Establishment and Purposes of the Committee
The Compensation Committee (the Committee) is appointed by the Board of Directors (the Board) of Paragon National Bank (the Company). The Committee's purpose is to assist the Board in:
A. Fulfilling its responsibilities relating to the compensation of executive officers of the Company including ensuring that all executive compensation matters are to be decided in the context of what is fair, appropriate, reasonable, and in compliance with all relevant regulations;
B. Developing and maintaining compensation programs that are designed to:
1. reward high performance, promote accountability and adherence to the Company's values and code of ethics;
2. align employee interests with the interests of the Company's shareholders, through the use of equity plans approved by the Board; and
3. attract, develop, and retain talented leadership to serve the long-term best interests of the Company.
C. Producing the compensation committee report for inclusion in the Company's proxy statement for the annual meeting of stockholders, in accordance with applicable rules and regulations; and
D. Performing such other duties and responsibilities enumerated in and consistent with this charter.
The Committee shall consist solely of three or more members of the Board each of whom the Board has determined has no material relationship with the Company and each of whom is otherwise "independent" under the rules of the New York Stock Exchange and/or NASDAQ.
Members shall be appointed by the Board and shall serve at the pleasure of the Board and for such term or terms as the Board may determine.
Committee Meetings and Structure
1. The Committee shall meet as frequently as the Committee deems necessary, but no less than three times per year, at a time and place determined by the Committee chairman, and the Committee may take action at meetings or by unanimous written consent as it or its chairman deems appropriate. Members of the Committee may participate in a meeting of the Committee by means of conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other.
2. The Committee may form and delegate to one or more subcommittees all or a portion of the Committee's authority, duties and responsibilities. The Committee also may establish such rules as it determines necessary or appropriate for its business.
3. The Committee shall hire and have unfettered access to consultants of their choosing.
Committee Authority and Responsibilities
In furtherance of its purpose set forth above, the Committee will have the following authority and responsibilities:
A. Executive Compensation Matters
1. In consultation with management, approve the Company's executive compensation philosophy and oversee and monitor the Company's executive compensation plans and programs to determine whether they are properly aligned with the Company's strategic and financial objectives.
2. Review and approve all Company goals and objectives relevant to the Chief Executive Officer's compensation; evaluate the Chief Executive Officer's performance in light of those goals and objectives; determine and approve the Chief Executive Officer's compensation (including base salary, incentive compensation , long-term compensation, executive benefits, and perquisites) based on this evaluation; and review the Committee's decisions with the Board.
3. Approve the compensation (including base salary, incentive compensation and long-term compensation) of other executive officers and such senior officers as the Committee determines appropriate.
4. In determining the long-term incentive award component of compensation for the Chief Executive Officer and other executive officers, the Committee shall consider the Company's performance and relative shareholder return, the award practices of the relevant peer group of competitive financial institutions, the awards given in past years, the Committee's assessment of the current and expected contribution of those individuals to the Company's success, and such other factors as the Committee considers appropriate.
5. Review the Company's policies regarding the tax deductibility of compensation paid to executive officers for purposes of Internal Revenue Code Section 162(m) and, as and when appropriate, establish performance goals and certify that performance goals have been attained.
6. In consultation with management, oversee regulatory compliance with respect to compensation matters, including overseeing the Company's policies on structuring compensation programs to preserve tax deductibility, and, as and when required, establishing performance goals and certifying that performance goals have been attained for purposes of Section 162(m) of the Internal Revenue Code.
7. Review and approve any employment agreement, new hire award or new hire payment proposed to be made with or to any proposed or current member of executive management.
8. Review and approve any severance, change-in-control or similar termination agreement, award or payment proposed to be made with or to current or former member of executive management.
B. Executive Compensation Plans; Benefit Plans
9. Administer the Company's executive compensation plans, top-hat plans or other arrangements providing for benefits to officers of the Company and its subsidiaries ("executive compensation plans") in accordance with the terms of the plans and any rules and regulations thereunder, and in the discretion of the Committee to delegate, to the fullest extent permitted by applicable law and the relevant plans, all or a portion of its powers and responsibilities with respect to such plans to the Chief Executive Officer of the Company or another body or committee; provided, however, that the Committee shall retain all power and responsibility with respect to awards granted to executive officers.
10. Designate the employees eligible to be granted awards under the Company's executive compensation plans, and the type, amount, and timing of such awards; provided, however, that the committee may delegate, to the fullest extent permitted by applicable law and the relevant plans, to the Chief Executive Officer of the Company or another body or committee its responsibilities to approve awards to employees of the corporation and its subsidiaries other than executive officers.
11. Review and approve the creation, termination and amendment of executive compensation plans, and to the extent the delegation of such powers and responsibilities is consistent with such executive compensation plans, the committee may delegate, to the fullest extent permitted by applicable law, to the Chief Executive Officer of the Company or another body or committee the power to take any of the foregoing actions.
12. Review periodically the administration of all of the Company's pension, profit sharing and welfare employee benefit plans, other than executive compensation plans ("Plans"), select and appoint Plan administrators, trustees, Named Fiduciaries, actuaries, and investment managers (and allocate assets of the Plans among investment managers, if any) and, consistent with the terms of the Plans, the committee may delegate, to the fullest extent permitted by applicable law, to the Chief Executive Officer of the Company or another body or committee the authority to make such selections, appointments and allocations.
13. Review and approve the creation of new Plans of the Company, Plan terminations and Plan amendments, and, to the extent that delegation of such powers and responsibilities is consistent with the Plans, the committee may delegate, to the fullest extent permitted by applicable law, to the Chief Executive Officer of the Company or another body or committee the power to take any of the foregoing actions.
C. Executive Officers
14. Review and approve or disapprove the holding or assuming of any office or board membership or similar position with any non-affiliated corporation or other entity by any Section 16 Officer; provided, however, that action of the committee shall not be required for holding positions with any "not-for-profit" entity, including any civic, religious, community, or charitable institution. The committee shall act upon the written recommendation of the Chief Executive Officer, and no Section 16 Officer shall accept or stand for election for any such position without the prior approval of this committee.
D. Director Compensation; Proxy Report; Management Succession
15. Administer the Companyâ€™s director compensation plans; review and evaluate on an annual basis the overall compensation of the directors, including the appropriate mix of cash versus equity-based compensation; make recommendations to the Board regarding any proposed changes in director compensation.
16. Produce the compensation committee report for inclusion in the Company's annual proxy statement, review for accuracy and recommend for inclusion in the proxy the Compensation Discussion and Analysis report filed by the Principal Executive Officer and Principal Financial Officer of the Company.
17. Advise and consult with management on succession planning and other significant human resources matters, as appropriate.
E. Procedural Matters
18. The Committee shall make periodic reports to the Board summarizing the matters reviewed and actions taken at each Committee meeting on a schedule no less than once a year.
19. The Committee shall review and reassess the adequacy of this Charter on an annual basis and recommend any proposed changes to the Governance Committee for approval.
20. The Committee may perform any other activities consistent with this Charter, the Company's Certificate of Incorporation and Bylaws, and governing law as the Committee or the Board deems appropriate.
21. The Committee shall have direct access to, and complete and open communication with, management and may obtain advice and assistance from legal, accounting or other advisors to assist it.
22. In the course of performing its duties and responsibilities, the Committee also is authorized to select, retain, terminate, and approve the fees and other retention terms of independent legal, accounting or other advisors as it deems appropriate, without seeking approval of management or the Board. The Company shall be responsible for all costs or expenses so incurred. Without limiting the generality of the foregoing, the Committee in its sole discretion may retain the services of outside compensation consultants to assist the Committee in the evaluation of CEO and other executive officer compensation and in making other determinations with respect to compensation matters that are within the authority of the Committee. The Committee shall have the sole authority to retain and terminate such consultants and to approve the fees and other retention terms for such consultants.