FIRST COMMUNITY BANK OF WASHINGTON
LACEY, WASHINGTON
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
THIS AGREEMENT is effective on the1st day of April, 1992, and is hereby
modified on the 5th day of November, 1999, by and between FIRST COMMUNITY BANK
OF WASHINGTON, LACEY, WASHINGTON, a state banking association (the "Bank"), and
XXX X. XXXXX (the "Officer").
W I T N E S S E T H :
WHEREAS, the Officer is currently employed by the Bank in an executive
capacity;
WHEREAS, the Bank 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 Bank;
WHEREAS, the Bank wishes to retain the Officer in order to prevent the
substantial financial loss which the Bank 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 Bank;
WHEREAS, the Bank 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;
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; and
WHEREAS, the Bank 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 Bank.
1.02. "BENEFICIARY" shall mean the person or persons the Officer has
most recently designated on a duly executed beneficiary form received by the
Bank; 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 Bank's
accounting records in order to record the Bank'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 Bank is sold, either through the sale of a
Controlling Interest in the Bank's voting stock or through the sale of
substantially all of the Bank's assets, to a party not having a Controlling
Interest in the Bank'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 when the transaction is
legally consummated.
1.08. "COMPENSATION" shall mean, for purposes of calculating
benefits under this Agreement, base compensation.
1.09. "CONTROLLING INTEREST" shall mean ownership, either directly
or indirectly, of more than thirty percent (30%) of the voting stock of the
Bank or a parent company of the Bank 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 Bank or any other
employer controlled by or under common control with the Bank. 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%) on the date of
commencement of Benefit payments under this Agreement. In the event eight
percent (8%) 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, or regulation (other than traffic violations or similar
offenses), final cease-and-desist order, material breach of any provision of
this Agreement, or gross negligence in matters of material importance to the
Bank. 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 Bank 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 Bank'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 Bank 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 Bank 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 Bank 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 Bank 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 Bank agrees that if the Officer attains Retirement Age
while covered by the provisions of this Agreement, the Retirement Benefit
shall be fully vested and nonforfeitable. 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 Bank 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 nonforfeitable vesting in
the Benefit Accrual Account 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. The Bank 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 and nonforfeitable. 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 Bank agrees that if the Officer dies after commencement of the
Disability Benefit and before Retirement Age, the Bank shall pay to the
Officers' Beneficiary the monthly Pre-Retirement Death Benefit determined
under Paragraph 2.01 of this Agreement, 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. 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 Bank 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.
5.02. 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 Bank'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 Bank'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.
5.03. 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 Bank during employment with the Bank 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.
5.04. CHANGE IN CONTROL.
The Bank agrees that upon a Change in Control the Officer
shall be fully vested in the Benefit Accrual Account and the Pre-Retirement
Death Benefit. Mutual written consent of the Officer and the Bank,
successors, and assigns shall be required to amend, modify, or revoke this
Agreement on the date of or on any date subsequent to the Change in Control.
The Bank agrees, prior to the effective date of a Change in
Control, to transfer to the ESI Trust the Benefit Accrual Account and any and
all assets that the Bank may have acquired in connection with the liabilities
it has assumed under this Agreement. The Bank, successors, and assigns agree
to continue the Benefit Accrual Period and the Pre-Retirement Death Benefit.
5.05. TERMINATION OF EMPLOYMENT.
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 Bank, 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 5.01 and 5.02 shall be in full force and effect.
5.06. ACCELERATION OF PAYMENT.
In the event the Officer and the Bank, 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 Bank 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 Bank,
determined under generally accepted accounting principles. Upon acceleration
of payment, the Officer agrees to be bound by a non-competition agreement for
one (1) year from the date of termination of employment. The non-competition
agreement will provide that the Officer shall not engage in any activity or
similar employment capacity for any business enterprise which competes to a
substantial degree with the
Bank.
ARTICLE VI
FUNDING
6.01. The Bank's obligations under this Agreement shall be an
unfunded and unsecured promise to pay. The Bank shall not be required under
any circumstances to fund its obligations under this Agreement. The Bank
may, however, in its sole and absolute discretion, elect to fund this
Agreement in whole or in part.
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 Bank. The Officer or the
Beneficiary shall only have the right to receive from the Bank those payments
as specified under this Agreement. The Officer or the Beneficiary shall have
no rights or interests whatsoever in any assets of the Bank. Any asset used
or acquired by the Bank in connection with the liabilities the Bank 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 Bank. It shall be,
and remain, a general, unpledged, and unrestricted asset of the Bank.
ARTICLE VIII
ACCELERATION OF PAYMENT
8.01. The Bank 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 Bank 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 Bank 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 Bank.
ARTICLE XI
AMENDMENT/REVOCATION
11.01. Notwithstanding the provisions of Article XII below, the Bank in
its sole discretion may amend, modify, or revoke this Agreement in whole or in
part at any time except under the following circumstances:
(1) The Officer has attained Retirement Age, and is entitled to
payment of the Retirement Benefit pursuant to Paragraph 3.01;
(2) The Officer has been granted Early Retirement, and is entitled
to payment of the Early Retirement Benefit pursuant to
Paragraph 3.02;
(3) The Officer has been declared Disabled and is entitled to
payment of the Disability Benefit pursuant to Article IV;
(4) The Officer has died and the Officer's Beneficiary is entitled
to payment of the Pre-Retirement Death Benefit pursuant to
Article II; or
(5) The Board of Directors has entered into discussions which
result in a Change in Control.
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
Bank. 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 Bank 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 Bank to have incurred
expense for such person otherwise entitled to payment, in such manner
and proportions as the Bank may determine. Any such payment shall be a
complete discharge of the liabilities of the Bank 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 Bank 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 Bank and the Officer. Furthermore,
the Officer or the Beneficiary shall only have recourse against the Bank 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 Bank.
IN WITNESS WHEREOF, the parties acknowledge receipt of an executed
original of this Agreement signed this 5th day of November, 1999.
/s/ Xxx X. Xxxxx
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XXX X. XXXXX
FIRST COMMUNITY BANK OF WASHINGTON
LACEY, WASHINGTON
By: /s/ Xxxxx X. Xxxxxxx Executive Vice President
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Title
FIRST COMMUNITY FINANCIAL GROUP, INC.
LACEY, WASHINGTON
ADDENDUM TO
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
This addendum to the Executive Supplemental Income Agreement covering XXX X.
XXXXX 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 $75,000
Years 2-15 $37,500
ANNUAL RETIREMENT BENEFIT:
$27,569 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/ Xxx X. Xxxxx
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XXX X. XXXXX
FIRST COMMUNITY FINANCIAL GROUP, INC.
LACEY, WASHINGTON
By: /s/ Xxxxx X. Xxxxxxx Executive Vice
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President
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Title
