craig W. Best
(1) Represents Company contributions under the Excess Benefit Plan, which contributions are included in (cid:179)All Other
Company
Contributions
in
2016 ($)
13,279(1)
14,000(2)
80,000(4)
Aggregate
Earnings in
2016($)
(cid:178)
2,460(3)
18,772(5)
Aggregate
Withdrawals/
Distributions
($)
(cid:178)
(cid:178)
(cid:178)
Aggregate
Balance at
December 31,
2016 ($)
76,330
56,619
526,697
Compensation(cid:180) in the Summary Compensation Table set forth above.
(2) Represents Company contributions under the Deferred Compensation Plan No. 1, which contributions are
included in (cid:179)Deferred Compensation(cid:180) in the Summary Compensation Table set forth above.
(3) Represents earnings on balances in the Deferred Compensation Plan No. 1.
(4) Represents Company contributions under the Deferred Compensation Plan No. 2, which contributions are
included in (cid:179)(cid:39)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)Compensation(cid:180) in the Summary Compensation Table set forth above.
(5) Represents earnings on balances in the Deferred Compensation Plan No. 2.
Excess Benefit Plan. The company contribution set forth in the table above represents our
contribution pursuant to the Excess Benefit Plan maintained for Mr. Best. This plan provides Mr. Best
with additional benefits in excess of those accrued under the Peoples Security 401(k) Plan and ESOP. The
plan provides Mr. Best with benefits in an amount which is equivalent to the excess, if any, of the
matching and ESOP contributions he would have been entitled to receive under the 401(k) Plan and
ESOP if those plans were administered without regard to the limitations required by Section 401(a)(17) of
the Code and any regulations thereunder, over the amount he is entitled to receive under those plans for
the applicable plan year. The Excess Benefit Plan is intended to be an unfunded excess benefit plan.
(cid:55)(cid:75)(cid:72)(cid:3) (cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:3) (cid:71)(cid:72)(cid:86)(cid:70)(cid:85)(cid:76)(cid:69)(cid:72)(cid:71)(cid:3) (cid:68)(cid:69)(cid:82)(cid:89)(cid:72)(cid:3) (cid:76)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:69)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3) (cid:68)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:71)(cid:68)(cid:87)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3) (cid:86)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) from
service. The accrued benefit will become payable if Mr. Best separates from service for any reason. If a
change in control (as defined in the Excess Benefit Plan) occurs, the accrued benefit at the date of the
change in control shall be valued and payable according to the provisions set forth below as if the change
in control constituted a separation from service.
Mr. Best, or his beneficiaries, will be entitled to receive, by virtue of his separation from service,
a distribution in an aggregate amount equal to his accrued benefit. The actuarial equivalent of his accrued
benefit will be distributed in a single lump sum payment within five days following the date that is six
months after the date Mr. Best separates from service.
-37-
If Mr. Best dies before terminating his employment with the Bank and before the commencement
of payments under the Excess Benefit Plan, the actuarial equivalent of the entire value of his accrued
benefit will be paid, in a single lump sum, within sixty days following the date of his death, to his
designated beneficiaries.
(cid:44)(cid:73)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:75)(cid:68)(cid:71)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:82)(cid:81)(cid:3) (cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3) (cid:22)(cid:20)(cid:15)(cid:3) (cid:21)(cid:19)(cid:20)6 his accrued benefit under the
Excess Benefit Plan would have been $76,330.
Deferred Compensation Plan No. 2. The Deferred Compensation Plan No. 2 is an account-based
(cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:85)(cid:85)(cid:68)(cid:81)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:80)(cid:83)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:85)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)
employment agreement on January 3, 2011. Pursuant to the agreement, the Deferred Compensation Plan
No. 2 provides Mr. Best an opportunity to defer base salary and bonus compensation and required the
Company (cid:87)(cid:82)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:7)(cid:25)(cid:20)(cid:15)(cid:22)(cid:26)(cid:24)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:85)(cid:82)(cid:88)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)
employment agreement was amended and restated, followed by credits of $60,000 each August 1
beginning in 2011 and ending in 2014. The plan was amended August 31, 2014 and, as amended,
requires an annual contribution of $80,000 per year from 2015 through 2019 (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)
continued employment. Notional interest will be credited to such deferred (cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)
account will be distributed upon his retirement or other separation from service, or upon his death or a
change in control if earlier. The company contribution set forth in the table above represents our
contribution following the merger.
Other Potential Post-Termination Benefits
Payments Made Upon Termination of Employment. The following chart summarizes the total
benefits payable to the named executive officers (other than our former chief financial officer) upon a
termination of employment, assuming that the termination occurred on December 31, 2016:
Name
Craig W. Best
Thomas P. Tulaney
Neal D. Koplin
Bradley S. Grubb
John R. Anderson III
Termination
(cid:58)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3)(cid:179)(cid:38)(cid:68)(cid:88)(cid:86)(cid:72)(cid:180)
1,657,819
1,672,781
200,000
275,000
76,677
Termination for
(cid:179)(cid:42)(cid:82)(cid:82)(cid:71)(cid:3)(cid:53)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:180)
1,657,819
1,672,781
(cid:177)
(cid:177)
(cid:177)
Termination After a
Change in Control
2,121,342
2,896,072
600,000
550,000
(cid:177)
Payments Made Upon Termination for Cause. Under the employment agreements with Messrs.
Best, Tulaney, Koplin and Grubb, we may terminate their employment for cause (as defined in the
agreement) at any time. Mr. Anderson is an at-will employee without an employment agreement. If any
of them is terminated for cause, he will receive only accrued compensation and vested benefits through
his termination date.
Payments Made Upon Termination Without Cause or For Good Reason. Craig W. Best (cid:177)
(cid:56)(cid:83)(cid:82)(cid:81)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3) (cid:179)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:180)(cid:3) (cid:11)(cid:68)(cid:86)(cid:3) (cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:75)(cid:76)(cid:86)(cid:3) (cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:12)(cid:3) (cid:82)(cid:85)(cid:3)
voluntary termination by Mr. Best with good reason (constructive termination), he will receive his
accrued compensation and other benefits through his termination date, along with a severance payment
equal to 24 months of payments based upon base salary and average annual bonus and $30,000 in
outplacement assistance to be paid by us to a firm selected by Mr. Best. In addition, the Company will
pay the applicable premium otherwise payable for COBRA continuation coverage for the executive, his
spouse and dependents for a period of 24 months following termination. If the Company terminated Mr.
(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3) (cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3) (cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:3) (cid:82)(cid:81)(cid:3) (cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3) 30, 2016, the cash severance payment due under his
(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:11)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:86)(cid:82)(cid:79)(cid:72)(cid:79)(cid:92)(cid:3)(cid:82)(cid:81)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:81)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) and average incentive
and bonus payments, without regard to future adjustments, incentives or bonuses) would have been
-38-
$951,286. In addition, Mr. Best would have received the outplacement assistance noted above, payment
of health insurance premiums valued at $35,760, and payment of accrued benefits of $76,330 under the
Excess Benefit Plan, $37,746 under Deferred Compensation Plan No. 1 and $526,697 under Deferred
Compensation Plan No. 2. The Best Employment Agreement provides that payment of severance is
contingent upon Mr. (cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86) execution and delivery of a release agreement to the Company and the Bank.
Thomas P. Tulaney (cid:177) Pursuant to the terms of his employment agreement, upon termination by
the Company without (cid:179)cause(cid:180)(cid:3)(cid:11)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:12) or voluntary termination by Mr.
Tulaney with good reason (constructive termination), he will receive his accrued compensation and other
benefits through his termination date, along with a severance payment equal to 12 months of payments
based upon base salary and average annual incentive payments. In addition, the Company will pay the
applicable premium otherwise payable for COBRA continuation coverage for the executive, his spouse
and dependents for a period of 18 months following termination. If the Company terminated Mr.
Tulaney(cid:182)(cid:86)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)t without cause on December 30, 2016, the cash severance payment due under his
(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:11)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:86)(cid:82)(cid:79)(cid:72)(cid:79)(cid:92)(cid:3) (cid:82)(cid:81)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:182)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:81)(cid:3) (cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3) base salary and average incentive
payment, without regard to future adjustments or incentives) would have been $272,392. In addition, Mr.
Tulaney would have received payment of health insurance premiums valued at $26,820, accelerated
vesting of $602,029 in restricted stock, and $38,577 per year, payable in monthly installments for twenty
years, under his SERP.
The Tulaney Employment Agreement provides that payment of severance is contingent upon Mr.
(cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:68)(cid:81)(cid:78)(cid:17)
Neal D. Koplin - Pursuant to the terms of his employment agreement, upon termination by the
Company without (cid:179)cause(cid:180)(cid:3)(cid:11)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:12) , we are obligated to, among other
things, make monthly payments to Mr. Koplin for one (1) year following the termination equal to 1/12th
(cid:82)(cid:73)(cid:3) (cid:48)(cid:85)(cid:17)(cid:3) (cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:182)(cid:86)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:3) (cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:3) (cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:87)(cid:76)(cid:80)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:72)rmination. If the company terminated Mr. Kopl(cid:76)(cid:81)(cid:182)(cid:86)(cid:3)
employment without cause on December 30, 2016, the cash severance payment due under his
employment agreement ((cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:86)(cid:82)(cid:79)(cid:72)(cid:79)(cid:92)(cid:3)(cid:82)(cid:81)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:182)(cid:86)(cid:3) then current base salary, without regard to future
base salary adjustments) would have been $200,000. Payment of severance under the Koplin
(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)
to the Company and the Bank.
Scott A. Seasock (cid:177) Mr. Seasock served (cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)s principal financial officer and principal
accounting officer during 2016 until April 8, and his employment with the Company ceased on May 8,
2016. In connection with his separation of service, Mr. Seasock received severance of $412,000, or twice
his base salary at that time.
Bradley S. Grubb (cid:177) Upon termination by the Company without (cid:179)cause(cid:180)(cid:3) (cid:11)(cid:68)(cid:86)(cid:3) (cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:75)(cid:76)(cid:86)(cid:3)
employment agreement), Mr. Grubb will receive his accrued compensation and other benefits through his
termination date, along with a severance payment equal to 12 months of payments based upon base
salary. If the Company terminated Mr. (cid:42)(cid:85)(cid:88)(cid:69)(cid:69)(cid:182)(cid:86)(cid:3) employment without cause on December 30, 2016, the
(cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:11)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:86)(cid:82)(cid:79)(cid:72)(cid:79)(cid:92)(cid:3)(cid:82)(cid:81)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:42)(cid:85)(cid:88)(cid:69)(cid:69)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:15)(cid:3)
without regard to future adjustments) would have been $275,000. Payment of severance under the Grubb
Employment Agreement is contingent upon Mr. Grubb(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)
the Company and the Bank.
John R. Anderson III (cid:177) Upon termination by the Company without cause, Mr. Anderson will
receive his accrued compensation and other benefits through his termination date, along with a severance
benefits available under a policy applicable to employees, generally, namely one week of severance pay
for each year of employment.
-39-
Payments Made Upon Disability or Death. The employment agreements with Messrs. Best,
Tulaney, Koplin, and Grubb (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:15)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:68)(cid:87)(cid:75)(cid:3)(cid:82)(cid:85)(cid:3)(cid:71)(cid:76)(cid:86)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:75)(cid:72)(cid:3)
will receive only accrued compensation and vested benefits through his termination date.
(cid:44)(cid:73)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:22)(cid:19)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:71)(cid:72)(cid:68)(cid:87)(cid:75)(cid:3)(cid:82)(cid:85)(cid:3)(cid:71)(cid:76)(cid:86)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:75)(cid:72)(cid:3)(cid:90)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)
be entitled to receive payment of accrued benefits of $76,330 under the Excess Benefit Plan, $37,746
under Deferred Compensation Plan No. 1 and $526,697 under Deferred Compensation Plan No. 2.
(cid:44)(cid:73)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:55)(cid:88)(cid:79)(cid:68)(cid:81)(cid:72)(cid:92)(cid:182)(cid:86)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:22)(cid:19)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:71)(cid:72)(cid:68)(cid:87)(cid:75)(cid:3)(cid:82)(cid:85)(cid:3)(cid:71)(cid:76)(cid:86)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:88)nder
his SERP he would be entitled to receive, respectively, $114,600 per year or $38,577 per year, in either
case payable in monthly installments for twenty years.
Payments Made Upon a Change in Control. In accordance with the terms of their employment
agreements, our named executive officers are entitled to the following payments upon termination in
connection with a change of control:
Craig W. Best (cid:177) If we terminate Mr. Best without cause or Mr. Best terminates for good reason
within 36 months of a change in control, he will receive, in addition to previously accrued compensation
and benefits, monthly severance payments for 36 months following termination, equal to the sum of
(cid:20)(cid:18)(cid:20)(cid:21)(cid:87)(cid:75)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:182)(cid:86)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:3) (cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:3) (cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:87)(cid:76)(cid:80)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:20)(cid:18)(cid:20)(cid:21)(cid:87)(cid:75)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) average bonus and
incentive payment that Mr. Best received over the prior three years. In addition, the Company will pay
the applicable premium otherwise payable for COBRA continuation coverage for the executive, his
spouse and dependents for a period of 36 months following termination. The executive will immediately
vest in all outstanding stock-based compensation awards upon termination in connection with a change in
control. If the payments or benefits payable to Mr. Best in connection with a change in control would be
subject to the excise tax on golden parachutes imposed under Section 4999 of the Internal Revenue Code,
or be non-deductible by us under Section 280G of the Internal Revenue Code, then those payments or
benefits will be reduced to an amount that will not exceed the Section 280G and Section 4999 limits
under the Internal Revenue Code. If Mr. Best was terminated without cause or resigned for good reason
on December 30, 2016 following a change in control, the cash severance payment due under his
employment agreement (based solely on Mr. (cid:37)(cid:72)(cid:86)(cid:87)(cid:182)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:81)(cid:3) (cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3) base salary and average bonus and
incentive payment, without regard to future adjustments, bonuses or incentives) would have been
$1,426,929. In addition, Mr. Best would have received payment of health insurance premiums valued at
$53,640, and payment of accrued benefits of $76,330 under the Excess Benefit Plan, $37,746 under
Deferred Compensation Plan No. 1 and $526,697 under Deferred Compensation Plan No. 2.
Thomas P. Tulaney (cid:177) Pursuant to the terms of his employment agreement, if we terminate Mr.
Tulaney without cause or Mr. Tulaney terminates for good reason within 24 months of a change in
control, he will receive, in addition to previously accrued compensation and benefits, monthly severance
payments for 24 months following termination, equal to the s(cid:88)(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:20)(cid:18)(cid:20)(cid:21)(cid:87)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:182)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:92)(cid:3)
at the time of termination and 1/12th of average annual incentive payments. In addition, the Company
will pay the applicable premium otherwise payable for COBRA continuation coverage for Mr. Tulaney,
his spouse and dependents for a period of 24 months following termination. Mr. Tulaney will
immediately vest in all outstanding stock-based compensation awards upon termination in connection
with a change in control. If Mr. Tulaney was terminated without cause or resigned for good reason on
December 30, 2016 following a change in control, the cash severance payment due under his employment
agreement (based solely on Mr. Tulaney(cid:182)(cid:86)(cid:3) then current base salary and average incentive payment,
without regard to future adjustments or incentives) would have been $544,783. In addition, Mr. Tulaney
would have received payment of health insurance premiums valued at $35,760, accelerated vesting of
$602,029 in restricted stock, and $85,675 per year, payable in monthly installments for twenty years,
under his SERP. If the payments or benefits payable to Mr. Tulaney under his employment agreement in
-40-
connection with a change in control would be subject to the excise tax on golden parachutes imposed
under Section 4999 of the Internal Revenue Code, or be non-deductible by us under Section 280G of the
Internal Revenue Code, then those payments or benefits will be reduced to an amount that will not exceed
the Section 280G and Section 4999 limits under the Internal Revenue Code
Neal D. Koplin - In the event that Mr. Koplin is terminated within 24 months following a Change
of Control (as defined in the Koplin Employment Agreement) or resigns for Good Reason (as defined in
the Koplin Employment Agreement), he will be entitled to the salary payments described above for a
period of three (3) years following termination (in lieu of one (1) year). Payment of severance under the
(cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:3)(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:70)(cid:68)(cid:86)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:46)(cid:82)(cid:83)(cid:79)(cid:76)(cid:81)(cid:182)(cid:86)(cid:3)execution and delivery of a
release agreement to the Company and the Bank. If Mr. Koplin was terminated without cause or resigned
for good reason on December 30, 2016 following a change in control, the cash severance due to Mr.
Koplin under his employment agreement would have been $600,000. If the payments or benefits payable
to Mr. Koplin under his employment agreement in connection with a change in control would be subject
to the excise tax on golden parachutes imposed under Section 4999 of the Internal Revenue Code, or be
non-deductible by us under Section 280G of the Internal Revenue Code, then those payments or benefits
will be reduced to an amount that will not exceed the Section 280G and Section 4999 limits under the
Internal Revenue Code
Bradley S. Grubb (cid:177) If we terminate Mr. Grubb without cause within 24 months after a change in
control, he will receive, in addition to previously accrued compensation and benefits, monthly severance
payments for 24 months following termination, equal to the sum of 1/12th of his base salary at the time of
termination. If Mr. Grubb had been employed under the initial terms of his employment agreement and a
change in control had occurred at December 31, 2016, the severance payment due to Mr. Grubb under his
employment agreement (based solely on his initial annual base salary, without regard to future base salary
adjustments) would have been $550,000. If the payments or benefits payable to Mr. Grubb under his
employment agreement in connection with a change in control would be subject to the excise tax on
golden parachutes imposed under Section 4999 of the Internal Revenue Code, or be non-deductible by us
under Section 280G of the Internal Revenue Code, then those payments or benefits will be reduced to an
amount that will not exceed the Section 280G and Section 4999 limits under the Internal Revenue Code.
The following table sets forth information concerning the compensation received by individuals
who served as directors (other than Craig W. Best) during the year ended December 31, 2016.
2016 Director Compensation
Name
William E. Aubrey II
Joseph G. Cesare, M.D.
James G. Keisling
P. Frank Kozik
Ronald G. Kukuchka
Richard S. Lochen, Jr.
Robert W. Naismith, Ph.D.
James B. Nicholas
Emily S. Perry
George H. Stover, Jr.
Steven L. Weinberger
Earle A. Wootton
Joseph T. Wright, Jr.
(1) Amount reflects 2016 imputed income on supplemental life insurance split-dollar arrangements.
Fees Earned or
Paid in Cash ($)
49,550
36,850
41,700
27,750
34,650
41,950
35,850
42,000
34,550
35,000
34,400
35,700
42,350
All Other
Compensation
($)(1)
320
380
(cid:177)
(cid:177)
796
320
(cid:177)
(cid:177)
(cid:177)
2,062
(cid:177)
2,507
711
Total ($)
49,870
37,230
41,700
27,750
35,446
42,270
35,850
42,000
34,550
37,062
34,400
38,207
43,061
-41-
Each non-employee director receives $1,000 for attendance at each board meeting, $350 for each
committee meeting, and $300 for each branch meeting. All non-employee directors receive a retainer of
$15,000 per year. The Chairman of the Board receives an additional $800 per month, and the Audit
Committee Chairman receives an additional $550 per audit committee meeting attended; the
Compensation Committee Chairman receives an additional $550 per compensation committee meeting
attended and the Nominating and Corporate Governance Committee Chairman receives an additional
$450 per nominating and corporate governance committee meeting attended.
We maintain a director supplemental life insurance plan. All directors are eligible for the life
insurance benefit, subject to medical underwriting acceptance. The plan currently insures seven directors.
The director life insurance benefit of up to $100,000 per participating director is provided through a
single premium bank-(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:79)(cid:76)(cid:73)(cid:72)(cid:3)(cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:179)BOLI(cid:15)(cid:180) program because BOLI is a more cost-effective
way of providing the benefits. The eligible participating directors are not required to pay any premiums
on the life insurance policy, but have the imputed value of the insurance coverage included in their
taxable income.
We also maintain a deferred compensation plan for directors. All current non-employee directors
are eligible to participate in the plan. The plan allows for deferrals by participants of up to 100 percent of
(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:73)(cid:72)(cid:72)(cid:86) and there is no maximum dollar limit on the amount that may be deferred each year.
Participants are permitted to change their percentage of deferral annually. The participants are always
100 percent vested in the amounts they defer and earnings are credited to their accounts at market rates.
Participants are entitled to receive a distribution from their account upon a termination of service, a
change in control, or a specified date as allowed within the plan.
The Company provides a retirement benefit to its non-employee directors. Upon vesting, based
on either a change in control or ten years of service, a director is eligible to receive an annual cash
payment equal to the product of the (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)multiplied by $150, payable for
a ten years period following retirement from board service.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BDO USA, LLP served as our independent registered public accounting firm for the fiscal years
ended December 31, 2016 and 2015. Our audit committee is evaluating independent registered public
accounting firms for the fiscal year ending December 31, 2017 and has not yet made a selection.
Representatives of BDO USA, LLP are expected to be present at the annual meeting and will have an
opportunity to make a statement if they so desire and will be available to respond to appropriate
questions.
The following table presents the aggregate fees, billed or expected to be billed, by BDO USA,
(cid:47)(cid:47)(cid:51)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:68)(cid:79)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:68)(cid:81)(cid:87)(cid:86)(cid:15) for the fiscal years ended December 31, 2016 and 2015.
Fee Category
Audit Fees (1)
Audit-Related Fees
Tax Fees
All Other Fees
Total Fees
2016
$ 291,165
(cid:177)
(cid:177)
(cid:177)
$ 291,165
2015
$ 289,063
(cid:177)
(cid:177)
(cid:177)
$ 289,063
1. Audit Fees consist of the aggregate fees billed for professional services rendered by the independent
registered public accounting firm for the a(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)
(cid:82)(cid:73)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q, or services that are
normally provided by the independent registered public accounting firm in connection with statutory and
regulatory filings or engagements
-42-
(cid:55)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3)(cid:70)(cid:75)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:68)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:79)(cid:3)(cid:83)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:72)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)-approval of audit and
non-audit services (including the fees and terms thereof) to be provided by the independent registered
public accounting firm of the Company, subject to the de minimis exception for non-audit services
described in Section 10A(i)(1)(B) of the Exchange Act, which are approved by the audit committee prior
to the completion of the audit. The policy requires that all services to be performed by BDO USA, LLP,
including audit services, audit-related services and permitted non-audit services, either be performed
pursuant to detailed pre-approval policies and procedures established by the committee as to the services
to be performed, or be presented to and pre-approved by the committee (subject to the de minimis
exception). All services rendered by BDO USA, LLP were permissible under applicable laws and
regulations, and the audit committee pre-approved all audit, audit-related and non-audit services
performed by BDO USA, LLP during 2016 and 2015. The audit committee has considered whether the
provision of services other than audit services (as specified above) is compatible with maintaining BDO
USA, LLP(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)determined that provision of such services has not adversely affected
BDO USA, LLP(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:17)
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has made, and expects to continue to make, loans in the future to our directors and
executive officers and their family members, and to firms, corporations, and other entities in which they
and their family members maintain interests. All such loans require the prior approval of our board of
directors. None of such loans are, as of the date of this proxy statement, or were at December 31, 2016,
nonaccrual, past due, restructured or potential problems, and all of such loans were made in the ordinary
course of business, on substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable loans with persons not related to the Company or the Bank and did
not involve more than the normal risk of collectability or present other unfavorable features.
Except for loan transactions described above, deposits with the Bank, and transactions where the
rates or charges were determined by competitive bids, there were no transactions since the beginning of
our last fiscal year, and there are no currently proposed transactions, in which we were or are to be a
participant, the amount involved exceeds $120,000, and in which any related person who is also an
executive officer had or will have a direct or indirect material interest.
The Bank has a formal process with respect to the review and approval of loans extended by it to
related persons. In accordance with these procedures, all transactions with related persons must be
approved or ratified by disinterested members of board of directors. All loans and commitments to lend
included in such transactions were made under substantially the same terms, including interest rates,
collateral, and repayment terms as those prevailing at the time for comparable transactions with other
persons not related to the Bank and do not involve more than the normal risk of collection or present other
unfavorable features.
Our code of business conduct and ethics, audit committee charter, and loan policy and procedures
related to the approval of loans set forth our policies and procedures for the review, approval, or
ratification of any transactions with related persons. Any transaction that involves the purchase from, sale
to, or joint ownership with, a related person, of an interest in real or personal property must receive any
required approvals of regulatory authorities confirming that the terms of such transactions are fair to, and
in the best interests of the Company or the Bank; be supported by an independent appraisal not prepared
by a related person or an employee of the Company or the Bank; and be approved in advance by a
resolution duly adopted, with full disclosure, by our audit committee. Any extension of credit to a related
person must be approved in advance by a resolution duly adopted after full disclosure by a majority of the
entire board of directors of the Bank, with each interested director abstaining from participating, directly
or indirectly, in the vote. All other transactions not expressly described in our code of conduct and ethics,
-43-
in which any related person will have a direct or indirect material interest, are subject to review and
approval by our audit committee.
Compensation Committee Interlocks and Insider Participants
During 2016, directors Aubrey, Keisling, Kozik, Lochen, Naismith, Perry and Wright served as
members of our compensation committee. Except for Mr. Lochen, who served as an executive officer of
the Company from 2006 until 2010, no member of the compensation committee has ever served as an
officer or employee of the Company or its subsidiaries. During 2016, there were no compensation
committee interlocks between the Company or its subsidiaries and any other entity involving the
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:17)
CODE OF ETHICS
We have adopted a code of conduct and ethics that applies to our directors and executive officers,
including our principal executive officer, principal financial officer, principal accounting officer and other
senior financial officers. Our code of conduct and ethics is available at our website, psbt.com, at the
(cid:179)Governance Documents(cid:180) page under (cid:179)Investor Relations.(cid:180)
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:20)(cid:25)(cid:11)(cid:68)(cid:12)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3) (cid:36)(cid:70)(cid:87)(cid:3) (cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:86)(cid:3)
(cid:90)(cid:75)(cid:82)(cid:3) (cid:82)(cid:90)(cid:81)(cid:3) (cid:80)(cid:82)(cid:85)(cid:72)(cid:3) (cid:87)(cid:75)(cid:68)(cid:81)(cid:3) (cid:87)(cid:72)(cid:81)(cid:3) (cid:83)(cid:72)(cid:85)(cid:70)(cid:72)(cid:81)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:3) (cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3) (cid:70)(cid:79)(cid:68)(cid:86)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3) securities ((cid:179)ten-percent
holders(cid:180)) to file reports of ownership and changes in ownership with the SEC. Officers, directors and
ten-percent holders are required by regulation to furnish the Company with copies of all Section 16(a)
forms they file. To the (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:78)(cid:81)(cid:82)(cid:90)(cid:79)(cid:72)(cid:71)(cid:74)(cid:72)(cid:15)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:86)(cid:82)(cid:79)(cid:72)(cid:79)(cid:92)(cid:3) (cid:82)(cid:81)(cid:3) (cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:83)(cid:76)(cid:72)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:86)(cid:88)(cid:70)(cid:75)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:86)(cid:3)
furnished to the Company and representations that no other reports were required, during the fiscal year
ended December 31, 2016(cid:15)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:74)(cid:85)(cid:72)(cid:68)(cid:87)er than ten-percent holders
complied with all Section 16(a) filing requirements applicable to him or her except that Mr. Anderson
failed to timely file a Form 3 when he assumed principal financial officer and principal accounting officer
duties on an interim basis.
SHAREHOLDER PROPOSALS
Nominations of persons for election to the board of directors and the proposal of business to be
considered by the shareholders at an annual meeting of shareholders may be made by any shareholder of
the Company who was a shareholder of record at the time of the notice for the annual meeting, who is
entitled to vote at the annual meeting, and who complies with the notice procedures set forth in our
bylaws.
For director nominations or other proposals to be properly brought before the 2018 annual
meeting by a shareholder, the shareholder must give written notice to the Secretary of the Company at
Peoples Financial Services Corp., 150 North Washington Avenue, Scranton, Pennsylvania 18503, by
March 15, 2018, and any proposal other than a director nomination must be a proper matter for
shareholder action, and not otherwise excludable under the rules and regulations of the SEC. In order for
(cid:68)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:82)(cid:86)(cid:68)(cid:79)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:68)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)(cid:81)(cid:82)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92) statement
for the 2018 annual meeting of shareholders, in addition to meeting all of the requirements set forth in our
bylaws, and all requirements of applicable securities laws, we must receive the proposal by December 4,
2017.
-44-
(cid:36)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:76)(cid:70)(cid:72)(cid:3)(cid:80)(cid:88)(cid:86)t set forth (i) the name and address of the shareholder who intends to
bring the business before the meeting ((cid:179)Proposing Shareholder(cid:180)); (ii) the name and address of the
beneficial owner, if different than the Proposing Shareholder, or any of the shares of Peoples common
stock which are owned of record and beneficially by the Proposing Shareholder and the number which are
owned beneficially by any beneficial owner; (iii) any interest (other than an interest solely as a
shareholder) which the Proposing Shareholder or a beneficial owner has in the business being proposed
by the Proposing Shareholder; (iv) a description of all arrangements and understandings between the
Proposing Shareholder and any beneficial owner and any other person or persons (naming such person or
persons) pursuant to which the proposal in the shareholder notice is being made; (v) a description of the
business which the Proposing Shareholder seeks to bring before the meeting, the reason for doing so and,
if a specific action is to be proposed, the text of the resolution or resolutions which the Proposing
Shareholder proposes that the Company adopt; and (vi) a representation that the Proposing Shareholder is
at the time of giving the shareholder notice, was or will be on the record date for the meeting, and will be
on the meeting date a holder of record of shares of the Company entitled to vote at such meeting, and
intends to appear in person or by proxy at the meeting to bring the business specified in the shareholder
notice before the meetin(cid:74)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3) (cid:83)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:80)(cid:72)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:80)(cid:68)(cid:92)(cid:15)(cid:3) (cid:76)(cid:81)(cid:3) (cid:86)(cid:88)(cid:70)(cid:75)(cid:3) (cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3) (cid:86)(cid:82)(cid:79)(cid:72)(cid:3) (cid:71)(cid:76)(cid:86)(cid:70)(cid:85)(cid:72)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)
refuse to acknowledge any business proposed by a shareholder which the presiding officer determines is
not made in compliance with the foregoing procedure.
Annual Report
REPORTS AND OTHER DOCUMENTS
(cid:36)(cid:3)(cid:70)(cid:82)(cid:83)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:21)(cid:19)(cid:20)6 Annual Report to Shareholders accompanies this proxy statement.
On written request, we will provide, without charge, a copy of our Annual Report on Form 10-K
for the year ended December 31, 2016, as filed with the SEC (including a list briefly describing the
exhibits thereto), to any record holder or beneficial owner of common stock on February 28, 2017,
the record date for the annual meeting, or to any person who subsequently becomes such a record
holder or beneficial owner. Additionally, our proxy statement, annual report to shareholders, and
proxy card are available at http://www.astproxyportal.com/ast/08838/. Requests should be directed
to the attention of the Secretary of the Company at Peoples Financial Services Corp., 150 North
Washington Avenue, Scranton, Pennsylvania 18503.
Security Holders Sharing an Address
Only one copy of this proxy statement and the accompanying 2016 Annual Report to
Shareholders is being delivered to multiple shareholders sharing an address unless we have previously
received contrary instructions from one or more of such shareholders. On written or oral request to the
Secretary of the Company at Peoples Financial Services Corp., 150 North Washington Avenue, Scranton,
Pennsylvania 18503, we will deliver promptly a separate copy of this proxy statement and the
accompanying 2016 Annual Report to Shareholders to a shareholder at a shared address to which a single
copy of the documents was delivered. Shareholders sharing an address who wish, in the future, to receive
separate copies or a single copy of our proxy statements and annual reports should provide written or oral
notice to the Secretary of the Company at the address and telephone number set forth above.
BY ORDER OF THE BOARD OF DIRECTORS
DEBRA E. DISSINGER
Secretary
-45-
Exhibit A
Peoples Financial Services Corp. 2017 Equity Incentive Plan
Section 1. Purpose; Definitions. The purposes of the Peoples Financial Services Corp. 2017 Equity
(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3) (cid:179)Plan(cid:180)(cid:12)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:82)(cid:29) (cid:11)(cid:68)(cid:12)(cid:3)(cid:72)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:51)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:17)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)Company(cid:180)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:68)(cid:73)(cid:73)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)
companies to recruit and retain highly qualified employees, directors and consultants; (b) provide those employees,
directors and consultants with an incentive for productivity; and (c) provide those employees, directors and
consultants with an opportunity to share in the growth and value of the Company.
For purposes of the Plan, the following terms will have the meanings defined below, unless the context
clearly requires a different meaning:
(a)
(cid:179)Affiliate(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:15)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:68)(cid:3) (cid:51)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:15)(cid:3) (cid:68)(cid:3) (cid:51)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:79)(cid:92)(cid:3) (cid:82)(cid:85)(cid:3) (cid:76)(cid:81)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:79)(cid:92)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:15)(cid:3) (cid:76)(cid:86)(cid:3)
controlled by, or is under common control with such Person.
(b)
(cid:179)Applicable Law(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:72)(cid:74)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:71)(cid:80)(cid:76)(cid:81)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)f and issuance of
securities under stock incentive plans, including, without limitation, the requirements of state corporations law,
federal, state and foreign securities law, federal, state and foreign tax law, federal and state banking law, and the
requirements of any stock exchange or quotation system upon which the Shares may then be listed or quoted.
(c)
(cid:179)Award(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:68)(cid:81)(cid:3) (cid:68)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:82)(cid:73)(cid:3) (cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3) (cid:36)(cid:83)(cid:83)(cid:85)(cid:72)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:53)(cid:76)(cid:74)(cid:75)(cid:87)(cid:86)(cid:15)(cid:3) (cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:15)(cid:3) (cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)
Stock Units, Cash Awards or Performance Awards made under this Plan.
(d)
(cid:179)Award Agreement(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:88)(cid:79)(cid:68)(cid:85)(cid:3)(cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:90)(cid:85)(cid:76)(cid:87)(cid:87)(cid:72)(cid:81)(cid:3)(cid:71)(cid:82)(cid:70)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)
forth the terms of that particular Award.
(e)
(f)
(cid:179)Board(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:17)
(cid:179)Cash Award(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)Section 10.
(g)
(cid:179)Cause(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:11)(cid:76)(cid:12)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:85)(cid:72)(cid:73)(cid:88)(cid:86)(cid:68)(cid:79)(cid:3) (cid:87)(cid:82)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:92)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3) (cid:79)(cid:68)(cid:90)(cid:73)(cid:88)(cid:79)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:82)(cid:85)(cid:3) (cid:83)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
Company which refusal is not cured by the Participant within ten (10) days of such written notice from the
C(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:30)(cid:3) (cid:11)(cid:76)(cid:76)(cid:12)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:3) (cid:75)(cid:68)(cid:86)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:71)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3) (cid:68)(cid:70)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:71)(cid:76)(cid:86)(cid:75)(cid:82)(cid:81)(cid:72)(cid:86)(cid:87)(cid:92)(cid:15)(cid:3) (cid:72)(cid:80)(cid:69)(cid:72)(cid:93)(cid:93)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)
unauthorized use or disclosure of confidential information or other intellectual property or trade secrets, common
law fraud or other fraud against the Company or any Subsidiary or Affiliate; (iii) a material breach by the Participant
of any written agreement with or any fiduciary duty owed to any Company or any Subsidiary or Affiliate;
(iv) (cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:89)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:81)(cid:87)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:83)(cid:79)(cid:72)(cid:68)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:81)(cid:82)(cid:79)(cid:82)(cid:3)contendere or equivalent plea) in a court of competent
(cid:77)(cid:88)(cid:85)(cid:76)(cid:86)(cid:71)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:73)(cid:72)(cid:79)(cid:82)(cid:81)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3) (cid:80)(cid:76)(cid:86)(cid:71)(cid:72)(cid:80)(cid:72)(cid:68)(cid:81)(cid:82)(cid:85)(cid:3)(cid:76)(cid:81)(cid:89)(cid:82)(cid:79)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3) (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:71)(cid:76)(cid:86)(cid:75)(cid:82)(cid:81)(cid:72)(cid:86)(cid:87)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3) (cid:80)(cid:82)(cid:85)(cid:68)(cid:79)(cid:3)(cid:87)(cid:88)(cid:85)(cid:83)(cid:76)(cid:87)(cid:88)(cid:71)(cid:72)(cid:30)(cid:3)(cid:82)(cid:85)(cid:3)(cid:11)(cid:89)(cid:12)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)
(cid:75)(cid:68)(cid:69)(cid:76)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:82)(cid:85)(cid:3)(cid:85)(cid:72)(cid:83)(cid:72)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:80)(cid:76)(cid:86)(cid:88)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:75)(cid:68)(cid:69)(cid:76)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:82)(cid:85)(cid:3)(cid:85)(cid:72)(cid:83)(cid:72)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:71)uties under the influence of,
alcohol,
illegally obtained prescription controlled substances or non-prescription controlled substances.
Notwithstanding the foregoing, if a Participant and the Company (or any of its Affiliates) have entered into an
employm(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:88)(cid:79)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:85)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:86)(cid:76)(cid:80)(cid:76)(cid:79)(cid:68)(cid:85)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:86)(cid:3)(cid:179)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:15)(cid:180)(cid:3)(cid:87)(cid:75)(cid:72)(cid:81)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)
(cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:15)(cid:3)(cid:179)(cid:38)(cid:68)(cid:88)(cid:86)(cid:72)(cid:180)(cid:3)(cid:86)(cid:75)(cid:68)(cid:79)(cid:79)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)
(h)
(cid:179)Change in Control(cid:180)(cid:3)(cid:86)(cid:75)(cid:68)(cid:79)(cid:79)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:70)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:86)(cid:29)(cid:3)(cid:11)(cid:76)(cid:12)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:179)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:180)(cid:3)(cid:11)(cid:68)(cid:86)(cid:3)
(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:76)(cid:86)(cid:3)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:20)(cid:22)(cid:11)(cid:71)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:20)(cid:23)(cid:11)(cid:71)(cid:12)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:36)(cid:70)(cid:87)(cid:12)(cid:3)(cid:76)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:69)(cid:72)(cid:70)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:68)(cid:3)(cid:179)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:82)(cid:90)(cid:81)(cid:72)(cid:85)(cid:180)(cid:3)(cid:11)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or
more of the total power to vote for the election of directors of the Company; (ii) during any twelve month period,
individuals who at the beginning of such period constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the Company to effect a transaction described in
Section 1(h)(i), Section 1(h)(iii), Section 1(h)(iv) or Section 1(h)(v) hereof) whose election by the Board or
(cid:81)(cid:82)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:87)(cid:82)ckholders was approved by a vote of at least a majority of the directors
then still in office who either were directors at the beginning of the period of whose election or nomination for
election was previously approved, cease for any reason to constitute a majority thereof; (iii) the merger or
A-1
consolidation of the Company with another corporation where the stockholders of the Company, immediately prior
to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares
entitling such stockholders to 50% or more of all votes to which all stockholders of the surviving corporation would
be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a
separate class vote); (iv) the sale or other disposition of all or substantially all of the assets of the Company; (v) a
liquidation or dissolution of the Company or (vi) acceptance by shareholders of the Company of shares in a share
exchange if the shareholders of the Company immediately before such share exchange do not or will not own
directly or indirectly immediately following such share exchange more than fifty percent (50%) of the combined
voting power of the outstanding voting securities of the entity resulting from or surviving such share exchange in
substantially the same proportion as their ownership of the voting securities outstanding immediately before such
share exchange.
Notwithstanding anything in the Plan or an Award Agreement to the contrary, if an Award is subject to
Section 409A of the Code, no event that, but for the application of this paragraph, would be a Change in Control as
defined in the Plan or the Award Agreement, as applicable, shall be a Change in Control unless such event is also a
(cid:179)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:180)(cid:3)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:23)(cid:19)(cid:28)(cid:36)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:71)(cid:72)(cid:17)
(i)
(cid:179)Code(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3) (cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3) (cid:38)(cid:82)(cid:71)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:20)(cid:28)(cid:27)(cid:25)(cid:15)(cid:3) (cid:68)(cid:86)(cid:3) (cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) (cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:87)(cid:76)(cid:80)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:76)(cid:80)(cid:72)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3)
successor thereto.
(j)
(cid:179)Committee(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3) (cid:71)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:68)(cid:71)(cid:80)(cid:76)(cid:81)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:51)(cid:79)(cid:68)(cid:81) under
Section 2. To the extent required under Applicable Law, the Committee shall have at least two members and each
member of the Committee shall be a Non-Employee Director and an Outside Director.
(k)
(l)
(cid:179)Director(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:68)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:17)
(cid:179)Disability(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:68)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:81)(cid:71)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:3)(cid:39)(cid:76)(cid:86)(cid:68)(cid:69)(cid:79)(cid:72)(cid:71)(cid:17)
(m)
(cid:179)Disabled(cid:180)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:80)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:86)(cid:3)(cid:86)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:87)(cid:75)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:21)(cid:21)(cid:11)(cid:72)(cid:12)(cid:11)(cid:22)(cid:12)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:71)(cid:72)(cid:17)
(n)
(cid:179)Exchange Act(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:20)(cid:28)(cid:22)(cid:23)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:17)
(o)
(cid:179)Fair Market Value(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73) any date, the value of a Share determined as follows: (i) if the
Shares are listed on any established stock exchange or a national market system, including, without limitation, the
Nasdaq Stock Market, the Fair Market Value of a Share will be the closing sales price for such stock as quoted on
that system or exchange (or the system or exchange with the greatest volume of trading in Shares) at the close of
regular hours trading on the day of determination; (ii) if the Shares are regularly quoted by recognized securities
dealers but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid
and low asked prices for Shares at the close of regular hours trading on the day of determination; or (iii) if Shares
are not traded as set forth above, the Fair Market Value will be determined in good faith by the Committee taking
into consideration such factors as the Committee considers appropriate, such determination by the Committee to be
final, conclusive and binding. Notwithstanding the foregoing, in connection with a Change in Control, Fair Market
Value shall be determined in good faith by the Committee, such determination by the Committee to be final
conclusive and binding.
(p)
(cid:179)Incentive Stock Option(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:68)(cid:81)(cid:3)(cid:179)(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:180)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
meaning of Section 422 of the Code.
(q)
(cid:179)Non-Employee Director(cid:180)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:87)(cid:75)(cid:3)(cid:76)(cid:81)(cid:3)(cid:53)(cid:88)(cid:79)(cid:72)(cid:3)(cid:20)(cid:25)(cid:69)-3(b)(3)(i) promulgated by
the Securities and Exchange Commission under the Exchange Act, or any successor definition adopted by the
Securities and Exchange Commission.
(r)
(cid:179)Non-Qualified Stock Option(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:68)(cid:81)(cid:3)(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)
A-2
(s)
(cid:179)Option(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:11)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)tock,
if the Committee so determines) granted pursuant to Section 5 hereof.
(t)
(cid:179)Outside Director(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:68)(cid:3) (cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3) (cid:90)(cid:75)(cid:82)(cid:3) (cid:80)(cid:72)(cid:72)(cid:87)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:81)(cid:3) (cid:179)(cid:82)(cid:88)(cid:87)(cid:86)(cid:76)(cid:71)(cid:72)(cid:3)
(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:180)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:20)(cid:25)(cid:21)(cid:11)(cid:80)(cid:12)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:71)(cid:72)(cid:17)
(u)
(cid:179)Parent(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:15)(cid:3)(cid:76)(cid:81)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:15)(cid:3)(cid:68)(cid:3)(cid:179)(cid:83)(cid:68)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:180)(cid:3)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:23)(cid:21)(cid:23)(cid:11)(cid:72)(cid:12)(cid:3)(cid:82)(cid:73)(cid:3)
the Code.
(v)
(cid:179)Participant(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:68)(cid:81)(cid:3) (cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:15)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:88)(cid:79)(cid:87)(cid:68)(cid:81)(cid:87)(cid:15)(cid:3) (cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:15)(cid:3) (cid:82)(cid:85)(cid:3) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:85)(cid:3) (cid:82)(cid:73)(cid:3) (cid:82)(cid:85)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
Company or any of its respective Affiliates to whom an Award is granted.
(w)
(cid:179)Performance Award(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:15)(cid:3) (cid:83)(cid:88)(cid:85)(cid:86)(cid:88)(cid:68)(cid:81)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) Section 11, is granted, vested and/or
settled upon the achievement of specified performance conditions.
(x)
(cid:179)Performance Goal(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:68)(cid:3) (cid:74)(cid:82)(cid:68)(cid:79)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:80)(cid:88)(cid:86)(cid:87)(cid:3) (cid:69)(cid:72)(cid:3) (cid:80)(cid:72)(cid:87)(cid:3) (cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:81)(cid:71)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:3) (cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3) (cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
Committee (but that is substantially uncertain of being met before the grant of the Award) based upon: pretax
operating contribution; economic value added; consolidated profits of the Company expressed as a percent; earnings
per share; stock price; book value; return on capi(cid:87)(cid:68)(cid:79)(cid:30)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:30)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)(cid:3)
equity; internal rate of return; efficiency ratio; revenue; working capital; pre-tax segment profit; net profit; net
interest margin; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization;
return on assets; expense to asset ratio; asset quality (including net charge-offs to average loans ratio; non-
performing loans to average loans plus other real estate owned ratio); asset growth; growth of loans; deposit growth;
and any combination of the foregoing. The Committee shall have discretion to determine the specific targets with
respect to each of these categories of Performance Goals and may apply them to the Company as a whole or to any
Subsidiary, division or other unit of the Company.
(y)
(cid:179)Person(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:68)(cid:81)(cid:3) (cid:76)(cid:81)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:88)(cid:68)(cid:79)(cid:15)(cid:3) (cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:15)(cid:3) (cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3) (cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3) (cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:15)(cid:3) (cid:87)(cid:85)(cid:88)(cid:86)(cid:87)(cid:15)(cid:3) (cid:77)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)
venture, unincorporated association, or other entity or association.
(z)
(cid:179)Plan(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:51)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)es Corp. 2017 Equity Incentive Plan herein set forth, as
amended from time to time.
(aa)
(cid:179)Restricted Stock(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:83)(cid:88)(cid:85)(cid:86)(cid:88)(cid:68)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)Section 8 hereof.
(bb)
(cid:179)Restricted Stock Unit(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3) (cid:68)(cid:3) (cid:85)(cid:76)(cid:74)(cid:75)(cid:87)(cid:3) (cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) restrictions pursuant to
Section 9 hereof.
(cc)
(cid:179)Shares(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:15)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:86)(cid:3)
provided in Section 3(c) hereof.
(dd)
(cid:179)Stock Appreciation Right(cid:180)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:68)(cid:3)(cid:85)(cid:76)(cid:74)(cid:75)(cid:87)(cid:3)(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)Section 6 hereof.
(ee)
(cid:179)Subsidiary(cid:180)(cid:3) (cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:15)(cid:3) (cid:76)(cid:81)(cid:3) (cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:15)(cid:3) (cid:68)(cid:3) (cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:92)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:68)(cid:86)(cid:3) (cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)
424(f) and (g) of the Code.
Section 2. Administration. The Plan shall be administered by the Committee. Any action of the
Committee in administering the Plan shall be final, conclusive and binding on all persons, including the Company,
its Subsidiaries, Affiliates, their respective employees, the Participants, persons claiming rights from or through
Participants and stockholders of the Company.
The Committee will have full authority to grant Awards under this Plan and determine the terms of such
Awards. Such authority will include the right to:
A-3
(a)
forth in Section 4);
select the individuals to whom Awards are granted (consistent with the eligibility conditions set
(b)
(c)
(d)
(e)
determine the type of Award to be granted;
determine the number of Shares, if any, to be covered by each Award;
establish the terms and conditions of each Award;
subject to Section 11, establish the performance conditions relevant to any Award and certify
whether such performance conditions have been satisfied;
(f)
(g)
approve forms of agreements (including Award Agreements) for use under the Plan;
determine whether and under what circumstances an Option may be exercised without a payment
of cash under Section 5(d);
(h)
accelerate the vesting or exercisability of an Award and to modify or amend each Award, subject
to Section 12; and
(i)
extend the period of time for which an Option or Stock Appreciation Right is to remain
e(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3) (cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3) (cid:68)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3) (cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:90)(cid:76)(cid:86)(cid:72)(cid:3) (cid:76)(cid:81)(cid:3)
effect for that Option or Stock Appreciation Right to such greater period of time as the Committee deems
appropriate, but in no event beyond the expiration of the term of the Option or Stock Appreciation Right.
The Committee will have the authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it, from time to time, deems advisable; to establish the terms and form of each
Award Agreement; to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any
Award Agreement); and to otherwise supervise the administration of the Plan. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or in any Award Agreement in the manner
and to the extent it deems necessary to carry out the intent of the Plan.
The Committee, in its discretion, may refer any matter arising hereunder to the Board or other committee
designated by the Board, together with its report and recommendation, unless such matter is required to be approved
by a compensation committee comprised solely of independent directors under Applicable Law, regulation or listing
standards.
The Committee may delegate to one or more officers of the Company the authority to grant Awards to
Participants who are not subject to the requirements of Section 16 of the Exchange Act or Section 162(m) of the
Code and the rules and regulations thereunder, provided that the Committee shall have fixed the total number of
Shares subject to such delegation. Any such delegation shall be subject to the applicable corporate laws of the State
of Pennsylvania. The Committee may revoke any such allocation or delegation at any time for any reason with or
without prior notice.
No Director will be liable for any good faith determination, act or omission in connection with the Plan or
any Award.
Section 3. Shares Subject to the Plan.
(a)
Shares Subject to the Plan. Subject to adjustment as provided in Section 3(c) of the Plan, the
maximum number of Shares that may be issued in respect of Awards under the Plan is one hundred thousand
(cid:11)(cid:20)(cid:19)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:12)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)Plan Limit(cid:180)(cid:12)(cid:15)(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:76)(cid:86)(cid:86)(cid:88)(cid:72)(cid:71)(cid:3)(cid:76)n respect of Incentive Stock Options. Any
shares issued hereunder may consist, in whole or in part, of authorized and unissued shares or treasury shares. Any
shares issued by the Company through the assumption or substitution of outstanding grants in connection with the
acquisition of another entity shall not reduce the maximum number of shares available for delivery under the Plan.
A-4
In accordance with the requirements under Section 162(m) of the Code, the maximum number of Shares underlying
Awards (including Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Performance
Awards) that may be granted during a calendar year to any individual Participant shall be fifty percent (50%) of the
Plan Limit.
(b)
Effect of the Expiration or Termination of Awards. If and to the extent that an Option or Stock
Appreciation Right expires, terminates or is canceled or forfeited for any reason without having been exercised in
full, the Shares associated with that Award will again become available for grant under the Plan. Similarly, if and to
the extent an Award of Restricted Stock or Restricted Stock Units is canceled or forfeited for any reason, the Shares
subject to that Award will again become available for grant under the Plan. Shares withheld in settlement of a tax
withholding obligation associated with an Award, or in satisfaction of the exercise price payable upon exercise of an
Option, will not become available for grant under the Plan.
(c)
Other Adjustment. In the event of any corporate event or transaction such as a merger,
consolidation, reorganization, recapitalization, stock split, reverse stock split, split up, spin-off, combination of
shares, exchange of shares, stock dividend, dividend in kind, or other like change in capital structure (other than
ordinary cash dividends) to shareholders of the Company, or other similar corporate event or transaction affecting
(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:83)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:76)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:85)(cid:3)(cid:72)(cid:81)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:85)(cid:76)(cid:74)(cid:75)(cid:87)(cid:86)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:15)(cid:3)(cid:86)(cid:75)(cid:68)(cid:79)(cid:79)(cid:15)(cid:3)(cid:76)(cid:81)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)
manner as it may deem equitable, substitute or adjust, in its sole discretion, the number and kind of shares that may
be issued under the Plan or under any outstanding Awards, the number and kind of shares subject to outstanding
Awards, the exercise price, grant price or purchase price applicable to outstanding Awards, and/or any other affected
terms and conditions of this Plan or outstanding Awards. The Committee shall not make any adjustment that would
(cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92)(cid:3) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:86)(cid:87)(cid:68)(cid:87)(cid:88)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3) (cid:179)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)rmance-(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:180)(cid:3) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3) (cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:20)(cid:25)(cid:21)(cid:11)(cid:80)(cid:12)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
Code.
(d)
Change in Control. Notwithstanding anything to the contrary set forth in the Plan, upon any
Change in Control, the Committee may, in its sole and absolute discretion and without the need for the consent of
any Participant, take one or more of the following actions contingent upon the occurrence of that Change in Control:
(i)
cause any or all outstanding Awards to become vested and immediately exercisable (as
applicable), in whole or in part;
(ii)
cause any outstanding Option or Stock Appreciation Right to become fully vested and
immediately exercisable for a reasonable period in advance of the Change in Control and, to the extent not
exercised prior to that Change in Control, cancel that Option or Stock Appreciation Right upon closing of
the Change in Control;
(iii)
cancel any unvested Award or unvested portion thereof, with or without consideration;
(iv)
cancel any Award in exchange for a substitute award;
(v)
redeem any Restricted Stock or Restricted Stock Unit for cash and/or other substitute
consideration with value equal to the Fair Market Value of an unrestricted Share on the date of the Change
in Control;
(vi)
cancel any Option or Stock Appreciation Right in exchange for cash and/or other
substitute consideration with a value equal to: (A) the number of Shares subject to that Option or Stock
Appreciation Right, multiplied by (B) the difference, if any, between the Fair Market Value per Share on
the date of the Change in Control and the exercise price of that Option or Stock Appreciation Right ;
provided, that if the Fair Market Value per Share on the date of the Change in Control does not exceed the
exercise price of any such Option or Stock Appreciation Right, the Committee may cancel that Option or
Stock Appreciation Right without any payment of consideration therefor; and/or
(vii)
take such other action as the Committee shall determine to be reasonable under the
circumstances.
A-5
Notwithstanding any provision of this Section 3(d), in the case of any Award subject to Section 409A of the
Code, such Award shall vest and be distributed only in accordance with the terms of the applicable Award
Agreement and the Committee shall only be permitted to use discretion to the extent that such discretion would be
permitted under Section 409A of the Code.
In the discretion of the Committee, any cash or substitute consideration payable upon cancellation of an
Award may be subjected to (i) vesting terms substantially identical to those that applied to the cancelled Award
immediately prior to the Change in Control, or (ii) earn-out, escrow, holdback or similar arrangements, to the extent
such arrangements are applicable to any consideration paid to stockholders in connection with the Change in
Control.
Section 4. Eligibility. Employees, Directors, consultants, and other individuals who provide services to
the Company or its Affiliates are eligible to be granted Awards under the Plan; provided, however, that only
employees of the Company, any Parent or a Subsidiary are eligible to be granted Incentive Stock Options.
Section 5. Options. Options granted under the Plan may be of two types: (i) Incentive Stock Options or
(ii) Non-Qualified Stock Options. The Award Agreement shall state whether such grant is an Incentive Stock
Option or a Non-Qualified Stock Option. Any Option granted under the Plan will be in such form as the Committee
may at the time of such grant approve.
The Award Agreement evidencing any Option will incorporate the following terms and conditions and will
contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee deems
appropriate in its sole and absolute discretion:
(a)
Option Price. The exercise price per Share under an Option will be determined by the Committee
and will not be less than 100% of the Fair Market Value of a Share on the date of the grant. However, any Incentive
Stock Option granted to any Participant who, at the time the Option is granted, owns, either directly and/or within
the meaning of the attribution rules contained in Section 424(d) of the Code, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, will have an exercise price per Share of not less
than 110% of Fair Market Value per Share on the date of the grant.
(b)
Option Term. The term of each Option will be fixed by the Committee, but no Option will be
exercisable more than 10 years after the date the Option is granted. However, any Incentive Stock Option granted to
any Participant who, at the time such Option is granted, owns, either directly and/or within the meaning of the
attribution rules contained in Section 424(d) of the Code, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, may not have a term of more than 5 years. No Option may be
exercised by any Person after expiration of the term of the Option.
(c)
Exercisability. Options will vest and be exercisable at such time or times and subject to such
terms and conditions as determined by the Committee.
(d)
Method of Exercise. Subject to the terms of the applicable Award Agreement, the exercisability
provisions of Section 5(c) and the termination provisions of Section 7, Options may be exercised in whole or in part
from time to time during their term by the delivery of written notice to the Company specifying the number of
Shares to be purchased. Such notice will be accompanied by payment in full of the purchase price, either by
certified or bank check, or such other means as the Committee may accept. The Committee may, in its sole
discretion, permit payment of the exercise price of an Option in the form of previously acquired Shares based on the
Fair Market Value of the Shares on the date the Option is exerci(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:179)(cid:81)(cid:72)(cid:87)(cid:3)(cid:86)(cid:72)(cid:87)(cid:87)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:180)(cid:3)(cid:90)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)
the Option exercise price will not be due in cash and where the number of Shares issued upon such exercise will be
equal to: (A) the product of (i) the number of Shares as to which the Option is then being exercised, and (ii) the
excess, if any, of (a) the then current Fair Market Value per Share over (b) the Option exercise price, divided by
(B) the then current Fair Market Value per Share.
No Shares will be issued upon exercise of an Option until full payment therefor has been made. A
Participant will not have the right to distributions or dividends or any other rights of a stockholder with respect to
A-6
Shares subject to the Option until the Participant has given written notice of exercise, has paid in full for such
Shares, if requested, has given the representation described in Section 18(a) hereof and fulfills such other conditions
as may be set forth in the applicable Award Agreement.
(e)
Incentive Stock Option Limitations. In the case of an Incentive Stock Option, the aggregate Fair
Market Value (determined as of the time of grant) of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year under the Plan and/or any other plan of the
Company, its Parent or any Subsidiary will not exceed $100,000. For purposes of applying the foregoing limitation,
Incentive Stock Options will be taken into account in the order granted. To the extent any Option does not meet
such limitation, that Option will be treated for all purposes as a Non-Qualified Stock Option.
(f)
Termination of Service. Unless otherwise specified in the applicable Award Agreement or as
otherwise provided by the Committee at or after the time of grant, Options will be subject to the terms of Section 7
with respect to exercise upon or following termination of employment or other service.
Section 6. Stock Appreciation Right. Subject to the other terms of the Plan, the Committee may grant
Stock Appreciation Rights to eligible individuals. Each Stock Appreciation Right shall represent the right to
receive, upon exercise, an amount equal to the number of Shares subject to the Award that is being exercised
multiplied by the excess of (i) the Fair Market Value of a Share on the date the Award is exercised, over (ii) the
exercise price specified in the applicable Award Agreement. Distributions may be made in cash, Shares, or a
combination of both, at the discretion of the Committee. Each Stock Appreciation Right shall be evidenced by an
Award Agreement in a form that is approved by the Committee. Such Award Agreement shall indicate the price, the
term and the vesting schedule for such Award. A Stock Appreciation Right exercise price may never be less than
the Fair Market Value of the underlying common stock of the Company on the date of grant of such Stock
Appreciation Right. The term of each Stock Appreciation Right will be fixed by the Committee, but no Stock
Appreciation Right will be exercisable more than 10 years after the date the Stock Appreciation Right is granted.
Subject to the terms and conditions of the applicable Award Agreement, Stock Appreciation Rights may be
exercised in whole or in part from time to time during their term by the delivery of written notice to the Company
specifying the number of Shares to be exercised. Unless otherwise specified in the applicable Award Agreement or
as otherwise provided by the Committee at or after the time of grant, Stock Appreciation Rights will be subject to
the terms of Section 7 with respect to exercise upon or following termination of employment or other service.
Section 7. Termination of Service. Unless otherwise specified with respect to a particular Option or
Stock Appreciation Right in the applicable Award Agreement or otherwise determined by the Committee, any
portion of an Option or Stock Appreciation Right that is not exercisable upon termination of service will expire
immediately and automatically upon such termination and any portion of an Option or Stock Appreciation Right that
is exercisable upon termination of service will expire on the date it ceases to be exercisable in accordance with this
Section 7.
(a)
Termination by Reason of Death(cid:17)(cid:3) (cid:3) (cid:44)(cid:73)(cid:3) (cid:68)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:82)(cid:85)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3) (cid:36)(cid:73)(cid:73)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)
terminates by reason of death, any Option or Stock Appreciation Right held by such Participant may thereafter be
exercised, to the extent it was exercisable at the time of his or her death or on such accelerated basis as the
Committee may determine at or after grant, by the legal representative of the estate or by the legatee of the
Participant, for a period expiring (i) at such time as may be specified by the Committee at or after grant, or (ii) if not
specified by the Committee, then 12 months from the date of death, or (iii) if sooner than the applicable period
specified under (i) or (ii) above, upon the expiration of the stated term of such Option or Stock Appreciation Right.
(b)
Termination by Reason of Disability(cid:17)(cid:3)(cid:3)(cid:44)(cid:73)(cid:3)(cid:68)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)r any Affiliate
terminates by reason of Disability, any Option or Stock Appreciation Right held by such Participant may thereafter
be exercised by the Participant or his personal representative, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Committee may determine at or after grant, for a period expiring
(i) at such time as may be specified by the Committee at or after grant, or (ii) if not specified by the Committee, then
12 months from the date of termination of service, or (iii) if sooner than the applicable period specified under (i) or
(ii) above, upon the expiration of the stated term of such Option or Stock Appreciation Right.
A-7
(c)
Cause(cid:17)(cid:3) (cid:3) (cid:44)(cid:73)(cid:3) (cid:68)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:82)(cid:85)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3) (cid:36)(cid:73)(cid:73)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3) (cid:76)(cid:86) terminated for Cause:
(i) any Option or Stock Appreciation Right, or portion thereof, not already exercised will be immediately and
automatically forfeited as of the date of such termination, and (ii) any Shares for which the Company has not yet
delivered share certificates will be immediately and automatically forfeited and the Company will refund to the
Participant the Option exercise price paid for such Shares, if any.
(d)
Other Termination(cid:17)(cid:3)(cid:3)(cid:44)(cid:73)(cid:3)(cid:68)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:36)(cid:73)(cid:73)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)terminates for any
reason other than death, Disability or Cause, any Option or Stock Appreciation Right held by such Participant may
thereafter be exercised by the Participant, to the extent it was exercisable at the time of such termination, or on such
accelerated basis as the Committee may determine at or after grant, for a period expiring (i) at such time as may be
specified by the Committee at or after grant, or (ii) if not specified by the Committee, then 90 days from the date of
termination of service, or (iii) if sooner than the applicable period specified under (i) or (ii) above, upon the
expiration of the stated term of such Option or Stock Appreciation Right.
Section 8. Restricted Stock.
(a)
Issuance. Restricted Stock may be issued either alone or in conjunction with other Awards. The
Committee will determine the time or times within which Restricted Stock may be subject to forfeiture, and all other
conditions of such Awards. The purchase price for Restricted Stock may, but need not, be zero. The prospective
recipient of an Award of Restricted Stock will not have any rights with respect to such Award, unless and until such
recipient has delivered to the Company an executed Award Agreement and has otherwise complied with the
applicable terms and conditions of such Award.
(b)
Certificates. Upon the Award of Restricted Stock, the Committee may direct that a certificate or
certificates representing the number of shares of common stock subject to such Award be issued to the Participant or
placed in a restricted stock account (including an electronic account) with the transfer agent and in either case
designating the Participant as the registered owner. The certificate(s) representing such shares shall be physically or
electronically legended, as applicable, as to sale, transfer, assignment, pledge or other encumbrances during the
Restriction Period and if issued to the Participant, returned to the Company, to be held in escrow during the
Restriction Period. As a condition to any Award of Restricted Stock, the Participant may be required to deliver to
the Company a share power, endorsed in blank, relating to the Shares covered by such Award.
(c)
Restrictions and Conditions. The Award Agreement evidencing the grant of any Restricted Stock
will incorporate the following terms and conditions and such additional terms and conditions, not inconsistent with
the terms of the Plan, as the Committee deems appropriate in its sole and absolute discretion:
(i)
During a period commencing with the date of an Award of Restricted Stock and ending at
(cid:86)(cid:88)(cid:70)(cid:75)(cid:3) (cid:87)(cid:76)(cid:80)(cid:72)(cid:3) (cid:82)(cid:85)(cid:3) (cid:87)(cid:76)(cid:80)(cid:72)(cid:86)(cid:3) (cid:68)(cid:86)(cid:3) (cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3) (cid:11)(cid:87)(cid:75)(cid:72)(cid:3) (cid:179)Restriction Period(cid:180)(cid:12)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:3) (cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:81)(cid:82)(cid:87)(cid:3) (cid:69)(cid:72)(cid:3)
permitted to sell, transfer, pledge, assign or otherwise encumber Restricted Stock awarded under the Plan.
The Committee may condition the lapse of restrictions on Restricted Stock upon the continued employment
or service of the recipient, the attainment of specified individual or corporate performance goals, or such
other factors as the Committee may determine, in its sole and absolute discretion.
(ii)
While any Share of Restricted Stock remains subject to restriction, the Participant will
have, with respect to the Restricted Stock, the right to vote the Shares, but will not have the right to receive
any cash distributions or dividends prior to the lapse of the Restriction Period underlying such Shares
unless otherwise provided under the applicable Award Agreement or as determined by the Committee. If
any cash distributions or dividends are payable with respect to the Restricted Stock, the Committee, in its
sole discretion, may require the cash distributions or dividends to be subjected to the same Restriction
Period as is applicable to the Restricted Stock with respect to which such amounts are paid, or, if the
Committee so determines, reinvested in additional Restricted Stock to the extent Shares are available under
Section 3(a) of the Plan. A Participant shall not be entitled to interest with respect to any dividends or
distributions subjected to the Restriction Period. Any distributions or dividends paid in the form of
securities with respect to Restricted Stock will be subject to the same terms and conditions as the Restricted
Stock with respect to which they were paid, including, without limitation, the same Restriction Period.
A-8
(iii)
Subject to the provisions of the applicable Award Agreement or as otherwise determined
(cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:15)(cid:3) (cid:76)(cid:73)(cid:3) (cid:68)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:76)(cid:87)(cid:86)(cid:3) (cid:36)(cid:73)(cid:73)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3) (cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
expiration of the applicable Restriction Per(cid:76)(cid:82)(cid:71)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:81)(cid:3)(cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)
to forfeiture will then be forfeited automatically.
Section 9. Restricted Stock Units. Subject to the other terms of the Plan, the Committee may grant
Restricted Stock Units to eligible individuals and may, in its sole and absolute discretion, impose conditions on such
units as it may deem appropriate, including, without limitation, (i) continued employment or service of the recipient
or (ii) the attainment of specified individual or corporate performance goals. Each Restricted Stock Unit shall be
evidenced by an Award Agreement in the form that is approved by the Committee and that is not inconsistent with
the terms and conditions of the Plan. Each Restricted Stock Unit will represent a right to receive from the Company,
upon fulfillment of any applicable conditions, an amount equal to the Fair Market Value (at the time of the
distribution) of one Share. Distributions may be made in cash, Shares, or a combination of both, at the discretion of
the Committee. All other terms governing Restricted Stock Units, such as vesting, time and form of payment and
termination of units shall be set forth in the applicable Award Agreement. The Participant shall not have any
shareholder rights with respect to the Shares subject to a Restricted Stock Unit Award until that Award vests and the
Shares are actually issued thereunder. Subject to the provisions of the applicable Award Agreement or as otherwise
(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:15)(cid:3)(cid:76)(cid:73)(cid:3)(cid:68)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:86)(cid:72)rvice with the Company terminates prior to the Restricted Stock
(cid:56)(cid:81)(cid:76)(cid:87)(cid:3) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3) (cid:56)(cid:81)(cid:76)(cid:87)(cid:86)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:81)(cid:3) (cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:3) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:73)(cid:82)(cid:85)(cid:73)(cid:72)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3) (cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:87)(cid:75)(cid:72)(cid:81)(cid:3) (cid:69)(cid:72)(cid:3)
forfeited automatically.
Section 10. Cash Award. Subject to the other terms of the Plan, the Committee may grant Cash Awards.
An Award Agreement for a Cash Award will indicate the applicable performance period, any applicable
Performance Goals, any applicable designation of the Award as a Performance Award, and the vesting schedule of
the Award. No Participant may be paid more than $500,000 in any calendar year in respect of a Cash Award that is
designated as Performance Award. Unless otherwise provided in an Award Agreement, a Participant must provide
services to the Company or its Affiliates through the last day of the performance period applicable to the Cash
Award in order to be eligible to receive payment. Unless otherwise specified in the Award Agreement, payment in
respect of a Cash Award will be made in cash, by the 15th day of the third month following the year in which such
Award is earned.
Section 11. Performance Based Awards.
(a)
Performance Awards Generally. The Committee may grant Performance Awards in accordance
with this Section 11. Performance Awards may be denominated as a number of Shares or specified number of other
Awards, which may be earned upon achievement or satisfaction of such Performance Goals as may be specified by
the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award
by conditioning the vesting or settlement of the Award upon the achievement or satisfaction of such Performance
Goals as may be specified by the Committee.
(b)
Adjustments to Performance Goals. The Committee may provide, at the time Performance Goals
are established, that adjustments will be made to those performance goals to take into account, in any objective
manner specified by that Committee, the impact of one or more of the following: (A) gain or loss from all or certain
claims and/or litigation and insurance recoveries, (B) the impairment of tangible or intangible assets, (C) stock-
(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:15)(cid:3)(cid:11)(cid:39)(cid:12)(cid:3)(cid:85)(cid:72)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:73)(cid:76)(cid:79)(cid:76)(cid:81)(cid:74)(cid:86)(cid:15)(cid:3)(cid:11)(cid:40)(cid:12)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)
dispositions or acquisitions, (F) loss from the disposal of certain assets, (G) gain or loss from the early
extinguishment, redemption, or repurchase of debt, (H) changes in accounting principles, or (I) any other item, event
or circumstance that would not cause an Award to fail to cons(cid:87)(cid:76)(cid:87)(cid:88)(cid:87)(cid:72)(cid:3) (cid:179)(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3) (cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)-(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:180)(cid:3)
(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3) (cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:20)(cid:25)(cid:21)(cid:11)(cid:80)(cid:12)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:71)(cid:72)(cid:3) (cid:11)(cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3) (cid:86)(cid:88)(cid:70)(cid:75)(cid:3) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:76)(cid:86)(cid:3) (cid:76)(cid:81)(cid:87)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:69)(cid:72)(cid:3) (cid:179)(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3) (cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)-based
(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:180)(cid:12)(cid:17)(cid:3)(cid:3)(cid:36)(cid:81)(cid:3)(cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:72)(cid:86)(cid:70)(cid:85)(cid:76)(cid:69)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)ary, division
or other operational unit of the Company or its Affiliates, as determined by the Committee at the time the
performance goals are established. Any adjustment shall be determined in accordance with generally accepted
accounting principles and standards, unless such other objective method of measurement is designated by the
committee at the time performance objectives are established. In addition, adjustments will be made as necessary to
(cid:68)(cid:81)(cid:92)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:70)(cid:85)(cid:76)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:87)o reflect changes in corporate capitalization, including a
A-9
recapitalization, stock split or combination, stock dividend, spin-off, merger, reorganization or other similar event or
(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:17)
(c)
Other Terms of Performance Awards. The Committee may specify other terms pertinent to a
Performance Award in the applicable Award Agreement, including terms relating to the treatment of that Award in
the event of a Change in Control prior to the end of the applicable performance period. The Participant shall not
have any shareholder rights with respect to the Shares subject to a Performance Award until the Shares are actually
issued thereunder. Subject to the provisions of the applicable Award Agreement or as otherwise determined by the
(cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:15)(cid:3) (cid:76)(cid:73)(cid:3) (cid:68)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3) (cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:51)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:51)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:82)(cid:85)(cid:3) (cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:81)(cid:3) (cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:73)(cid:82)(cid:85)(cid:73)(cid:72)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3) (cid:90)(cid:76)(cid:79)(cid:79)(cid:3) (cid:87)(cid:75)(cid:72)(cid:81)(cid:3) (cid:69)(cid:72)(cid:3) (cid:73)(cid:82)(cid:85)(cid:73)(cid:72)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)
automatically.
Section 12. Amendments and Termination. The Board may amend, alter or discontinue the Plan at any
time. However, except as otherwise provided in Section 3, no amendment, alteration or discontinuation will be
made which would impair the rights of a Participant with (cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:3)(cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:85)(cid:3)
(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:68)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:22)(cid:25)(cid:24)(cid:3)(cid:71)(cid:68)(cid:92)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:68)(cid:71)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:85)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)
stockholders in a manner consistent with Treas. Reg. § 1.422-3 (or any successor provision), would: (i) increase the
total number of Shares reserved for issuance hereunder, or (ii) change the persons or class of persons eligible to
receive Awards.
Section 13. Prohibition on Repricing Programs. Neither the Committee nor the Board shall
(i) implement any cancellation/re-grant program pursuant to which outstanding Options or Stock Appreciation
Rights under the Plan are cancelled and new Options or Stock Appreciation Rights are granted in replacement with a
lower exercise or base price per share, (ii) cancel outstanding Options or Stock Appreciation Rights under the Plan
with exercise prices or base prices per share in excess of the then current Fair Market Value per Share for
consideration payable in equity securities of the Company or (iii) otherwise directly reduce the exercise price or base
price in effect for outstanding Options or Stock Appreciation Rights under the Plan, without in each such instance
obtaining shareholder approval.
Section 14. Conditions Upon Grant of Awards and Issuance of Shares.
(a)
The implementation of the Plan, the grant of any Award and the issuance of Shares in connection
(cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:76)(cid:86)(cid:86)(cid:88)(cid:68)(cid:81)(cid:70)(cid:72)(cid:15)(cid:3) (cid:72)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72)(cid:3) (cid:82)(cid:85)(cid:3) (cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:80)(cid:68)(cid:71)(cid:72)(cid:3) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:51)(cid:79)(cid:68)(cid:81)(cid:3) (cid:86)(cid:75)(cid:68)(cid:79)(cid:79)(cid:3) (cid:69)(cid:72)(cid:3) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)
procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the
Awards made under the Plan and the Shares issuable pursuant to those Awards.
(b)
No Shares or other assets shall be issued or delivered under the Plan unless and until there shall
have been compliance with all applicable requirements of Applicable Law, including the filing and effectiveness of
the Form S-8 registration statement for the Shares issuable under the Plan, and all applicable listing requirements of
any stock exchange on which Shares are then listed for trading.
Section 15. Limits on Transferability; Beneficiaries. No Award or other right or interest of a Participant
under the Plan shall be pledged, encumbered, or hypothecated to, or in favor of, or subject to any lien, obligation, or
liability of such Participant to, any party, other than the Company, any Subsidiary or Affiliate, or assigned or
transferred by such Participant other than by will or the laws of descent and distribution, and such Awards and rights
shall be exercisable during the lifetime of the Participant only by the Participant or his or her guardian or legal
representative. Notwithstanding the foregoing, the Committee may, in its discretion, provide that Awards or other
rights or interests of a Participant granted pursuant to the Plan (other than an Incentive Stock Option) be
transferable, without consideration, to immediate family members (i.e., children, grandchildren or spouse), to trusts
for the benefit of such immediate family members and to partnerships in which such family members are the only
partners. The Committee may attach to such transferability feature such terms and conditions as it deems advisable.
In addition, a Participant may, in the manner established by the Committee, designate a beneficiary (which may be a
person or a trust) to exercise the rights of the Participant, and to receive any distribution, with respect to any Award
upon the death of the Participant. A beneficiary, guardian, legal representative or other person claiming any rights
under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any
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Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any
additional restrictions deemed necessary or appropriate by the Committee.
Section 16. Withholding. No later than the date as of which an amount first becomes includible in the
gross income of the Participant for federal income tax purposes with respect to any Award under the Plan, the
Participant will pay to the Company, or make arrangements satisfactory to the Company regarding the payment of,
any federal, state or local taxes of any kind required by law to be withheld with respect to such amount. The
minimum required withholding obligations may be settled with Shares, including Shares that are part of the Award
that gives rise to the withholding requirement. Notwithstanding the immediately preceding sentence, the Company,
in its discretion, may withhold Shares having a Fair Market Value up to, but not in excess of, the maximum statutory
withholding requirements. The obligations of the Company under the Plan will be conditioned on such payment or
arrangements and the Company will have the right to deduct any such taxes from any payment of any kind otherwise
due to the Participant.
Section 17. Liability of Company.
(a)
Inability to Obtain Authority. If the Company cannot, by the exercise of commercially reasonable
efforts, obtain authority from any regulatory body having jurisdiction for the sale of any Shares under this Plan, and
(cid:86)(cid:88)(cid:70)(cid:75)(cid:3) (cid:68)(cid:88)(cid:87)(cid:75)(cid:82)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3) (cid:76)(cid:86)(cid:3) (cid:71)(cid:72)(cid:72)(cid:80)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:70)(cid:82)(cid:88)(cid:81)(cid:86)(cid:72)(cid:79)(cid:3) (cid:87)(cid:82)(cid:3) (cid:69)(cid:72)(cid:3) (cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:79)(cid:68)(cid:90)(cid:73)(cid:88)(cid:79)(cid:3) (cid:76)(cid:86)(cid:86)(cid:88)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:82)(cid:86)(cid:72)(cid:3) (cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
Company will be relieved of any liability for failing to issue or sell those Shares.
(b)
Grants Exceeding Allotted Shares. If Shares subject to an Award exceed, as of the date of grant,
the number of Shares which may be issued under the Plan without additional shareholder approval, that Award will
be contingent with respect to such excess Shares, on the effectiveness under Applicable Law of a sufficient increase
in the number of Shares subject to this Plan.
(c)
Rights of Participants and Beneficiaries. The Company will pay all amounts payable under this
Plan only to the applicable Participant, or beneficiaries entitled thereto pursuant to this Plan. The Company will not
be liable for the debts, contracts, or engagements of any Participant or his or her beneficiaries, and rights to cash
payments under this Plan may not be taken in execution by attachment or garnishment, or by any other legal or
equitable proceeding while in the hands of the Company.
Section 18. General Provisions.
(a)
The Board may require each Participant to represent to and agree with the Company in writing that
the Participant is acquiring securities of the Company for investment purposes and without a view to distribution
thereof and as to such other matters as the Board believes are appropriate.
(b)
(cid:55)(cid:75)(cid:72)(cid:3) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3) (cid:86)(cid:75)(cid:68)(cid:79)(cid:79)(cid:3) (cid:69)(cid:72)(cid:3) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:85)(cid:72)(cid:70)(cid:82)(cid:88)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3) (cid:82)(cid:90)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3) (cid:83)(cid:82)licies, as in
effect from time to time.
(c)
All certificates for Shares or other securities delivered under the Plan will be subject to such share-
transfer orders and other restrictions as the Board may deem advisable under the rules, regulations and other
requirements of the Securities Act of 1933, as amended, the Exchange Act, any stock exchange upon which the
Shares are then listed, and any other Applicable Law, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(d)
Nothing contained in the Plan will prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval if such approval is required.
(e)
Neither the adoption of the Plan nor the execution of any document in connection with the Plan
will: (i) confer upon any employee or other service provider of the Company or an Affiliate any right to continued
employment or engagement with the Company or such Affiliate, or (ii) interfere in any way with the right of the
Company or such Affiliate to terminate the employment or engagement of any of its employees or other service
providers at any time.
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(f)
Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under
any law, government regulation or stock exchange listing requirement, will be subject to such deductions and
clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing
requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock
exchange listing requirement).
Section 19. Effective Date of Plan(cid:17)(cid:3)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:3)(cid:69)(cid:72)(cid:70)(cid:68)(cid:80)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:81)(cid:3)(cid:48)(cid:68)(cid:92)(cid:3)(cid:21)(cid:19)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)Effective Date(cid:180)(cid:12)(cid:15)(cid:3)
upon its approval by the holders of a majority of the voting power of the shares deemed present and entitled to vote
at the Annual Meeting of Shareholders of Peoples Financial Services Corp.
Section 20. Term of Plan. Unless the Plan shall theretofore have been terminated in accordance with
Section 12, the Plan shall terminate on the 10-year anniversary of the Effective Date, and no Awards under the Plan
shall thereafter be granted.
Section 21. Invalid Provisions. In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any Applicable Law, such invalidity or unenforceability will not be construed as
rendering any other provisions contained herein as invalid or unenforceable, and all such other provisions will be
given full force and effect to the same extent as though the invalid or unenforceable provision was not contained
herein.
Section 22. Governing Law. The Plan and all Awards granted hereunder will be governed by and
construed in accordance with the laws and judicial decisions of the Commonwealth of Pennsylvania, without regard
to the application of the principles of conflicts of laws.
Section 23. Notices. Any notice to be given to the Company pursuant to the provisions of this Plan must
be given in writing and addressed, if to the Company, to its principal executive office to the attention of its Chief
Financial Officer (or such other Person as the Company may designate in writing from time to time), and, if to a
(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:71)(cid:71)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:81)(cid:72)(cid:79)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:86)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:87)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:82)(cid:87)her address as that Participant
may hereafter designate in writing to the Company. Any such notice will be deemed duly given: if delivered
personally or via recognized overnight delivery service, on the date and at the time so delivered; if sent via
telecopier or email, on the date and at the time telecopied or emailed with confirmation of delivery; or, if mailed,
five (5) days after the date of mailing by registered or certified mail.
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P EOP L E S F IN A NCI A L SE R V IC E S C ORP.
150 North Washington Avenue | Scranton | PA | 18503
psbt.com | 888 868 3858