Document:

exv10w38

 

Exhibit 10.38

IRWIN COMMERCIAL FINANCE CORPORATION

SHAREHOLDER AGREEMENT

     THIS SHAREHOLDER AGREEMENT (the “Agreement”) is entered into on the 23rd day of December 2005,
by and among IRWIN COMMERCIAL FINANCE CORPORATION, an Indiana business corporation (“ICF”), IRWIN
UNION BANK AND TRUST COMPANY, an Indiana commercial bank (“IUBT”), and JOE LALEGGIA, (“LaLeggia”),
ROBERT MURPHY (“Murphy”), ROBERT MORMINA (“Mormina”), LUIGI SPIZZIRRI (“Spizzirri”), MARK CANNON
(“Cannon”) and JOHN RINALDI (“Rinaldi,” and together with LaLeggia, Murphy, Mormina, Spizzirri and
Cannon, the “Option Holders”; ICF, IUBT, LaLeggia, Murphy, Mormina, Spizzirri, Cannon and Rinaldi
are sometime referred to herein as the “Parties”).

RECITALS

A. ICF (f/k/a IRWIN CAPITAL HOLDINGS CORPORATION) was incorporated under the laws of the State of
Indiana on April 6, 2001, and is a direct subsidiary of IUBT and an indirect subsidiary of Irwin
Financial Corporation (“Irwin Financial”).

B. Irwin Financial, a bank holding company, organizes and conducts its various operations through a
line of business organizational structure, within which the majority of its separate businesses
fund their operations through IUBT.

C. One of Irwin Financial’s business segments within this structure is the consolidated commercial
finance line of business, including ICF and its subsidiaries.

D. The authorized capital stock of ICF consists of 1,500 shares of common stock, without par value
(“Common Shares”), and 100,000 shares of preferred stock, without par value (“Preferred Shares”).

E. All of the other authorized Common Shares that are issued and outstanding are owned by IUBT.

G. Each Option Holder has been granted an option (each, an “Options”) to purchase Common Shares
pursuant to an Irwin Commercial Finance Corporation Stock Option Agreement dated even date herewith
(the “Stock Option Agreements”).

H. The parties desire to set forth their agreement regarding the terms and conditions relating to
the ownership of any Common Shares that may be received by the Option Holders upon the exercise of
any of the Options, the transfer of such Common Shares and restrictions thereon, and certain other
matters concerning ownership of such Common Shares.

 

 

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

AGREEMENT

1. DEFINITIONS

     1.1. In this Agreement (the “Agreement”):

          (a) “Affiliate” means, with respect to a specified Person:

               (i) any Person that is Controlled by the specified Person; or

               (ii) if the specified Person is not an individual, any Person that Controls the specified
Person; or

               (iii) if the specified Person is not an individual, any Person under common Control with the
specified Person.

          (b) “Board” means the board of directors of ICF;

          (c) “Control” means, with respect to any Person, the (i) ownership, control or power to vote,
directly or indirectly, 25 percent or more of the outstanding shares of any class of voting
securities of such Person (if such Person is a corporation); (ii) control in any manner over the
right to elect or appoint directly or indirectly a majority of the directors of such Person (if
such Person is a corporation); or (iii) the power to manage or supervise or otherwise exercise,
directly or indirectly, a controlling influence over the management of the business and affairs of
such Person;

          (d) A “day” means calendar day, except where otherwise specified. If the day upon which any
act or event is to occur under this Agreement falls on a Saturday, Sunday or other day on which
banks in the State of Indiana or the Province of British Columbia, Canada are closed, the action or
event shall occur on the following day.

          (e) “Effective Date” means the date upon which a binding agreement of purchase and sale is
formed between any of the Parties to this Agreement under the terms of this Agreement, pursuant to
which one Party will purchase some or all of another Party’s Common Shares, and includes the date
on which an Exercise Notice or Right of First Refusal Notice is delivered;

          (f) “Exercise Notice” means any notice delivered by ICF or IUBT to an Option Holder for the
purpose of exercising the Call under Section 4.1 or Section 4.2(b)(2), thereby triggering a
purchase and sale of Common Shares pursuant to the provisions of Sections 4.3 and 4.4 hereof.

          (g) “Fair Market Value” means the fair market value of a Common Share as determined in
accordance with Section 4.3 of this Agreement;

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          (h) “Person” means an individual, a partnership, a corporation, an association, a joint stock
company, a limited liability company, a trust, a joint venture, an unincorporated organization or
any other entity.

2. ANTI-DILUTION PROVISIONS

     2.1. Adjustment Events.

          (a) An “Adjustment Event” occurs if ICF:

               (i) pays a dividend with respect to its capital stock in Common Shares or securities
convertible into Common Shares;

               (ii) subdivides its outstanding Common Shares or securities convertible into Common Shares;

               (iii) combines its outstanding Common Shares into a smaller number of Shares of any class of
Common Shares; or

               (iv) issues any Common Shares or securities convertible into Common Shares in a
reclassification or recapitalization of the Common Shares.

          (b) If an “Adjustment Event” occurs, the number of Common Shares held by any Option Holders
immediately prior to the Adjustment Event shall be adjusted so that such Option Holders shall
thereafter be entitled to receive the number of Common Shares necessary to avoid dilution of such
Option Holder’s percentage ownership of Common Shares from that existing immediately prior to such
Adjustment Event. An adjustment made pursuant to this Section 2.1 shall become effective
immediately after the effective date of such Adjustment Event, retroactive to the record date, if
any, for such Adjustment Event.

3. RESTRICTIONS ON TRANSFER

     3.1. Transfers Restricted.

          Prior to the first anniversary of the date an Option Holder acquires Common Shares, such
Option Holder may not sell, transfer or dispose of any of such Common Shares other than to another
Option Holder. On or after the first anniversary of the date an Option Holder acquires Common
Shares, such Option Holder may sell, transfer, or dispose of any such Common Shares only pursuant
to the terms of this Agreement. Any Option Holder may sell, transfer or dispose of any of his
Common Shares to another Option Holder at any time. Subject to the terms of this Agreement, IUBT
may sell, transfer or dispose of any of its Common Shares to any Person at any time.

     3.2. No Encumbrance.

          Except as permitted by this Agreement, an Option Holder may not mortgage, pledge, charge,
hypothecate or otherwise encumber any Common Shares without ICF’s prior written consent.

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     3.3. Obligation of Transferee.

          No Common Shares may be sold, transferred or issued in any event unless the Person receiving
the Common Shares has executed and delivered to ICF a joinder agreement in form and substance
satisfactory to ICF pursuant to which such Person agrees to be bound by the terms of this
Agreement.

     3.4. Effect of Non-Permitted Transfers.

          Any sale, transfer or other disposition of, or any attempted sale, transfer or other
disposition of, Common Shares in contravention of this Agreement shall be void and of no effect for
any purpose and shall not confer on any transferee or purported transferee any rights whatsoever.
ICF shall not effect such a transfer on its books, nor will it treat any purported transferee as
the holder of such Common Shares, and the Parties acknowledge that the certificates representing
Common Shares shall bear a legend referring to the restrictions imposed by this Agreement.

     3.5. Legend on Share Certificates.

          The share certificates representing each of the Common Shares are to be legibly stamped or
endorsed with the following statement:

“The shares represented by this Certificate have not been registered
under the federal Securities Act of 1933 (the “1933 Act”) or any
state securities law. These shares cannot be transferred, pledged
or hypothecated except in accordance with the provisions of
Regulation S under the 1933 Act, pursuant to registration under the
1933 Act and applicable state securities laws, or unless Irwin
Commercial Finance Corporation has received an opinion of counsel
satisfactory to it that registration under such laws is not required
by virtue of an available exemption from such registration
requirements. The sale, transfer, pledge and hypothecation of the shares represented by this Certificate are restricted under the
terms of an Agreement among Irwin Commercial Finance Corporation,
Irwin Union Bank and Trust Company and Certain Individuals, dated as
of December 23, 2005. Hedging transactions involving such shares
may not be conducted unless in compliance with the 1933 Act.”

4. CALL RIGHT; RIGHT OF FIRST REFUSAL

     4.1. ICF and IUBT Call Right.

          With respect to each Option Holder, each of ICF and IUBT shall have the right to purchase (the
“Call”), and each such Option Holder shall have the obligation to sell upon the exercise of such
Call, all or any portion of such Option Holder’s Common Shares (a) at any time after the first
anniversary of the date on which such Option Holder acquires such

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Common Shares, by delivery of an Exercise Notice to such Option Holder or his personal
representative (with the date of such Exercise Notice constituting the “Effective Date” for
purposes of determining the Fair Market Value of the Common Shares in accordance with Section 4.3)
or (b) upon any proposed transfer of Common Shares by such Option Holder to a third party that is
not an Affiliate of ICF or another Option Holder, in which case the Call shall be exercisable
pursuant to the procedures set forth in Section 4.2.

     4.2. Right of First Refusal.

          In the event on or after the first anniversary of the date on which an Option Holder acquires
Common Shares, such Option Holder proposes to transfer such Common Shares pursuant to a bona fide
purchase offer received from a third party that is not an Affiliate of ICF, the Call right of each
of ICF and IUBT shall be in the form of a right of first refusal to purchase such Common Shares
upon the following terms:

          (a) The Option Holder shall first notify ICF and IUBT in writing at least 30 days in advance
of the proposed transfer. The notice shall contain all of the terms of the proposed transfer,
including, without limitation, the name and address of the prospective transferee, the purchase
price and other terms and conditions of payment (or the minimum purchase price or basis for
determining the minimum purchase price and other minimum acceptable terms and conditions), the date
on or about which the transfer is to be made, and the number of Common Shares to be transferred
(the “Transfer Notice”).

          (b) Within 10 business days after receipt of the Transfer Notice, either ICF or IUBT (the
“Exercising Party”) may notify the Option Holder that it intends either:

               (1) to exercise its Call by purchasing all (but not less than all) of the Common Shares
proposed to be transferred pursuant to the terms and conditions as set forth in the Transfer Notice
(the “Right of First Refusal Notice”), in which case the provisions of Subsection 4.2(c) shall
govern such purchase and sale, or

               (2) to exercise its Call by purchasing all (but not less than all) of the Common Shares
proposed to be transferred pursuant to the provisions of Sections 4.3 and 4.4, in which case the
Exercising Party shall deliver an Exercise Notice, and the provisions of Sections 4.3 and 4.4 shall
govern such purchase and sale.

If the Exercising Party exercises its Call under this Subsection 4.2(b), a binding contract of
purchase and sale will be formed between it and the Option Holder upon the delivery of the Right of
First Refusal Notice or the Exercise Notice, as the case may be.

          (c) If the Exercising Party delivers a Right of First Refusal Notice, the Exercising Party
will buy, and the Option Holder will sell, the Common Shares at the time, at the price, and on the
same terms and conditions as those contained in the Transfer Notice, subject to the following:

               (1) If the Transfer Notice provides for payment over time, the Exercising Party will have the
option to make payment all in cash for clear title at the closing of the purchase and sale;

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               (2) If the Transfer Notice provides for the closing to take place more than 30 days after the
delivery of the Transfer Notice, the Exercising Party will have the option to close its purchase on
or before the 30th day after delivery of the Transfer Notice.

          (d) After compliance with the provisions of this Section 4.2, if no Call has been exercised,
the Option Holder may transfer his Common Shares, but only to the transferee designated in the
Transfer Notice, at the time, at the price, and on the same terms and conditions as those contained
in the Transfer Notice. If no Call is exercised and such proposed transfer to a third party is not
consummated within 30 days after delivery of the Transfer Notice, any proposed sale of the Common
Shares will again become subject to the notice provisions and the right of first refusal provided
in this Section 4.2.

     4.3. Purchase Price.

          If ICF or IUBT exercises its Call pursuant to Section 4.1 or Section 4.2(b)(2), the purchase
price (“Purchase Price”) for each Common Share to be purchased shall be equal to the Fair Market
Value of the Common Share, plus interest thereon from the Effective Date at the national prime rate
as reported in The Wall Street Journal as of the Effective Date (the “National Prime Rate”). The
Fair Market Value of a Common Share shall be determined as follows (with the date such Fair Market
Value is finally determined hereunder being referred to as the “Valuation Date”):

          (a) The Board shall determine the Fair Market Value of each Common Share as of the Effective
Date (the “Initial Valuation”), which Initial Valuation may be based on the opinion of an
independent appraiser engaged by the Board. All costs incurred in connection with the Initial
Valuation shall be borne by ICF. The Initial Valuation shall be set forth in a written notice (the
“Valuation Notice”) delivered by ICF to the Option Holder as soon as practicable following the
Board’s receipt of the independent appraiser’s opinion with respect to the value of the Common
Shares, if any, but in any event within 60 days after delivery of the Exercise Notice.

          (b) If the Option Holder does not dispute the Initial Valuation by delivery of a written
notice of dispute to ICF within 20 days after ICF’s delivery of the Valuation Notice, the Initial
Valuation shall be binding upon the Parties as the Fair Market Value. If the Option Holder does
dispute the Initial Valuation within the 20-day period, the Option Holder shall, at his sole
expense, retain a qualified appraiser (“the Second Appraiser”) of his own choosing to make a second
appraisal (the “Second Appraisal”) of the Fair Market Value of each Common Share. If the Second
Appraisal is less than the Initial Valuation, the Initial Valuation shall be binding upon the
Parties. If the Second Appraisal exceeds the Initial Valuation by an amount not greater than 10
percent of the Initial Valuation, the Fair Market Value of each Common Share shall be the average
of the Initial Valuation and the Second Appraisal.

          (c) If the Second Appraisal exceeds the Initial Valuation by an amount greater than 10 percent
of the Initial Valuation, the Board and the Second Appraiser shall act in good faith to select a
third appraiser, who shall conduct a third appraisal (the “Third Appraisal”), which shall be final
and binding upon the Parties. If the Third Appraisal of the Fair Market Value of each Common Share
determines an amount that is closer to the amount determined

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by the Second Appraisal than to the amount determined by the Initial Valuation, then ICF shall
reimburse the Option Holder for the cost of the Second Appraisal. All costs with respect to the
fees and expenses paid or payable to the appraiser that issues the Third Appraisal shall be shared
equally by ICF and the Option Holder. All other costs incurred in connection with the Third
Appraisal shall be borne by the party incurring such costs.

          (d) In determining the Fair Market Value of a Common Share, all appraisers shall take into
account, in addition to the factors described in Section 4.3(g) below, the internally prepared
income statement and balance sheet for ICF up through the end of the month immediately preceding
the Effective Date.

          (e) IUBT, ICF and the Option Holder each agree to make available to each other and to the
appraisers the information used to analyze and develop the Fair Market Value in connection with the
Initial Valuation and any decision by the Option Holder on whether or not to dispute the same.

          (f) Notwithstanding anything in this Agreement to the contrary, (i) under no circumstances
shall IUBT, ICF or their Affiliates be obligated to do anything that would cause a violation of any
Federal, state, provincial or local law, including without limitation any banking laws, and (ii)
the Option Holder shall have no ownership interest, by virtue of this Agreement or the ownership of
Common Shares, in Irwin Financial or IUBT, or rights as against IUBT or Irwin Financial (it being
understood that the foregoing provision shall not preclude the Option Holder from owning shares, or
options to acquire shares, of common stock of Irwin Financial).

          (g) The Parties agree that it is the intent and purpose of this Section 4.3 that the Fair
Market Value be determined in accordance with Revenue Ruling 59-60 (as modified), a copy of which
is attached hereto as Exhibit A, and the appraisers shall take into account the various
factors set forth in Section 4 of Revenue Ruling 59-60; provided, however, that
such factors shall not have the effect of altering or removing the consideration of the financial
statements described in Section 4.3(d) above. The calculation of Fair Market Value of all issued
and outstanding Common Shares shall include and reflect, after taking into account all liabilities
of ICF (including inter-company debt owed to Irwin Financial, IUBT or any of their Affiliates) and
the liquidation preference and preferential dividend rights of the Preferred Shares, only the value
of Common Shares, and shall not include or reflect any value of Preferred Shares or any other
investments in ICF made by IUBT or any of its Affiliates. In determining the Fair Market Value of
a Common Share, the following rules will be applied:

               (i) the Fair Market Value per Common Share will be equal to the quotient obtained when the
aggregate Fair Market Value of all of the issued and outstanding Common Shares is divided by the
aggregate number of such issued and outstanding Common Shares.

               (ii) any allocations of the overhead of Irwin Financial or IUBT to the consolidated commercial
finance line of business segment may be made only in a manner that is consistent with historical
charges and only in a manner that is consistently applied among the business units and subsidiaries
of Irwin Financial; and

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               (iii) there will be no consideration of a liquidity or marketability discount or bonus applied
to minority Common Shares.

          (h) In determining the Fair Market Value of a Common Share, any transaction between ICF, on
the one hand, and IUBT or other Affiliates of Irwin Financial, on the other hand, will be based
upon the manner booked by the relevant entities, or on the basis of arm’s length transactions,
whichever would be more favorable to ICF. The Parties acknowledge that some transactions may not
have comparable arm’s length transactions available, in which case such value shall be based upon
the manner booked by IUBT or such other Affiliates of Irwin Financial, to the extent reasonable.

          (i) The Purchase Price shall be increased or decreased appropriately, without duplication, to
reflect the occurrence after the Effective Date of an Adjustment Event, as defined in Subsection
2.1(a).

     4.4. Option Closing.

          The closing (“Option Closing”) of the purchase and sale of the Common Shares, whether pursuant
to a Call exercised in accordance with Section 4.1 or Section 4.2(b)(2), will take place on a date
selected by the party exercising the Call (whether IUBT or ICF),as the case may be, which date will
not be later than the 30th day following the Valuation Date unless the parties agree
otherwise, but shall in any case be no later than the 90th day following the Valuation
Date. The parties shall use their best efforts to complete the entire valuation and closing
process within the designated period. At the Option Closing, the Option Holder will tender all the
Common Shares subject to the Call to ICF or IUBT, as the case may be, and ICF or IUBT, as the case
may be, will make payment of the Purchase Price for all such Common Shares to the Option Holder.

          During any period of determination of Fair Market Value, the Parties agree to use their best
efforts to carry on the business of ICF in the normal course and in the best interest of ICF. On
the Option Closing date, the Option Holder will sign and deliver to ICF all documents necessary to
transfer, free and clear of all liens, claims and other encumbrances, his/her Common Shares to ICF
or IUBT, as the case may be, including the stock certificates representing the Common Shares duly
endorsed for transfer. The Option Holder hereby appoints each of ICF and IUBT, as the case may be,
as the Option Holder’s attorney-in-fact, coupled with an interest, with full power and authority to
sign and deliver all resolutions and share transfers which may be required under this Section 4.4.
This appointment is irrevocable while the Option Holder owns Common Shares but will lapse
automatically as soon as the Option Holder ceases to own Common Shares.

     4.5. Request for Determination of Fair Market Value.

          An Option Holder shall have the right, upon request, to have an internal determination of Fair
Market Value made by the Board, which right may not be exercised more frequently than annually and
only during the month of June, with a Valuation Date as of June 30 (it being understood that any
such determination shall be binding and not subject to further review or appraisal until a
subsequent request is made in the following year pursuant to this

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Section 4.5 or until a subsequent appraisal is conducted in accordance with the provisions of
Section 4.3 hereof).

5. Exit Provisions.

     5.1. Exit Provisions.

          (a) If:

               (i) IUBT and the Option Holders receive a simultaneous bona fide arm’s length offer from a
third party (other than an Affiliate of any Option Holder) to purchase any of the issued and
outstanding Common Shares (it being understood that the provisions of this Section 5.1 shall not
apply to such a simultaneous offer for all of the issued and outstanding Common Shares); or

               (ii) ICF receives a bona fide arm’s length offer from a third party (other than an Affiliate
of any Option Holder) to purchase all of its assets and business or to acquire ICF through any
other form of business combination (whether by merger or otherwise),

which, in either case, IUBT or ICF wishes to accept (in either instance, the “Exit Offer”). IUBT
or ICF as the case may be will notify the Option Holders in writing, within 15 days of its receipt
of the Exit Offer (the “Exit Notice”), that (i) IUBT or ICF, as the case may be, wishes to accept
the Exit Offer and (ii) in the case of an asset sale or other business combination, IUBT and/or ICF
intends to vote to approve the transaction described in the Exit Offer.

          (b) The Exit Notice shall contain all of the terms and conditions of the proposed sale,
including, without limitation, the name and address of the prospective buyer, the purchase price
and other components of the transaction value, the terms of payment, other terms and conditions (or
the minimum purchase price or basis for determining the minimum purchase price and minimum
acceptable other terms and conditions) and the date on or about which the sale is to be made.

          (c) IUBT and the Option Holders or ICF, as the case may be, will sell to the purchaser named
in the Exit Notice:

               (i) their Common Shares, if the Exit Offer contemplated the sale of Common Shares (it being
understood that IUBT may also elect to sell, or to cause ICF to redeem, its Preferred Shares to the
extent such sale or redemption is contemplated by the Exit Offer), or

               (ii) the assets and business of ICF, if the Exit Offer contemplated the sale of ICF’s assets
and business, whether pursuant to an asset sale transaction, a merger, or some other form of
business combination, for the price and upon the terms and conditions set forth in the Exit Offer.

Each of the Option Holders and IUBT or ICF, as appropriate, shall sign all documents and do all
things, or shall cause all documents to be signed and all things to be done, that are

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necessary to complete the sale described in the Exit Notice. Without limiting the generality of
the foregoing, each of the Option Holders shall be obligated (which obligation shall be enforceable
by IUBT), to sell his/her Common Shares and otherwise participate in the transaction described in
the Exit Notice, to vote his/her Common Shares in favor of such transaction at any meeting of
shareholders called to vote on or approve such transaction (or to execute one or more written
consents in lieu of such a meeting), and otherwise take all necessary action to consummate, or
cause ICF to consummate, such transaction.

          (d) Any Exit Notice may be rescinded by IUBT or ICF, as appropriate, by its delivering a
written notice to the Option Holders to that effect.

          (e) Upon consummation of any transaction described in an Exit Notice, IUBT and each Option
Holder shall receive the same proportion of the aggregate consideration that such holder would have
received if such aggregate consideration had been distributed by ICF in complete liquidation,
giving due regard to the prior rights and preferences of the Preferred Shares and the pro rata
distribution of net assets remaining following the payment of amounts owed to creditors and the
satisfaction of liquidation preferences.

6. CERTAIN REPRESENTATIONS AND WARRANTIES

          Each Option Holder represents and warrants to ICF and IUBT, in connection with his/her
ownership of Common Shares, as the case may be, as follows:

          (a) The Option Holder will acquire and will own any Common Shares for investment purposes only
and not with the view to the distribution or resale thereof.

          (b) The Option Holder understands that the transfer of the Common Shares is severely limited
and that the Common Shares have not been registered under the 1933 Act, or any state or province,
Canadian or other securities laws.

          (c) The Option Holder understands and agrees that the Common Shares may not be offered or sold
except pursuant to the registration requirements of the 1933 Act and applicable state, provincial
or other securities laws, or pursuant to an available exemption therefrom. The Option Holder
agrees not to engage in hedging transactions with regard to the Common Shares except in compliance
with the 1933 Act.

          (d) The Option Holder has such knowledge and experience in financial and business matters that
the Option Holder is capable of evaluating the merits and risk of investment in the Common Shares.
Furthermore, as a result of the Option Holder’s active involvement as officers and directors of ICF
or subsidiaries of ICF, the Option Holder has had access to and actual knowledge of all material
facts concerning ICF and the Common Shares, and has had the availability to ask questions and
receive answers from ICF concerning the Common Shares, ICF and its operations. The Option Holder
also has had the opportunity to consult with his/her legal counsel and tax adviser in connection
with the investment in the Common Shares and the matters set forth in this Agreement.

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          (e) The execution, delivery and performance of this Agreement by the Option Holder and the
transactions contemplated hereby, do and will not violate, breach or constitute a default under any
agreement or contract to which the Option Holder is a party.

7. Miscellaneous

     7.1. Further Assurances; Other Agreements; Entire Agreement.

          (a) Each party hereto shall do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other agreements, certificates, instruments
and documents as any other party hereto may reasonably request, or as may be reasonably necessary,
in order to carry out the intent and the provisions of this Agreement and the consummation of the
transactions contemplated hereby.

          (b) This Agreement constitutes the entire agreement and understanding among the parties
pertaining to the subject matter of this Agreement and supersedes any and all prior agreements,
whether written or oral, relating hereto.

     7.2. Notices.

          (a) Except as otherwise provided in this Agreement, all notices, requests, demands and other
communications under this Agreement shall be in writing and addressed as follows (or as amended by
proper notice under this Section 7.2):

               (i) If to ICF:

Irwin Commercial Finance Corporation

500 Washington Street

Columbus, Indiana 47201

Attention: Thomas D. Washburn, Chairman

               (ii) If to IUBT:

Irwin Union Bank and Trust Company

500 Washington Street

Columbus, Indiana 47201

Attention: Thomas D. Washburn, Chairman

               (iii) If to any Option Holder, at the address set forth on the signature page.

          (b) If properly addressed, as in (a) above, notice shall be deemed effective and evidenced as
follows:

               (i) if by registered or certified mail, postage prepaid and return receipt requested: three
Days after deposit in the United States or Canadian mails;

               (ii) if by personal delivery or delivery service: upon actual delivery evidenced by written
receipt;

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               (iii) if by facsimile transmission: upon sending, evidenced by facsimile confirmation or
transmission log; or

               (iv) if by internationally-recognized overnight courier, on the next business day after the
date when sent.

     7.3. Amendments.

          This Agreement may be amended only by a written agreement executed by each of the Parties
hereto.

     7.4. Governing Law.

          This Agreement shall be governed by and construed in accordance with the laws of the State of
Indiana (without regard to conflicts of laws provisions).

     7.5. Successors and Assigns.

          This Agreement shall continue to benefit and to bind the parties and each of their permitted
successors and assigns. This Agreement may be assigned by the Parties hereto to any of their
respective successors and assigns who acquire Common Shares from them in compliance with the
provisions hereof. All or any portion of the rights of IUBT or ICF hereunder may be assigned by
them to any of their Affiliates upon notice to the Option Holders, but without the consent of the
Option Holders. No Option Holder may assign this Agreement without the consent of ICF. This
Agreement is not intended to create any third party beneficiaries.

     7.6. No Waiver.

          Failure to insist upon strict compliance with any of the terms, covenants, or conditions of
this Agreement shall not be deemed to be a waiver of such term, covenant, or condition, nor shall
any waiver or relinquishment of any right or power under this Agreement at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or times. In the event
a party hereto breaches any of its covenants or fails to perform any of its obligations hereunder,
the other parties may proceed to protect and enforce their rights by suit in equity and/or by
action at law, including an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or obligation contained in this Agreement.

     7.7. Severability.

          It is the desire and intent of the parties hereto that the provisions of this Agreement be
enforced to the fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, should any clause, portion, or paragraph
of this Agreement be unenforceable or invalid for any reason, such unenforceability or invalidity
shall not affect the enforceability or validity of the remainder of the clause, portion or
paragraph of this Agreement. Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not to be invalid, prohibited or unenforceable in such

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jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating
the remaining provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.

     7.8. Section Headings.

          Introductory headings at the beginning of each Section and Subsection of this Agreement are
solely for the convenience of the parties and shall not be deemed to be a limitation upon or
description of the contents of any such Section or Subsection of this Agreement.

     7.9. Counterparts.

          This Agreement may be executed in counterparts, each of which shall be deemed an original and
all of which, when taken together, shall constitute one and the same Agreement. Telecopied
signatures of this Agreement are effective to the same extent as original signatures.

     7.10. Time is of the Essence.

          Time shall be of the essence of any purchase and sale of Common Shares pursuant to the terms
of this Agreement.

     7.11. Alternative Dispute Resolution.

          (a) Negotiation. In the event of a dispute between the parties arising out of or related to
this Agreement, either party may give the other relevant party(ies) written notice of the dispute.
Upon such notice being given, the parties shall attempt in good faith to resolve the dispute
promptly by negotiation. Within 10 days after delivery of the notice, the receiving party(ies)
shall submit to the other party a written response to the notice. Thereafter, the parties shall
confer in person or by telephone promptly to attempt to resolve the dispute.

          (b) Mediation. If such dispute has not been resolved by negotiation within 30 days of the
sending of the original notice, or if the parties have failed to confer within 20 days after
delivery of the original notice, the parties shall endeavor to settle the dispute by mediation
under the then current Center for Public Resources (“CPR”) Model Procedure for Mediation of
Business Disputes. Unless otherwise agreed, the parties will select a mediator from the CPR Panels
of Distinguished Neutrals. If the parties encounter difficulty in agreeing on a neutral, they will
seek the assistance of CPR in the selection process. All negotiations and proceedings pursuant to
subparagraph (a) and this subparagraph (b) shall be confidential and shall be treated as compromise
and settlement negotiations for purposes of applicable rules of evidence and any additional
confidentiality protections provided by applicable law.

          (c) Arbitration. If the dispute has not been resolved by negotiation or mediation as provided
herein within 90 days of the initiation of the CPR mediation procedure, the parties shall finally
settle such dispute by binding arbitration conducted expeditiously in accordance with the CPR Rules
for Non-Administered Arbitration of Business Disputes by a sole arbitrator; provided,
however, that if one party has requested the other party(ies) to participate

-13-

 

in negotiation or mediation and the other party(ies) has failed to participate, the requesting
party may initiate arbitration before expiration of the above period. Unless otherwise agreed, the
sole arbitrator will be a lawyer selected from the CPR Panels of Distinguished Neutrals. If the
parties encounter difficulty in agreeing on a neutral, they will seek the assistance of CPR in the
selection process.

          The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1-16 to the
exclusion of state laws inconsistent therewith, and judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction thereof. The place of arbitration shall
be Columbus, Indiana. In deciding the dispute, the arbitrator shall be bound by, and shall
faithfully apply, the laws of the State of Indiana, including the laws of evidence but excepting
the rules of procedure. Notwithstanding anything in the foregoing to the contrary, the arbitrator
is not empowered to award damages in excess of compensatory damages, and each party hereby
irrevocably waives any right to recover such excessive damages with respect to any dispute between
them resolved by arbitration. The statute of limitations of the State of Indiana applicable to the
commencement of a lawsuit shall apply to the commencement of an arbitration hereunder, except that
no defenses shall be available based upon the passage of time during any negotiation or mediation
called for by the preceding subparagraphs (a) and (b).

[signature page follows]

-14-

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement and deem it effective as
of the date written above.

	 	 	 	 	 	 	 
	IRWIN COMMERCIAL FINANCE CORPORATION	 	IRWIN UNION BANK AND TRUST COMPANY
	 
	 	 	 	 	 	 
	By:

	 	/s/ Thomas D. Washburn
	 	By:
	 	/s/ Gregory F. Ehlinger
	 

	 	 
	 	 	 	 
	 

	 	Thomas D. Washburn, Chairman
	 	 	 	Gregory F. Ehlinger, Vice President
and Chief Financial Officer

	 	 	 	 	 	 	 
	/s/ JOSEPH LALEGGIA
	 	/s/ LUIGI SPIZZIRRI

	 
	 	 	 	 	 	 
	Address:

	 	 
	 	Address:
	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	/s/ MARK CANNON
	 	/s/ ROBERT MURPHY

	 
	 	 	 	 	 	 
	Address:

	 	 
	 	Address:
	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	/s/ ROBERT MORMINA
	 	/s/ JOHN RINALDI

	 
	 	 	 	 	 	 
	Address:

	 	 
	 	Address:
	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 

-15-exv10w39

 

EXHIBIT
10.39

IRWIN COMMERCIAL FINANCE CORPORATION

2005 STOCK OPTION AGREEMENT

     1. Grant of Option. Irwin Commercial Finance Corporation, an Indiana corporation (the
“Company”), hereby grants to JOSEPH LaLEGGIA (the “Optionee”) an option (the “Option”) to purchase
a total number of shares of Stock (the “Shares”) set forth in the Irwin Commercial Finance 2005
Notice of Stock Option Grant (the “Notice”), at the exercise price per share set forth in the
Notice (the “Exercise Price”), subject to the terms and conditions of this Irwin Commercial Finance
Corporation 2005 Stock Option Agreement (the “Agreement”) and the Shareholder Agreement of the
Company, dated as of December 23, 2005 (the “Shareholder Agreement”).

     2. Exercise of Option. This Option shall be exercisable during its term set out in the Notice
as follows:

          (a) Right to Exercise.

               (i) This Option may be exercised solely as to Shares which have vested, as indicated on
the Notice.

               (ii) In the event of Optionee’s termination of employment or service as a director, the
exercisability of the Option is governed by Section 5 below, subject to the limitation
contained in Section 2(a)(iii) below.

               (iii) In no event may this Option be exercised after the Expiration Date of this Option
as set forth in the Notice.

          (b) Method of Exercise. This Option shall be exercisable by written notice approved for such
purpose by the Company which shall state the election to exercise the Option, the number of Shares
in respect of which the Option is being exercised, and such other representations and agreements as
to the Optionee’s investment intent with respect to such shares of Stock as may be required by the
Company. Such written notice shall be signed by Optionee and shall be delivered in person, by
certified mail, or by nationally recognized courier service with written receipt of delivery, to
the Secretary of the Company. The written notice shall be accompanied by payment of the Exercise
Price. This Option shall be deemed to be exercised upon receipt by the Company of such written
notice accompanied by the Exercise Price.

     No Shares will be issued pursuant to the exercise of an Option unless such issuance and such
exercise shall comply with all relevant provisions of applicable law, including the requirements of
any stock exchange upon which the Shares may then be listed. Assuming such

 

 

compliance, for income tax purposes the Shares shall be considered transferred to Optionee on
the date on which the Option is exercised with respect to such Shares.

          3. Method of Payment. Payment of the Exercise Price must be in cash or its equivalent
denominated in U.S. dollars.

          4. Restrictions on Exercise. As a condition to the exercise of this Option, the Company may
require Optionee to make any representation and warranty to the Company as may be required by any
applicable law or regulation.

          5. Termination of Relationship.

               (a) Termination of Employment Due to Death. In the event Optionee’s employment or service as
a director is terminated by reason of death, any outstanding Options whether or not then
exercisable, may be exercised within twelve (12) months after such date of termination of
employment or service. In no case shall the period for exercise extend beyond the expiration date
of such option grant.

               (b) Termination
of Employment due to Disability or Retirement. In the event that Optionee’s
employment or service as a director is terminated due to disability or retirement, the options
theretofore granted to such Optionee may be exercised to the extent that such Optionee was entitled
to exercise the options at the date of such termination, but only within a period of three (3)
years beginning on the day following the date of such termination. In no case shall the period for
exercise extend beyond the expiration date of such option grant. So long as Optionee shall
continue to serve as a director or continue to be an employee of the Company, the options granted
to the Optionee shall not be affected by any change of duties or position. A change of employment
from the Company to a subsidiary, from a subsidiary to the Company, from one subsidiary to another,
or any combination thereof, shall not be considered to be a termination of employment for purposes
of this Agreement.

               (c) Resignation or Termination Without Cause. In the event that an Optionee’s employment with
the Company or its subsidiaries or service as a director is terminated due to resignation or by the
Company without cause (other than a retirement or disability), the options theretofore granted to
such Optionee may be exercised to the extent that such Optionee was entitled to exercise the
options at the date of such resignation, but only within a period of three (3) months beginning on
the day following the date of such termination. In no case shall the period for exercise extend
beyond the expiration date of such option.

               (d) Termination for Cause. Notwithstanding anything herein to the contrary, all outstanding
options shall immediately terminate without further action on the part of the Company in the event
of the termination of a Optionee’s employment or service with the Company or its subsidiaries for
cause.

          6. Effect of an Exit Offer. Upon the receipt of an Exit Offer (as such term is defined in the
Shareholder Agreement), the Company shall provide written notice thereof (the “Exit Offer Notice”)
to the Optionee. The Company shall have the right, but not the obligation, to terminate all
outstanding options as of the 30th day immediately following the date of the sending of the Exit
Offer Notice by including a statement to such effect in the Exit Offer Notice.

-2-

 

Upon delivery of the Exit Offer Notice and regardless of whether the Company elects to
terminate the outstanding options, the Optionee shall have the right to immediately exercise all
outstanding options in full during the 30-day period notwithstanding the other terms and conditions
otherwise set forth in this Agreement.

          7. Transferability of Option. This Option may not be transferred in any manner except (a) a
transfer by will or by the laws of descent or distribution or (b) to another Option Holder (as such
term is defined in the Shareholder Agreement). This Option may be exercised during the lifetime
of Optionee only by him or her, or upon transfer to a permitted transferee by such permitted
transferee. The terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.

          8. Term of Option. This Option may be exercised only within the Term set forth in the Notice.

          9. Adjustment in Capitalization. In the event of any change in the outstanding shares of
Stock that occurs after the date of this Agreement by reason of a Stock dividend or split,
recapitalization, merger, consolidation, combination, separation (including a spin-off), exchange
of shares, or other similar corporate change or distribution of stock or property by the Company,
the number and class of and/or price of shares of Stock subject to this Option shall be adjusted
appropriately by the Committee, whose determination shall be conclusive.

          10. Governing Law. The Plan, and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of Indiana. With respect to any dispute arising out of
the Agreement or alleged breach of this Agreement or both, Optionee, by accepting the Option,
hereby irrevocably consents, to the maximum extent permitted by law, to the jurisdiction and venue
of the Federal Courts in Indiana if they have subject matter jurisdictions, and otherwise to the
jurisdiction and venue of the courts of the State of Indiana, and the Optionee shall not be
entitled to a trial by jury.

          11. Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:

          “Committee” means a committee consisting of the Chairman of the Board of Directors of the
Company or such other committee appointed from time to time by the Board of Directors of the
Company.

          “Stock” means the common stock, without par value, of the Company.

          12. Withholding Tax Obligations. As a condition to the exercise of Option granted
hereunder, Optionee shall make such arrangements as the Company may require for the satisfaction of
any federal, state, local or foreign withholding tax obligations that may arise in connection with
the exercise, receipt or vesting of the Option. The Company shall not be required to issue any
shares under this Agreement.

-3-

 

     This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one document.

	 	 	 	 	 
	 	IRWIN COMMERCIAL FINANCE CORPORATION

 	 
	 	By:  	/s/ Thomas D. Washburn
 	 
	 	 	Thomas W. Washburn, Chairman 	 
	 	 	 	 
	 

     OPTIONEE ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON OPTIONEE ANY
RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT BY THE COMPANY OR ANY OF ITS AFFILIATES, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.

     Optionee acknowledges receipt of a copy of this Agreement and the Notice, which is
incorporated herein by reference, and the Shareholder Agreement and represents that he or she is
familiar with the terms and provisions of all of the foregoing, and hereby accepts this Option
subject to all of the terms and provisions of this Agreement, the Notice and the Shareholder
Agreement. Optionee has reviewed this Agreement, the Notice and the Shareholder Agreement in their
entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement
and the Shareholder Agreement and fully understands all provisions of this Agreement and the
Shareholder Agreement. Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Committee upon any questions arising under this Agreement or
the Notice.

	 	 	 	 	 
	 	 	 
	Dated:  December 23, 2005 	/s/ Joseph LaLeggia
 	 
	 	JOSEPH LaLEGGIA 	 
	 	 	 
	 

-4-

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