Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.8

CHANGE IN CONTROL BENEFITS AGREEMENT

This Change in Control Benefits Agreement (“Agreement”) is made and entered into as of May 22,
2007, by and between Integra Bank Corporation, an Indiana corporation (hereinafter referred to as
the “Company”), and Michael B. Carroll (hereinafter referred to as “Employee”).

W I T N E S S E T H

WHEREAS, Employee is a senior officer of the Company; and

WHEREAS, the Company believes that Employee will make valuable contributions to the
productivity and profitability of the Company; and

WHEREAS, the Company desires to encourage Employee to continue to make such contributions and
not to seek or accept employment elsewhere; and

WHEREAS, the Company, therefore, desires to assure Employee of certain benefits in case of any
termination or significant redefinition of the terms of his employment with the Company subsequent
to any Change in Control of the Company;

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained
and the mutual benefits herein provided, the Company and Employee hereby agree as follows:

1. The term of this Agreement shall be from the date hereof through December 31, 2007;
provided, however, that such term shall be automatically extended for an additional year each year
thereafter unless either party hereto gives written notice to the other party not to so extend
prior to November 30 of the year for which notice is given, in which case no further automatic
extension shall occur.

2. As used in this Agreement, “Change in Control” of the Company means:

(A) The acquisition, within a 12-month period ending on the date of the most recent
acquisition, by any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act as in effect from time to time) of thirty-five percent (35%) or more of the
combined voting power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors; provided, however, that the following
acquisitions shall not constitute an acquisition of control: (i) any acquisition by a
Person who, immediately before the commencement of the 12-month period, already held
beneficial ownership of thirty-five percent (35%) or more of that
combined voting power; (ii) any acquisition directly from the Company (excluding an
acquisition by virtue of the exercise of a conversion privilege), (iii) any acquisition by
the Company, (iv) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company, or (v) any
acquisition by any corporation pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the conditions described in clauses
(i), (ii) and (iii) of subsection (C) below are satisfied;

 

 

 

(B) The replacement of a majority of members of the Board of Directors during any
12-month period, by members whose appointment or election is not endorsed by a majority of
the members of the Board of Directors prior to the date of the appointment or election;

(C) A reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than sixty percent (60%) of, respectively,
the then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of the
outstanding Company common stock and outstanding Company voting securities immediately prior
to such reorganization, merger or consolidation in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger or consolidation, of the
outstanding Company stock and outstanding Company voting securities, as the case may be,
(ii) no Person (excluding the Company, any employee benefit plan or related trust of the
Company or such corporation resulting from such reorganization, merger or consolidation and
any Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, twenty-five percent (25%) or more of the outstanding
Company common stock or outstanding voting securities, as the case may be) beneficially
owns, directly or indirectly, twenty-five percent (25%) or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation;

(D) A complete liquidation or dissolution of the Company; or

 

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(E) The sale or other disposition of all or substantially all of the assets of the
Company, other than any of the following dispositions: (i) to a corporation with respect to
which following such sale or other disposition (x) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding Company common stock and outstanding
Company voting securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such sale or
other disposition, of the outstanding Company common stock and outstanding Company voting
securities, as the case may be, (y) no Person (excluding the Company and any employee
benefit plan or related trust of the Company or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or indirectly,
twenty-five percent (25%) or more of the outstanding Company common stock or outstanding
Company voting securities, as the case may be) beneficially owns, directly or indirectly,
twenty-five percent (25%) or more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of directors and
(z) at least a majority of the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition of assets of the Company;
(ii) to a shareholder of the Company in exchange for or with respect to its stock; (iii) to
a Person that owns, directly or indirectly, fifty percent (50%) or more of the total value
or voting power of all outstanding stock of the Company; or (iv) to an entity, at least
fifty percent (50%) or more of the total value or voting power of which is owned, directly
or directly, by the Company or by a Person described in clause (iii).

Despite any other provision of this Section 2 to the contrary, an occurrence shall not
constitute a Change in Control if it does not constitute a change in the ownership or
effective control, or in the ownership of a substantial portion of the assets of, the
Company within the meaning of Section 409A(a)(2)(A)(v) of the Code and its interpretive
regulations.

3. The Company shall provide Employee with the benefits set forth in Section 6 of this
Agreement upon any termination of Employee’s employment by the Company within twelve (12) months
following a Change in Control for any reason except the following:

(A) Termination by reason of Employee’s death.

(B) Termination by reason of Employee’s “disability.” For purposes hereof,
“disability” mean either (i) when Employee is deemed disabled in accordance with the
long-term disability insurance policy or plan of the Company in effect at the time
of the illness or injury causing the disability or (ii) the inability of Employee,
because of injury, illness, disease or bodily or mental infirmity, to perform the
essential functions of his or her job (with or without reasonable accommodation) for
more than one hundred twenty (120) days during any period of twelve (12) consecutive
months.

 

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(C) Termination upon Employee reaching his or her normal retirement date, which
for purposes of this Agreement shall be deemed to be the end of the month during
which Employee reaches sixty-five (65) years of age.

(D) Termination for “cause.” As used in this Agreement, the term “cause” mean
the occurrence of one or more of the following events: (i) Employee’s conviction
for a felony or of any crime involving moral turpitude; (ii) Employee’s engaging in
any illegal conduct or willful misconduct in the performance of his employment
duties for the Company (or its affiliates); (iii) Employee’s engaging in any
fraudulent or dishonest conduct in his dealings with, or on behalf of, the Company
(or its affiliates); (iv) Employee’s failure or refusal to follow the lawful
instructions of the Company, if such failure or refusal continues for a period of
five (5) calendar days after the Company delivers to Employee a written notice
stating the instructions which Employee has failed or refused to follow; (v)
Employee’s breach of any of Employee’s obligations under this Agreement; (vi)
Employee’s gross or habitual negligence in the performance of his employment duties
for the Company (or its affiliates); (vii) Employee’s engaging in any conduct
tending to bring the Company into public disgrace or disrepute or to injure the
reputation or goodwill of the Company; (viii) Employee’s material violation of the
Company’s business ethics or conflict-of-interest policies, as such policies
currently exist or as they may be amended or implemented during Employee’s
employment with the Company; (ix) Employee’s misuse of alcohol or illegal drugs
which interferes with the performance of Employee’s employment duties for the
Company or which compromises the reputation or goodwill of the Company; (x)
Employee’s intentional violation of any applicable banking law or regulation in the
performance of Employee’s employment duties for the Company; or (xi) Employee’s
failure to abide by any employment rules or policies applicable to the Company’s
employees generally that Company currently has or may adopt, amend or implement from
time to time during Employee’s employment with the Company.

4. The Company shall also provide Employee with the benefits set forth in Section 6 of this
Agreement upon any voluntary resignation of Employee if any one of the following events occurs
within twelve (12) months following a Change in Control:

(A) Without Employee’s express written consent, the assignment of Employee to
any duties which are fundamentally and significantly inconsistent with his duties
with the Company immediately prior to the Change in Control or a fundamental and
substantial reduction of his duties or responsibilities from his duties or
responsibilities immediately prior to the Change in Control.

(B) A reduction by the Company in Employee’s base salary from the level of such
salary immediately prior to the Change in Control.

 

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(C) The failure by the Company to continue to provide Employee with benefits
substantially similar to those enjoyed by Employee or to which Employee was entitled
under any of the Company’s incentive compensation or bonus plan, principal pension,
profit sharing, life insurance, medical, dental, health and accident, or disability
plans in which Employee was participating prior to the Change in Control.

(D) The Company’s requiring Employee to relocate other than any of the
metropolitan areas where the Company or its subsidiaries maintained offices prior to
the Change in Control.

5. Any termination by Company of Employee’s employment as contemplated by Section 3 hereof
(except subsection 3(A)) or any resignation by Employee as contemplated by Section 4 hereof shall
be communicated by a written notice to the other party hereto. Any notice given by Employee
pursuant to Section 4 or given by the Company in connection with a termination as to which the
Company believes it is not obligated to provide Employee with benefits set forth in Section 6
hereof shall indicate the specific provisions of this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for such termination.

6. Subject to the conditions and exceptions set forth in Section 3 and Section 4 hereof, the
following benefits, less any amounts required to be withheld therefrom under any applicable
federal, state or local income tax, other tax, or social security laws or similar statutes, shall
be paid to Employee:

(A) Within thirty (30) days following such a termination, Employee shall be
paid, at his then-effective salary, for services performed through the date of his
termination. In addition, any earned but unpaid amount of any bonus or incentive
payment (which, for purposes of this Agreement, shall mean that amount computed in a
fashion consistent with the manner in which Employee’s bonus or incentive plan for
the year preceding the year of termination was computed, if Employee received a
bonus or incentive payment during such preceding year in accordance with a plan or
program of the Company, or, if not, then the total bonus or incentive payment
received by the Employee during such preceding year, in either case prorated through
the date of termination) shall be paid to Employee within thirty (30) days following
the termination of his employment.

(B) Within thirty (30) days following such a termination, Employee shall be
paid a lump sum payment of an amount equal to one times Employee’s “Base Amount.”
For purposes hereof, Base Amount is defined as Employee’s average includable salary,
bonus, incentive payments and similar compensation paid by the Company for the five
(5) most recent taxable years ending before the date on which the Change in Control
occurs (or such shorter period of time that the Employee has been employed by the
Company). The definition, interpretation and calculation of the dollar amount of
Base Amount shall be in a manner
consistent with and as required by the provisions of Section 280G of the
Internal Revenue Code of 1986, as amended (“Code”), and the regulations and rulings
of the Internal Revenue Service promulgated thereunder. The payments to the
Employee under this Section 6(B) shall be reduced by the full amount that such
payment, when added to all other payments or benefits of any kind to the Employee by
reason of the Change in Control, constitutes an “excess parachute payment” within
the meaning of Section 280G of the Code.

 

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(C) Employee acknowledges and agrees that payment in accordance with
subsections 6(A), 6(B) and 6(C) shall be deemed to constitute a full settlement and
discharge of any and all obligations of the Company to Employee arising out of his
employment with the Company and the termination thereof, except for any vested
rights Employee may then have under any insurance, pension, supplemental pension,
thrift, employee stock ownership, or stock option plans sponsored or made available
by the Company.

(D) If as of the date his employment terminates, Employee is a “key employee”
within the meaning of Section 416(i) of the Code, without regard to paragraph
416(i)(5) thereof, and the Company has stock that is publicly traded on an
established securities market or otherwise, any deferred compensation payments
otherwise payable because of employment termination will be suspended until, and
will be paid to Employee on, the first day of the seventh month following the month
in which Employee’s last day of employment occurs. For purposes of this subsection
6(D), “deferred compensation” means compensation provided under a nonqualified
deferred compensation plan as defined in, and subject to, Section 409A of the Code.

7. In the event of a termination of Employee’s employment by the Company for any reason except
those set forth in subsections 3(A) through 3(D) prior to a Change in Control, the following
benefits, less any amounts required to be withheld therefrom under any applicable federal, state or
local income tax, or other social security laws or similar statutes, shall be paid to Employee:

(A) For six months following such a termination, Employee shall be paid a
monthly severance benefit equal to his or her salary for the preceding year divided
by twelve.

(B) Employee acknowledges and agrees that payment in accordance with subsection
7(A) shall be deemed to constitute a full settlement and discharge of any and all
obligations of the Company to Employee arising out of his employment with the
Company and the termination thereof, except for any vested rights Employee may then
have under any insurance, pension, supplemental pension, thrift, employee stock
ownership, or stock option plans sponsored or made available by the Company.

 

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8. Employee is not required to mitigate the amount of benefit payments to be made by the
Company pursuant to this Agreement by seeking other employment or otherwise, nor shall the amount
of any benefit payments provided for in this Agreement be reduced by any compensation earned by
Employee as a result of employment by another employer or which might have been earned by Employee
had Employee sought such employment, after the date of termination of his employment with the
Company or otherwise.

9. Employee acknowledges that in connection with his employment with the Company he has
provided and will continue to provide services that are of a unique and special value and that he
has been and will continue to be entrusted with confidential and proprietary information concerning
the Company and its affiliates. Employee further acknowledges that the Company and its affiliates
are engaged in highly competitive businesses and that the Company and its affiliates expend
substantial amounts of time, money and effort to develop trade secrets, business strategies,
customer relationships, employee relationships and goodwill, and Employee has benefited and will
continue to benefit from these efforts. Therefore, as an essential part of this Agreement,
Employee agrees and covenants to comply with the following:

(A) During Employee’s employment with the Company and for one year from the date of
termination of employment (the “Restriction Period”), Employee will not provide, sell,
market or endeavor to provide, sell or market any Competing Products/Services to any of the
Company’s Customers, or otherwise solicit or communicate with any of the Company’s Customers
for the purpose of selling or providing any Competing Products/Services. For purposes of
this Agreement, the term “Competing Products/Services” means any products or services
similar to or competitive with the products or services offered by the Company or any of its
subsidiaries. For purposes of this Agreement, the term “Company’s Customers” means any
person or entity that has engaged in any banking services with, or has purchased any
products or services from, the Company or any of its subsidiaries at any time during the
Restrictive Period.

(B) During the Restriction Period, Employee will not urge, induce or seek to induce any
of the Company’s Customers to terminate their business with the Company or to cancel,
reduce, limit or in any manner interfere with the Company’s Customers’ business with the
Company.

(C) During the Restriction Period, Employee will not urge, induce or seek to induce any
of the Company’s independent contractors, subcontractors, consultants, vendors or suppliers
to terminate their relationship with, or representation of, the Company or to cancel,
withdraw, reduce, limit, or in any manner modify any of such person’s or entity’s business
with, or representation of, the Company.

(D) During the Restriction Period, Employee will not solicit, recruit, hire, employ or
attempt to hire or employ, or assist anyone in the recruitment or hiring of, any person who
is then an employee of the Company, or urge, influence, induce or seek to induce any
employee of the Company to terminate his/her relationship with the Company.

 

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(E) Employee acknowledges and agrees that the covenants contained in this Section 9
prohibit Employee from engaging in certain activities directly or indirectly, whether on
Employee’s own behalf or on behalf of any other person or entity, and regardless of the
capacity in which Employee is acting, including without limitation as an employee,
independent contractor, owner, partner, officer, agent, consultant, or advisor.

(F) Employee acknowledges and agrees that his obligations under this Section 9 shall
survive the expiration or termination of this Agreement and the cessation of his employment
with the Company for whatever reason.

(G) In the event Employee violates any of the restrictive covenants contained in this
Section 9, the duration of such restrictive covenant shall automatically be extended by the
length of time during which Employee was in violation of such restriction.

(H) Although Employee and the Company consider the restrictions contained in this
Section 9 to be reasonable, particularly given the competitive nature of the Company’s
business and Employee’s position with the Company, Employee and the Company acknowledge and
agree that: (i) if any covenant, subsection, portion or clause of this Section 9 is
determined to be unenforceable or invalid for any reason, such unenforceability or
invalidity shall not affect the enforceability or validity of the remainder of the
Agreement; and (ii) if any particular covenant, subsection, provision or clause of this
Section 9 is determined to be unreasonable or unenforceable for any reason, including,
without limitation, the time period, geographic area, and/or scope of activity covered by
any restrictive covenant, such covenant, subsection, provision or clause shall automatically
be deemed reformed such that the contested covenant, subsection, provision or clause shall
have the closest effect permitted by applicable law to the original form and shall be given
effect and enforced as so reformed to whatever extent would be reasonable and enforceable
under applicable law.

(I) Employee recognizes that a breach or threatened breach by Employee of Section 9 of
this Agreement will give rise to irreparable injury to the Company and that money damages
will not be adequate relief for such injury. Employee agrees that the Company shall be
entitled to obtain injunctive relief, including, but not limited to, temporary restraining
orders, preliminary injunctions and/or permanent injunctions, without having to post any
bond or other security, to restrain or prohibit such breach or threatened breach, in
addition to any other legal remedies which may be available, including the recovery of money
damages.

(J) In the event Employee breaches any of the covenants contained in this Section 9
following termination of employment, Employee immediately shall (i) forfeit his right to
receive (and the Company shall no longer be obligated to pay) any severance compensation
under this Agreement, (ii) forfeit any stock options, stock appreciation and other rights
granted under any equity incentive compensation plans of the Company, regardless whether
such options or rights are vested, unvested, exercisable or unexercisable, (iii) disgorge
and repay to the Company any gross profits realized from the exercise within the two (2)
year period immediately preceding such termination of any Company stock options, stock
appreciation rights and other rights that were granted

 

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during the four (4) year period immediately preceding such termination, (iv) disgorge
and repay to the Company an amount equal to the current market value of any restricted stock
or other full value equity awards which were granted to Employee within the four (4) year
period immediately preceding such termination and vested to Employee during the two (2) year
period immediately preceding such termination and (v) repay to the Company any cash
incentive or bonus payments paid to Employee within the two (2) year period immediately
preceding such termination. The Company and Employee acknowledge and agree that the
foregoing remedies are in addition to, and not in lieu of, any and all other legal and/or
equitable remedies that may be available to Company in connection with Employee’s breach or
threatened breach, of any covenant set forth in this Section 9.

10. Should Employee die while any amounts are payable to him hereunder, this Agreement shall
inure to the benefit of and be enforceable by Employee’s executors, administrators, heirs,
distributees, devisees and legatees and all amounts payable hereunder shall be paid in accordance
with the terms of this Agreement to Employee’s devisee, legatee or other designee or if there be no
such designee, to his estate.

11. For purposes of this Agreement, notices and all other communications provided for herein
shall be in writing and shall be deemed to have been given when delivered or mailed by United
States registered or certified mail, return receipt requested, postage prepaid, addressed as
follows:

If to Employee:

Michael B. Carroll

2333 Anderson Road

Newburgh, Indiana 47630

If to the Company:

Integra Bank Corporation

21 Southeast Third Street

P. O. Box 868

Evansville, Indiana 47705-0868

Attention: Chief Executive Officer

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

12. The validity, interpretation, and performance of this Agreement shall be governed by the
laws of the State of Indiana. The parties agree that all legal disputes regarding this Agreement
will be resolved in Evansville, Indiana, and irrevocably consent to service of process in such City
for such purpose.

 

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13. No provision of this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by Employee and the Company. No waiver by
any party hereto at any time of any breach by any other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or any prior or subsequent
time. No agreements or representation, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any party which are not set forth expressly in this
Agreement.

14. The invalidity or unenforceability of any provisions of this Agreement shall not affect
the validity or enforceability of any other provision of this Agreement, which shall remain in full
force and effect.

15. This Agreement may be executed in two counterparts, each of which shall be deemed an
original, but which together will constitute one and the same Agreement.

16. This Agreement is personal in nature and neither of the parties hereto shall, without the
consent of the other, assign or transfer this Agreement or any rights or obligations hereunder,
except as provided in Section 10 above. Without limiting the foregoing, Employee’s right to
receive payments hereunder shall not be assignable or transferable, whether by pledge, creation of
a security interest or otherwise, other than a transfer by his Will or by the laws of descent and
distribution as set forth in Section 10 hereof, and in the event of any attempted assignment or
transfer contrary to this Section 16, the Company shall have no liability to pay any amount so
attempted to be assigned or transferred.

17. Any benefits payable under this Agreement shall be paid solely from the general assets of
the Company. Neither Employee nor Employee’s beneficiary shall have interest in any specific
assets of the Company under the terms of this Agreement. This Agreement shall not be considered to
create an escrow account, trust fund or other funding arrangement of any kind or a fiduciary
relationship between Employee and the Company.

18. This Agreement supersedes any prior change in control or severance agreements or
understandings, written or oral, between the parties hereto with respect to the subject matter
hereof, and constitutes the entire agreement of the parties with respect thereto.

19. This Agreement shall be interpreted and applied in a manner consistent with the applicable
standards for nonqualified deferred compensation plans established by Section 409A of the Code and
its interpretive regulations and other regulatory guidance. To the extent that any terms of this
Agreement would subject Employee to gross income inclusion, interest, or additional tax pursuant to
Section 409A of the Code, those terms are to that extent superseded by, and shall be adjusted to
the minimum extent necessary to satisfy, the applicable Section 409A of the Code standards.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of
the day and year first above set forth.

	 	 	 	 	 
	 	INTEGRA BANK CORPORATION

 	 
	 	By:  	 	 
	 	 	Michael T. Vea, Chairman of the Board and 	 
	 	 	Chief Executive Officer

(“Company”) 	 
	 
	 
	 	
(“Employee”)

 	 
	 	 	 
	 	 	 
	 	 	 
	 

 

-11-Filed by Bowne Pure Compliance

 

Exhibit 10.9

REVISED SUMMARY SHEET

OF

2007 COMPENSATION

Director Compensation

Employee Directors

Directors who are employees of the Company receive no separate compensation for Board service. Mr.
Vea and Mr. Stevens are the only directors who are also employees of the Company, and they do not
receive any additional compensation for such service.

Non-Employee Directors

Non-employee directors currently receive the following compensation:

Annual Retainer:

	 	•	 	$12,000 restricted stock retainer, which vests over a
three year period, issued under the Company’s 2007 Equity Incentive Plan. A copy of the
2007 Equity Incentive Plan is filed as an exhibit to the
Company’s Form 8-K filed on April 20, 2007.

	 	•	 	$12,000 cash retainer payable in four quarterly payments.

Meeting Fees:

	 	•	 	$900 cash fee for each Board of Directors meeting of the Company attended.

	 	•	 	$600 cash fee for each committee meeting attended.

Presiding Independent Director/Committee Chair Fees:

	 	•	 	$2,000 fee payable in four quarterly payments to Presiding Independent Director.

	 	•	 	$2,000 fee payable in four quarterly payments to Committee Chairs.

Other:

	 	•	 	$900 additional fee for each full day spent in training at seminars or other training
sessions approved in advance by the Chairman of the Board.

	 	•	 	Reimbursement for travel and other expenses incurred for attending seminars or other
training sessions.

	 	•	 	Reimbursement for accommodations, travel or meals in connection with attending
corporate, board or other authorized functions, which includes Board of Directors meetings,
committee meetings, and Board retreats.

Under the Corporate Governance Principles, non-employee directors are expected to own shares with
an aggregate value equal to $100,000 within five years of being elected a director. Each
non-employee director meets this requirement, with the exception of Ms. Roxy Baas.

 

 

 

Compensation of Named Executive Officers

The executive officers of the Company serve at the discretion of the Board of Directors. The
following are the current base salaries effective April 20, 2007, for the Company’s Chief Executive
Officer, Chief Financial Officer and its other most highly compensated current executive officers
based upon total compensation for 2006 who were identified in the Company’s proxy statement for the
2007 annual meeting (the “Named Executive Officers”):

	 	 	 	 	 
	Michael T. Vea, Chairman,

President and Chief Executive

Officer
	 	$	468,180	 
	 
	 	 	 	 
	Martin M. Zorn, Executive

Vice-President, Chief Risk

Officer and Secretary
	 	$	271,500	 
	 
	 	 	 	 
	Archie M. Brown, Executive

Vice-President, Commercial

and Consumer Banking
	 	$	271,500	 
	 
	 	 	 	 
	Roger M. Watson, Executive

Vice-President, Division

Manager, Commercial Real Estate
	 	$	210,000	 
	 
	 	 	 	 
	Roger W. Duncan, Executive

Vice-President, Evansville and

Community Banking Division

President
	 	$	210,000	 

The Compensation Committee of the Board of Directors determines and approves the compensation
payable to the executive officers. Mr. Vea, Mr. Zorn and Mr. Brown are parties to employment
agreements with the Company. A copy of Mr. Vea’s employment agreement is filed as an exhibit to
the 2006 10-K. On May 22, 2007, the Compensation Committee approved employment agreements to Mr.
Zorn and Mr. Brown. Copies of Mr. Zorn and Mr. Brown’s employment agreements are filed as exhibits
to the 10-Q for the quarterly period ended June 30, 2007. Their current salaries are currently
based on the terms of their employment agreement and may be increased by action of the Compensation
Committee. On May 22, 2007, the Compensation Committee approved a Change in Control Benefits
Agreement with Mr. Duncan. Mr. Watson, who was not previously a party to an employment or
severance agreement, also entered into a Change in Control Benefits Agreement. A copy of Mr.
Watson and Mr. Duncan’s Change in Control Benefits Agreements are filed as exhibits to the 10-Q for
the quarterly period ended June 30, 2007.

 

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Cash Incentives.

Messrs. Vea, Zorn and Brown participated in the Incentive Plan, a four year plan that ended in
2006. In February 2006, the committee set “minimum,” “target” and “maximum” levels for the 2006
award under the Incentive Plan for two performance measures: adjusted earnings per share (weighted
at 66%) and credit quality (weighted at 34%). The range of potential cash incentive payout was based
on earnings per share of $1.65 to $1.79 excluding stock option expensing. The adjustment to
exclude the effect of complying with FASB Statement 123(R), Share Based Payments, (“FAS 123R”) from
earnings per share allowed the committee to establish growth goals that were comparable on a year
over year basis. The objectives for credit quality were divided equally between net charge-offs
and non-performing loans to total loans. We consider the objectives set for credit quality as
confidential information. However, the committee set the objectives for the credit quality
performance measures at levels the committee believed were achievable, but which would represent
continuing improvement in the quality of our loan portfolio.

In February 2007, the committee determined that the “minimum” level for the adjusted earnings
per share measure had not been met, the “minimum” level for net charge-offs had not been met, but
the “maximum” level for non-performing loans to total loans had been met. The amounts represented
sixty percent of the 2006 award. The remaining forty percent of the 2006 award and forty percent
of the awards earned for 2003 through 2005 under the Incentive Plan had been deferred until after
December 31, 2006, subject to the achievement of long-term targets tied to earnings per share
growth and credit quality. The long-term targets were not met and the deferred portion of the
Incentive Plan awards will not be paid. The total deferred portion of the Incentive Plan awards
that were forfeited was $631,570.

The other two named executive officers did not participate in the Incentive Plan. The amount
of the cash incentives paid to those officers for 2006 is shown in the Summary Compensation Table.

Equity-Based Incentives.

The committee established equity-based incentive award opportunities for Messrs. Vea, Zorn,
and Brown as a percentage of base salary subject to the achievement of “threshold”, “target”, and
“maximum” levels. For 2006, the equity award grant as a percentage of salary was based on
achievement of 2005 goals and was as follows: Mr. Vea: 50% at threshold, 80% at target and 160%
at maximum; Mr. Zorn: 20% at threshold, 35% at target, and 70% at maximum; and Mr. Brown: 20% at
threshold, 35% at target, and 70% at maximum. The form of the award opportunity was allocated
between stock options (66%) and restricted stock (34%) valued using their grant date fair value,
vesting equally over three years. In addition, the committee considered other factors in its
determination of the appropriate equity awards including quality of results, retention of
management, progress against strategic plan goals, and total compensation. Based on those factors,
the committee approved equity awards (expressed at a percentage of base salary) as follows: Mr.
Vea — 72%, Mr. Zorn — 46%, and Mr. Brown — 45%.

For Mr. Watson and Mr. Duncan, who were not executive officers at the time of the 2006 equity
grants, and the other executive officers, the awards were made by the committee based upon
recommendations of management and the comparative compensation information provided by Clark
Consulting. The blend of options and restricted stock differed from the other named executive
officers.

The stock option and restricted stock awards to the named executive officers for 2006 are
shown in the Grants of Plan-Based Awards Table in the 2007 proxy statement.

2007 Executive Compensation Decisions.

The committee has established 2007 award opportunities, which are similar to 2006, for the
executive officers under the Annual Cash Incentive Plan, or Cash Plan. These awards were
contingent upon the shareholders approving the Cash Plan at the 2007 annual meeting of shareholders
which has occurred. The following award opportunities, as a percentage of base salary, apply to
the named executive officers:

 

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	 	 	Threshold	 	 	Target	 	 	Maximum	 
	Michael T. Vea
	 	 	0	%	 	 	60	%	 	 	100	%
	Martin M. Zorn
	 	 	0	%	 	 	45	%	 	 	80	%
	Archie M. Brown
	 	 	0	%	 	 	45	%	 	 	80	%
	Roger D. Watson
	 	 	0	%	 	 	35	%	 	 	60	%
	Roger M. Duncan
	 	 	0	%	 	 	35	%	 	 	60	%

The committee established two performance measures: earnings per share (weighted at 66%) and
credit quality (weighted at 34%). The earnings per share levels have not been set at the time of
printing the proxy statement. The objectives for credit quality are divided equally between net
charge-offs, and non-performing loans to total loans. As we indicated earlier, we consider the
objectives set for credit quality as confidential information; however, the credit quality goals
were established to achieve performance at median or better of our peer group. Mr. Watson’s award
opportunity may have a more equal weighting between these goals and the performance of his business
unit.

The committee has established 2007 equity award opportunities for the executive officers under
the 2007 Equity Incentive Plan, or Equity Plan. These awards were also subject to shareholder
approval of the Equity Plan which has occurred. The equity award opportunities are subject to the
same performance measures as under the Cash Plan, as well as the other factors discussed earlier
under Equity-Based Incentives. The following award opportunities, as a percentage of base salary,
apply to the named executive officers:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Threshold	 	 	Target	 	 	Maximum	 
	Michael T. Vea
	 	 	50	%	 	 	80	%	 	 	160	%
	Martin M. Zorn
	 	 	20	%	 	 	35	%	 	 	70	%
	Archie M. Brown
	 	 	20	%	 	 	35	%	 	 	70	%
	Roger D. Watson
	 	 	20	%	 	 	35	%	 	 	60	%
	Roger M. Duncan
	 	 	20	%	 	 	35	%	 	 	60	%

Other Compensation of Named Executive Officers

The Summary Compensation Table in the Company’s 2007 proxy statement identified the aggregate
perquisites and other personal benefits received by each of the Named Executive Officers which
equal or exceed $10,000. The primary perquisites for Messrs. Vea, Brown and Zorn include an
automobile allowance and social club membership dues.

The Company also provides matching contributions to the accounts of the Named Executive
Officers under its Employees 401(k) Plan and pays for term life insurance for each of the Named
Executive Officers.

Agreements with Other Executive Officers

Mr. Bradley M. Stevens, Executive Vice President of the Company and President and CEO –
Chicago Region of the Bank entered into an Employment Agreement with an effective date of April 9,
2007, the date the Prairie Financial Corporation acquisition was completed. On May 22, 2007, the
Compensation Committee approved Change in Control Benefits Agreements with Mr. Raymond D. Beck,
Executive Vice President and Chief Credit Officer and Mr. Michael B. Carroll, Senior Vice President
and Controller. Mr. Stevens’ agreement is filed as an exhibit to the 10-Q for the quarterly period
ended March 31, 2007. Mr. Beck and Mr. Carroll’s agreements are filed as exhibits to the 10-Q for
the quarterly
period ended June 30, 2007.

 

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