Exhibit 10(a)(6)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, dated as of March 31, 2001, by and between XXXX X. XXXXXXXX,
hereinafter referred to as "Executive", and lst SOURCE CORPORATION, an Indiana
corporation, hereinafter referred to as "Employer," WITNESSETH; That
WHEREAS, Executive is being employed as an executive officer (Senior Vice
President and General Counsel) of Employer and its subsidiary, lst Source Bank,
hereinafter referred to as "Bank;" and
WHEREAS, Employer desires to secure the 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 Senior Vice President and General Counsel. 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, or such other
senior executive officer of Employer or its subsidiary, 1st Source 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 March
-----
31, 2004, 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 March 31, 2004 and on March 31 of each year thereafter,
unless either party hereto gives written notice of an intention not to extend
this Agreement on or before April 1 of the preceding year, in which case no
initial or further (as the case may be) 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 (the "Base Salary")
------------
of Two Hundred Thousand Dollars ($200,000) per annum, with such
increases thereafter as may be determined by Employer.
(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 20% of
base salary for purposes of determining awards under the Plan. All
amounts awarded are subject to the terms and conditions of the Plan.
However, Executive is guaranteed a bonus of 20% of the base salary
paid to him from the date he commences such employment to March 31,
2002.
(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. As is presently available to all officers of Employer,
---------------
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. In its sole discretion,
Employer may provide this through its traditional company wide benefit
plan or as a "carve-out" plan. In addition, Employer shall provide
Executive with additional term life insurance coverage as approved by
the Chief Executive Officer.
(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.
(f) Stock-Based Compensation. Employer agrees to grant to Executive: (i)
-------------------------
options to purchase 25,000 shares under Employer's Year 2001 Stock
Option Program, subject to the traditional restrictions for 1st
Source's option programs, which (A) have an exercise price equal to
the market value on the date the registration statement relating to
the plan is declared effective by the Securities and Exchange
Commission or the first day of employment, whichever is later, (B)
have a ten year exercise period; and (C) become exercisable in 20%
increments beginning March 31, 2002 and on each year thereafter,
provided that Executive remains an employee of Employer through such
dates; and (ii) subject to Board approval, a restricted stock award of
approximately $50,000 (adjusted to avoid fractional shares) which
restrictions will lapse in 20% increments beginning March 31, 2002 and
on each year thereafter, provided that Executive remains an employee
of Employer through such dates.
(g) Bar Association Dues, Conferences, Publications and Other Professional
----------------------------------------------------------------------
Development Costs. Employer shall pay all expenses as are approved in
------------------
advance by the Chief Executive Officer, which approval shall not be
unreasonably withheld, related to Executive's professional
development, including without limitation, any continuing education
required under applicable law or rules, bar association dues,
conferences or seminars, publications and other professional
development costs.
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 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 5(b).
(c) Death or Disability. This Agreement shall terminate in the event of
--------------------
the death or Disability of Executive. In the event of Disability, the
provisions of Section 4 shall apply.
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 Senior Vice President and General Counsel 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 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.
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) Executive shall not divulge or furnish any trade secrets (as defined
in IND. CODE ss. 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 voting
securities of such entity are traded on a national securities exchange
or quoted on a national interdealer quotation system; and, provided
further, that notwithstanding the foregoing, nothing contained in this
Section 12(b) shall be construed to prevent, limit or impair
Executive's ability to practice law, including the representation of
customers or competitors of Employer, as long as such representation
does not violate the Rules of Professional Conduct or other
professional ethical rules applicable to Executive and the provisions
of Section 12(a) regarding the use of any trade secrets or
confidential information.
(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 noncompetition under Section 12(b).
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.
(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.
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).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
/s/ Xxxx X. Xxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxx
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
