Exhibit 10.17

 

**PACIFIC NORTHWEST BANK****EMPLOYMENT AGREEMENT**

             THISEMPLOYMENT AGREEMENT ("Agreement"), signed January 15, 1998, betweenPACIFIC NORTHWEST BANK ("Bank") and GEORGE P. BRACE("Employee") takes effect on the effective date of the Reorganization("Effective Date").

**RECITALS**
| A.     | InterWest Bancorp, Inc.  ("InterWest") has entered into a Plan and Agreement of  Reorganization ("Plan") with the Bank, under which the Bank will  become a wholly owned subsidiary of InterWest ("Reorganization"). |
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| B.     | Employee is presently the Bank's Senior Vice  President and the Manager of the Bellevue Financial Center. The Bank wishes  to continue Employee's employment in that capacity under the terms and  conditions of this Agreement.                   |
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| C.     | Employee wishes to continue his employment at  the Bank under the terms and conditions of this Agreement.                                                                                                                                          |

**AGREEMENT**
|   | The parties agree as follows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
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| **1.** | **Employment****.** The Bank will continue Employee's  employment during the Term of this Agreement, and Employee accepts employment  by the Bank on the terms and conditions set forth in this Agreement.  Employee's title will be "Senior Vice President/Manager, Bellevue  Financial Center."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
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| **2.** | **Effective Date and  Term.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
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|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Effective Date. This Agreement is effective as of the  Effective Date. |
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|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Term. The term of this Agreement ("Term")  is three years, beginning on the Effective Date. |
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|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Abandonment of the Reorganization. If the Plan terminates before Closing,  this Agreement will not become effective and will be void. |
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| **3.** | **Duties.** Employee will faithfully and  diligently perform the duties assigned to Employee from time to time by the  Bank's Chairman or President, consistent with the duties that have been  normal and customary to Employee's position. Employee will use his best efforts  to perform his duties and will devote full time and attention to these duties  during working hours. Employee will report directly to the Bank's President.  The Bank's board of directors may, from time to time, modify Employee's title  or performance responsibilities to accommodate management succession, as well  as any other management objectives of the Bank or of InterWest. Employee will  assume any additional positions, duties, and responsibilities as may  reasonably be requested of him with or without additional compensation, as  appropriate and consistent with this Section 3. |
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| **4.** | **Salary.** Initially, Employee will receive a  salary of $125,000 per year, to be paid in accordance with the Bank's regular  payroll schedule.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
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| **5.** | **Incentive  Compensation.**  The Bank's board of directors, subject to ratification by InterWest's board  of directors, will determine the amount of bonus, if any, to be paid by the  Bank to Employee for each year during the Term. In making this determination,  the Bank's board of directors will consider factors such as Employee's  performance of his duties and the safety, soundness, and profitability of the  Bank. Employee's bonus, if any, will reflect Employee's contribution to the  performance of the Bank during the year.                                                                                                                                                                                                                          |
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| **6.** | **Income Deferral and  Benefits.**  Subject to eligibility requirements and in accordance with and subject to any  policies adopted by the Bank's or InterWest's board of directors with respect  to any benefit plans or programs, Employee will be entitled to receive  benefits (including stock options) similar to those offered to other  employees of the Bank or InterWest with position and duties comparable to  those of Employee. The foregoing notwithstanding, it is the specific and  agreed intent that the total compensation of Employee shall be, in the  aggregate, comparable to the total compensation Employee is presently  receiving at the Bank (including but not limited to benefits under any  retirement plans or long-term disability plans). |
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| **7.** | **Business Expenses.** The Bank will reimburse Employee for  ordinary and necessary expenses (including, without limitation, Bank  automobile, travel, entertainment, and similar expenses) incurred in  performing and promoting the Bank's business. Employee will present from time  to time itemized accounts of these expenses, subject to any limits of Bank  policy or the rules and regulations of the Internal Revenue Service.                                                                                                                                                                                                                                                                                                                                     |
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| **8.** | **Termination.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
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|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Termination By Bank for Cause. If, before the end of the Term, the  Bank terminates Employee's employment for Cause or Employee terminates his  employment without Good Reason, the Bank will pay Employee the salary earned  and expenses reimbursable under this Agreement incurred through the date of  Employee's termination. Employee will have no right to receive compensation  or other benefits for any period after termination under this Section 8(a). |
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|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Other Termination By Bank. If, before the end of the Term, the  Bank terminates Employee's employment without Cause or Employee terminates  his employment for Good Reason (defined below), the Bank will pay Employee  for the remainder of the Term the salary Employee would have been entitled to  under this Agreement if his employment had not terminated. |
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|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Death or Disability. This Agreement terminates (1) if Employee  dies or (2) if Employee 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 accomodation Employee could continue to perform his duties under  this Agreement and making these accomodations would not require the Bank to  expend any funds. If termination occurs under this Section 8(c), Employee or  his estate will be entitled to receive only the compensation and benefits  earned and expenses reimbursable through the date this Agreement terminated. |
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|   | (d)    | Employee Termination Window. During the period commencing with the  25th  month of the Term through the 30th month of the Tem, Employee may terminate  this Agreement by delivering written notice to the Bank and to InterWest. If  Employee does so, regardless of whether Employee had Good Reason to terminate  the Agreement, the Bank will pay Employee a single cash payment in an amount  equal to Employee's W-2 income before salary deferrals over the twelve (12)  months preceding the date of termination ("Total Annual  Compensation").                                                                                                                                                                                                                                  |
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|   | (e)    | Termination Related to a Change in Control.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
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|   | (1)    | Termination by Bank. If the Bank, or its successor in  interest by merger, or its transferee in the event of a purchase and  assumption transaction, (for reasons other than Employee's death, disability,  or Cause) (1) terminates Employee's employment within one year following a  Change in Control (as defined below) or (2) terminates Employee's employment  before a Change in Control and a Change in Control occurs within nine months  after the termination, the Bank will pay Employee the payment described in  Section 8(e)(3).                                                                                                                                                                                                                                                   |
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|   | (2)    | Termination by Employee. If Employee terminates Employee's  employment, with or without Good Reason, within one year following a Change  in Control, the Bank will pay Employee the payment described in Section  8(e)(3).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
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|   | (3)    | Payments. If Section 8(e)(1) or (2) is triggered as  described in those Sections, the Bank will pay Employee his Total Annual  Compensation (as defined in Section 8(d) above).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
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|   | (f)    | Limitations on Payments Related to Change in  Control.  The following apply notwithstanding any other provision of this Agreement:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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|   | (1)    | the payment described in Section 8(e)(3) will  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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
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|   | (2)    | Employee's right to receive the payment  described in Section 8(e)(3) terminates (i) immediately, if before the Change  in Control transaction closes, Employee terminates his employment without  Good Reason or the Bank terminates Employee's employment for Cause, or (ii)  one year after a Change in Control occurs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
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|   | (g)    | Definition of "Change in Control". "Change in Control" means a  change "in the ownership or effective control" or "in the  ownership of a substantial portion of the assets" of InterWest, within  the meaning of section 280G of the Internal Revenue Code.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
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|   | (h)    | Return of Bank Property. If and when Employee ceases, for any  reason, to be employed by the Bank, Employee must return to the Bank all  keys, pass cards, identification cards and any other property of the Bank or  InterWest. At the same time, Employee also must return to the Bank 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 the Bank or InterWest. The obligations in this paragraph include  the return of documents and other materials which may be in Employee's desk  at work, in Employee's car or place of residence, or in any other location  under Employee's control. |
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| **9.**  | **Definition of  "Cause".**  "Cause" means any one or more of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
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|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Willful misfeasance or gross negligence in the  performance of Employee's duties; |
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|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Conviction of a crime in connection with his  duties; |
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|    | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Conduct demonstrably and significantly harmful  to the Bank, as reasonably determined by the Bank's board of directors on the  advice of legal counsel; or |
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|    | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Permanent disability, meaning a physical or  mental impairment which renders Employee incapable of substantially  performing the duties required under this Agreement, and which is expected to  continue rendering Employee so incapable for the reasonably foreseeable  future. |
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| **10.** | **Definition of  "Good Reason".** "Good Reason" means only any one or  more of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                        |
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|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Reduction, without Employee's consent, of  Employee's salary or elimination of any compensation or benefit plan  benefiting Employee, unless the reduction or elimination is generally  applicable to substantially all similarly situated Bank employees (or  employees of a successor or controlling entity of the Bank) formerly  benefited; |
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|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | The assignment to Employee without his consent  of any authority or duties materially inconsistent with Employee's position  as of the date of this Agreement; or |
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|    | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | A relocation or transfer of Employee's  principal place of employment that would require Employee to commute on a  regular basis more than 60 miles each way from his current business office at  the Bank on the date of this Agreement, unless Employee consents to the  relocation or transfer. |
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| **11.** | **Confidentiality.** Employee 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 the Bank or InterWest or their business operations or customers,  unless (1) the Bank or InterWest consents to the use or disclosure of their  respective confidential information, (2) the use or disclosure is consistent  with Employee's duties under this Agreement, or (3) disclosure is required by  law or court order. |
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| **12.** | **Noncompetition.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
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|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Participation in a Competing Business. During the Term and for eighteen (18)  months after Employee's employment with the Bank, InterWest, or any Subsidiary  of InterWest ends (regardless of whether Employee's employment ends at the  end of the Term or at some other point after the end of the Term), Employee  will not become involved with a Competing Business or serve, directly or  indirectly, a Competing Business in any manner, including, without  limitation, as a shareholder, member, partner, director, officer, manager,  investor, organizer, "founder", employee, consultant, or agent; provided,  however, that Employee may acquire and passively own an interest not to  exceed 2% of the total equity interest in any entity (whether or not such  entity is a Competing Business). |

 

|    | (b)              | No Solicitation. During the Term and for eighteen (18)  months after Employee's employment with the Bank, InterWest, or any affiliate  of InterWest ends (regardless of whether Employee's employment ends at the  end of the Term or at some other point after the end of the Term), Employee  will not directly or indirectly solicit or attempt to solicit (1) any  employees of the Bank, InterWest, or any of InterWest's Subsidiaries, to  leave their employment or (2) any customers of the Bank, InterWest, or any of  InterWest's Subsidiaries to remove their business from the Bank, InterWest,  or any of InterWest's Subsidiaries, 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. |
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|    | (c)              | Employment Outside the Washington State. Nothing in this Agreement prevents  Employee from accepting employment after the end of the Term outside  Washington State from a Competing Business, as long as Employee will not (a)  act as an employee or other representative or agent of the Competing Business  within Washington State or (b) have any responsibilities for the Competing  Business' operations within Washington State.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
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|    | (d)              | Competing Business. "Competing Business" means  any financial institution or trust company that competes with, or will  compete in Washington State with, InterWest, the Bank, or any of InterWest's  Subsidiaries. The term "Competing Business" includes, without  limitation, any start-up or other financial institution or trust company in  formation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
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| **13.** | **Enforcement.** |
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|    | (a)              | The Bank and Employee stipulate that, in light  of all of the facts and circumstances of the relationship between Employee  and the Bank, the agreements referred to in Sections 11 and 12 (including  without limitation their scope, duration and geographic extent) are fair and  reasonably necessary for the protection of the Bank's and InterWest's  confidential information, goodwill and other protectable interests. If a  court of competent jurisdiction should decline to enforce any of those  covenants and agreements, Employee and the Bank request the court to reform  these provisions to restrict Employee's use of confidential information and  Employee's ability to compete with the Bank and InterWest to the maximum  extent, in time, scope of activities, and geography, the court finds  enforceable.                                                                                                  |
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|    | (b)              | Employee acknowledges that the Bank and  InterWest will suffer immediate and irreparable harm that will not be  compensable by damages alone, if Employee repudiates or breaches any of the  provisions of Sections 11 or 12 or threatens or attempts to do so. For this  reason, under these circumstances, the Bank and InterWest, in addition to and  without limitation of any other rights, remedies or damages available to it  at law or in equity, will be entitled to obtain temporary, preliminary, and  permanent injunctions in order to prevent or retrain the breach, and neither  the Bank nor InterWest will be required to post a bond as a condition for the  granting of this relief.                                                                                                                                                                                                                              |

 

| **14.** | **Adequate Consideration. **Employee specifically acknowledges the  receipt of adequate consideration for the covenants contained in Sections 11  and 12 and that the Bank is entitled to require him to comply with these  Sections. These Sections will survive termination of this Agreement. Employee  represents that if his employment is terminated, whether voluntarily or  involuntarily, Employee has experience and capabilities sufficient to enable  Employee 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 Employee from earning a livelihood. |
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| **15.** | **Arbitration.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
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|    | (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. |
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|    | (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. |
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|    | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Exception to Arbitration. Notwithstanding the above, if Employee  violates Section 11 or 12, the Bank will have the right to initiate the court  proceedings described in Section 13(b), in lieu of an arbitration proceeding  under this Section 15. The Bank may initiate these proceedings wherever appropriate  within Washington State; but Employee will consent to venue and jurisdiction  in King County, Washington. |
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| **16.** | **Miscellaneous  Provisions.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
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|    | (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. |
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|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Entire Agreement. This Agreement constitutes the entire  understanding between the parties concerning its subject matter and  supersedes all prior agreements. Accordingly, Employee specifically waives  the terms of and all of his rights under all employment, change-in-control  and salary continuation agreements, whether written or oral, he has  previously entered into with the Bank or any of its Subsidiaries or  affiliates. |
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|    | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Binding Effect. This Agreement will bind and inure to the  benefit of the Bank's, InterWest's, and Employee's heirs, legal  representatives, successors and assigns. |
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|    | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 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. |

 

|   | (e)    | 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.                                                                                                                     |
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|   | (f)    | Counsel Review. Employee acknowledges that he has had the  opportunity to consult with independent counsel with respect to the  negotiation, preparation, and execution of this Agreement.                                                                                                                                                                                                                   |
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|   | (g)    | Assignment. The services to be rendered by Employee under  this Agreement are unique and personal. Accordingly, Employee may not assign  any of his rights or duties under this Agreement.                                                                                                                                                                                                                   |
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|   | (h)    | Amendment. This Agreement may be modified only through a  written instrument signed by both parties and consented to by InterWest in  writing.                                                                                                                                                                                                                                                               |
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|   | (i)    | Severability. The provisions of this Agreement are  severable. The invalidity of any provision will not affect the validity of  other provisions of this Agreement.                                                                                                                                                                                                                                          |
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|   | (j)    | Governing Law and Venue. 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. Except as otherwise provided  in Section 15(c), the parties must bring any legal proceeding arising out of  this Agreement in King County, Washington, and the parties will submit to  jurisdiction in that county. |
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|   | (k)    | Counterparts. This Agreement may be executed in one or more  counterparts, each of which will be deemed an original, but all of which  taken together will constitute one and the same document.                                                                                                                                                                                                             |

 

Signed January 15, 1998:

|   | PACIFIC NORTHWEST BANK        |
|--------|-------------------------------|
|   |                          |
|   | /s/ PATRICK M. FAHEY          |
|   |                               |
|   | By:                           |
|   | Its: President                |
|   |                          |
|   | GEORGE P. BRACE, individually |
|   |                          |
|   | /s/ GEORGE P. BRACE           |
|   |                               |
|   | George P. Brace               |

**FIRST AMENDMENT TOPACIFIC NORTHWEST BANK EMPLOYMENT AGREEMENT**

 

*(GEORGE P. BRACE)*

 

             ThisFirst Amendment to Employment Agreement (“Amendment”) is made on the 23rdday of March, 2000, between INTERWEST BANCORP, INC. and PACIFIC NORTHWEST BANK(hereinafter jointly referred to as “Bank”) and GEORGE P. BRACE (“Employee”),who agree as follows:

 

RECITALS

 

             ThisAmendment is made with reference to the following facts and objectives:

 

             A.         Pacific Northwest Bank, in conjunctionwith a Plan and Merger Agreement of Reorganization whereby Pacific NorthwestBank was acquired by InterWest Bancorp, Inc., entered into an EmploymentAgreement with Employee (“Agreement”).

 

             B.          Bank and Employee now wish to amendthe Agreement to make it advantageous for Employee to continue his employmentafter June 16, 2000, the first date upon which Employee has the right toterminate employment with Bank and receive a one-time cash payment as providedunder the “Employment Termination Window” provision of the Agreement.

 

             C.          To achieve the goals set forth in B,above, the parties agree to amend the Agreement as set forth hereafter.

 

AMENDMENT

 

             1.          Subparagraph (b), **Term**, of paragraph 2 of the Agreement, **Effective Date and Term**, is deleted inits entirety and the following shall be inserted in its place:

 

             (b)        Term.  The term of this Agreement (“Term”) shallcommence on the Effective Date and terminate on June 15, 2002, unless extendedby written agreement.

 

             2.          Paragraph 4, **Salary**, is deleted in its entirety andthe following shall be inserted in its place:

 

             4.          Salary.  Employee shall receive a salary set by theCompensation Committee for employees with comparable duties and experience, butnot less than $130,000 per year, to be paid in accordance with the Bank’sregular payroll schedule.  Employee’ssalary shall be reviewed annually.

 

             3.          Subparagraph 8 (c), **Termination**, is amended to add thefollowing at the end of the paragraph:

 

“. . . , together with a single cash payment in an amount equal to Employee’s W-2income before salary deferrals over the 12 months preceding the death ordisability, *provided, however*, ifthe death or disability occurs after June 16, 2000, the amount paid shall in noevent be less than the amount Employee would receive if Employee terminatedemployment on June 16, 2000.”

 

             4.          Subparagraph 8(d), EmployeeTermination Window, is deleted in its entirety and replaced with thefollowing:

 

             (d)        EmployeeTermination Window.  During theperiod commencing with June 16, 2000 through June 15, 2002, Employee mayterminate this Agreement by delivering written notice to Bank.  If Employee does so, regardless of whetherEmployee had Good Reason to terminate the Agreement, Bank will pay Employee asingle cash payment, payable within 30 days of termination, in an amount equalto Employee’s W-2 income before salary deferrals over the twelve (12) monthspreceding the date of termination (“Total Annual Compensation”); *provided, however*, that the amount paidunder this section shall in no event be less than the amount Employee wouldreceive if Employee terminated employment on June 16, 2000.

 

             5.          Subparagraph 12(a), **Participation in a Competing Business**,is deleted in its entirety and replaced with the following:

 

             (a)         Participationin a Competing Business.  During hisemployment with Bank and for twelve (12) months after Employee’s employmentwith Bank, or any Subsidiary of InterWest ends (regardless of whetherEmployee’s employment ends at the end of the Term or at some other point afterthe end of the Term), Employee will not become involved with a CompetingBusiness or serve, directly or indirectly, a Competing Business in any manner,including, without limitation, as a shareholder, member, partner, director,officer, manager, investor, organizer, “founder,” employee, consultant, oragent; *provided, however,* thatEmployee may acquire and passively own an interest not to exceed 2% of thetotal equity interest in any entity (whether or not such entity is a CompetingBusiness).

 

             6.          Except as set forth in this Amendment,all the provisions of the Agreement shall remain unchanged and in full forceand effect.

 

|   | InterWest Bancorp, Inc.                                                          |
|--------|----------------------------------------------------------------------------------|
|   |                                                                             |
|   |                                                                             |
|   | By:   /s/ STEVEN M. WALDEN                                                  |
|   |                                                                                  |
|   |          Stephen M. Walden, President and CEO |
|   |                                                                             |
|   | Pacific Northwest Bank                                                           |
|   |                                                                             |
|   |                                                                             |
|   | By:   /s/ PATRICK M. FAHEY                                                  |
|   |                                                                                  |
|   |          Patrick M. Fahey, President and CEO  |
|   |                                                                             |
|   | /S/ GEORGE P. BRACE                                                              |
|   |                                                                                  |
|   | George P.  Brace                                                                 |