Exhibit 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement is effective as of the 27th day of April, 1998
("Effective Date"), by, between and among Crouse Cartage Company, an Iowa
corporation ("Crouse"), David D. Taggart ("Employee") and TransFinancial
Holdings, Inc., a Delaware corporation ("TFH").
RECITALS
1. Crouse is engaged in the business of transporting freight by motor
vehicle, and desires to continue the employment of Employee as an executive
officer on the terms and conditions hereinafter set forth.
2. Employee for a number of years has been an executive officer of Crouse
and TFH and other freight transportation companies, has expertise in that
business, and desires to continue employment with Crouse and TFH on the terms
and conditions hereinafter set forth.
3. TFH is the sole shareholder of Crouse and, to induce employee to enter
into the Agreement with Crouse and TFH, has agreed to pay and provide to
Employee the compensation and other benefits hereinafter set forth.
4. The parties desire to here set forth all of the terms and provisions
of their agreements relating to the employment of Employee.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
herein contained, the parties agree as follows:
AGREEMENTS
1. Employment. Crouse and TFH hereby employs Employee as its Chairman
and Chief Executive of Crouse and Executive Vice President of TFH, and Employee
accepts such employment and position. Employee is an employee at will, and his
employment by Crouse and TFH may be terminated at any time, and for any reason,
or no reason; provided, however, that until such termination and, in some
instances, thereafter, as provided in paragraph 8.c. hereof, Employee shall be
entitled to the compensation and other benefits herein provided unless and until
the parties hereto shall otherwise agree in writing.
2. Employee's Duties and Responsibilities. Employee shall be the
President and Chief Executive of Crouse and Executive Vice President of TFH, and
shall report directly to its board of directors and the Chief Executive Officer
of TFH. Employee's duties on behalf of Crouse shall be the usual and customary
duties and responsibilities of a chief executive officer, and he shall to the
best of his ability perform the same and such other lawful duties as shall be
from time to time assigned to him by the board of directors and the Chief
Executive Officer of TFH so long as the same are not inconsistent with his
position. During the term of this Employment Agreement, Employee agrees to
devote his entire skill, attention, loyalty and diligence to serving and
promoting the business of Crouse and TFH, and agrees that he shall not, directly
or indirectly, during the term of this Agreement, engage or participate in any
other activities for profit or in conflict with the interest of Crouse;
provided, however, that Employee shall be entitled to devote reasonable time to
his personal investments and affairs.
3. Base Compensation. During the term of this Employment Agreement,
Employee shall be paid base compensation at the rate of $143,000 per year, in
semi-monthly installments, or in installments otherwise applicable to
compensation paid to the executive officers of Crouse, subject to withholding
for applicable federal, state, local, social security and unemployment taxes,
and any other withholding required by law or contract. Such base compensation
shall be paid by TFH, but Crouse agrees to reimburse TFH for such amount, and
the amount of Incentive Compensation hereinafter provided. Base Compensation
and Incentive Compensation shall be reviewed annually and may be increased by
agreement of the parties.
4. Incentive Compensation. For each year or portion thereof during the
term hereof, from and after the Effective Date, Employee shall be entitled to
receive incentive compensation equal to such percentage (which may exceed 100%)
of $62,000 as shall be determined in accordance with Exhibit A hereto. Such
incentive compensation shall be computed within 30 days after receipt of the
report of TFH's independent auditors on the consolidated net income of TFH. The
amount so computed shall be paid to Employee within 30 days of such
determination. Such Incentive Compensation shall not be less, for 1998 and
1999, than is provided in existing compensation arrangements with Employee.
5. Benefits. In addition to base compensation and incentive
compensation, Employee shall be entitled to the following:
a. The exclusive use of an automobile owned by Crouse which is to be
replaced every four years or earlier at such time as such automobile has
been driven 80,000 miles. Employee shall have the option, but not the
obligation, to purchase any of such automobiles, at the time of replacement
thereof, at the depreciated net book value thereof on the books of Crouse.
b. Medical insurance to the extent provided by TFH or Crouse to its
other executive officers.
c. Long-term disability to the extent provided by TFH to its
officers, currently two-thirds of base compensation from the 181st day of
disability through age 65, fully integrated with social security and with a
maximum of $10,000 per month.
d. Life insurance to the extent provided by TFH or Crouse to its
other executive officers.
e. Supplemental benefits in accordance with the Supplemental Benefit
Agreement dated September 30, 1995.
f. Three weeks paid vacation per year through 2000, and four weeks
per year thereafter.
g. Participation in the defined contribution pension plan maintained
by Crouse, as amended from time to time, all of which is vested by virtue
of Employee's prior service with another affiliate of TFH.
h. Participation in whatever 401(k) Plan is from time to time
sponsored by Crouse, if any.
i. In the event of a change of control of TFH or Crouse as defined
in the Agreement dated September 30, 1995 Employee shall be entitled to the
rights and benefits provided therein, and shall be additionally entitled to
(a) purchase the automobile then being provided to him, at the depreciated
net book value thereof on the books of Crouse, and (b) sell to Crouse, and
require Crouse to purchase, Employee's residence in Carroll, Iowa, for an
amount, payable in cash, equal to the greater of Employee's cost therein or
the fair market value thereof.
j. Such stock options as TFH shall from time to time grant
to Employee pursuant to Stock Option Plans from time to time in effect.
k. The right to sell to Crouse, and require Crouse to
purchase, Employee's residence in Carroll, Iowa, for an amount, payable in
cash, equal to the greater of Employee's cost therein, or the fair market
value thereof, if Crouse or TFH shall direct Employee to relocate from
Carroll, Iowa.
l. In general, Employee shall be entitled to participate in all
welfare and benefit plans from time to time maintained by TFH or Crouse
generally for its executive officers, subject to amendment or termination
thereof and subject to all legal constraints, including discrimination in
favor of highly compensated employees.
6. Confidentiality. Employee agrees that he shall not, at any time
during or following the term of his employment hereunder, directly or indirectly
use, disseminate, divulge or disclose, for any purpose whatsoever, any
Confidential Information (as hereinafter defined) which has been given to or
obtained by him as a result of his employment. For purposes of this paragraph,
Confidential Information shall include the identity and location of customers,
financing, accounts, systems, procedures, policies, manuals, trade secrets and
other information peculiar to the operations of Crouse and not known to the
public in general. In the event of a breach or threatened breach of any of the
provisions of this paragraph, or the following paragraph, either Crouse, or TFH,
in addition to and not in limitation of any other rights, remedies or damages
available at law or in equity, shall be entitled to a restraining order and
injunction in order to prevent or restrain any such breach.
7. Non-Competition. Employee agrees that, during the term of this
Agreement and for a period of two years from and after the termination of his
employment with Crouse, for whatever reason, he shall not, directly or
indirectly:
a. Solicit of divert business from any customer or Crouse or any
other business owned directly or indirectly by Crouse or TFH and with
respect to which Employee has responsibility; or
b. Solicit for employment or employ any person who in the prior six
months has been an employee of Crouse or TFH or any other such business; or
c. Individually or through any corporation, partnership, joint
venture, trust, limited liability company or person, engage in any business
competitive with the business then being conducted by Crouse, or any other
business owned directly or indirectly by Crouse or TFH and with respect to
which Employee has responsibility, at any place and in any state in which
Crouse or such other business is then conducting its business, except by
mutual written consent of TFH and the Employee.
8. Termination of Employment.
a. The employment of Employee under this Employment Agreement will
be terminated:
(i) Upon the death of Employee;
(ii) In the event Employee becomes permanently disabled. For
the purpose of this Employment Agreement, Employee will be considered
to be permanently disabled if, by a mental or physical incapacity, it
is impossible for Employee to render, for 130 consecutive days or more
to Crouse the Employee's Duties and Responsibilities provided in
paragraph 2 hereof. Such determination shall be made by a licensed
medical doctor designated by TFH or Crouse and reasonably acceptable
to Employee or on evidence that the Employee is eligible for Social
Security disability payments. Total and permanent Disability shall
exclude disability arising from:
(a) Chronic or excessive use of intoxicants, drugs or
narcotics; or
(b) Intentionally self-inflicted injury or intentionally
self-induced sickness.
(iii) By the mutual written agreement of Employee and TFH or
Crouse; or
(iv) Within a reasonable period of time following a
determination by TFH that "cause" exists for such termination and the
delivery by TFH to Employee of a written notice specifying with
factual specificity the actions of Employee which justify TFH's
determination that cause exists to terminate Employee's employment
pursuant to Paragraph 8(b) herein. Delivery of such notice shall not
be determinative of whether cause does or does not in fact exist for
purposes of termination of Employee's employment.
b. For purposes hereof, the term "cause" is defined as (1) a
material breach by Employee of his obligations under this Employment
Agreement (other than as a result of death, disability or normal
retirement) which is demonstrably willful and deliberate on Employee's
part, committed in bad faith, or without reasonable belief that such breach
is in the best interest of TFH or Crouse and is not remedied within a
reasonable period of time after receipt of written notice specifying the
breach; (2) conviction of Employee of a felony; (3) fraud committed by
Employee against TFH or Crouse or misappropriation by Employee of the
assets of either thereof, or (4) breach of Employee's duty of loyalty to
other fiduciary duty or obligation to TFH or Crouse which is not remedied
within a reasonable period of time after receipt of written notice
specifying the same.
c. If employment is terminated by TFH or Crouse without cause, TFH
shall pay within fourteen (14) days following the date of such termination
an amount equal to then existing Base Compensation for two (2) years.
9. Burden and Benefit. This Agreement shall be binding upon, and shall
inure to the benefit of, Crouse, TFH and Employee, and their respective heirs,
personal and legal representatives, successors and assigns, provided that no
party hereto may assign its rights or obligations hereunder.
10. Governing Law. It is understood and agreed that the construction and
interpretation of this Agreement shall at all times and in all respects be
governed by the laws of the State of Kansas.
11. Severability. The provisions of this Agreement (including
particularly, but not limited to, the provisions of Paragraphs 6 and 7 hereof)
shall be deemed severable, and the invalidity or unenforceability of any one or
more of the provisions hereof shall not affect the validity and enforceability
of the other provisions hereof, and if any court shall determine any provision
of Paragraphs 6 or 7 hereof to be unreasonably broad, the parties hereto agree
that such provision(s) shall be deemed amended to the greatest breadth which
such court shall find to be reasonable and enforceable.
12. Notices. Any notice permitted or required to be given hereunder shall
be sufficient and deemed given when in writing, and delivered or sent by
certified or registered mail, return receipt requested, first-class postage
prepaid, to his last known residence in the case of Employee, and to its
principal office in the case of Crouse and TFH.
13. Attorney Fees. If any party to this Agreement files suit or takes
legal action to enforce or avoid its provisions, the losing party shall pay the
prevailing parties' reasonable attorney fees.
14. Entire Agreement. This Agreement and the Exhibit hereto contain the
entire agreement and understanding among Crouse, TFH, and Employee with respect
to the employment herein referred to, and no representations, promises,
agreements or understandings, written or oral, not herein contained, shall be of
any force or effect. No change or modification hereof shall be valid or binding
unless the same is in writing and signed by the party intended to be bound. No
waiver of any provision of this Agreement shall be valid unless the same is in
writing and signed by the party against whom such waiver is sought to be
enforced; moreover, no valid waiver of any provision of this Agreement at any
time shall be deemed a waiver of any other provision of this Agreement at such
time or be deemed a valid waiver of such provision at any other time. This
Agreement replaces and supercedes an earlier Employment Agreement among the
parties dated September 30, 1995, but does not in any way, except as set forth
in subparagraph 5(i) and 5(k) hereof, alter, amend or modify the agreements
referred to therein as Exhibit A and B thereto.
IN WITNESS WHEREOF, Crouse, TFH and Employee have duly executed this
Agreement as of the day and year first above written.
CROUSE CARTAGE COMPANY
Attest:
By: /s/Larry Pendleton By: /s/Mark A. Foltz
Witness:
By: /s/Larry Pendleton By: /s/David D. Taggart
David D. Taggart
TRANSFINANCIAL HOLDINGS, INC.
Attest:
By: /s/Larry Pendleton By: /s/Timothy P. O'Neil
President
EXHIBIT A
(a) Except as set forth in subparagraph (b) hereof, no Incentive
Compensation shall be earned unless the net income of TFH
(consolidated) or Crouse, for each full or partial year during the
term of the Employment Agreement, shall equal at least 80% of budget
(the "Threshold"). If the Threshold with respect to Crouse is met,
26.67% of Incentive Compensation shall be deemed earned, and such
amount shall be increased by 2% for each whole percentage point by
which the net income of Crouse exceeds 80% of budget. If the
Threshold with respect to TFH is met, 6.67% of Incentive Compensation
shall be deemed earned, and such amount shall be increased by 0.5% for
each whole percentage point by which the consolidated net income of
TFH exceeds 80% of budget.
(b) An amount not to exceed 16.67% of Incentive Compensation may be
awarded if, in the sole judgment of the Chief Executive Officer of
TFH, such adjustment is necessary to properly reflect Employee's
contribution.