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Purpose
The purpose of the Executive Compensation and Human Resources Committee (the "Committee") of the Board of Directors of 1st Source Corporation and 1st Source Bank is to determine compensation for senior management personnel, review the CEO, establish wage and benefit policies for the Company and its subsidiaries, review general human resources guidelines, policies and procedures in regard to all employees, and oversee the Company's stock and benefit plans.
Committee Membership, Qualifications and Meeting Schedule
The Committee shall consist of at least three directors, each of whom shall be independent in accordance with the Nasdaq exchange listing standards, shall be a "Non-Employee Director" as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and shall be an "Outside Director" as defined by the regulations under Section 162(m) of the Internal Revenue Code of 1986, as amended. The members of the Committee shall be appointed and replaced by the Board on the recommendation of the Executive and Governance Committee. Members are appointed annually and serve a one-year term with the expectation that members will serve at least two consecutive terms and preferably three. The Board shall appoint one member of the Committee as its chairperson who will serve a two-year term. The CEO may attend meetings in an advisory, non voting capacity. However, the CEO should not be in attendance during any portion of a meeting where the CEO's performance or compensation are discussed, unless specifically invited by the Committee. The Committee shall meet at least twice a year. Additional meetings will occur as the Committee or its chair deems advisable. The Committee will cause to be kept adequate minutes of all its proceedings, and will report its actions to the next meeting of the Board.
Duties and Responsibilities
- Determine the form and amount of director compensation with appropriate benchmarking against peer companies.
- Establish, in consultation with senior management, the Company's general compensation philosophy, and oversee the implementation of all compensation plans, policies and programs of the Company.
- Approve revisions to the Company's salary range structure and annual salary increase guidelines.
- Produce an annual report on executive compensation for inclusion in the Company's annual proxy statement.
- Review and approve on an annual basis the corporate goals and objectives relative to CEO compensation, evaluate the CEO's performance in light of those goals and objectives, and have the sole authority to determine the CEO's compensation levels based on that evaluation.
- Review and approve on an annual basis the compensation of senior officers and key executives other than the CEO, including other incentive compensation and equity-based plans.
- Monitor the rules and procedures governing the administration of the Company's retirement plans making sure the rules relating to investments in the Company's shares are properly protective of employee interests.
- Monitor compliance with the Sarbanes-Oxley prohibitions on personal loans to directors and executive officers.
- Administer the Company's incentive stock plans, including making awards under such plans, and review and approve all proposed, new, or amended employee benefit plans.
- Approve the amount of any discretionary contributions to be made by the Company under any retirement or savings plan.
- Review periodic reports from management on matters relating to the Company's personnel appointments and practices.
- Review the Company's succession plans relating to the CEO and other senior management.
- Select and retain independent compensation and benefits consultants and other outside counsel, as needed, to provide independent advice to the Committee with respect to the Company's current and proposed executive compensation and employee benefit programs.
- Review the Committee's own performance and review and reassess the adequacy of this charter every other year coincident with the bi-annual self-assessment of the full Board.
- Perform and delegate authority to sub-Committees when appropriate.
Limitation
Nothing in this charter is intended to alter in any way the standard of conduct that applies to any of the directors under Ind. Code § 23-1-35 or § 28-13-11, as applicable, as amended, and this charter does not impose, nor shall it be interpreted to impose, any duty on any director greater than, or in addition to, the duties or standard established by such provisions.
February 2006
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