EXHIBIT 10.14
EMPLOYMENT AGREEMENT
XXXXX X. XXXXXXX
THIS EMPLOYMENT AGREEMENT ("Agreement") is made this 21st day of August,
2006, by and between WSB FINANCIAL GROUP, INC. and WESTSOUND BANK (hereinafter
jointly referred to as "Westsound") and XXXXX X. XXXXXXX ("Xxxxxxx") and will
become effective upon execution. Westsound and Xxxxxxx are sometimes
collectively referred to herein as "the Parties."
RECITALS
WHEREAS, Xxxxxxx currently serves as the President and Chief Executive
Officer of Westsound; and
WHEREAS, the Parties now wish to formalize Xxxxxxx'x employment with
Westsound;
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Term. Xxxxxxx'x term of employment ("Term") under this Agreement shall
commence on the date of execution of this Agreement and continue until
terminated as provided in the Termination provision of this Agreement.
2. Duties. Xxxxxxx is engaged as President and Chief Executive Officer of
Westsound Bank and WSB Financial Group, Inc., and is responsible for the overall
operation and conduct of Westsound's business, in accordance with the laws of
the State of Washington and the federal government and pursuant to the general
guidelines and directions as established from time to time by the Board of
Directors of Westsound (the "Board"). Subject to any required approval by the
shareholders of Westsound, the Board of Directors of Westsound Bank and WSB
Financial Group, Inc. shall appoint or nominate and recommend Xxxxxxx for
election as a member of their respective Boards of Directors and, if so
appointed or elected, Xxxxxxx shall serve in that capacity as long as he is
employed as the President and Chief Executive Officer of Westsound Bank and WSB
Financial Group, Inc.
3. Exclusive Services and Best Efforts. Xxxxxxx shall render services
solely on behalf of Westsound, and in no event shall he render services directly
to a customer of Westsound for the individual gain of Xxxxxxx, without
Westsound's prior written consent. Xxxxxxx shall devote his full time, attention
and energies, during regular business hours, to the business of Westsound.
Xxxxxxx further agrees that he shall perform any and all duties to the best of
his abilities. In addition to any other responsibilities which Westsound may
from time to time require him to perform, Xxxxxxx shall:
(a) Use his diligent efforts to promote the business and further the
goals of Westsound;
(b) Conduct his business and regulate his habits so as to maintain and
increase the goodwill and reputation of both Westsound and its business and to
abide by all codes of ethics and other professional duties which are binding
upon or applicable to general good business practices;
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(c) Not render to others, during his employment with Westsound,
services of any kind or promote, participate or engage in any other business
activity which would interfere with the performance of his duties under this
Agreement, including, without limitation, providing consulting services or
otherwise engaging in business with any person or entity which directly or
indirectly competes with Westsound, unless he first obtains Westsound's prior
written consent to engage in such outside activities.
Although Xxxxxxx is required to devote his entire time, attention and
energies to the business of Westsound and cannot, during the term of this
Agreement, be engaged in any other business activity which interferes with his
duties hereunder, whether or not such business activity is pursued for gain,
profit or other pecuniary advantage, this shall not be construed as preventing
Xxxxxxx from investing his assets in such manner as will not require any
services on his part in the operation of the affairs of the companies in which
such investments are made, or in making other investments which do not interfere
with his duties under this Agreement.
4. Compensation. Westsound shall pay Xxxxxxx, as compensation for his
full-time services during the Term of Employment, the following:
(a) Base Compensation. Xxxxxxx will receive a monthly salary, the
amount of which will be set annually by the Board ("Base Compensation"), payable
in accordance with Westsound's regular payroll schedule. Base Compensation will
be reviewed annually by the Compensation Committee. Xxxxxxx will receive no
additional compensation for serving as a member of the Board of Directors of
Westsound or WSB Financial Group, Inc.
(b) Bonus. Xxxxxxx shall receive an annual bonus set by the
Compensation Committee ("Bonus"). In determining the amount of the Bonus, if
any, the Compensation Committee shall consider earnings, asset quality, factors
affecting shareholder value and such other factors as the Compensation Committee
shall deem appropriate.
(c) Benefit Plans. During the Term, Xxxxxxx shall be entitled to
participate in any and all employee benefit plans, including, but not be limited
to, 401(k) Plan, Stock Option Plan, and employee welfare and health benefit
plans which may be established by Westsound from time to time for the benefit of
all executives of Westsound. Xxxxxxx shall be required to comply with the
conditions attendant to coverage by such plans and shall comply with and be
entitled to benefits only in accordance with the terms and conditions of such
plans as they may be amended from time to time.
5. Business Expenses. Westsound will pay or reimburse Xxxxxxx for
reasonable and necessary business expenses incurred by Xxxxxxx, which are
directly related to the performance of his duties of employment, including
travel, professional memberships and professional development, subject to
documentation by Xxxxxxx and approval of the Chairman of the Audit Committee.
Westsound will pay Xxxxxxx'x current monthly club membership dues at the Kitsap
Golf and Country Club.
6. Automobile. Westsound will provide Xxxxxxx the use of a bank-owned
vehicle for use incident to his duties as President and Chief Executive Officer
of Westsound. Xxxxxxx shall reimburse Westsound from time to time for personal
use of the automobile pursuant to the rules and regulations of the Internal
Revenue Code.
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7. Working Facilities. Xxxxxxx shall be furnished with such working
facilities as are reasonably required by Xxxxxxx to perform his duties as
President and Chief Executive Officer of Westsound, which working facilities
shall include, but not be limited to, an office and secretarial and staff
support.
8. Termination. This Agreement may be terminated by Westsound upon written
notice to Xxxxxxx, and by Xxxxxxx upon 90 days written notice to Westsound. If
Xxxxxxx resigns from Westsound, he will receive only his compensation, benefits
earned and expenses reimbursable through the date this Agreement is terminated.
If Xxxxxxx'x employment is terminated by Westsound, he shall receive the
compensation provided hereafter.
(a) Termination Without Cause. If Xxxxxxx'x employment is terminated
by Westsound, except for cause as provided in paragraph 8(b), Xxxxxxx shall
receive a severance benefit equal to his Base Compensation plus Bonus before
salary deferrals over the twelve (12) months prior to termination. Such payment
shall, at the option of Westsound, be made in a lump sum or in accordance with
Westsound's regular payroll schedule.
(b) Termination for Cause. The compensation payable on termination as
provided in paragraph 8(a) shall not be payable in the event Xxxxxxx'x
employment is terminated for cause. Termination shall be determined to be for
cause only in the event: (i) Xxxxxxx is convicted of a felony or crime involving
moral turpitude, or charged with a felony or crime involving moral turpitude if
the Board, in its sole discretion, determines that the adverse
publicity/notoriety stemming from such charge will make it difficult for Xxxxxxx
to perform his duties and/or Westsound to carry on its normal business
activities; or (ii) Xxxxxxx fails or refuses, after written request, to comply
with any material policies adopted by the Board; (iii) Xxxxxxx is terminated for
fraud, embezzlement, or willful misconduct (including, but not limited to,
violation of Westsound's anti-discrimination and harassment policies); or (iv)
Xxxxxxx is removed from office by the Board in order to comply with a
requirement, request or recommendation from the Supervisor of Banking for the
State of Washington or the Federal Deposit Insurance Corporation ("FDIC").
(c) Death or Disability. This Agreement will terminate immediately
upon Xxxxxxx'x death. If Xxxxxxx is unable to perform his duties and obligations
under this Agreement for an aggregate period of ninety (90) days as a result of
a physical or mental disability and cannot continue to perform his duties with
reasonable accommodation, the Board may terminate this Agreement. If termination
occurs due to Xxxxxxx'x death, his estate will be entitled to receive the
compensation, benefits earned, and expenses reimbursable through the date this
Agreement is terminated. If termination occurs due to Xxxxxxx'x disability, he
shall continue to receive his Salary until payments under Westsound's long-term
disability plan commence, or in the event Westsound has no long-term disability
plan on the date of disability, Xxxxxxx'x salary shall continue for a period of
six (6) months.
9. Change of Control. If there is a Change of Control of Westsound as
hereinafter defined, all Xxxxxxx'x stock options shall become fully vested upon
the effective date of the Change of Control. If Xxxxxxx leaves the employment of
Westsound, whether voluntarily or involuntarily, within twelve (12) months after
such Change of Control, Xxxxxxx shall receive an amount equal to two (2) times
his Base Compensation plus Bonus before salary deferrals over the twelve (12)
month period prior to the Change of Control, reduced by any amount received
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under paragraph 8. "Change of Control" as used herein will be deemed to have
occurred when there is:
(a) Any individual, corporation (other than Westsound or an affiliated
entity), partnership, trust, association, pool, syndicate or any other entity or
any group of persons acting in concert becomes the beneficial owner, as that
concept is defined in Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, of securities of Westsound
possessing fifty percent (50%) or more of the voting power for the election of
Directors of Westsound;
(b) There shall be consummated any consolidation, merger or other
business combination involving Westsound or the securities of Westsound in which
holders of voting securities of Westsound immediately prior to such consummation
own, as a group, immediately after such consummation, voting securities of
Westsound (or, if Westsound does not survive such transaction, voting securities
of the corporation surviving such transaction) having less than sixty percent
(60%) of the total voting power in an election of Directors of Westsound (or
such other surviving corporation);
(c) There shall be consummated any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of Westsound (on a consolidated basis) to a
party which is not controlled by or under common control with Westsound.
10. Federal Regulatory Provisions.
(a) If Xxxxxxx is suspended and/or temporarily prohibited from
participating in the conduct of Westsound's affairs by a notice served under
section 8 (e)(3) or (g)(1) of Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(3) and (g)(1)) Westsound's obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, Westsound may in its discretion (i) pay
Xxxxxxx all or part of the compensation withheld while its obligations under
this Agreement were suspended, and (ii) reinstate (in whole or in part) any of
its obligations which were suspended.
(b) If Xxxxxxx is removed and/or permanently prohibited from
participating in the conduct of Westsound's affairs by an order issued under
section 8 (e)(4) or (g)(1) of the U.S.C. 1818 (e)(4) or (g)(1)), all obligations
of Westsound under this Agreement shall terminate as of the effective date of
the order, but vested rights of the Parties shall not be affected.
(c) If Westsound is in default (as defined in section 3(x)(1) of the
Federal Deposit Insurance Act), all obligations under this Agreement shall
terminate as of the date of default, but this paragraph (c) shall not affect any
vested rights of the Parties.
(d) All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is necessary to the
continued operation of Westsound:
(i) By the Director of the Federal Deposit Insurance Corporation
("Director") or his or her designee, at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or
on behalf of Westsound under the authority contained in 13(c) of the
Federal Deposit Insurance Act; or
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(ii) By the Director or his or her designee, at the time the
Director or his or her designee approves a supervisory merger to resolve
problems related to operation of Westsound or when Westsound is determined
by the Director to be in an unsafe or unsound condition.
11. Confidentiality. Xxxxxxx acknowledges that he will have access to
certain proprietary and confidential information of Westsound and its clients.
Xxxxxxx will not, after signing this Agreement, including during and after its
Term, use for his own purposes or disclose to any other person or entity any
confidential information concerning Westsound or its business operations or
customers, unless: (i) Westsound consents to the use or disclosure of said
confidential information, (ii) the use or disclosure is consistent with
Xxxxxxx'x duties under this Agreement, or (iii) disclosure is required by law or
court order.
12. Competition Restriction. During the Term and for the period for which
Xxxxxxx receives compensation under paragraph 8(a), and for twenty-four (24)
months after termination of his employment, if Xxxxxxx receives compensation
under paragraph 8(a) or 9, he shall not become or serve as an officer, director,
founder or employee of any financial institution with its main office in Kitsap,
Xxxxxxxxx, Xxxxx or Clallam Counties, or any other financial institution which,
in the judgment of the Board, is in substantial competition with Westsound,
unless Xxxxxxx has first obtained the Board's written consent. In the event
Xxxxxxx breaches this condition, which breach is not corrected within fifteen
(15) days of notice to Xxxxxxx of such breach, Xxxxxxx shall forfeit all right
to receive all benefits or other payments remaining unpaid on the date of any
such breach, and shall refund any payments received pursuant to paragraph 8(a)
or 9 hereof, and all unexercised stock options which will be forfeited.
13. No Solicitation. During the Term and for the period for which Xxxxxxx
receives compensation under paragraph 8(a), and for twenty-four (24) months
after termination of his employment, if Xxxxxxx receives compensation under
paragraph 8(a) or 9, he will not, directly or indirectly, solicit or attempt to
solicit: (i) any employees of Westsound to leave their employment, or (ii) any
customers of Westsound to remove their business from Westsound to participate in
any manner in a competing business ("Competing Business"). "Competing Business"
means any financial institution or trust company that competes with or will
compete with Westsound in Kitsap, Xxxxxxxxx, Xxxxx or Clallam Counties, or any
start-up or other financial institution or trust company in Kitsap, Xxxxxxxxx,
Xxxxx or Clallam Counties.
14. Return of Bank Property. If and when Xxxxxxx ceases, for any reason, to
be employed by Westsound, Xxxxxxx must return to Westsound all keys, pass cards,
identification cards and any other property of Westsound. At the same time,
Xxxxxxx also must return to Westsound all originals and copies (whether in hard
copy, electronic or other form) of any documents, drawings, notes, memoranda,
designs, devices, diskettes, tapes, manuals, and specifications which constitute
proprietary information or material of Westsound. The obligations in this
paragraph include the return of documents and other materials which may be in
Xxxxxxx'x desk at work, in Xxxxxxx'x car or place of residence, or in any other
location under Xxxxxxx'x control.
15. Enforcement of Confidentiality and Non-Competition Covenants. Westsound
and Xxxxxxx stipulate that, in light of all of the facts and circumstances of
the relationship between them, the covenants referred to in paragraphs 10, 12,
13, and 14 above, including, without
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limitation, their scope, duration and geographic extent, are fair and reasonably
necessary for the protection of Westsound's confidential information, goodwill
and other protectable interests. If a court of competent jurisdiction should
decline to enforce any of those covenants and agreements, Xxxxxxx and Westsound
request the court to reform these provisions to restrict Xxxxxxx'x use of
confidential information and Xxxxxxx'x ability to compete with Westsound, to the
maximum extent, in time, scope of activities, and geography, as the court finds
enforceable.
Xxxxxxx acknowledges that Westsound will suffer immediate and irreparable
harm that will not be compensable by damages alone, if Xxxxxxx repudiates or
breaches any of the provisions in paragraphs 10, 12, 13, and 14 above or
threatens or attempts to do so. For this reason, under these circumstances,
Westsound, in addition to and without limitation of any other rights, remedies
or damages available to it at law or in equity, will be entitled to obtain
temporary, preliminary and permanent injunctions in order to prevent or restrain
the breach, and Westsound will not be required to post a bond as a condition for
the granting of this relief.
16. Adequate Consideration. Xxxxxxx specifically acknowledges the receipt
of adequate consideration for the covenants contained in paragraphs 10, 12, 13,
and 14 above and that Westsound is entitled to require him to comply with these
paragraphs. These paragraphs will survive termination of this Agreement. Xxxxxxx
represents that if his employment is terminated, whether voluntarily or
involuntarily, he has the experience and capabilities sufficient to enable him
to obtain employment in areas which do not violate this Agreement and that
Westsound's enforcement of a remedy by way of injunction will not prevent
Xxxxxxx from earning a livelihood.
17. No Employee Contract Rights. Nothing contained in this Agreement shall
be construed to abrogate, limit or affect the powers, rights and privileges of
the Board to remove Xxxxxxx as President or Chief Executive Officer of
Westsound, with or without the cause.
18. Regulatory Agencies. The Parties fully acknowledge and recognize that
Westsound and Xxxxxxx (insofar as he conducts Westsound's business) are
regulated and governed by the Division of Banks for the State of Washington and
the FDIC. In the event the Division of Banks, the FDIC or any other governmental
agency with authority to regulate Westsound objects to, and requires
modification of, any of the terms of this Agreement, the Parties agree that they
shall abide by and modify the terms of this Agreement to comply with any and all
requirements of that governmental agency.
19. Dispute Resolution. The Parties agree to attempt to resolve all
disputes arising out of this Agreement by mediation. Any party desiring
mediation may begin the process by giving the other party a written Request to
Mediate, describing the issues involved and inviting the other party to join
with the calling party to name a mutually agreeable mediator and a timeframe for
the mediation meeting. The Parties and mediator may adopt any procedural format
that seems appropriate for the particular dispute. The contents of all
discussions during the mediation shall be confidential and non-discoverable in
subsequent arbitration or litigation, if any. If the Parties can, through the
mediation process, resolve the dispute(s), the agreement reached by the Parties
shall be reduced to writing, signed by the Parties, and the dispute shall be at
an end.
If the result of the mediation is a recognition that the dispute cannot be
successfully mediated, or if either party believes mediation would be
unproductive or too slow, then either
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party may seek to resolve the dispute in accordance with the procedures
established by Judicial Arbitration and Mediation Services, Inc.
The award rendered by the arbitrator (whether through Judicial Arbitration
and Mediation Services, Inc. or otherwise) shall be final, and judgment may be
entered upon it in accordance with applicable law in any court having
jurisdiction thereof.
The arbitrator shall allocate the costs charged by Judicial Arbitration and
Mediation Services, Inc., or other arbitrator as the case may be, for the
arbitration between the Parties in a manner which the arbitrator considers
equitable. It is agreed that the arbitrator shall award to the prevailing or
substantially prevailing party all fees incurred by such party with regard to
such arbitration, including reasonable legal and accounting fees. If the
arbitrator determines that there is no prevailing or substantially prevailing
party, the legal and accounting fees shall be the responsibility of each party.
20. Governing Law. All proceedings will be held at a place designated by
the arbitrator in Kitsap County, Washington. The arbitrator, in rendering a
decision as to any state law claims, will apply Washington law.
21. Exception to Arbitration. Notwithstanding the above, if Xxxxxxx
violates paragraphs 10, 12, 13, and 14 above, Westsound will have the right to
initiate the court proceedings described in paragraph 15 above, in lieu of an
arbitration proceeding. Westsound may initiate these proceedings wherever
appropriate within Washington state, but Xxxxxxx will consent to venue and
jurisdiction in Kitsap County, Washington.
22. Internal Revenue Code Section 280G. If any severance benefit paid to
Xxxxxxx constitutes an "excess parachute payment" under Section 280G of the
United States Internal Revenue Code, said severance benefit or pay shall be
reduced by the amount of the tax deduction disallowed to Employer as result of
such excess parachute payment.
23. Execution of Release. Any payment to Xxxxxxx under paragraph 8 and/or 9
hereof shall be conditioned upon receipt by Westsound of an executed release of
all claims against Westsound, satisfactory to Westsound and its counsel.
24. 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 Westsound or to Xxxxxxx at their last known address.
25. Independent Legal Counsel. Xxxxxxx acknowledges that he has had the
opportunity to review and consult with his own personal legal counsel regarding
this Agreement.
26. Non-Waiver. No delay or failure by either party to exercise any right
under this Agreement, and no partial single exercise of that right, shall
constitute a waiver of that or any other right.
27. 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.
28. Entire Agreement. This Agreement represents the entire agreement of the
Parties. This Agreement supersedes any prior oral or written agreement between
the Parties on the
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subject matter hereof. This Agreement may be superseded by another written
agreement entered into between Xxxxxxx and Westsound on mutually agreeable
terms, provided such agreement expressly by its terms supersedes this Agreement.
The offer by Westsound to enter into any such agreement, or the entering into
such agreement, shall not be considered to have terminated this Agreement,
triggering the payment of benefits under paragraph 8 hereof.
29. 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. It is
specifically understood that in the event of Xxxxxxx'x death prior to the full
payment of any benefit to which he is entitled under this Agreement, such
payment(s) shall be made to his spouse and/or heirs as the case may be.
IN WITNESS WHEREOF, the Parties have signed this Agreement on the day and
year first above written.
WESTSOUND BANK
By: /s/ Xxxxx X. Xxxx /s/ Xxxxx X. Xxxxxxx
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Title: Chairman of the Board XXXXX X. XXXXXXX
WSB FINANCIAL GROUP, INC.
By: /s/ Xxxxx X. Xxxx
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Title: Chairman of the Board
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