Exhibit 10.2

 

SEVERANCE/CHANGE OF CONTROL AGREEMENT

Christian R. Rasmussen

 

 

This Severance/Change of Control Agreement (“Agreement”) signed November 7,
2002, between PACIFIC NORTHWEST BANCORP and PACIFIC NORTHWEST BANK (hereinafter
referred to jointly as “Pacific” unless Pacific Northwest Bank is specifically
mentioned) and CHRISTIAN R. RASMUSSEN (“Executive”) takes effect on the
effective date of the Merger of Bank of the Northwest into Pacific Northwest
Bank (“Effective Date”).

 

RECITALS

 

WHEREAS, on the Effective Date, Pacific desires to employ Executive; and

 

WHEREAS, Executive wishes to be employed by Pacific but desires assurance that
he will be protected in the event of termination of his employment without cause
or a Change of Control as defined below; and

 

WHEREAS, Pacific wishes to assure itself of continuity of management in the
event of a Change of Control of Pacific;

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements of the parties set forth in this Agreement, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:

 

1.     Severance Benefits.

 

(a)   If Executive’s employment is involuntarily terminated (other than a
Discharge for Cause as defined below), Executive shall be entitled to receive,
in a lump sum payable on the first day of the first calendar month following
discontinuance of his employment due to involuntary termination, a cash payment
in an amount equal to the Total Compensation paid to Executive over the last
twelve (12) months of his employment with Pacific preceding the month in which
the involuntary termination occurs. For purposes of this Agreement, “Total
Compensation” shall be defined as an amount equal to Executive’s W-2 income
before salary deferrals, excluding any one-time payment made to Executive
relating to the termination of his employment under his Second Restated
Employment Agreement with Bank of the Northwest dated December 31, 2001, as
amended in June, 2002.

 

(b)   If Executive’s employment is involuntarily terminated (other than a
Discharge for Cause) before a Change of Control but after the Board of Directors
has authorized proceeding with negotiations which result in a Change of Control,
Executive shall be entitled to the severance benefits described in Paragraph
2(d), said benefits to be paid after the Change of Control actually occurs, less
any amount paid under Paragraph 1(a) hereof.

 

(c)   The amounts paid to Executive hereunder shall be considered severance pay
in consideration of his continued service from the Effective Date to his
entitlement to those payments.

 

(d)   Once entitled to receive severance benefits under Paragraph (1) of this
Agreement, Executive shall have no duty to mitigate the obligation of Pacific to
make severance payments due by seeking other employment.  Should Executive
actually receive compensation from any such other employment, the payments
called for hereunder shall not be reduced or offset by any such future earnings.

 

2.     Change of Control. Upon a Change in Control, Executive shall be entitled
to receive a four-year employment contract (“Employment Contract”) with the
successor entity that provides:

 

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(a)   Executive a position with the survivor entity with duties and
responsibilities commensurate with those performed by Executive at the time of
the change of control, although the title held by Executive need not be the
same;

 

(b)   That Executive’s services shall be performed in the same geographical
location where Executive is employed at the time of the Change in Control;

 

(c)   That Executive’s salary and benefits are comparable to those received by
Executive over the twelve (12) months prior to the Change in Control;

 

(d)   That the successor entity may terminate Executive’s employment at any time
prior to the expiration of the four-year contract term by paying Executive an
amount equal to the Total Compensation paid to Executive over the last
twenty-four (24) months of his employment with Pacific preceding the month in
which the Change of Control occurs payable on the first day of the first
calendar month following discontinuance of his employment.

 

(e)   Notwithstanding the foregoing, the successor entity may provide in the
Employment Contract that Executive may be terminated for reasons constituting a
Discharge for Cause, as defined in this Agreement.  If Executive is terminated
under such provision, Executive shall not be entitled to receive any payments
under this Agreement.

 

(f)    That, during the period commencing with the 25th month following a Change
in Control through the 30th month following a Change in Control, Executive may
terminate his Employment Agreement for any reason or no reason by delivering
written notice to the successor entity.  If Executive does so, the successor
entity will pay Executive a single cash payment in an amount equal to
Executive’s Total Compensation for the prior twelve (12) month period payable on
the first day of the first calendar month following discontinuance of his
employment.

 

(g)   Payments under this Paragraph 2 shall be reduced by any amount paid
Executive under Paragraph 1(a), above.

 

3.     Certain Definitions.

 

(a)   Change of Control.  A “Change of Control” of Pacific shall be deemed to
have occurred as of the first day any one or more of the following conditions is
satisfied:

 

(i)            Any individual, corporation (other than Pacific), 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 Pacific possessing fifty
percent (50%) or more of the voting power for the election of directors of
Pacific;

 

(ii)           There shall be consummated any consolidation, merger, or other
business combination involving Pacific or the securities of Pacific in which
holders of voting securities of Pacific immediately prior to such consummation
own, as a group, immediately after such consummation, voting securities of
Pacific (or, if Pacific 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 Pacific (or such other
surviving corporation);

 

(iii)          During any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the directors of Pacific cease for
any reason to constitute at least a majority thereof unless the election, or the
nomination for election by Pacific’s shareholders, of each new director of
Pacific was approved by a vote of at least two-thirds (2/3) of the directors of
Pacific then still in office who were directors of Pacific at the beginning of
any such period; or

 

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(iv)          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 Pacific (on a consolidated basis) to a party
which is not controlled by or under common control with Pacific.

 

(b)   Discharge for Cause.  For purposes of this Agreement, the termination of
Executive’s employment shall be deemed to be a “Discharge for Cause” only upon
termination as a result of:

 

(i)            An act of dishonesty on the part of Executive constituting a
felony and resulting or intended to result directly or indirectly in gain or
personal enrichment of Executive at the expense of Pacific;

 

(ii)           A deliberate act of proven fraud having a material adverse impact
on the business or consolidated financial condition or results of operations of
Pacific and its subsidiaries; or

 

(iii)          The deliberate and continuing failure to comply with applicable
laws and regulations having a material adverse impact on the business.

 

4.     Termination of the Agreement.  This Agreement shall terminate if
Executive shall voluntarily resign, retire, become permanently and totally
disabled, or die; provided, however, if Executive becomes permanently and
totally disabled or dies after the Board of Directors has authorized proceeding
with negotiations which result in a Change of Control or within twelve (12)
months after a Change of Control, if Executive is then employed by Pacific,
Executive or his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees, as the case may be,
shall be entitled to receive the Change of Control payment under Paragraph 2(d)
hereof.

 

5.     Effect on Other Benefits.  The arrangements called for by this Agreement
are not intended to have any effect on Executive’s participation in any other
benefits available to executive personnel or to preclude other compensation or
additional benefits as may be authorized by the Board of Directors from time to
time.

 

6.     Limitations on Payments Related to Severance Benefits.  The following
limitations apply, notwithstanding any other provision of this Agreement:

 

(a)   The severance benefits payable under Paragraph 1 shall not exceed an
amount that would cause it to be a “parachute payment” within the meaning of
Section 280G(b)(2)(A) of the Internal Revenue Code; and

 

(b)   Pacific shall not be obligated to make, and Executive shall not be
entitled to, any payment under this Agreement if such payment would constitute a
“golden parachute” payment prohibited by 12 U.S.C. 1828(k) or 12 CFR §359.0 et
seq.  Pacific shall have no liability to Executive under or in relation to this
Agreement should any payment be deemed a prohibited “golden parachute” payment.

 

7.     Confidentiality.  From the date of this Agreement, Executive will not,
directly or indirectly, disclose to any third party not affiliated with Pacific,
Confidential Information of Pacific and its subsidiaries and affiliates, except
as to any of the Confidential Information which shall be or become in the public
domain or shall be required to be disclosed by applicable laws or regulations,
any judicial or administrative authority or stock exchange rule or regulation. 
For the purposes of this Paragraph 7, “Confidential Information” shall mean: (i)
internal policies and procedures, (ii) financial information, (iii) marketing
strategies, (iv) customer information, and (v) other non-public information
relating to Pacific’s business or financial condition.

 

8.     Noncompetition.

 

(a)   Participation in a Competing Business.  During the period Executive is
employed by Pacific and for twelve (12) months after Executive’s employment with
Pacific terminates, Executive will not become

 

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involved with a Competing Business or serve, directly or indirectly, a Competing
Business in any manner, including, without limitation, as a shareholder, member,
partner, director, officer, manager, investor, organizer, “founder,” employee,
consultant, or agent; provided, however, that Executive may acquire and
passively own an interest not exceeding 1% of the total equity interest in any
Competing Business.

 

(b)   No Solicitation. During the period Executive is employed with Pacific and
for twelve (12) months after Executive’s employment with Pacific terminates,
Executive will not directly or indirectly solicit or attempt to solicit (1) any
employees of Pacific, or any of Pacific’s Subsidiaries, to leave their
employment or (2) any customers of Pacific, or any of Pacific’s Subsidiaries, to
remove their business from Pacific or to participate in any manner in a
Competing Business.  Solicitation prohibited under this Section includes
solicitation by any means, including, without limitation, meetings, letters or
other mailings, electronic communications of any kind, and internet
communications.

 

(c)   Employment Outside the Restricted Area.  Nothing in this Agreement
prevents Executive from accepting employment after the end of the Term outside
the Restricted Area (defined below) from a Competing Business, as long as
Executive will not (a) act as an employee or other representative or agent of
the Competing Business within the Restricted Area or (b) have any
responsibilities for the Competing Business’ operations within the Restricted
Area.

 

(d)   Competing Business.  “Competing Business” means any financial institution
(“financial institution” means a state or national bank, a state or federal
savings and loan association, a mutual savings bank, or a state or federal
credit union), trust company or mortgage company (including without limitation,
any start-up or other financial institution, trust company or mortgage company)
that competes with, or will compete with, Pacific in the states of Washington
and/or Oregon (the “Restricted Area”).

 

9.     Enforcement.

 

(a)   Pacific and Executive stipulate that, in light of all of the facts and
circumstances of the relationship between Executive and Pacific, the agreements
referred to in Section 7 (including without limitation their scope, duration and
geographic extent) are fair and reasonably necessary for the protection of
Pacific’s confidential information, goodwill and other protectable interests. 
If a court of competent jurisdiction should decline to enforce any of those
covenants and agreements, Executive and Pacific request the court to reform
these provisions to restrict Executive’s use of confidential information and
Executive’s ability to compete with Pacific to the maximum extent, in time,
scope of activities and geography, the court finds enforceable.

 

(b)   Executive acknowledges that Pacific will suffer immediate and irreparable
harm that will not be compensable by damages alone, if Executive repudiates or
breaches any of the provisions of Section 7 or threatens or attempts to do so.
For this reason, under these circumstances, Pacific, 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 Pacific will not be
required to post a bond as a condition for the granting of this relief.

 

10.   Adequate Consideration.  Executive specifically acknowledges the receipt
of adequate consideration for the covenants contained in Section 7 and that
Pacific is entitled to require him to comply with this Section.  These Sections
will survive termination of this Agreement.  Executive represents that if his
employment is terminated, whether voluntarily or involuntarily, Executive has
experience and capabilities sufficient to enable Executive to obtain employment
in areas which do not violate this Agreement and that the Bank’s enforcement of
a remedy by way of injunction will not prevent Executive from earning a
livelihood.

 

11.   Assignment.

 

(a)   By Pacific.  This Agreement may and shall be assigned or transferred to,
and shall be binding upon and inure to the benefit of, any successor of Pacific,
and any such successor shall be deemed substituted for all

 

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purposes of the “Company” under the terms of this Agreement.  As used in this
Agreement, the term “successor” shall mean any person, firm, corporation or
business entity that at any time causes a Change of Control as described in
Paragraph 2.  Notwithstanding such assignment, Pacific shall remain, with such
successor, jointly and severally liable for all its obligations hereunder. 
Except as herein provided, Pacific may not otherwise assign this Agreement.

 

(b)   By Executive.  This Agreement shall inure to the benefit of and be
enforceable by Executive’s personal or legal representatives, executors and
administrators, successors, heirs, distributees, devisees and legatees.  If
Executive should die while any amounts payable to Executive hereunder remain
outstanding, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to Executive’s devisees, legatee
or other designee, or, in the absence of such designee, to Executive’s estate. 
This Agreement is not otherwise assignable by Executive.

 

12.   Jurisdiction/Venue/Mandatory Arbitration.  Any legal action brought to
resolve disputes arising out of this Agreement, or any amendments thereto, shall
be commenced in King County Superior Court in Seattle, Washington and shall be
resolved in accordance with the Superior Court Mandatory Arbitration Rules and
the King County Local Rules for Mandatory Arbitration, if any, with the parties
agreeing to waive the jurisdictional limits.  The decision of the arbitrator
shall be binding on the parties, and the parties waive the right of de novo
appeal from such decision.  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, accounting, and
expert witness fees.  If the arbitrator determines that there is no prevailing
or substantially prevailing party, the reasonable legal, accounting, and expert
witnesses fees shall be the responsibility of each party.

 

13.   Miscellaneous.

 

(a)   Gender and Number.  Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

 

(b)   Entire Agreement.  This Agreement supersedes any prior agreements or
understandings, oral or written, between Executive and Pacific, with respect to
the subject matter hereof and constitutes the entire agreement of the parties
with respect thereto.

 

(c)   Modification.  This Agreement shall not be varied, altered, modified,
canceled, changed or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their legal
representatives.

 

(d)   Reviewed with Independent Counsel/Construction of Agreement.  Each party
had the opportunity to review this Agreement with legal counsel of their
choosing, and this Agreement is the outcome of that review process. This
Agreement has been entered into after negotiation and review of its terms and
conditions by parties under no compulsion to execute and deliver a
disadvantageous agreement.  This Agreement incorporates provisions, comments and
suggestions proposed by both parties.  No ambiguity or omission in this
Agreement shall be construed or resolved against any party on the ground that
this Agreement or any of its provisions was drafted or proposed by that party.

 

(e)   Severability.  In the event any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the remaining
provision of this Agreement shall be unaffected thereby and shall remain in full
force and effect.

 

(f)    Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.

 

(g)   Tax Withholding.  Pacific may withhold from any benefits payable under
this Agreement all federal, state, city or other taxes as may be required
pursuant to any law or governmental regulation or ruling.

 

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(h)   Beneficiaries. Executive may designate one or more persons or entities as
the primary and/or contingent beneficiaries of any amounts to be received under
this Agreement. Such designation must be in the form of a signed writing
acceptable to the Board or the Board’s designee. Executive may make or change
such designation at any time.

 

(i)    Governing Law.  To the extent not preempted by federal law, the
provisions of this Agreement shall be construed and enforced in accordance with
the laws of the state of Washington.  Venue for any action arising under this
Agreement shall lie in Seattle, Washington.

 

IN WITNESS WHEREOF, Executive and Pacific have executed this Agreement, as of
the day and year first above written.

 

 

PACIFIC NORTHWEST BANCORP

 

 

 

 

 

 

 

 

By:

/s/ Patrick M. Fahey

 

 

 

Patrick M. Fahey, President and CEO

 

 

 

 

PACIFIC NORTHWEST BANK

 

 

 

 

 

 

 

 

By:

/s/ Patrick M. Fahey

 

 

 

Patrick M. Fahey, President and CEO

 

 

 

 

 

 

 

 

 

/s/ Christian R. Rasmussen

 

 

CHRISTIAN R. RASMUSSEN

 

 

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