EMPLOYMENT AGREEMENT

 

 

                              EMPLOYMENT AGREEMENT

 

 

This   Agreement   made and   effective   this day,   July 1, 2005,   (the   "Effective

Date"),   by and between IOWA FIRST BANCSHARES CORP. and its successors,   an Iowa

corporation ("Employer"), and Patrick N. Hurley ("Executive").

 

 

                              W I T N E S S E T H:

 

WHEREAS, Employer and its subsidiaries and affiliates are engaged in the banking

and financial services business;

 

WHEREAS,   Executive has expertise,   experience and capability in the business of

Employer and its affiliates and the banking and financial   services   business in

general;

 

WHEREAS,   Executive   is now   serving   Employer   as   President   and CEO of   First

National Bank in Fairfield, a subsidiary of Iowa First Bancshares Corp.;

 

WHEREAS, an employment agreement would ensure Employer and Executive of a stable

employment   arrangement and provide   severance and other benefits   comparable to

those   provided by competing   financial   institutions   for   Executive as well as

obtain   confidentiality   and   noncompetition   agreements   for   Employer   and its

affiliates; and

 

WHEREAS,   Employer   desires   hereafter   to continue to employ   Executive in said

respective   executive   capacities,   and Executive is willing to continue in such

employment, upon the terms and conditions herein set forth.

 

NOW,   THEREFORE,   in   consideration   of the promises and mutual covenants herein

contained,   and for other   good and   valuable   consideration,   the   receipt   and

sufficiency of which   consideration is mutually   acknowledged by the parties, it

is hereby agreed as follows:

 

1. Recitals.   The recitals hereinbefore set forth constitute an integral part of

this   Agreement,   evidencing   the   intent   of   the   parties   in   executing   this

Agreement,   and describing the   circumstances   surrounding   its execution.   Said

recitals are by express reference made a part of the covenants hereof,   and this

Agreement shall be construed in the light thereof.

 

2. Duties and Responsibilities.

 

     (a) The duties and   responsibilities of Executive are and shall continue to

be of an executive nature as shall be required by Employer in the conduct of its

business. Executive's powers and authority shall be as prescribed by the by-laws

of Employer,   if applicable,   and shall include all those presently delegated to

him, together with the performance of such other duties and   responsibilities as

from time to time may be assigned to him by the Board of   Directors   of Employer

or its   subsidiary,   First   National   Bank in   Fairfield,   consistent   with   the

positions of President and CEO of First   National   Bank in Fairfield.   Executive

recognizes   that   during   the   period of his   employment   hereunder,   he owes an

undivided duty of loyalty to Employer,   and agrees to devote his entire business

time and attention to the performance of said duties and responsibilities and to

use his best efforts to promote and develop the business of Employer.   Executive

will not perform   any duties for any other   business   without the prior   written

consent of Employer.

 

     (b)   Notwithstanding   that this   Agreement   provides for the   employment of

Executive   in his present   capacity   as   Employer's   President   and CEO of First

National Bank in Fairfield, nothing herein contained shall assure Executive, nor

in any manner be   construed to   constitute   an agreement by Employer to continue

the employment of Executive   after the expiration of the Employment   Term or any

Successive   Employment Term (as hereinafter   defined) in such capacity or in any

other capacity.

 

3.   Employment   Term.   For a period   commencing on the Effective Date hereof and

ending on the second anniversary from the Effective Date hereof (the "Employment

Term"),   Employer hereby agrees to continue to employ Executive in the executive

capacities of President and CEO of First   National Bank in Fairfield.   Executive

agrees,   pursuant to the terms   hereof,   to continue to serve in said   executive

capacities for the Employment Term.

 

This   Agreement   and the   Employment   Term shall be   automatically   extended for

consecutive two (2) year periods ("Successive   Employment Term") unless not less

than   ninety (90) days prior to the   expiration   of the   Employment   Term or any

Successive Employment Term a party, by written notice,   notifies the other party

that there shall be no extension or further extension of this Agreement.

 

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4. Compensation and Benefits.

 

     (a) Base Annual Salary.   Employer agrees to pay Executive,   on the 15th and

the last day of each   month,   a base   salary at the rate of One   Hundred   Twenty

thousand dollars ($120,000.00) per year ("Base Annual Salary"). It is understood

that Executive's performance will be reviewed annually by Employer, which review

shall be   conducted   in   accordance   with the   performance   review   policies and

procedures of Employer,   applicable   to similarly   situated   employees.   At such

time,   Employer,   may (but is not required to)   increase   (but may not,   without

Executive's   consent,   decrease) the Base Annual   Salary in accordance   with the

standard   performance   review   criteria,   policies and   procedures   of Employer,

applicable to similarly   situated   employees.   The   determination   of whether to

increase   the Base Annual   Salary shall   include a review of standard   criteria,

including without limitation,   Executive's   performance,   cost of living changes

and   comparability   with other   executives in similar   positions   with financial

institutions in the banking business.

 

     (b) Expenses.   Employer shall   reimburse   Executive's   reasonable   expenses

incurred in performing services hereunder,   which are incurred and accounted for

in accordance with the policies and procedures of Employer.

 

     (c) Vacations. Executive is entitled to 20 days of vacation with pay during

each calendar year of the term of this Agreement.   Vacation in any year shall be

taken prior to the end of the calendar year, and any vacation time not taken for

such year shall be forfeited.

 

     (d) Other   Benefits.   Executive   shall be   eligible to   participate   in all

employee incentive,   medical,   dental,   life, sick pay, long-term disability and

qualified   retirement   and   profit-sharing   benefit plans and all other employee

benefit   plans or   arrangements   of Employer,   in effect on the date hereof,   or

adopted during the Employment Term.   Executive shall be covered by any officers'

and directors'   liability insurance and/or   indemnification   plans maintained or

adopted by Employer.

 

5.   Perquisites.   Employer will furnish Executive with such other perquisites as

are in effect   on the   Effective   Date   hereof or which may from time to time be

provided by Employer and which are suitable to his position and adequate for the

performance of his duties hereunder and reasonable in the circumstances.

 

6. Voluntary Resignation by Executive or Termination for Cause by Employer.

 

     (a) Voluntary   Resignation by Executive.   At any time during the Employment

Term or any   Successive   Employment   Term,   Executive has the right,   by written

notice   to   Employer,    to   terminate    his    services    hereunder    ("Voluntary

Resignation"), effective as of thirty (30) days after such notice.

 

     (b)   Termination   for Cause by Employer.   At any time during the Employment

Term or any Successive   Employment   Term,   Employer may terminate this Agreement

upon the occurrence of any of the following acts ("Termination for Cause"):

 

     (i) The continued   refusal by Executive after written notice by Employer to

make himself   available for performance of Executive's   duties   hereunder (other

than as the result of physical or mental disability). The term "continued" shall

mean a period of not less than twenty (20) consecutive business days (other than

while Executive is taking his vacation) and the term "available"   shall mean the

failure of Executive to be personally   present at the offices of Employer and to

be immediately willing and able to perform his duties.

 

     (ii)   Conviction   of a felony   for a matter   related   to or   affecting   the

business of Employer   as   reasonably   determined   by the Board of   Directors   of

Employer in its sole judgment.

 

For Termination   for Cause,   written notice of the termination of this Agreement

and Executive's   employment hereunder by Employer shall be served upon Executive

and shall be   effective   as of the date of such   service.   Such notice   given by

employer shall specify the act or acts of Executive underlying such termination.

Upon   termination   of   this   Agreement   by   either    Voluntary    Resignation   or

Termination   for Cause,   Employer shall have no obligations   and Executive shall

have no rights or   obligations   under this   Agreement,   other   than   Executive's

obligations under Sections 12 and 13 hereof.

 

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7. Other   Termination   by Employer.   If Employer   terminates   this Agreement and

Executive's   employment during the Employment Term or any Successive   Employment

Term, other than pursuant to Section 6 hereof,   Executive shall,   subject to the

other provisions of this Section 7, be entitled to the following:

 

     (a) to   continue   to   receive   for a period   of   twelve   (12)   months   (the

"Severance Period") compensation in the amount equal to his Base Annual Salary;

 

     (b)   any   vacation   pay   accrued   by   Executive   in the   calendar   year   of

termination   for   vacation   not   yet   taken   as of the   date of   termination   of

employment; and

 

     (c) a pro rata portion of Executive's   award under the Incentive   Plan, the

amount of such pro rata portion to be determined as follows:

 

     (i) the annual average received for the past three years.

 

     (d)   reimbursement of a portion of the premiums paid by Executive for COBRA

continuation   coverage of group medical   insurance   benefits such that Executive

maintains such group medical insurance benefits on the same "cost-sharing" basis

provided at the date of termination   of this Agreement   throughout the Severance

Period.

                                    

Employer shall pay or cause to be paid the amounts   payable under   paragraph (a)

above in equal installments,   on the 15th and last day of each month, the amount

payable under paragraphs (b) and (c) above in a lump sum within thirty (30) days

of   termination   (except   that any amounts of any vacation pay paid to Executive

for   vacation   taken   but not yet   accrued   as of the   date   of   termination   of

employment   shall be   deducted   from the first,   and if   necessary,   subsequent,

installments   payable under paragraph (a) above),   and the amounts payable under

paragraph   (d)   monthly   at the time such   premiums   are   otherwise   payable   by

Executive.   All   payments   pursuant   to this   Section   7   shall   be   subject   to

applicable federal and state income and other withholding taxes.

 

In the event   Executive   becomes   employed   during   the   Severance   Period,   the

reimbursement   of a portion of the cost of the group medical   insurance   benefit

described in paragraph (d) above shall   immediately   cease,   provided   Executive

shall retain any rights to continue such coverage   under the COBRA   continuation

provisions of the group medical insurance plan by paying the applicable   premium

therefor.

 

The payments and benefits provided for in this Section 7 shall be in addition to

all other sums then   payable and owing to   Executive   hereunder   and,   except as

expressly   provided   herein,   shall not be subject to reduction   for any amounts

received by Executive for employment or services   provided after   termination of

employment hereunder, and shall be in full settlement and satisfaction of all of

Executive's   claims   and   demands.   Upon   such   termination   of this   Agreement,

Employer shall have no rights or obligations and, Executive shall have no rights

or obligations   under this Agreement,   other than Executive's   obligations under

Sections 12 and 13 hereof.

 

In all events,   Executive's right to receive severance benefits pursuant to this

Section 7 shall cease   immediately in the event Executive   performs   services of

any type for a competing   financial   institution   located within the Market Area

(as defined in Section 13 hereof) during the   Non-Compete   Period (as defined in

Section 13 hereof).

 

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8.   Resignation   Following   Constructive   Discharge.   If at any time   during the

Employment Term or any Successive   Employment Term,   except in connection with a

termination   pursuant to Section 6 or 7, Executive is Constructively   Discharged

(as hereinafter   defined) t