EMPLOYMENT AGREEMENT
THIS
AGREEMENT, dated as of January 1, 2008, by and between WELLINGTON X.
XXXXX 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 Executive Vice President of Employer and
the President and Chief Operating Officer of Employer’s subsidiary,
1st Source Bank, hereinafter referred to as “Bank,” pursuant to the terms
of that certain Employment Agreement 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 for both Employer and Bank with the same
titles referenced above. 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 Chief Executive Officer, or
such other senior executive officer of Employer or Bank, as the Chief Executive
Officer of Employer, the Chairman of the Board, or the Board of Directors
(“Board”) shall direct.
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 year, in which case no further automatic extension shall occur
and the term of this Agreement shall end on December 31 of such
year.
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3.
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Compensation and
Benefits.
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(a) Base Salary. Executive
shall be paid a base salary of Three Hundred Fifty-Nine Thousand
Dollars ($359,000) per annum, with such increases 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 in Employer’s
Executive Incentive Plan at a “partnership” rate of 25% of Base Salary for
purposes of determining awards under the Plan. All amounts awarded are subject
to the terms and conditions of the Plan.
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(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)
directors and officers liability insurance, 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. 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.
(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 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 times his then monthly
Base Salary amount; and (b) six (6) monthly installment payments, each
installment payment equal to his then 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, 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 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.
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(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, the
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 such discharge, equal to six (6) times his then monthly
Base Salary amount; and (ii) six (6) 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 five (5) 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.
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, (ii) any material adverse
change in Executive’s status or position as the Executive Vice President of
Employer and President and Chief Operating Officer of Bank, including, without
limitation, as a result of a material diminution of his duties or
responsibilities, (iii) any removal of Executive from, or any failure to
reappoint or re-elect him to, any such position (except in connection with the
termination of his employment pursuant to Section 4 or Section 5(a), 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) six (6) 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 five (5)
months. This provision shall survive and remain operative so long as
Executive remains employed by Employer, notwithstanding any expiration of the
term or after delivery of a Non-Renewal Notice as provided in Section 2 of this
Agreement.
(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
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”)).
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(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 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.
Despite
any other provision in 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.
(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.
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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.
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 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
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 affiliate 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.
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(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 for reasons set forth in
Sections 5(b) or 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 becomes 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.
(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.
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(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 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.
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.
17. Resolution of
Disputes. Employer agrees to pay promptly as incurred 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).
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first written above.
/s/Wellington
X. Xxxxx, III
Wellington
X. Xxxxx, III
lst
SOURCE CORPORATION
an
Indiana corporation
By:
/s/Xxxxxxxxxxx X. Xxxxxx,
III
Xxxxxxxxxxx
X. Xxxxxx, III
Chairman
of the Board, President and
Chief
Executive Officer
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