EXHIBIT 10.1
FARMERS NATIONAL BANK
EXECUTIVE MANAGEMENT
BONUS PROGRAM
I. EFFECTIVE DATE
The program will be in effect from January 1, 2006 through December 31,
2006.
II. PURPOSE
The Farmers National Bank Executive Management Bonus Program ("the Plan")
is intended to provide an annual bonus that will reward the performance of
the members of Executive Management for directing the profitability of the
institution.
The Plan will be reviewed on an annual basis by the Board's Human Resources
Committee and based on business conditions and recommendations will be
submitted to the full Board of Directors for approval.
III. ELIGIBILITY
All Executive Management level employees who meet the following criteria:
- -- Have been employed for at least 6 months as of December 31, 2006. (Those
employees who worked less than the entire 2006 calendar year will receive a
pro-rated payment based on the number of months employed.)
- -- Have received a performance evaluation of at least "Meets Expectations".
A. Time missed in excess of accrued vacation paid and normal absence days
will not be credited as time worked for purposes of plan payment.
B. Employees will not receive any portion or payment under the Plan
unless the established goals have been attained.
C. An individual's participation is not assurance of participation in
future years.
IV. METHOD OF COMPENSATION
Direct deposit into employee payroll account.
V. TIMING OF BONUS PAYMENTS
A. To be entitled to receive a payment as described in this policy, it is
an expressed condition that the participant be employed with Farmers
National Bank as of the date of payment.
B. Payments under the Plan shall be made as soon as practicable after the
organization's consolidated financial statements for the fiscal year
period have been completed. Payment of the bonus awards shall be
subject to withholdings in an amount sufficient to pay any tax
required by law to be withheld and paid by the organization to
appropriate governmental authorities.
VI. BASIS FOR EARNING BONUS
- -- As an entry point for the Plan, the holding company must realize Return on
Average Equity ("ROE") goals as follows:
o Entry Level 10.54%
o Goal 10.64%
o Maximum 11.13%
(Note: The ROE goal must be attained net of all bonus and profit sharing
accruals.)
Return on Average Equity is defined as total average capital less
unrealized gains/losses on available for sale (AFS) securities.
- -- Eligible Executive Management employees would receive the following
percentage of their annual salary:
Entry Goal Maximum
----- ---- -------
o President 20% 25% 30%
o Senior Vice-President
Chief Lending Officer 15% 20% 25%
o Senior Vice-President
Chief Operating Officer 15% 20% 25%
o Vice-President
Human Resources Director 10% 15% 20%
o Vice-President
Controller 10% 15% 20%
- -- The actual amount paid will be based on the availability of sufficient Plan
accrual. If sufficient accrual is not available, payments will be limited
and distributed on a pro-rata basis.
VII. CHANGE OF EMPLOYMENT STATUS
A. In the event that an employee ceases to be employed by the
organization prior to the payout date, bonus payments under the Plan
for the award period shall be treated as follows:
If the termination is due to retirement, death or disability,
payments, if earned, shall be paid to the employee at the normal
payment date, with payment reduced pro-rata for the number of full
months in which the employee was not employed during the award period.
For purposes of this determination, employment services must exceed
six months. No payments shall be made unless the Committee, in its
sole discretion, determines that a payout should be made.
B. In the event that an employee's position status changes such that the
change increases or decreases salary grade level during the plan year,
while continuing to meet the eligibility requirements for the Plan,
bonus awards under the Plan shall be prorated based on time in
position.
VIII. PLAN COMMITTEE
A. The Plan will be administered by the Human Resources Committee.
B. The Human Resources Committee shall have the full and complete
authority in its sole discretion, but subject to the expressed
provisions of the Plan to:
1. determine the eligibility criteria for participation under the
Plan;
2. determine the time such bonus awards shall be granted;
3. establish the terms and conditions upon which such bonus awards
shall be made and become payable; and
4. adopt such rules and regulations deemed necessary or desirable
for administration of the Plan.
The Human Resources Committee shall determine any facts necessary for the
administration of the Plan and respond to any questions concerning
interpretation or administration of the Plan. The good faith determination made
by the Human Resources Committee in response to such questions shall be final
and conclusive upon all parties.
IX. NON-EMPLOYMENT CONTRACT
Nothing contained herein may be interpreted as an employee contract for a
particular position. Further, nothing contained in the Plan shall in any way be
construed as to amend or modify Farmers National Bank's at will relationships
with participants.