Exhibit 10.19

Letter of Understanding between Heritage Financial Corporation and Donald V.
Rhodes

LOGO [g87106ex10_19pg1.jpg]

September 21, 2006

Mr. Donald V. Rhodes

Chairman and Chief Executive Officer

Heritage Financial Corporation

201 5th Avenue SW

Olympia, WA 98501-1114

Dear Don:

This letter is a non-binding letter of understanding to outline your employment
by Heritage Financial Corporation (“HFC”), Heritage Bank, and Central Valley
Bank. You will continue under your current Employment Agreement until
December 31, 2006, with your Base Salary of $150,000 per annum, continuing on a
monthly basis until then. Beginning January 1, 2007, you will be an employee at
will and serve as Chairman of the Board of HFC, Heritage Bank and Central Valley
Bank. As such Chairman, you will perform the duties customarily attributable to
the position and as described in Exhibit A and preside over all meetings of the
Board and the Executive Committee. This arrangement shall continue so long as
the Board of HFC continues to elect you as Chairman.

The terms of your employment beginning January 1, 2007 are:

Annual Base Salary of $75,000 payable under Heritage Bank’s payroll policies;

Bonuses as determined by HFC or the Banks’ Boards from time to time, in those
Boards’ sole discretion;

Benefits available to employees who work less than 1,000 hours each year;

Participation in the 401(k) ESOP allowing deferred compensation, but no
eligibility for employer matching contributions;

Club memberships deemed appropriate;

Reimbursement of reasonable business expenses; and

Automobile as is currently provided as of the date of this letter.

 

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Your employment is “at will” but will be terminated in the event of:

Death;

Disability defined as medically reimbursable physical or mental impairment that
may be expected to result in death, or to be of long, continued duration, and
that renders you incapable of performing your duties;

Termination for Cause defined as (i) willful misfeasance or gross negligence in
the performance of your duties, (ii) conduct demonstrably and significantly harm
to the company (which would include willful violation of any final cease and
desist order applicable to employer or a financial institution subsidiary), or
(iii) conviction of a felony; and

Failure to be elected as Chairman of the Board of Directors of HFC.

In case of any such termination, you will not be entitled to any additional
compensation or benefits.

To indicate your acceptance of the terms described above, please sign below and
return this letter to me.

Sincerely,

 

By:  

/s/ Peter Fluetsch

Printed Name:   Peter N. Fluetsch Title:   Chairman, Compensation Committee

I hereby agree to the above terms.

 

September 26, 2006  

/s/ Donald V. Rhodes

Date   Donald V. Rhodes

 

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Exhibit “A”

Position Description

For Donald V. Rhodes

 

POSITION:    CHAIRMAN OF THE BOARD    HERITAGE FINANCIAL CORPORATION    HERITAGE
BANK    CENTRAL VALLEY BANK

REPORTS TO: BOARD OF DIRECTORS

FLSA STATUS: EXEMPT

Essential Functions:

Provides an exceptional level of customer service and customer satisfaction;
enhancing and supporting the mission and vision statements of Heritage Financial
Corporation.

Performs duties as necessary including keeping current with industry and
investor trends and expectations to ensure continued safety and soundness of the
corporation.

Provides support, insight, and advice to HFWA CEO in developing a strategic
vision for the corporation and for the management and overall profitability of
the corporation.

Provides support, insight, and advice to HFWA CEO in exploring new markets for
future locations, as well as seeking strategic alliances/joint ventures to
optimize and leverage the corporation’s position.

Provides support, insight, and advice to HFWA CEO in planning and gaining Board
approval for all capital management strategies, including stock and cash
dividend policies to provide adequate capital levels to support the future
growth of the corporation and shareholder expectations.

Provides strategic financial input and advice on decision-making issues
affecting the corporation such as evaluation of potential alliances,
acquisitions and/or mergers and new lines of business, products, or services.

Provides leadership representation for the corporation and subsidiary banks as
Chairman of the Board of Directors and member of various Board committees.
Ensures that all policies and by-laws of the Board are observed. Responsible for
overseeing reporting to the Board on the overall financial and operational
conditions of the corporation and ensuring that Board members are kept informed
about important industry trends and developments.

Coordinates with corporate CEO and CFO on setting agendas for the monthly Board
meetings and annual shareholder meetings.

 

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Assists corporate CEO with shareholder relations to include representing
Heritage Financial Corporation at corporate, investor, and industry meetings in
order to educate and generate market interest in the corporation.

Represents the corporation and its values in its relationships with major
customers, regulatory bodies, and shareholders.

Represents the corporation and provides leadership in key community activities
including business, charitable, civic, and social organizations.

In the absence of Executive management at subsidiary organizations, may act in
their capacity.

Other Responsibilities:

Must be able to travel within region and nationally to perform job duties and
represent the corporation.

Education, Skills, and Experience:

Ability to read, speak, and understand English well with effective written and
oral business communication skills. Ability to make persuasive speeches and
presentations on controversial or complex topics to the Board and outside
investors.

Prefer college degree in Business, Finance, or related field or applicable
experience.

A strategic visionary with sound technical skills, analytical ability, good
judgment, and strong customer and growth focus.

Fifteen years finance/commercial banking experience at executive level with a
demonstrated ability to lead a team and expand profitability.

Must have in-depth knowledge of and experience in Pacific Northwest markets,
preferably the Puget Sound and Central Washington regions.

Desired personal characteristics include: professional sophistication, political
awareness, creativity, energy, self-directed, and balanced ego.

Maintain a record of business development and participation in community
activities.

 

Name:   

 

      Date:  

 

 

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