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10.2
Form of Letter Agreement Amending Employment Agreements of James D. Rickard,
Paul A. Chrisco, Michael K. Bauer, Kevin J. Cecil and Bill D. Wright

 
 

 
 

 
 
May [___], 2009
 
[Senior Executive Officer]
Community Bank Shares of Indiana, Inc.
101 West Spring Street
New Albany, IN  47150
 
Dear [Senior Executive Officer],
 
 
          Community Bank Shares of Indiana, Inc. (the “Company”) anticipates
entering into a Securities Purchase Agreement (the “Purchase Agreement”) with
the United States Department of Treasury (the “Treasury”) that provides, among
other things, for the Treasury’s purchase of Company securities. This purchase
is anticipated to occur as part of the Company’s participation in the Treasury’s
Troubled Asset Relief Program (“TARP”) - Capital Purchase Program (the
“CPP”).  If the Company does not participate or ceases at any time to
participate in TARP, this letter shall be of no further force and effect.
 
 
          As a condition to the closing of the investment contemplated by the
Purchase Agreement, the Company is required to take certain actions with respect
to compensation arrangements of some of its executive officers. For purposes of
the CPP, the Company has determined that you are or may be a Senior Executive
Officer (defined below) or one of the next 5 most highly-compensated employees
of the Company.  To comply with the requirements of the CPP, and in
consideration of the benefits that you will receive because of the Company’s
participation in the CPP and for other good and valuable consideration, the
sufficiency of which you hereby acknowledge, you agree as follows:
 
 
            (1)           No Golden Parachute (Severance) Payments. The Company
may not pay and you will not be entitled to receive from the Company any Golden
Parachute Payment (as defined below) during any Restricted Period (defined
below).
 
 
            (2)           Recovery of Bonus and Incentive Compensation.  Any
bonus, retention award or incentive compensation paid to you during the
Restricted Period or prior to the Restricted Period is subject to recovery or
“clawback” by the Company if the payments were based on materially inaccurate
statements of earnings, revenues, gains or other criteria.  In such an event,
you will be required to and shall return to the Company any bonus, retention
award or incentive compensation paid to you by the Company if such bonus,
retention award or incentive compensation was paid to you based on materially
inaccurate statements of earnings, revenues, gains or other criteria.
 
 
            (3)           Compensation Program Amendments. Each of the Company’s
compensation, bonus, incentive and other benefit plans, arrangements and
agreements, including your employment agreement (the “Employment Agreement”),
and compensation policies (all such plans, arrangements and agreements, and
policies, the “Compensation Plans”) are hereby amended with respect to you to
the extent necessary to give effect to provisions (1) and (2) of this letter,
and you agree to execute any further amendments as may be necessary to implement
the agreements contained in this letter.
 
 
            (4)           Compensation Plan Review.  In addition, the Company is
required to review its Compensation Plans to ensure that the Compensation Plans
do not (a) provide incentives or otherwise encourage its Senior Executive
Officers to take unnecessary and excessive risks that threaten the value of the
Company, (b) encourage manipulation of the Company’s reported earnings to
enhance compensation of any employees or (c) commit the Company to make
excessive or luxury expenditures as identified under EESA (defined below).  To
the extent any such review requires revisions to any Compensation Plan, you
agree that the Company may implement unilaterally such changes to the
Compensation Plans that the Company determines are necessary because of such
review of its Compensation Plans.
 
 

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            (5)           Bonus Restriction.  If you are the most highly
compensated employee of the Company, to the extent required by Section 111 of
EESA, you will not receive or accrue during the Restricted Period any bonus,
retention award or incentive compensation except as described in the next
sentence.  This prohibition does not apply to the award of long-term restricted
stock in a year that (i) does not fully vest during the Restricted Period, (ii)
does not have a value of greater than one-third of your total annual
compensation amount for such year and (iii) is subject to such other terms and
conditions as the Treasury may determine are in the public interest.
 
 
            (6)           Definitions and Interpretation. This letter shall be
interpreted as follows:
 
 
· “Company” includes any entities treated as a single employer with the Company
under EESA, including Your Community Bank and The Scott County State Bank.  You
are also delivering a waiver pursuant to the Securities Purchase Agreement, and,
as between the Company and you, the term “employer” in that waiver will be
deemed to mean the Company as used in this letter. 
 
 
· “EESA” means the Emergency Economic Stabilization Act of 2008, as amended, and
any future amendments thereto and regulations and other authorized guidance
issued thereunder.
 
 
· “Golden Parachute Payment” means any payment upon departure from employment
for any reason, except for payments for services performed or benefits accrued,
pursuant to subsection 111(a)(2) of EESA.
 
 
· “Restricted Period” means any period that the Investor under the Purchase
Agreement owns any debt or equity securities of the Company acquired pursuant to
the Purchase Agreement or the Warrants issued thereunder.
 
 
·  “Senior Executive Officer” means an individual who is 1 of the top 5 most
highly paid executives of the Company, whose compensation is required to be
disclosed pursuant to the Securities Exchange Act of 1934, and any regulations
issued thereunder, pursuant to subsection 111(a)(1) of EESA, as determined in
accordance with EESA.
 
 
· This letter is intended to, and shall be interpreted, administered and
construed to comply with Section 111 of EESA (and, to the maximum extent
consistent with the preceding, to permit operation of the Compensation Plans in
accordance with their terms before giving effect to this letter).
 
 
            (7)           Payments following TARP Participation.   Once the
Restricted Period has ended and if applicable law permits, the Company will pay
you all cash amounts, if any, it would have paid to you as a result of any
event(s) that occurred during the Restricted Period that would have entitled you
to cash payment rights under your employment agreement with the Company.  Any
such payment amounts will not accrue interest.
 
            (8)          Termination of Noncompetition Provisions in Employment
Agreement.  If, during the Restricted Period, your employment is terminated by
the Company under your Employment Agreement for other than Cause, Disability,
Retirement or Death, of if, during the Restricted Period, your employment is
terminated by you due to a material breach of the Employment Agreement which has
not been cured within fifteen (15) days after a written notice of non-compliance
has been given by you to the Company, then the provisions in your Employment
Agreement prohibiting you from competing with or being employed by any company
that competes with the Company within a certain geographic region shall not
apply to you, but the provisions of the Employment Agreement prohibiting you
from soliciting or attempting to entice away any employees, customers, projects,
loan arrangements or prospective business opportunities of the Company shall
continue in force and shall be enforceable against you for a period of one year
following your termination of employment with the Company.
 

 
 

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            (9)           Miscellaneous. 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 an original. A signature transmitted
by facsimile will be deemed an original signature.
 
 
We appreciate the concessions you are making and look forward to your continued
leadership during these financially turbulent times.
 
 
Sincerely,
                                   
                                                                                               
Community Bank Shares of Indiana, Inc.
 
 
                                    
 
By:  _________________________________ 
                                                                                                      
Name:
                                                                                                      
Title:
Intending to be legally bound,
I agree with and accept the foregoing
terms on the date set forth below.
 
                                                                         
 
 
By:
____________________________                                                                            
 
Name:   [Senior Executive Officer]
Title:                                                                       
Date:                                                                       

 
 

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