Exhibit 10

 

**FIRST COMMUNITY FINANCIAL GROUP**

**EMPLOYMENT AGREEMENT**

 

THIS EMPLOYMENT AGREEMENT (“Agreement”), signed November 13, 2001,between FIRST COMMUNITY FINANCIAL GROUP and FIRST COMMUNITY BANK OF WASHINGTON(collectively, the “Bank”) and JON M. JONES (“Executive”) takes effect on theeffective date of this document (“Effective Date”).

RECITALS

A.            Executive ispresently the Bank’s Chief Lending Officer. The Bank wishes to continue Executive’s employment in that capacityunder the terms and conditions of this Agreement.

B.            Under the terms ofthis Agreement, Executive wishes to continue his employment with the Bank (orits successor, if any) on a full-time basis for the period provided in thisAgreement.

AGREEMENT

                The parties agree as follows.

**1.**             **Employment.**  TheBank will continue Executive’s employment during the Term, and Executiveaccepts employment by the Bank on the terms and conditions set forth in thisAgreement.  Executive’s title will be“Chief Lending Officer.”

**2.**             **Effective Date and Term.**

(a)          Effective Date.  This Agreement is effective as of September5, 2001.

(b)         Term.  The term of this Agreement (“Term”) is twoyears, beginning on the Effective Date and will be automatically extended oneadditional year on the anniversary of the effective date.

**3.**             **Duties.**  Executivewill faithfully and diligently perform the duties assigned to Executive fromtime to time by the Bank’s Chairman or President, consistent with the dutiesthat have been normal and customary to Executive’s position.  Executive will use his best efforts toperform his duties and will devote full time and attention to theseduties.  Executive will report directlyto the Bank’s President.  The Bank’sboard of directors may, from time to time, modify Executive’s title orperformance responsibilities to accommodate management succession, as well asany other management objectives of the Bank.

**4.**             **Salary.**  Initially,Executive will receive a salary of $108,000 per year, to be paid in accordancewith the Bank’s regular payroll schedule.

**5.**             **Incentive Compensation.** The Bank’s board of directors, will determine the amount of bonus, ifany, to be paid by the Bank to Executive for each year during the Term.  In making this determination, the Bank’sboard of directors will consider factors such as Executive’s performance of hisduties and the safety, soundness, and profitability of the Bank.  Executive’s bonus, if any, will reflectExecutive’s contribution to the performance of the Bank during the year.

**6.**             **Income Deferral and Benefits.**  Subject to eligibility requirements and in accordance with andsubject to any policies adopted by the Bank. Executive will be entitled to receive benefits (including stock optionsand participation in the Executive Supplemental Income Plan) similar to thoseoffered to other executive officers of the Bank and its subsidiaries with position and duties comparable tothose of Executive.

 

**7.             BusinessExpenses.** The Bank will reimburse Executive for ordinary and necessary expenses(including, without limitation, travel, entertainment, and similar expenses)incurred in performing and promoting the Bank’s business.  Executive will present from time to timeitemized accounts of these expenses, subject to any limits of Bank policy or therules and regulations of the Internal Revenue Service.

**8.             Changein Control. **

(a)          Definition of“Change in Control.”  “Change inControl” of the Bank shall be deemed to have occurred if (i) any person, firm,corporation or other business entity, at any time, by merger, consolidation,purchase or otherwise, is or becomes the “beneficial owner” directly orindirectly, of securities of the Bank representing 50% or more of the combinedvoting power of the Bank’s then outstanding securities; or (ii) an agreement isapproved for the sale or disposition of all or substantially all of the Bank’sassets; or (iii) during any period of two consecutive years, individuals who atthe beginning of such period constitute the Board of Directors of Company ceasefor any reason to constitute at least a majority thereof unless the election,or the nomination for election by stockholders, of each new director wasapproved by a vote of a least two-thirds of the directors then still in officewho were directors at the beginning of the period.

(b)          Definitionof “Change in Control Period.” “Change in Control Period” shall be defined as any time during a periodbeginning six months prior to the earlier of a public announcement of a ChangeIn Control if public announcement is made, or the date on which the Board ofDirectors knows, or should reasonably know of an impending Change in Control,and ending twenty four (24) months subsequent to the consummation of a Changein Control.

(c)            Stock Options.  Upon a change in control rights to allunexpired stock options granted to Executive will fully and immediatelyvest.  If terminated within the changein Control Period, but prior to the change in Control, any options that mayhave expired as a result of the termination will be reinstated upon theconsummation of the Change in Control such that the option or the related rightas defined in the option plan may be exercised in accordance with the plan.

 

(d)          Salary Continuation Payment.  Upon Termination on Change in Control,Executive will receive cash payments for a period of 24 months equal to thehighest monthly base salary he has received in any of the 24 months prior totermination.

**9.             Termination.**

(a)          Termination ByBank for Cause.  If, before the endof the Term, the Bank terminates Executive’s employment for Cause or Executiveterminates his employment without Good Reason, the Bank will pay Executive thesalary earned and expenses reimbursable under this Agreement incurred throughthe date of Executive’s termination.  Atthe election of the Bank, Executive will be subject to the noncompetition andnonsolicitation requirements as described in Section 13 and will receivenoncompetition compensation as described in Section 13e.

(b)         Termination By Bankor Executive.  If before the end ofthe Term, the Bank terminates Executive’s employment without Cause or Executiveterminates his employment for Good Reason (defined below), the Bank will payExecutive an amount equal to one year’s salary.  Additionally, Executive will be subject to the noncompetition andnonsolicitation requirements of Section 13 for 12 months followingtermination and will receive noncompetition compensation as described inSection 13e.

(c)            Death or Disability.  This Agreement terminates (1) if Executivedies or (2) if Executive is unable to perform his duties and obligations underthis Agreement for a period of 90 days as a result of a physical or mentaldisability arising at any time during the term of this Agreement, unless withreasonable accommodation Executive could continue to perform his duties under thisAgreement and making these accommodations would not require the Bank to expendany funds.  If termination occurs underthis Section 8(c), Executive or his estate will be entitled to receive only thecompensation and benefits earned and expenses reimbursablethrough the date this Agreement terminated.

(d)           TerminationRelated to a Change in Control.  Inthe event that any person extends any proposal or offer which is intended to ormay result in a Change in Control, Executive shall, at the Company’s request,assist the Company in evaluating such proposal or offer.  Further, as a condition to receipt of theSalary Continuation Payment defined below, Executive agrees not to resign hisposition with the Company during any period from the receipt of a specificChange in Control proposal up to the consummation or abandonment of thetransaction contemplated by such Proposal.

(1)          Terminationby Bank.  If the Bank, or itssuccessor in interest by merger, or its transferee in the event of a purchasein an assumption transaction, for reasons other than Executive’s death,disability, or Cause terminates Executive’s employment within the Change inControl Period, the Bank will pay Executive the Salary Continuation Payment.

 

(2)          Terminationby Executive.  If Executive terminatesExecutive’s employment, with or without Good Reason, within one year followinga Change in Control, the Bank will pay Executive the Salary ContinuationPayment.

(e)            Return of BankProperty.  If and when Executiveceases, for any reason, to be employed by the Bank, Executive must return tothe Bank all keys, pass cards, identification cards and any other property ofthe Bank. At the same time, Executive also must return to the Bank alloriginals and copies (whether in hard copy, electronic or other form) of anydocuments, drawings, notes, memoranda, designs, devices, diskettes, tapes,manuals, and specifications which constitute proprietary information ormaterial of the Bank.  The obligationsin this paragraph include the return of documents and other materials which maybe in Executive’s desk at work, in Executive’s car or place of residence, or inany other location under Executive’s control.

(f)            ExecutiveSupplemental Income (ESI) Plan.  Inaddition to the benefits described above, Executive may be covered under anExecutive Supplemental Income agreement. Upon termination, Executive’s rights with respect to ESI benefits willbe determined in accordance with the ESI agreement.

 

**10.          Definition of “Cause.”**  “Cause” means any one or more of the following:

Willful misfeasance or gross negligence in the performance ofExecutive’s duties;

Conviction of a crime in connection with his duties;

Conduct demonstrably and significantly harmful to the Bank, asreasonably determined by the Bank’s board of directors on the advice of legalcounsel; or

Permanent disability, meaning a physical or mental impairment whichrenders Executive incapable of substantially performing the duties requiredunder this Agreement, and which is expected to continue rendering Executive soincapable for the reasonably foreseeable future.

**11.          Definition of “Good Reason.**”  “Good Reason” means only any one or more ofthe following:

Reduction, without Executive’s consent, of Executive’s salary orelimination of any compensation or benefit plan benefitting Executive unlessapplicable to all officers;

The assignment to Executive without his consent of any authority orduties materially inconsistent with Executive’s position as of the date of thisAgreement; or

A relocation or transfer of Executive’s principal place of employmentthat would require Executive to commute on a regular basis more than 30 mileseach way from his current business office at the Bank on the date of thisAgreement, unless Executive consents to the relocation or transfer.

 

**12.          Confidentiality.**  Executive will not, after signing thisAgreement, including during and after its Term, use for his own purposes ordisclose to any other person or entity any confidential information concerningthe Bank, unless (1) the Bank consents to the use or disclosure of theirrespective confidential information, (2) the use or disclosure is consistentwith Executive’s duties under this Agreement, or (3) disclosure is required bylaw or court order.

**13.          Noncompetition.**

(a)            Participation ina Competing Business.  During theTerm and for twelve (12) months after expiration of the Term (such 12-monthsbeing the “Post-Term Period”) (regardless of whether Executive’s employmentends at the end of the Term or at some other point after the end of the Term),Executive will not become involved with a Competing Business or serve, directlyor indirectly, a Competing Business in any manner, including, withoutlimitation, as a shareholder, member, partner, director, officer, manager,investor, organizer, “founder,” employee, consultant, or agent; provided,however, that Executive may acquire and own an interest not exceeding 2%of the total equity interest in any publicly held entity whose equitysecurities are listed on a national securities exchange (whether or not suchentity is a Competing Business). Executive’s noncompetition obligations for the Post-Term Period will notapply if termination occurs within the Change in Control Period.

(b)           No Solicitation.  During the Term and for the Post-Term Period(regardless of whether Executive’s employment ends at the end of the Term or atsome other point after the end of the Term), Executive will not directly orindirectly solicit or attempt to solicit (1) any employees located in Thurston,Pierce, Mason or Lewis Counties in Washington State (the “Counties”) of theBank, to leave their employment or (2) any customers located in the Counties ofthe Bank, to remove their business from the Bank, or to participate in anymanner in a Competing Business. Solicitation prohibited under this Section includes solicitation by anymeans, including, without limitation, meetings, letters or other mailings,electronic communications of any kind, and internet communications.

 

(c)            EmploymentOutside the Counties.  Nothing inthis Agreement prevents Executive from accepting employment after the end ofthe Term outside the Counties from a Competing Business, as long as Executivewill not (a) act as an employee or other representative or agent of theCompeting Business within the Counties or (b) have any responsibilities for theCompeting Business’ operations within the Counties.

(d)           CompetingBusiness.  “Competing Business”means any financial institution or trust company that competes with, or willcompete in the Counties with, the Bank. The term “Competing Business” includes, without limitation, any start-upor other financial institution or trust company in formation.

(e)            Noncompetition Compensation.  As compensation for the agreements referredto in Section 13, commencing at the beginning of the Post-term Period,Executive will receive cash payments from the bank for a period of 12successive months equal to the highest monthly base salary paid in any of the12 months prior to termination.

**14.          Enforcement.**

(a)            The Bank and Executivestipulate that, in light of all of the facts and circumstances of therelationship between Executive and the Bank, the agreements referred to inSections 12 and 13 (including without limitation their scope, duration andgeographic extent) are fair and reasonably necessary for the protection of theBank’s confidential information, goodwill and other protectable interests.  If a court of competent jurisdiction shoulddecline to enforce any of those covenants and agreements, Executive and theBank request the court to reform these provisions to restrict Executive’s useof confidential information and Executive’s ability to compete with the Bank tothe maximum extent, in time, scope of activities, and geography, the courtfinds enforceable.

(b)           Executiveacknowledges that the Bank will suffer immediate and irreparable harm that willnot be compensable by damages alone, if Executive repudiates or breaches any ofthe provisions of Sections 12 or 13 or threatens or attempts to do so.  For this reason, under these circumstances,the Bank, in addition to and without limitation of any other rights, remediesor damages available to it at law or in equity, will be entitled to obtaintemporary, preliminary, and permanent injunctions in order to prevent orrestrain the breach, and neither the Bank will be required to post a bond as acondition for the granting of this relief.

**15.          AdequateConsideration.** Executive specifically acknowledges the receipt of adequateconsideration for the covenants contained in Sections 12 and 13 and that theBank is entitled to require him to comply with these Sections.  These Sections will survive termination ofthis Agreement.  Executive representsthat if his employment is terminated, whether voluntarily or involuntarily,Executive has experience and capabilities sufficient to enable Executive toobtain employment in areas which do not violate this Agreement and that theBank’s enforcement of a remedy by way of injunction will not prevent Executivefrom earning a livelihood.

 

**16.         Arbitration. **

(a)            Arbitration.  At either party’s request, the parties mustsubmit any dispute, controversy or claim arising out of or in connection with,or relating to, this Agreement or any breach or alleged breach of thisAgreement, to arbitration under the American Arbitration Association’s rulesthen in effect (or under any other form of arbitration mutually acceptable tothe parties).  A single arbitratoragreed on by the parties will conduct the arbitration.  If the parties cannot agree on a single arbitrator,each party must select one arbitrator and those two arbitrators will select athird arbitrator.  This third arbitratorwill hear the dispute.  The arbitrator’sdecision is final (except as otherwise specifically provided by law) and bindsthe parties, and either party may request any court having jurisdiction toenter a judgment and to enforce the arbitrator’s decision.  The arbitrator will provide the parties witha written decision naming the substantially prevailing party in theaction.  This prevailing party isentitled to reimbursement from the other party for its costs and expenses,including reasonable attorneys’ fees.

(b)           Governing Law.  All proceedings will be held at a placedesignated by the arbitrator in Thurston County, Washington.  The arbitrator, in rendering a decision asto any state law claims, will apply Washington law.

(c)            Exception toArbitration.  Notwithstanding theabove, if Executive violates Section 12 or 13, the Bank will have the right toinitiate the court proceedings described in Section 14(b), in lieu of anarbitration proceeding under this Section 16.  The Bank may initiate these proceedings wherever appropriatewithin Washington State; but Executive will consent to venue and jurisdictionin Thurston County, Washington.

**17.          MiscellaneousProvisions.**

(a)            Defined Terms.  Capitalized terms used as defined terms, butnot defined in this Agreement, will have the meanings assigned to those termsin the Plan.

(b)           Entire Agreement.  This Agreement constitutes the entireunderstanding between the parties concerning its subject matter and supersedesall prior agreements.  Accordingly, Executivespecifically waives the terms of and all of his rights under all employment,change-in-control and salary continuation agreements, whether written or oral,he has previously entered into with the Bank or any of its Subsidiaries oraffiliates.

(c)            Binding Effect.  This Agreement will bind and inure to thebenefit of the Bank’s, and Executive’s heirs, legal representatives, successorsand assigns.

(d)           LitigationExpenses.  If either partysuccessfully seeks to enforce any provision of this Agreement or to collect anyamount claimed to be due under it, this party will be entitled to reimbursementfrom the other party for any and all of its out-of-pocket expenses and costsincluding, without limitation, reasonable attorneys’ fees and costs incurred inconnection with the enforcement or collection.

(e)            Waiver.  Any waiver by a party of its rights underthis Agreement must be written and signed by the party waiving its rights.  A party’s waiver of the other party’s breachof any provision of this Agreement will not operate as a waiver of any otherbreach by the breaching party.

(f)            Counsel Review.  Executive acknowledges that he has had theopportunity to consult with independent counsel with respect to thenegotiation, preparation, and execution of this Agreement.

(g)           Assignment.  The services to be rendered by Executiveunder this Agreement are unique and personal. Accordingly, Executive may not assign any of his rights or duties underthis Agreement.

(h)           Amendment.  This Agreement may not be modified or amendedexcept by a written instrument signed by both parties with the prior writtenconsent of  the Bank.

(i)             Severability.  The provisions of this Agreement areseverable.  The invalidity of anyprovision will not affect the validity of other provisions of this Agreement.

(j)             Governing Lawand Venue.  This Agreement will begoverned by and construed in accordance with Washington law, except to theextent that certain matters may be governed by federal law.  Except as otherwise provided in Section16(c), the parties must bring any legal proceeding arising out of thisAgreement in Thurston County, Washington, and the parties will submit tojurisdiction in that county.

(k)            Counterparts.  This Agreement may be executed in one ormore facsimile counterparts, each of which will be deemed an original, but allof which taken together will constitute one and the same document.

Signed: November 13, 2001:
| **FIRST COMMUNITY FINANCIAL GROUP** | **FIRST COMMUNITY BANK** |
|-------------------------------------|--------------------------|
|                                |                     |   |
| /s/________________________         |                     | /s/________________________ |
| By: Ken  Parsons, Chairman/CEO      |                     | By: Ken  Parsons, Chairman/CEO |
|                                |                     |   |
| **JON M. JONES, individually**      |                     |   |
|                                |                     |   |
| /s/_______________________          |                     |   |
| Jon M. Jones                        |                     |   |