Document:

Exhibit 10.11

 

CARDINAL FINANCIAL
CORPORATION

INCENTIVE STOCK OPTION AGREEMENT

 

                This Incentive Stock Option Agreement (this “Agreement”),
dated as of the Grant Date set forth below, is by and between Cardinal
Financial Corporation, a Virginia corporation (the “Corporation”), and the key
employee of the Corporation identified below (the “Optionee”).  For good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Corporation and
the Optionee, the parties hereto agree as follows:

 

                                                Optionee:

 

                                                Grant Date:

 

                                                Number of shares of Common Stock

                                                subject to option (“Option Shares”):

 

                                                Exercise Price per Option Share:

 

                                                Vesting:                                                                                        20%
per year on the anniversary date of the grant.

 

                                                Optionee’s Address for Notices:

 

 

                                                Exhibit A attached
hereto is incorporated herein by reference.

 

                                                IN WITNESS
WHEREOF, the parties hereto have executed and delivered this Agreement as of
the Grant Date.

 

 

	
   

  	
  CARDINAL
  FINANCIAL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Bernard H. Clineburg

  
	
   

  	
  Title:

  	
  Chairman & CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  

 

 

 

EXHIBIT A

TO

CARDINAL FINANCIAL
CORPORATION

INCENTIVE STOCK OPTION AGREEMENT

 

                1.             Grant of Option. Subject to
the provisions of the Cardinal Financial Corporation 2002 Stock Option Plan and
from time to time thereafter (the “Plan”) and this Agreement, the Corporation
hereby grants to the Optionee the right and option (the “Option”) to purchase
from the Corporation shares of the Corporation’s Common Stock. The number of
shares covered by the Option (the “Option Shares”) and the exercise price per
share are set forth on the cover page to this Agreement (the “Cover Page”).  The Option is intended to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”), to the extent possible.  To the extent the Option is not so
qualifying, it shall be treated as a nonqualified stock option.  If an Option is treated as an incentive stock
option in part and as a nonqualified stock option in part, the Optionee may
designate which portion of such Option the Optionee is exercising and separate
certificates representing each such portion shall be issued upon the exercise
of the Option.  In the absence of such
designation, the Optionee shall be deemed to have exercised the incentive stock
option portion of the Option first.

 

                2.             Vesting and Expiration.

 

                                (a)           The
Option shall become exercisable as set forth on the Cover Page; provided
that, except as otherwise expressly provided in this Agreement, the Optionee is
employed by the Corporation on the date of exercise.

 

                                (b)           Notwithstanding
any other provision hereof, the Option shall expire on the tenth anniversary of
the Grant Date.

 

                3.             Exercise Following Termination
of Employment. If the Optionee’s employment with the Corporation is
terminated for any reason, including death or Disability (as defined below),
the outstanding portion of the Option shall, to the extent then vested, remain
exercisable until the first to occur of (a) the tenth anniversary of the
Grant Date and (b) the expiration of three months after the date of
termination of the Optionee’s employment with the Corporation, provided
that if the Optionee ceases to be employed by the Corporation by reason of
death or Disability, the period referred to in this clause (b) shall be
one (1) year following the date the Optionee ceases to be an employee of
the Corporation.  As used herein, “Disability”
means the inability of the Optionee to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or has lasted or can be expected to
last for a continuous period of not less than one (1) year.

 

                4.             Effect
of Change of Control on Vesting.  In
the event of a merger, or consolidation of the Corporation with or into another
unaffiliated entity, or the acquisition by another unaffiliated entity or
person, or a “group” as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, of all or substantially all of the Corporation’s assets
or more than fifty percent (50%) of the voting power represented by the
Corporation’s then outstanding voting stock, or the liquidation, dissolution,
or winding up of the Corporation (other than a restructuring transaction which
results in the continuation of the Corporation’s business by an affiliated
company), then the Option shall 

 

 

immediately become
exercisable with respect to all Option Shares and at the discretion of the
Corporation:  (a) the Option shall
be assumed or an equivalent Option substituted by any successor corporation to
the Corporation, or (b) the Corporation shall make provision for the
Optionee to exercise the Option, for a minimum of ten (10) days prior to
such event, as to all Option Shares.

 

5.             Exercise. The Option may be
exercised by delivering to the Corporation at its principal offices a written
notice, signed by a person entitled to exercise the Option, of the election to
exercise the Option and stating the number of Option Shares to be purchased.
Such notice shall be accompanied by the payment of the full exercise price of
the Option Shares to be purchased. Upon payment in accordance with the Plan and
within the time period specified by the Corporation of the amount, if any,
required to be withheld for Federal, state and local tax purposes on account of
the exercise of the Option (provided that the Optionee may at the time
of exercise authorize the Corporation to withhold from the Optionee’s next
salary or other payment, if any, all or part of the amount, if any, required to
be withheld by the Corporation on account of such exercise), the Option shall
be deemed exercised as of the date the Corporation received such notice. Upon
the proper exercise of the Option and proper payment as set forth under Section 6,
subject to the other provisions of this Agreement, the Corporation shall issue
in the name of the person exercising the Option, and deliver to such person, a
certificate or certificates for the Option Shares purchased.

 

6.             Payment.  Payment of the full exercise price shall be
in the form of cash, Option Shares of capital stock of the Corporation having a
fair market value (as defined in the Plan) on the date of exercise equal to the
full exercise price, or by any combination of cash and Option Shares of such
capital stock.

 

7.             Nontransferability of Option.
The Option shall not be transferable by the Optionee except by will or the laws
of descent and distribution. In the event of any such transfer, the Option must
be transferred to the same person or persons or entity or entities. Without
limiting the generality of the foregoing, the Option shall not be sold,
transferred except as aforesaid, assigned, pledged or otherwise encumbered or
disposed of, shall not be assignable by operation of law, and shall not be
subject to execution, attachment or similar process. Any attempted sale,
transfer, pledge, assignment or other encumbrance or disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
During the lifetime of the Optionee, the Option may be exercised only by the
Optionee or the Optionee’s agent, attorney-in-fact or guardian. Following the
death of the Optionee, the Option may be exercised by the Optionee’s
beneficiary or estate to the extent permitted by Section 3.

 

8.             Disposition of Option Shares.  Without limiting the generality of Section 7,
the Optionee shall notify the Corporation in writing of any sale or other
disposition of any Option Shares purchased upon the exercise of the Option if
such sale or disposition occurs (a) within two (2) years of the Grant
Date or (b) within one (1) year after the exercise of the Option with
respect to such Option Shares, whichever occurs later.

 

9.             Adjustments Upon Change in
Common Stock. Upon the occurrence of the events referred to in Article VII
of the Plan, the Board of Directors of the Corporation shall make 

 

 

2

 

appropriate adjustments
to the relevant provisions of the Option in accordance with the terms of the
Plan.

 

10.           Compliance with Securities Laws.  The Option and the Option Shares have been
registered under the Securities Act of 1933, as amended (the “Securities Act”),
and under any applicable state securities laws (the Securities Act and such
state laws being hereinafter sometimes referred to as the “Securities Laws”).

 

11.           Miscellaneous.

 

                                (a)           Notices. Any notice hereunder
shall be in writing, and delivered or sent by first-class U.S. mail, postage
prepaid, addressed to:

 

                                                (i)            if
to the Corporation, at:

                                                                Cardinal
Financial Corporation

                                                                8270
Greensboro Drive, Suite 500

                                                                McLean,
VA  22102

                                                                Attn:
Secretary

 

                                                (ii)           if
to the Optionee, at the address set forth on the Cover Page,

 

subject to the right of
either party, by written notice hereunder, to designate at any time hereafter
some other address.

 

                                (b)           Compliance with Law and
Regulations. The Option and the obligation of the Corporation to sell and
deliver Option Shares hereunder shall be subject to all applicable Federal and
state laws, rules and regulations and to such approvals by any government
or regulatory agency as may be required. Notwithstanding any other provision of
this Agreement, the Option may not be exercised if its exercise, or the receipt
of Option Shares pursuant thereto, would be contrary to applicable laws, any
listing agreement to which the Corporation is a party, and the rules of
all domestic stock exchanges on which the Corporation’s shares may be listed.

 

                                (c)           No Rights as Shareholder. The
Optionee shall have no rights as a shareholder with respect to any Option
Shares subject to the Option prior to the date of issuance to the Optionee of a
certificate or certificates for such Option Shares.

 

                                (d)           No Employment Rights. Nothing
in the Plan, this Agreement or the grant of the Option shall confer upon the
Optionee any rights to continued employment or service with the Corporation or
an affiliate or shall interfere with the right of the Corporation or the
affiliate to terminate the Optionee’s employment or service with the
Corporation.

 

                                (e)           Withholding.  The Corporation shall, to the extent
permitted by law, have the right to deduct from any payment of any kind
otherwise due to the Optionee any Federal, state and local taxes required by
law to be withheld or collected with respect to the Option.

 

 

3

 

                                (f)            Reservation
of Option Shares; Certain Costs. The Corporation shall keep available
sufficient authorized but unissued Option Shares needed to satisfy the
requirements of this Agreement. The Corporation shall pay any original issue
tax that may be due upon the issuance of Option Shares pursuant to the Option
and all other costs incurred by the Corporation in issuing such Option Shares.

 

                                (g)           Employment
by Affiliates. For the purpose of this Agreement, employment by an
Affiliate of, or a successor to, the Corporation shall be considered employment
by the Corporation. “Affiliate” as used herein shall have the meaning of “subsidiary”
or “parent” corporation  (within the
meaning of Section 424 of the Code) of the Corporation.

 

                                (h)           Plan
Governs. The Optionee hereby acknowledges receipt of a copy of the Plan and
agrees to be bound by its terms, all of which are incorporated herein by
reference. The Plan (as amended from time to time, including amendments adopted
after the Grant Date) shall govern in the event of any conflict between this
Agreement and the Plan.

 

                                (i)            Choice
of Law. This Agreement shall be construed in accordance with and be
governed by the laws of the Commonwealth of Virginia.

 

                                (j)            Counterparts.
This Agreement may be executed in two counterparts each of which shall
constitute one and the same instrument.

 

 

 

4EXHIBIT 10.9

 

MAINSOURCE FINANCIAL
GROUP, INC.

2007 STOCK INCENTIVE PLAN

 

ARTICLE I

 

Purpose

 

The primary purposes of the MainSource Financial
Group, Inc. 2007 Stock Incentive Plan (the “Plan”) are to promote and
align the interests of key employees, officers, directors, consultants,
advisors and other service providers of the Company and its Affiliates in order
to reward performance that enhances long term shareholder value, increases
employee stock ownership and improves the ability of the Company and its
Affiliates to attract, retain and motivate their key employees, officers,
directors, consultants, advisors and other service providers.

 

Similar purposes were the motivation behind the
Company’s prior establishment of the 2003 Stock Option Plan, which is in
addition to, and not replaced by, this 2007 Stock Incentive Plan. At the same
time as the adoption of this Plan, no further awards will be made under the
2003 Stock Option Plan. However, unexercised options, which were previously
issued under the 2003 Stock Option Plan, will not be terminated, but will
otherwise be continued in accordance with the 2003 Stock Option Plan, as it may
be amended from time to time in accordance with its terms and conditions.

 

In furtherance of the foregoing expressed purposes,
this Plan is intended to provide a means by which eligible recipients of Stock
Awards may be given an opportunity to benefit from increases in value of the
Company Stock through the granting of the following Stock Awards:  (a) Option Awards; (b) Bonus Stock
Awards; and (c) Restricted Stock Awards.

 

ARTICLE II

 

Definitions

 

As used in this Plan,
terms defined parenthetically immediately after their use have the meanings
provided by such definitions, and the terms set forth below have the following
meanings (such meanings to apply equally to both the singular and plural forms
of the terms defined):

 

(a)                  “Administrator”
means the Board, the Compensation Committee of the Board or any committee of
the Board  comprised solely of directors
who both are (i) “Non-employee Directors” under Rule 16b-3, and
(ii) “outside directors” as described in Treasury Regulation
Section 1.162-27(e)(3).

 

(b)                 “Affiliate”
means (i) any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of the granting of a
Stock Award under the Plan, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain, and (ii) any other organization in which the
Company has a substantial equity investment, as designated by the Board.

 

(c)                  “Award
Agreement” means the written agreement which sets forth the terms and
provisions applicable to each Option Award, Restricted Stock Award and/or Bonus
Stock Award.

 

(d)                 “Board”
means the Board of Directors of the Company.

 

(e)                  “Bonus
Stock Award” is a grant of shares of Company Stock in return for previously
performed services, or in return for a Grantee surrendering other compensation
that may be due.

 

1

 

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

 

(i)                     individuals
who, on January 1, 2007, constitute the Board (the “Incumbent Directors”)
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to January 1, 2007, whose
election or nomination for election was approved by a vote of at least two-thirds
of the Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as
a nominee for director, without written objection by such Incumbent Directors
to such nomination) shall be deemed to be an Incumbent Director; provided,
however, that no individual elected or nominated as a director of the Company
initially as a result of an actual or threatened election contest with respect
to directors or any other actual or threatened solicitation of proxies by or on
behalf of any person other than the Board shall be deemed to be an Incumbent
Director;

 

(ii)                  any
“person” (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes
a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25% or more
of the combined voting power of the Company’s then outstanding securities
eligible to vote for the election of the Board (the “Company Voting
Securities”); provided, however, that the event described in this paragraph
(ii) shall not be deemed to be a Change in Control by virtue of any of the
following acquisitions: (A) by the Company or any subsidiary, (B) by
any employee benefit plan sponsored or maintained by the Company or any
subsidiary, or by any employee stock benefit trust created by the Company or
any subsidiary, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (iii)), (E) pursuant
to any acquisition by any group of persons (or any entity controlled by any
group of persons); or (F) a transaction (other than one described in
(iii) below) in which Company Voting Securities are acquired from the
Company, if a majority of the Incumbent Directors approves a resolution
providing expressly that the acquisition pursuant to this clause (F) does
not constitute a Change in Control under this paragraph (ii);

 

(iii)               the
consummation of a merger, consolidation, share exchange or similar form of
corporate transaction involving the Company or any of its Subsidiaries that
requires the approval of the Company’s shareholders, whether for such
transaction or the issuance of securities in the transaction (a “Business
Combination”), unless immediately following such Business Combination:
(A) more than 40% of the total voting power of (x) the corporation
resulting from the consummation of such Business Combination (the “Surviving
Corporation”) or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the voting securities
eligible to elect directors of the Surviving Corporation (the “Parent
Corporation”), is represented by Company Voting Securities that were
outstanding immediately prior to such Business Combination (or, if applicable,
represented by shares into which such Company Voting Securities were converted
pursuant to such Business Combination), and such voting power among the holders
thereof is in substantially the same proportion as the voting power of such
Company Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person (other than any employee benefit plan
sponsored or maintained by the Surviving Corporation or the Parent Corporation
or any employee stock benefit trust created by the Surviving Corporation or the
Parent Corporation) is or becomes the beneficial owner, directly or indirectly,
of 25% or more of the total voting power of the outstanding voting securities
eligible to elect directors of the Parent Corporation (or, if there is no
Parent 

 

2

 

Corporation, the Surviving Corporation) and
(C) at least one-half of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) were Incumbent Directors at the time of the Board’s approval of
the execution of the initial agreement providing for such Business Combination
(any Business Combination which satisfies all of the criteria specified in (A),
(B) and (C) above shall be deemed to be a “Non-Qualifying
Transaction”); or

 

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

 

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

 

(g)      “Code”
means the Internal Revenue Code of 1986, as amended, and regulations and
rulings thereunder. References to a particular Section of the Internal
Revenue Code will include references to successor provisions.

 

(h)      “Company”
means MainSource Financial Group, Inc., an Indiana corporation.

 

(i)       “Company
Stock” means the common stock of the Company.

 

(j)       “Current
Grant” has the meaning specified in Section 7.1(c).

 

(k)      “Effective
Date” means January 1, 2007.

 

(l)       “Exchange
Act” means the Securities Exchange Act of 1934, as amended. References to a
particular section of, or rule under, the Exchange Act will include
references to successor provisions.

 

(m)     “Exercise
Price” means the price at which a share of Company Stock may be purchased by a
Grantee pursuant to exercise of an Option Award.

 

(n)      “Fair
Market Value” of any security of the Company or any other issuer means, as of
any applicable date:

 

(i)       The
per share closing price of a share of the Company Stock on the National
Association of Securities Dealers, Inc.’s NASDAQ National Market System
(“NASDAQ”) on the day preceding the day such grant determination is being made
or, if there was no closing price reported on such day, on the most recently
preceding day on which a closing price was reported; or

 

(ii)      If
a security is not so listed, the Fair Market Value of a share of Company Stock
will be determined by a reasonable application of a reasonable valuation method
taking into consideration such factors as the value of the Company’s tangible
and intangible assets, the present value of the Company’s future cash flows,
the market value of stock of equity interests in similar corporations and other
entities engaged in trades or businesses substantially similar to those engaged
in by the Company, the value of which can be readily determined through
objective means and other relevant factors such as control premiums or
discounts for lack of marketability and whether the valuation method is used
for other purposes that have a material economic effect on the Company, its
shareholders or its creditors.

 

3

 

(o)      “Grant
Date” means the date of grant of a Stock Award determined in accordance with
Section 6.1(a).

 

(p)      “Grantee”
means an individual who has been granted a Stock Award.

 

(q)      “ISO”
means an Option Award which meets the requirements of Code Section 422.

 

(r)       “Non-employee
Director” means any individual who is a member of the Board and who is not an
employee of the Company.

 

(s)      “Nonqualified
Stock Option” means an Option Award that does not meet the requirements of Code
Section 422.

 

(t)       “Option
Award” means the grant of a stock option under the Plan.

 

(u)      “Other
Plans” has the meaning specified in subsection Section 7.1(b)

 

(v)      “Plan”
means the MainSource Financial Group, Inc. 2007 Stock Incentive Plan.

 

(w)     “Prior
Grants” has the meaning specified in subsection Section 7.1(c).

 

(x)      “Restricted
Stock Award” is a grant of shares of Company Stock that are subject to a risk
of forfeiture or other restrictions that will lapse upon the achievement of one
or more goals, performance goals or other objectives, as determined by the
Board.

 

(y)      “Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act, and any future
rule or regulation amending, supplementing or superseding such rule.

 

(z)      “SEC”
means the Securities and Exchange Commission.

 

(aa)    “Securities
Act” means the Securities Act of 1933, as amended. References to a particular
section of, or rule under the Securities Act will include references to
successor provisions.

 

(bb)   “Stock
Award” means an Option Award, Bonus Stock Award or Restricted Stock Award, or
all or any combination of them.

 

(cc)    “Ten
Percent Owner” means a person who owns stock (including stock treated as owned
under Code Section 424(d)) possessing more than ten percent of the total
combined voting power of all classes of stock of the Company.

 

(dd)   “Termination
of Employment” occurs the first day an individual, for any reason, is entitled
to severance payments under the Company’s or any Affiliate’s personnel policies
or is no longer employed by the Company or any of its Affiliates, or, with
respect to an individual who is an employee of an Affiliate, the first day such
corporation is no longer an Affiliate. For the purposes of this Plan, the death
of an individual will not constitute a Termination of Employment.

 

(ee)    “Termination
of Employment for Cause” means a Termination of Employment following the
occurrence of any of the following events:

 

(i)       Grantee
commits fraud, theft or embezzlement against the Company or an Affiliate;

 

(ii)      Grantee
commits a felony or a crime involving moral turpitude;

 

(iii)     Grantee
compromises trade secrets or other proprietary information of the Company or an
Affiliate; or

 

(iv)     Grantee
breaches any non-solicitation agreement or noncompetition agreement with the
Employer.

 

(ff)     “$100,000
Limit” has the meaning specified in subsection Section 7.1(b).

 

4

 

ARTICLE III

 

Scope

 

Section 3.1  Reservation of Shares.

 

(a)                  An aggregate of 650,000 shares of Company Stock is hereby
made available and is reserved for delivery in connection with the Plan. This
is the maximum number of shares of Company Stock that may be subject to Stock
Awards awarded under the Plan. Subject to the foregoing limit, shares of
Company Stock held as treasury shares may be used for or in connection with
Stock Awards. Issuance of Company Stock pursuant to a Stock Award reduces the
shares available for grant and issuance under the Plan.

 

(b)                 If and to the
extent a Stock Award expires or terminates for any reason without having been
exercised in full or is forfeited, shares of Company Stock associated with such
Stock Award will again become available for other Stock Awards.

 

ARTICLE IV

 

Administration

 

The Plan will be
administered by the Administrator who will have full power and final authority,
in its sole discretion, but subject to the express provisions of the Plan, as
follows:

 

(a)                  To grant Stock
Awards;

 

(b)                 To determine when
Stock Awards may be granted;

 

(c)                  To interpret the
Plan and to make all determinations necessary or advisable for the
administration of the Plan;

 

(d)                 To prescribe,
amend and rescind rules relating to the Plan, including rules with
respect to the exercisability of Stock Awards upon the Termination of
Employment of a Grantee;

 

(e)                  To determine the
terms and provisions of Award Agreements and, with the consent of the Grantee,
to modify any such Award Agreement at any time;

 

(f)                    To accelerate
the exercisability of, and to accelerate or waive any or all of the
restrictions and conditions applicable to any Stock Award; or

 

(g)                 To impose such
additional conditions, restrictions and limitations upon the grant, exercise or
retention of Stock Awards as the Administrator may, before or concurrently with
the grant thereof, deem appropriate.

 

Any decision made by the Administrator or any action
which the Administrator is required or authorized to take will, to the extent
permitted by applicable law, be final, conclusive, and binding upon each and
every person who is or may become interested in the Plan, any Award Agreement
or any Stock Award. The Administrator will not be liable for any action or
determination made in good faith with respect to the Plan or any Stock Award.

 

ARTICLE V

 

Eligibility

 

Section 5.1  In General. 
Except as otherwise provided herein, Stock
Awards may be granted to any employee, director or officer of the Company or
any Affiliate, or to any consultant or advisor to the Company provided that if
such consultant or advisor is employed by or providing services to the Company 

 

5

 

or a Affiliate at the time of the grant).
Notwithstanding the foregoing, but otherwise subject to Code Section 422,
only employees of the Company or an Affiliate may be granted ISOs.

 

Section 5.2  Acquired Employees.  To the extent not
otherwise precluded in the Plan or in any other agreement, Stock Awards may be
granted under this Plan in substitution for awards held by employees of an
organization or business acquired, in any manner, by the Company or an
Affiliate. The terms, provisions and benefits of any substitute Stock Awards
will be determined by the Board.

 

ARTICLE VI

 

Conditions to Grants

 

Section 6.1  General Conditions.

 

(a)                  The “Grant Date”
of a Stock Award is the date on which the Administrator grants the Stock Award
or such later date as specified in advance by the Administrator.

 

(b)                 The term of each
Stock Award subject to Section 7.1(a) with respect to ISOs will be a
period of not more than ten years from the Grant Date and will be subject to
earlier termination as herein provided.

 

Section 6.2  Exercise Price.  The Exercise Price
of any Option Award or Restricted Stock Award, if any,  will be equal to the Fair Market Value of
Company Stock as of the Grant Date.

 

Section 6.3  Cash Settlement.  To the extent
provided by the Administrator, any Stock Award may be settled in cash rather
than Company Stock. To the extent any shares of Company Stock covered by a
Stock Award are not delivered to a Grantee because the Stock Award is
forfeited, such shares will not be deemed to have been delivered for purposes
of determining the maximum number of shares of Company Stock available for
delivery under the Plan.

 

ARTICLE VII

 

Option Awards

 

Section 7.1  Incentive Stock Options.  If, at the time of
the grant of any Option Award to an employee of the Company or a Affiliate, the
Exercise Price is, in the case of a Ten Percent Owner, not less than 110
percent of the Fair Market Value of the Company Stock on the Grant Date, then
the Administrator may, but need not, designate that such Option Award will be
made subject to additional restrictions to permit it to qualify as an ISO. Any
Option Award designated as an ISO:

 

(a)      Will be for a period of not more than ten
years (five years, in the case of a Ten Percent Owner) from the Grant Date, and
will be subject to earlier termination as provided herein or in the applicable
Award Agreement;

 

(b)      Will not, when aggregated with all other
ISOs (granted under the Plan or any other stock option plan of the Company or
an Affiliate (“Other Plans”)) granted to any specific Grantee and exercisable
for the first time during any calendar year, have an aggregate Fair Market
Value (determined with respect to the underlying capital stock on each ISO’s
grant date and otherwise in accordance with Code Section 422) in excess of
$100,000 (the “$100,000 Limit”);

 

(c)      Will, if the aggregate Fair Market Value
on the date of grant of the underlying capital stock with respect to such grant
(the “Current Grant”) and all prior ISO grants under the Plan and Other Plans
(“Prior Grants”) which are exercisable for the first time during any calendar
year would exceed the $100,000 Limit, be exercisable as follows:

 

(i)       The
portion of the Current Grant exercisable for the first time by a specific
Grantee during a calendar year which causes all relevant grants to the Grantee
to exceed the 

 

6

 

$100,000 Limit for such calendar year will,
notwithstanding the terms of the Current Grant, be exercisable for the first
time by the Grantee in the first subsequent calendar year or years in which it
could be exercisable for the first time by the Grantee without exceeding the
$100,000 Limit for such subsequent calendar year; and

 

(ii)      If,
viewed as of the date of the Current Grant, any portion of a Current Grant
could not be exercised under subsection (i) above during any calendar year
commencing with the calendar year in which it is first exercisable through and
including the last calendar year in which it may by its terms be exercised,
such portion of the Current Grant will not be an ISO, but will be exercisable
as a separate Option Award at such date or dates as are provided in the Current
Grant;

 

(d)      will be granted within ten years after the
earlier of the date the Plan is adopted by the Board or the date the Plan is
approved by the shareholders of the Company; and

 

(e)      will require the Grantee to notify the
Administrator of any disposition of any Company Stock issued pursuant to the
exercise of the ISO under the circumstances described in Code
Section 421(b) (relating to certain disqualifying dispositions),
within ten days of such disposition.

 

Section 7.2  Nonqualified Stock Options.  Any Option Award that
does not meet the requirements of Code Section 422 will be a Nonqualified
Stock Option, which will be in such form and will contain such terms and
conditions as the Administrator will appropriate; provided, however, the
Exercise Price will not be less than 100 percent of the underlying Company
Stock’s Fair Market Value on the Grant Date.

 

Section 7.3  Termination of Employment.

 

(a)                  Unless otherwise
determined by the Administrator and specified in the applicable Award
Agreement, any Option Award that has not vested as of the date of Termination
of Employment will terminate immediately as of the date of Termination of
Employment.

 

(b)                 Upon a Change in
Control, any Option Award will be immediately vested and immediately
exercisable.

 

(c)                  Any vested,
unexercised Option Award will terminate automatically and without further
notice on the earliest of the following dates, but otherwise subject to the
expiration date set forth in the Award Agreement:

 

(i)                     One
year after the Grantee’s death;

 

(ii)                  One
year after the Grantee’s Termination of Employment arising from a permanent and
total disability, within the meaning of Code Section 22(e)(3);

 

(iii)               Immediately if the Termination of
Employment is based upon Cause; and

 

(iv)              90
days after Termination of Employment for any reason other than disability or
Cause as provided in this Section.

 

7

 

ARTICLE VIII

 

Bonus Stock and Restricted Stock Awards

 

Section 8.1  Bonus Stock Awards.  Each Award Agreement relating to a
Bonus Stock Award will be in such form and will contain such terms and
conditions as the Administrator will deem appropriate. Each Bonus Stock Award
Agreement will include (through the incorporation of these provisions by
reference or otherwise) the substance of each of the following provisions:

 

(a)                  Consideration.   A
Bonus Stock Award may be made in consideration for past services actually
rendered to the Company or any Affiliate for its benefit.

 

(b)                 Vesting.   Shares of
Company Stock awarded under a Bonus Stock Award Agreement may, but need not, be
subject to vesting, as determined by the Administrator and specified in the
applicable Award Agreement. Upon a Change in Control, any Bonus Stock Award, to
the extent subject to vesting, will be immediately vested.

 

(c)                  Termination of Employment.  
Upon a Grantee’s Termination of Employment, the Company may reacquire
any or all of the shares of Company Stock held by the Grantee which have not
yet vested as of the date of the Termination of Employment under the terms of
the Bonus Stock Award Agreement. If as of the Termination of Employment the
restrictions applicable to a Bonus Stock Award, if any, have not been
satisfied, the Bonus Stock Award will be forfeited and the underlying shares of
Company Stock returned to the Company.

 

Section 8.2  Restricted Stock Awards.  Each Restricted Stock Award
Agreement will be in such form and will contain such terms and conditions as the Administrator
will deem appropriate. Each Restricted Stock Award Agreement will include
(through the incorporation of these provisions by reference or otherwise) the
substance of each of the following provisions:

 

(a)                  Purchase Price.   The
purchase price, if any, under each Restricted Stock Award Agreement will be
such amount as the Administrator will determine and designate in the Award
Agreement.

 

(b)                 Vesting.   Shares of
Company Stock awarded under a Restricted Stock Award Agreement may, but need
not, be subject to vesting, as determined by the Administrator and specified in
the applicable Award Agreement. Upon a Change in Control, any Restricted Stock
Award, to the extent subject to vesting, will be immediately vested.

 

(c)                  Termination of Employment.  
Upon a Grantee’s Termination of Employment, the Company may reacquire
any or all of the shares of Company Stock held by the Grantee which have not
yet vested as of the date of the Termination of Employment under the terms of
the Restricted Stock Award Agreement. If as of the Termination of Employment the
restrictions applicable to a Restricted Stock Award have not been satisfied,
the Restricted Stock Award will be forfeited and the underlying shares of
Company Stock returned to the Company.

 

ARTICLE IX

 

Exercise and Transferability

 

Section 9.1  Exercise.  Subject to Article IV(f), other provisions of the Plan
and the Award Agreement, as well as such other terms and conditions as the
Administrator may impose, each Stock Award that is exercisable in whole or in
part after the Grant Date will be exercisable in one or more installments
commencing on the date it vests under the applicable Award Agreement. Each such
Stock Award will be exercised by delivery to the Company of written notice of
exercise, in whole or in part, and delivery of such other documents, instruments
and other items as may be required by the applicable Award 

 

8

 

Agreement. The Exercise Price will be paid in full at
the time of the exercise. Payment may, at the election of the Grantee, be made in
any one or any combination of the following:

 

(a)                  Cash;

 

(b)                 Company Stock
valued at its Fair Market Value on the business day preceding the date of
exercise (including through an attestation procedure);

 

(c)                  By waiver of
compensation due or accrued to the Grantee for services rendered;

 

(d)                 With the consent
of the Administrator, by tender of property; or

 

(e)                  Consideration
received by the Company under any form of cashless exercise approved by the
Administrator, including (provided that a public market for the Company Stock
exists):

 

(i)                     A
“same day sale” commitment from the Grantee and a broker-dealer that is a
member of the National Association of Securities Dealers (an “NASD Dealer”)
whereby the Grantee irrevocably elects to exercise the Stock Award and to sell
a portion of the Company Stock so purchased in order to pay for the Stock
Award, and whereby the NASD Dealer irrevocably commits upon receipt of such
Company Stock to forward the Exercise Price directly to the Company; or

 

(ii)                  A
“margin” commitment from the Grantee and an NASD Dealer whereby the Grantee
irrevocably elects to exercise the Stock Award and to pledge the Company Stock
so purchased to the NASD Dealer in a margin account as security for a loan from
the NASD Dealer in the amount of the Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Company Stock to forward the
Exercise Price directly to the Company.

 

Section 9.2  Transferability.  Each Stock Award granted hereunder
will by its terms not be assignable or transferable other than by will or the
laws of descent and distribution and may be exercised, during the Grantee’s
lifetime, only by the Grantee. A Stock Award may be exercised by the Grantee’s
personal representative or heir(s) upon the Grantee’s death, but only
during the period ending on the earlier of (a) the date 12 months
following the date of death (or such longer or shorter period as is specified
in the applicable Award Agreement), or (b) the expiration of the term of
the Stock Award as specified in the Award Agreement. If, after death, the Stock
Award is not exercised within the time specified herein, the Stock Award will
terminate.

 

ARTICLE X

 

Amendment and Termination of the Plan

 

The Board may supplement, amend, alter or discontinue
the Plan in its sole discretion at any time and from time to time, but no
supplement, amendment, alteration or discontinuation will be made which would
impair the rights of a Grantee under an Award theretofore granted without the
Grantee’s consent, except that any supplement, amendment, alteration or
discontinuation may be made to (a) avoid a material charge or expense to
the Company, (b) cause the Plan to comply with applicable law, or
(c) permit the Company to claim a tax deduction under applicable law. In
addition, subject to the provisions of this Section, the Board, in its sole
discretion at any time and from time to time, may supplement, amend, alter or
discontinue this Plan without the approval of the Company’s shareholders
(a) to the extent such approval is not required by applicable law or the
terms of a written agreement, and (b) so long as any such amendment or
alteration does not increase the number of Shares subject to this Plan (other
than pursuant to Section 12.9) or increase the maximum number of Stock
Awards that the Administrator may award under the Plan. The Committee may
supplement, amend, alter or discontinue the terms of any Award theretofore
granted, prospectively or retroactively, on the same conditions and limitations
(and exceptions 

 

9

 

to limitations) as apply to the Board under the
foregoing provisions of this Section, and further subject to any approval or
limitations the Board may impose.

 

ARTICLE XI

 

Legal Construction

 

Section 11.1  Gender and Number.  Except where otherwise indicated
by the context, any masculine term used herein also includes the feminine, the
plural includes the singular and the singular includes the plural.

 

Section 11.2  Severability.  In the event any provision of the Plan is held to be
illegal or invalid for any reason, the illegality or invalidity will not affect
the remaining parts of this Plan, and this Plan will be construed and enforced
as if the illegal or invalid provision had never been included herein.

 

Section 11.3  Requirements of Law.  The grant of Awards and the
issuance of shares of Company Stock under this Plan will be subject to all
applicable statutes, laws, rules and regulations and to such approvals and
requirements as may be required from time to time by any governmental
authorities or any securities exchange or market on which the shares of Company
Stock are then listed or traded.

 

Section 11.4  Governing Law.  Except to the extent preempted by
the Federal laws of the United States, the Plan and all Award Agreements will
be construed in accordance with and governed by the laws of the State of
Indiana without giving effect to any choice or conflict of law provisions,
principles or rules (whether of the State of Indiana or any other
jurisdiction) that would cause the application of any laws of any jurisdiction
other than the State of Indiana.

 

Section 11.5  Headings.  The descriptive headings and
sections of this Plan are provided herein for convenience of reference only and
will not serve as a basis for interpretation or construction of the Plan.

 

Section 11.6  Mistake of Fact.  Any mistake of fact or
misstatement of facts will be corrected when it becomes known by a proper adjustment to an
Award or Award Agreement.

 

Section 11.7  Evidence.  Evidence required of anyone under
the Plan may be by certificate, affidavit, document or other information which
the person relying thereon considers pertinent and reliable, and signed, made
or presented by the proper party or parties.

 

ARTICLE XII

 

Miscellaneous

 

Section 12.1  Section 83(b) Election.  If the Administrator has not, on the Grant Date or any
later date, prohibited such Grantee from making the following election, and the
Grantee has, in connection with the receipt or exercise of any Stock Award
(when applicable), made the election permitted under Code
Section 83(b) (i.e., an
election to include in such Grantee’s gross income in the year of transfer the
amounts specified in Code Section 83(b)), such Grantee will notify the
Company of such election within ten days of filing notice of the election with
the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under the authority of Code
Section 83(b).

 

Section 12.2  Withholding Requirements.

 

(a)                  Whenever under
the Plan, shares of Company Stock are to be delivered upon exercise or payment
of a Stock Award, or any other event with respect to rights and benefits
hereunder, the Company will be entitled to require as a condition of delivery
(i) that the Grantee remit an amount sufficient to satisfy all federal,
state and local withholding tax requirements related thereto, (ii) the
withholding of such sums from compensation otherwise due to the Grantee or 

 

10

 

from
any shares of Company Stock due to the Grantee under the Plan or (iii) any
combination of the foregoing.

 

(b)                 If any
disqualifying disposition described in Section 7.1(e) is made with
respect to shares of Company Stock acquired under an ISO granted pursuant to
the Plan or any Code Section 83(b) election described in
Section 12.1 is made, then the person making such disqualifying
disposition or election will remit to the Company an amount sufficient to
satisfy all federal, state, and local withholding taxes thereby incurred;
provided that, in lieu of or in addition to the foregoing, the Company will
have the right to withhold such sums from compensation otherwise due to the
Grantee or from any shares of Company Stock due to the Grantee under the Plan.

 

Section 12.3  Withholding Arrangements.

 

(a)                  Subject to
subsection (b), a Grantee may elect for withholding (“Share Withholding”) by
the Company a portion of the shares of Company Stock otherwise deliverable to
such Grantee upon the exercise or payment of a Stock Award (a “Taxable Event”)
having a Fair Market Value equal to:

 

(i)                     The
minimum amount necessary to satisfy required federal, state, or local
withholding tax liability attributable to the Taxable Event; or

 

(ii)                  With
the Administrator’s prior approval, a greater amount, not to exceed the
estimated total amount of such Grantee’s tax liability with respect to the
Taxable Event.

 

(b)                 Each Share
Withholding election by a Grantee will be made in writing in a form acceptable
to the Administrator and will be subject to the following restrictions:

 

(i)                     A
Grantee’s right to make such an election will be subject to the Administrator’s
right to revoke such right at any time before the Grantee’s election unless the
Administrator specifically waives its right to do so in the Award Agreement;

 

(ii)                  The
Grantee’s election must be made before the date (the “Tax Date”) on which the
amount of tax to be withheld is determined;

 

(iii)               The Grantee’s election will be
irrevocable by the Grantee; and

 

(iv)              In
the event that the Tax Date is deferred until six months after the delivery of
Company Stock under Section 83(b) of the Code, the Grantee will
receive the full amount of Company Stock with respect to which the exercise
occurs, but such Grantee will be unconditionally obligated to tender back to
the Company the proper number of shares of Company Stock on the Tax Date.

 

Section 12.4  Securities Law Matters.

 

(a)                  If the
Administrator deems necessary to comply with the Securities Act, or any rules,
regulations or other requirements of the SEC or any stock exchange or automated
quotation system, the Administrator may require a written investment intent
representation by the Grantee and may require that a restrictive legend be
affixed to certificates for shares of Company Stock, that the Company Stock be
subject to such stock transfer orders and other restrictions as the
Administrator may deem necessary or advisable.

 

(b)                 If, based upon
the opinion of counsel for the Company, the Administrator determines that the
exercise of, or delivery of benefits pursuant to, any Stock Award would violate
any applicable provision of (i) federal or state securities law, or
(ii) the listing requirements of any national securities exchange on which
are listed any of the Company’s equity securities, then the 

 

11

 

Administrator
may postpone any such exercise or delivery, as the case may be, but the Company
will use reasonable and good faith efforts to cause such exercise or delivery
to comply with all such provisions at the earliest practicable date.

 

Section 12.5  Funding.  Benefits payable under the Plan to
any person will be paid directly by the Company. The Company will not be
required to fund, or otherwise segregate assets to be used for payment of, benefits
under the Plan.

 

Section 12.6  No Employment Rights.  Neither the establishment of the
Plan, nor the granting of any Stock Award, will be construed to (a) give
any Grantee the right to remain employed by the Company or any of its
Affiliates or to any benefits not specifically provided by the Plan, or
(b) in any manner modify the right of the Company or any of its Affiliates
to modify, amend, or terminate any of its employee benefit plans.

 

Section 12.7  No Rights of a Shareholder.  A Grantee will not, by reason of
any Stock Award, have any right as a shareholder of the Company with respect to
the shares of Company Stock which may be deliverable upon exercise or payment
of such Stock Award until such shares have been actually delivered to such
Grantee.

 

Section 12.8  Non-Uniform Determinations.  The Administrator’s determinations
under the Plan need not be uniform and may be made by the Administrator
selectively among persons who receive, or are eligible to receive, Stock Awards
(whether or not such persons are similarly situated). Without limiting the
generality of the foregoing, the Administrator will be entitled, among other
things, to make non-uniform and selective determinations and to enter into
non-uniform and selective Award Agreements as to (a) the identity of the
Grantees, (b) the terms and provisions of Stock Awards, and (c) the
treatment of Terminations of Employment. Notwithstanding the foregoing, the
Administrator’s interpretation of Plan provisions will be uniform as to
similarly situated Grantees.

 

Section 12.9  Adjustments.  The Administrator will make
equitable adjustment of: (a) the aggregate number of shares of Company
Stock available under Section 3.1; (b) the number of shares of
Company Stock covered by a Stock Award; and (c) the Exercise Price of a
Stock Award (if applicable) to reflect a stock dividend, stock split, reverse
stock split, share combination, recapitalization, merger, consolidation, asset
spin-off, reorganization or similar event of or by the Company.

 

Section 12.10  Adoption Award and
Shareholder Approval.  The
Plan is effective
as of April 26, 2007, the date the Plan was approved by the Company’s
shareholders.

 

Section 12.11  Nonexclusivity.  Neither the adoption of the Plan
by the Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including the granting of stock options
and bonuses otherwise than under the Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.

 

Section 12.13  Cancellation of Options.  The Administrator may, with the concurrence of the
affected Grantee, cancel any unexercised Stock Award granted under this Plan.
In the event of any such cancellation, the Administrator may authorize the
granting of a new Stock Award (which may or may not cover the same number of
shares of Company Stock that had been subject of any prior unexercised Stock
Award) in such manner, at new Exercise Price and subject to the same terms,
conditions and discretion as would have been applicable under this Plan had the
canceled Stock Award not been previously granted.

 

12

 

	
   

  	
   

  	
  MAINSOURCE FINANCIAL GROUP, INC.

  
	
   

  	
   

  	
   

  
	
  DATED:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  James L. Saner, Sr., President

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
							

 

13

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