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EXHIBIT 10(a)(3)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of April 16, 1998, by and between XX
XXXXXX, hereinafter referred to as "Executive", and lst SOURCE CORPORATION, an
Indiana corporation, hereinafter referred to as "Employer," WITNESSETH; That
WHEREAS, Executive is currently employed as the President of
1st Source Transportation and Equipment Finance division, a specialty finance
group, of Employer and its subsidiary, lst Source Bank, hereinafter referred to
as "Bank;" 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 title of President of 1st Source Transportation and Equipment
Finance or similar position for the specialty finance business of Employer.
Executive shall devote his full time during business hours to the performance of
his duties hereunder and shall at all times use his best effort to promote the
best interests of Employer. Executive shall report to the Chief Executive
Officer of the Corporation and/or Bank.
2. Term. The term of this Agreement shall be from the date
hereof until December 31, 2003, 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, 2004 and on January
1 of each year thereafter, unless either party hereto gives written notice of an
intention not to extend this Agreement on or before September 30 of the
preceding year, in which case no further automatic extension shall occur and the
term of this Agreement shall end.
3. Compensation and Benefits.
(a) Base Salary. Executive shall be paid a Base Salary of One
Hundred Seventy-Five Thousand Dollars ($175,000) per annum, with such
increases thereafter as may be determined by Employer.
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(b) Incentive Compensation. In addition to amounts paid to
Executive as salary and for other benefits, Executive will participate
in Employer's Executive Incentive Plan at a "partnership" rate of 15%
of base salary for purposes of determining awards under the Plan. All
amounts awarded are subject to the terms and conditions of the 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.
(d) Life Insurance. Employer will purchase term life insurance
coverage equal to two (2) times the initial Base Salary provided in
Section 3(b) for the benefit of Executive, his family or estate as he
may direct and as provided under Employer's insurance benefit programs.
(e) Club Membership. A club membership will be provided by
Employer for Executive to at least one country club and to one club in
downtown South Bend, Indiana, with the initiation fees, monthly fee and
appropriate business related expenses paid by Employer.
4. Disability. In the event that this Agreement is terminated
by reason of Executive's Disability, Executive will continue to receive his Base
Salary for up to one year from the date of the termination and shall also
participate in any other disability compensation programs, including any Salary
Continuance Plan in effect at that time for officers or executives of Employer.
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, provided that written notice of any termination for Disability shall
have been given by Employer to Executive prior to the full resumption by him of
the performance of such duties.
5. Termination by Employer; Death or Disability.
(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 this Agreement such termination to
be effective thirty (30) days after
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the Board gives written notice to Executive setting forth with
specificity the reason or cause for terminating the Agreement. 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,
or if Employer violates the provisions of this Agreement in a material
manner, Executive shall have the right to terminate his obligations and
duties hereunder, but the rights of Executive to receive the
compensation provided for in Section 3 shall continue nevertheless to
be fully in effect for the remaining term of this Agreement in the same
manner as would have been payable absent such termination.
Notwithstanding the foregoing Employer shall have the right at any time
after the termination contemplated by this Section 5(b) to pay
Executive in a lump sum the then present value of the amount payable to
Executive discounted at the then current savings rate for Bank under
this Section (b).
(c) Death or Disability. This Agreement shall terminate in the
event of the death or Disability of Executive.
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 any adverse
change in Executive's status or position as the President of 1st Source
Transportation Finance including, without limitation, as a result of a material
diminution of his duties or responsibilities or the assignment to him of duties
or responsibilities which, in his reasonable judgment, are inconsistent with
such status or positions, or 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 5(a) or 5(c) or by him for
other than Good Reason).
(a) If such termination does not follow a Change of Control of
Employer or Bank, Executive shall continue to receive his Base Salary
as then in effect for a period of twelve (12) months after the
effective date of such termination, in the same manner as such Base
Salary would have become payable pursuant to this Agreement absent such
termination.
(b) If such termination occurs within one (1) year after a
Change of Control of Employer or Bank, as severance pay and in lieu of
any further
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compensation for periods subsequent to the effective date of such
termination, Executive shall receive 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 then outstanding
shares of common stock of Employer or the combined voting power of the
then outstanding voting securities of Employer entitled to vote 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 a sale or other disposition of all or substantially
all the assets of Employer.
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.
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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.
12. Restrictive Covenants. In order to induce Employer to
enter into this Agreement, Executive hereby agrees as follows:
(a) While Executive is employed by Employer and for a period
of twenty-four (24) months after the effective date of termination of
such employment for reasons other than those set forth in Section 5(b)
of this Agreement, 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 its 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.
(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 Section 5(b) 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 Employee served either alone or with
others while employed by Employer within St. Xxxxxx, Elkhart, Xxxxxxxx
or LaPorte Counties in the State of Indiana, 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
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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 Section 5(b) of this Agreement,
Executive shall have no obligations to Employer with respect to trade secrets,
confidential information or noncompetition under this Section 12.
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
Employee 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.
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.
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17. Resolution of Disputes. Employer agrees to pay promptly as
incurred, to the full extent permitted by law, all legal fees and expenses which
Executive may reasonably incur as a result of any contest, regardless of
outcome, by Employer, Executive or others of the validity of enforceability of,
or liability under, any provision of this Agreement or any guarantee of
performance (including as a result of any contest by Executive concerning the
amount of any payment pursuant to this Agreement).
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
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Xxxxx X. Xxxxxx
lst SOURCE CORPORATION, an Indiana
corporation
By:
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Xxxxxxxxxxx X. Xxxxxx, III
Chairman of the Board, President and
Chief Executive Officer
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