Document:

faf-ex1010_76.htm

EXHIBIT 10.10

 

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) dated as of December 20, 2017 is made and entered into by and between Mark E. Seaton (“Executive”) and First American Financial Corporation (“Employer”).  In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows:

1.Employment of Executive.  Subject to the terms and conditions of this Agreement, Employer hereby employs Executive, and Executive hereby accepts employment, as Executive Vice President, Chief Financial Officer.  Executive shall devote Executive’s entire productive time, effort and attention to the business of Employer during the Term (as defined below).  Executive will use his best efforts at all times to promote and protect the good name of Employer and Employer’s subsidiaries, affiliates and other related companies (together with Employer, each a “Related Company” and, collectively the “Related Companies”) as well as that of their respective officers, directors, employees, agents, products and services.  Executive shall not directly or indirectly render any service of a business, commercial or professional nature to any other person or organization, whether for compensation or otherwise, without the prior written consent of Employer.

2.Duties To Be Performed.  Executive shall perform the duties and have the responsibilities customarily performed and held by a person in a position similar to that set forth in Section 1.  Executive shall also perform such other duties as directed by Employer’s Board of Directors and the Chief Executive Officer of Employer or his designee.  Any modification made by Employer’s Board of Directors to the duties of Executive shall not constitute a breach of this Agreement.

3.Term of Agreement.  This Agreement shall become effective on the date of this Agreement and, unless earlier terminated pursuant to the provisions of the Agreement, shall continue through the close of business on December 31, 2020 (the “Term”).  Unless continued on an “at-will” basis by Employer or any other Related Company or pursuant to another agreement, Executive’s employment shall terminate upon the termination of this Agreement for any reason.

4.Compensation.  In full payment for Executive’s services, Employer shall provide to Executive compensation and benefits determined in accordance with this Section 4.

 

4.1Salary.  During the Term, Employer shall pay Executive a base annual salary (the “Base Salary”), before deducting all applicable withholdings, of $600,000 per year, payable at the times and in the manner dictated by Employer’s standard payroll policies, which Base Salary may be increased in the sole and unfettered discretion of the Compensation Committee of the Board of Directors of Employer (the “Compensation Committee”) or the Board of Directors of Employer.  The Base Salary shall be prorated for any partial pay period that occurs during the Term. 

4.2Performance Bonus; Long-Term Incentive Equity Awards.  During the Term, in addition to the Base Salary, Employer may, in the sole and unfettered discretion of 

	
 
	
 
	

 

 

the Compensation Committee, pay to Executive an annual bonus and long-term incentive equity award. 

4.3Benefits.  Executive shall, subject to the terms and conditions of any applicable benefits plan documents and applicable law, be entitled to receive all benefits of employment generally available to other similarly situated executives of Employer when and as he becomes eligible for them, including medical, dental, life and disability insurance benefits.  Employer reserves the right to modify, suspend or discontinue any and all of the above benefit plans, policies, and practices at any time without notice to or recourse by Executive, so long as such action is taken generally with respect to other similarly situated executives of Employer and does not single out Executive.

 

4.4Taxes and Withholdings.  Employer may deduct from all compensation payable under this Agreement to Executive any taxes or withholdings Employer is required to deduct pursuant to state and federal laws or by mutual agreement between the parties.  Employee is solely liable for any and all taxes beyond those specifically withheld by Employer.

5.Termination.

5.1Termination Upon Death.  The Term (and Executive’s employment) shall automatically terminate with immediate effect upon the death of Executive.

5.2Termination by Employer.  Notwithstanding anything in this Agreement to the contrary, express or implied, the Term (and Executive’s employment) may be terminated immediately by Employer (by delivery of written notice specifying that termination is made pursuant to this Section 5.2) as follows:

(a)Whenever Executive is not physically or mentally able (with reasonable accommodation) to perform the essential functions of Executive’s job;

(b)For “Cause,” which shall be defined as: (i) embezzlement, theft or misappropriation by the Executive of any property of any of the Related Companies; (ii) Executive’s willful breach of any fiduciary duty to Employer; (iii) Executive’s willful failure or refusal to comply with laws or regulations applicable to Employer and its business or the policies of Employer governing the conduct of its employees; (iv) Executive’s gross incompetence in the performance of Executive’s job duties; (v) commission by Executive of a felony or of any crime involving moral turpitude, fraud or misrepresentation; (vi) the failure of Executive to perform duties consistent with a commercially reasonable standard of care; (vii) Executive’s refusal to perform Executive’s job duties or to perform reasonable specific directives of Executive’s supervisor or his successor or designee and the Board of Directors of Employer; or (viii) any gross negligence or willful misconduct of Executive resulting in a loss to Employer or any other Related Company, or damage to the reputation of Employer or any other Related Company; or

	
 
	
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(c) Upon the occurrence of any material breach (not covered by any of clauses (i) through (viii) of Section 5.2(b) above) of any of the provisions of this Agreement, it being agreed that for all purposes under this Agreement any violation of any of the provisions of Sections 1, 6, 7, 8, 9 and 10 shall be deemed to be a material breach of this Agreement.

5.3Termination by Employer without Cause.  Employer may terminate the Term (and Executive’s employment) by giving two weeks written notice to Executive.  A termination made pursuant to this Section 5.3 is a “termination Without Cause.”  A termination made pursuant to Section 5.2 (and satisfying the notice requirement set forth therein) shall under no circumstance be considered a termination Without Cause.

5.4Rights and Obligations Upon Termination.

(a)In the event of Employer’s termination of the Term (and Executive’s employment) pursuant to Section 5.3 (which, for the avoidance of doubt, is a termination Without Cause), Employer shall pay Executive:

(i) his Base Salary through the date of termination, paid within 5 days following the termination date (or earlier if required by law); 

(ii)any annual bonus earned for any fiscal year completed before the date of termination that remains unpaid as of the date of termination, paid within 5 days following the termination date (or earlier if required by law); and

(iii) an amount (the “Severance Amount”) equal to two (2) times the sum of (A) his Base Salary and (B) the median of the last three (3) annual bonuses paid to Executive (whether earned pursuant to this Agreement or otherwise and whether paid in cash, restricted stock units, stock options or otherwise) (the “Median Bonus”), fifty percent (50%) of which will be paid on the first business day following the 12-month anniversary of the date of termination and fifty percent (50%) of which will be paid in twelve installments equal to 1/24th of the Severance Amount, the first payment of which will be made on the 29th day following termination and the remaining eleven payments of which will be made on the first business day of each calendar month thereafter.

For the purpose of determining the Median Bonus, the value of (1) the portion of any annual bonus paid in the form of restricted stock or restricted stock units (“RSUs”) shall be determined by multiplying the number of restricted shares or RSUs granted by the closing price of the restricted shares or stock underlying the RSUs on the grant date and (2) the portion of any annual bonus paid in the form of stock options or other equity (excluding restricted stock or RSUs) shall be determined using the methodology utilized by Employer for determining the cost of such stock option or other equity for financial reporting purposes, but without giving effect to the amortization of such stock option or other equity.  For the avoidance of doubt, the Median Bonus shall not include any long-term incentive equity awards which would not be included in “Covered Compensation” under the Executive Supplemental Benefit Plan (including any 

	
 
	
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amendment, modification or successor thereto, the “SERP”).  For the avoidance of doubt, “median” means, with respect to a set of three amounts, the middle amount and not the highest or the lowest amount, unless two of the amounts in the set are the same amount, in which case “median” means the amount which occurs twice in the set.

In exchange for Employer’s agreement to pay the Severance Amount and as a condition thereto, Executive agrees to execute (within 21 days following the date of termination of employment), deliver and not revoke (within the time period permitted by applicable law) a general release of the Related Companies and their respective officers, directors, employees and owners from any and all claims, obligations and liabilities of any kind whatsoever, including all such claims arising from or in connection with Executive’s employment or termination of employment with Employer or this Agreement (including, without limitation, civil rights claims), in such form as is reasonably requested by Employer.  Executive’s right to receive the Severance Amount is conditioned upon the release described in the preceding sentence becoming irrevocable within the prescribed time period.  In addition, Executive’s right to receive the Severance Amount shall immediately cease in the event that Executive violates any of the provisions of Sections 7 or 8.  Apart from the payments set forth in this Section 5.4(a) and the benefits to which Executive may be entitled under the Employment Arrangements (as defined below), upon such termination Employer shall have no further liability whatsoever to Executive.  

(b)In the event of the termination of the Term (and Executive’s employment) pursuant to Sections 5.1 or 5.2 or, if Executive’s employment does not continue on an at-will basis or pursuant to another agreement, upon the expiration of the Term, Employer shall be obligated to pay Executive (or, in the case of a termination under Section 5.1, Executive’s heir or successor) the Base Salary through the date of termination and any annual bonus earned for any fiscal year completed before the date of termination, in each case, that remains unpaid as of the date of termination.  Apart from the payments set forth in this Section 5.4(b) and the benefits to which Executive may be entitled under the Employment Arrangements, upon such termination or expiration, as the case may be, Employer shall have no further liability whatsoever to Executive.

(c)If (i) Executive’s employment is terminated Without Cause by Employer prior to the expiration of the Term, (ii) as of the date of such termination Executive has not yet reached his “Early Retirement Date”, as defined in the SERP and (iii) Executive would have reached his “Early Retirement Date” during the Term had his employment not been earlier terminated, Executive will be deemed to be vested in the SERP on the date he would have reached his “Early Retirement Date” and he will begin receiving payments under the SERP on such date as otherwise provided in, and otherwise subject to the provisions of, the SERP; provided, however, that in such circumstance Executive’s “Final Average Compensation” (or equivalent) for purposes of the SERP shall be determined as of the date of the termination of his employment. 

(d)If it becomes known that Executive’s employment will terminate for any reason, Employer may, in its sole discretion and subject to its other obligations under this Agreement, relieve Executive of his duties under this Agreement and assign Executive other reasonable duties and responsibilities to be performed until the termination becomes effective.

	
 
	
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(e)In the event that any payment or benefit received or to be received by Executive under this Agreement and all other arrangements or programs, including any acceleration of vesting of stock options, restricted stock, restricted stock units, deferred compensation, or long-term incentive awards (collectively, the “Payments”), would constitute an excess parachute payment within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), as determined in good faith by Employer’s independent auditors, then the portion of the Payments that would be treated as parachute payments under Section 280G of the Code shall be reduced so that the Payments, in the aggregate, are reduced to the Safe Harbor Amount (as defined below).  For purposes of this Agreement, the term “Safe Harbor Amount” means the largest portion of the Payments that would result in no portion of the Payments being considered parachute payments under Section 280G of the Code.  In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.  In addition, with regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A of the Code, all such payments shall be made on or before the last day of calendar year following the calendar year in which the expense occurred.

(f)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A of the Code and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  If Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Code, then with regard to any payment or the provision of any benefit (whether under this Agreement or otherwise) that is considered deferred compensation under Section 409A of the Code payable on account of a “separation from service,” and that is not exempt from Section 409A of the Code as involuntary separation pay or a short-term deferral (or otherwise), such payment or benefit shall be made or provided at the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of Executive or (ii) the date of Executive’s death (the “Delay Period”).  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 5.4(f) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive in a lump sum without interest, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.  For purposes of Section 409A of the Code, each payment amount or benefit due under this Agreement will be considered a separate payment and Executive’s entitlement to a series of payments or benefits under this Agreement is to be treated as an entitlement to a series of separate payments.

(g)Upon termination of Executive’s employment for any reason, Executive hereby resigns from any and all (i) positions with all Related Companies, whether as a director, manager, general partner, officer or otherwise; (ii) committee memberships, fiduciary capacities or similar positions with respect to employee benefit plans sponsored by any Related Company, and (iii) any other positions associated with any Related Company.

	
 
	
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6.Restrictive Covenants

6.1 Access to Trade Secrets and Confidential Information.  Executive acknowledges and agrees that in the performance of Executive’s duties of employment Executive will be brought into frequent contact with existing and potential customers of Employer and the other Related Companies throughout the world.  Executive also agrees that trade secrets and confidential information of Employer and the other Related Companies gained by Executive during Executive’s association with Employer and the other Related Companies have been developed by Employer and the other Related Companies through substantial expenditures of time, effort and money and constitute valuable and unique property of Employer and the other Related Companies, and Employer and/or the Related Companies will suffer substantial damage and irreparable harm which will be difficult to compute if, during the Term and thereafter, Executive should disclose or improperly use such confidential information and trade secrets in violation of the provisions of this Section 6.  Executive further understands and agrees that the foregoing makes it necessary for the protection of the businesses of Employer and the other Related Companies that Executive not compete with Employer or any other Related Company during his or her employment, as further provided in this Section 6.

6.2 Non-Compete and Non-Solicit.  While employed by Employer or any other Related Company, Executive will not, directly or indirectly, engage in or render any service of a business, commercial or professional nature to any other person, entity or organization, whether for compensation or otherwise, that is in competition with Employer or any other Related Company anywhere in the world.  In accordance with this restriction, but without limiting its terms, Executive will not:

(a)enter into or engage in any business which competes with the business of Employer or any other Related Company;

(b)solicit customers, business, patronage or orders for, or sell, any products or services in competition with, or for any business that competes with, the business of Employer or any other Related Company;

(c)divert, entice, or take away any customers, business, patronage or orders of Employer or any other Related Company or attempt to do so; or

(d)promote or assist, financially or otherwise, any person, firm, association, partnership, corporation or other entity engaged in any business which competes with the business of Employer or any other Related Company.

6.3Scope of Restricted Activities.  For the purposes of Section 6.2, but without limitation thereof, Executive will be in violation thereof if Executive engages in any or all of the activities set forth therein directly as an individual on Executive’s own account, or indirectly as a stockholder, partner, joint venturer, executive, agent, salesperson, consultant, officer and/or director of, or by virtue of the ownership by Executive’s spouse, child or parent of any equity interest in, any firm, association, partnership, corporation or other entity engaging in any or all of such activities; provided, however, Executive’s or Executive’s spouse’s, child’s or 

	
 
	
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parent’s ownership of less than one percent (1%) of the issued equity interest in any publicly traded corporation shall not alone constitute a violation of this Agreement.

6.4Scope of Covenants.  Employer and Executive acknowledge that the time, scope, geographic area and other provisions of Sections 6 and 7 have been specifically negotiated by sophisticated commercial parties and agree that they consider the restrictions and covenants contained in such Sections to be reasonable and necessary for the protection of the interests of the Related Companies, but if any such restriction or covenant shall be held by any court of competent jurisdiction to be void but would be valid if deleted in part or reduced in application, such restriction or covenant shall apply with such deletion or modification as may be necessary to make it valid and enforceable.  The restrictions and covenants contained in each provision of such Sections shall be construed as separate and individual restrictions and covenants and shall each be capable of being severed without prejudice to the other restrictions and covenants or to the remaining provisions of this Agreement.

7.No Solicitation of Employees.  Executive will not directly or indirectly, at any time during the Term and the 12-month period after termination of Executive’s employment, either for Executive or for any other person or entity, recruit or solicit for hire any employee, officer, director or other personnel of the Employer or any of the Related Companies, or to induce or encourage such a person or entity to terminate his, her or its relationship, or breach an agreement, with the Employer or one of the Related Companies.

8.Nondisclosure of Confidential Information.  Executive will keep in strict confidence, and will not, directly or indirectly, at any time during or after Executive’s employment with Employer, disclose, furnish, disseminate, make available or, except in the course of performing Executive’s duties of employment, use any trade secrets or confidential business and technical information of Employer, any other Related Company or any of its respective customers or vendors, without limitation as to when or how Executive may have acquired such information.  Such confidential information shall include, without limitation, Employer’s and any other Related Company’s unique selling and servicing methods and business techniques, business strategies, financial information, training, service and business manuals, promotional materials, training courses and other training and instructional materials, vendor and product information, customer and prospective customer lists, other customer and prospective customer information, processes, inventions, patents, copyrights, trademarks and other intellectual property and intangible rights, and other business information.  Executive specifically acknowledges that all such confidential information, whether reduced to writing, maintained on any form of electronic media, or maintained in the mind or memory of Executive and whether compiled by Employer, any other Related Company and/or Executive, derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from its disclosure or use, that reasonable efforts have been made by Employer or another Related Company, as the case may be, to maintain the secrecy of such information, that such information is the sole property of Employer or another Related Company and that any retention and use of such information or rights by Executive during his employment with Employer (except in the course of performing his duties and obligations hereunder) or after the termination of his employment shall constitute a misappropriation of Employer’s or another Related Company’s trade secrets, rights or other property.

	
 
	
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9.Return of Company Property.  Executive agrees that upon termination of Executive’s employment with Employer, for any reason, Executive shall return to Employer, in good condition, all property of Employer and the other Related Companies, including without limitation, the originals and all copies of any materials which contain, reflect, summarize, describe, analyze or refer or relate to any items of information listed in Section 8 of this Agreement.  In the event that such items are not so returned, Employer will have the right to charge Executive for all reasonable damages, costs, attorneys’ fees and other expenses incurred in searching for, taking, removing and/or recovering such property.

10.Representations and Warranties.  Executive hereby represents and warrants that he has the legal capacity to execute and perform this Agreement, that this Agreement is a valid and binding agreement enforceable against him according to its terms, and that the execution and performance of this Agreement by him does not violate the terms of any existing agreement or understanding, written or oral, to which Executive is a party or any judgment or decree to which Executive is subject.  In addition, Executive represents and warrants that he knows of no reason why he is not physically or legally capable of performing his obligations under this Agreement in accordance with its terms.  Executive hereby indemnifies the Related Companies and shall hold harmless the Related Companies from and against all liability, loss, cost, or expense, including, without limitation, reasonable attorneys’ fees and expenses, incurred by any Related Company by reason of the inaccuracy of Executive’s representations and warranties contained in this Section 10.

11.Survival.   Each of the representations, warranties and covenants set forth in Sections 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19 and 20 of this Agreement shall survive and shall continue to be binding upon Employer and Executive notwithstanding the termination of Executive’s employment or the expiration of the Term for any reason whatsoever.

12.Breach by Executive.  Executive is obligated under this Agreement to render services of a special, unique, unusual, extraordinary, and intellectual character, which give this Agreement particular value.  The loss of these services cannot be reasonably or adequately compensated in damages in an action at law.  Accordingly, in addition to other remedies provided by law or this Agreement, Employer shall have the right during the Term and any period of non-competition governed by this Agreement, to seek injunctive relief against breach or threatened breach of this Agreement by Executive or the performance of services, or threatened performance of services, by Executive in violation of this Agreement, or both.  This Section is not meant to limit the damages the Employer may pursue and is not meant to be an exhaustive list of the relief available to the Employer.

13.Controlling Law.  This Agreement shall be controlled, construed and enforced in accordance with the laws of the State of California, without regard to conflicts of laws principles.  

14.Notices.  Any notice to Employer required or permitted under this Agreement shall be given in writing to Employer, either by personal service or by registered or certified mail, postage prepaid, addressed to the Chief Executive Officer of Employer, or equivalent, with a copy to the General Counsel of Employer, at Employer’s then principal place of business.  Any such notice to Executive shall be given in a like manner and, if mailed, shall be 

	
 
	
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addressed to Executive at his home address then shown in Employer’s files.  For the purpose of determining compliance with any time limit in this Agreement, a notice shall be deemed to have been duly given (a) on the date of service, if served personally on the party to whom notice is to be given, or (b) on the third business day after mailing, if mailed to the party to whom the notice is to be given in the manner provided by this Section.

15.Amendments.  This Agreement may be amended only by written agreement of each of the parties to this Agreement.

16.Severability.  If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided that if Executive breaches Section 6 and if Section 6 is finally determined to be unenforceable, the payment obligations of Section 5.4(a)(iii) and Section 5.4(c) shall be deemed void ab initio.

17.Assignment.  Executive shall not transfer or assign this Agreement or any part thereof.  Employer reserves the right to transfer or assign this Agreement to any organization associated with it or any successor organization; provided, however, that Employer may assign this Agreement to any Related Company the stock or other equity of which is distributed to the shareholders of Employer and which, at the time of such distribution, agrees to employ Executive and assume Employer’s obligations under this Agreement.

18.Third-Party Beneficiaries.  This Agreement shall not confer any rights or remedies upon any party other than Employer, the other Related Companies, Executive and their respective successors and permitted assigns.

19.Integration.  

(a)This Agreement; the SERP; any stock option, restricted stock, stock appreciation right or other equity compensation plan of Employer or any other Related Company (including, without limitation, the First American Financial Corporation 2010 Incentive Compensation Plan) and any award agreement entered into thereunder; any pension plan and pension restoration plan or Employer or any Related Company; any deferred compensation plan of Employer or any other Related Company; any other employee benefit plan of Employer or any other Related Company; any change-of-control or similar agreement to which Employer and/or and Related Party and Executive are parties; any Confidential Information and Inventions Agreement between Executive and Employer; and any amendment, restatement or successor to any of the foregoing (the foregoing, collectively, the “Employment Arrangements”) contain the entire Agreement between the parties and supersedes all prior verbal and written agreements, understandings, commitments and practices between the parties. The benefits conferred upon Executive pursuant to this Agreement shall be in addition to the benefits provided for under the other Employment Arrangements; provided, however, that duplicative benefits shall not be payable pursuant to this Agreement and any other Employment Arrangement and, for the avoidance of doubt, none of the benefits provided in this Agreement shall be payable to the extent they are otherwise payable under the other Employment Arrangements.  

	
 
	
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(b)In the event (i) Executive is a party to an agreement with a Related Company providing for a severance benefit in the event Executive’s employment terminates following a change-in-control (a “Change-in-Control Agreement”), (ii) Executive becomes entitled to such benefit and (iii) Executive becomes entitled to the Severance Amount under Section 5.4(a)(iii), then the severance benefit payable to Executive under the Change-in-Control Agreement shall offset any Severance Amount payable to Executive pursuant to Section 5.4(a)(iii).        

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

[Signatures on next page]

 

	
 
	
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement effective as of the day and year first above written.

 

	
“EMPLOYEE”
	
 
	
“EMPLOYER”

	
 

 

/s/ Mark E. Seaton
	
 
	
 

 

/s/ Dennis J. Gilmore

	
Name:  Mark E. Seaton
	
 
	
Name:  Dennis J. Gilmore

	
Date:  12/15/17
	
 
	
Title:  Chief Executive Officer

	
 
	
 
	
Date:  12/20/2017

 

	
 
	
Signature Page to Employment AgreementExhibit

Exhibit 10(b)

Effective as of 4/17/97

1ST SOURCE CORPORATION
EMPLOYEE STOCK PURCHASE PLAN

1.PURPOSE.  This Employee Stock Purchase Plan (the “Plan”) of 1st Source Corporation (the “Corporation”) is designed to encourage employee purchases of shares of the Corporation's Common Stock by offering to eligible employees the right to purchase such shares. The Plan is intended to apply to the Corporation and to such subsidiaries of the Corporation as the Plan Administrative Committee may from time to time designate (including subsidiaries which become such subsequent to the effective date of the Plan); provided, however, that the Plan shall only apply to such subsidiaries of the Corporation as are defined in Section 425(f) of the Internal Revenue Code of 1986, as amended.

The Corporation intends that the Plan shall qualify as an “Employee Stock Purchase Plan” under Section 423 of the Internal Revenue Code of 1986, as amended, and the Plan shall be construed in a manner consistent with the requirements of said Section 423.

2.ADMINISTRATION.  The Plan shall be administered by a committee appointed by the Board of Directors of the Corporation (the “Committee”). The Committee shall consist of not less than three (3) members of the Corporation’s Board of Directors. The Board of Directors may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors.  No member of the Committee shall be eligible to participate in the Plan.

Subject to the express provisions of the Plan and such instructions and limitations as the Board of Directors of the Corporation may establish from time to time, the Committee shall be authorized to develop guidelines regarding the Plan; to publish, amend, and rescind rules and regulations relating to the Plan; to administer and interpret the Plan as may be required from time to time; and to take all other actions and make all other determinations necessary for the administration of the Plan. Decisions of the Committee shall be made by a majority of its members and shall be final, conclusive and binding upon all participants in the Plan. Any decision reduced to writing and signed by a majority of the members of the Committee shall be fully effective as if it had been made at a meeting of the Committee duly held. The Corporation will pay all expenses incurred in the administration of the Plan.

Subject to the approval of the Board of Directors of the Corporation, the Committee shall have the right to suspend, discontinue or cancel the Plan, on either a temporary or permanent basis, as the Committee may from time to time deem appropriate and for such reasons as the Committee in its sole judgment may deem appropriate; provided, however, the Committee may not suspend, discontinue or cancel the Plan during an offering period with respect to purchase rights then outstanding. No provision of the Plan shall be deemed to grant to any employee or his legal representatives or assigns any right to participate in the Plan except as expressly set forth herein or as provided in such interpretations or decisions as the Committee may from time to time issue in accordance with the provisions of the Plan.

No member of the Board of Directors or the Committee shall be liable for any action or determination with respect to the Plan or any option granted under it which does not involve recklessness or willful misconduct. 

3.STOCK SUBJECT TO PLAN AND ADJUSTMENT.  Shares offered hereunder (hereinafter referred to as “Common Stock”) may be authorized but unissued Common Stock of the Corporation or previously issued Common Stock acquired by the Corporation and held in its treasury.  Not more than two hundred thousand (200,000) shares of the Common Stock of the Corporation (as said amount may be adjusted in accordance with Paragraph 9 hereof) shall be sold in the aggregate hereunder.  Shares not actually purchased under an offering may be offered again in a subsequent offering.

4.OFFERINGS.  Purchase rights shall be granted under the Plan in one or more offerings, as the Committee may determine, but the maximum number of shares of Common Stock which shall be subject to purchase rights hereunder during any offering period shall be sixty-five thousand (65,000) shares (as said amount may be adjusted in accordance with Paragraph 9 hereof).

The terms of each offering shall specify the number of shares of Common Stock which may be subject to purchase rights thereunder, and, subject to Paragraph 6, each offering shall bear a uniform relationship to the basic rate of pay of the eligible employees on the effective date of the offering. (“Basic rate of pay” shall mean either the salary of an employee or such employee’s hourly, weekly, or other periodic rate of pay on an annualized basis including vacation, holiday and sick pay, but excluding overtime, shift differentials, commissions, bonuses, deferred compensation, and fringe benefits.)

Purchase rights shall be granted solely to eligible employees, and shall expire at the close of the offering period (as hereinafter defined).

No offering of Common Stock under the Plan may be made prior to June 1, 1997. The effective date of an offering shall be the date determined by the Committee and specified in the communication of the offering by the Corporation.

Purchase rights shall be granted to all eligible employees of the Corporation or of a subsidiary of the Corporation whose employees are granted any of such rights in an offering, and (subject to this Paragraph and Paragraph 6 hereof) all employees granted rights shall have the same rights and privileges under the offering; provided, however, that under rules prescribed by the Committee, no employee will be granted a purchase right:

		
	(a)
	if immediately after the right is granted, the employee owns (as defined in Sections 423 and 425(d) of the Internal Revenue Code of 1986, as amended) stock, and/or holds outstanding purchase rights to purchase stock, possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Corporation or of any subsidiary of the Corporation; or,

		
	(b)
	the grant of any purchase right permits the employee’s rights to purchase stock under this Plan and under all other employee stock purchase plans, if any, of the Corporation or its subsidiaries, to accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000.00) of fair market value of such stock (determined at the time such purchase right is granted) for each calendar year in which such purchase right is outstanding at any time; or

		
	(c)
	if at any time the grant of such purchase right is prohibited by applicable law or will cause the Plan not to qualify under Section 423 of the Internal Revenue Code of 1986, as amended.

5.ELIGIBLE EMPLOYEES.  An eligible employee is an employee who, on the effective date of an offering, has been an employee of the Corporation or one of the Corporation’s subsidiaries (designated by the Committee on the effective date of such offering as a participating subsidiary) for at least two years preceding the effective date of such offering; whose customary employment is twenty (20) hours or more per week; and whose customary employment is for five (5) months or more in any calendar year.

6.PROVISIONS OF OFFERINGS.  The provisions and related conditions of each offering hereunder shall be determined by the Committee, subject to the provisions of the Plan and the following requirements:

		
	(a)
	The Committee shall fix the purchase price of the shares to be offered so that such price per share shall equal one hundred percent (100%) of the fair market value of a share of the Corporation’s Common Stock on the effective date of the offering. The purchase price so fixed shall be the purchase price per share to be paid by a participant for all shares purchased by the participant during the offering period. The “fair market value” of the Corporation’s Common Stock shall be determined by the Committee under any reasonable valuation method permitted under the applicable provisions of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder.

		
	(b)
	The “offering period” shall be that period of time fixed by the Committee, but not to exceed twenty-seven (27) months following the effective date of the offering.

		
	(c)
	The “entry period” shall be that period of time commencing not earlier than ninety (90) days prior to the effective date of the offering during which appropriate participation and payroll deduction forms shall be distributed to eligible employees along with such other documents as may be required, and during which such eligible employees shall have the right to elect to participate in the Plan by completing, signing, and returning such forms to the Committee not later than the close of business on the last business day prior to the effective date of the offering. Participation and payroll deduction forms not received by the Committee prior to the close of business day prior to the effective date of the offering shall not be accepted for participation in the offering made by the Corporation.

		
	(d)
	The “payroll deduction period” shall be that period within which electing participants shall make, through payroll deductions, the required payments for the shares of the Corporation’s Common Stock which said participants have elected to purchase. The payroll deduction period shall commence on or after the effective date of an offering, shall terminate not later than the expiration of the offering period, and shall be fixed for each offering by the Committee.

		
	(e)
	Each participant shall indicate on the Plan participation and/or payroll deduction forms the amount which said participant desires to be withheld from his compensation during the offering period and applied to the purchase of shares of the Corporation’s Common Stock; provided, however, the total amount to be withheld and applied during an offering period for any individual participant may not exceed twenty-five percent (25%) of such participant's annual basic rate of pay determined as of the effective date of the offering by the Committee.

		
	(f)
	A participant shall be granted the right to purchase a fixed number of whole shares of Common Stock of the Corporation, which fixed number shall be determined by the Committee as of the effective date of the offering by dividing the total amount expected to be credited to such participant’s payroll deduction account (as defined in subparagraph 6(g) hereof) (including payroll deductions and accrued interest thereon), based upon his actual rate of participation as indicated on his participation and payroll deduction forms, by the purchase price per share as determined by the Committee under subparagraph 6(a) hereof.

		
	(g)
	The participant, in his participation and/or payroll deduction forms, shall authorize the Corporation or the participating subsidiary, as the case may be, to withhold from his compensation, throughout the offering period, the amount which said participant indicated he desired to be withheld and applied to the purchase of shares of the Common Stock of the Corporation (in accordance with subparagraph 6(e) hereof). The participant, in his participation and/or payroll deduction forms, shall direct the Corporation or the participating subsidiary, as the case may be, to deposit such withheld amounts in a savings account (herein referred to as a “payroll deduction account”) to be opened for the employee with 1st Source Bank, South Bend, Indiana, or any successor bank to that institution (hereinafter called the “Bank”) pursuant to directions set forth in said participation and/or payroll deduction forms. The employee shall further agree in the participation and/or payroll forms that he shall only withdraw and be paid the funds so accumulated in said payroll deduction forms. If required by local law or regulation, payroll deduction accounts may be opened at foreign branches of the Bank, or at other banks approved by the Corporation; such payroll deduction accounts shall be maintained and bear interest in accordance with local practice.

7.TERMINATION AND EXERCISE OF PURCHASE RIGHTS. A participant may elect by written notice furnished to the Committee at least thirty (30) days prior to the expiration of an offering period:

		
	(a)
	To cancel his participation and receive all payroll deductions and accrued interest in said participant’s payroll deduction account as soon as practicable following such notice or as soon as practicable following expiration of the offering period, as he may elect. Upon receipt of a notice of cancellation by the Committee, the participant’s purchase rights shall immediately lapse, and no further payroll deduction shall be made from his pay during the offering period. Partial withdrawals of payroll deductions may not be made.

		
	(b)
	To discontinue further payroll deductions and have the balance in his payroll deduction account applied as of the expiration of the offering period to the purchase of the maximum number of whole shares of Common Stock as may then be purchased, subject to the applicable limitations under subparagraph 6(f) hereof, in which event his purchase rights shall be permitted to lapse to the extent consistent with his election.

		
	(c)
	To elect to purchase on the last business day of the month following the date of his written notice under this Paragraph 7, all or fewer than all of the shares of which said participant is entitled to purchase under the offering as provided in subparagraph 6(f) hereof. Payment for said shares of Common Stock so purchased shall be made by the application of the balance of said participant’s payroll deduction, account plus the payment of cash or certified check, if necessary. Said payment shall be delivered to the Committee or a representative thereof on the last business day of the month following said participant’s written notice. As soon as practicable following the participant’s purchase of shares in accordance with this subparagraph 7(c), the balance in said participant’s payroll deduction account, if any, shall be paid to said participant.

Unless a participant gives timely, written notice as provided under this Paragraph 7 or unless the employment of said participant is terminated prior to the expiration of an offering period, said participant’s purchase rights shall be exercised as of the expiration of the offering period for the purchase of that number of whole shares of Common Stock which can be purchased with the balance in his payroll deduction account.

As soon as practicable after a participant's purchase of shares under this Paragraph 7, the Committee shall cause certificates for the number of shares of the Corporation’s Common Stock purchased hereunder to be issued to said participant, or the estate, personal representative or beneficiaries of a deceased participant, as fully paid and non-assessable shares, and shall refund any unused balance remaining in such participant’s payroll deduction account.

8.TERMINATION OF EMPLOYMENT.

		
	(a)
	In the event that the employment by the Corporation or a participating subsidiary of an employee who was a participant under the Plan shall terminate other than by reason of said participant’s death prior to the expiration of an offering period and prior to said participant making an election under Paragraph 7 hereof, said participant shall have the right within thirty (30) days from the date of said termination (unless the expiration of the offering period shall first occur, in which event such right may be exercised only on or prior to the expiration of said offering period) to elect to purchase, by written notice to the Committee, all or fewer than all of the shares said participant is entitled to purchase under the offering as provided in subparagraph 6(f) hereof. Payment for said shares of Common Stock shall be made by the application of the balance of said participant’s payroll deduction account plus the payment of cash or certified check, if necessary. Said payment shall be delivered to the Committee or a representative thereof on the date of said participant’s written notice of election under this subparagraph 8(a). As soon as practicable following the payment for shares under this subparagraph 8(a), the balance in said participant's payroll deduction account, if any, shall be paid to said participant.

		
	(b)
	In the event that the employment by the Corporation or a participating subsidiary of an employee who is a participant under the Plan shall terminate prior to the expiration of an offering period by reason of such employee’s death, his estate, personal representative, or beneficiary shall have the right, at any time within ninety (90) days from the date of his death (unless the expiration of the offering period shall first occur, in which event such right may be exercised only on or prior to the expiration of the offering period), to elect by written notice delivered to the Committee to purchase all or fewer than all of the shares of the Common Stock which said deceased participant was entitled to purchase under the offering as provided in subparagraph 6(f) hereof. Payment for said shares of Common Stock shall be made by the application of the balance of said participant's payroll deduction account plus the payment of cash or certified check, if necessary. Said payment shall be delivered to the Committee or a representative thereof on the date of the written notice given under this subparagraph 8(b). As soon as practicable following the payment for shares under this subparagraph 8(b), the balance in said deceased participant’s payroll deduction account, if any, shall be paid to said estate, personal representative or beneficiary.

		
	(c)
	In the event that the employment by the Corporation or a participating subsidiary of an employee who was a participant under the Plan shall terminate for any reason, including death, and, said participant or the estate, personal representative or beneficiary of said participant shall not make an election by written notice in accordance with the provisions of subparagraphs 8(a) or 8(b) hereof, then, such participant's purchase rights shall, with respect to such offering period, automatically lapse, and the Committee shall cause the balance of such participant’s payroll deduction account to be paid to him or to his estate, personal representative or beneficiary as soon as practicable.

		
	(d)
	As soon as practicable after a participant or a participant’s estate, personal representative or beneficiary’s purchase of shares under this Paragraph, the Committee shall cause certificates for the number of shares of the Corporation’s Common Stock purchased hereunder to be issued to said participant or said participant’s estate, personal representative or beneficiaries fully paid and non-assessable shares.

9.ADJUSTMENTS IN CAPITAL STRUCTURE.  In the event that the outstanding shares of the Common Stock of the Corporation shall be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities, whether through reorganization, recapitalization, stock split-up, combination of shares, stock dividend, merger, consolidation or any other change in corporate structure affecting the Common Stock of the Corporation, appropriate adjustments shall be made by the Committee in the number and kind of shares or other securities available for purchase hereunder and subject to any purchase rights then outstanding, and/or the purchase price thereof. Any determination by the Committee of any adjustment to be made in any contingency under this Paragraph, along with such other action as the Committee shall deem appropriate under the circumstances, shall be final.

10.MERGER OR LIQUIDATION.  In the event of a dissolution or liquidation of the Corporation, or a merger or consolidation in which the Corporation is not the surviving corporation, the Plan shall terminate upon the date of approval of such dissolution, liquidation, merger or consolidation by the Corporation’s shareholders. Unless a participant elects to exercise his/her purchase rights as provided in Paragraph 7 at any time prior to the date of approval by the shareholders of any dissolution, liquidation, merger or consolidation, upon such termination, all purchase rights under the Plan shall automatically lapse, and all payroll deduction accounts shall be refunded with interest to the participants as soon as practicable.

11.NON-TRANSFERABILITY OF RIGHTS.  Purchase rights granted an employee under the Plan are exercisable, during such employee's lifetime, only by him; they may not be sold, transferred (other than by will or laws of descent or distribution), pledged or otherwise disposed of or encumbered.

12.RIGHTS AS A SHAREHOLDER.  An employee or his estate, personal representative or beneficiary will have none of the rights and privileges of a shareholder of the Corporation with respect to shares of Common Stock subject to purchase rights under the Plan until certificates representing such shares of Common Stock have been transferred or issued.

13.STATUS OF PLAN FUNDS.  All amounts received by the Corporation under the Plan may be used by the Corporation for any corporate purpose.

14.GOVERNMENTAL REGULATIONS.  The Corporation’s obligation to sell and deliver Common Stock under the Plan is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale or delivery of such Common Stock. In the event any governmental agency having any jurisdiction over the Plan, the qualification thereof or the shares of Common Stock to be issued thereunder fails or refuses to qualify the Plan or objects thereto, the Corporation may cause this Plan to be amended to conform with said governmental agencies requirements or may terminate the same, in which event all payroll deduction account balances shall be paid to employee participants.

15.INDEMNIFICATION OF COMMITTEE.  The members of the Committee shall be indemnified by the Corporation against all reasonable expenses incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal thereof, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any offering or purchase right, and against all amounts paid by them in settlement thereof (provided such settlement is approved by counsel selected by the Corporation) or paid by them in satisfaction of a judgment in any such action, suit or proceeding. A member of the Committee shall not be entitled to indemnification with respect to any matter or claim arising out of recklessness or willful misconduct by such member in the performance of his duties. As a condition of any indemnification, a Committee member shall in writing offer the Corporation the opportunity, at its own expense, to handle and defend any suit or claim against him.

16.EFFECTIVE DATE, TERMINATION AND AMENDMENT.  The Plan is subject to the approval of the Corporation’s shareholders within twelve (12) months following adoption of the Plan by the Board of Directors of the Corporation; and, if such approval is not received by such date, this Plan shall terminate, and no employee shall have any rights hereunder except to receive in cash the balance of his payroll deduction account including interest. The Plan may be amended from time to time or terminated by the Committee and/or the Board of Directors, provided that no such amendment or termination may adversely affect the rights of any participant under any outstanding purchase offering under this Plan, nor cause any purchase rights to fail to qualify under Section 423 of the Internal Revenue Code of 1986, as amended, and provided further that no such amendment may, without approval of the shareholders of the Corporation, (a) increase the maximum number of shares to be offered under the Plan (except as provided in Paragraph 9 hereof), (b) reduce the purchase price specified in subparagraph 6(f) (except as provided in Paragraph 9 hereof), (c) extend the term of offering periods under the Plan, or (d) change the person or categories of persons eligible to participate in the Plan specified in Paragraph 5 hereof.

17.WITHHOLDING.  Any amounts to be paid or shares to be delivered by the Corporation under the Plan shall be reduced by any sums required to be withheld by the Corporation.

18.TAX EFFECT.  There are no federal tax consequences resulting from the purchase of stock under this Plan. Under current law, upon the sale of any shares purchased under the Plan within one year of purchase, or prior to the termination of a current offering, the difference between the market value of the stock on the day it was purchased and the amount the employee paid for the stock is treated as compensation. The difference between the sales price of the stock and the market value on the day of purchase must be reported on the employee’s tax return as a capital gain. Separate information and detailed examples will be provided by the Corporation to Plan participants shortly after the employee election to participate is made. ANY PARTICIPANT MUST INFORM THE CORPORATION IF SHARES ARE SOLD AS PROVIDED ABOVE.

19.NOTICE.  Unless otherwise specifically provided herein, any notice to be given to the Committee under the Plan shall be given in writing and shall be deemed delivered for all purposes of the Plan if personally delivered to a member of the Committee or mailed to such Committee addressed to the Corporation by postpaid, certified United States mail.

20.MISCELLANEOUS. The term “his” or “him” as used in the Plan shall be deemed to refer to all eligible employees of the Corporation and participants herein irrespective of gender or age.

The Plan shall be governed by the laws of the State of Indiana.

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