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EXHIBIT 10.4
FIRST COMMUNITY BANK OF WASHINGTON
EMPLOYMENT AGREEMENT
Xxxxxxx X. Xxxxxxx
This AGREEMENT is made and entered into the 11th day of September,
1996, by and between FIRST COMMUNITY BANK and/or assigns, a Washington Banking
Corporation (the "Company") and Xxxxxxx X. Xxxxxxx ("Xxxxxxx"). This AGREEMENT
will become effective upon the day (the "Effective Date") following the merger
(the "Merger") of Prairie Security Bank ("PSB") and First Community Bank.
WHEREAS, Xxxxxxx has agreed to become employed by the Company and
occupy the position of President; and
WHEREAS, Xxxxxxx desires to serve as President of the Company, and the
Company desires to obtain his services and to provide incentive for him to
remain with the company; it is, therefore, agreed:
1. Employment. Xxxxxxx agrees to serve the Company as President and
Director and to perform all services generally performed by a person in the
capacity of President. He will be appointed to serve on the Executive Committee
of the Company. Organizational charts and general executive responsibilities
(subject to change in the ordinary course of corporate planning) are attached
was Exhibit A. This position shall be an exempt position as defined by the Fair
Labor Standards Act (FLSA) and not subject to overtime compensation. The Company
and Chairman will nominate Xxxxxxx as a Director of First Community Financial
Group ("FCFG") and use their best efforts to have him appointed/elected to the
FCFG Board of Directors.
2. Duties. Xxxxxxx shall serve the Company faithfully and to the best
of his ability, devote his entire time and energy to his employment, and use his
best efforts and ability to promote the Company's interests. Xxxxxxx shall not
become involved with any business activity which may conflict with his duties
and responsibilities, without written approval of the Chairman. The Company
acknowledges that Xxxxxxx will continue private and family real estate
investments and holdings, but will not let those activities impact his
performance and responsibilities to the Company.
3. Compensation. The Company shall pay Xxxxxxx, as compensation for his
full-time services during the term of employment:
A. A salary of $120,000 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% on September 1, 1997. Twelve months after his 10%
salary increase and annually thereafter, Xxxxxxx will be entitled to raises at
least commensurate with raises granted other executive officers and in no event
xxxx Xxxxxxx' salary be reduced.
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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 five (5)
weeks.
C. Stock Options. On the Effective Date, FCFG will xxxxx Xxxxxxx
options to acquire 40,000 shares of FCFG common stock at the current market
price as of the Effective Date. Vesting for 20,000 shares will be over 5 years
with the first 4,000 shares vested after twelve full months of employment, 4,000
shares vested one year later, 4,000 one year later, 4,000 one year later, and
the remaining 4,000 vested one year later. The remaining 20,000 will be vested
or expire based upon the year end ROA of the Company, as shown in the following
table:
--------------------------- ----------- ------------ ----------- ----------- ------------ -----------
ROA 1.1 1.2 1.3 1.4 1.5 1.6
--------------------------- ----------- ------------ ----------- ----------- ------------ -----------
--------------------------- ----------- ------------ ----------- ----------- ------------ -----------
1997 Shares 500 1,000 2,000 3,000 4,000 5,000
--------------------------- ----------- ------------ ----------- ----------- ------------ -----------
--------------------------- ----------- ------------ ----------- ----------- ------------ -----------
1998 Shares 500 1,000 2,000 3,000 4,000 5,000
--------------------------- ----------- ------------ ----------- ----------- ------------ -----------
--------------------------- ----------- ------------ ----------- ----------- ------------ -----------
1999 Shares 500 1,000 2,000 3,000 4,000 5,000
--------------------------- ----------- ------------ ----------- ----------- ------------ -----------
--------------------------- ----------- ------------ ----------- ----------- ------------ -----------
2000 Shares 500 1,000 2,000 3,000 4,000 5,000
--------------------------- ----------- ------------ ----------- ----------- ------------ -----------
The Company may provide additional stock option opportunities to Xxxxxxx, from
time to time, at the discretion of the Board of Directors. Additional options
granted during the first two (2) years of employment will be commensurate with
the options granted to the Chairman during this same time period, based on a
ratio of options granted to total base salary; for example, if the Chairman's
salary is 50% more than Xxxxxxx' salary, Xxxxxxx would be entitled to be granted
two-thirds of the number of options granted to the Chairman. 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 in Control. In addition to
options granted above, all PSB options to Xxxxxxx will be converted in the
Merger into options for FCFG common stock, with the number of options and
exercise price adjusted by the merger ratio (as defined in the FCFG/PSB
Definitive Agreement). Xxxxxxx' vested portion of the PSB plan shall be deemed
vested in the FCFG Plan.
The above ROA performance scale for additional vested stock options shall be
adjusted for extraordinary income and expense items which may not have been
included within the annual budget. This would include such Items as special
investments sales, sales of unused assets, expansion or acquisition costs, etc.
X. Xxxxxxx will participate in an Incentive Program with annual
incentive as 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 net profits of the Company and FCFG. If Xxxxxxx were
employed by the Company for the entire year of 1996, his incentive opportunity
for each ROA category would have been:
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------------ ----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
1.1% 1.2% 1.3% 1.4% 1.5% 1.6% 1.7% 1.8% 1.9% 2.0%
------------ ----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
------------ ----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
$10,634 $15,519 $23,778 $33,531 $39,089 $44,262 $49,052 $53,459 $57,483 $61,124
------------ ----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
In 1996, Xxxxxxx shall participate in the above ROA incentive on a prorata
basis, based on the number of months he was employed in 1996. The Company
minimum target for 1996 is 1.35% ROA and the Company's budget is based on a 1.5%
ROA. The incentive for Xxxxxxx for the first two (2) years of employment will be
the same relationship as the current (1996) incentive relationship to the
Chairman; for example, if the Chairman's incentive is 50% more than Xxxxxxx',
Xxxxxxx would be entitled to incentive target equal to two-thirds of the
incentive targeted for the Chairman.
The following table shows the ROA Incentive Bonus for Xxxxxxx for 1997:
------------ ----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
1.1% 1.2% 1.3% 1.4% 1.5% 1.6% 1.7% 1.8% 1.9% 2.0%
------------ ----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
------------ ----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
$13,825 $20,176 $30,912 $43,591 $50,815 $57,540 $63,768 $69,497 $74,728 $79,461
------------ ----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
The above ROA performance scale for Incentive Bonus shall be adjusted for
extraordinary income and expense items which may not have been included within
the annual budget. This would include such items as special investments sales,
sales of unused assets, expansion or acquisition costs, etc.
E. The Executive Supplemental Income (ESI) Agreement for Xxxxxxx dated
November 1, 1992 along with the Income Agreement Addendum dated November 1, 1992
shall remain in place. Xxxxxxx agrees to waive accelerated vesting of benefits
under his ESI Agreement that may be triggered by the Merger, but otherwise will
have a vested and nonforfeitable right to the retirement benefits provided in
his ESI Agreement.
4. Other benefits. Xxxxxxx is entitled to the following benefits:
A. Medical, Dental, Vision, Life Insurance and Long-Term Disability
insurance as provided to regular full-time employees of the Company;
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. The Company acknowledges and agrees that it
may be advisable for Xxxxxxx to join clubs and/or professional organizations and
for the Company to pay the membership fees therefore, all as may hereafter be
determined appropriate by the Chairman based on proposals therefore submitted by
Xxxxxxx. Xxxxxxx will be permitted to continue holding IBAA positions currently
held and remain active in the financial industry as an integral part of his
responsibilities. Xxxxxxx shall retain his current bank-owned vehicle.
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Operating expenses will be paid by the bank until July 1999. Thereafter, the
Company will provide an automobile allowance of $500.00 each month in lieu of
providing a Company owned vehicle.
6. Working facilities. Xxxxxxx shall be furnished with such working
facilities as are reasonably required by a President to perform his duties.
7. Term of Employment.
A. This Agreement will terminate after sixty (60) months of employment,
and may be terminated prior to that date by either party with 30 days notice.
B. If this Agreement is terminated (i) by the Company without "cause"
(as defined in Section 8, below) or (ii) by Xxxxxxx for "good reason" (as
defined in paragraph 7.C below), 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 his sixtieth (60th) month after the
Effective Date,
(ii) fully vested rights to all stock options granted or
awarded under the Plan, including any "PSB options" (all option will expire if
not exercised within three (3) months of termination or such longer period as
may be provided under the terms of the Plan or amendments to the Plan), and paid
benefits under the ESI Agreement, and
(iii) if termination occurs later than 36 months after the
Effective Date, payment under Section 11.C for any part of the "noncompete
period" that continue after the date sixty (60) months after the Effective Date.
C, Xxxxxxx has "good reason" to terminate this Agreement if
action taken by the Company's Chairman or Board of Directors effectively
withdraws from Xxxxxxx the authority and responsibility customarily associated
with the position of President of a bank subsidiary of a holding company.
D. 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 11.
8. Cause. Notwithstanding any provision of this Agreement, the benefits
payable on termination which are provided in paragraph 7 and paragraph 11.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), and such failures continue for a period of at least sixty (60) days
after a written demand for performance to Xxxxxxx by a duly authorized member or
representative of the board of directors of the Company that specifically
identifies the manner in which it is alleged that Xxxxxxx has not substantially
performed such duties, (b) is adjudged guilty of any crime
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involving a breach of his fiduciary duties to the Company or involving moral
turpitude, or (c) is adjudged guilty of any felony or (d) willfully and
continually fails to comply with any law, rule, or regulation (other than
traffic violations or similar minor offenses) or any final cease and desist
order of any government 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.
9. Compliance. Xxxxxxx agrees to provide his best efforts to comply
with all rules and regulations of the Federal Deposit Insurance Corporation and
the State of Washington Department of Financial Institutions.
10. 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.
11. Restrictive Covenant.
A. If the Company terminates Xxxxxxx employment without "cause," or
Xxxxxxx terminates for "good reason" as defined in Section 7.C 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,
before the later of sixty (60) months after the Effective Date or twenty-four
(24) months after the date of termination (the "Noncompete Period"), be employed
or act in any capacity, either directly or indirectly, or by or far 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 its affiliates conduct business at the time of termination. For purposes of
this Agreement, the term "participate" includes, without
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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.
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 (24 months in subparagraph A or 12
months in subparagraph B), and if Xxxxxxx is not receiving compensation from the
Company, the Company shall pay Xxxxxxx 50% of his base salary. 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 50% of his 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.
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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 a 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 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.
12. Directorship. The Company agrees to extend it's best efforts to
maintain Xxxxxxx as a Director on the Board of the Company and as a Director on
the Board of FCFG. Xxxxxxx shall be compensated for his participation as a
member of the Board, on the same basis as other employee directors are so paid.
Employee directors are not compensated for attending and participating in
meetings of committees of the Board.
13. 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.
14. 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.
15. 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.
16. 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.
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17. Entire Agreement. This Agreement represents the entire agreement of
the parties. This Agreement supersedes any prior oral or written agreements
between the parties on the subject matter hereof. It may be modified only by a
subsequent agreement in writing signed by the parties.
18. 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/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
FIRST COMMUNITY BANK
By:/s/ Xxx X. Xxxxxxx
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Xxx X. Xxxxxxx, Chairman
