ex10.htm


    
      

      
Exhibit
10.2

     

    COMMUNITY
BANK SHARES OF INDIANA, INC.

    PERFORMANCE
UNITS PLAN

     

    1.  Purpose. The Performance
Units Plan (the “Plan”) of Community Bank Shares of Indiana, Inc. (“Company”) is
designed to provide long-term incentive compensation for employees. Its purpose
is to benefit the Company by increasing motivation on the part of its personnel
in key positions who are materially important to the development of the
Company's business. The Plan will create an incentive for them to remain in the
employ of the Company and to work to the very best of their abilities for the
achievement of the Company's strategic growth objectives. This purpose is
intended to be accomplished under the Plan by granting Performance Units
(“Performance Units”) to such key personnel (in addition to their annual cash
compensation, including bonus) which, if performance objectives and/or service
requirements with the Company are achieved, will permit them to share in the
Company's success.

     

     

    2.  Participants.  Participants
in the Plan (“Participants”) shall be full time employees of the Company, its
subsidiaries or any subsidiary of its subsidiaries, who may, but need not be,
officers of the Company or of its subsidiaries or divisions, who are determined
by the Compensation Committee (the “Committee”) of the Board of Directors (the
“Board”) of the Company, in its discretion, to be personnel important to the
growth of the Company, and to whom the Committee shall make any award under the
Plan. Participants in the Plan are required to sign an Acceptance of Award form
which contains, among other things, such non-competition/non-solicitation
covenants as the Committee in its discretion may determine from time to
time.

     

     

    3.  Performance Units; Company
Shares. The total number of Performance Units available under the Plan
shall be 250,000 Performance Units. In the event any award of Performance Units
is cancelled on account of termination of a Participant's employment, failure to
meet performance objectives, or for any other reason, the Committee may again
award the Performance Units canceled to an existing or new
Participant.

     

     

    The total
number of shares of Company common stock (“Shares”) that may be issued in
payment of Performance Units awarded under the Plan shall be 250,000 Shares as
presently constituted. This number shall be adjusted to reflect subsequent stock
dividends, stock splits, spin-offs, spin-outs, reverse stock splits and similar
matters affecting outstanding Shares. Shares not exceeding this number may be
issued in payment of Performance Units awarded under the Plan at the discretion
of the Committee.

     

     

    4.  Performance Period. The
Committee in its discretion may award none, all, or any part of the Performance
Units covered by the Plan as Performance Units. Performance objectives may be
established from time to time by the Committee. Performance objectives need not
be the same in respect to all Participants and may be established separately for
the Company as a whole or for its various groups, divisions and subsidiaries,
all as the Committee may determine, in its discretion. The performance
objectives may include growth in the Company's earnings per share or net income,
increases in the assets or profitability of a division or subsidiary or any
other growth measure the Committee may adopt. Except as provided in Section 11,
the performance period over which achievement of any performance objective shall
be determined shall not be less than two years or more than four years. The
performance period over which achievement of any performance objective is
determined may include the fiscal year during which the Performance Unit to
which the performance objective relates is awarded.

     

     

    Awards of
Performance Units may be conditioned on the Participant's continued employment
by the Company or a subsidiary over the performance period or in any other
manner the Committee may determine.

     

     

    Any award
of Performance Units prior to the date this Plan is approved or ratified by
shareholders of the Company shall be contingent on the approval or ratification
of this Plan by the shareholders of the Company, as contemplated by Section
15.

     

     

    5.  Performance Unit Awards.
Performance Unit Awards shall be made pursuant to performance programs as
follows:

     

     

    (a)  Performance
Programs; Initial Grants. After the approval of this Plan by the Board, and
subject to approval or ratification of this Plan by shareholders, the Committee
shall establish one or more performance programs each with a specified objective
or objectives and a specified performance period over which the specified
objective is targeted for achievement. Participants may be awarded Units in any
one or more of the performance programs. Initial awards in any program shall be
made to such number of Participants as then determined by the Committee. In
making its determination of who shall be Participants in any performance
program, the Committee shall take into account such factors as the Participants'
level of responsibility, job performance, potential for growth, level and types
of compensation and such other factors as the Committee deems
relevant.

     

     

    (b)
Subsequent Awards. During the term of the Plan, additional Performance Units may
be awarded (subject to the maximum number provided for above) in the discretion
of the Committee, either (i) to new Participants in the Plan or (ii) if the
Committee determines circumstances of significant promotion or additional
responsibility so warrant, to any one or more of the initial Participants in the
Plan. In respect of such additional awards, the Committee may make such
adjustments therein as it may deem reasonable on account of any lesser period of
participation in the program by the holder of any subsequent award.

     

     

    (c)
Notice of Awards. Upon the making of any award by the Committee, the Participant
shall be advised of the number of Performance Units awarded and of the terms of
the award. An award to a Participant shall not be effective until the
Participant delivers to the Company an executed written Acceptance of Award, in
such form as the Committee determines, to evidence the Participant's acceptance
of such award and agreement to be bound by the terms and conditions of the award
and this Plan.

     

     

    6.  Performance Unit Payment.
Subject to Section 15, a holder of Performance Units shall be entitled to
receive, if the applicable targeted performance objective is met, an amount
equal to the market value of one Share on the date of the expiration of the
applicable performance period multiplied by the number of Performance Units
awarded. For the purposes hereof market value as of any date shall be the value
as of said date as reasonably determined by the Committee based on market
activity.

     

     

    Notwithstanding
the provisions of the foregoing paragraph, the Committee in its discretion may
establish at the time it establishes the targeted performance objective, a
minimum performance target and may provide for payment on a reduced scale if the
targeted performance objective is not achieved but the minimum performance
target is met or exceeded. Similarly, the Committee in its discretion may
establish at the time it establishes the targeted performance objective enhanced
performance objective(s) and may provide for payment on an increased scale to
the extent both the targeted and enhanced performance objectives are exceeded
subject, however, to the limitation herein on the maximum number of Units and
Shares covered by this Plan.

     

     

    Payment
amounts for Performance Units will be in the form of Shares, except that the
Committee may, in its discretion, authorize payment in cash in lieu of Shares in
an amount sufficient to satisfy applicable tax withholding obligations on
account of such payment.

     

    7.  Distributions. Distribution
of amounts to which a Participant is entitled in respect of Performance Units
shall be made as soon as practicable after the holder of such Performance Units
becomes entitled thereto, but no later than two and one-half months after such
date; provided, however, that if the payment amounts for the Performance Units
constitute nonqualified deferred compensation pursuant to Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), and if
the  Participant is a “specified employee” as that term is defined
under Section 409A(a)(2)(B) of the Code, the payment amount for the Performance
Units shall be made on the first business day of the seventh month following the
date of the Change in Control of the Company or other event that triggers
Section 409A of the Code.

    


    8. Conditions to Payments.
Except as otherwise herein provided or determined by the Committee, a
Participant, in order to be entitled to receive any payment on Performance Units
awarded to him, must be in the employ of the Company or subsidiary of the
Company on the expiration of the relevant performance period and must have been
continuously in the employ of the Company or a subsidiary from the time of the
award of the Performance Units to him, except for leaves of absence, which may
be approved by the Committee. No vested interest in any payment under the Units
shall accrue during the term of the performance period and no payment in respect
of the Units shall be required to be made to any Participant whose employment
with the Company or a subsidiary is terminated, with or without cause, prior to
the time he is entitled to receive a distribution hereunder; provided, however,
that the Committee, in its absolute discretion, may make such pro-rata or other
payment (or no payment), as it may determine, to a Participant whose employment
terminates (on account of death, disability, or retirement) prior to the time he
is entitled to receive distribution on his Performance Units. If termination is
on the account of death, the Committee may make payment of any distribution it
authorizes to the Participant's surviving spouse, heirs or estate, as the
Committee may determine.

     

    9.  Committee Membership;
Authority. The Plan shall be administered by the members of the
Committee, so long as it shall consist solely of two or more members of the
Board who are non-employee directors as defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the “1934 Act”), as in effect from
time to time. In the event said Committee, by reason of changes in its
membership, shall no longer be so qualified, the Board shall appoint a new
Committee to administer the Plan, whose members shall cause the Committee to
qualify under Rule 16b-3. The Committee shall have plenary authority and
discretion to interpret the Plan, to establish any rules or regulations relating
to the Plan which it determines to be appropriate, and to make any other
determination which it believes necessary or advisable for the proper
administration of the Plan. All decisions and determinations by the Committee
with respect to the Plan and its administration, including, without limitation,
the establishment of programs, the award of Performance Units and the
determination of whether performance objectives have been achieved or
Performance Units are payable, shall be final and binding.

     

     

    10.  Determination of Achievement of
Objectives.  Without limiting its authority as provided for in
the preceding Section, the Committee in regard to any performance program
adopted by it, may thereafter change or modify the terms of the program and
shall determine whether any performance objective of any program has been met.
For this purpose, if the targeted objective shall be growth in assets, earnings,
profitability or other target determined by reference to the Company's accounts,
the Committee shall use the accounting results, as audited at the end of any
fiscal year by Company's independent certified accountants, provided that the
Committee, in its discretion, shall have the authority for the purposes of the
Plan to adjust such results for any factors it deems relevant, including,
without limitation, changes in accounting methods, changes in corporate
taxation, or any extraordinary nonrecurring event causing dilution or diminution
in the Company's earnings, all as the Committee may in its discretion deem
necessary or desirable to accomplish the purpose of the performance
program.

     

     

    11. Change in Control of the
Company. In the event of a Change of Control (as hereinafter defined)
each Participant then holding an award of Performance Units shall, subject to
Section 15, be entitled to receive payment thereof, free of any conditions, in
an amount determined as follows:

     

     

    (a)  if
the targeted performance objectives have been met as of the date of the Change
of Control, the amount shall be equal to the amount that otherwise would be
payable if the performance periods had elapsed on the date of the Change of
Control; and

     

     

    (b)  if
any of the targeted performance objectives have not been met as of the date of
the Change of Control, the amount shall be determined by multiplying (i) the
amount that otherwise would be payable if the performance periods had elapsed
and the targeted performance objectives had been met, by (ii) a fraction, the
numerator of which is the number of full months that have elapsed since the
beginning of the performance period(s) and the denominator of which is the
aggregate number of full months in the longest performance period over which
achievement of the targeted performance objectives is measured; provided
however, that if the aggregate amount to which such Participant would be
entitled would constitute a “parachute payment” under Section 280G of the Code,
such amount shall be reduced by the amount determined by the Committee which is
the minimum necessary to result in no portion of the payment of such amount
being non-deductible to the Company pursuant to Section 280G of the Code and
subject to excise tax imposed under Section 4999 of the Code. Such amount shall
be determined as of the date of the Change of Control and payable in accordance
with Section 6 as promptly as practicable thereafter. Payment of such amount
shall constitute satisfaction in full of all Performance Units held by such
Participant at the time of the Change in Control.

     

     

    As used
herein, “Change in Control” shall be determined in accordance with the
definition of “a change in the ownership or effective control of the [C]ompany,
or in the ownership of a substantial portion of the assets of the [C]ompany”
under Section 409A, and the regulations and other guidance promulgated
thereunder, of the Code.

     

     

    12.  Amendment of Plan. The
Committee shall have the authority to make amendments and revisions of this
Plan, so long as such amendments or revisions do not negatively affect
Participants with respect to their previously awarded Performance
Units.

     

     

    13. Additional Provisions. The
following additional terms and provisions apply to the Plan:

     

     

    (a)  No
Participant in the Plan shall have any right because he is a Participant in the
Plan to continue in the employ of the Company or of any of its subsidiaries for
any period of time, or any right to a continuation of his present or any other
rate of compensation; and such rights and powers as the Company now has or which
it may have in the future to dismiss or discharge any Participant from his
employment or to change the assignments of any Participant are expressly
reserved to the Company.

     

     

    (b)  The
award of Performance Units to a Participant in the Plan shall create no rights
in such Participant as a shareholder of the Company until such time and to the
extent that the Participant is delivered Shares in satisfaction of such
Participant's Performance Units.

     

     

    (c) The
Company at the time any payment is made under the Plan is authorized to withhold
from such payment any amount necessary to satisfy income tax withholding
requirements in respect to such payment.

     

     

    (d) In
the event of stock dividends, stock splits, spin-offs, reverse stock splits or
similar matters affecting outstanding Shares during the term of the Plan,
appropriate revision shall be made (i) in the targeted growth objectives of
performance programs, and (ii) in the Performance Units awarded to reflect the
effect of such stock dividend, stock split, spin-off, reverse stock split or
similar matter on the interests of the Participants in the Plan. Otherwise, no
adjustment shall be made in the Performance Units awarded or the amounts payable
with respect thereto on account of cash dividends which may be paid or other
rights which may be issued to holders of Shares during the term of the
Plan.

     

     

    14.  Definitions.

     

    (a)
“Disability” shall have the meaning ascribed thereto under Section 409A of the
Code and the regulations and other guidance promulgated
thereunder.  The Board or the Committee may require medical evidence
of disability, including medical examinations by physicians elected by
it.

     

    (b)
“Retires” or “Retirement” shall mean the voluntary decision by a Participant to
terminate his employment with the Company at or after the age of 55 with at
least five years of continuous employment.

     

    (c)
“Participant” shall mean any employee of the Company or any of its subsidiary or
affiliated companies who is also a Participant in this Plan.

     

     

    15.  Term of Plan. Subject to
Section 15, the term of the Plan shall be for the period from the date of its
approval by the Board until the first business day after March 31, 2013, or such
earlier date as of which the Board, in its discretion, elects to terminate the
Plan. Termination of the Plan shall have no effect on the performance periods of
Performance Units awarded prior to termination. Awards of Performance Units may
be made during the term of the Plan under performance programs with performance
periods extending beyond the term of the Plan.

     

     

    16.  Shareholder Approval and Other
Actions. This Plan, and any award of Performance Units under the Plan, is
conditioned on the approval and ratification of the Plan by the shareholders of
the Company at or before the 2003 annual meeting of shareholders of the Company,
and no Shares may be issued hereunder prior to the receipt of such shareholder
approval and ratification. The Plan, and the award of Performance Units
hereunder, shall become void if the shareholders of the Company do not approve
and ratify the Plan at or before the 2003 annual meeting of shareholders of the
Company.

     

     

    Subject
to the approval and ratification of this Plan by the shareholders of the
Company, the Board and officers of the Company are authorized to take such
action as may be necessary to provide for the issuance of any or all of the
Shares which may be necessary to satisfy the Company's obligations hereunder and
to cause said shares to be listed on any stock exchange or authorized for
quotation on any inter-dealer automated quotation system on which Shares may at
such time be listed or transactions in Shares may be quoted.

     

     

    17.
Non-Assignability. Rights under the Plan and in respect of Units granted under
the Plan or payments of amounts are not transferable and may not be assigned or
pledged by any Participant at any time, and no recognition shall be required to
be given by the Company to any attempted assignment of any rights hereunder or
of any attempted assignment of the Units.

     

     

    18.  Plan
a Part of Continuing Compensation Program. This Plan is a part of a continuing
program of incentive compensation for senior managerial personnel of the Company
and is expected to be supplemented or continued in effect after the term hereof
by any additional plan or plans as approved by the Board of
Directors.

     

     

    *** ***
*** ***

     

     

    The
foregoing is a full text of the Performance Units Plan of Community Bank Shares
of Indiana, Inc. approved by the Board of Directors of Community Bank Shares of
Indiana, Inc. as of March 25, 2003, as amended on October 17, 2006 and November
25, 2008.