Document:

exhibit10.htm

    
      

      
Exhibit
10.1

    

    COMMUNITY
BANK SHARES OF INDIANA, INC.

    STOCK
AWARD PLAN

    

    

    
      
        1.           Purpose.  The
purpose of the Community Bank Shares of Indiana, Inc. Stock Award Plan (the
“Plan”) is to secure for Community Bank Shares of Indiana, Inc. and its
successors and assigns (the “Company”) and its stockholders the benefits of the
additional incentives, inherent in the ownership of the Company’s common stock,
$0.10 par value per share (the “Common Stock”), by selected employees, directors
and advisory directors of the Company and its subsidiaries who are important to
the success and growth of the business of the Company and its subsidiaries and
to help the Company and its subsidiaries secure and retain the services of such
persons. Compensation awarded under the Plan in appropriate instances is
intended to qualify for tax deductibility pursuant to the requirements of
Section 162(m) of the Internal Revenue Code of 1986, as amended from time to
time or any successor statute or statutes (the “Code”), to the extent deemed
appropriate by the Board or the Compensation Committee (as defined in Paragraph
2. 1 hereof).

         

        Pursuant
to the Plan, selected employees, directors, advisory directors, consultants and
advisors of the Company will be offered the opportunity to acquire Common Stock
through the grant of options, stock appreciation rights in tandem with such
options and awards of restricted stock. Any options, rights or awards granted
hereunder are a matter of separate inducement and are not in lieu of any salary
or other compensation for the services of any advisory director, director,
employee, consultant or advisor. Options granted under the Plan will be either
“incentive stock options,” intended to qualify as such under the provisions of
Section 422 of the Code, or “nonqualified stock options.” For purposes of the
Plan, the terms “parent” and “subsidiary” shall mean “parent corporation” and
“subsidiary corporation,” respectively, as such terms are defined in Sections
424(e) and (f) of the Code.

         

        2. Committee.

         

        2.1           Administration.  The
Plan shall be administered by the board of directors of the Company or by a
Compensation Committee (the “Committee”) appointed by the board of directors
from among its members (collectively, the “Board”). Any such committee appointed
shall be comprised, unless otherwise determined by the board of directors,
solely of not less than two members who shall be “Non-Employee Directors” within
the meaning of Rule 16b-3(b)(3) (or any successor rule) promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

        

        2.2           Procedures.  The
Board or the Committee shall adopt such rules and regulations as they shall deem
appropriate concerning the administration of the Plan. A majority of the whole
Board shall constitute a quorum, and the acts of a majority of the members of
the Board present at a meeting at which a quorum is present, or acts approved in
writing by all of the members of the Board, shall be the acts of the
Board.

         

        2.3           Interpretation.  The
Compensation Committee shall have full power and authority to
interpret the provisions of the Plan and any agreement evidencing options or
restricted stock awards granted under the Plan, and to determine any and all
questions arising under the Plan, and its decisions shall be final and binding
on all participants in the Plan. Either the Board or the Committee shall
have authority to select the individuals to be granted awards under the Plan, to
determine the type, size and terms of all such awards, to modify the terms of
any awards so granted and to make any other determinations which they deem
necessary or desirable for the administration of the Plan.

         

        2.4           Liability.  No
member of the Board or the Committee and no employee of the Company shall be
liable for any act or failure to act hereunder, except in circumstances
involving his or her bad faith, gross negligence or willful misconduct, or for
any act or failure to act hereunder by any other member or employee or by any
agent to whom duties in connection with the administration of this Plan have
been delegated. The Company shall indemnify members of the Board and the
Committee and any agent of the Board or the Committee who is an employee of the
Company, a subsidiary or an affiliate against any and all liabilities or
expenses to which they may be subjected by reason of any act or failure to act
with respect to their duties on behalf of the Plan, except in circumstances
involving such person's bad faith, gross negligence or willful
misconduct.

         

        The Board
or the Committee may delegate to one or more of their members, or to one or more
agents, such administrative duties as they may deem advisable, and the Board or
the Committee, or
any person to whom either has delegated duties as aforesaid, may employ one or
more persons to render advice with respect to any responsibility the Board, the
Committee, or such person may have under the Plan. The Board or the Committee
may employ such legal or other counsel, consultants and agents as they may deem
desirable for the administration of the Plan and may rely upon any opinion or
computation received from any such counsel, consultant or agent. Expenses
incurred by the Board or the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company, or the subsidiary or affiliate
whose employees have benefited from the Plan, as determined by the Board or the
Committee.

         

        3.           Shares Subject to
Grants.

         

        3.1           Number of
Shares.  Subject to the provisions of Paragraph 19 hereof
(relating to adjustments upon mergers, reorganizations or like changes in
capitalization), the number of shares of Common Stock subject at any one time to
options or awards of restricted stock or deferred stock units granted under the
Plan, plus the number of shares of Common Stock theretofore issued or delivered
pursuant to the exercise of options granted, and awards of restricted stock and
deferred stock units made, under the Plan, shall not exceed 400,000 shares;
provided, that no more than one-fifth of such shares may be
awarded as restricted stock awards. If and to the extent that options granted
under the Plan terminate, expire or are canceled without having been exercised,
or restricted stock or deferred stock units are forfeited, new options,
restricted stock or deferred stock units may be granted under the Plan with
respect to the shares of Common Stock covered by such terminated, expired or
canceled options or forfeited shares of restricted stock or deferred stock
units; provided that the granting and terms of such new options, restricted
stock awards and deferred stock units shall in all respects comply with the
provisions of the Plan.

         

        3.2           Character of
Shares.  Shares of Common Stock delivered under the Plan may be
authorized and unissued Common Stock, issued Common Stock held in the Company’s
treasury, or both.

         

        3.3           Reservation of
Shares.  There shall be reserved at all times for sale or award
under the Plan a number of shares of Common Stock (authorized and unissued
Common Stock, issued Common Stock held in the Company’s treasury, or both) equal
to the maximum number of shares set forth in Paragraph 3. 1 hereof.

         

        4.           Eligibility. Options and awards of
restricted stock may be granted under the Plan to any employee, director or
advisory director of the Company or any of its subsidiaries, or to any
prospective employee, director or advisory director of the Company or any of its
subsidiaries,conditioned upon, and effective not earlier than, such person's
becoming an employee or director. Notwithstanding the foregoing:

         

        (a)           Only
non-qualified stock options may be granted to non-employee directors, advisory
directors, consultants or advisors of the Company;

         

        (b)           No
incentive stock options may be granted under the Plan to any person who owns,
directly or indirectly (within the meaning of Sections 422(b)(6) and 424(d) of
the Code), at the time the incentive stock option is granted, stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company unless the option price is at least 110% of the fair market value of the
shares subject to the option, determined on the date of the grant, and the
option by its terms is not exercisable after the expiration of five years from
the date such option is granted; and

         

        (c)           In
each calendar year during any part of which the Plan is in effect, no
Participant (as defined below) may be granted options relating in the aggregate
to more than 20,000 shares of Common Stock, subject to adjustment as provided in
Paragraph 19 hereof.

         

        An individual receiving any option,
restricted stock award or deferred stock units under the Plan is hereinafter
referred to as a “Participant.” Any reference herein to the employment of a
Participant by the Company shall include (i) his or her employment by the
Company or any of its subsidiaries, and (ii) with respect to a Participant who
was not an employee of the Company or any of its subsidiaries at the time of
grant of his or her option or award, his or her period of service in the
capacity for which the option or award was granted. For all purposes of this
Plan, the time at which an option or award is granted shall be deemed to be the
effective date of such grant.  The Plan does not create a right in any
person to participate in the Plan, nor does it create a right in any person to
have any options or rights granted to him or her.

         

        5.           Grant of
Options.  The Board or the Committee shall determine, within
the limitations of the Plan, the persons to whom options are to be granted, the
number of shares that may be purchased under each option and the option price,
and shall designate options at the time of grant as either “incentive stock
options” or “nonqualified stock options”; provided, that the aggregate fair
market value (determined as of the time the option is granted) of the Common
Stock with respect to which incentive stock options become exercisable for the
first time by any Participant (as defined in Paragraph 4 hereof) in any calendar
year (under all stock option plans of the employee’s employer corporation and
its parent, if any, and its subsidiaries) shall not exceed $100,000 (the
provisions of Section 422(d) of the Code are intended to govern). In determining
the persons to whom options shall be granted and the number of shares to be
covered by each option, the Board or the Committee shall take into consideration
the person's present and potential contribution to the success of the Company
and its subsidiaries and such other factors as the Board or the Committee may
deem proper and relevant. Each option granted under the Plan shall be evidenced
by a written agreement between the Company and the Participant containing such
terms and conditions and in such form, not inconsistent with the provisions of
the Plan or, with respect to incentive stock options, Section 422 of the Code,
as the Board or the Committee shall provide.

         

        6.           Option
Price.  Subject to Paragraph 19 hereof, the option price of
each share of Common Stock purchasable under any incentive stock option or
non-qualified stock option granted under the Plan shall be not less than the
fair market value of such share of Common Stock at the time the option is
granted. The option price of an option issued in a transaction described in
Section 424(a) of the Code shall be an amount which conforms to the requirements
of that Section and the regulations thereunder.

         

        For
purposes of this Plan, the “fair market value” of the Common Stock on any date
means (i) if the Common Stock is listed on a national securities exchange or
quotation system, the closing sales price on such exchange or quotation system
on such date or, in the absence of reported sales on such date, the closing
sales price on the immediately preceding date on which sales were reported, or
(ii) if the Common Stock is not listed on a national securities exchange or
quotation system, the fair value as determined by such other method as the Board
or the Committee determines in good faith to be reasonable.

         

        7.           Stock Appreciation
Rights.  In the discretion of the Board or the Committee, a
stock appreciation right may be granted (a) alone, (b) simultaneously with the
grant of an option (either incentive or non-qualified) and in conjunction
therewith or in the alternative thereto or (c) subsequent to the grant of a
non-qualified option and in conjunction therewith or in the alternative
thereto.

        

        The
exercise price of a right granted alone shall be determined by the Board or
the Committee but
shall not be less than one hundred percent (100%) of the fair market value of
one share of Common Stock on the date of grant of such right. A right granted
simultaneously with or subsequent to the grant of an option and in conjunction
therewith or in the alternative thereto shall have the same exercise price as
the related option, provided that the exercise price is no less than the fair
market value of one share of Common Stock at the date of the grant of the stock
appreciation right, shall be transferable only upon the same terms and
conditions as the related option, and shall be exercisable only to the same
extent as the related option; provided, however, that a right, by its terms,
shall be exercisable only when the fair market value of the shares subject to
the right and related option exceeds the exercise price thereof.

         

        Upon
exercise of a right granted simultaneously with or subsequent to an option and
in the alternative thereto, the number of shares for which the related option
shall be exercisable shall be reduced by the number of shares for which the
right shall have been exercised. The number of shares for which a right shall be
exercisable shall be reduced upon any exercise of a related option by the number
of shares for which such option shall have been exercised.

         

        Any right
shall be exercisable upon such additional terms and conditions as may from time
to time be prescribed by the Board or the Committee.

         

        A right
shall entitle the holder upon exercise thereof to receive from the Company, upon
a written request filed with the Secretary of the Company at its principal
offices, a number of shares (with or without restrictions as to substantial risk
of forfeiture and transferability, as determined by the Board or the Committee
in their sole discretion), an amount of cash, or any combination of shares and
cash, as specified in the request (but subject to the approval of the Board or
the Committee, in their sole discretion, at any time up to and including the
time of payment, as to the making of any cash payment), having an aggregate fair
market value equal to the product of (a) the excess of the fair market value, on
the day of such request, of one share over the exercise price per share
specified in such
right or its related option, multiplied by (b) the number of shares for which
such right shall be exercised; provided, however, that the Board or the Committee,
in their discretion, may impose a maximum limitation on the amount of cash, the
fair market value of shares, or a combination thereof, which may be received by
a holder upon exercise of a right.

         

        Any
election by a holder of a right to receive cash in full or partial settlement of
such right, and any exercise of such right for cash, may be made only by a
request filed with the Corporate Secretary of the Company during the period
beginning on the third business day following the date of the release for
publication by the Company of quarterly or annual summary statements of earnings
and ending on the twelfth business day following such date. Within thirty (30)
days after the receipt by the Company of a request to receive cash in full or
partial settlement of a right or to exercise such right for cash, the Company
shall, in its sole discretion, either consent to or disapprove, in whole or in
part, such request.

         

        If the
Board or the Committee disapprove in whole or in part any election by a holder
to receive cash in full or partial settlement of a right or to exercise such
right for cash, such disapproval shall not affect such holder’s right to
exercise such right at a later date, to the extent that such right shall be
otherwise exercisable, or to elect the form of payment at a later date, provided
that an election to receive cash upon such later exercise shall be subject to
the approval of the Board or the Committee. Additionally, such disapproval shall
not affect such holder's right to exercise any related option or options granted
to such holder under the Plan.

         

        A holder
of a right shall not be entitled to request or receive cash in full or partial
payment of such right during the first six (6) months of its term, provided
however, that such prohibition shall not apply if the holder of such right is
not subject to the reporting requirements of Section 16(a) of the Exchange
Act.

         

        For all
purposes of this Paragraph 7, the fair market value of shares shall be
determined in accordance with the principles set forth in Paragraph 6
hereof.

         

        8.           Exercisability and Duration
of Options.

         

        8.1           Determination of Board or
Committee; Acceleration.  Each option granted under the Plan
shall be exercisable at such time or times, or upon the occurrence of such event
or events, and in such amounts, as the Board or the Committee shall specify in
the agreement evidencing the option. Subsequent to the grant of an option which
is not immediately exercisable in full, the Board or the Committee, at any time
before complete termination of such option, may accelerate the time or times at
which such option may be exercised in whole or in part if (i) the Participant
dies, (ii) the Participant’s employment or service terminates by reason of
disability, as determined by the Board or the Committee, (iii) the recipient
retires or (iv) a “Change in Control” of the Company occurs.

         

        8.2           Automatic
Termination.  The unexercised portion of any option granted
under the Plan shall automatically and without notice terminate and become null
and void at the time of the earliest to occur of the following:

         

        (a)           The
expiration of ten years from the date on which such option was
granted;

         

        (b)           The
expiration of three months from the date of termination of the Participant’s
employment by the Company or service as a director or advisory director with the
Company unless a longer period is provided by the Board or the Committee (other
than a termination described in subparagraph (c) or (d) below); provided that if
the Participant shall die during such three-month period, the time of
termination of the unexercised portion of any such option shall be determined
under the provisions of subparagraph (c) below;

         

        (c)           The
expiration of six months following the issuance of letters testamentary or
letters of administration to the executor or administrator of a deceased
Participant, if the Participant’s death occurs either during his employment by
the Company or service as a director or advisory director or during the
three-month period following the date of termination of such employment or
service as a director or advisory director (other than a termination described
in subparagraph (d) below), but in no event later than one year after the
Participant's death;

         

        (d)           The
termination of the Participant’s employment by the Company if such termination
constitutes or is attributable to a breach by the Participant of an employment
or consulting agreement with the Company or any of its subsidiaries, or if the
Participant is discharged from employment or service as a director or advisory
director or his or her services are terminated for cause or if the Participant
voluntarily terminates his or her employment or service as a director or
advisory director; or

         

        (e)           The
expiration of such period of time or the occurrence of such event as the Board
or the Committee in their discretion may provide upon the granting
thereof.

         

        The Board
or the Committee shall have the right to determine what constitutes cause for
discharge or termination of services, whether the Participant has been
discharged or his or her services terminated for cause and the date of such
discharge or termination of services, and such determination of the Board or the
Committee shall be final and
conclusive.

         

        9.           Exercise of
Options.  Options granted under the Plan shall be exercised by
the Participant (or by his or her executors or administrators, as provided in
Paragraph 10 hereof) as to all or part of the shares covered thereby, by the
giving of written notice of exercise to the Company, specifying the number of
shares to be purchased accompanied by payment of the full purchase price for the
shares being purchased. Payment of such purchase price shall be made (a) by
check payable to the Company, (b) with the consent of the Board or the
Committee, by delivery of shares of Common Stock already owned by the
Participant for at least six months (which may include shares received as the
result of a prior exercise of an option) having a fair market value (determined
as of the date such option is exercised) equal to all or part of the aggregate
purchase price, (c) with the consent of the Board or the Committee and at the
election of the Participant, by withholding from those shares that would
otherwise be obtained upon exercise of the option a number of shares having a
fair market value equal to the option exercise price, (d) in accordance with a
“cashless exercise” program established by the Board or the Committee in their
sole discretion under which if so instructed by the Participant, shares may be
issued directly to the Participant’s broker or dealer upon receipt of the
purchase price in cash from the broker or dealer, (e) by any combination of (a),
(b), (c) or (d) above or (f) by other means that the Board or the Committee deem
appropriate. Such notice of exercise, accompanied by such payment, shall be
delivered to the Company at its principal business office or such other office
as the Board or the Committee may from time to time direct, and shall be in such
form, containing such further provisions consistent with the provisions of the
Plan, as the Board or the Committee may from time to time prescribe. The date of
exercise shall be the date of the Company’s receipt of such notice. The Company
shall effect the transfer of the shares so purchased to the Participant (or such
other person exercising the option pursuant to Paragraph 10 hereof) as soon as
practicable. No Participant or other person exercising an option shall have any
of the rights of a stockholder of the Company with respect to shares subject to
an option granted under the Plan until due exercise and full payment has been
made as provided above. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date of such due exercise and
full payment. In no event may any option granted hereunder be exercised for a
fraction of a share.

         

        10.           Non-Transferability of
Options and Stock Appreciation Rights.  Except as provided
herein, no option granted under the Plan or any right evidenced thereby shall be
transferable by the Participant other than by will or by the laws of descent and
distribution, and an option may be exercised, during the lifetime of a
Participant, only by such Participant. Notwithstanding the preceding sentence:
(a) in the event of a Participant’s death during his or her employment by the
Company or his or her service as a director or advisory director of the Company,
its parent, if any, or any of its subsidiaries, or during the three-month period
following the date of termination of such employment, his or her options shall
thereafter be exercisable, during the period specified in Paragraph 8.2(c)
hereof, by his or her executors or administrators; and (b) the Participant, with
the approval of the Board or the Committee, may transfer his or her options
(other than incentive stock options) for no consideration to or for the benefit
of the Participant’s spouse, parents, children (including stepchildren or
adoptive children), grandchildren or siblings, or to a trust for the benefit of
any of such persons.

         

        11.           Restricted
Stock.  Participants may be granted awards of restricted stock
under the Plan, subject to the applicable provisions of the Plan, including the
following terms and conditions, and to such other terms and conditions not
inconsistent therewith, as the Board or the  Committee shall
determine:

         

        (a)           Awards
of restricted stock may be in addition to or in lieu of option
grants;

         

        (b)           During
a period set by, and/or until the attainment of particular performance goals
based upon criteria established by the Board or the Committee at the time of
each award of restricted stock (the “restriction period”), the Participant shall
not be permitted to sell, transfer, pledge or otherwise encumber the shares of
restricted stock; except that such shares may be used, if the Board or the
Committee permit, to pay the option price of any option granted under the Plan;
provided that an equal number of shares delivered to the Participant upon
exercise of the option shall carry the same restrictions as the shares of
restricted stock so used;

         

        (c)           If
so provided by the Board or the Committee, the applicable restriction period
shall expire, and shares of restricted stock shall become free of all
restrictions if (i) the Participant dies, (ii) the Participant’s employment or
service terminates by reason of disability, as determined by the Board or the
Committee, (iii) the recipient retires or (iv) a “Change in Control” of the
Company occurs.

         

        (d)           Unless
and to the extent otherwise provided in accordance with Paragraph 11(c) hereof,
shares of restricted stock shall be forfeited and revert to the Company upon the
Participant’s termination of employment or service during the restriction
period.

         

        (e)           Stock
certificates for restricted stock shall be registered in the name of the
Participant but shall be appropriately legended and returned to the Company by
the Participant, together with a stock power, endorsed in blank by the
Participant. The Participant shall be entitled to vote shares of restricted
stock and shall be entitled to all dividends paid thereon, except that dividends
paid in Common Stock or other property shall be subject to the same restrictions
as apply to the restricted stock with respect to which they are paid;
and

         

        (f)           Restricted
stock shall become free of the foregoing restrictions upon expiration of the
applicable restriction period and the Company shall then deliver certificates
evidencing such Common Stock to the recipient.

         

        12.           Deferred Stock
Units.  Participants may be granted units representing the
right to receive shares of Common Stock at the end of a specified deferral
period (“deferred stock units”), subject to applicable provisions of the Plan,
including the following terms and conditions, and to such other terms and
conditions not inconsistent therewith, as the Board or the Committee shall
determine:

         

        (a)           Deferred
stock units shall be exercisable for shares of Common Stock after the period and
upon the terms set by the Board or the Committee. If so determined by the Board
or the Committee, the applicable deferral period shall expire when (i) the
Participant dies, (ii) the Participant’s employment or service terminates by
reason of disability, as determined by the Board or the Committee, (iii) the
recipient retires or (iv) a “Change in Control” of the Company
occurs;

         

        (b)           Unless
and to the extent otherwise provided in accordance with Paragraph 12(a),
deferred stock units shall be forfeited and revert to the Company upon the
Participant’s termination of employment or service during the deferral
period.

         

        (c)           Dividends
on the specified number of shares of Common Stock covered by the deferred stock
units will be paid from and after the date on which the units become
non-forfeitable. Unless otherwise determined by the Board or the Committee,
shares of Common Stock distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be subject to
restrictions, risk of forfeiture and/or deferral to the same extent as the
deferred stock units with respect to which such Common Stock or other property
has been distributed.

         

        13.           Reload
Options.  At the time an option (the “original option”) is
granted, the Board or the Committee may also authorize the grant of a “reload
option,” which shall be subject to the following terms:

         

        (a)           The
number of shares of Common Stock subject to the reload option shall be the
number of shares, if any, used by the Participant to pay the purchase price upon
exercise of the original option, plus the number of shares, if any, delivered by
the Participant to satisfy the tax withholding requirement relating to such
exercise;

         

        (b)           The
reload option shall be a nonqualified stock option;

         

        (c)           The
grant of the reload option shall be effective upon the date of exercise of the
original option, and the term of the reload option shall be the period, if any,
remaining from that date to the date upon which the original option would have
expired;

         

        (d)           The
grant of the reload option shall not be effective if, on the date of exercise of
the original option, the Participant is not employed by the Company;
and

         

        (e)           Except
as specified in (a) through (d) above, the terms of the reload option shall be
as prescribed in the preceding Paragraphs of this Plan.

         

        14.           Withholding
Tax.

         

        (a)           Whenever
under the Plan shares of stock are to be delivered upon exercise of a
nonqualified stock option or deferred stock unit, the Company shall be entitled
to require as a condition of delivery that the Participant remit or, in
appropriate cases, agree to remit when due an amount sufficient to satisfy all
federal, state and local withholding tax requirements relating thereto. At the
option of the Company, such amount may be remitted by check payable to the
Company, in shares of Common Stock (which may include shares received as the
result of a prior exercise of an option or deferred stock unit), by the
Company's withholding of shares of Common Stock issuable upon the exercise of
any option or stock appreciation right or pursuant to any award of restricted
stock or deferred stock unit pursuant to the Plan, or any combination thereof.
Whenever an amount shall become payable to a Participant in connection with the
exercise of a stock appreciation right, the Company shall be entitled to
withhold therefrom an amount sufficient to satisfy all federal, state and local
withholding tax requirements relating to such amount.

         

        (b)           Recipients
of restricted stock, pursuant to Paragraph 11 hereof, shall be required to remit
to the Company an amount sufficient to satisfy all applicable tax withholding
requirements upon expiration of restriction periods or upon such earlier dates)
as may be elected pursuant to Section 83 of the Code, unless other arrangements
satisfactory to the Company have been made for the withholding of applicable
taxes. At the option of the Company, the amount referred to in the preceding
sentence may be remitted by check payable to the Company, in shares of Common
Stock (which may include shares of Common Stock received as the result of a
prior exercise of an option), by the Company’s withholding of shares of Common
Stock issuable upon the exercise of any option or stock appreciation right or
pursuant to any award of restricted stock or deferred stock unit pursuant to the
Plan, or any combination thereof.

         

        15.           Restrictions on Delivery and
Sale of Shares.  Each option and restricted stock award and
deferred stock unit granted under the Plan is subject to the condition that if
at any time the Board or the Committee, in their discretion, shall determine
that the listing, registration or qualification of the shares covered by such
option or award upon any securities exchange or under any state or federal law
is necessary or desirable as a condition of or in connection with the granting
of such option or award or the purchase or delivery of shares thereunder, the
delivery of any or all shares pursuant to exercise of the option or upon
expiration of the restriction or deferral period may be withheld unless and
until such listing, registration or qualification shall have been effected. The
Board or the Committee may require, as a condition of exercise of any option, or
grant of a restricted stock award or deferred stock unit that the Participant
represent, in writing, that the shares received are being acquired for
investment and not with a view to distribution and agree that the shares will
not be disposed of except pursuant to an effective registration statement,
unless the Company shall have received an opinion of counsel satisfactory to the
Company that such disposition is exempt from such requirement under the
Securities Act of 1933. The Board or the Committee may require that the sale or
other disposition of any shares acquired upon exercise of an option hereunder or
upon expiration of a restriction or deferral period shall be subject to a right
of first refusal in favor of the Company, which right shall permit the Company
to repurchase such shares from the Participant or his or her representative
prior to their sale or other disposition at their then current fair market value
in accordance with such terms and conditions as shall be specified in the
agreement evidencing the grant of the option, restricted stock award or deferred
stock unit. The Company may endorse on certificates representing shares issued
upon the exercise of an option or expiration of a restriction or deferral
period, such legends referring to the foregoing representations or restrictions
or any other applicable restrictions on resale as the Company, in its
discretion, shall deem appropriate.

         

        16.           Change in
Control.

         

        (a)           In
the event of a Change in Control of the Company, the Board or the Committee may,
in their sole discretion, provide that any of the following applicable actions
be taken as a result, or in anticipation, of any such event to assure fair and
equitable treatment of Participants:

         

        (i)           accelerate
the exercisability of any outstanding options, or the expiration of restriction
periods of restricted stock or the expiration of deferral periods of deferred
stock units awarded pursuant to this Plan;

         

        (ii)           offer
to purchase any outstanding options or shares of restricted stock or deferred
stock units made pursuant to this Plan from the holder for its equivalent cash
value, as determined by the Board or the Committee, as of the date of the Change
in Control; or

         

        (iii)
make adjustments or modifications to outstanding options, restricted stock or
deferred stock units as the Board or the Committee deem appropriate to maintain
and protect the rights and interests of the Participants following such Change
in Control.

         

        Any such
action approved by the Board or the Committee shall be conclusive and binding on
the Company, its subsidiaries and all Participants.

         

        (b)           In
no event, however, may (i) any option be exercised prior to the expiration of
six (6) months from the date of grant (unless otherwise provided in the
agreement evidencing the option), or (ii) any option be exercised after ten (10)
years from the date it was granted.

         

        17.           Right to Terminate
Employment.  Nothing in the Plan or in any option granted under
the Plan shall confer upon any Participant the right to continue as an employee
of the Company or affect the right of the Company or any of its subsidiaries to
terminate the Participant's employment at any time, subject, however, to the
provisions of any agreement of employment between the Participant and the
Company, its parent, if any, or any of its subsidiaries.

         

        18.           Transfer or Leave of
Absence.  For purposes of this Plan, neither (i) a transfer of
an employee from the Company to a subsidiary or other affiliate of the Company,
or vice versa, or from one subsidiary or affiliate of the Company to another,
nor (ii) a duly authorized leave of absence, shall be deemed a termination of
employment.

         

        19.           Adjustment Provisions:
Effect of Certain Transactions.  If there shall be any change
in the Common Stock of the Company, through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse stock
split, split up, spin-off, combination of shares, exchange of shares, dividend
in kind or other like change in capital structure or distribution to
shareholders of the Company (other than normal cash dividends), in order to
prevent dilution or enlargement of participants’ rights under the Plan, the
Board or the Committee (or the counterpart Board or Committee of any entity
assuming the obligations of the Plan) shall adjust, in an equitable manner, the
number and kind of shares that may be issued under the Plan, the number and kind
of shares subject to outstanding options and rights, the consideration to be
received upon exercise of options or in respect of rights, the exercise price
applicable to outstanding options and rights, and/or the fair market value of
the shares and other value determinations applicable to outstanding options and
rights. Appropriate adjustments may also be made by the Board or the Committee
(or the counterpart Board or Committee of any entity assuming the obligations of
the Plan) in the terms of any options and rights under the Plan to reflect such
changes or distributions and to modify any other terms of outstanding options
and rights on an equitable basis. In addition, the Board or the Committee (or
the counterpart Board or the Committee of any entity assuming the obligations of
the Plan) are authorized to make adjustments to the terms and conditions of, and
the criteria included in, options and rights in recognition of unusual or
nonrecurring events affecting the Company or the financial statements of the
Company, or in response to changes in applicable laws, regulations or accounting
principles.

         

        20.           Expiration and Termination
of the Plan.

         

        20.1           General.  Options
and awards of restricted stock and deferred stock units may be granted under the
Plan at any time and from time to time on or prior to the tenth anniversary of
the effective date of the Plan as set forth in Paragraph 21 hereof (the
“Expiration Date”), on which date the Plan will expire except as to options then
outstanding and stock subject to restriction or deferral periods under the Plan.
Such outstanding options shall remain in effect until they have been exercised,
terminated or have expired; such restricted stock shall remain subject to
restriction until expiration of the restriction period in accordance with
Paragraph 11 hereof and such deferred stock units shall remain subject to
deferral until expiration of the deferral period in accordance with Paragraph
12. The Plan may be terminated, modified or amended by the board of directors or
the Committee at any time on or prior to the Expiration Date, except with
respect to any options then outstanding under the Plan; provided, however, that
the approval of the Company’s stockholders will be required for any amendment
which (i) changes the class of employees eligible for grants, as specified in
Paragraph 4, (ii) increases the maximum number of shares subject to grants, as
specified in Paragraph 3 hereof (unless made pursuant to the provisions of
Paragraph 19 hereof) or (iii) materially increases the benefits accruing to
participants under the Plan, within the meaning of Rule 16b-3 promulgated under
the Exchange Act.

         

        20.2           Modifications.  No
modification, extension, renewal or other change in any option or award of
restricted stock or deferred stock unit granted under the Plan shall be made
after grant, unless the same is consistent with the provisions of the Plan and
does not disqualify an incentive stock option under the provisions of Section
422 of the Code.

         

        21.           Definitions. To the
extent not otherwise defined in this Plan, the following terms shall have the
following meanings:

         

        “Affiliate” means any other
corporation or other entity which controls, is controlled, directly or
indirectly, by, or under common control with, the Company and which the Board or
the Committee designate as an “Affiliate” for purposes of the Plan.

         

        “Associate” of a Person means (a) any
corporation or organization of which such Person is an officer or partner or is,
directly or indirectly, the Beneficial Owner of 10% or more of any class of
equity securities, (b) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity and (c) any relative or spouse of such Person,
or any relative of such spouse, who has the same home as such Person or who is a
director or officer of such Person or any of its parents or
subsidiaries.

         

        “Beneficial Owner” has the meaning
ascribed thereto in Rule 13d-3 under the Exchange Act, except that, in any case,
a Person shall be deemed the Beneficial Owner of any securities owned, directly
or indirectly, by the Affiliates and Associates of such Person.

         

        “Change in Control” shall mean “a
change in the ownerhip or effective control of the [C]ompany, or in the
ownership of a substantial portion of the assets of the [C]ompany,” as
determined under Section 409A of the Internal Revenue Code (the “Code”), and the
regulations and other guidance promulgated thereunder.

         

        “Continuing Director” means any member
of the board of directors who is a member on the effective date of the Plan as
set forth in Paragraph 21 hereof or who is elected to the board of directors
after such date upon the recommendation or with the approval of a majority of
the Continuing Directors at the time of such recommendation or
approval.

         

        “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 them.

         

        “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.

         

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

         

        “Person” means an individual, a
corporation, a partnership, an association, a joint stock company, a trust, any
unincorporated organization or a government or a political subdivision thereof
or any other entity.

         

        22.           Effective Date of
Plan.  The Plan (as amended and restated) shall become
effective on May 17, 2005, the date of its adoption by the Company’s
stockholders.

         

        *****

         

        The
foregoing is a full text of the amended and restated Stock Award Plan adopted by
the shareholders of Community Bank Shares of Indiana, Inc. on May 17, 2005, as
further amended on October 17, 2006 and November 25, 2008 by the Board of
Directors.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.

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