EMPLOYMENT AGREEMENT
THIS
AGREEMENT is dated as of January 1, 2008, by and between XXXXXXXXXXX X. XXXXXX
III, hereinafter referred to as “Executive,” and lst SOURCE CORPORATION, an
Indiana corporation, hereinafter referred to as “Employer.”
WHEREAS,
Executive is currently employed as the Chairman of the Board, President and
Chief Executive Officer of Employer and Chairman of the Board and Chief
Executive Officer of Employer’s subsidiary, lst Source Bank, hereinafter
referred to as “Bank,” pursuant to the terms of an Employment Agreement between
Employer and Executive dated as of April 16, 1998; and
WHEREAS,
Employer desires to assure the continued service of Executive, and Executive is
willing to provide such service on the terms and conditions specified
herein.
NOW
THEREFORE, in consideration of the premises and the mutual covenants and
agreements contained in this Agreement, Employer and Executive hereby agree as
follows:
1. Employment
Position. The parties agree that the employment of Executive
by Employer shall continue for the term referred to in Section
2. Employer agrees to continue the employment of Executive in a
senior officer position with the titles of Chairman of the Board, President and
Chief Executive Officer of Employer and Chairman of the Board and Chief
Executive Officer of Bank, and agrees that Executive will serve as a director of
both Employer and Bank.
Executive
shall devote his full time during business hours to the performance of his
duties hereunder and shall at all times use his best efforts to promote the best
interests of Employer. Executive shall report to the Board of
Directors of Employer and the Board of Directors of Bank. The
assignments of Executive initially shall include:
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(a)
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full
management responsibility for all operating divisions of Employer and its
subsidiaries;
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(b)
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such
additional and specific duties as may be reasonably assigned to Executive
by either the Board of Directors or the Executive Committee of the Board
of Directors of Employer.
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Employer also agrees to provide to
Executive during the term of this Agreement an adequate staff, together with
such facilities and secretarial support consistent with a senior employment
position to permit the performance by Executive of the duties assigned to
him.
For the
purpose of this Agreement, the Board of Directors of Employer is sometimes
referred to herein as the “Board.”
2. Term. The
term of this Agreement shall be from the date hereof until December 31, 2008,
unless terminated sooner in accordance with Section 5 or Section 6 hereof,
provided, however, that the term shall be automatically extended for an
additional year on January 1, 2009 and on January 1 of each year thereafter,
unless either party hereto gives written notice of an intention not to extend
this Agreement (a “Non-Renewal Notice”) on or before September 30 of the then
current term, in which case no further automatic extension shall occur and the
term of this Agreement shall end on December 31 of the third year following
the year during which the Non-Renewal Notice is given. For example,
if a Non-Renewal Notice were given on September 30, 2008, then the term of
this Agreement would end on December 31, 2011.
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3. Compensation and
Benefits.
(a) Base
Salary. Executive shall be paid a base salary of not less than Six
Hundred Forty Thousand and 00/100 Dollars ($640,000.00) per annum initially,
with increases effective on January 1 of each year thereafter as may be
determined by Employer (the “Base Salary”).
(b) Incentive
Compensation. In addition to amounts paid to Executive as salary and
for other benefits, Executive will participate on a “phantom” basis in
Employer’s Executive Incentive Plan at a minimum “partnership” rate of 30% of
base salary. All amounts awarded will be received and earned as if
awarded under the Executive Incentive Plan except that, Executive may
elect to receive cash compensation in lieu of stock due to Executive’s already
substantial investment in stock of Employer. In addition, Executive
shall participate in Employer’s 1998 Performance Compensation Plan.
(c) Benefit
Plans. During the term of this Agreement, Executive shall be entitled
to participate, at a level commensurate with his position, in all benefit plans
Employer presently has or hereafter adopts for its officers or employees,
including (without limitation) pension, profit sharing, stock option or any
group life or health insurance, hospitalization or other similar plans, any
eligibility or waiting periods to be waived to the extent
feasible. In other plans where stock is awarded and if Executive is
not permitted to receive such stock, cash or its equivalent will be paid to
Executive.
(d) Life
Insurance. Executive will be entitled to term life insurance coverage
for the benefit of Executive, his family or estate as he may direct, provided
under the terms of the group policy offered to all employees (except that
Employer will pay Executive’s portion of the cost thereof), or provided under a
separate individual policy as Employer deems in its best interest.
(e) Additional
Benefits. Executive shall be entitled to receive six (6) weeks
vacation each year without reduction of compensation during the term of this
Agreement.
A club
membership will be provided by Employer for Executive to at least one country
club, one dinner club in downtown South Bend, Indiana, and such other clubs in
such locations as the Board deems in the best interests of Employer, with the
initiation fees, monthly fee and appropriate business related expenses paid by
Employer.
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One
automobile shall be provided by Employer to Executive on a full lease basis
consistent with the title and position of Executive.
4. Disability. In
the event that Executive’s employment is terminated by reason of Executive’s
Disability, Executive will participate in the Employer’s disability compensation
programs, including any salary continuance plan in effect at that time for
officers or executives of Employer. In addition, Executive will
receive the following separation payments: (a) a lump sum payment, payable
within thirty (30) days following his termination, equal to six (6) times his
then monthly Base Salary amount; and (b) six (6) monthly installment payments,
each installment payment equal to his monthly Base Salary amount, commencing on
the first day of the seventh month following the month in which Executive’s last
day of employment occurs and continuing on the first day of the immediately
succeeding five (5) months. For purposes of this Agreement,
“Disability” means Executive’s inability by reason of illness or other physical
or mental impairment to perform the duties required by his employment for any
consecutive one hundred eighty (180) day period. Executive’s
employment shall terminate upon written notice of termination for Disability
given by Employer to Executive prior to the full resumption by him of the
performance of such duties.
5. Termination by Employer;
Death of Executive.
(a) With
Cause. In the event the Board determines that Executive is guilty of
gross dereliction of duty or of fraud or dishonesty in connection with the
performance of his duties under this Agreement, the Board may terminate the
Executive’s employment, such termination to be effective thirty (30) days after
the Board gives written notice to Executive setting forth with specificity the
reason or cause for terminating the Executive’s employment. In such
event, the compensation and other benefits provided for in this Agreement shall
terminate on the date specified by the Board in the written
notice of termination delivered to Executive.
(b) Without
Cause. If Employer shall discharge Executive from his employment
hereunder for any reason other than one set forth in Section 5(a), or if it
shall be determined by a court of competent jurisdiction that the discharge
under Section 5(a) was not justified, then Executive’s employment shall end as
of the date of such discharge by Employer, provided, however, that Executive
shall receive the following separation payments: (i) a lump sum payment, payable
within thirty (30) days following the date of discharge, equal to six (6) times
his then monthly Base Salary amount; and (ii) thirty (30) monthly installment
payments, each installment payment equal to such monthly Base Salary amount,
commencing on the first day of the seventh month following the month in which
Executive’s last day of employment occurs and continuing on the first day of
each immediately succeeding month for the next twenty nine (29)
months.
(c) Death. This
Agreement shall terminate in the event of the death of Executive. In
such event, Executive’s estate or his designee shall be entitled to the death
benefits provided in Section 3(d) of this Agreement.
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6. Termination By
Executive. Executive may, at any time upon written notice to
Employer, immediately terminate his employment for Good Reason. For
purposes of this Agreement, “Good Reason” shall mean (i) breach of this
Agreement by Employer in any material respect, or (ii) any material adverse
change in Executive’s status or position as Chairman of the Board, President and
Chief Executive Officer of Employer or as Chairman of the Board and Chief
Executive Officer of Bank or as a director of either including, without
limitation, as a result of a material diminution of his duties or
responsibilities, or (iii) any removal of Executive from, or any failure to
reappoint or reelect him to, any such position (except in connection with the
termination of his employment pursuant to Section 4 or Section 5(c) or by
him for other than Good Reason), or (iv) any material change in the geographic
location at which Executive must perform his duties under this
Agreement.
(a) If
such termination does not follow a Change in Control of Employer or Bank,
Executive shall receive the following separation payments: (i) a lump sum
payment, payable within thirty (30) days following his termination, equal to six
(6) times his then monthly Base Salary amount; and (ii) thirty (30) monthly
installment payments, each installment payment equal to such monthly Base Salary
amount, commencing on the first day of the seventh month following the month in
which Executive’s last day of employment occurs and continuing on the first day
of each immediately succeeding month for the next twenty-nine (29)
months.
(b) If
such termination occurs within one (1) year after a Change in Control of
Employer or Bank, then as severance pay and in lieu of any further compensation
hereunder for periods subsequent to the effective date of such termination,
Executive shall receive, within thirty (30) days following such termination, an
amount in cash equal to 2.99 times his “annualized includable compensation for
the base period” (as defined in Section 280G(d)(1) of the Internal Revenue
Code of 1986, as amended (the ”Code”)).
(c) Each
of the events specified in the following clauses (i) through (iii) of this
Section 6(c) shall be deemed a “Change in Control”:
(i) any third
person, including a “group” within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, shall become the beneficial owner of 50% or
more of the combined voting power of the then outstanding voting securities of
Employer entitled to vote generally for the election of the Board of Directors
of Employer,
(ii) as a
result of, or in connection with, any cash tender offer, exchange offer, merger
or other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of Employer shall
cease to constitute a majority of such Board of Directors, or
(iii) the
shareholders of Employer shall approve an agreement providing for the sale or
other disposition of all or substantially all of the assets of
Employer.
Despite
any other provision of this Section 6(c) to the contrary, an event 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, Employer within the meaning of Section 409A(a)(2)(A)(v) of the
Code and its interpretive regulations.
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(d) If
as of the date his employment terminates, Executive is a “key employee” within
the meaning of Section 416(i) of the Code, without regard to paragraph 416(i)(5)
thereof, and Employer has stock that is publicly traded on an established
securities market or otherwise, then any payments that would constitute deferred
compensation payments otherwise payable because of employment termination will
be suspended until, and will be paid to Executive on, the first day of the
seventh month following the month in which Executive’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. Assignment. This
Agreement is a personal contract, and the rights and interest of Executive
hereunder may not be sold, transferred, assigned, pledged or
hypothecated. Except as otherwise may be herein expressly provided,
this Agreement shall inure to the benefit of and be binding upon Employer and
its successors and assigns.
8. Amendment. This
Agreement may be amended only by a written instrument signed by the parties
hereto after approval by either the Board or Executive Committee of
Employer.
9. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
10. Fees and
Expenses. If a dispute arises regarding the interpretation or
enforcement of this Agreement and Executive obtains a final judgment in his
favor in a court of competent jurisdiction or his claim is settled by Employer
prior to the rendering of a judgment by such a court, all reasonable legal fees
and expenses incurred by Executive in seeking to obtain or enforce any right or
benefit provided for in this Agreement or otherwise pursuing his claim shall be
paid by Employer, to the fullest extent permitted by law.
11.
Miscellaneous. No
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in a writing signed by the
parties hereto. No waiver by any party hereto at any time of any
breach by the 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 at any
prior or subsequent time. This Agreement supersedes the prior
agreement between the parties in its entirety.
12. Restrictive
Covenants. In order to induce Employer to enter into this
Agreement, Executive hereby agrees as follows:
(a) Executive
shall not divulge or furnish any trade secrets (as defined in IND. CODE
§24-2-3-2) of Employer or any confidential information acquired by him while
employed by Employer concerning the policies, plans, procedures or customers of
Employer to any person, firm or corporation, other than Employer or with
Employer’s prior written consent, or use any such trade secret or confidential
information directly or indirectly for Executive’s own benefit or for the
benefit of any person, firm or corporation other than Employer, as such trade
secrets and confidential information are confidential and shall at all times
remain the property of Employer.
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(b) For
a period of twenty-four (24) months after the effective date of termination of
Executive’s employment hereunder for reasons other than those set forth in
Sections 5(b) and 6(a) of this Agreement, Executive shall not, directly or
indirectly, provide banking or bank-related services to, or solicit the banking
or bank-related business of, any customer of Employer at the time of such
provision of services or solicitation which Executive served either alone or
with others while employed by Employer within the geographic region or regions
in which retail, full service branches of Bank or any affiliates of Bank are
located, or assist any actual or potential competitor of Employer to provide
banking or bank-related services to, or solicit the banking or bank-related
business of, any such customer in any such area, and Executive shall not,
directly or indirectly, as principal, agent, or trustee, or through the agency
of any corporation, partnership, trade association, agent or agency, engage in
any banking or bank-related business or venture which competes with the business
of Employer as conducted during Executive’s employment by Employer within such
area; provided, however, that Executive may own not more than five percent of
the voting securities of any entity providing banking or
bank-related services within such area if the voting securities of such entity
are traded on a national securities exchange or quoted on a national interdealer
quotation system.
(c) Executive
acknowledges that any violation of this Section 12 would cause irreparable harm
to Employer, that damages for such harm would be incapable of precise
measurement and that, accordingly, Employer would not have an adequate remedy at
law to redress the harm caused by such violation. Therefore,
Executive agrees that, in addition to any other remedy, Employer shall be
entitled to immediate (i.e., without prior notice) preliminary and final
injunctive relief to enjoin and restrain any violation of this Section
12.
If
Executive’s employment is terminated during the Term of this Agreement for
reasons set forth in Sections 5(b) and 6(a) of this Agreement, Executive shall
have no obligations to Employer with respect to non-solicitation and
non-competition under this Section 12. Executive’s obligations with
respect to trade secrets and confidential information as described in Section
12(a) shall survive any termination of the employment of Executive regardless of
the reason(s) for such termination.
13. Certain Additional Payments
by Employer.
(a) In
the event that Section 280G of the Code is determined to apply to the payments
to be made by Employer to Executive under this Agreement or other compensation
or benefit programs, and in the event any excise tax (“Excise Tax”) that may be
imposed by Section 4999 of the Code become payable by Executive because of any
of the payments made to Executive under this Agreement or otherwise, Employer
will pay to Executive an additional amount (“Gross-up Payment”) at least 60 days
prior to the due date for payment of the Excise Tax. The Gross-up
Payment shall be in an amount such that, after payment by Executive of all taxes
(including, without limitation, all income and employment tax and Excise Tax and
treating as a tax the disallowance of any deduction of Executive by virtue of
the inclusion of the Gross-up Payment in Executive’s adjusted gross income) and
interest and penalties with respect to such taxes imposed upon the Gross-up
Payment, Executive retains an amount equal to the Excise
Tax. Employer shall notify Executive of its determination of the
amount of payments under this Agreement subject to the Excise Tax (which
determination shall be made by an accounting firm selected by Employer) and
shall provide Executive with a receipt for the Excise Tax
paid. Executive shall report the amount indicated in Employer’s
notice as the amount subject to the Excise Tax on Executive’s Federal income tax
return.
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(b) If,
for any reason, the Internal Revenue Service or any other taxing authority
proposes an adjustment to the amount of Excise Tax due with respect to any
payments or with respect to any additional amounts received by Executive
pursuant to this Agreement, Executive will notify Employer immediately of such
proposed adjustment and shall give Employer the right to contest such proposed
adjustment on Executive’s behalf; provided, however, that Executive may pay such
claim if Employer does not take any action prior to the time such payment is
due. Employer shall bear and pay directly all costs related to or
associated with any contest, regardless of outcome, and shall have complete
control over such contest as it relates to the Excise Tax, including whether
such contest shall be by way of non-payment of the Excise Tax, payment of the
Excise Tax under protest, or payment of the Excise Tax accompanied by a claim
for a refund. Employer shall pay to Executive (i) an amount equal to
the Excise Tax required to be paid to the Internal Revenue Service by Executive
as a result of the outcome of any contest, any penalties or interest thereon,
and (ii) a Gross-up Payment computed in the same manner and subject to the same
adjustments as other Gross-up Payments previously described. Payment
by Employer of an amount equal to the Excise tax and Gross-up Payment shall be
made to Executive in advance of the due date for payment of Excise
Taxes.
(c) In
the event that the amount of any additional payments made pursuant to this
Section 13 exceeds the amount determined to have been due, the excess additional
amounts made shall constitute a loan by Employer to Executive payable within 30
days after receipt by Executive of the refund from the Internal Revenue Service
together with any interest received.
14. No Duty to
Mitigate. Executive is not required to mitigate the amount of
salary or benefits payable pursuant to this Agreement upon termination of his
employment by seeking other employment or otherwise, nor shall any amount
provided to be paid by Employer pursuant to this Agreement upon termination of
Executive’s employment be reduced by any compensation earned by Executive as a
result of employment by another employer that is not in violation of Executive’s
obligations under Section 12.
15. Severability. The
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement,
which shall remain in full force and effect. 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 Executive 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 requirements of Section 409A
of the Code.
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16. Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original but all of which together shall constitute one and the
same instrument.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first written above.
/s/Xxxxxxxxxxx
X. Xxxxxx, III
Xxxxxxxxxxx
X. Xxxxxx, III
lst
SOURCE CORPORATION,
an
Indiana corporation
By: /s/Xxx
Xxxxxx, Chairman
Xxx
Xxxxxx, Chairman
Executive
Compensation and Human Resources Committee
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