Exhibit 10.16

 

DIRECTOR FEE CONTINUATION AGREEMENT

 

THIS AGREEMENT, made and entered into this First Day of January, 2003, by and
between AmericanWest Bank, a bank organized and existing under the laws of the
State of Washington (hereinafter referred to as the “Bank”), and Donald Swartz,
II, a member of the Board of Directors of the Bank (hereinafter referred to as
the “Director”).

 

WITNESSETH:

 

WHEREAS, it is the consensus of the Board of Directors (hereinafter referred to
as the “Board”) that the Director’s services to the Bank in the past have been
of exceptional merit and have constituted an invaluable contribution to the
general welfare of the Bank and in bringing it to its present status of
operating efficiency, and its present position in its field of activity;

 

WHEREAS, the Director’s experience, knowledge of the affairs of the Bank,
reputation, and contacts in the industry are so valuable that assurance of the
Director’s continued services is essential for the future growth and profits of
the Bank and it is in the best interests of the Bank to arrange terms of
continued service for the Director so as to reasonably assure the Director’s
remaining in the Bank’s service during the Director’s lifetime or until the age
of retirement;

 

WHEREAS, it is the desire of the Bank that the Director’s services be retained
as herein provided;

 

WHEREAS, the Director is willing to continue to serve the Bank provided the Bank
agrees to pay the Director or the Director’s beneficiary(ies), certain benefits
in accordance with the terms and conditions hereinafter set forth;

 

ACCORDINGLY, it is the desire of the Bank and the Director to enter into this
Agreement under which the Bank will agree to make certain payments to the
Director at retirement or the Director’s beneficiary(ies) in the event of the
Director’s death pursuant to this Agreement;

 

FURTHERMORE, it is the intent of the parties hereto that this Director Plan be
considered an unfunded arrangement maintained primarily to provide supplemental
retirement benefits for the Director, and to be considered a non-qualified
benefit plan for purposes of the Employee Retirement Security Act of 1974, as
amended (“ERISA”). The Director is fully advised of the Bank’s financial status
and has had substantial input in the design and operation of this benefit plan;
and

 

NOW, THEREFORE, in consideration of services performed in the past and to be
performed in the future as well as of the mutual promises and covenants herein
contained it is agreed as follows:

 

I. SERVICE

 

The Director will continue to serve the Bank in such capacity and with such
duties and

 

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responsibilities as may be assigned, and with such compensation as may be
determined from time to time by the Board of Directors of the Bank.

 

II. FRINGE BENEFITS

 

The fee continuation benefits provided by this Agreement are granted by the Bank
as a fringe benefit to the Director and are not part of any fee reduction plan
or an arrangement deferring a bonus or a fee increase. The Director has no
option to take any current payment or bonus in lieu of these fee continuation
benefits except as set forth hereinafter.

 

III. RETIREMENT DATE AND NORMAL RETIREMENT AGE

 

  A. Retirement Date:

 

If the Director continuously serves the Bank, the Director shall be eligible to
retire from active service with the Bank on January 1, 2010 and receive the
benefits described below, unless by action of the Board of Directors this period
of active service shall be shortened or extended.

 

  B. Normal Retirement Age:

 

Normal Retirement Age shall mean the date on which the Director attains age
sixty-five (65).

 

IV. RETIREMENT BENEFIT AND POST-RETIREMENT DEATH BENEFIT

 

Upon said retirement, the Bank, commencing with the first day of the month
following the date of such retirement, shall pay the Director a monthly benefit
of five hundred dollars ($500). Said benefit shall be paid for a period of one
hundred twenty (120) months; provided, that if less than one hundred twenty
(120) such monthly payments have been made prior to the death of the Director,
the Bank shall either, at the discretion of the Bank, continue such monthly
payments to the individual or individuals the Director may have designated in
writing and filed with the Bank until the full number of one hundred twenty
(120) monthly payments have been made, or make the total amount of said payments
due in a lump sum* reduced to present value as set forth in Subparagraph XI (K)
to said beneficiary(ies). In the absence of any effective beneficiary
designation, any such amounts becoming due and payable upon the death of the
Director shall be payable to the duly qualified executor or administrator of the
Director’s estate. Said payments due hereunder shall begin the first day of the
second month following the decease of the Director.

 

V. DEATH BENEFIT PRIOR TO RETIREMENT

 

In the event the Director should die while actively serving the Bank at any time
after the date of this Agreement but prior to January 1, 2010 (or such later
date as may be agreed upon), the Bank will pay a monthly benefit of Five Hundred
Dollars ($500) for a period

 

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of One Hundred Twenty (120) months, or at the discretion of the Bank, a lump
sum* reduced to present value as set forth in Subparagraph XI (K), to such
individual or individuals as the Director may have designated in writing and
filed with the Bank. In the absence of any effective beneficiary designation,
any such amounts becoming due and payable upon the death of the Director shall
be payable to the duly qualified executor or administrator of the Director’s
estate. Said payments due hereunder shall begin the first day of the second
month following the decease of the Director.

 

VI. BENEFIT ACCOUNTING

 

The Bank shall account for this benefit using the regulatory accounting
principles of the Bank’s primary federal regulator. The Bank shall establish an
accrued liability retirement account for the Director into which appropriate
reserves shall be accrued.

 

VII. VESTING

 

Director’s interest in the benefits that are the subject of this Agreement shall
be subject to a vesting schedule described in Schedule A.

 

VIII. OTHER TERMINATION OF SERVICE

 

Subject to Subparagraph VII (i) hereinbelow, in the event that the service of
the Director shall terminate prior to January 1, 2010 by the Director’s
voluntary action, or by the Director’s discharge by the Bank without cause, then
this Agreement shall terminate upon the date of such termination of service and
the Bank shall pay to the Director the vested percentage of benefits earned as
of the date of termination. Such benefits shall be payable commencing on the
Retirement Date described above.

 

In the event the Director’s death should occur after such severance but prior to
the completion of the monthly payments provided for in this Paragraph VIII, the
remaining installments, or a lump sum*, at the discretion of the Bank, shall be
paid to such individual or individuals as the Director may have designated in
writing and filed with the Bank. In the absence of any effective beneficiary
designation, any such amounts shall be payable to the duly qualified executor or
administrator of the Director’s estate. Said payments due hereunder shall begin
the first day of the second month following the decease of the Director.

 

(i) Discharge for Cause: In the event the Director shall be discharged or
removed from the Board for cause at any time, all benefits provided herein shall
be forfeited. The term “for cause” shall mean any of the following: (i) gross
negligence or gross neglect; (ii) the commission of a felony or gross
misdemeanor involving moral turpitude, fraud, or dishonesty; (iii) the willful
violation of any law, rule, or regulation (other than a traffic violation or
similar offense); (iv) an intentional failure to perform stated duties; or (v) a
breach of fiduciary duty involving personal profit. If a dispute arises as to
discharge “for cause,” such dispute shall be resolved by arbitration as set
forth in this Director Plan.

 

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IX. CHANGE OF CONTROL

 

The term “Change in Control” shall mean: (i) any merger or consolidation of the
Bank in which the Bank is not the surviving corporation, and any merger or
consolidation of the Bank’s parent company in which the parent company is not
the surviving corporation; (ii) any sale, exchange, transfer or other
disposition (in one transaction or a series of transactions) of any assets of
the Bank or its parent company having an aggregate fair market value of more
than 50% of the total value of the assets of the Bank or such parent company; or
(iii) any person (as such term is used in sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes a beneficial owner, directly or
indirectly, of the Bank or its parent company representing more than 50% of the
Bank’s or such parent company’s then outstanding voting stock.

 

X. RESTRICTIONS ON FUNDING

 

The Bank shall have no obligation to set aside, earmark or entrust any fund or
money with which to pay its obligations under this Director Plan. The Directors,
their beneficiary(ies), or any successor in interest shall be and remain simply
a general creditor of the Bank in the same manner as any other creditor having a
general claim for matured and unpaid compensation.

 

The Bank reserves the absolute right, at its sole discretion, to either fund the
obligations undertaken by this Director Plan or to refrain from funding the same
and to determine the extent, nature and method of such funding. Should the Bank
elect to fund this Director Plan, in whole or in part, through the purchase of
life insurance, mutual funds, disability policies or annuities, the Bank
reserves the absolute right, in its sole discretion, to terminate such funding
at any time, in whole or in part. At no time shall any Director be deemed to
have any lien or right, title or interest in or to any specific funding
investment or assets of the Bank.

 

If the Bank elects to invest in a life insurance, disability or annuity policy
upon the life of the Director, then the Director shall assist the Bank by freely
submitting to a physical exam and supplying such additional information
necessary to obtain such insurance or annuities.

 

XI. MISCELLANEOUS

 

  A. Status as an Unsecured General Creditor:

 

Notwithstanding anything contained herein to the contrary: (i) neither the
Director, the Director’s spouse or the Director’s designated beneficiaries shall
have any legal or equitable rights, interests, or claims in or to any specific
property or assets of the Bank as a result of this Agreement; (ii) none of the
Bank’s assets shall be held in or under any trust for the benefit of the
Director, the Director’s spouse or the Director’s designated beneficiaries or
held in any way as

 

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security for the fulfillment of the obligations of the Bank under this
Agreement; (iii) all of the Bank’s assets shall be and remain the general
unpledged and unrestricted assets of the Bank; (iv) the Bank’s obligation under
this Agreement shall be that of an unfunded and unsecured promise by the Bank to
pay money in the future; and (v) the Director, the Director’s spouse and the
Director’s designated beneficiaries shall be unsecured general creditors with
respect to any benefits which may be payable under the terms of this Agreement.

 

Notwithstanding the above, the Director and the Bank acknowledge and agree that,
in the event of a Change in Control and at the written request of the Director,
the Bank shall establish, not later than the effective date of the Change in
Control, a Rabbi Trust or multiple Rabbi Trusts (the “Trust” or “Trusts”) upon
such terms and conditions as the Bank in its sole discretion deems appropriate
and in compliance with applicable provisions of the Code in order to permit the
Bank to make contributions and/or transfer assets to the Trust or Trusts to
discharge its obligations pursuant to this Agreement. The principal of the Trust
or Trusts and any earnings thereon shall be held separate and apart from other
funds of the Bank to be used exclusively for discharge of the Bank’s obligations
pursuant to this Agreement and shall continue to be subject to the claims of the
Bank’s general creditors until paid to the Director or his beneficiaries in such
manner and at such times as specified in this Agreement.

 

  B. Binding Obligation of the Bank and any Successor in Interest:

 

The Bank shall not merge or consolidate into or with another bank or sell
substantially all of its assets to another bank, firm or person until such bank,
firm or person expressly agree, in writing, to assume and discharge the duties
and obligations of the Bank under this Director Plan. This Director Plan shall
be binding upon the parties hereto, their successors, beneficiaries, heirs and
personal representatives.

 

  C. Amendment or Revocation:

 

Subject to Paragraph XIII, it is agreed by and between the parties hereto that,
during the lifetime of the Director, this Director Plan may be amended or
revoked at any time or times, in whole or in part, by the mutual written consent
of the Director and the Bank.

 

  D. Gender:

 

Whenever in this Director Plan words are used in the masculine or neuter gender,
they shall be read and construed as in the masculine, feminine or neuter gender,
whenever they should so apply.

 

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  E. Effect on Other Bank Benefit Plans:

 

Nothing contained in this Director Plan shall affect the right of the Director
to participate in or be covered by any qualified or non-qualified pension,
profit-sharing, group, bonus or other supplemental compensation or fringe
benefit plan constituting a part of the Bank’s existing or future compensation
structure.

 

  F. Headings:

 

Headings and subheadings in this Director Plan are inserted for reference and
convenience only and shall not be deemed a part of this Director Plan.

 

  G. Applicable Law:

 

The validity and interpretation of this Agreement shall be governed by the laws
of the State of Washington.

 

  H. 12 U.S.C. § 1828(k):

 

Any payments made to the Director pursuant to this Director Plan, or otherwise,
are subject to and conditioned upon their compliance with 12 U.S.C. § 1828(k) or
any regulations promulgated thereunder.

 

  I. Partial Invalidity:

 

If any term, provision, covenant, or condition of this Director Plan is
determined by an arbitrator or a court, as the case may be, to be invalid, void,
or unenforceable, such determination shall not render any other term, provision,
covenant, or condition invalid, void, or unenforceable, and the Director Plan
shall remain in full force and effect notwithstanding such partial invalidity.

 

  J. Continuation as Director:

 

Neither this Agreement nor the payments of any benefits hereunder shall be
construed as giving to the Director any right to be retained as a member of the
Board of Directors of the Bank.

 

  K. Present Value:

 

All present value calculations under this Agreement shall be based on the
following discount rate:

 

Discount Rate:

  The discount rate as used in the FASB 87 calculations for the Executive plan.

 

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XII. ERISA PROVISION

 

  A. Named Fiduciary and Plan Administrator:

 

The “Named Fiduciary and Plan Administrator” of this Director Plan shall be
AmericanWest Bank until its resignation or removal by the Board. As Named
Fiduciary and Plan Administrator, the Bank shall be responsible for the
management, control and administration of the Director Plan. The Named Fiduciary
may delegate to others certain aspects of the management and operation
responsibilities of the Director Plan including the employment of advisors and
the delegation of ministerial duties to qualified individuals.

 

  B. Claims Procedure and Arbitration:

 

In the event a dispute arises over benefits under this Director Plan and
benefits are not paid to the Director (or to the Director’s beneficiary(ies) in
the case of the Director’s death) and such claimants feel they are entitled to
receive such benefits, then a written claim must be made to the Named Fiduciary
and Plan Administrator named above within sixty (60) days from the date payments
are refused. The Named Fiduciary and Plan Administrator shall review the written
claim and if the claim is denied, in whole or in part, it shall provide in
writing within sixty (60) days of receipt of such claim its specific reasons for
such denial, reference to the provisions of this Director Plan upon which the
denial is based and any additional material or information necessary to perfect
the claim. Such written notice shall further indicate the additional steps to be
taken by claimants if a further review of the claim denial is desired. A claim
shall be deemed denied if the Named Fiduciary and Plan Administrator fail to
take any action within the aforesaid sixty-day period.

 

If claimants desire a second review they shall notify the Named Fiduciary and
Plan Administrator in writing within sixty (60) days of the first claim denial.
Claimants may review this Director Plan or any documents relating thereto and
submit any written issues and comments it may feel appropriate. In their sole
discretion, the Named Fiduciary and Plan Administrator shall then review the
second claim and provide a written decision within sixty (60) days of receipt of
such claim. This decision shall likewise state the specific reasons for the
decision and shall include reference to specific provisions of the Plan
Agreement upon which the decision is based.

 

If claimants continue to dispute the benefit denial based upon completed
performance of this Director Plan or the meaning and effect of the terms and
conditions thereof, then claimants may submit the dispute to an arbitrator for
final arbitration. The arbitrator shall be selected by mutual agreement of the
Bank and the claimants. The arbitrator shall operate under any generally
recognized set of arbitration rules. The parties hereto agree that they and
their heirs, personal representatives, successors and assigns shall be bound by
the decision of such arbitrator with respect to any controversy properly
submitted to it for determination.

 

Where a dispute arises as to the Bank’s discharge of the Director “for cause,”
such dispute shall likewise by submitted to arbitration as above described and
the parties hereto agree to be bound by the decision thereunder.

 

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XIII. TERMINATION OR MODIFICATION OF AGREEMENT BY REASON OF CHANGES IN THE LAW,
RULES OR REGULATIONS

 

The Bank is entering into this Agreement upon the assumption that certain
existing tax laws, roles and regulations will continue in effect in their
current form. If any said assumptions should change and said change has a
detrimental effect on this Director Plan, then the Bank reserves the right to
terminate or modify this Agreement accordingly. Upon a Change of Control
(Paragraph IX), this paragraph shall become null and void effective immediately
upon said Change of Control.

 

IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully read
this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

 

           

AMERICANWEST BANK

Spokane, Washington

/s/ Evelyn M. Dugger

      By:  

/s/ Wes Colley

Witness

         

Wes Colley

President & CEO

/s/ Jacqueline A. Barnard

     

/s/ Donald Swartz, II

Witness

     

Donald Swartz, II, Director

 

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SCHEDULE A

 

VESTING SCHEDULE

 

End of Calendar Year

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   Vested Percentage

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December 31, 2002

   100%