EXHIBIT 10.1
INCENTIVE STOCK OPTION AGREEMENT
This AGREEMENT (the "Agreement") is made as of ______________________, by and
between MainSource Financial Group, Inc. an Indiana corporation (the "Company"),
and ___________________________, an employee of the Company or an Affiliate of
the Company (the "Optionee").
Now, therefore, the parties hereto agree as follows:
1. Grant of Stock Option. Subject to and upon the terms, conditions, and
restrictions set forth in this Agreement and in the MainSource Financial Group,
Inc. 2003 Stock Option Plan (the "Plan"), and in consideration, among other
things, of Optionee's covenants and agreements set forth in Section 21 of this
Agreement, the Company hereby grants to the Optionee as of the Date of Grant a
stock option (the "Option") to purchase ________ Common Shares, subject to
adjustment as hereinafter provided (the "Optioned Shares"). The Option may be
exercised from time to time in accordance with the terms of this Agreement. The
price at which the Optioned Shares may be purchased pursuant to this Option
shall be $______ per share subject to adjustment as hereinafter provided (the
"Option Price"). The Option is intended to be an "Incentive Stock Option" within
the meaning of that term under Section 422 of the Code, or any successor
provision thereto; this Agreement shall be construed in a manner that will
enable this Option to be so qualified.
2. Term of Option. The term of the Option shall commence on the date hereof
(the "Date of Grant') and, unless earlier terminated in accordance with Section
6 hereof, shall expire ten (10) years from the Date of Grant.
3. Right to Exercise. Subject to expiration or earlier termination, on
December 31, ____, if the Optionee is an employee of the Company or an Affiliate
of the Company on such date, the number of Optioned Shares equal to ten percent
(10%) multiplied by the number of Optioned Shares specified in this Agreement
shall become exercisable; on December 31, _____, if the Optionee is an employee
of the Company or an Affiliate of the Company on such date, the number of
Optioned Shares equal to twenty percent (20%) multiplied by the number of
Optioned Shares specified in this Agreement shall become exercisable on a
cumulative basis with all other Optioned Shares that have previously become
exercisable; on December 31, _____, if the Optionee is an employee of the
Company or an Affiliate of the Company on such date, the number of Optioned
Shares equal to thirty percent (30%) multiplied by the number of Optioned Shares
specified in this Agreement shall become exercisable on a cumulative basis with
all other Optioned Shares that have previously become exercisable; and on
December 31, _____, if the Optionee is an employee of the Company or an
Affiliate of the Company on such date, the number of Optioned Shares equal to
forty percent (40%) multiplied by the number of Optioned Shares specified in
this Agreement shall become exercisable on a cumulative basis with all other
Optioned Shares that have previously become exercisable. Therefore, on December
31, _____, it is intended that if the Optionee is an employee of the Company or
an Affiliate of the Company,
on such date, all Optioned Shares shall be exercisable. To the extent the Option
is exercisable; it may be exercised in whole or in part. In no event shall the
Optionee be entitled to acquire a fraction of one Optioned Share pursuant to
this Option. The Optionee shall be entitled to the privileges of ownership with
respect to Optioned Shares purchased and delivered to him upon the exercise of
all or part of this Option.
4. Option Nontransferable. The Option granted hereby shall be neither
transferable nor assignable by an Optionee other than by will or by the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee, or in the event of his or her legal incapacity,
by his or her guardian or legal representative acting on behalf of the Optionee
in a fiduciary capacity under state law and court supervision.
5. Notice of Exercise; Payment.
(1) To the extent then exercisable, the Option may be exercised by written
notice to the Company stating the number of Optioned Shares for which the Option
is being exercised and the intended manner of payment. Payment equal to the
aggregate Option Price of the Optioned Shares being exercised shall be tendered
in full with the notice of exercise to the Company in cash in the form of
currency or check or other cash equivalent acceptable to the Company. The
requirement of payment in cash shall be deemed satisfied if the Optionee makes
arrangements that are satisfactory to the Company with a broker that is a member
of the National Association of Securities Dealers, Inc. to sell a sufficient
number of Optioned Shares which are being purchased pursuant to the exercise and
deliver to the Company the amount of the aggregate Option Price not later than
the date on which the sale transaction will settle in the ordinary course of
business.
(2) The Optionee may also tender the Option Price by (i) the actual or
constructive transfer to the Company of nonforfeitable, nonrestricted Common
Shares that have been owned by the Optionee for (x) more than one year prior to
the date of exercise and for more than two years from the date on which the
option was granted, if they were originally acquired by the Optionee pursuant to
the exercise of an Incentive Stock Option, or (y) more than six months prior to
the date of exercise, if they were originally acquired by the Optionee other
than pursuant to the exercise of an Incentive Stock Option, or (ii) by any
combination of the foregoing methods of payment, including a partial tender in
cash and a partial tender in nonforfeitable, nonrestricted Common Shares.
(3) Within ten (10) days after notice, the Company shall direct the due
issuance of the Optioned Shares so purchased, which shares may be subject to
legal restrictions regarding their transfer only in accordance with the
requirements of the Securities Act of 1933, as amended.
(4) Nonforfeitable, nonrestricted Common Shares that are transferred by the
Optionee in payment of all or any part of the Option Price shall be valued on
the basis of their Fair Market Value.
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(5) As a further condition precedent to the exercise of this Option, the
Optionee shall comply with all regulations and the requirements of any
regulatory authority having control of, or supervision over, the issuance of
Common Shares and in connection therewith shall execute any documents which the
Board shall in its sole discretion deem necessary or advisable. The date of such
notice shall be the exercise date.
6. Termination of Agreement. The Agreement, except for the provisions of
Section 21 (Restrictive Covenants and Agreements) and Sections 15 (Amendments)
and 18 (Successors and Assigns), which shall survive the termination of any
other provisions of this Agreement, and the Option granted hereby, shall
terminate automatically and without further notice on the earliest of the
following dates:
(1) One (1) year after the Optionee's death if the Optionee dies while in
the employ of the Company or an Affiliate;
(2) One (1) year after the date of the Optionee's permanent and total
disability, within the meaning of Code Section 22(e)(3), as confirmed by a
licensed physician's statement, if the Optionee becomes permanently and totally
disabled while an employee of the Company;
(3) Ninety (90) days after the Optionee's retirement under a retirement
plan of the Company at or after the earliest voluntary retirement age provided
for in such retirement plan or retirement at any earlier age with the consent of
the Board;
(4) Except as provided on a case-by-case basis, ninety (90) days after the
date the Optionee ceases to be an employee of the Company, or an Affiliate, for
any reason other than as described in this Section; or
(5) Ten (10) years from the Date of Grant.
In the event that the Optionee's employment is terminated for Cause, this
Agreement, except for the provisions of Section 21 (Restrictive Covenants and
Agreements) and Sections 15 (Amendments) and 18 (Successors and Assigns), which
shall survive the termination of any other provisions of this Agreement, shall
terminate at the time of such termination notwithstanding any other provision of
this Agreement. For purposes of this Agreement, "Cause" shall mean the Optionee
shall have committed prior to termination of employment any of the following
acts:
(i) an act of fraud, embezzlement or theft, or any other material
violation of law in connection with the Optionee's duties or in the course
of the Optionee's employment that is intentional or the result, in the good
faith opinion of the Company, of gross negligence;
(ii) wrongful damage to material assets of the Company that is
intentional or the result, in the good faith opinion of the Company, of
gross negligence;
(iii) wrongful disclosure of material confidential information of the
Company that is intentional or the result, in the good faith opinion of the
Company, of gross negligence;
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(iv) wrongful engagement in any competitive activity that would
constitute a material breach of the duty of loyalty that is intentional or
the result, in the good faith opinion of the Company, of gross negligence;
or
(v) any breach of any stated material employment policy of the Company
that is intentional or the result, in the good faith opinion of the
Company, of gross negligence.
Any determination of whether an Optionee's employment was terminated for Cause
shall be made by the Corporate CEO or the Board, whose determination shall be
binding and conclusive.
This Agreement shall not be exercisable for any number of Optioned Shares
in excess of the number of Optioned Shares for which this Agreement is then
exercisable, pursuant to Sections 3, 7 and 8 hereof, on the date of termination
of employment. For the purposes of this Agreement, the continuous employment of
the Optionee with the Company shall not be deemed to have been interrupted, and
the Optionee shall not be deemed to have ceased to be an employee of the Company
or an Affiliate by reason of the transfer of his employment among the Company
and its Affiliates or a leave of absence of not more than ninety (90) days
approved by the Corporate CEO or the Board.
7. Acceleration of Option. Notwithstanding Section 3, the Option granted
hereby shall become immediately exercisable in full in the event of a Change of
Control.
For purposes of this Section, a "Change in Control" shall mean the
occurrence of any of the following events:
(1) The Company is merged or consolidated or reorganized into or with
another corporation or other legal person, and as a result of such merger,
consolidation, or reorganization less than forty percent (40%) of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of directors of the
Company immediately prior to such transaction;
(2) The Company sells or otherwise transfers all or substantially all of
its assets to any other corporation or other legal person, and less than a
majority of the combined voting power of the then-outstanding securities of such
corporation or person immediately after such sale or transfer is held in the
aggregate by the holders of shares of Common Shares immediately prior to such
sale or transfer;
(3) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Exchange Act, disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of
securities representing twenty-five percent (25%) or more of the voting power of
the then outstanding voting stock of the Company;
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(4) The Company files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in response to Form
8-K or Schedule 14A (or any successor schedule, form or report or item therein)
that a change in control of the Company, other than through any event(s)
referred to in paragraphs (1) through (3) of this Section 7, has or may have
occurred or will or may occur in the future pursuant to any then-existing
contract or transaction; or
(5) If during any period of two (2) consecutive years, individuals who at
the beginning of any such period constitute the directors (including for this
purpose any new director whose election or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority thereof
(excluding any director's seat that is vacant or otherwise unoccupied).
Notwithstanding the foregoing provisions of (3) and (4) above, a "Change in
Control" shall not be deemed to have occurred for purposes of this Agreement (i)
solely because (A) the Company; (B) a subsidiary; or (C) any Company-sponsored
employee stock ownership plan or other employee benefit plan of the Company
either files or becomes obligated to file a report or proxy statement under or
in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) under the Exchange Act,
disclosing beneficial ownership by it of shares, whether in excess of
twenty-five percent (25%) of the voting power or otherwise, or because the
Company reports that a change of control of the Company has or may have occurred
or will or may occur in the future by reason of such beneficial ownership or
(ii) solely because of a change in control of any subsidiary.
8. Merger of Equals. Notwithstanding Section 3, the Option granted hereby
shall become immediately exercisable in full in the event that within 15 months
following the month in which a Merger of Equals occurs, the Optionee's
employment with the Company is terminated by the Company without Cause or by the
Optionee for Good Reason.
For purposes of this Section 8:
(1) A "Merger of Equals" shall have occurred if the Company is merged or
consolidated or reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation, or reorganization at
least forty percent (40%), but not more than sixty percent (60%), of the
combined voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the aggregate by the
holders of securities entitled to vote generally in the election of directors of
the Company immediately prior to such transaction; and
(2) "Good Reason" shall mean the occurrence of any of the following events
without the Optionee's express written consent:
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(i) the assignment to the Optionee of duties inconsistent in any
material respect with the position, authority, duties, or responsibilities
vested in the Optionee immediately prior to the Merger of Equals, excluding
for these purposes an isolated, insubstantial and inadvertent action not
taken in bad faith that is remedied by the Company promptly after receipt
of notice thereof given by the Optionee;
(ii) a reduction by the Company in the Optionee's annual base salary
as in effect on the date of the Merger of Equals or as the same may be
increased from time to time;
(iii) the Company's requiring the Optionee to (A) be based at any
office or location that is more than twenty-five (25) miles from the
Optionee's office or location immediately prior to the Merger of Equals, or
(B) travel on business to a substantially greater extent than required
immediately prior to the Merger of Equals; or
(iv) the failure by the Company to continue to provide the Optionee
with benefits comparable on an overall basis to those enjoyed by the
Optionee under any of the Company's pension, life insurance, medical,
disability or other employee benefit or fringe benefit plans, programs and
arrangements that applied to the Optionee at the time of the Merger of
Equals.
11. No Employment Contract. Nothing contained in this Agreement shall
confer upon the Optionee any right with respect to continuance of employment by
the Company, nor limit or affect in any manner the right of the Company to
terminate the employment or adjust the compensation of the Optionee.
12. Taxes and Withholding. If the Company shall be required to withhold any
federal, state, local or foreign tax in connection with the exercise of the
Option, and the amounts available to the Company for such withholding are
insufficient, the Optionee shall pay the tax or make provisions that are
satisfactory to the Company for the payment thereof. The Optionee may elect to
satisfy all or any part of any such withholding obligation by surrendering to
the Company a portion of the Optioned Shares that are issued or transferred to
the Optionee upon the exercise of the Option, and the Optioned Shares so
surrendered by the Optionee shall be credited against any such withholding
obligation at the Fair Market Value of such shares on the date of such
surrender; provided, however, that in no event shall the aggregate Fair Market
Value of the Optioned Shares surrendered pursuant to this Section 10 exceed the
minimum amount of taxes required to be withheld in connection with exercise of
the Option. The Company will pay any and all issue and other taxes in the nature
thereof which may be payable by the Company in respect of any issue or delivery
upon a purchase pursuant to this Option.
13. Compliance with Law. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Option shall not be
exercisable if the exercise thereof would result in a violation of any such law.
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12. Adjustments. The Board may make or provide (and in the event of any
event described in clause (a) below, shall make or provide ) for such
adjustments in the number of Optioned Shares covered by this Option, in the
Option Price applicable to such Option, and in the kind of shares covered
thereby, as the Board determines is equitably required to prevent dilution or
enlargement of the Optionee's rights that otherwise would result from (a) any
stock dividend, stock split, combination of shares, recapitalization, or other
change in the capital structure of the Company, (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation, or other distribution of assets or issuance of rights or warrants
to purchase securities, or (c) any other corporate transaction or event having
an effect similar to any of the foregoing. In the event of any such transaction
or event, the Board may provide in substitution for this Option such alternative
consideration as it may determine to be equitable in the circumstances and may
require in connection therewith the surrender of this Option.
13. Relation to Other Benefits. Any economic or other benefit to the
Optionee under this Agreement shall not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company and
shall not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the Company.
14. Mandatory Notice of Disqualifying Disposition. Without limiting any
other provision hereof, the Optionee hereby agrees that, if the Optionee
disposes (whether by sale, exchange, gift or otherwise) of any of the Optioned
Shares within two (2) years of the Date of Grant or within one (1) year after
the transfer of such share or shares to the Optionee, the Optionee shall notify
the Company of such disposition in writing within thirty (30) days from the date
of such disposition. Such written notice shall state the principal terms of such
disposition and the type and amount of the consideration received for such share
or shares by the Optionee in connection therewith.
15. Amendments. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee under this Agreement without the Optionee's consent.
16. Severability. In the event that one or more of the provisions of this
Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
17. Relation to Plan. This Agreement is subject to the terms and conditions
of the Plan. In the event of any inconsistent provisions between this Agreement
and the Plan, the Plan shall govern. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Plan. The Board
acting pursuant to the Plan, as constituted from time to time, shall, except as
expressly provided otherwise herein, have the right to determine any questions
which arise in connection with this option or its exercise.
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18. Successors and Assigns. The provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of the Optionee, and the successors and
assigns of the Company.
19. Governing Law. The interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Indiana, without giving
effect to the principles of conflict of laws thereof.
20. Notices. Any notice to the Company provided for herein shall be in
writing to the Company, marked Attention: Corporate Secretary, and any notice to
the Optionee shall be addressed to said Optionee at his or her address currently
on file with the Company. Except as otherwise provided herein, any written
notice shall be deemed to be duly given if and when delivered personally or
deposited in the United States mail, first class registered mail, postage and
fees prepaid, and addressed as aforesaid. Any party may change the address to
which notices are to be given hereunder by written notice to the other party as
herein specified (provided that for this purpose any mailed notice shall be
deemed given on the third business day following deposit of the same in the
United States mail).
21. Restrictive Covenants and Agreements.
(1) Non-Competition and Non-Solicitation; Confidentiality. Optionee
acknowledges that without his or her making the covenants and agreements in this
Section 21, the Company would not have granted the Option and that such issuance
to Optionee is in reliance upon Optionee's compliance with the covenants and
agreements made in this Section 21. Optionee hereby covenants and agrees that
from and after his termination of employment and until the expiration of
eighteen months from the date of termination of employment with the Company of
any Affiliate (such later date being referred to herein as the "Ending Date" and
the period beginning on the date of termination of employment and ending on the
Ending Date being referred to herein as the "Limited Period"), or such perpetual
period in the case of Section 21(1)(iv) below, Optionee shall not, directly or
indirectly:
(i) engage in, control, advise, manage, serve as a director, officer
or employee of, act as a consultant to, any bank holding company, savings
association holding company, financial services holding company, bank,
savings bank, thrift or any other financial institution or other
organization that is primarily engaged in the financial services industry,
in competition with the Company, which is located within the county of the
Optionee's designated office or any county adjacent to that "designated
office" county. The "designated office" and county will be listed on the
signature page of this document. This prohibition shall not prohibit
Optionee or any of his affiliates, associates, agents or representatives
from owning less than 1% of the publicly traded securities of any
corporation or other entity engaged in such business;
(ii) solicit, divert or attempt to solicit or divert any "past
customers", "present customers", or "prospective customers" of the Company,
as those terms are defined below, for the purpose of competing with the
Company in providing financial services;
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(iii) employ, solicit for employment or encourage to leave his
employment, any person who was, during the one-year period prior to such
employment, solicitation or encouragement, or is, an officer or employee of
the Company or an Affiliate; and/or
(iv) divulge, furnish or make accessible to any person or entity
(during the Limited Period or at any time thereafter) any knowledge or
information about the business conducted by the Company or any Affiliate
not otherwise in the public domain (except as required by law or order of
any governmental entity), or any of any of their customers or with respect
to any other aspect of the business conducted by the Company or any
Affiliate.
For purposes of this Section 21(1), the term "directly or indirectly" shall
include acts or omissions as proprietor, partner, joint venture, employer,
salesman, agent, employee, officer, director, lender or consultant of, to or
for, or owner of any interest in, any person or entity. In addition, the term
"past customers" means any customer who was acquired during Optionee's last year
of employment, but who was not still a customer at the time of Optionee's
departure. The term "present customers" means any customer who was a customer
during Optionee's employment and who remained a customer at the time of
Optionee's departure. The term "prospective customer" means entities to which
the Company had made overtures during the last year of Optionee's employment.
(2) Tolling of Limited Period. The running of the one (1) year Limited
Period prescribed in subparagraphs (1)(i) through (iii) above (but not
Optionee's obligations under Section 21(1)) shall be tolled and suspended by the
length of time Optionee is directly or indirectly involved in circumstances that
a court of competent jurisdiction subsequently finds to violate the terms of
Section 21(1).
(3) Injunctive Relief. Optionee acknowledges that it would be difficult to
compensate fully the Company or any affected Affiliate for damages for any
violation of the provisions of 21(1) of this Agreement, and the Company and any
affected Affiliate in any such violation will not have an adequate remedy at
law. Accordingly, the Company and/or the affected Affiliate shall be entitled to
injunctive relief, both pendente lite and permanently, against Optionee.
Optionee hereby consents to any initiation by the Company and/or any affected
Affiliate in a court of appropriate jurisdiction of any action to enjoin
immediately any anticipatory, continuing or future breach of Section 21(1).
Optionee hereby releases the Company from the requirement of posting any bond in
connection with temporary or interlocutory injunctive relief, to the extent
permitted by law. This Section 21(3) with respect to injunctive relief shall
not, however, diminish the right of the Company and/or any affected Affiliate to
claim and recover damages in addition to injunctive relief.
(4) Judicial Modification. If any of the provisions of this Section 21 is
held to be unenforceable because of the scope, duration or area of its
applicability, or otherwise, the court or other body having jurisdiction over
the matter making such determination shall have the power to modify such scope,
duration or area or other matter, or all of them, and such provisions shall then
be applicable in such modified form; and each Affiliated Shareholder agrees that
this Section 21, as so amended, shall be valid and binding as though any invalid
or unenforceable provision had not been included herein.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer and Optionee, after reviewing and
understanding, among other matters herein, the restrictions imposed and the
remedies granted in Section 21, has also executed this Agreement in duplicate,
as of the day and year first above written.
MAINSOURCE FINANCIAL GROUP, INC.
By:______________________________________
James L. Saner Sr., President/CEO
Date: ___________________________________
OPTIONEE
By: _____________________________________
Optionee
Date: ___________________________________
Designated Office: ______________________
County: _________________________________
State: __________________________________
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