COMPENSATION/HUMAN RESOURCES COMMITTEE CHARTER
The Compensation/Human Resources Committee (“C/HRC”) is appointed by the Board of Directors (the “Board”) of Citizens Financial Services, Inc. (the “Company”) (1) to review, determine and implement the Company’s compensation philosophy and the compensation of executive officers, (2) administer the Company’s incentive compensation and benefit plans and make recommendations to the Board regarding the adoption of or any amendment to the Company’s incentive compensation and benefit plans, (3) if required, produce an annual report on executive officer compensation for inclusion in the Company's proxy statement or Annual Report on Form 10-K (the “Form 10-K”) and (4) otherwise carry out the duties and responsibilities set forth in this Charter and any other responsibilities or duties that the Board may assign to the C/HRC from time to time.
The C/HRC is comprised of a minimum of three independent directors of the Board. C/HRC members are appointed by the Board on the recommendation of the Governance and Nominating Committee. C/HRC members may be replaced by the Board. The C/HRC's chairperson shall be designated by the Chairman of the Board. Each member of the C/HRC must satisfy the independence requirements of The Nasdaq Stock Market LLC, any rules and regulations promulgated by the SEC and any other applicable laws relating to independence, as determined by the Board in its business judgment. All C/HRC members shall meet the definitions of a “nonemployee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). C/HRC members are prohibited from interlocking or insider participation with any member of the Board or compensation committee of another company.
AUTHORITY AND RESPONSIBILITIES:
- The C/HRC shall review and recommend benefit, compensation, and perquisite plans and arrangements applicable to the executive officers of the Company and First Citizens Community Bank (the “Bank”) for ratification by the Board.
- The C/HRC shall coordinate an evaluation by each of the outside directors on the performance of the Chief Executive Officer (“CEO”). In connection with such evaluation, the outside directors shall convene in executive session without the CEO being present to discuss the annual performance evaluation. The Chairman and Lead Director of the Board will conduct the CEO annual performance evaluation. The Chairman and Lead Director of the Board will request input from the C/HRC and the Board for incorporation during the performance evaluation. The C/HRC shall annually review and recommend corporate goals and objectives to the Chairman and Lead Director of the Board relevant to CEO compensation, evaluate the CEO's performance in light of those goals and objectives, determine and approve the CEO's compensation based on this evaluation, and recommend the CEO's compensation for ratification by the Board. In determining the long-term incentive component of CEO compensation, the C/HRC shall consider, among other factors, the Company's and Bank's performance and relative stockholder return, the value of similar incentive awards to CEOs at comparable companies, and the awards given to the CEO in past years.
- The C/HRC shall review and approve, for the CEO and the current executive officers of the Company and Bank, (a) the annual base salary level, (b) the annual incentive opportunity level, (c) the annual long-term incentive opportunity level, (d) employment agreements, severance arrangements, and change in control agreements, and (e) any special supplemental benefits. The C/HRC shall recommend that the Board ratify the CEO's compensation. The CEO may not be present during voting or deliberations on the CEO’s compensation.
- The C/HRC shall review on an annual basis director compensation and recommend any changes to the Board for approval. Upon the request of the Compensation/Human Resources Committee, senior management shall gather information and present different scenarios on the Company's director compensation practices based on a survey of compensation practices of comparable financial institutions based on factors such as, but not limited to, size, location and/or charter type. The Compensation/Human Resources Committee shall recommend any changes to director compensation to the Board. Any changes to be approved by the Board shall be consistent and competitive with the compensation practices of the Company's competition. Management directors do not receive any additional compensation for their service as directors.
- The C/HRC shall make recommendations to the Board with respect to the Company's and Bank's incentive compensation and benefit plans, which may include amendments to existing plans, cash- and equity-based incentive compensation plans, and non-qualified deferred compensation and retirement plans, and discharge any responsibilities assigned to the C/HRC by any of these plans. Where appropriate or required by law, the C/HRC shall also recommend these plans for approval by the shareholders of the Company.
- The C/HRC shall review and approve any perquisites and benefit policies or programs available to the Company’s executive officers, except to the extent the benefit policies or programs apply to employees of the Company generally.
- The C/HRC shall review and discuss with management the Company’s Compensation Discussion & Analysis (“CD&A”) and recommend to the Board whether the CD&A and related executive compensation information be included in the Company’s proxy statement or Form 10-K.
- If required, the C/HRC shall produce an annual report on executive officer compensation for inclusion in the Company's proxy statement or Form 10-K, in accordance with applicable rules and regulations of the Securities and Exchange Commission.
- The C/HRC shall make recommendations on retaining and terminating any compensation consultant to be used to assist in the evaluation of executive compensation and make recommendations on the consultant's fees and other retention terms for ratification by the Board.
- [The C/HRC shall review and recommend to the Board for approval any employment or post-employment agreement with the Company’s CEO and review and approve any employment or post-employment agreement with any other executive officer, including any benefits to be provided in connection with a change in control.
- The C/HRC shall oversee the Company’s stock ownership guidelines, at least annually review compliance by the Company’s directors and executive officers with these guidelines, and periodically review and recommend changes to the guidelines for approval by the Board.
- The C/HRC shall oversee and, at least annually, review the assessment and mitigation of risks associated with the Company’s compensation policies and practices and incentive compensation arrangements for its employees.
- If required, the C/HRC shall (1) review the results of stockholder advisory votes on executive compensation (“Say-on-Pay Votes”) and, if appropriate, consider these results in connection with the determination of executive compensation and incentive-compensation and equity-based plans and (2) review and recommend to the Board the frequency of Say-on-Pay Votes, taking into account the results of the most recent stockholder advisory vote on frequency of Say-on-Pay Votes required by Section 14A of the Exchange Act.
- The C/HRC shall develop and recommend to the Board for approval a CEO succession plan.
COMMITTEE, STRUCTURE AND OPERATIONS
- The C/HR shall meet with such frequency and at such intervals as it shall determine is necessary to carry out its duties and responsibilities, but in any case, the C/HR shall meet at least three times per year. The C/HR shall establish a schedule of meetings to be held each year and may schedule additional meetings as it determines to be necessary or appropriate. Special meetings may be called by the Chairman of the C/HR or any other member of the C/HR. The C/HR may meet by telephone or videoconference and may take action by unanimous written consent. The C/HR may invite to meetings such officers of the Company or other persons as the C/HR deems necessary or appropriate in its discretion. Minutes of each meeting shall be kept and distributed to each member of the C/HR.
- The C/HR shall have the authority to obtain advice and seek assistance from internal or external legal, accounting or other advisors. The C/HR shall have the sole authority to retain and terminate outside legal or other advisors to the C/HR as it deems necessary or appropriate in its sole discretion. In selecting any such outside advisor, the C/HR shall consider the outside advisor’s independence, as determined by the C/HR in its business judgment. The C/HR shall have the sole authority to approve the fees and other retention terms for such outside advisors. The Company shall provide appropriate funding for payment of the compensation (as determined by the GNC in its sole reasonable opinion) of such outside advisors retained by the C/HR, as well as reasonable ordinary administrative expenses of C/HR that are necessary or appropriate in carrying out its duties.
- The C/HRC may, in its discretion, form and delegate all or a portion of its authority to subcommittees, executive management or the CEO. The C/HRC shall make regular reports to the Board summarizing the matters reviewed and actions taken at each C/HRC meeting.
- The C/HRC shall review and assess the adequacy of this Charter annually. The C/HRC may recommend amendments to this Charter at any time and submit amendments for approval to the Board.
This Charter, as may be amended from time to time, shall be posted on the Company’s website. The Company shall state in its annual proxy statement that this Charter is available on the Company’s website and provide the website address.