Document:

first_8k0123ex102.htm

    Exhibit
10.2

     

    

      CPP
COMPENSATION LIMITATION AGREEMENT

       

      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:

       

      
        	
                1.  

              	
                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.

              

      

       

      
        	
                2.  

              	
                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.

              

      

       

      
        	
                3.  

              	
                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.

              

      

       

      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:

       

      
        	
                a.  

              	
                “Senior
      Executive Officer” means the Company’s “senior executive officers” as
      defined in subsection 111(b)(3) of the
EESA.

              

      

       

      
        	
                b.  

              	
                “Golden
      Parachute Payment” has the meaning set forth at 31 C.F.R. § 30.9 (as in
      effect on the Closing Date).

              

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                c.  

              	
                 “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.

              

      

       

      
        	
                d.  

              	
                The
      term “Closing Date” means the date the transaction between the Company and
      the Treasury closes.

              

      

       

      
        	
                e.  

              	
                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).

              

      

       

      
        	
                f.  

              	
                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).

              

      

       

      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.

       

       

      
        
          
            	 
      	 
      	 	 
      
	 
      	 
      	 	
                    Christopher
      J. Murphy III

                  
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	
                    Date:

                  	
                     
      

                  
	 
      	 	 
      	 
      
	
                    Agreed
      to:

                  	 	 
      	 
      
	 
      	 
      	 	 
      	 
      
	
                    1st
      Source Corporation

                  	 	 
      	 
      
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	 
      	 
      
	
                    By:

                  	 
      	 	 
      	 
      
	 
      	
                    Larry
      E. Lentych, Senior Vice President, Treasurer and Chief Financial
      Officer

                  	 	 
      	 
      
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	 
      	 
      

          

        

      

      

       

      
        
          2 

        

        
           

          
            

          

        

        
           

        

      

      APPENDIX
A

       

      
        	
                1.  

              	
                Employment
      Agreement of Christopher J. Murphy III, dated January 1,
    2008

              

      

      
        	
                2.  

              	
                1st
      Source Corporation Employee Stock Purchase
Plan

              

      

      
        	
                3.  

              	
                1st
      Source Corporation 1982 Executive Incentive Plan, as
    amended

              

      

      
        	
                4.  

              	
                1st
      Source Corporation 1982 Restricted Stock Award Plan, as
      amended

              

      

      
        	
                5.  

              	
                1st
      Source Corporation 1992 Stock Option Plan, as
  amended

              

      

      
        	
                6.  

              	
                1st
      Source Corporation 2001 Stock Option Plan, as amended

              
	7.
       	1st
      Source Corporation 1998 Performance Compensation
Plan

      

       

      

      
 

       

       

      3first_8k0123ex103.htm

      Exhibit
10.3

     

    

       

      WAIVER

       

      In
consideration for the benefits I will receive as a result of the participation
of 1st Source Corporation (which is either my employer or the sole shareholder
of my employer) in the United States Department of the Treasury’s TARP Capital
Purchase Program, I hereby voluntarily waive any claim against the United
States, 1st Source Corporation and 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 1st Source
Corporation or my employer or in which I participate as they relate to the
period the United States holds any equity or debt securities of 1st Source
Corporation 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.

      
 

      

      
        	
                Dated:

              	 
      	 
      	 
      
	 
      	 
      	 
      	
                [Signature
      of Senior Executive Officer]

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