Exhibit 10.18
 
FIRST FEDERAL BANK, A F.S.B.
EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENT

THIS EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENT (the “AGREEMENT”), made
and entered into this 1st day of October 1996, by and between FIRST FEDERAL
BANK, A F.S.B., a banking corporation organized and existing under the laws of
the state of Indiana (hereinafter referred to as “Bank”) and Bradley M. Rust, a
key employee and executive (hereinafter referred to as “Executive”).

WITNESSETH:

WHEREAS, the Executive is employed by the Bank; and

WHEREAS, the Bank recognizes the valuable services heretofore performed for it
by the Executive and wishes to encourage continued employment; and

WHEREAS, the Executive wishes to be assured that he will be entitled to a
certain amount of additional compensation for some definite period of time from
and after his retirement from active service with the Bank or other termination
of his employment and wishes to provide his beneficiary with benefits from and
after his death; and

WHEREAS, the parties hereto wish to provide the terms and conditions upon which
the Bank shall pay such additional compensation to the Executive after his
retirement or other termination of his employment and/or death benefits to his
beneficiary after his death; and

WHEREAS, the parties hereto intend that this Agreement be considered an unfunded
arrangement, maintained primarily to provide supplemental retirement income for
the Executive, a member of a select group of management or highly compensated
employees of the Bank, for purposes of the Employee Retirement Income Security
Act of 1975, as amended; and

WHEREAS, the Bank has adopted this Executive Supplemental Retirement Income
Agreement which controls all issues relating to the Supplemental Retirement
Income Benefit as described herein; and

NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties hereto agree to the following terms and conditions:

 

--------------------------------------------------------------------------------

 

SECTION I

DEFINITIONS

When used herein, the following words shall have the meanings below unless the
context clearly indicates otherwise:

1.1
“Accrued Benefit” means that portion of the Supplemental Retirement Income
Benefit which is required to be expensed and accrued under generally accepted
accounting principals by any appropriate methodology which the Board may require
in the exercise of its sole discretion.  Such Accrued Benefit shall be
annuitized and shall be paid to the Executive in one hundred eighty (180) equal
monthly installments.  The interest factor used to annuitize the Accrued Benefit
shall be equal to the average cost of deposits of the Bank (as determined by the
Board) for the calendar year immediately preceding the date on which the Accrued
Benefit is annuitized.

 
1.2
“Act” means the Employee Retirement Income Security Act of 1974, as now in
effect and as it may be amended from time to time.

 
1.3
“Bank” means FIRST FEDERAL BANK, A F.S.B. and any successor thereto.

 
1.4
“Beneficiary” means the person, persons (and their heirs) or other entity
designated as Beneficiary in writing to the Bank to whom the benefit(s), the
deceased Executive would have received had he lived, is (are) payable.  If no
Beneficiary is so designated, then the Executive’s Spouse, if living, will be
deemed the Beneficiary.  If the Executive’s Spouse is not living, then the
Children of the Executive will be deemed Beneficiary and take on a per stirped
basis.  If there are no living Children, then the Estate of the Executive will
be deemed the Beneficiary.

 
1.5
“Board” means the Board of Directors of the Bank.

 
1.6
“Cause” means willful misconduct, willful malfeasance, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, regulation (other than traffic violations or similar
offenses), or final cease-and-desist order, material breach of any provision of
this Agreement, or gross negligence in matters of material importance to the
Bank.  Cause shall be determined by the Board in its sole discretion within the
parameters of this Section.

 
1.7
“Children” means the Executive’s children, both natural and adopted, then living
at the time payments are due the Children under this Agreement.

 
1.8
“Code” means the Internal Revenue Code of 1986 as now in effect and as amended
from time to time.

 
1.9
“Early Retirement Date” means retirement from service, upon meeting certain
conditions as specified in this Agreement, which is effective prior to the
Normal Retirement Date.

 
1.10
“Effective Date” shall be the effective date of this Agreement, October 1, 1996.

 
2

--------------------------------------------------------------------------------

 
 
1.11
“Estate” means the estate (including, when applicable, any irrevocable trust
governing the transfer of non-probate assets) of the Executive.

 
1.12
“Normal Retirement Date” means the first day of the month coincident with or
next following the Executive’s sixty-fifth (65th) birthday.

 
1.13
“Permanently and Totally Disabled” means the Executive has, for at least six (6)
months, been unable to perform the services incident to his position with the
Bank as a result of accidental bodily injury or sickness and that the status is
likely to continue for an indefinite period, as reasonably determined subsequent
to the expiration of the six (6) month period by a duly licensed physician
selected in good faith by the Bank.

 
1.14
“Postponed Retirement Date” means the first day of the month coincident with or
next following the Executive’s termination of employment with the Bank after his
Normal Retirement Date.

 
1.15
“Spouse” means the individual to whom the Executive is legally married at the
time of the Executive’s death.

 
1.16
“Suicide” means the act of intentionally killing oneself.

 
1.17
“Supplemental Retirement Income Benefit” means an annual amount equal to
Twenty-Six Thousand Three Hundred Forty Dollars ($26,340).  This total shall be
divided by twelve (12) and paid in equal monthly installments for a period of
one hundred eighty (180) months.

 
1.18
“Survivor’s Benefit” means Twenty-Six Thousand Three Hundred Forty Dollars
($26,340) per year to be paid in one hundred eighty (180) equal monthly
installments.

 
1.19
“Vested” means the non-forfeitable portion of the benefit to which the Executive
is entitled.

 
1.20
“Vested Accrued Benefit” means that portion of the Executive’s Accrued Benefit
in which he is vested.  It is computed by multiplying the Accrued Benefit by the
vesting percentage specified in Subsection 3.5.  Such Vested Accrued Benefit
shall be paid to the Executive in one hundred eighty (180) equal monthly
installments.

 
1.21
“Years of Service” means the total number of complete years of employment
(including employment before the Effective Date and authorized leaves of
absence).

 
3

--------------------------------------------------------------------------------

 
 
SECTION II
 
PRE-RETIREMENT AND POST RETIREMENT DEATH BENEFITS
 
2.1
Death Prior to Termination of Employment.  It the Executive dies prior to
termination of employment with the Bank, his Beneficiary shall be entitled to be
paid the Survivor’s Benefit, commencing within thirty (30) days of the
Executive’s death.

 
2.2
Death After Termination of Employment.  In the event of the Executive’s death
after his termination of employment, the Executive’s Beneficiary shall be paid a
monthly benefit for a period of one hundred eighty (180) months, commencing
within thirty (30) days of the Executive’s death and the benefit payment shall
be determined as follows:

 
(a)           Voluntary or Involuntary Termination of Employment Prior to Normal
Retirement Date.  In the event the Executive’s death occurs after his voluntary
termination of employment with the Bank but before his Normal Retirement Date,
the Executive’s Beneficiary shall be entitled to be paid the Executive’s Vested
Accrued Benefit in one hundred eighty (180) equal monthly installments.  If the
Executive dies while he is receiving benefits, the Executive’s Beneficiary shall
be entitled to receive those benefits which the Executive would have been paid
had he lived the entire distribution period.

In the event the Executive’s death follows his involuntary termination (not for
Cause by the Board), the Executive’s Beneficiary shall be entitled to receive
the Executive’s Supplemental Retirement Income Benefit, with payments commencing
within thirty (30) days of the Executive’s death.  In the event the Executive
dies while he is receiving his supplemental retirement income benefits, the
Executive’s Beneficiary shall be entitled to receive the balance of payments
that the Executive would have received had he lived.

(b)           Termination of Service at Normal Retirement Age.  In the event of
the Executive’s death following the termination of service on or after his
Normal Retirement Date, the Executive’s Beneficiary shall be paid those benefits
which the Executive would have been paid had he lived for the entire retirement
distribution period.  Benefits shall be paid to the Executive’s Beneficiary in
the same manner they would have been paid to the Executive had he lived; that
is, a total of one hundred eighty (180) equal monthly installments shall be paid
to the Executive and/or his Beneficiary.

2.3
Death by Reason of Suicide.  In the event the Executive dies by reason of
suicide within two (2) years of the date of execution of this Agreement, the
Bank shall be under no obligation to provide any benefits to the Executive’s
Beneficiary.

 
2.4
Additional Death Benefit – Burial Expenses.  In addition to the above-described
death benefits, upon his death, the Executive’s Beneficiary shall be entitled to
receive a one-time lump sum death benefit in the amount of Ten Thousand
($10,000.00) Dollars; provided, however, that if the Executive terminates his
employment with the Bank before July 1, 1998 for reasons other than his death or
due to his becoming Permanently and Totally Disable, the one-time lump sum death
benefit otherwise provided in this Section shall not be payable.

 
4

--------------------------------------------------------------------------------

 

SECTION III

SUPPLEMENTAL RETIREMENT INCOME BENEFIT
AND DISABILITY BENEFIT

3.1
Normal Retirement Benefit.  If the Executive retires on his Normal Retirement
Date, the Bank shall commence payment of the Supplemental Retirement Income
Benefit.  Such payments shall commence on the first day of the month next
following the Executive’s retirement date and shall be payable monthly
thereafter until all payments have been made.

 
3.2
Early Retirement Benefit.  If the Executive terminates his employment with the
Bank on or after reaching age sixty (60) and if he remains in continuous service
from the date of this Agreement through his employment termination date, the
Executive shall be entitled to receive the Supplemental Retirement Income
Benefit specified in Subsection 1.17, reduced by six (6) percent per year for
each year (or fraction thereof) that the Early Retirement Date precedes the
Normal Retirement Date.  Payment of this early retirement benefit shall commence
with thirty (30) days after Executive’s Early Retirement Date.

 
3.3
Postponed Retirement Benefit.  If the Executive continues his employment with
the Bank beyond his Normal Retirement Date, the postponed retirement benefit of
the Executive shall be the Supplemental Retirement Income Benefit as set forth
in Subsection 1.17.  However, the Board, in the exercise of its sole discretion,
may, but is not required to, increase benefits if retirement is postponed past
the Normal Retirement Date.  The postponed retirement benefit shall not commence
until the Postponed Retirement Date.

 
3.4
Disability.  If the Executive becomes Permanently and Totally Disabled prior to
reaching his retirement, while covered by the provisions of this Agreement, the
Executive shall be entitled to his Accrued Benefit at the time he becomes
Permanently and Totally Disabled.  Payments shall begin within thirty (30) days
after the Executive becomes Permanently and Totally Disabled.

At the Executive’s death, if the total amount of disability payments received
under the provisions of this Subsection is less than the total amount of
payments that would have been received under the Survivor’s Benefit section (has
it applied instead), the Bank shall pay the Executive’s Beneficiary a lump sum
payment to make the total benefits equal to the amount allowable under the
Survivor’s Benefit section.  Such a lump sum payment would be in full
satisfaction of the Bank’s obligations under this Agreement.
 
3.5
Vesting.  Vested Accrued Benefits, as described in Subsection 1.20, shall be
determined according to the following schedule:

  

   
Percentage of
     
Total Benefit
 
Years of Service
 
Vested
         
Less than 5 years
    0 %
5 years or more
    100 %

 
5

--------------------------------------------------------------------------------

 

SECTION IV

EXECUTIVE’S RIGHT TO ASSETS

The rights of the Executive, any Beneficiary of the Executive, or any other
person claiming through the Executive under this Agreement, shall be solely
those of an unsecured general creditor of the Bank.  The Executive, the
Beneficiary of the Executive, or any other person claiming through the
Executive, shall only have the right to receive from the Bank those payments
which are specified under this Agreement.  The Executive agrees that he, his
Beneficiary, or any other person claiming through him shall have no rights or
interests whatsoever in any asset of the Bank, including any insurance policies
or contracts which the Bank may possess or obtain to informally fund this
Agreement.  Any asset used or acquired by the Bank in connection with the
liabilities it has assumed under this Agreement, except as expressly provided,
shall not be deemed to be held under any trust for the benefit of the Executive
or his Beneficiaries, nor shall it be considered security for the performance of
the obligations of the Bank.  It shall be and remain, a general, unpledged, and
unrestricted asset of the Bank.

SECTION V

RESTRICTIONS UPON FUNDING

The Bank shall have no obligation to set aside, earmark or entrust any fund or
money with which to pay its obligations under this Agreement.  The Executive,
his Beneficiaries or any successor in interest to him, shall be and remain
simply a general creditor of the Bank in the same manner as any other creditor
having a general claim for matured and unpaid compensation.  The Bank reserves
the absolute right, at its sole discretion, to either fund the obligations
undertaken by the Agreement or to refrain from funding the same and to determine
the extent, nature, and method of such informal funding.  Should the Bank elect
to fund this Agreement, in whole or in part, through the purchase of life
insurance, mutual funds, disability policies or annuities, the Bank reserves the
absolute right, in its sole discretion, to terminate such funding at any time,
in whole or in part.  At no time shall the Executive be deemed to have any lien
nor right, title or interest in or to any specific funding investment or to any
assets of the Bank.  If the Bank elects to invest in a life insurance,
disability or annuity policy upon the life of the Executive, then the Executive
shall assist the Bank by freely submitting to a physical examination and
supplying such additional information necessary to obtain such insurance or
annuities.

SECTION VI

ALIENABILITY AND ASSIGNMENT PROHIBITION

Neither the Executive nor any Beneficiary under this Agreement shall have any
power or right to transfer, assign, anticipate, hypothecate, mortgage, commute,
modify or otherwise encumber in advance any of the benefits payable hereunder,
nor shall any of said benefits be subject to seizure for the payment of any
debts, judgments, alimony or separate maintenance owed by the Executive or his
Beneficiary, nor be transferable by operation of law in the event of bankruptcy,
insolvency or otherwise.

 
6

--------------------------------------------------------------------------------

 

SECTION VII

TERMINATION OF EMPLOYMENT

7.1
Termination of Service Prior to Retirement Date.  If, prior to Executive’s Early
Retirement Date, the Executive is terminated without Cause by the Bank, the Bank
shall pay to the Executive an amount equal to the Executive’s Supplemental
Retirement Income Benefit, commencing within thirty (30) days of the Executive’s
Normal Retirement Date.  However, it the Executive’s termination of employment
with the Bank before his Early Retirement Date is voluntary, he shall only be
entitled to his Vested Accrued Benefit existing at the date of
termination.  Payment of the Vested Accrued Benefit shall commence within thirty
(30) days after his attainment of his Normal Retirement Date.

 
7.2
Termination of Service for Cause.  Should the Executive’s employment by the Bank
be terminated for Cause before his Normal Retirement Date, his Benefits,
including any death benefits, under this Agreement shall be forfeited and this
Agreement shall become null and void.

 
7.3
Termination or Suspension Resulting from Regulatory Actions.  Pursuant to 12
C.F.R. § 563.39 (b), the following conditions shall apply to this Agreement:

(1)          The Board may terminate the Executive’s employment at any time, but
any termination by the Board other than termination for Cause, shall not
prejudice the Executive’s right to compensation or other benefits under the
contract.  The Executive’s shall have no right to receive compensation or other
benefits for any period after termination for Cause.

(2)          If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank’s affairs by a notice served under
Section 8 (e) (3) or (g) (1) of (the) Federal Deposit Insurance Act (12 U.S.C.
1818 (e) (3) and (g) (1)) the Bank’s obligations under the contract shall be
suspended as of the date of termination of service unless stayed by appropriate
proceedings.  If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Executive all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in part)
any of its obligations which were suspended.

(3)          If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank’s affairs by an order issued under
Section 8 (3) (4) or (g) (1) of the Federal Deposit Insurance Act (12 U.S.C.
1818 (e) (4) or (g) (1)), all obligations of the Bank under the contract shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

(4)          If the Bank is in default (as defined in Section 3 (x) (1) of the
Federal Deposit Insurance Act), all obligations under the contract shall
terminate as of the date of default, but this paragraph shall not affect any
vested rights of the contracting parties.

 
7

--------------------------------------------------------------------------------

 

(5)          All non-vested obligations under the contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the Bank:

(i)          by the Director or his designee at the time the Federal Deposit
Insurance Corporation or the Resolution Trust Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in § 13 (c) of the Federal Deposit Insurance Act; or

(ii)          by the Director or his designee, at the time the Director or his
designee approves a supervisory merger to resolve problems related to operation
of the Bank or when the Bank is determined by the Director to be in an unsafe or
unsound condition.

Any rights of the parties that have already vested, however, shall not be
affected by such action.

SECTION VIII

ACT PROVISIONS

8.1
Named Fiduciary and Administrator.  The Bank shall be the named fiduciary and
administrator of this Agreement.  As administrator, the Bank shall be
responsible for the management, control and administration of the Agreement as
established herein.  It may delegate to others certain aspects of the management
and operation responsibilities of the Agreement including the employment of
advisors and the delegation of ministerial duties to qualified individuals.

 
8.2
Claims Procedure and Arbitration.  In the event that benefits under this
Agreement are not paid to the Executive (or to his Beneficiary in the case of
the Executive’s death) and such claimants feel they are entitled  to receive
such benefits, then a written claim must be made to the Bank within sixty (60)
days from the date payments are refused.  The Bank shall review the written
claim and, if the claim is denied, in whole or in part, they shall provide in
writing within sixty (60) days of receipt of such claim their specific reasons
for such denial, reference to the provisions of this Agreement upon which the
denial is based and any additional material or information necessary to perfect
the claim.  Such written notice shall further indicate the additional steps to
be taken by claimants if a further review of the claim denial is desired.

If claimants desire a second review, they shall notify the Bank in writing
within sixty (60) days of the first claim denial.  Claimants may review the
Agreement or any documents relating thereto and submit any written issues and
comments they may feel appropriate.  In its sole discretion, the Bank shall then
review the second claim and provide a written decision within sixty (60) days of
receipt of such claim.  This decision shall likewise state the specific reasons
for the decision and shall include reference to specific provisions of the
Agreement upon which the decision is based.  If claimants disagree with the
decision of the Bank, nothing herein shall serve to preclude them from seeking
any and all remedies available at law.

 
8

--------------------------------------------------------------------------------

 

SECTION IX

MISCELLANEOUS

9.1
No Effect on Employment Rights.  Nothing contained herein shall confer upon the
Executive the right to be retained in the service of the Bank nor limit the
right of the Bank to discharge or otherwise deal with the Executive without
regard to the existence of this Agreement.

 
9.2
Disclosure.  Each Executive shall receive a copy of his Agreement and the Bank
will make available, upon request, a copy of the rules and regulations that
govern this type of Agreement.

 
9.3
State Law.  The Agreement is established under, and will be construed according
to, the laws of the State of Indiana, to the extent that such laws are not
preempted by the Act and valid regulations published thereunder.

 
9.4
Severability.  In the event that any of the provisions of this Agreement or
portion thereof, are held to be inoperative or invalid by any court of competent
jurisdiction, then: (1) insofar as is reasonable, effect will be given to the
intent manifested in the provisions held invalid or inoperative, and (2) the
validity and enforceability of the remaining provisions will not be affected
thereby.

 
9.5
Incapacity of Recipient.  In the event the Executive is declared incompetent and
a conservator or other person legally charged with the care of his person or of
his estate is appointed, any benefits under the Agreement to which such
Executive is entitled shall be paid to such conservator or other person legally
charged with the care of his person or his Estate.

 
9.6
Recovery of Estate Taxes.  If the Executive’s gross Estate for federal estate
tax purposes includes any amount determined by reference to and on account of
this Executive Supplemental Retirement Income Agreement, and if the Beneficiary
is other than the Executive’s Estate, then the Executive’s Estate shall be
entitled to recover from the Beneficiary receiving such benefit under the terms
of the Deferred Compensation Benefit an amount by which the total estate tax due
by the Executive’s Estate, exceeds the total estate tax which would have been
payable if the value of such benefit had not been included in the Executive’s
gross Estate. If there is more than on person receiving such benefit, the right
of recovery shall be against each such person in proportion to the benefits
received by each such person.  In the event any Beneficiary has a liability
hereunder, such Beneficiary may petition the Bank for a lump sum payment in an
amount not to exceed the Beneficiary’s liability hereunder.

 
9.7
Unclaimed Benefit.  The Executive shall keep the Bank informed of his current
address and the current address of his Beneficiaries.  The Bank shall not be
obligated to search for the whereabouts of any person.  If within three years
after the actual death of the Executive the Bank is unable to locate any
Beneficiary of the Executive, then the Bank may fully discharge its obligation
by payment to the Estate.

 
9

--------------------------------------------------------------------------------

 

 
9.8
Limitations on Liability.  Notwithstanding any of the preceding provisions of
the Agreement and except for the benefits otherwise payable under this
Agreement, neither the Bank, nor any individual acting as an employee or agent
of the Bank or as a member of the Board shall be liable to the Executive or any
other person for any claim, loss, liability or expense incurred in connection
with the Agreement.

 
9.9
Gender.  Whenever, in this Agreement, words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine or neuter
gender, whenever they should so apply.

 
9.10
Affect on Other Corporate Benefit Agreements.  Nothing contained in this
Agreement shall affect the right of the Executive to participate in, or be
covered by, any qualified or non-qualified pension, profit sharing, group, bonus
or other supplemental compensation or fringe benefit agreement constituting a
part of the Bank’s existing or future compensation structure.

 
9.11
Headings.  Heading and sub-headings in this Agreement are inserted for reference
and convenience only and shall not be deemed a part of this Agreement.

SECTION X

NON-COMPETITION

10.1
Non-Compete Clause.  The Executive expressly agrees that, as consideration for
the agreements of the Bank contained herein and as a condition to the
performance by the Bank of its obligations hereunder, throughout the entire
period beginning at the time of termination of employment until the final
payment is made to Executive, as provided herein, he will not, without the prior
written consent of the Board, engage in, become interested, directly or
indirectly, as a sole proprietor, as a partner in a partnership, or as a 5% or
greater shareholder in a corporation, nor become associated with, in the
capacity of an employee, director, officer, principal, agent, trustee or in any
other capacity whatsoever, any enterprise conducted in the trading area of the
business of the Bank which may be deemed to be competitive with any business
earned on by the Bank as of the date of the termination of the Executive’s
employment or his retirement.

10.2
Breach.  In the event of any breach by the Executive of the agreements and
covenants contained herein, the Board shall direct that any unpaid balance of
any payments to the Executive under this Agreement be suspended, and shall
thereupon notify the Executive of such suspensions, in writing.  Thereupon, if
the Board shall determine that said breach by the Executive has continued for a
period of one (1) month following notification of such suspension, all rights of
the Executive and his Beneficiaries under this Agreement, including rights to
further payments hereunder, shall thereupon terminate.

 
10

--------------------------------------------------------------------------------

 

SECTION XI

AMENDMENT/REVOCATION

This Agreement shall not be amended, modified, or revoked at any time, in whole
or part, without the mutual written consent of the Executive and the Bank, and
such mutual consent shall be required even if the Executive is no longer
employed by the Bank.

ARTICLE XII

EXECUTION

12.1
This Agreement sets forth the entire understanding of the parties hereto with
respect to the transactions contemplated hereby, and any previous agreements or
understandings between the parties hereto regarding the subject matter hereof
are merged into and superseded by this Agreement.

12.2
This agreement shall be executed in triplicate, each copy of which, when so
executed and delivered, shall be an original, but all three copies shall
together constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
this 2 day of January, 1997.

By/s/Bradley M. Rust
Bradley M. Rust, Executive
 
FIRST FEDERAL BANK, A F.S.B.
 
By/s/Frank D. Baracani
Frank D. Baracani
President
(Title)

 
11

--------------------------------------------------------------------------------

 

German American Bancorp
Executive Supplemental Retirement Income Agreement

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

FIRST AMENDMENT
TO THE
EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
DATED OCTOBER 1, 1996
FOR
BRADLEY M. RUST

THIS FIRST AMENDMENT is adopted this 30th day of December, 2008, effective as of
January 1, 2005, by and between German American Bancorp (“GABC”) (the successor
to First American Bank f/k/a First Federal Bank, a banking corporation located
in Vincennes, Indiana (the “Bank”)), and Bradley M. Rust (the “Executive”).

The Bank and the Executive executed the Executive Supplemental Retirement Income
Agreement effective as of October 1, 1996 (the “Agreement”).  This amendment
shall apply to all amounts deferred or vested under the Agreement after 2004,
and any earnings with respect to such amounts.  The amendment shall not apply to
any amount deferred and vested as of December 31, 2004, or any earnings credited
under the Agreement with respect to such amounts (“Grandfathered
Amounts”).  Such Grandfathered Amounts shall continue to be governed by the
terms and conditions of the Agreement in effect prior to January 1, 2005, and
without regard to this amendment to the extent necessary to preserve the
exemption of Grandfathered Amounts from the application of Code Section
409A.  The Agreement shall be deemed two agreements, one for Grandfathered
Amounts and one for Non-Grandfathered Amounts.

The undersigned hereby amend the Agreement for the purpose of bringing the
Agreement into compliance with Section 409A of the Internal Revenue
Code.  Therefore, the following changes shall be made:

Section 1.13 of the Agreement shall be deleted in its entirety and replaced by
the following:

1.13
“Permanently and Totally Disabled” means the Executive: (i) is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve (12) months; or
(ii) is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than three (3) months under an
accident and health plan covering employees of GABC.  Medical determination of
Disability may be made by either the Social Security Administration or by the
provider of an accident or health plan covering employees of GABC.  Upon the
request of the plan administrator, the Executive must submit proof to the plan
administrator of the Social Security Administration’s or the provider’s
determination.

 
12

--------------------------------------------------------------------------------

 

German American Bancorp
Executive Supplemental Retirement Income Agreement

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

The following Sections 1.14a shall be added to the Agreement immediately
following Section 1.14:

1.14a
“Specified Employee” means any individual who, at any time during the twelve
(12) month period ending on the identification date (as determined by GABC or
its delegate), is a specified employee under Section 409A of the Code, as
determined by GABC (or its delegate).  The determination of “specified
employees,” including the number and identity of persons considered “specified
employees” and identification date, shall be made by GABC (or its delegate) in
accordance with the provisions of Sections 416(i) and 409A of the Code.

The following Sections 1.18a shall be added to the Agreement immediately
following Section 1.18:

1.18a
“Termination of Employment” means a “separation from service” with the meaning
of section 409A of the Code and the guidance thereunder.

Section 3.2 of the Agreement shall be deleted in its entirety and replaced by
the following:

3.2
Early Retirement Benefit.  If the Executive remains in continuous service to the
GABC from the date of this Agreement through Termination of Employment, then
upon Termination of Employment on or after reaching age sixty (60) and before
the Normal Retirement Date, then the Executive shall be entitled to receive the
Supplemental Retirement Income Benefit reduced by six percent (6%) per year for
each year (or fraction thereof) that the Early Retirement Date precedes the
Normal Retirement Date.  Payment shall commence on the first day of the month
next following Termination of Employment and shall continue monthly until all
payments have been made.

Section 3.3 of the Agreement shall be deleted in its entirety and replaced by
the following:

3.3
Postponed Retirement Benefit.  If the Executive remains in continuous service to
GABC after the Normal Retirement Date, the postponed retirement benefit shall be
the Supplemental Retirement Income Benefit.  Prior to Termination of Employment,
the Board, in its sole discretion, may, but is not required to, increase the
postponed retirement benefit if retirement is postponed past the Normal
Retirement Date.  Payment shall commence on the first day of the month next
following Termination of Employment and shall continue monthly until all
payments have been made.

  

The following Sections 3.6, 3.7 and 3.8 shall be added to the Agreement
immediately following Section 3.5:

3.6
Restriction on Timing of Distributions.  Notwithstanding any provision of this
Agreement to the contrary, if the Executive is considered a Specified Employee
at Termination of Employment, the provisions of this Section 3.6 shall govern
all distributions hereunder.  Benefit distributions that are made due to a
Termination of Employment occurring while the Executive is a Specified Employee
shall not be made during the first six (6) months following Termination of
Employment, rather any distribution which would otherwise be paid to the
Executive during such period shall be accumulated and paid to the Executive in a
lump sum on the first day of the seventh month following the Termination of
Employment.  All subsequent distributions shall be paid in the manner specified.

 
13

--------------------------------------------------------------------------------

 

German American Bancorp
Executive Supplemental Retirement Income Agreement

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

3.7
Distributions Upon Income Inclusion Under Section 409A of the Code.  If any
amount is required to be included in income by the Executive prior to receipt
due to a failure of this Agreement to meet the requirements of Code Section 409A
and related Treasury guidance or Regulations, the Executive may petition the
Plan Administrator for a distribution of that portion the Accrued Benefit that
is required to be included in the Executive’s income.  Upon the grant of such a
petition, which grant shall not be unreasonably withheld, GABC shall distribute
to the Executive immediately available funds in an amount equal to the portion
of the Accrued Benefit required to be included in income as a result of the
failure of this Agreement to meet the requirement of Code Section 409A and
related Treasury guidance or Regulations, within ninety (90) days of the date
when the Executive’s petition is granted.  Such a distribution shall affect and
reduce the Executive’s benefits to be paid under this Agreement.

3.8
Change in Form or Timing of Distributions.  All changes in the form or timing of
distributions hereunder must comply with the requirements of Code Section 409A,
which generally provide that such changes:

 
(a)
may not accelerate the time or schedule of any distribution, except as provided
in Section 409A of the Code and the regulations thereunder;

 
 
(b)
must, for benefits distributable under Sections 3.1, 3.2, 3.3 and 7.1, delay the
commencement of distributions for a minimum of five (5) years from the date the
first distribution was originally scheduled to be made; and

 
 
(c)
must take effect not less than twelve (12) months after the election is made.

Section 7.1 of the Agreement shall be deleted in its entirety and shall be
replaced by the following:

7.1
Termination of Employment Prior to Age Sixty.  If, prior to age sixty (60), the
Executive is terminated without Cause by GABC, GABC shall pay to the Executive
an amount equal to the Executive’s Supplemental Retirement Income Benefit,
commencing within thirty (30) days of the Executive’s Normal Retirement
Date.  However, if the Executive’s Termination of Employment with GABC before
age sixty (60) is voluntary, he shall only be entitled to his Vested Accrued
Benefit existing at the Termination of Employment.  Payment of the Vested
Accrued Benefit shall commence within thirty (30) days after his attainment of
Normal Retirement Date.

 
14

--------------------------------------------------------------------------------

 

German American Bancorp
Executive Supplemental Retirement Income Agreement

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Section 9.6 of the Agreement shall be deleted in its entirety and shall be
replaced by the following:

9.6
Compliance with Section 409A.

(a)           The parties hereto intend that all benefits and payments to be
made to the Executive hereunder will be provided or paid to him in compliance
with al applicable provisions of section 409A of the Code and the regulations
issued thereunder, and the rulings, notices and other guidance issued by the
Internal Revenue Services interpreting the same, and this Agreement shall be
construed and administered in accordance with such intent.  The parties also
agree that this Agreement may be modified, as reasonably requested by either
party, to the extent necessary to comply with all applicable requirements of,
and to avoid the imposition of any additional tax, interest and penalties under,
the section 409A of the Code in connection with, the benefits and payments to be
provided or paid to the Executive hereunder.  Any such modification shall
maintain the original intent and benefit to GABC and the Executive of the
applicable provision of this Agreement, to the maximum extent possible without
violating section 409A of the Code.

(b)           All payments to be made upon a termination of employment under
this Agreement may only be made upon a “separation from service” under section
409A of the Code.  For purposes of section 409A of the Code, the right to
receive a series of installment payments under this Agreement shall be treated
as a right to a series of separate payments.  Further, for purposes of the
limitations on nonqualified deferred compensation under section 409A of the
Code, each payment of compensation under this Agreement shall be treated as a
separate payment.  In no event may the Executive, directly or indirectly,
designate the calendar year of a payment.

Section XI of the Agreement shall be deleted in its entirety and replaced by the
following:

Section XI
Amendments and Termination

11.1
Amendments.  This Agreement may be amended only by a written agreement signed by
GABC and the Executive.  However, GABC may unilaterally amend this Agreement to
conform with written directives to GABC from its auditors or banking regulators
or to comply with legislative changes or tax law, including without limitation
Section 409A of the Code and any and all Treasury regulations and guidance
promulgated thereunder.

 

11.2
Plan Termination Generally.  GABC and the Executive may terminate this Agreement
at any time.  The benefit hereunder shall be the Accrued Benefit as of the date
the Agreement is terminated.  Except as provided in Section 11.3, the
termination of this Agreement shall not cause a distribution of benefits under
this Agreement.  Rather, after such termination benefit distributions will be
made at the earliest distribution event permitted under Section II, Section III
and Section VII.

 
15

--------------------------------------------------------------------------------

 

German American Bancorp
Executive Supplemental Retirement Income Agreement

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

11.3
Plan Terminations Under Section 409A.  Notwithstanding anything to the contrary
in Section 11.2, if this Agreement terminates in the following circumstances:

 
(a)
Within thirty (30) days before or twelve (12) months after a change in the
ownership or effective control of GABC, or in the ownership of a substantial
portion of the assets of GABC as described in Section 409A(2)(A)(v) of the Code,
provided that all distributions are made no later than twelve (12) months
following such termination of the Agreement and further provided that all GABC’s
arrangements which are substantially similar to the Agreement are terminated so
the Executive and all participants in the similar arrangements are required to
receive all amounts of compensation deferred under the terminated arrangements
within twelve (12) months of the termination of the arrangements;

 
 
(b)
Upon GABC’s dissolution or with the approval of a bankruptcy court provided that
the amounts deferred under the Agreement are included in the Executive’s gross
income in the latest of (i) the calendar year in which the Agreement terminates;
(ii) the calendar year in which the amount is no longer subject to a substantial
risk of forfeiture; or (iii) the first calendar year in which the distribution
is administratively practical; or

 
 
(c)
Upon GABC’s termination of this and all other non-account balance plans (as
referenced in Section 409A of the Code or the regulations thereunder), provided
that all distributions are made no earlier than twelve (12) months and no later
than twenty-four (24) months following such termination, and GABC does not adopt
any new non-account balance plans for a minimum of five (5) years following the
date of such termination (or such lesser period permitted under Code Section
409A);

GABC may distribute the Accrued Benefit, determined as of the date of the
termination of the Agreement, to the Executive in a lump sum subject to the
above terms.

IN WITNESS OF THE ABOVE, GABC and the Executive hereby consent to this First
Amendment.

Executive:
 
German American Bancorp
     
By/s/Bradley M. Rust
 
By/s/Mark A. Schroeder
Bradley M. Rust
 
Title President/CEO

 
16

--------------------------------------------------------------------------------