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EXHIBIT (10) a.
FIRST COMMUNITY FINANCIAL GROUP
EMPLOYMENT AGREEMENT
Xxx X. Xxxxxxx, Xx.
This AGREEMENT is made and entered into to be effective as of September
1, 1996, by and between FIRST COMMUNITY FINANCIAL GROUP, a Washington
Corporation, and FIRST COMMUNITY BANK, a Washington Corporation, (the
"Company"); and XXX X. XXXXXXX ("Xxxxxxx"), WITNESSETH:
WHEREAS, Xxxxxxx was a founder of the Company; it's primary subsidiary,
First Community Bank, and other subsidiaries, and he has played an important
role in the growth and success of those entities, having served as a director of
them since their inception and having served as President and Chief Executive
Officer of the Company since 1990; and
WHEREAS, the Company desires to have Xxxxxxx serve as its President and
Chief Executive Officer and to serve in a similar capacity and/or as
Chairman/Chief Executive Officer with one or more of the Company's subsidiaries,
and Xxxxxxx desires to serve in such capacities; and
WHEREAS, the Company desires to have Xxxxxxx continue his service as a
Director on the Company's and subsidiaries' Boards of Directors;
NOW, THEREFORE, in consideration of the covenants and undertakings
herein contained and the mutual benefits to be derived herefrom, the parties
hereto agree as follows:
1. Employment. Xxxxxxx agrees to serve the Company and it's
subsidiaries as President, Chief Executive Officer, Chairman, and Director.
Xxxxxxx also agrees to serve in other additionally associated capacities as may
be assigned by the Company's Board of Directors ("Board"), the duties of which
are consistent with those normally performed by a President, Chief Executive
Officer, Chairman or Director. The Board will appoint/elect Xxxxxxx to serve as
President, Chief Executive Officer, and a member of the Executive Committee of
the Company. The Company will nominate Xxxxxxx as a director of FCFG and use
their best efforts to have him appointed/elected. The Board will appoint/elect
Xxxxxxx to serve as Chairman, Chief Executive Officer, and a member of the
Executive Committee of First Community Bank. Xxxxxxx' shall remain in these
positions until his retirement or until terminated as provided herein.
2. Duties. Xxxxxxx shall have all executive powers normally incident to
the positions of President, Chief Executive Officer, Chairman, and Director
which are reasonably required to enable Xxxxxxx to efficiently discharge his
duties in such capacity.
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3. Compensation. The Company shall pay Xxxxxxx, as compensation for his
full- time services during the term of employment:
A. A base compensation annual salary of one hundred forty thousand
dollars ($140,000) for the remainder of 1996. Commencing on January 1, 1997, the
Company shall pay Xxxxxxx a base compensation salary of not less than one
hundred sixty thousand dollars ($160,000) per annum, which salary shall be
payable in equal installments, at least monthly, as set forth in the Company's
Policy Manual and subject to review and adjustment annually. Xxxxxxx will
receive a minimum salary increase of 10% to be effective January 1, 1998. After
January 1, 1998, Xxxxxxx will be entitled to annual raises at least commensurate
with raises granted other executive officers and in no event xxxx Xxxxxxx'
salary be reduced.
X. Xxxxxxx shall be entitled to paid vacation and sick leave, all as
more fully specified in the Company's Policy Manual and modified from time to
time. Xxxxxxx' annual paid vacation accrual shall not be less then six (6)
weeks.
C. The Company may provide additional stock option opportunities to
Xxxxxxx, from time to time, at the discretion of the Board of Directors. All
unexpired options granted under the Company's Employee Stock Option and
Restricted Stock Award Plan "Plan" will vest in the event of a Change of Control
or upon termination of Xxxxxxx without Cause.
All Return on Asset ("ROA") performance stock options shall be adjusted for
extraordinary income and expense items which may or may not have been included
within the annual budget. Special investment sales, sales of unused assets and
expansion or acquisition costs shall always be removed when calculating ROA. The
determination of what other items constitute extraordinary income and expense
items shall be made by a majority vote of the Company's Executive Committee and
approved by a majority vote of the Board.
D. In addition to the Base Compensation provided hereinabove, Xxxxxxx
will participate in an Incentive Program and shall be paid an annual bonus at a
level or pursuant to a formula determined by the Company from time to time based
on factors including, but not limited to, the quality of Xxxxxxx'x performance
of his assigned duties and the pre-tax profits of the Company and it's
subsidiaries; Provided, however, each such bonus shall be greater than the bonus
paid for the same time period to any other executive of the Company and it's
subsidiaries.
The ROA performance scale for incentive bonus compensation shall be adjusted for
extraordinary income and expense items which may or may not have been included
within the annual budget. Special investment sales, sales of unused assets and
expansion or acquisition costs shall always be removed when calculating ROA. The
determination of what other items constitute extraordinary income and expense
items shall be made by a majority vote of the Company's Executive Committee and
approved by a majority vote of the Board.
4. Other benefits. Xxxxxxx is entitled to receive all employee benefits
the Company generally provides to it's senior executives along with the
following benefits:
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A. Medical, Dental, Vision, Life Insurance and Long-Term
Disability insurance as provided to regular full-time employees of the Company.
The Long-Term Disability insurance shall provide Xxxxxxx with at least sixty
percent (60%) of his then current base compensation should Xxxxxxx become
totally disabled;
B. Voluntary Life Insurance as available to regular full-time
employees of the Company;
C. KSOP Program as provided to regular full-time employees of the
Company;
D. Other benefits as outlined in the Personnel Manual.
5. Reimbursable Expenses. Xxxxxxx is authorized to incur reasonable
expenses in performing his duties and in promoting the business of the Company.
The Company will reimburse Xxxxxxx for all such expenses, specifically
including, without limitation, the dues for Xxxxxxx' membership in the Olympia
Country & Golf Club and the Rotary Club. The Company acknowledges and agrees
that it may be advisable for Xxxxxxx to join other clubs and/or professional
organizations and for the Company to pay the membership fees therefore, all as
may hereafter be determined appropriate by the Executive Committee based on
proposals therefore submitted by Xxxxxxx.
6. Working Conditions. Xxxxxxx shall be furnished with such working
facilities and equipment that are reasonably required by Xxxxxxx to perform his
duties as President, Chief Executive Officer, Chairman, and Director of the
Company, specifically including, but not limited to, secretarial and support
staff , an office and an automobile allowance of at least $600.00 per month,
which allowance shall be reviewed and adjusted annually by the Executive
Committee.
7. Retirement. The Company shall enter into an updated Executive
Supplemental Income ("ESI") Agreement with Xxxxxxx, a copy of which is attached
hereto as Exhibit A. The ESI Agreement provides for a pre-age 65 Death Benefit
(as defined in the ESI Agreement) payable to Xxxxxxx' designated beneficiary in
the amount of $180,000 for the first 12 month period after Xxxxxxx' death;
$135,000 per year for the second throught fifth years following Xxxxxxx' death;
and $90,000 per year for the sixth through fifteenth years following Xxxxxxx'
death. The ESI Agreement also provides that should Xxxxxxx live to age 65 the
Company will pay an Annual Compensation (as defined in the Addendum to the ESI
Agreement) to Xxxxxxx in the amount of $125,000 per year (or the actuarially
reduced amount should Xxxxxxx select either a lump sum or a joint and survivor
payment option) for a period of fifteen years. Xxxxxxx is vested at all times in
the Benefit Accrual (as defined in the ESI Agreement). Xxxxxxx shall have a
nonforfeitable right to the Annual Compensation or the Death Benefit, at all
times while employed with the Company, or after August 31, 2004, or a Change in
Control (as defined in the ESI Agreement), or termination without Cause (as
defined in the ESI Agreement).
8. Stock Redemption. The Company agrees that at least $1,000,000 of the
proceeds received from life insurance placed on the life of Xxxxxxx by the
Company may be used to redeem shares of Company common stock held by either the
estate of Xxxxxxx, a designated beneficiary of Xxxxxxx, or a trust or entity
created by Xxxxxxx.
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9. Consulting Services. Upon termination of Xxxxxxx' services to the
Company; or, upon diagnosis of a condition deemed terminal within two years, to
be confirmed by his treating physician; or, Termination as provided in Paragraph
10 hereof, and if such Termination is not for cause as defined in Paragraph 11
hereof, the Company agrees to retain Xxxxxxx' services following such
termination as a consultant and not as an employee, for a period equal to one
year for each three years Xxxxxxx served as an employee (partial years to be
prorated); provided such consultant services period shall not exceed 5 years
(the "Consulting Period"). During such Consulting Period, at all reasonable
times and to the extent his physical and mental condition permit, Xxxxxxx shall
be available to consult with and advise the Company's officers, directors and
other representatives, not to exceed an average of 20 hours per month. During
such Consulting Period, Xxxxxxx shall be entitled to receive for such consulting
services, a monthly amount calculated by adding the total cash compensation paid
to Xxxxxxx during the three years of his highest compensation, dividing that sum
by three and then determining a percentage of that quotient equal to one percent
(1%) for each year of employment under the terms of this Agreement. The
resulting figure will be divided by 12 to produce the monthly amount. For
example, if Xxxxxxx received $140,000, $150,000 and $160,000 as his three years
of highest compensation and worked for 12 years, the amount would be computed by
adding the three years of total compensation and dividing that amount by three
to arrive at $150,000; then multiply that amount ($150,000) by 1% for each year
worked (1% x 12 = 12%); then dividing that product (12% x 150,000 = $18,000) by
twelve months to arrive at $1,500 per month. The monthly payment determined as
provided in this Paragraph 9 shall commence 30 days after Xxxxxxx last received
compensation as President and Chief Executive Officer of the Company unless
Xxxxxxx chooses to defer commencement of the Consulting Period which may be
deferred for a period of up to five years in Xxxxxxx' sole discretion. Xxxxxxx
may arrange for availability through telephone communications acceptable to the
then President of the Company, and in such event, he shall be considered to be
in compliance with the requirement of this paragraph.
Consulting services and payment for consulting services shall follow any
severance compensation periods. Under the circumstances entitling Xxxxxxx to
receive consulting service payments, the Company shall provide medical benefits
for Xxxxxxx, if possible, or pay the equivalency directly to Xxxxxxx if medical
benefits cannot be obtained through the Company, during the Consulting Period at
the same level being provided to other executive employees of the Company. This
consulting medical benefit provision shall not exceed $500.00 per month.
10. Term of Employment.
A. The initial term of this Agreement shall be for ninty-six
(96) months of employment from effective date. Additionally, this Agreement will
automatically renew and have a continual (perpetual) term of employment of
thirty-six (36) months, unless Xxxxxxx is terminated for Cause as defined in
Section 11 of this Agreement. Any amendment, alteration or change to this
Agreement must be agreed to and approved in writing by both Xxxxxxx and the
Company;
B. This subparagraph was deleted prior to Agreement approval;
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C. If this Agreement is terminated (i) by the Company without
"cause" (as defined in Section 11, below), or (ii) by Xxxxxxx for "good reason"
(as defined in paragraph 10.D below),or (iii) by Xxxxxxx for any reason and a
Change of Control has occurred within last twelve (12) months, Xxxxxxx will be
entitled to receive the following:
(i) Base Compensation (as defined in Section 3.A) and Other
Benefits (as defined in Section 4) until the seventy-second
(72nd) month after September 1, 1996, or for thirty-six
(36) months (whichever is longer),
(ii) fully vested rights to all stock options granted or
awarded under the Plan, (all options will expire if not
exercised within six (6) months of termination or such
longer period as may be provided under the terms of the
Plan or amendments to the Plan), and a nonforfeitable fully
vested rights to fully funded benefits under the ESI
Agreement;
X. Xxxxxxx has "good reason" to terminate this Agreement if
action taken by the Company's Board of Directors effectively withdraws from
Xxxxxxx the authority and responsibility customarily associated with the
position of President and Chief Executive Officer;
E. All severance compensation paid to Xxxxxxx shall be paid on
normal payroll cycles. The Company can pay lump sum payment or payments only if
Xxxxxxx has provided written acceptance of lump sum payments;
F. In no event xxxx Xxxxxxx be entitled to any payments under
this Agreement that would violate any applicable banking regulations (including
regulations of the Federal Deposit Insurance Corporation as set forth at 12 CFR
Part 359). Any payments under this Agreement will terminate if Xxxxxxx violates
Section 14 of this Agreement.
11. Cause. Notwithstanding any provision of this Agreement, the
benefits payable on termination which are provided in paragraph 9 and paragraph
14.A, shall not be payable if Xxxxxxx' employment is terminated for cause. For
the purposes of this Agreement, termination for "cause" means termination
because Xxxxxxx' (a) willfully and continually fails to substantially perform
his principal responsibilities with the Company, as outlined in Section 2 (other
than any such failure resulting from Xxxxxxx' incapacity due to injury or
illness, or Xxxxxxx inability due to the Company's failure to provide Xxxxxxx
with the proper authority required to carry out those responsibilities), and
such failures continue for a period of at least sixty (60) days after a written
demand for performance is delivered to Xxxxxxx by a duly authorized member or
representative of the Board, which specifically sets forth the manner in which
it is alleged that Xxxxxxx has failed to substantially perform his duties, and
the action steps which Xxxxxxx must follow to meet the Board's expectations,
followed by a meeting between Xxxxxxx and the Board at the end of the sixty (60)
day period in which a majority vote by the Board (not including Xxxxxxx) is
required to determine that Cause still exists, or (b) is adjudged guilty of any
crime involving a breach of his fiduciary duties to the Company; is adjudged
guilty of any felony; or willfully (in bad faith without reasonable belief such
action or inaction was in the best interests of the Company) and continually
fails to comply with any law, rule, or regulation pertaining to the Company's
business (other than traffic violations or similar minor offenses); or fails to
comply with any final cease and desist order of any government
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agency having jurisdiction over the Company. For purposes of this Agreement, no
act or failure to act on the part of Xxxxxxx shall be considered "willful"
unless done or omitted to be done in bad faith without reasonable belief that
such action or omission was in, or not opposed to, the best interests of the
Company.
12. Compliance. Xxxxxxx agrees to provide his best efforts to comply
with all rules and regulations of the Federal Deposit Insurance Corporation, the
Federal Reserve Board, and the State of Washington Department of Financial
Institutions.
13. Confidential Information. Xxxxxxx acknowledges that in the course
of his employment, he will have or obtain knowledge of confidential information
and other secrets concerning the Company and its business, actual and
prospective customers, and other matters which are valuable to the Company and
which the Company does not want disclosed. Xxxxxxx promises during employment at
the Company and thereafter to maintain all such information on a confidential
basis and not to disclose it to any third party, without the Company's prior
written consent or at the Company's express instruction. This confidentiality
promise of Xxxxxxx is intended to and shall apply in the broadest sense possible
to information regarding the Company's business activities and actual and
prospective customers, and is not intended to be limited solely to matters which
might meet the legal definition of "trade secrets" under Washington law. Prior
to termination of his employment with the Company Xxxxxxx will return all
records, files, handbooks, manuals, and any other form of documentation related
in any way to the business of the Company. Xxxxxxx acknowledges that he shall
not be entitled to retain, copy, utilize, or rely upon all or part of any such
materials. This section shall survive termination of this Agreement. The
existence of any claim or cause of action against the Company, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of this Section.
14. Restrictive Covenant.
A. If the Company terminates Xxxxxxx employment without "cause", or
Xxxxxxx terminates for "good reason" as defined in Section 10.D of this
Agreement, or the Company does not extend an offer for contract renewal for a
minimum term of one year at substantially the same compensation and corporate
standing in effect at the completion of this Agreement; then Xxxxxxx shall not,
for a period of thirty-six (36) months after the date of termination (the
"Noncompete Period"), be employed or act in any capacity, either directly or
indirectly, or by or for himself or for any partnership, corporation, trust, or
company, "participate" (as defined below) in any business similar to the type of
business conducted by the Company at the time of termination of employment in
any market area in which the Company or it's affiliates conduct business at the
time of termination. For purposes of this Agreement, the term "participate"
includes, without limitation, any direct or indirect interest in any business,
whether as an officer, director, consultant, employee, partner, sole proprietor,
stockholder, owner, or otherwise, other than by ownership of less than one
percent (1%) of the stock of a publicly held corporation whose stock is traded
on a national securities exchange or on the over-the-counter market. The term
"participate" shall also include participation, planning, or consulting for any
startup financial organization. For the purpose of this Agreement market areas
covered by the bank shall be the service areas as delineated in the Company's
CRA (Community Reinvestment Act) Plan at the time of termination;
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B. If Xxxxxxx voluntarily terminates his employment without "good
reason" or the Company terminates Xxxxxxx for "cause", then Xxxxxxx shall not,
for a period of 12 months that commences on the date of termination (the
"noncompete period"), be employed or act in any capacity, either directly or
indirectly, or by or for himself or for any partnership, corporation, trust, or
company, "participate" (as defined below), in any business similar to the type
of business conducted by the Company at the time of termination of employment in
any market area in which the Company or it's affiliates conduct business at the
time of termination. For purposes of this Agreement, the term "participate"
includes, without limitation, any direct or indirect interest in any business,
whether as an officer, director, consultant, employee, partner, sole proprietor,
stockholder, owner, or otherwise, other than by ownership of less than one
percent (1%) of the stock of a publicly held corporation whose stock is traded
on a national securities exchange or on the over-the-counter market. The term
"participate" shall also include participation, planning, or consulting for any
startup financial organization;
C. In addition, Xxxxxxx agrees that for a period of 24 months following
his termination (whether voluntary or not) he will not (a) induce or attempt to
induce any other employee of the Company to leave the employ of the Company, or
in any way interfere with the relationship between the Company and any other
employee of the Company or (b) induce or attempt to induce any customer,
supplier, licensee, or other business relations of the Company to cease doing
business with the Company.
During the applicable noncompete period (36 months in sub-paragraph A or 12
months in sub- paragraph B), the Company shall pay Xxxxxxx his base salary and
Other benefits, but not the annual incentive bonus. These payments will be made
at normal payroll cycles unless Xxxxxxx has provided written acceptance to
accept lump sum payments. The Company's portion of health insurance premiums
shall also continue during this noncompete period. Xxxxxxx agrees that in the
event of violation by Xxxxxxx of this covenant not to compete, then all payments
to Xxxxxxx under this restrictive covenant shall immediately cease and Xxxxxxx
shall pay liquidated damages to the Company in the amount of base salary per
month for each month or part of a month that Xxxxxxx is in violation of and
continues to violate such agreement.
It is recognized and agreed that damages in such event would be difficult or
impossible to ascertain, though great and irreparable, and that this agreement
with respect to liquidated damages shall in no event disentitle the Company to
injunctive relief;
D. This Restrictive Covenant may be enforced by an action at law for
damages and by an injunction to prohibit the restricted activity. Nothing set
forth herein shall prohibit the Company from pursuing all remedies available to
it. The parties agree that if a trial judge with jurisdictions over a dispute
related to this agreement should determine that any portion of the restrictive
covenants set forth in this section is unreasonably broad, that the parties
authorize said trial judge to narrow same so as to make it reasonable, given all
relevant circumstances, and to enforce same;
E. It is agreed between the parties that this Agreement in its
entirety, and in particular the restraints imposed herein upon Xxxxxxx, are
reasonable both as to time and as to area. The parties additionally agree (I)
that the restraints imposed herein upon Xxxxxxx are necessary for the protection
of the business and goodwill of the Company; (ii) that the restraints
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imposed herein upon Xxxxxxx are not any greater than are reasonably necessary to
secure the business of the Company and the goodwill thereof; and (iii) that the
degree of injury to the public due to the loss of the service and skill of
Xxxxxxx upon enforcement of said restraints does not and will not warrant
nonenforcement of said restraints;
F. This section shall survive the termination of this agreement.
15. Change of Control. In the event any person, firm, corporation or
other business entity, at any time, by merger, consolidation, purchase or
otherwise, acquires a majority of the outstanding stock or substantially all of
the assets of the Company or it's subsidiary, First Community Bank, it will be
considered a Change of Control. In the event the Board deems it to be in the
best interests of the Company to consider a Change of Control, or recommendation
of the same to the Company's stockholders, the Board shall first offer Xxxxxxx
the opportunity to arrange such an acquisition on behalf of himself or in
conjunction with an investment group. The Board shall not be obligated to grant
a right of first refusal to Xxxxxxx. In the event a proposal is made by Xxxxxxx
and accepted by the Company, this Agreement shall terminate without further
obligation on the part of the Company upon consummation of that acquisition
transaction.
16. Directorship. The Company agrees to extend it's best efforts to
maintain Xxxxxxx as a Director on the Board of the Company and it's
subsidiaries. Xxxxxxx shall receive compensation as a Director in accordance
with Company policy. Current Company policy provides that employees of the
Company and it's subsidiaries are not entitled to receive compensation for
service on Board Committees.
17. Proceedings and Attorney's Fees. It is the intention of the
parties hereto that this Agreement, the performance hereunder, and all suits and
special proceedings hereunder be construed in accordance with, under, and
pursuant to the laws of the State of Washington. The substantially prevailing
party in any suits or special proceedings shall be entitled to reasonable
attorney's fees and costs of suit. The parties agree that the venue of any legal
proceedings involving, in whole or in part, any provision of this agreement
shall be in Xxxxxxxx County, Washington, regardless of which party initiates
such proceedings.
18. Notice. Any notice to be delivered under this Agreement shall be
given in writing and delivered, personally or by certified mail, postage
prepaid, addressed to the Company or to Xxxxxxx at their last known addresses.
19. Non-Waiver. No delay or failure by either party to exercise any
right under this Agreement shall constitute a waiver of that or any other right.
20. Severability. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be invalid or unenforceable, the remaining
provisions shall continue to be fully effective.
21. Entire Agreement. This Agreement represents the entire employment
agreement between the parties. This Agreement supersedes any other prior oral or
written employment agreement between the parties on the subject matter hereof.
This Agreement does not supersede
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either the Executive Supplemental Income Agreement or any other incentive
compensation agreement (including stock option agreements) entered into
separately by the parties to this Agreement. This Agreement may be modified,
altered, amended or changed only by a subsequent writing agreed to, and entered
into, by both Xxxxxxx and the Company.
22. Binding Effect. It is agreed that all covenants, terms, and
conditions of this Agreement shall extend, apply to, and firmly bind the heirs,
executors, administrators, assigns, and successors in interest of the respective
parties hereto as fully as the respective parties themselves are bound.
IN WITNESS WHEREOF, the parties have signed this Agreement on the day
and year first above written.
/s/ Xxx X. Xxxxxxx, Xx.
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Xxx X. Xxxxxxx, Xx.
FIRST COMMUNITY FINANCIAL GROUP
By: /s/ E. Xxxx XxXxxx
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E. Xxxx XxXxxx, Chairman
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