Exhibit 10.3


 


Employee
Options (TARP)


 


AWARD
AGREEMENT


UNDER THE


MAINSOURCE
FINANCIAL GROUP, INC.


2007 Stock
Incentive Plan


 


Notice of
Grant


 


The individual named below has been granted
an “Award” with respect to the common stock of MainSource Financial Group, Inc.,
an Indiana corporation (the “Company”), subject to the terms and conditions of
the MainSource Financial Group, Inc. 2007 Stock Incentive Plan (the “Plan”)
and this Award Agreement (the “Agreement”).


 


	
  1.

  	
  Grantee:

  	
                                               

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Grant Date:

  	
  February 23, 2009

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Type and Size of Award:

  	
  Incentive Stock Option to purchase
                            
  Shares*

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Exercise Price per Share:

  	
  $5.40 (this is the Fair Market Value of the Share on the Grant Date)

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Expiration Date:

  	
  February 23, 2019 (ten years from the Grant Date)

  



 






*For an Incentive Stock Option (an “Option Award”),
this represents the number of shares of common stock of the Company (“Company Stock”)
the Grantee is entitled to purchase upon subsequent exercise of the Option
Award.


 


Agreement
Regarding Terms and Conditions of Grant


 


This Agreement is dated as of the Grant Date
and is between the Company and the Grantee, in accordance with the terms of the
Plan.  Capitalized terms used in this
Agreement and not otherwise defined have the meanings given to them in the
Plan.


 


1.             The
Plan.  The Plan contains terms and conditions
applicable to the Award that are not explicitly set forth in this Award
Agreement, but which are incorporated herein by reference.  The terms of this Agreement shall be subject
to the terms of the Plan.  In the case of
any conflict between the terms of this Agreement and the terms of the Plan, the
terms of the Plan shall control.  Grantee
acknowledges receipt of a copy of the Plan and represents that he or she is
familiar with the terms and provisions of the Plan.  Grantee has reviewed the Plan and this
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to signing this Agreement and fully understands all provisions of
the Award.  Grantee agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator (as defined in the Plan) upon any questions arising under the
Plan or this Agreement.


 















 


2.             Grant
of Option Award.  Subject to the terms of this Agreement and
the Plan, the Company hereby grants to Grantee an Option Award which entitles
Grantee to purchase the number of shares of common stock of Company Stock set
forth in the Notice of Grant above (the “Shares”), at the price per Share set
forth in the Notice of Grant above (the “Exercise Price”) and in the manner and
subject to the conditions provided in this Agreement.


 


3.             Vesting.


 


(a)           Except as otherwise provided in subsection 3(b), the Award is subject
to forfeiture upon the Grantee’s Termination of Employment, unless and until
the Award vests as provided in this subsection.


 


	
  Date of Vesting

  	
   

  	
  Percent of Option Shares Vested

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2009

  	
   

  	
  10

  	
  %

  
	
  December 31,
  2010

  	
   

  	
  30

  	
  %

  
	
  December 31,
  2011

  	
   

  	
  60

  	
  %

  
	
  December 31,
  2012

  	
   

  	
  100

  	
  %

  



 


(b)           Upon a Change in Control, the Award will be immediately vested and
exercisable.  Additionally, notwithstanding
the foregoing, the Grantee will not become vested in any portion of his or her
Award during the period of time the United States Department of Treasury (“Treasury”)
holds Series A preferred stock of the Company (the “Preferred Stock”).  After the Treasury no longer holds the Preferred
Stock, the Grantee will be credited with vesting service for the period of time
beginning on the Grant Date and ending on the last date that Treasury held any
of the Preferred Stock.


 


4.             Exercise
of Option Award.  The following terms and conditions shall
apply to the exercise of the Option Award.


 


(a)           The Option Award shall not be exercisable after the Expiration
Date.  The Grantee may exercise the
Option Award in whole or in part, at any time on or before the Expiration Date,
as to any Shares which have vested as set forth in this Agreement.  Shares owned by Grantee as a result of his or
her exercise of the Option Award shall be referred to herein as “Purchased
Shares.”


 


(b)           Except to the extent the Grantee uses the sale and remittance procedure
described in this subsection, the Grantee must pay cash for the Exercise Price
for the Shares on the Exercise Date.  The
Grantee may also pay the Exercise Price as follows:


 


(i)            In shares of equivalent equity interests,
held for the requisite period necessary to avoid a charge to the Company’s
earnings for financial reporting purposes and valued at Fair Market Value on
the Exercise Date, or


 


(ii)           Through a special sale and remittance procedure pursuant to which the
Grantee concurrently provides irrevocable written instructions to (A) a
brokerage firm designated by the Company to effect the immediate sale of the
purchased interests and remit to the Company, out of the sale proceeds
available 


 


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on the settlement date, sufficient funds to
cover the aggregate Exercise Price payable for the purchased interests plus all
applicable federal, state and local income and employment taxes required to be
withheld by the Company by reason of such exercise, and (B) the Company to
deliver the certificates for the purchased interests directly to such brokerage
firm to complete the sale.


 


The Company’s obligations to
deliver purchased equity interests under the sale and remittance procedure
described in this subsection shall be conditioned upon receiving sufficient
funds and/or other assets to cover the Exercise Price and tax withholding
obligations described herein.


 


5.             Conditions.  The
Company’s obligation to issue or transfer Shares to Grantee after the exercise
of the Option Award, in whole or in part, is conditioned upon Grantee’s payment
in full for the Shares with respect to which the Option Award was exercised.


 


6.             Change
in Company Stock.  In the event of any change in the Shares, as
described in Section 12.9 of the Plan, the Administrator will make
appropriate adjustment or substitution in the number, kind and price of Shares
under this Agreement, all as provided in the Plan.  Such adjustment or substitution in the
number, kind and price of Shares under this Agreement will be automatic and no
formal amendment will be required to be made to this Agreement to effect the
adjustment or substitution, provided the Participant is provided with adequate
notice of such adjustment or substitution. 
The Administrator’s determination
in this respect will be final, conclusive and binding on all parties.


 


7.             No
Shareholder Rights; No Guarantee of Employment. 
Grantee shall not have any of the rights of a shareholder with respect
to the Shares until such Shares are issued or transferred to Grantee after the
exercise of the Option Award.  Nothing in
this Agreement (a) confers on Grantee any right to continue in the
employment of the Company, or (b) interferes with the Company’s right to
terminate the employment of Grantee at any time, with or without cause.


 


8.             Certain
Tax Consequences.  Grantee acknowledges that the exercise of the
Option Award and any sale of the Purchased Shares may have various tax
consequences under federal and state law. 
Grantee has discussed these consequences with his personal tax
advisor.  Grantee may be required to report
the grant of the Option Award to the Internal Revenue Service and/or to state
tax authorities under applicable state law. 
The Company is not obligated to deliver Shares upon the exercise of any
Option Award issued under the Plan until all applicable federal, state, local
and foreign income and employment tax withholding requirements have been
satisfied.  In accordance with the
foregoing, the Company has the right to withhold sums from compensation
otherwise due to Grantee to satisfy such withholding requirements.


 


9.             Transferability.  An
Option Award granted hereby shall be neither transferable nor assignable by a
Grantee other than by will or by the laws of descent and distribution and may
be exercised, during the lifetime of the Grantee, only by the Grantee, or in
the event of his legal incapacity, by his guardian or legal representative
acting on behalf of the Grantee in a fiduciary capacity under state law and
court supervision.


 


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10.           Successors
and Assigns.  The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Company and its successors and
assigns and Grantee, Grantee’s assigns and the legal representatives, heir and
legatees of Grantee’s estate.


 


11.           Compliance
with Laws and Regulations.


 


(a)           The grant and exercise of the Award, as applicable, and the issuance of
the Shares shall be subject to compliance by the Company and Grantee with all
applicable requirements of law relating thereto, including but not limited to
federal and state securities laws, and with all applicable regulations of any
stock exchange on which the Shares or an equivalent equity interest may be
listed for trading at the time of such exercise and issuance.


 


(b)           The inability of the Company to obtain approval from any regulatory
body having authority deemed by the Company to be necessary to the lawful
issuance and sale of any Share pursuant to the Award shall relieve the Company
of any liability with respect to the non-issuance or sale of the Shares as to
which such approval shall not have been obtained.  The Company, however, shall use its best
efforts to obtain all such approvals.


 


12.           Restrictive
Covenants.  Grantee acknowledges that without his or her
making the covenants and agreements hereinafter contained in this Section, the
Company would not have granted this Award to the Grantee and the grant of such
Award is in reliance upon Grantee’s compliance with the covenants and agreements
made in this Section.


 


(a)           Noncompetition. 
Grantee hereby covenants and agrees that during Grantee’s employment
with the Company and its Affiliates and for a period of 18 months following the
termination of that employment, for any reason, Grantee agrees that he or she
shall not, directly or directly, whether individually or as a partner, shareholder,
officer, director, employee, independent representative, broker, agent,
consultant or in any other capacity for any other individual, partnership,
firm, corporation, company or other entity, engage in the following prohibited
activities without prior written authorization from the Company:


 


(i)            Have any ownership interest in any Restricted
Organization (as hereinafter defined);


 


(ii)           Work or provide services for any Restricted Organization;


 


(iii)          Employ or seek to employ or engage or seek to engage any person who has
worked for or in conjunction with the Company or an Affiliate during the 12-month
period preceding the termination of Grantee’s employment, specifically
including any consultant, employee, provider or vendor used by the Company or
an Affiliate;


 


(iv)          Solicit or induce any person currently employed by or otherwise
associated with the Company or an Affiliate to terminate such employment or
relationship;


 


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(v)           Solicit or provide or offer to solicit or provide any Restricted
Product or Service to any business account or customer of the Company or an
Affiliate who was a business account or customer of the Company or an Affiliate
during the 12-month period preceding termination of Grantee’s employment or
about whom Grantee obtained confidential information;


 


(vi)          Accept business from any business account or customer of the Company or
an Affiliate who was a business account or customer of the Company or an
Affiliate during the term of Grantee’s employment, including, but not limited
to, any business account or customer serviced or contacted by Grantee, or for
whom Grantee had direct or indirect responsibility, on behalf of the Company or
an Affiliate within the 12-month period preceding the termination of Grantee’s
employment or about whom Grantee obtained confidential information, when that
business pertains to products or services which are competitive with or
substantially similar to any Restricted Product or Service; or


 


(vii)         Otherwise attempt to interfere with the Company or an Affiliate’s
business or its relationship with its business accounts, consultants,
customers, employees or vendors.


 


(b)           Definitions.  For purposes of this Section:


 


(i)            “Restricted Product or Service” shall
mean a product or service in development or design, or produced, marketed,
sold, disseminated, offered or distributed by the Company or an Affiliate at
any time on or after the date of this Award Agreement and until Grantee’s termination
of employment.


 


(ii)           “Restricted Area” shall mean the county of the Grantee’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.


 


(iii)          “Restricted Organization” shall mean any bank holding company,
savings association holding company, financial services holding company, bank,
savings bank, thrift, any other financial institution or other organization or
entity that is primarily engaged in the financial services industry within the
Restricted Area, which competes with the Company or an Affiliate.


 


(c)           Adjustments and Extension of Restrictive
Period. Should any covenant
or restriction included in this Section be held to be unreasonable or
unenforceable for any reason, including without limitation the temporal
limitation, geographic restrictions, or scope of activity covered by a
restrictive covenant, then such provision or restriction shall be given effect
and enforced to whatever extent would be reasonable and enforceable.  All remaining covenants and restrictions
shall remain in full force and effect in accordance with the terms
thereof.  If Grantee is deemed to have
breached any of the foregoing restrictive covenants, Grantee agrees that the
restrictive period shall be 


 


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automatically extended by a period of time
equal to the period of such breach, measured from the date of the breach
through the date of such determination.


 


(d)           Survival of Obligations.  Grantee
agrees that his obligations contained in this Section shall survive the
termination of Grantee’s employment with the Company, whether such termination
is voluntary or involuntary.  Grantee further
acknowledges that any breach by the Company of any contractual, statutory, or
other legal obligation to the Grantee shall not excuse or terminate the Grantee’s
obligations hereunder or otherwise preclude the Company from seeking relief
pursuant to any provision of this Agreement.


 


(e)           Reasonableness of Restrictions. 
Grantee hereby agrees and acknowledges that (i) the provisions of
this Section are reasonable, and (ii) Grantee has (A) read the
foregoing provisions of this Section, (B) been given ample time and
opportunity to consult with counsel concerning the meaning and effect of this
Section, and (C) in no way been coerced or in any way forced to agree to
the provisions of those Sections.


 


(f)            Remedies.  Grantee acknowledges and
agrees that any actual or threatened breach of the foregoing provisions of this
Agreement will cause irreparable harm to the Company and/or its Affiliates and
that it may be difficult to determine or adequately compensate the Company and
its Affiliates through monetary damages. 
Accordingly, Grantee hereby agrees that the Company may seek a restraining
order or other injunctive remedy to prevent or restrain such breach without the
requirement to post or obtain a bond or other security.  Grantee further agrees that the Company shall
also be entitled to recover reasonable costs and attorneys fees incurred by it
to enforce the foregoing covenants and agreement.  Grantee further acknowledges that nothing
contained herein shall be construed to prohibit or limit the Company and its
Affiliates from pursuing any other remedies, whether such remedies are contractual
or arise at law or in equity.  Grantee
further agrees to indemnify and hold harmless the Company and its Affiliates,
directors, officers, employees, agents, successors and assigns from and against
any and all losses or liabilities which may result from the breach of the
restrictive covenants set forth in this Section.


 


13.           Amendment.  Subject
to Section 409A of the Internal Revenue Code of 1986, as amended, if
applicable, the Administrator shall have complete and exclusive power and
authority to amend or modify this Agreement (and the Administrator shall have
the power and authority to amend or modify the Plan) in any or all respects;
provided, however, that no such amendment or modification shall adversely
affect, in any material respect, any rights of the Grantee with respect to an Award
granted pursuant to this Agreement, unless the Grantee consents to such
amendment or modification.  However, the
Administrator shall have the power and authority to amend or modify this
Agreement (and the Administrator shall have the power and authority to amend or
modify the Plan) in any manner (including in a manner that adversely affects
the rights of the Grantee with respect to the Award) if such amendment or
modification applies equally to all holders of the type of award granted under
the Plan and is approved by holders of the type of award granted representing a
majority of the Shares issued or issuable pursuant to such awards granted under
the Plan.


 


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Additionally, in the event any laws, rules,
regulations or other guidance enacted or issued by the United States government
or any agency thereof, including the United States Treasury, including but not
limited to any regulations implementing the American Recovery and Reinvestment
Act of 2009 (“ARRA”), make any portion of this Agreement illegal, the
Administrator retains the right to amend the Agreement, without the Grantee’s
consent, to bring the Agreement into compliance with ARRA or, if compliance
with ARRA is not possible, the Administrator has the unilateral right to
terminate this Agreement pursuant to Section 14.


 


14.           Termination.  Except
as otherwise provided in the Plan, this Agreement and any unvested Shares or
Option Awards granted hereby will terminate immediately upon Grantee’s termination
of employment.  Additionally, in the
event any laws, rules, regulations or other guidance enacted or issued by the United
States government or any agency thereof, including the United States Treasury,
including any regulations implementing the American Recovery and Reinvestment
Act of 2009 (“ARRA”), make any portion of this Agreement illegal, this
Agreement shall be null and void, and the Administrator shall have the
unilateral right to terminate this Agreement, without the Grantee’s consent.


 


15.           Entire
Agreement; Governing Law; Attorneys’ Fees.  The Plan is incorporated into
this Agreement by reference.  The Plan
and this Agreement constitute the entire agreement of the parties with respect
to the subject matter of this Agreement and supersede in their entirety all
prior undertakings and agreements of the Company and Grantee with respect to
subject matter of this Agreement.  The Award
and this Agreement shall be construed, administered and governed in all
respects under and by the internal laws (but not the choice of law rules) of
the State of Indiana.  The Company, its
Affiliates and the Grantee irrevocably consent to the jurisdiction and venue of
the Courts of the State of Indiana and the United States federal courts serving
Decatur County, Indiana with respect to any and all actions related to the
Award and this Agreement or the enforcement hereof, and the parties hereto
hereby irrevocably waive any and all objections thereto.  If the Plan or this Agreement is challenged
in a court of law, the prevailing party shall be entitled to receive from the
other party reasonable attorneys’ fees and other costs and expenses incurred by
the prevailing party in connection with such suit regardless of whether such
suit is prosecuted to judgment.


 


16.           Counterparts.  This
Agreement may be executed in two or more counterparts, each of which will be
deemed an original, but all of which collectively will constitute one and the
same instrument.


 


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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
Grantee, after thoroughly reviewing and developing a complete understanding of
the restrictions and covenants imposed by Section 12, has also executed
this Agreement as of the date first above written.


 


 


	
  GRANTEE:

  	
   

  	
  MAINSOURCE FINANCIAL GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  (Signature)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Designate Office)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (County and State)

  	
   

  	
   

  



 


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