Exhibit 10.4

 

CONSULTING AGREEMENT

 

Mark A. Coffey

 

This Consulting Agreement (“Agreement”) is made this 8th day of November, 2002,
between PACIFIC NORTHWEST BANCORP (“Pacific”), PACIFIC NORTHWEST BANK and MARK
A. COFFEY.

 

RECITALS

 

A.            Pacific and Pacific Northwest Bank have entered into a Plan and
Agreement of Merger (“Plan”) with Bank of the Northwest, pursuant to which Bank
of the Northwest will merge into Pacific Northwest Bank (“Merger”).  Mr. Coffey
is presently Executive Vice President and Chief Financial Officer of Bank of the
Northwest, and his employment in that capacity will terminate on the effective
date of the Merger.

 

B.            Following the Merger, Pacific and Pacific Northwest Bank
(hereinafter referred to jointly as “Pacific” unless Pacific Northwest Bank is
specifically mentioned) desire to retain Mr. Coffey as a consultant, and Mr.
Coffey wishes to perform such services.  (Mr. Coffey is referred to hereinafter
as “Consultant.”)

 

NOW, THEREFORE, in consideration of the mutual covenants herein recited, the
sufficiency of which is hereby acknowledged, the parties agree as follows:

1.                                       EFFECTIVE DATE AND TERM.

A)             EFFECTIVE DATE.  THIS AGREEMENT TAKES EFFECT ON THE EFFECTIVE
DATE OF THE MERGER(“EFFECTIVE DATE”).

B)             TERM.  THE TERM OF THIS AGREEMENT (“TERM”) IS SIX (6) MONTHS,
BEGINNING ON THE EFFECTIVE DATE.

C)             EMPLOYMENT STATUS.  DURING THE TERM CONSULTANT SHALL BE AN
EMPLOYEE OF PACIFIC NORTHWEST BANK.

D)             OFFICE.  CONSULTANT WILL HAVE NO SPECIFIC OFFICE FOLLOWING THE
MERGER BUT WILL HAVE ACCESS TO AN OFFICE AT THE FORMER MAIN OFFICE OF BANK OF
THE NORTHWEST (600 PIONEER TOWER, 888 S.W. FIFTH AVENUE, PORTLAND OREGON), AND
NECESSARY SUPPORT STAFF WILL BE AVAILABLE TO HIM TO PERFORM THE DUTIES ASSIGNED
TO HIM UNDER THIS AGREEMENT.

 

2.             Compensation.  For and in consideration of the consulting
services to be performed by Consultant, and the further covenants and agreements
made by him under this Agreement, Pacific shall:

a)             Pay to Consultant base monthly compensation of $19,000 payable in
accordance with Pacific Northwest Bank’s regular payroll schedule
(“Compensation”).

b)            Reimburse Consultant for out-of-pocket expenses reasonably
incurred by Consultant in the performance of the services upon Consultant’s
submission of any request for reimbursement in a format consistent with
Pacific’s policies from time to time in effect.

 

ANY PAYMENTS MADE PURSUANT TO THIS AGREEMENT SHALL BE NET OF (I) ALL AMOUNTS
REQUIRED TO BE WITHHELD FROM SUCH PAYMENTS PURSUANT TO APPLICABLE INCOME TAX,
SOCIAL SECURITY AND UNEMPLOYMENT INSURANCE LAWS AND REGULATIONS, AND (II) SUCH
OTHER AMOUNTS AS ARE WITHHELD FROM SUCH PAYMENTS PURSUANT TO CONSULTANT’S
AUTHORIZATION.

 

3.             Benefit Plans.  During the Term of this Agreement:

a)             Consultant shall be entitled to participate in the Pacific group
medical plan established by Pacific from time to time for the benefit of all
full-time employees of Pacific.  Consultant shall be required to comply with the
conditions attendant to coverage by such plan and shall comply with and be
entitled to

 

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benefits only in accordance with the terms and conditions of such plan as they
may be amended from time to time.  Nothing herein contained shall be construed
as requiring Pacific to establish or continue any particular benefit plan in
discharge of its obligations under this Agreement.

b)            All outstanding stock options will continue to vest, and
Consultant will be permitted to exercise such options, until the earlier to
occur of: (1) the expiration date of the options, or (2) ninety (90) days
following expiration of the term of this Agreement.

 

4.             Duties.  Consultant will perform the duties assigned to him from
time to time by the Chief Executive Officer of Pacific and the President of
Pacific Northwest Bank Oregon.  These duties will include, without limitation,
advising and consulting with the Chief Executive Officer of Pacific and the
President of Pacific Northwest Bank Oregon on an as-needed basis only on
financial issues relating to the operations of Bank of the Northwest prior to
the merger.

 

DURING THE TERM, CONSULTANT AGREES TO DEVOTE SUCH TIME AS NECESSARY TO DISCHARGE
THE DUTIES ASSIGNED TO HIM AND TO USE HIS BEST EFFORTS TO PERFORM SUCH DUTIES
FAITHFULLY AND EFFICIENTLY.  HOWEVER, IT IS UNDERSTOOD THAT THE TIME REQUIRED TO
COMPLETE THESE DUTIES WILL BE LIMITED AND STRUCTURED TO PERMIT CONSULTANT TO BE
OTHERWISE EMPLOYED ON A FULL-TIME BASIS. IF THE TIME REQUIREMENTS ARE
SIGNIFICANTLY GREATER THAN CONTEMPLATED, CONSULTANT’S COMPENSATION WILL BE
ADJUSTED BY AGREEMENT BETWEEN PACIFIC AND CONSULTANT.

 

5.             Termination.

a)             Termination By Pacific for Cause.  If, before the end of the
Term, Pacific terminates Consultant’s employment for Cause or Consultant
terminates his employment without Good Reason (defined below), Pacific will pay
Consultant, in a lump sum, the compensation to which he would be entitled to
receive for the balance of the Term under Section a)

b)            Other Termination By Pacific.  If, before the end of the Term,
Pacific terminates Consultant’s employment without Cause or Consultant
terminates his employment for Good Reason (defined below), Pacific will pay
Consultant a lump sum payment in an amount equal to the Compensation he would
have received for the balance of the Term if his employment had not terminated,
and Pacific will continue Consultant’s coverage under the Pacific group medical
plan established by Pacific from time to time for the benefit of all full-time
employees of Pacific (or provide Consultant with equivalent benefits) through
the expiration of the Term.

c)             Death or Disability.  This Agreement terminates (1) if Consultant
dies or (2) if Consultant is unable to perform his duties and obligations under
this Agreement for a period of 90 days as a result of a physical or mental
disability arising at any time during the Term of this Agreement, unless with
reasonable accommodation Consultant could continue to perform his duties under
this Agreement and making these accommodations would not pose undue hardship to
Pacific.  If termination occurs under this Section 5b), Consultant or his estate
will be entitled to receive, in a lump sum, an amount equal to the balance which
would be owed Consultant under this Agreement.

d)            Return of Bank Property.  If and when Consultant ceases, for any
reason, to be employed by Pacific, Consultant must return to Pacific all keys,
passcards, identification cards and any other property of Pacific. At the same
time, Consultant also must return to Pacific all originals and copies (whether
in hard copy, electronic or other form) of any documents, drawings, notes,
memoranda, designs, devices, diskettes, tapes, manuals and specifications which
constitute proprietary information or material of Pacific.  The obligations in
this paragraph include the return of documents and other materials which may be
in Consultant’s desk at work, in Consultant’s car or place of residence, or in
any other location under Consultant’s control.

 

6.             Definition of “Cause”. “Cause” means any one or more of the
following, as reasonably determined by Pacific:

a)             Willful misfeasance or gross negligence in the performance of
Consultant’s duties for Pacific that continues for more than 30 days after
written notice to Consultant specifying conduct or omission that constitutes the
misfeasance or gross negligence.

 

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b)            Conviction of a crime in connection with his duties for Pacific.

c)             Conduct demonstrably and significantly harmful to Pacific, as
reasonably determined by the Board of Directors of Pacific on the advice of
legal counsel that continues for more than 30 days after written notice to
Consultant specifying the harmful conduct.

d)            Conviction of a felony.

e)             Breach of the covenants set forth in Sections h) and i) of this
Agreement.

 

Notwithstanding the foregoing, Consultant will not be deemed to have been
terminated for Cause unless and until there has been delivered to Consultant a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board of Directors of Pacific at
a meeting of the Board of Directors called and held for that purpose (after
reasonable notice to Consultant and an  opportunity for Consultant, together
with his counsel, to be heard before the Board of Directors), finding that in
the good faith opinion of the Board of Directors, Consultant was guilty of
conduct constituting Cause as defined above and specifying the particulars for
such finding in detail.

 

7.             Definition of “Good Reason”.  “Good Reason” means only any one or
more of the following:

a)             Reduction, without Consultant’s consent, of Consultant’s
Compensation.

b)            Reduction or elimination of any benefit plan benefiting
Consultant, unless the reduction or elimination is generally applicable to
substantially all similarly situated full-time Pacific employees formerly
benefited.

c)             The assignment to Consultant without his consent of any duties
materially inconsistent with those set forth in this Agreement.

d)            The requirement by Pacific that Consultant’s employment be based
at any office or location other than that set forth in Section b) hereof.

 

8.             Confidentiality.  Consultant will not, after signing this
Agreement, including during and after its Term, use for his own purposes or
disclose to any other person or entity any confidential information concerning
Pacific or their business operations or customers, unless (1) Pacific consents
to the use or disclosure of their respective confidential information, (2) the
use or disclosure is consistent with Consultant’s duties under this Agreement,
or (3) disclosure is required by law or court order.

 

9.             Nonsolicitation.

 

FOR A PERIOD OF TWELVE (12) MONTHS FROM THE EFFECTIVE DATE, CONSULTANT 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.

 

10.           Enforcement.

a)             Pacific and Consultant stipulate that, in light of all of the
facts and circumstances of the relationship between Consultant and Pacific, the
agreements referred to in Sections h) and i) (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, Consultant and Pacific request the court to
reform these provisions to restrict Consultant’s use of confidential information
and Consultant’s ability to compete with Pacific to the maximum extent, in time,
scope of activities and geography, the court finds enforceable.

b)            Consultant acknowledges that Pacific will suffer immediate and
irreparable harm that will not be compensable by damages alone, if Consultant
repudiates or breaches any of the provisions of Sections h) and i) 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

 

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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.

 

11.          Adequate Consideration.  Consultant specifically acknowledges the
receipt of adequate consideration for the covenants contained in Sections h) and
i) and that Pacific is entitled to require him to comply with these Sections. 
These Sections will survive termination of this Agreement.  Consultant
represents that if his employment is terminated, whether voluntarily or
involuntarily, Consultant has experience and capabilities sufficient to enable
Consultant 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
Consultant from earning a livelihood.

 

12.           Arbitration.

a)             Arbitration.  At either party’s request, the parties must submit
any dispute, controversy or claim arising out of or in connection with, or
relating to, this Agreement or any breach or alleged breach of this Agreement,
to arbitration under the American Arbitration Association’s rules then in effect
(or under any other form of arbitration mutually acceptable to the parties).  A
single arbitrator agreed 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 a third arbitrator.  This third
arbitrator will hear the dispute.  The arbitrator’s decision is final (except as
otherwise specifically provided by law) and binds the parties, and either party
may request any court having jurisdiction to enter a judgment and to enforce the
arbitrator’s decision.  The arbitrator will provide the parties with a written
decision naming the substantially prevailing party in the action.  This
prevailing party is entitled 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 place designated
by the arbitrator in King County, Washington.  The arbitrator, in rendering a
decision as to any state law claims, will apply Washington law.

c)             Exception to Arbitration.  Notwithstanding the above, if
Consultant violates Section h) or i), Pacific will have the right to initiate
the court proceedings described in Section b), in lieu of an arbitration
proceeding under this Section c) Pacific may initiate these proceedings wherever
appropriate within Washington State; but Consultant will consent to venue and
jurisdiction in King County, Washington.

 

13.           Miscellaneous Provisions.

a)             Defined Terms.  Capitalized terms used as defined terms, but not
defined in this Agreement, will have the meanings assigned to those terms in the
Plan.

b)            Abandonment of the Merger.  If the Plan terminates before the
Effective Date, this Agreement will not become effective and will be void.

c)             Entire Agreement.  This Agreement constitutes the entire
understanding between the parties concerning its subject matter and supersedes
all prior agreements.

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)             Binding Effect.  This Agreement will bind and inure to the
benefit of Pacific’s and Consultant’s heirs, legal representatives, successors
and assigns.

f)             Litigation Expenses.  If either party successfully seeks to
enforce any provision of this Agreement or to collect any amount claimed to be
due under it, this party will be entitled to reimbursement from the other party
for any and all of its out-of-pocket expenses and costs including, without
limitation, reasonable attorneys’ fees and costs incurred in connection with the
enforcement or collection.

 

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g)            Waiver.  Any waiver by a party of its rights under this Agreement
must be written and signed by the party waiving its rights.  A party’s waiver of
the other party’s breach of any provision of this Agreement will not operate as
a waiver of any other breach by the breaching party.

h)            Assignment.  The services to be rendered by Consultant under this
Agreement are unique and personal.  Accordingly, Consultant may not assign any
of his rights or duties under this Agreement.

i)              Amendment.  This Agreement may be modified only through a
written instrument signed by all parties.

j)              Severability.  The provisions of this Agreement are severable. 
The invalidity of any provision will not affect the validity of other provisions
of this Agreement.

k)             Governing Law.  This Agreement will be governed by and construed
in accordance with Washington law, except to the extent that certain matters may
be governed by federal law.

 

 

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/ Mark A. Coffey

 

MARK A. COFFEY

 

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