FIRST COMMUNITY FINANCIAL GROUP, INC.
LACEY, WASHINGTON
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
THIS AGREEMENT is effective on the 1st day of April 1993, and is hereby
modified on the 5th day of November, 1999, by and between FIRST COMMUNITY
FINANCIAL GROUP, INC., LACEY, WASHINGTON, a Washington corporation (the
"Company"), and XXXXX X. XXXXXXX (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 recognizes the increasing value of the Officer the
longer the period of service and desires to provide a benefit to Officer which
will encourage continuous service until Retirement Age by providing increased
benefit levels as years of service increase; and
WHEREAS, the Company desires to continue the benefits provided in the
Executive Supplemental Agreement with the Officer originally dated April 1,
1993, and desires to modify the Agreement to clarify the terms of those
benefits;
WHEREAS, the Company desires to pay the Officer the benefits provided
herein, subject to the terms and conditions set forth hereinbelow.
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 earlier of the date of the Officer's termination of employment or the
date the Officer begins receiving payments 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.
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 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.
1.16. "JUST CAUSE" shall mean personal dishonesty, willful misconduct,
willful malfeasance, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, regulation (other than traffic violations or similar offenses), or final
cease-and-desist order, material breach of any provision of this Agreement, or
gross negligence in matters of material importance to the Company. The
existence of Just Cause shall be determined upon recommendation by a majority
vote of the Board of Directors.
1.17. "LIFE ANNUITY" shall mean equal monthly payments for the life of
the Officer such that using the UP 84 Mortality Table and the Interest Rate, the
present value of such annuity is equal to the Benefit Accrual Account.
1.18. "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.
1.19. "PRE-RETIREMENT DEATH BENEFIT" shall mean the Annual
Pre-Retirement Death Benefit amount set forth in the Addendum to this
Agreement.
1.20. "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.
1.21. "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.
1.22. "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.
ARTICLE III
PAYMENT OF RETIREMENT BENEFIT
3.01. RETIREMENT.
The Company agrees that if the Officer attains Retirement Age
while covered by the provisions of this Agreement, the Retirement Benefit
shall be fully vested. After attaining Retirement Age, the Officer may elect
to terminate employment and 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
termination of employment. 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 and the payment of the Early Retirement Benefit
commencing on the first business day of the month following the Officer's
termination of employment. 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 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, and any
other applicable provisions of this Agreement, upon execution of this
Agreement, the Officer shall be fully vested in the Benefit Accrual Account
and the Pre-Retirement Death Benefit.
5.02. COVERAGE BY THIS AGREEMENT.
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 attains Retirement Age, is granted Early
Retirement by the Board of Directors, 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 upon a Change in Control the Officer
shall be fully vested in the Benefit. The Benefit Accrual Account shall be
adjusted to equal the present value of the Retirement Benefit at the Interest
Rate as of the effective date of the 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.
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 to end the Benefit
Accrual Period and commence compounding the Benefit Accrual Account balance
annually at the Interest Rate. The Pre-Retirement Death Benefit and all
other provisions except Paragraph 5.02 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 to end the Benefit Accrual Period and commence compounding the
Benefit Accrual Account balance annually at the Interest Rate. 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 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.
ARTICLE XII
TERMINATION OF AGREEMENT
12.01. In the event the Officer is discharged for Just Cause, this
Agreement shall be terminated and considered null and void with neither the
Officer nor the Officer's Beneficiary having any claim or right against the
Company. The provisions of this Article shall be superior to and take
precedence over any other provisions of this Agreement.
ARTICLE XIII
FIDUCIARY
13.01. 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.
13.02. 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 XIV
INCOMPETENCY
14.01. 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 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 XV
NO EMPLOYMENT CONTRACT
15.01. This Agreement shall in no way be construed to create an
employment contract between the Company and the Officer.
ARTICLE XVI
PRIOR AGREEMENTS
16.01. 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 XVII
SEVERABILITY
17.01. 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 XVIII
MISCELLANEOUS
18.01. LAWS GOVERNING.
This Agreement shall be governed by the laws of the State of
Washington.
18.02. ENFORCEMENT.
This Agreement is solely between the Company and the Officer.
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 5th day of November, 1999.
/s/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX
FIRST COMMUNITY FINANCIAL GROUP, INC.
LACEY, WASHINGTON
By: /s/ Xxx X. Xxxxxxx CEO
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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 XXXXX 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, 1993. This addendum revokes any previously dated Addendum.
ANNUAL PRE-RETIREMENT DEATH BENEFIT:
Year 1 $100,000
Years 2-15 $50,000
ANNUAL RETIREMENT BENEFIT:
$42,569 payable for fifteen (15) years
IN WITNESS WHEREOF, the parties hereto have executed this Addendum this 5th day
of November, 1999, each acknowledging receipt of a fully signed original hereof.
/s/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX
FIRST COMMUNITY FINANCIAL GROUP, INC.
LACEY, WASHINGTON
By: /s/ Xxx X. Xxxxxxx CEO
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