FIRST COMMUNITY FINANCIAL GROUP, INC.
LACEY, WASHINGTON
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
THIS AGREEMENT is effective on the 1st day of April, 1992, and is hereby
modified on this 4th day of November, 1999, by and between FIRST COMMUNITY
FINANCIAL GROUP, INC., LACEY, WASHINGTON, a Washington corporation (the
"Company"), and XXX X. XXXXXXX, XX. (the "Officer").
W I T N E S S E T H :
WHEREAS, the Officer is currently employed by the Company in an executive
capacity;
WHEREAS, the Company desires to retain the valuable services and business
counsel of the Officer and to induce the Officer to remain in an executive
capacity with the Company;
WHEREAS, the Company wishes to retain the Officer in order to prevent the
substantial financial loss which the Company could incur if the Officer were to
leave and were to enter the employment of a competitor;
WHEREAS, the Officer is considered a highly compensated Officer or member
of a select management group of the Company;
WHEREAS, the Company desires to pay the Officer the benefits provided
herein, and desires to pay the Officer the benefits described in any current
employment agreement;
WHEREAS, the Company desires to continue the benefits provided in the
Executive Supplemental Agreement with the Officer originally dated April 1,
1992, and desires to modify the Agreement to clarify the terms of those
benefits;
NOW, THEREFORE, for and in consideration of the above premises, and of the
following terms, conditions and mutual covenants of the parties hereto, IT IS
HEREBY AGREED:
ARTICLE 1
DEFINITIONS
For the purposes of this Agreement, the capitalized terms shall have the
following meanings:
1.01. "ADDENDUM" shall mean the attachment to this Agreement entitled
"Addendum to Executive Supplemental Income Agreement" which shall be executed by
the Officer and a representative of the Company.
1.02. "BENEFICIARY" shall mean the person or persons the Officer has
most recently designated on a duly executed beneficiary form received by the
Company; if the Officer has not designated a Beneficiary, then any payments due
under this Agreement shall be paid to the Officer's estate.
1.03. "BENEFIT" shall mean the Retirement Benefit, the Early Retirement
Benefit, the Disability Benefit, or the Pre-Retirement Death Benefit, as the
case may be.
1.04. "BENEFIT ACCRUAL ACCOUNT" shall mean the aggregate of the accrued
liability entries made or required to be made to the Company's accounting
records in order to record the Company's obligation to pay Benefits under this
Agreement pursuant to generally accepted accounting principles during the
Benefit Accrual Period and compound interest due under this Agreement. The
Benefit Accrual Period begins with the effective date of this Agreement and ends
at the date all benefits are paid under this Agreement.
1.05. "BOARD OF DIRECTORS" shall mean the Board of Directors of First
Community Bank of Washington and First Community Financial Group, Inc., as the
case may be.
1.06. "BUYOUT" shall mean a transaction or series of related
transactions by which the Company is sold, either through the sale of a
Controlling Interest in the Company's voting stock or through the sale of
substantially all of the Company's assets, to a party not having a Controlling
Interest in the Company's voting stock on the date of execution of this
Agreement.
1.07. "CHANGE IN CONTROL" shall mean a Buyout, Merger, or Substantial
Change in Ownership and shall occur on the date the transaction is legally
consummated.
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1.08. "COMPENSATION" shall mean the total base salary paid to Officer
by Company for any calendar year, as reflected on the payroll records of the
Company.
1.09. "CONTROLLING INTEREST" shall mean ownership, either directly or
indirectly, of more than thirty percent (30%) of the voting stock of the Company
or a parent company of the Company which is a member of the same "affiliated
group" as defined in 26 U.S.C. Section 1504(a).
1.10. "DISABLED" shall mean a permanent physical or mental condition
whereby the Officer is or will be unable to perform the duties of the Officer's
customary position of employment with the Company or any other employer
controlled by or under common control with the Company. The Board of Directors
shall determine whether the Officer is declared Disabled within this definition
and may require the Officer to submit to a physical examination in order to
declare the Officer Disabled.
1.11. "DISABILITY BENEFIT" shall mean, at the Disabled Officer's
election, a period certain not less than six (6) months nor more than one
hundred eighty (180) months, in an amount necessary to amortize the Benefit
Accrual Account at the Interest Rate.
1.12. "EARLY RETIREMENT AGE" shall mean age fifty-five (55).
1.13. "EARLY RETIREMENT BENEFIT" shall mean, at the Retiring Officer's
election, a monthly payment over a period certain not less than twelve (12)
months nor more than one hundred eighty (180) months, in an amount necessary to
amortize the Benefit Accrual Account at the Interest Rate.
1.14. "ESI TRUST" is the Trust established to receive and hold the
assets and liabilities associated with this Agreement in the event of a Change
in Control.
1.15. "INTEREST RATE" shall mean eight percent (8.0%). In the event
eight percent (8.0%) should fail to be an appropriate rate, the Interest Rate
shall be determined by the Board of Directors.
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1.16. "MERGER" shall mean a transaction or series of transactions
wherein the Company is combined with another business entity, and after which
the persons or entities who had owned, either directly or indirectly, a
Controlling Interest in the Company's voting stock on the effective date of this
Agreement own less than a Controlling Interest in the voting stock of the
combined entity.
1.17. "PRE-RETIREMENT DEATH BENEFIT" shall mean the Annual
Pre-Retirement Death Benefit amount set forth in the Addendum to this Agreement.
1.18. "RETIREMENT AGE" shall mean age sixty-five (65). The Board of
Directors and the Officer may, by mutual written consent, elect to postpone the
Retirement Age.
1.19. "RETIREMENT BENEFIT" shall mean the Annual Retirement Benefit
amount set forth in the Addendum to this Agreement. At the Officer's election,
the Retirement Benefit may be recalculated and paid as a Life Annuity.
1.20. "SUBSTANTIAL CHANGE IN OWNERSHIP" shall mean a transaction or
series of transactions in which a Controlling Interest in the Company is
acquired by or for a person or business entity, either of which did not own,
either directly or indirectly, a Controlling Interest in the Company on the
effective date of this Agreement. The above shall not apply to stock acquired
and held by First Community Financial Group, Inc. Employee Stock Ownership Plan
with 401(k) Provisions (KSOP).
ARTICLE II
PAYMENT OF PRE-RETIREMENT DEATH BENEFIT
2.01. PRE-RETIREMENT DEATH.
The Company agrees that if the Officer dies while covered by the
provisions of this Agreement and prior to commencement of Benefit payments
under Article III below, the Company will pay the Officer's Beneficiary the
Pre-Retirement Death Benefit. The Pre-Retirement Death Benefit shall be
divided by twelve (12) and paid in monthly payments commencing on the first
business day of the month following the month in which the Officer dies. The
payment of such Pre-Retirement Death Benefit will be subject to the
conditions and limitations set forth elsewhere in this Agreement. If the
Officer's Beneficiary is entitled to receipt of the Pre-Retirement Death
Benefit, the Officer's Beneficiary shall not be entitled to any other
payments under this Agreement.
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ARTICLE III
PAYMENT OF RETIREMENT BENEFIT
3.01. RETIREMENT.
After attaining Retirement Age, the Officer may elect to commence
receipt of the Retirement Benefit. The Retirement Benefit shall be divided by
twelve (12) and paid in monthly payments commencing on the first business day of
the month after such election. Payment of the Retirement Benefit is conditioned
upon the Officer's compliance with this Agreement and upon the Officer receiving
no other payments under this Agreement.
3.02. EARLY RETIREMENT.
The Company agrees that the Officer may at any time subsequent to
attaining Early Retirement Age request in writing to the Board of Directors to
retire early. The Board of Directors may grant early retirement termination of
employment. Upon the Board's grant, and at the Officer's election the payment
of the Early Retirement Benefit will commence on the first business day of the
month following the later of the Officer's termination of employment or election
to receive the Early Retirement Benefit. The Officer may make the election to
begin receiving the Early Retirement Benefit at any time after the Board's grant
of early retirement but before the Officer attains Retirement Age. If the
election is not made, benefits will be paid as indicated in 3.01 of this
Agreement. Payment of the Early Retirement Benefit is conditioned upon the
Officer's compliance with this Agreement and upon the Officer receiving no other
payments under this Agreement.
3.03. POSTPONED RETIREMENT BENEFIT.
In the event Retirement Age is postponed, the postponed retirement
benefit shall be equal to the Retirement Benefit, unless the Board of Directors,
in the exercise of its sole discretion, elects to increase the Retirement
Benefit. Payment of the postponed Retirement Benefit shall commence on the
first business day of the month after the Officer attains the postponed
Retirement Age.
3.04. POST-RETIREMENT DEATH BENEFIT.
In the event the Officer dies on or after commencement of Benefit
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payments under this Article III, the Officer's remaining Benefit payments shall
continue to be paid to the Officer's Beneficiary.
ARTICLE IV
PAYMENT OF DISABILITY BENEFIT
4.01. DISABILITY.
The Company agrees that if the Officer is declared Disabled while
covered by the provisions of this Agreement, the Disability Benefit and the
Pre-Retirement Death Benefit shall be fully vested. The Disabled Officer may
elect to begin receipt of the Disability Benefit at any time subsequent to
being declared Disabled.
4.02. POST-DISABILITY DEATH BENEFIT.
The Company agrees that if the Officer dies after commencement of the
Disability Benefit and before Retirement Age, the Company shall pay to the
Officers' Beneficiary the Pre-Retirement Death Benefit determined under
Paragraph 2.01 of this Agreement, with each monthly payment reduced by an amount
equal to the sum of all Disability Benefit payments previously paid to the
Officer under this Agreement divided by the period certain elected by the
Disabled Officer. Payment of the Post-Disability Death Benefit shall commence
on the first business day of the month following the month in which the Officer
dies.
In the event the Officer dies after commencement of the Disability
Benefit and on or after Retirement Age, the remaining Disability Benefit
payments due under Paragraph 4.01 of this Agreement shall be paid to the
Disabled Officer's Beneficiary.
ARTICLE V
CONDITIONS
5.01. VESTING RIGHTS.
The Company agrees that subject to Paragraph 5.04 of this Agreement,
upon execution of this Agreement, the Officer shall be fully vested in the
Benefit.
5.02. COVERAGE BY THIS AGREEMENT.
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Coverage by the provisions of this Agreement is conditioned upon the
Officer's continuous employment in an eligible capacity (periods of temporary
disability and authorized leave of absence shall be considered as periods of
employment) with the Company from the effective date of this Agreement until the
earlier of the date the Officer retires, is declared Disabled or dies. Benefit
payments are conditioned upon the Officer's compliance with the terms of this
Agreement so long as the Officer lives and payments are due under the provisions
of this Agreement.
5.03. SERVICES.
Payment of the Retirement Benefit or Early Retirement Benefit is
further conditioned upon the Officer rendering such reasonable business
consulting and advisory services as the Company's Board of Directors may call
upon the Officer to provide while receiving payments under this Agreement.
(a) It is understood that such services shall not require the
Officer to be active in the Company's day-to-day activities,
and that the Officer shall perform services as requested by
management.
(b) The Officer shall be compensated for services performed and
reimbursed for all expenses incurred in performing such
services.
5.04. NONCOMPETITION.
Coverage by the provisions of this Agreement is further conditioned
upon the Officer not engaging in any activity or similar employment capacity for
any business enterprise which competes to a substantial degree with the Company
during employment with the Company or while receiving Benefit coverage or
payments. In the event of violation of this provision, all future Benefit
coverage or payments shall be canceled and discontinued. The Board of Directors
shall determine whether violations have occurred and may also waive these
conditions.
5.05. CHANGE IN CONTROL.
The Company agrees that prior to the effective date of a Change in
Control to transfer to the ESI Trust the adjusted Benefit Accrual Account and
any and all assets that the Company may have acquired in connection with the
liabilities it has assumed under this Agreement. The Company, successors, and
assigns agrees to continue the Benefit Accrual Period and the Pre-Retirement
Death Benefit.
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5.06. TERMINATION OF EMPLOYMENT.
In the event of termination of employment prior to a Change in Control
and prior to the commencement of Benefit payments under any provision of this
Agreement, the Officer and the Company agree that the Retirement Benefit, the
Pre-Retirement Death Benefit and all other provisions except Paragraphs 5.02 and
5.03 shall remain in full force and effect.
In the event of termination of employment subsequent to a Change in
Control and prior to the commencement of Benefit payments under any provision of
this Agreement, the Officer and the Company, successors, and assigns agree that
the Retirement Benefit, the Pre-Retirement Death Benefit and all other
provisions of this Agreement except Paragraph 5.02 and 5.03 shall remain in full
force and effect.
5.07. ACCELERATION OF PAYMENT.
In the event the Officer and the Company, successors, and assigns
agree to accelerate payment as set forth in Article VIII, the Pre-Retirement
Death Benefit is null and void. The Officer shall have an exclusive option to
purchase (the "Option") any and all assets that the Company may have acquired in
connection with the liabilities it has assumed under this Agreement in whole or
in part. The Option is exercisable no later than thirty (30) days after the
Officer's receipt of the single payment amount, at a price equal to the carrying
value of the assets on the books and records of the Company, determined under
generally accepted accounting principles. The conditions set forth in Paragraph
5.04 shall not be applicable.
ARTICLE VI
FUNDING
6.01. The Company's obligations under this Agreement shall be an
unfunded and unsecured promise to pay. The Company shall not be required under
any circumstances to fund its obligations under this Agreement.
ARTICLE VII
OFFICER RIGHT TO ASSETS
7.01. The rights of the Officer or the Beneficiary shall be solely
those of an unsecured general creditor of the Company. The Officer or the
Beneficiary shall only
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have the right to receive from the Company those payments as specified under
this Agreement. The Officer or the Beneficiary shall have no rights or
interests whatsoever in any assets of the Company. Any asset used or
acquired by the Company in connection with the liabilities the Company has
assumed under this Agreement shall not be deemed to be held under any trust
for the benefit of the Officer or the Beneficiary, nor shall it be considered
security for the performance of the obligations of the Company. It shall be,
and remain, a general, unpledged, and unrestricted asset of the Company.
ARTICLE VIII
ACCELERATION OF PAYMENT
8.01. The Company may accelerate to a single payment any Benefits
payable under this Agreement with the written consent of the Officer or the
Beneficiary. In the event it is agreed to accelerate payment, the single
payment amount shall equal the Benefit Accrual Account at the date of payment.
ARTICLE IX
LEAVES OF ABSENCE
9.01. The Company may, in its sole discretion, permit the Officer to
take a leave of absence; each such period shall not exceed one (1) year in
length. During such leave, the Officer shall be considered to be in the
continuous employment of the Company for purposes of this Agreement.
ARTICLE X
ASSIGNABILITY
10.01. Except insofar as this provision may be contrary to applicable
law, no sale, transfer, alienation, assignment, pledge, collateralization, or
attachment of any Benefits under this Agreement shall be valid or recognized by
the Company.
ARTICLE XI
AMENDMENT/REVOCATION
11.01. This Agreement shall not be amended, modified, or revoked at any
time, in whole or in part, without the mutual written consent of the Officer and
the Company.
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ARTICLE XII
FIDUCIARY
12.01. NAMED FIDUCIARY AND ADMINISTRATOR.
The Board of Directors shall be the Named Fiduciary and Agreement
Administrator (the "Administrator") of this Agreement. The Administrator
shall be responsible for the management, control, and administration of this
Agreement as established herein. The Administrator shall possess and
exercise discretionary authority to make determinations as to an Officer's
eligibility for benefits and to construe the terms of this Agreement. The
Administrator may delegate to others certain aspects of the management and
operation responsibilities of this Agreement including the employment of
advisors and the delegation of ministerial duties to qualified individuals.
12.02. CLAIMS PROCEDURE.
In the event that benefits under this Agreement are not paid to the
Officer (or the Beneficiary in the case of the Officer's death) and such
claimants feel they are entitled to receive such benefits, then a written
claim must be made to the Administrator named above within sixty (60) days
from the date payments are refused. The Administrator shall review the
written claim and, if the claim is denied, in whole or in part, they shall
provide in writing within ninety (90) days of receipt of such claim their
specific reasons for such denial, reference to the provision of this
Agreement upon which the denial is based and any additional material or
information necessary to perfect the claim. The Administrator and Officer
agree that any unresolved claims or disputes under this Agreement shall be
submitted to a mutually acceptable arbitrator for resolution.
ARTICLE XIII
INCOMPETENCY
13.01. If the Company shall find that any person to whom any payment
is payable under this Agreement is unable to care for their affairs because
of illness or
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injury, or is a minor, any payment due (unless a prior claim shall have been
made by a duly appointed guardian, committee, or other legal representative)
may be paid to the Spouse, a child, a parent, a brother or sister, or a
custodian determined pursuant to the Uniform Gift to Minors Act (or similar
law), or to any person deemed by the Company to have incurred expense for
such person otherwise entitled to payment, in such manner and proportions as
the Company may determine. Any such payment shall be a complete discharge of
the liabilities of the Company under this Agreement.
ARTICLE XIV
NO EMPLOYMENT CONTRACT
14.01. This Agreement shall in no way be construed to create an
employment contract between the Company and the Officer.
ARTICLE XV
PRIOR AGREEMENTS
15.01. This Agreement sets forth the entire understanding of the parties
hereto with respect to the transactions contemplated hereby, and any previous
Agreements or understandings between the parties hereto regarding the subject
matter hereof are merged into and superseded by this Agreement.
ARTICLE XVI
SEVERABILITY
16.01. In the event that any of the provisions of this Agreement or
portion thereof, are held to be inoperative or invalid by any court of competent
jurisdiction, then: (a) insofar as is reasonable, effect will be given to the
intent manifested in the provision held invalid or inoperative; and (b) the
validity and enforceability of the remaining provisions will not be affected
thereby.
ARTICLE XVII
MISCELLANEOUS
17.01. LAWS GOVERNING.
This Agreement shall be governed by the laws of the State of
Washington.
17.02. ENFORCEMENT.
This Agreement is solely between the Company and the Officer.
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Furthermore, the Officer or the Beneficiary shall only have recourse against the
Company for enforcement of this Agreement. However, it shall be binding upon
the Beneficiary, heirs, executors and administrators of the Officer, and upon
any and all successors and assigns of the Company.
IN WITNESS WHEREOF, the parties acknowledge receipt of an executed
original of this Agreement signed this 4th day of November, 1999.
/s/ Xxx X. Xxxxxxx
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XXX X. XXXXXXX, XX.
FIRST COMMUNITY FINANCIAL GROUP, INC.
LACEY, WASHINGTON
By: /s/ Xxxxxxx Xxxxxx
---------------------------------
Chair, Compensation Committee
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Title
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FIRST COMMUNITY FINANCIAL GROUP, INC.
LACEY, WASHINGTON
ADDENDUM TO
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
This addendum to the Executive Supplemental Income Agreement covering XXX X.
XXXXXXX enumerates the dollar amount of Benefits payable under the Executive
Supplemental Income Agreement. All rights and payment provisions are controlled
by the Executive Supplemental Income Agreement effective on the 1st day of
April, 1992. This addendum revokes any previously dated Addendum.
ANNUAL PRE-RETIREMENT DEATH BENEFIT:
Year 1 $180,000
Years 2-5 $135,000
Years 6-15 $90,000
ANNUAL RETIREMENT BENEFIT:
$125,000 payable for fifteen (15) years
IN WITNESS WHEREOF, the parties hereto have executed this Addendum this 4th day
of November, 1999, each acknowledging receipt of a fully signed original hereof.
/s/ Xxx X. Xxxxxxx
-------------------------------
XXX X. XXXXXXX
FIRST COMMUNITY FINANCIAL GROUP, INC.
LACEY, WASHINGTON
By: /s/ Xxxxxxx Xxxxxx, Chair, Compensation Committee
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