EX-10.3






Exhibit 10.3




December      , 2008



[Senior Executive Officer Name]


     


     


     , MO      



Dear      :



Hawthorn Bancshares, Inc. (the “Company”) is entering into a Letter Agreement and accompanying
Securities Purchase Agreement — Standard Terms (collectively, the “Purchase Agreement”)
with the United States Department of Treasury (“Treasury”) that provides for the Company’s
participation in the Capital Purchase Program (“CPP”) established by the Treasury under the
Emergency Economic Stabilization Act of 2008 (“EESA”). Pursuant to the Purchase Agreement, the
Company will issue and sell, and the Treasury will purchase, shares of the Company’s preferred
stock and warrants for the purchase of the Company’s common stock.



As a condition to the Company’s participation in the CPP and as a requirement of the
Treasury’s investment pursuant to the CPP and contemplated by the Purchase Agreement, the Company
is required to adopt the Treasury’s standards for executive compensation and corporate governance
for its Senior Executive Officers (defined in Section 6 below) as set forth in Section 111(b) of
EESA. 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, and notwithstanding any other
agreement or right set forth in any Benefit Plan (defined in Section 5 below), by signing this
letter you agree as follows:



1. Prohibit Golden Parachute Payments. The Company is prohibited from making and
shall not make any golden parachute payment to you during any period (the “CPP Period”) during
which (i) you are a Senior Executive Officer, and (ii) the Treasury holds an equity or debt
position in the Company pursuant to the Purchase Agreement.



2. Bonus and Incentive Compensation Clawback. Any bonus and incentive compensation
paid to you during the CPP Period is subject to recovery or “clawback” by the Company if the
payments were based on statements of earnings, gains, or other criteria that are later proven to be
materially inaccurate.



3. Compensation Review. The Company will promptly review and, in no event more than
90 days after Treasury’s investment, will place limits on executive compensation to exclude
incentives for unnecessary and excessive risks that threaten the value of the Company during the
CPP Period. Thereafter, the Company will conduct similar annual reviews. To the extent any such
review requires revisions to any Benefit Plan with respect to you, you acknowledge and agree that
the Company will be permitted to make such changes as it deems necessary or appropriate to comply
with the requirements of the CPP.



4. Waiver. Immediately upon the Company’s request, you agree to execute and deliver
to the Company a waiver substantially in the form attached hereto as Exhibit A (the
“Waiver”), under which you will waive any claims against the Treasury or the Company for any
changes to your compensation or benefits as required to comply with regulations issued under the
CPP and acknowledging that the regulation may require modification of your Benefit Plans during the
CPP Period. The Waiver will only be executed in the event that you are or become a Senior
Executive Officer, as determined by the Company in its sole discretion.



5. Amendment. You hereby acknowledge and agree that each of the Company’s
compensation, bonus, incentive and other benefit plans, arrangements and agreements, including
golden parachute, change of control, severance and employment agreements (collectively, “Benefit
Plans”), with respect to you is hereby deemed amended to the extent necessary to comply with the
requirements of the CPP and as set forth above. In no event shall any amendments to the Benefit
Plans pursuant to this letter trigger an adverse change in circumstances or such other adverse
change as set forth in the Benefit Plans.



6. Definitions and Interpretation. This letter shall be interpreted as follows:




	 	(a)	 	“Senior Executive Officer” means the Company’s “senior executive officers” as
defined in subsection 111(b)(3) of EESA, and interpreted in a manner consistent with,
31 C.F.R. §30.2.






	 	(b)	 	“golden parachute payment” has the meaning ascribed to that term in Section
111(b)(2)(C) of EESA.






	 	(c)	 	The term “CPP Period” shall be limited by, and interpreted in a manner
consistent with, 31 C.F.R. §30.11.






	 	(d)	 	For purposes of this letter and the Waiver, 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 date hereof).






	 	(e)	 	This letter is intended to, and will 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 Benefit Plans in accordance with their terms
before giving effect to this letter).





7. Miscellaneous. 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. 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.




Sincerely,




HAWTHORN BANCSHARES, INC.




	 	 	 	By:
     






Name:




Title:



AGREED TO AND ACCEPTED


THIS      DAY OF DECEMBER, 2008,


INTENDING TO BE LEGALLY BOUND



     


Name:


Title:



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EXHIBIT A 




FORM OF WAIVER




In consideration for the benefits I will receive as a result of my employer’s participation in the
United States Department of the Treasury’s TARP Capital Purchase Program, I hereby voluntarily
waive any claim against the United States or my employer for any changes to my compensation or
benefits that are required to comply with the regulation issued by the Department of the Treasury
as published in the Federal Register on October 20, 2008.



I acknowledge that this regulation may require modification of the compensation, bonus, incentive
and other benefit plans, arrangements, policies and agreements (including so-called “golden
parachute” agreements) that I have with my employer or in which I participate as they relate to the
period the United States holds any equity or debt securities of my employer acquired through the
TARP Capital Purchase Program.



This waiver includes all claims I may have under the laws of the United States or any state related
to the requirements imposed by the aforementioned regulation, including without limitation a claim
for any compensation or other payments I would otherwise receive, any challenge to the process by
which this regulation was adopted and any tort or constitutional claim about the effect of these
regulations on my employment relationship.



     


Name:


Title:



Dated: December      , 2008




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