Exhibit 10.20

 

**EMPLOYMENT AGREEMENT**

**KIM S. BRACE**

 

This Employment Agreement is made on the 15th day of June,2001, between PACIFIC NORTHWEST BANCORP and PACIFIC NORTHWEST BANK (hereinafterjointly referred to as the “Bank”) and KIM S. BRACE (hereinafter referred to asthe “Executive”), who agree as follows:

 

RECITALS

 

A.            Pacific NorthwestBank, in conjunction with a Plan and Merger Agreement of Reorganization wherebyPacific Northwest Bank was acquired by InterWest Bancorp, Inc., entered into anEmployment Agreement with Executive dated January 15, 1998.

 

B.             On June 15, 2000,the Bank and Executive amended the Agreement to make it advantageous forExecutive to continue her employment through June 15, 2001.

 

C.             The Bank andExecutive now wish to terminate the original Employment Agreement (January 15,1998), as amended by the First Amendment thereto (June 15, 2000) and replace itwith this Employment Agreement (this “Agreement”).

 

AGREEMENT

 

The parties agree as follows:

 

1.    Employment.  The Bank agrees to employ Executive andExecutive agrees to accept employment as the Bank’s Executive Vice Presidentand Chief Administrative Officer under the terms and conditions set forth inthis Employment Agreement.

 

2.    Effective Date and Term.  This Employment Agreement is effective onJune 16, 2001, replacing the prior Employment Agreement, as amended, which willremain in effect until the effective date of this Agreement.  The term of this Agreement is two yearsbeginning on June 16, 2001, and terminating on June 15, 2003 (“Term”).

 

3.    Duties.  Executive will faithfully and diligentlyperform the duties assigned to Executive from time to time by the Bank’sPresident, consistent with the duties that have been normal and customary toExecutive’s position.  Executive willuse her best efforts to perform her duties and will devote full time andattention to these duties during working hours.  Executive will report directly to the Bank’s President.  The Bank’s Board of Directors may, from timeto time, modify Executive’s title or performance responsibilities toaccommodate management succession, as well as any other management objectivesof the Bank.  Executive will assume anyadditional positions, duties and responsibilities as may reasonably berequested of her with or without additional compensation, as appropriate andconsistent with this paragraph 3.

 

4.    Salary.  Executive shall receive a salary set by theCompensation Committee for employees with comparable duties and experience, butnot less than $160,000 per year, to be paid in accordance with the Bank’sregular payroll schedule.  Executive’ssalary shall be reviewed annually.

 

5.    Incentive Compensation.  The Bank’s Board of Directors will determinethe amount of bonus, if any, to be paid by the Bank to Executive for each yearduring the Term.  In making thisdetermination, the Bank’s Board of Directors will consider factors such asExecutive’s performance of her duties and the safety, soundness andprofitability of the Bank.  Executive’sbonus, if any, will reflect Executive’s contribution to the performance of theBank during the year.

 

6.    Income Deferral andBenefits.  Subject to eligibilityrequirements and in accordance with and subject to any policies adopted by theBank’s Board of Directors with respect to any benefit plans or programs,Executive will be entitled to receive benefits (including stock options)similar to those offered to other employees of the Bank with positions andduties comparable to those of Executive.

 

7.    Business Expenses.  The Bank will reimburse Executive forordinary and necessary expenses including, without limitation, Bank automobile,travel, entertainment and similar expenses incurred in performing and promotingthe Bank’s business.  Executive willpresent from time to time itemized accounts of these expenses, subject to anylimits of Bank policy or the rules and regulations of the Internal RevenueService.

 

8.    Termination.

 

8.1  Terminationby Bank for Cause.  If, before theend of the Term, the Bank terminates Executive’s employment for Cause, the Bankwill pay Executive the salary earned and expenses reimbursable under thisAgreement incurred through the date of Executive’s termination.  If Executive is terminated for Cause, Executivewill have no right to receive compensation or other benefits for any periodafter termination under this Section 8.1.

 

8.2  Death or Disability.  This Agreement terminates: (i) if Executivedies, or (ii) if Executive is unable to perform her duties and obligationsunder this Agreement for a period of 90 days as a result of a physical ormental disability arising at any time during the term of this Agreement, unlesswith reasonable accommodation Executive could continue to perform her dutiesunder this Agreement and making these accommodations would not require the Bankto expend any funds.  If terminationoccurs under this Section 8.2, Executive or her estatewill be entitled to receive only the compensation and benefits earned andexpenses reimbursable through the date this Agreement terminated, together witha single cash payment in an amount equal to Executive’s W-2 income beforesalary deferrals over the twelve (12) months preceding her death or disability.

 

8.3  Other Termination by Bank.  If, before the end of the Term, the Bankterminates Executive’s employment without Cause, or Executive terminates heremployment for Good Reason, the Bank will pay Executive the greater of (a) thesalary Executive would have been entitled to receive under this Agreement forthe remainder of the Term if her employment had not terminated, or (b) theamount Executive would be entitled to receive under Section 8.4 hereof.

 

8.4  Voluntary Termination byExecutive.  If before the end of theTerm, Executive elects to terminate this Agreement by delivering written noticeto the Bank, regardless of whether Executive had Good Reason to terminate thisAgreement, the Bank will pay Executive a single cash payment in an amount equalto Executive’s W-2 income before salary deferrals over the twelve (12) monthspreceding the date of termination (“Total Annual Compensation”).

 

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

 

9.    Definition of “Cause”.  “Cause” means any one or more of thefollowing:

 

9.1  Willful misfeasance orgross negligence in the performance of Executive’s duties;

 

9.2  Conviction of a crime inconnection with her duties; or

 

9.3  Conduct demonstrably andsignificantly harmful to the Bank, as reasonably determined by the Bank’s Boardof Directors on the advice of legal counsel.

 

10.    Definition of “GoodReason”.  “Good Reason” means onlyany one or more of the following:

 

10.1  Reduction, withoutExecutive’s consent, of Executive’s salary or elimination of any compensationor benefit plan benefiting Executive, unless the reduction or elimination isgenerally applicable to substantially all similarly situated Bank employees (or employees of a successor or controlling entity of the Bank);

 

10.2 Assignment to Executive without her consent of any authority or dutiesmaterially inconsistent with Executive’s position as of the date of thisAgreement; or

 

10.3  Relocation or transfer ofExecutive’s principal place of employment that would require Executive tocommute on a regular basis more than 60 miles each way from her currentbusiness office at the Bank on the date of this Agreement, unless Executiveconsents to the relocation or transfer.

 

11.   Confidentiality. Executive will not, after signing this Agreement, including during andafter its Term, use for her own purposes or disclose to any other person orentity any confidential information concerning the Bank or its businessoperations or customers, unless: (i) the Bank consents to the use or disclosureof its respective confidential information, (ii) the use or disclosure isconsistent with Executive’s duties under this Agreement, or (iii) disclosure isrequired by law or court order.

 

12.    Enforcement.

 

12.1  The Bank and Executive stipulate that, inlight of all the facts and circumstances of the relationship between Executiveand the Bank, the requirement of confidentiality referred to in Section 11 isfair and reasonably necessary for the protection of the Bank’s confidentialinformation, goodwill and other protectable interest.  If a court of competent jurisdiction should decline to enforcethat provision, Executive and the Bank shall request the court to reform theprovision to restrict Executive’s use of confidential information to themaximum extent the court finds enforceable.

 

12.2  Executive acknowledges that the Bank willsuffer immediate and irreparable harm that will not be compensable by damages alone,if Executive repudiates or breaches Section 11 or threatens or attempts to doso.  For this reason, under thesecircumstances, the Bank, in addition to and without limitation of any otherrights, remedies or damages available to it at law or in equity, will beentitled to obtain temporary, preliminary and permanent injunctions in order toprevent or restrain the breach, and the Bank will not be required to post abond as a condition for the granting of this relief.

 

13.    Adequate Consideration.  Executive specifically acknowledges thereceipt of adequate consideration for the covenants contained in Section 11 andthat the Bank is entitled to require her to comply with such section.  Section 11 will survive termination of thisAgreement.  Executive represents that ifher employment is terminated, whether voluntarily or involuntarily,  Executive has experience and capabilitiessufficient to enable Executive to obtain employment in areas which do notviolate this Agreement and that the Bank’s enforcement of a remedy by way ofinjunction will not prevent Executive from earning a livelihood.

 

14.   Arbitration.

 

14.1  Arbitration.  At either party’s request the parties mustsubmit any dispute, controversy or claim arising out of or in connection with,or relating to, this Agreement or any breach or alleged breach of thisAgreement, to arbitration under the American Arbitration Association’s rulesthen in effect (or under any other form of arbitration usually acceptable tothe parties).  A single arbitrator agreedon by the parties will conduct the arbitration.  If the parties cannot agree on a single arbitrator, each partymust select one arbitrator and those two arbitrators will select a thirdarbitrator.  This third arbitrator willhear the dispute.  The arbitrator’sdecision is final (except as otherwise specifically provided by law) and bindsthe parties, and either party may request any court having jurisdiction toenter a judgment and to enforce the arbitrator’s decision.  The arbitrator will provide the parties witha written decision naming the substantially prevailing party in the action.This prevailing party is entitled to reimbursement from the other party for itscosts and expenses, including reasonable attorneys’ fees.

 

14.2  Governing Law.  All proceedings will be held at a placedesignated by the arbitrator in King County, Washington.  The arbitrator, in rendering a decision asto any state law claims, will apply Washington law.

 

14.3  Exception to Arbitration.  Notwithstanding the above, if Executiveviolates Section 11 hereof, the Bank will have the right to initiate the courtproceedings described in Section 12.2, in lieu of an arbitration proceedingunder this Section 14.  The Bank mayinitiate these proceedings wherever appropriate within the state of Washington,but Executive will consent to venue and jurisdiction in King County,Washington.

 

15.    MiscellaneousProvisions.

 

15.1  Entire Agreement.  This Agreement constitutes the entireunderstanding between the parties concerning its subject matter and supersedesall prior agreements.  Accordingly,Executive specifically waives the terms of and all of her rights under allemployment, change in control and salary continuation agreements, whether writtenor oral, she has previously entered into with the Bank or any of itssubsidiaries or affiliates.

 

15.2  Binding Effect.  This Agreement will bind and inure to thebenefit of the Bank’s and Executive’s heirs, legal representatives, successorsand assigns.

 

15.3  Litigation Expenses.  If either party successfully seeks toenforce any provision of this Agreement or to collect any amount claimed to bedue under it, this party will be entitled to reimbursement from the other partyfor any and all its out-of-pocket expenses and costs including, withoutlimitation, reasonable attorneys’ fees and costs incurred in connection withthe enforcement or collection.

 

15.4  Waiver.  Any waiver by a party of its rights underthis Agreement must be written and signed by the party waiving its rights.  A party’s waiver of the other party’s breachof any provision of this Agreement will not operate as a waiver of any otherbreach by the breaching party.

 

15.5  Counsel Review.  Executive acknowledges that she has had theopportunity to consult with independent counsel with respect to thenegotiation, preparation and execution of this Agreement.

 

15.6  Assignment.  The services to be rendered by Executiveunder this Agreement are unique and personal. Accordingly, Executive may not assign any of her rights or duties underthis Agreement.

 

15.7  Amendment.  This Agreement may be modified only througha written instrument signed by both parties and consented to by the Bank inwriting.

 

15.8  Severability.  The provisions of this Agreement areseverable.  The invalidity of anyprovision will not affect the validity of other provisions of this Agreement.

 

15.9  Governing Law and Venue.  This Agreement will be governed by andconstrued in accordance with Washington law, except to the extent that certainmatters may be governed by federal law. Except as otherwise provided in Section 14.3, the parties must bring anylegal proceeding arising out of this Agreement in King County, Washington, andthe parties will submit to jurisdiction in that county.

 

15.10  Counterparts.  This Agreement may be executed in one ormore counterparts, each of which will be deemed an original, but all of whichtaken together will constitute one and the same document.

 

Dated as of the date first above written.

 
|   | PACIFIC  NORTHWEST BANK |
|--------|-------------------------|
|   |                    |   |
|   |                    |   |
|   | By:                     | /s/  Patrick M. Fahey |
|   |                    | Patrick M.  Fahey, President and CEO |
|   |                    |   |
|   |                    |   |
|   |                    | /s/  Kim S. Brace |
|   |                    | KIM S. BRACE |