EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”), between The Bank of the Pacific, a
Washington business corporation (“The Bank”) and Philippe S. Swaab (“Executive”)
is dated as of December 20th, 2005 and will be effective January 1, 2006.

RECITALS

  A. The Bank of the Pacific is a Washington banking corporation. The Bank is
engaged in the business of commercial banking in Grays Harbor County, Pacific
County, Skagit County, Whatcom County, and Wahkiakum County, Washington. The
Bank also engages business in Oregon Counties.

  B. The Executive represents that he has considerable experience, expertise and
training in technology related to banking and services offered by The Bank. The
Bank desires and intends to employ the Executive pursuant to the terms and
conditions set forth in this Agreement.

  C. Both The Bank and the Executive have read and understand the terms and
provisions set forth in this Agreement, and have been afforded a reasonable
opportunity to review this Agreement and to consult with an attorney.

AGREEMENT

The parties agree as follows:

1. Employment. The Bank will employ the Executive for the Term, except as
specifically stated herein, and the Executive accepts employment with The Bank
on the terms and conditions set forth in this Agreement. The Executive’s title
will be Executive Vice President.

2. Effective Date and Term.

  (a) Effective Date. This Agreement is effective as of the 1st day of January
1, 2006

  (b) Term. The initial term of this Agreement is two years (24 months),
beginning on the Effective Date stated in paragraph 2(a), after which it shall
renew annually for a term of one year (12 months) unless notice of termination
or nonrenewal is provided by either party pursuant to paragraph 5(a).

3. Duties. The Executive will serve as the Executive Vice President & Real
Estate Division Manager for the Bank and faithfully and diligently perform the
duties assigned to the Executive by the Chief Executive Officer (“CEO”) of The
Bank. The Executive will report directly to the CEO of The Bank. The Executive
will use his best efforts to perform his duties and will devote all his working
time and attention to these duties.

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4. Compensation.

  (a) Salary. Initially, the Executive will receive an annualized salary of
$120,000.00 per year, to be paid at regular intervals by The Bank in accordance
with its regular payroll schedules.

  (b) Incentive Compensation. Executive will be eligible to participate in an
incentive plan relative to The Bank’s Mortgage Division’s approved plan. The
plan will be approved each year by The Bank’s board of directors. No incentive
compensation bonus shall be paid for any calendar year or portion thereof, in
which this Agreement is terminated or not renewed, or in which notice of
nonrenewal or termination is given, regardless of reasons for termination or
nonrenewal, and regardless of which party terminates or declines to renew this
Agreement. The Executive will also be entitled to participate in stock bonus or
option plans generally available to senior executives of The Bank.

  (c) Standard Benefits. The Bank will provide to the Executive the standard
Executive benefits provided in accordance with The Bank’s benefit plans and
policies, including but not limited to health insurance, disability insurance,
life insurance and four (4) weeks of paid vacation per year accrued in
accordance with The Bank’s benefit plans and policies. The Executive also will
be entitled to participate in retirement plans, including 401(k) plans.

  (d) Auto Allowance The Executive will be entitled to an automobile allowance
in the amount of $500.00 per month. In lieu of an automobile allowance, The Bank
may provide the Executive with the use of an automobile, of a model typically
appropriate for the performance of the services by a similarly situated
executive.

  (e) Expense. The Bank will reimburse the Executive for all reasonable expenses
that the Executive may incur in the performance of his duties including monthly
country club dues. The Executive will request reimbursement and provide
documentation of such expenses within a reasonable time, but no later than 90
days after the expense has been incurred.

  (f) Annual Review and Adjustment. The Executive’s compensation as set forth in
this Section 4(a), will be subject to annual review and adjustment by the CEO.
In no case, however, will the Executive’s salary, vacation, and expense
reimbursement be less than the amounts set forth in this section 4.

5. Termination.

  (a) Notice of Termination or Nonrenewal. Either party may unilaterally
terminate or decline to renew this Agreement for any reason by providing the
other party with written notice of the termination or nonrenewal no less than
ninety (90) days prior to the termination date or the final date of the then
current Term of this Agreement.

  (b) Termination or Nonrenewal by The Bank Without Cause: In the event that the
Bank provides the Executive with a notice of termination without cause or
nonrenewal under paragraph 5(a), The Bank will pay to the Executive his salary
from the date of the notice for the balance of the then current Term or for
twelve (12) months from the date of the notice, whichever is greater, and in its
discretion will advise the Executive of those duties and responsibilities, if
any, it wants him to perform during this time. Such duties and responsibilities
will be in Bellingham, Washington and reasonably commensurate with the duties
and responsibilities he held prior to the notice of termination or nonrenewal.
All forfeiture provisions regarding restricted stock awards and all vesting
requirements regarding stock options shall lapse or be deemed fully completed.

  (c) Termination or Nonrenewal by the Executive: In the event the Executive
seeks to terminate or refuses to renew this Agreement without providing at least
(90) days’ written notice prior to the termination date of final date of the
then current term, the Executive will pay to The Bank liquidated damages as
follows: (A) in the event the Executive provides notice of termination or
nonrenewal 29 days or less prior to the termination date of the Agreement, the
Executive shall pay The Bank $25,000 in liquidated damages; (B) in the event the
Executive provides notice of termination or nonrenewal at least 30 days but not
more than 59 days prior to the termination date of the Agreement, the Executive
shall pay The Bank $20,000 in liquidated damages; (C) in the event the Executive
provides notice of termination or nonrenewal at least 60 days but not more than
89 days prior to termination of this Agreement, the Executive shall pay to The
Bank $15,000 in liquidated damages. This paragraph shall not apply to any
termination or nonrenewal by the Executive is based upon a breach of this
agreement by the Bank.

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  (d) Termination by the Bank for Cause. Notwithstanding paragraph 5(a), The
Bank may immediately terminate this Agreement with no advance notice if
termination is for cause. For purposes of this Agreement, “cause” means
dishonesty; fraud; commission of a felony or of a crime involving moral
turpitude; deliberate violation of statutes, regulations, or orders pertaining
to financial institutions or reckless disregard of such statutes, regulations,
or orders; destruction or theft of Bank property or assets of customers of The
Bank; physical attack of a fellow Executive or a customer; intoxication at work;
use of narcotics or alcohol to an extent that materially impairs Executive’s
performance of his duties; willful malfeasance or gross negligence in the
performance of Executive’s duties; violation of law in the course of employment
that has a material adverse impact on The Bank, its Executives, or its
customers; Executive’s refusal to perform Executive’s duties; Executive’s
refusal to follow reasonable instructions or directions; misconduct materially
injurious to The Bank; significant neglect of duty; or any material breach of
Executive’s duties or obligations to The Bank that results in material harm to
The Bank. If termination occurs under this paragraph, the Executive will be
entitled to receive only the salary earned through the date this Agreement is
terminated and shall not be entitled to any payment pursuant to paragraph 5(b),
and except as otherwise provided by law, participation in benefit plans ceases
upon termination of this Agreement.

  (e) Death or Disability. Notwithstanding paragraph 5(a), this Agreement will
terminate immediately upon the Executive’s death. Notwithstanding paragraph
5(a), if the Executive is unable to perform his duties and obligations under
this Agreement for a period of 90 days as a result of a disability that
substantially limits one or more of his major life activities, this Agreement
will terminate immediately upon expiration of such 90 day period unless
Executive is thereafter able to perform the essential functions of the position
referenced in paragraph 2(c) with or without a reasonable accommodation. If
termination occurs under this paragraph, the Executive or his estate will be
entitled to receive only the salary earned through the date this Agreement is
terminated and shall not be entitled to any payment pursuant to paragraph 4(a),
and except as otherwise provided by law, participation in benefit plans ceases
upon termination of this Agreement, except that as of such termination date, all
vesting requirements regarding then currently pending stock options shall be
deemed fully completed.

  (f) Termination Related to a Change in Control. This paragraph will apply to
any termination related to a Change in Control, as set forth herein.

  i. “Change in Control” means a change “in the ownership or effective control”
or “in the ownership of a substantial portion of the assets” of The Bank, within
the meaning of Section 280G of the Internal Revenue Code. An initial public
offering by The Bank will not, however, be deemed to be a Change in Control
under this Agreement.

  ii. Termination by the Bank. Notwithstanding the provisions of paragraph 5(a),
if The Bank or its successors in interest by merger, or their transferees in the
event of a purchase and assumption transaction, and for reasons other than the
provisions in paragraphs 5(c) and 5(d) terminates this Agreement within
twenty-four (24) months following a Change in Control, The Bank will pay the
Executive twenty four (24) times the base compensation received by the Executive
during the most recent calendar month ending on or prior to the effective date
of termination, less statutory payroll deductions. Payment under this paragraph
shall be made in accordance with The Bank’s ordinary payroll policies and
procedures, unless the parties mutually agree to a different payment schedule.

  iii. Executive Assignment Related to Change in Control. If the assignment to
the Executive by The Bank or its successors in interest by merger, or their
transferees in the event of a purchase and assumption transaction, is (i) other
than the position of Executive Vice President & Real Estate Division Manager or
(ii) not in Bellingham, Washington, without the Executive’s expressed written
consent, then the provisions of paragraph 5(f)(ii) shall apply.

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  iv. Limitations on Payments Related to Change in Control. The following apply
notwithstanding any other provision of this Agreement:

  1. The payment described in Section 5(f)(ii) shall be less than the 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

  2. The Executive’s right to receive the payment described in Section 5(f)(ii)
terminates (a) immediately if before the Change in Control transaction closes,
the Executive terminates his employment without good reason or the Company
terminates the Executive’s employment for cause, or (b) two years after Change
in Control occurs

6. Confidentiality.The Executive will not, after signing this Agreement,
including during and after its Term, disclose to any other person or entity any
confidential information concerning The Bank or its business operations or
customers, or use for his own purposes or permit or assist in the use of such
confidential information by third parties unless The Bank consents to the use or
disclosures of their respective information, or disclosure is required by law or
court order. The provisions of this paragraph survive the termination of the
Executives employment by The Bank.

7. Noncompetition during Term of this Agreement.During the Term of this
Agreement, the Executive will not become involved with a Competing Business or
serve, directly or indirectly, a Competing Business in any matter. “Competing
Business” means any company that competes with or will compete with The Bank in
Grays Harbor, Pacific, Wahkiakum, Whatcom, and Skagit Counties, or any other
Washington or Oregon county in which The Bank maintains a banking office(s) at
the time of the termination of this Agreement. “Competing Business” includes,
without limitation, any existing or newly formed financial institution or trust
company

8. Noncompetition in the event of termination and Nonrenewal.In the event this
Agreement is terminated or not renewed regardless of reasons for termination or
non renewal, and regardless of which party terminates or declines to renew this
Agreement, the Executive will not become involved with a Competing Business (as
the term is defined above) for the number of months of salary he is provided
(either as a lump sum or a monthly payment) pursuant to paragraph 5(b) or
otherwise after the termination or nonrenewal but in no event exceeding 24
months. It is the intent of the parties that upon termination or nonrenewal The
Bank may purchase up to 24 months of noncompetition from the Executive by paying
the Executive his then current monthly salary for the period of noncompetition

9. Enforcement.The Bank and the Executive agree that, in light of all of the
facts and circumstances of the relationship between The Bank and the Executive,
the agreements referred to in paragraphs 5(a), 6 and 7 are fair and reasonably
necessary for the protection

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  of The Bank’s confidential information, goodwill and other protectible
interests. The parties acknowledge and agree that the time and expense involved
in proving in any forum the actual damage or loss suffered by The Bank if there
is a breach of paragraphs 5(a), 6 or 7 make this case appropriate for liquidated
damages. Accordingly, The Bank and the Executive agree that the following
schedule of liquidated damages is reasonable and fair, and shall be the amount
of damages which the Executive shall pay to The Bank for each, separate breach
of paragraphs 5(a), 6 or 7 by the Executive:

a.              for a breach of paragraph 5(a), the sum of $25,000;

b.              for a breach of paragraph 6, the sum of $75,000;

c.              for a breach of paragraph 7, the sum of $150,000.

  For purposes of paragraph 7, a “separate breach” shall be deemed to have
occurred with each Competing Business with which the Executive becomes involved
or serves in violation of paragraph 7.

  Neither the breach of paragraphs 5(a), 6 or 7, nor the payment of liquidated
damages by the Executive, shall affect the continuing validity or enforceability
of this Agreement, or The Bank’s right to seek and obtain injunctive relief. If
a court of competent jurisdiction should decline to enforce any of these
covenants and agreements, the Executive and the Bank hereby stipulate that the
Court shall reform these provisions to restrict the Executive’s use of
confidential information and the Executive’s ability to compete with The Bank to
the maximum extent, in time, scope of activities, and geography, as the court
finds enforceable.

10. Adequate Consideration.The Executive specifically acknowledges the receipt
of adequate consideration for the covenants contained in paragraph 5(a), 6, and
7, and that The Bank is entitled to require him to comply with these paragraphs.
These paragraphs will survive termination of this agreement. The Executive
represents that if his employment is terminated, whether voluntarily or
involuntarily, the Executive has experience and capabilities sufficient to
enable the 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 the Executive from earning a livelihood.

11. Miscellaneous Provisions. This Agreement constitutes the entire
understanding between the parties concerning its subject matter. This Agreement
will bind and inure to the benefit of The Bank’s and the Executive’s heirs,
legal representatives, successors and assigns. This Agreement may be modified
only through a written instrument signed by both parties. This Agreement will be
governed and construed in accordance with Washington law,. except that certain
matters may be governed by federal law. Venue for enforcement of any terms of
this Agreement shall be in Grays Harbor County, Washington Superior Court.

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Signed as of December 20th, 2005:

THE BANK OF THE PACIFIC EXECUTIVE

____________________

____________________ Dennis A. Long, CEO Philippe S. Swaab

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