Exhibit 10.7


CHANGE IN CONTROL AGREEMENT


THIS CHANGE IN CONTROL AGREEMENT (“Agreement”) is
entered into as of the 1st day of January,
2006 by and between MAINSOURCE
FINANCIAL GROUP, INC. (the “Company”), an Indiana corporation, and JAMES M. ANDERSON (“Executive”).


R E C I T A L S:


WHEREAS,
the Company considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of
the Company and its shareholders; and


WHEREAS, the Company recognizes that, as is the case
with many publicly held corporations, the possibility of a change in control
may arise and that such possibility may result in the departure or distraction
of management personnel to the detriment of the Company and its shareholders;
and


WHEREAS, the Board of Directors of the Company (the “Board”)
has determined that it is in the best interests of the Company and its
shareholders to secure Executive’s continued services and to ensure Executive’s
continued and undivided dedication to his duties in the event of any threat or
occurrence of a Change in Control (as defined in Section 1) of the Company; and


WHEREAS, the Board has authorized the Company to enter
into this Agreement;


NOW, THEREFORE, for and in consideration of the
premises and the mutual covenants and agreements herein contained, and
intending to be legally bound hereby, the Company and Executive hereby agree as
follows:


A G R E E M E N T:


1.             Definitions.  As used in this Agreement, the following
terms shall have the respective meanings set forth below:


(a)   “Bonus
Amount” means the annual incentive bonus earned by Executive from the
Company during the last completed fiscal year of the Company immediately
preceding Executive’s Date of Termination (annualized in the event Executive
was not employed by the Company for the whole of any such fiscal year).


(b)   “Cause”
means (i) the willful and continued failure of Executive to perform
substantially his duties with the Company (other than any such failure
resulting from Executive’s incapacity due to physical or mental illness or any
such failure subsequent to Executive being delivered a Notice of Termination
without Cause by the Company or delivering a Notice of Termination for Good
Reason to the Company) after a written demand for substantial performance is
delivered to Executive by the Board that specifically identifies the manner in
which the Board



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believes
that Executive has not substantially performed Executive’s duties, (ii) the
willful engaging by Executive in illegal conduct or gross misconduct that is
demonstrably and materially injurious to the Company, or (iii) the conviction
of Executive of, or a plea by Executive of nolo contendre to, a felony.  For purpose of this paragraph (b), no act or
failure to act by Executive shall be considered “willful” unless done or
omitted to be done by Executive in bad faith and without reasonable belief that
Executive’s action or omission was legal, regulatory compliant, and in the best
interests of the Company.  Any act, or
failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board, based upon the advice of counsel for the Company or upon
the instructions of the Company’s chief executive officer or another senior
officer of the Company, shall be conclusively presumed to be done, or omitted
to be done, by Executive in good faith and in the best interests of the
Company.  Cause shall not exist unless
and until the Company has delivered to Executive a copy of a resolution duly
adopted by three-fourths (3/4) of the entire Board (excluding Executive if
Executive is a Board member) at a meeting of the Board called and held for such
purpose (after reasonable notice to Executive and an opportunity for Executive,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board an event set forth in clauses (i) or (ii) has
occurred and specifying the particulars thereof in detail. The Company must
notify Executive of any event constituting Cause within ninety (90) days
following the Company’s knowledge of its existence or such event shall not
constitute Cause under this Agreement.


(c)    “Change
in Control” means the occurrence of any one of the following events:


(i)    individuals
who, on January 1, 2006, constitute the Board (the “Incumbent Directors”) cease
for any reason to constitute at least a majority of the Board, provided that
any person becoming a director subsequent to January 1, 2006, whose election or
nomination for election was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without written objection by such Incumbent Directors to such
nomination) shall be deemed to be an Incumbent Director; provided, however,
that no individual elected or nominated as a director of the Company initially
as a result of an actual or threatened election contest with respect to
directors or any other actual or threatened solicitation of proxies by or on
behalf of any person other than the Board shall be deemed to be an Incumbent
Director;


(ii)   any “person”
(as such term is defined in Section 3(a)(9) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and as used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 25% or more of the combined voting power of the
Company’s then outstanding securities eligible to vote for the election of the
Board (the “Company Voting Securities”); provided, however, that the event
described in this paragraph (ii) shall not be deemed to be a Change in Control
by virtue of any of the following acquisitions: (A) by the Company or any
Subsidiary, (B) by any employee benefit plan sponsored or maintained by the
Company or any Subsidiary, or by any employee stock benefit trust created by
the Company or any Subsidiary, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (iii)), (E) pursuant to any
acquisition by Executive or any group of persons including



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Executive (or any entity controlled by Executive or
any group of persons including Executive); or (F) a transaction (other than one
described in (iii) below) in which Company Voting Securities are acquired from
the Company, if a majority of the Incumbent Directors approves a resolution
providing expressly that the acquisition pursuant to this clause (F) does not
constitute a Change in Control under this paragraph (ii);


(iii)  the
consummation of a merger, consolidation, share exchange or similar form of
corporate transaction involving the Company or any of its Subsidiaries that
requires the approval of the Company’s shareholders, whether for such
transaction or the issuance of securities in the transaction (a “Business
Combination”), unless immediately following such Business Combination: (A) more
than 40% of the total voting power of (x) the corporation resulting from the
consummation of such Business Combination (the “Surviving Corporation”), or (y)
if applicable, the ultimate parent corporation that directly or indirectly has
beneficial ownership of 100% of the voting securities eligible to elect
directors of the Surviving Corporation (the “Parent Corporation”), is
represented by Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, represented by shares
into which such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination, (B) no person (other than any employee benefit plan sponsored or
maintained by the Surviving Corporation or the Parent Corporation or any
employee stock benefit trust created by the Surviving Corporation or the Parent
Corporation) is or becomes the beneficial owner, directly or indirectly, of 25%
or more of the total voting power of the outstanding voting securities eligible
to elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (C) at least one-half of the
members of the board of directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) were Incumbent Directors at the
time of the Board’s approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination which
satisfies all of the criteria specified in (A), (B) and (C) above shall be
deemed to be a “Non-Qualifying Transaction”); or


(iv)  the
shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company or a sale of all or substantially all of the Company’s
assets.


Notwithstanding
the foregoing, a Change in Control of the Company shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 25% of the
Company Voting Securities as a result of the acquisition of Company Voting
Securities by the Company that reduces the number of Company Voting Securities
outstanding; provided, that if after such acquisition by the Company such
person becomes the beneficial owner of additional Company Voting Securities
that increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, a Change in Control of the Company shall
then occur.


(d)   “Date of
Termination” means (i) the effective date on which Executive’s employment
by the Company terminates as specified in a prior written notice by the Company
or Executive, as the case may be, to the other, delivered pursuant to Section
10, or (ii) if Executive’s employment by the Company terminates by reason of
death, the date of death of Executive.



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(e)    “Disability”
means termination of Executive’s employment by the Company due to Executive’s
absence from Executive’s duties with the Company on a full-time basis for at
least one hundred eighty (180) consecutive days as a result of Executive’s
incapacity due to physical or mental illness. 
The determination of Disability shall be made by a physician mutually
agreed upon by both the Executive and the Company.


(f)    “Good
Reason” means, without Executive’s express written consent, the occurrence
of any of the following events after a Change in Control:


(i)    any change
in the duties or responsibilities (including reporting responsibilities) of
Executive that is inconsistent in any material and adverse respect with
Executive’s positions, duties, responsibilities or status with the Company
immediately prior to such Change in Control (including any material and adverse
diminution of such duties or responsibilities);


(ii)   (A) a
reduction by the Company in Executive’s rate of annual base salary as in effect
immediately prior to such Change in Control, or as the same may be increased
from time to time thereafter, or (B) the failure by the Company to pay
Executive an annual bonus in respect of the year in which such Change in
Control occurs or any subsequent year in an amount greater than or equal to the
annual bonus earned for the year prior to the year in which such Change in
Control occurs, provided that Executive has met any requisite performance
criteria threshold necessary to the payment of such annual bonus in respect of
the year in which such Change in Control occurs or such subsequent year.


(iii)  any
requirement of the Company that Executive (A) be based anywhere more than
thirty (30) miles from the office where Executive is located at the time of the
Change in Control, or (B)endure overnight travel on Company business to an
extent substantially greater than the travel obligations of Executive
immediately prior to such Change in Control;


(iv)  the failure
of the Company to (A) continue in effect any employee benefit plan,
compensation plan, welfare benefit plan or material fringe benefit plan in which
Executive is participating immediately prior to such Change in Control or the
taking of any action by the Company that would adversely affect Executive’s
participation in or reduce Executive’s benefits under any such plan, unless
Executive is permitted to participate in other plans providing Executive with
the same benefits that the party effecting the Change in Control (or, if
applicable, its Parent Corporation) provides to its most senior executive
officers (or, in the case of a Parent Corporation, the most senior executive
officers of its principal banking or financial services subsidiary), or (B)
provide Executive with paid time-off in accordance with the most favorable
time-off policies of the Company and its affiliated companies as in effect for
Executive immediately prior to such Change in Control, including the crediting
of all service for which Executive had been credited under such vacation
policies prior to the Change in Control; or


(v)   the failure
of the Company to obtain the assumption (and, if applicable, guarantee)
agreement from any successor (and Parent Corporation) as contemplated in
Section 9(b).



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Notwithstanding anything herein to the contrary,
termination of employment by Executive for any reason during the 30-day period
commencing six (6) months after the date of a Change in Control shall
constitute Good Reason.


An isolated, insubstantial and inadvertent action
taken in good faith and which is remedied by the Company within ten (10) days
after receipt of notice thereof given by Executive shall not constitute Good
Reason. Executive’s right to terminate employment for Good Reason shall not be
affected by Executive’s incapacities due to mental or physical illness and
Executive’s continued employment shall not constitute consent to, or a waiver
of rights with respect to, any event or condition constituting Good Reason;
provided, however, that Executive must provide notice of termination of
employment within one-hundred twenty (120) days following Executive’s knowledge
of an event constituting Good Reason or such event shall not constitute Good
Reason under this Agreement.


(g)   “Qualifying
Termination” means a termination of Executive’s employment (i) by the
Company other than for Cause, or (ii) by Executive for Good Reason.  Termination of Executive’s employment on
account of death, Disability or Retirement shall not be treated as a Qualifying
Termination.


(h)   “Retirement”
means the termination of Executive’s employment on or after the first of the
month coincident with or following Executive’s attainment of age 65, or such
later date as may be provided in a written agreement between the Company and
the Executive.


(i)     “Subsidiary”
means any corporation or other entity in which the Company has a direct or
indirect ownership interest of 50% or more of the total combined voting power
of the then outstanding securities or interests of such corporation or other
entity entitled to vote generally in the election of directors or in which the
Company has the right to receive 50% or more of the distribution of profits or
50% of the assets upon liquidation or dissolution.


(j)     “Termination
Period” means the period of time beginning with a Change in Control and
ending two (2) years following such Change in Control. Notwithstanding anything
in this Agreement to the contrary, if (i) Executive’s employment is terminated
prior to a Change in Control for reasons that would have constituted a
Qualifying Termination if they had occurred following a Change in Control; (ii)
Executive reasonably demonstrates that such termination (or Good Reason event)
was at the request of a third party who had indicated an intention or taken
steps reasonably calculated to effect a Change in Control; and (iii) a Change
in Control involving such third party (or a party competing with such third
party to effectuate a Change in Control) does occur, then for purposes of this
Agreement, the date immediately prior to the date of such termination of
employment or event constituting Good Reason shall be treated as a Change in
Control.  For purposes of determining the
timing of payments and benefits to Executive under Section 4, the date of the
actual Change in Control shall be treated as Executive’s Date of Termination
under Section l(d).


2.             Obligation
of Executive.  In the
event of a tender or exchange offer, proxy contest, or the execution of any
agreement that, if consummated, would constitute a Change in Control,



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Executive
agrees not to voluntarily leave the employ of the Company that may employ
Executive, other than as a result of Disability, Retirement or an event that
would constitute Good Reason if a Change in Control had occurred, until the
Change in Control occurs or, if earlier, such tender or exchange offer, proxy
contest, or agreement is terminated or abandoned.


3.             Term
of Agreement.  This
Agreement shall be effective on the date hereof and shall continue in effect
until the Company shall have given two (2) years’ written notice of
cancellation; provided, that, notwithstanding the delivery of any such notice,
this Agreement shall continue in effect for a period of two (2) years after a
Change in Control, if such Change in Control shall have occurred during the
term of this Agreement.  Notwithstanding
anything in this Section to the contrary, this Agreement shall terminate if
Executive or the Company terminates Executive’s employment prior to a Change in
Control except as provided in Section 1(j).


4.             Payments
Upon Termination of Employment.


(a)    Qualifying
Termination — Cash Payment.  If
during the Termination Period the employment of Executive shall terminate
pursuant to a Qualifying Termination, then the Company shall provide to
Executive, subject to the provisions of Section 11 hereunder:


(i)    within
twenty (20) days following the Date of Termination a lump-sum cash amount equal
to the sum of (A) Executive’s base salary through the Date of Termination and
any bonus amounts that have become payable, to the extent not theretofore paid
or deferred, (B) a pro rata portion of Executive’s annual bonus for the fiscal
year in which Executive’s Date of Termination occurs in an amount at least
equal to (x) Executive’s Bonus Amount, multiplied by (y) a fraction, the
numerator of which is the number of days in the fiscal year in which the Date
of Termination occurs through the Date of Termination and the denominator of
which is three hundred sixty-five (365), and reduced by (z) any amounts paid
from the Company’s annual incentive plan for the fiscal year in which Executive’s
Date of Termination occurs and (C) any accrued vacation pay, to the extent not
theretofore paid; plus


(ii)   within
twenty (20) days following the Date of Termination, a lump-sum cash amount
equal to the sum of (1) two times Executive’s highest annual rate of base
salary during the 12-month period immediately prior to Executive’s Date of Termination,
plus (2) two times Executive’s Bonus Amount; 
provided, however, that if Executive’s Date of Termination is within two
years  of the earliest date on
which termination by the Executive could otherwise be considered a Retirement (“Retirement
Date”), such sum shall be multiplied by a fraction (“Adjustment Fraction”), the
numerator of which is equal to the number of full months from the Date of
Termination to the Retirement Date, and the denominator of which is equal to
24.


(b)   Qualifying
Termination — Continued Coverage.  If
during the Termination Period the employment of Executive shall terminate
pursuant to a Qualifying Termination, the Company shall continue to provide,
for a period of two (2) years  following
Executive’s Date of Termination, Executive (and Executive’s dependents, if
applicable) with the same level of medical, dental, accident, disability and
life insurance benefits upon substantially the same terms and conditions
(including contributions required by Executive for such benefits) as existed
immediately prior to



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Executive’s
Date of Termination (or, if more favorable to Executive, as such benefits and
terms and conditions existed immediately prior to the Change in Control);
provided, however, that if Executive’s Date of Termination is within one (1)
year of Executive’s Retirement Date, the number of years of continued benefits
coverage (as described in this Section 4(b)) shall be equal to the product of
(x) one, and (y) the Adjustment Fraction; provided, further, if Executive
cannot continue to participate in the Company plans providing such benefits,
the Company shall otherwise provide such benefits on the same after-tax basis
as if continued participation had been permitted.  Notwithstanding the foregoing, in the event
Executive becomes reemployed with another employer and becomes eligible to
receive welfare benefits from such employer, the welfare benefits described
herein shall be secondary to such benefits during the period of Executive’s
eligibility, but only to the extent that the Company reimburses Executive for
any increased cost and provides any additional benefits necessary to give
Executive the benefits provided hereunder. 
The Executive’s accrued benefits as of the Date of Termination under the
Company’s employee benefit plans shall be paid to Executive in accordance with
the terms of such plans.


(c)    Qualifying
Termination — SERP Accrual. If during the Termination Period the employment
of Executive shall terminate pursuant to a Qualifying Termination, the Company
shall provide Executive with one (1) additional year of service credit under
all non-qualified retirement plans and excess benefit plans in which the
Executive participated as of his Date of Termination; provided, however, that
if Executive’s Date of Termination is within two (2) years of Executive’s
Retirement Date, the number of years of additional service credit (as described
in this Section 4(c)) shall be equal to the product of (x) two, and (y) the
Adjustment Fraction.


(d)   Qualifying
Termination — Voluntary Reduction of Payments. If during the Termination
Period the employment of Executive shall terminate pursuant to a Qualifying
Termination, Executive shall have the right to direct that the Company reduce
the amounts which it is otherwise required to pay to Executive under Section 4
of this Agreement to the Safe Harbor Cap (as defined in Section 5(a) of this
Agreement).


(e)    Other
than Qualifying Termination. If during the Termination Period the
employment of Executive shall terminate other than by reason of a Qualifying
Termination, then the Company shall pay to Executive within thirty (30) days
following the Date of Termination, a lump-sum cash amount equal to the sum of
(1) Executive’s base salary through the Date of Termination and any bonus
amounts that have become payable, to the extent not theretofore paid or
deferred, and (2) any accrued vacation pay, to the extent not theretofore paid.
The Company may make such additional payments, and provide such additional
benefits, to Executive as the Company and Executive may agree in writing. The
Executive’s accrued benefits as of the Date of Termination under the Company’s
employee benefit plans shall be paid to Executive in accordance with the terms
of such plans.


(f)    Suspension
of Payments to Specified Employees. 
To the extent such suspension is required by Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”) or Treasury Regulations
issued pursuant to Section 409A of the Code, if an amount is payable to the
Executive due to a Qualifying Termination, and if at the time of the Qualifying
Termination the Executive is a “Specified Employee,” payment of all amounts
under Section 4(a)(ii) and Section 5, to



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the
extent such payments constitute deferred compensation for purposes of Section
409A of the Code, will be suspended for six months following the date of the
Qualifying Termination.  The Executive
will receive payment of such amounts on the first day following the six-month
suspension period with interest on any delayed payment at the 30-year Treasury
Bond rate as published in the Wall Street Journal.


(i)    A “Specified
Employee” means an individual who is a “Key Employee” of the Company at a time
when the Company’s stock is publicly traded on an established securities
market.  The Executive will be a Specified
Employee on the first day of the fourth month following any “Identification
Date” on which the Executive is a Key Employee.


(ii)   The
Executive is a “Key Employee” if at any time during the 12-month period ending
on an Identification Date the Executive is: (A) an officer of the Company
having annual compensation greater than $140,000 (as adjusted in the same
manner as under Section 415(d) of the Code except that the base period will be
the calendar quarter beginning July 1, 2001, and any increase under this
sentence which is not a multiple of $5,000 will be rounded to the next lower
multiple of $5,000); (B) a five-percent owner of the Company; or (C) a
one-percent owner of the Company having an annual compensation greater than
$150,000.  For purposes of determining
whether an Executive is an officer under clause (A), nor more than 50 employees
(or, if lesser, the greater of three or ten percent of the employees) will be
treated as officers, and those categories of employees listed in Section
414(q)(5) of the Code will be excluded.


(iii)  The “Identification
Date” for purposes of this Agreement is December 31 of each calendar year.


5.             Certain
Additional Payments by the Company.


(a)   Anything in
this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment, award, benefit or distribution (or any
acceleration of any payment, award, benefit or distribution) by the Company (or
any affiliated entity) or any entity that effectuates a Change in Control (or
any of its affiliated entities) to or for the benefit of Executive (whether
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 5) (the “Payments”)
would be subject to the excise tax imposed by Section 4999 of the Code, or any
interest or penalties are incurred by Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Excise Tax”), then the Company
shall pay to Executive an additional payment (a “Gross-Up Payment”) in an
amount such that after payment by Executive of all taxes (including any Excise
Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the sum of (i) the Excise Tax imposed upon the
Payments, and (ii) the product of any deductions disallowed because of the
inclusion of the Gross-up Payment in Executive’s adjusted gross income and the
highest applicable marginal rate of federal income taxation for the calendar
year in which the Gross-up Payment is to be made. Such Gross-Up Payment will be
made at the same time payment is made to the Executive pursuant to Section
4(a)(ii).  For purposes of determining
the amount of the Gross-up Payment, the Executive shall be deemed to (A) pay
federal income taxes at the highest marginal rates of federal income taxation
for the calendar



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year
in which the Gross-up Payment is to be made, (B) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes and (C) have otherwise allowable deductions for federal income tax
purposes at least equal to the Gross-up Payment.


Notwithstanding
the foregoing provisions of this Section 5(a), if it shall be determined that
Executive is entitled to a Gross-Up Payment, but that the Payments would not be
subject to the Excise Tax if the Payments were reduced by an amount that is
less than 5% of the portion of the Payments that would be treated as “parachute
payments” under Section 28OG of the Code, then the amounts payable to Executive
under this Agreement shall be reduced (but not below zero) to the maximum
amount that could be paid to Executive without giving rise to the Excise Tax
(the “Safe Harbor Cap”), and no Gross-Up Payment shall be made to Executive.
The reduction of the amounts payable hereunder, if applicable, shall be made by
reducing first the payments under Section 4(a)(ii), unless an alternative
method of reduction is elected by Executive. For purposes of reducing the
Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and
no other Payments) shall be reduced. If the reduction of the amounts payable
hereunder would not result in a reduction of the Payments to the Safe Harbor
Cap, no amounts payable under this Agreement shall be reduced pursuant to this
provision.


(b)   Subject to
the provisions of Section 5(a), all determinations required to be made under
this Section 5, including whether and when a Gross-Up Payment is required, the
amount of such Gross-Up Payment, the reduction of the Payments to the Safe
Harbor Cap and the assumptions to be utilized in arriving at such
determinations, shall be made by the public accounting firm that is retained by
the Company as of the date immediately prior to the Change in Control (the “Accounting
Firm”), which shall provide detailed supporting calculations both to the
Company and Executive within fifteen (15) business days of the receipt of
notice from the Company or the Executive that there has been a Payment, or such
earlier time as is requested by the Company (collectively, the “Determination”).
In the event that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change in Control, Executive may
appoint another regionally or nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company and the Company shall
enter into any agreement requested by the Accounting Firm in connection with
the performance of the services hereunder. The Gross-up Payment under this
Section 5 with respect to any Payments shall be made no later than thirty (30)
days following such Payment. If the Accounting Firm determines that no Excise
Tax is payable by Executive, it shall furnish Executive with a written opinion
to such effect, and to the effect that failure to report the Excise Tax, if
any, on Executive’s applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. In the event the Accounting Firm
determines that the Payments shall be reduced to the Safe Harbor Cap, it shall
furnish Executive with a written opinion to such effect. The Determination by
the Accounting Firm shall be binding upon the Company and Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made (“Underpayment”) or
Gross-up Payments are made by the Company which should not have



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been
made (“Overpayment”), consistent with the calculations required to be made
hereunder. In the event that the Executive thereafter is required to make
payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of Executive. In the event the amount of the Gross-up Payment exceeds
the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been
made and any such Overpayment (together with interest at the rate provided in
Section 1274(b)(2) of the Code) shall be promptly paid by Executive (to the
extent he has received a refund if the applicable Excise Tax has been paid to
the Internal Revenue Service) to or for the benefit of the Company. Executive
shall cooperate, to the extent his expenses are reimbursed by the Company, with
any reasonable requests by the Company in connection with any contests or
disputes with the Internal Revenue Service in connection with the Excise Tax.


6.             Withholding
Taxes.  The Company may
withhold from all payments due to Executive (or his beneficiary or estate)
hereunder all taxes that, by applicable federal, state, local or other law, the
Company is required to withhold therefrom.


7.             Reimbursement
of Expenses.  If any
contest or dispute shall arise under this Agreement involving termination of
Executive’s employment with the Company or involving the failure or refusal of
the Company to perform fully in accordance with the terms hereof, the Company
shall reimburse Executive, on a current basis, for all reasonable legal fees
and expenses, if any, incurred by Executive in connection with such contest or
dispute (regardless of the result thereof), together with interest in an amount
equal to the prime rate as published in the Wall Street Journal from
time to time in effect, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from the date the
Company receives Executive’s statement for such fees and expenses through the
date of payment thereof, regardless of whether or not Executive’s claim is
upheld by an arbitration panel.


8.             Scope
of Agreement.  Nothing
in this Agreement shall be deemed to entitle Executive to continued employment
with the Company or its Subsidiaries, and if Executive’s employment with the
Company shall terminate prior to a Change in Control, Executive shall have no
further rights under this Agreement (except as otherwise provided hereunder);
provided, however, that any termination of Executive’s employment during the
Termination Period shall be subject to all of the provisions of this Agreement.


9.             Successors;
Binding Agreement.


(a)   This
Agreement shall not be terminated by any Business Combination. In the event of
any Business Combination, the provisions of this Agreement shall be binding
upon the Surviving Corporation, and such Surviving Corporation shall be treated
as the Company hereunder.


(b)   The Company
agrees that in connection with any Business Combination, it will cause any
successor entity to the Company unconditionally to assume (and for any Parent
Corporation in such Business Combination to guarantee), by written instrument
delivered to



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Executive
(or his beneficiary or estate), all of the obligations of the Company
hereunder. Failure of the Company to obtain such assumption and guarantee prior
to the effectiveness of any such Business Combination that constitutes a Change
in Control shall be a breach of this Agreement and shall constitute Good Reason
hereunder and shall entitle Executive to compensation and other benefits from
the Company in the same amount and on the same terms as Executive would be
entitled hereunder if Executive’s employment were terminated following a Change
in Control by reason of a Qualifying Termination. For purposes of implementing
the foregoing, the date on which any such Business Combination becomes
effective shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by Executive.


(c)   This Agreement
shall inure to the benefit of and be enforceable by Executive’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive shall die while any amounts
would be payable to Executive hereunder had Executive continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in writing
by Executive to receive such amounts or, if no person is so appointed, to
Executive’s estate.


10.           Notice.


(a)   For
purposes of this Agreement, all notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been dully
given when delivered or five (5) days after deposit in the United States mail,
certified and return receipt requested, postage prepaid, addressed as follows:


	
  If to Executive:

  	
  At the address
  set forth below the signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
  If to the
  Company:

  	
  MainSource
  Financial Group, Inc.

  
	
   

  	
  201 North
  Broadway

  
	
   

  	
  Greensburg,
  Indiana 47240

  
	
   

  	
  Attn: Chief
  Executive Officer

  



 


or
to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.



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(b)   A written
notice of Executive’s date of termination by the Company or Executive, as the
case may be, to the other, shall (i) indicate the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive’s employment under the provision so
indicated and (iii) specify the Date of Termination (which date shall not be
less than fifteen (15) days (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such
notice).  The failure by Executive or the
Company to set forth in such notice any fact or circumstance that contributes
to a showing of Good Reason or Cause shall not waive any right of Executive or
the Company hereunder or preclude Executive or the Company from asserting such
fact or circumstance in enforcing Executive’s or the Company’s rights
hereunder.


11.           Full
Settlement; Resolution of Disputes.  The Company’s obligation to make any payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall be in lieu of and in full settlement of all other severance
payments to Executive under any other severance or employment agreement between
Executive and the Company, and any severance plan of the Company.  The Company’s obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action that the Company may have against Executive or others.  In no event shall Executive be obligated to
seek other employment or take other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and, except
as provided in Section 4(b), such amounts shall not be reduced whether or not
Executive obtains other employment.  Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in Indianapolis, Indiana by three
arbitrators in accordance with the rules of the American Arbitration
Association then in effect.  The results
of the arbitration will be binding on both parties and may not be appealed.  Judgment may be entered on the arbitrators’
award in any court having jurisdiction. 
The Company shall bear all costs and expenses arising in connection with
any arbitration proceeding pursuant to this Section.


12.           Employment
with Subsidiaries. 
Employment with the Company for purposes of this Agreement shall include
employment with any Subsidiary.


13.           Survival.  The respective obligations and benefits
afforded to the Company and Executive as provided in Sections 4 (to the extent
that payments or benefits are owed as a result of a termination of employment
that occurs during the term of this Agreement), 5 (to the extent that Payments
are made to Executive as a result of a Change in Control that occurs during the
term of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of
this Agreement.


14.           Governing
Law; Validity.  The
interpretation, construction and performance of this Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Indiana without regard to the principle of conflicts of laws.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which other provisions shall remain in
full force and effect.


15.           Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.



 12
 









16.           Miscellaneous.  No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. 
Except as set forth in Sections l(b) and l(f), the failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement. 
Except as otherwise specifically provided herein, the rights of, and
benefits payable to, Executive, his estate or his beneficiaries pursuant to
this Agreement are in addition to any rights of, or benefits payable to,
Executive, his estate or his beneficiaries under any other employee benefit
plan or compensation program of the Company.


IN WITNESS WHEREOF,
the Company has caused this Agreement to be executed by a duly authorized
officer of the Company and Executive has executed this Agreement, in each case
as of the day and year first set forth above.


	
  

  	
  MAINSOURCE
  FINANCIAL GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  James L. Saner, Sr.

  
	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
  James M.
  Anderson

  
	
   

  	
   

  	
   

  	
  88 Dogwood Trail

  
	
   

  	
   

  	
   

  	
  Batesville,
  Indiana 47006

  
					



 


 



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