CPP COMPENSATION LIMITATION AGREEMENT
Exhibit
10.2
1st
Source Corporation (the “Company”) anticipates entering
into a Securities Purchase Agreement (the “Investment Agreement”), with
the United States Department of Treasury (the “Treasury”) that provides for
the Company’s participation in the Treasury’s TARP Capital Purchase Program (the
“CPP”). If the
Company does not participate or ceases at any time to participate in the CPP,
this letter shall be of no further force and effect.
For the
Company to participate in the CPP and as a condition to the closing of the
investment contemplated by the Investment Agreement, the Company is required to
establish specified standards for incentive compensation to its senior executive
officers and to make changes to its compensation arrangements. To comply
with these requirements, and in consideration of the benefits that you will
receive as a result of the Company’s participation in the CPP, you agree as
follows:
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1.
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No Golden Parachute
Payments. The Company is prohibiting any Golden Parachute
Payment to you during any “CPP Covered Period.” A “CPP Covered
Period” is any period during which (A) you are a Senior Executive Officer
and (B) the Treasury holds an equity or debt position acquired from the
Company in the CPP.
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2.
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Recovery of Bonus and
Incentive Compensation. Any bonus and incentive compensation
paid to you during a CPP Covered Period is subject to recovery or
“clawback” by the Company if the payments were based on materially
inaccurate financial statements or any other materially inaccurate
performance metric criteria.
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3.
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Compensation Program
Amendments. You and the Company hereby agree and consent
to any amendments required to be made to the Company’s compensation,
bonus, incentive, deferred compensation and other benefit plans,
arrangements and agreements (including golden parachute, severance, change
in control and employment agreements) (collectively, “Benefit Plans”) to give
effect to Provisions 1 and 2 above. For reference, possible
affected Benefit Plans are set forth in Appendix A to
this letter, but there may be other Benefit Plans affected by these
requirements.
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The
Company is also required to review its Benefit Plans to ensure that they do not
encourage Senior Executive Officers to take unnecessary and excessive risks that
threaten the value of the Company. To the extent any such review requires
revisions to any Benefit Plan with respect to you, you and the Company hereby
agree to negotiate such changes promptly and in good faith so as not to
encourage unnecessary and excessive risks.
This
letter shall be interpreted in light of the following definitions:
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a.
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“Senior
Executive Officer” means the Company’s “senior executive officers” as
defined in subsection 111(b)(3) of the
EESA.
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b.
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“Golden
Parachute Payment” has the meaning set forth at 31 C.F.R. § 30.9 (as in
effect on the Closing Date).
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c.
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“EESA”
means the Emergency Economic Stabilization Act of 2008 as implemented by
guidance or regulation issued by the Department of the Treasury and as
published in the Federal Register on October 20,
2008.
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d.
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The
term “Closing Date” means the date the transaction between the Company and
the Treasury closes.
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e.
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The
term “Company” includes any entities treated as a single employer with the
Company under 31 C.F.R. § 30.1(b) (as in effect on the Closing
Date).
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f.
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The
term “CPP Covered Period” shall be limited by, and interpreted in a manner
consistent with, 31 C.F.R. § 30.10 (as in effect on the Closing
Date).
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Provisions
1 and 2 of this letter are intended to, and will be interpreted,
administered and construed to comply with Section 111 of the EESA (and, to
the maximum extent consistent with the preceding, to permit operation of the
Benefit Plans in accordance with their terms before giving effect to this
letter). To the extent not subject to federal law, this letter will be
governed by and construed in accordance with the laws of the State of
Indiana. This letter may be executed in two or more counterparts, each of
which will be deemed to be an original. A signature transmitted by
facsimile will be deemed an original signature.
In
consideration for the benefits I will receive as a result of participation by my
employer and/or its affiliates in the United States Department of the Treasury’s
TARP Capital Purchase Program and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, I agree with and
accept the foregoing terms on the date set forth below.
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Xxxxxxxxxxx
X. Xxxxxx III
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Date:
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Agreed
to:
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1st
Source Corporation
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By:
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Xxxxx
X. Xxxxxxx, Senior Vice President, Treasurer and Chief Financial
Officer
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2
APPENDIX
A
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1.
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Employment
Agreement of Xxxxxxxxxxx X. Xxxxxx III, dated January 1,
2008
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2.
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1st
Source Corporation Employee Stock Purchase
Plan
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3.
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1st
Source Corporation 1982 Executive Incentive Plan, as
amended
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4.
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1st
Source Corporation 1982 Restricted Stock Award Plan, as
amended
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5.
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1st
Source Corporation 1992 Stock Option Plan, as
amended
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6.
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1st
Source Corporation 2001 Stock Option Plan, as amended
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| 7. | 1st Source Corporation 1998 Performance Compensation Plan |
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