Exhibit 10.21

 

**SEVERANCE PAY AGREEMENT**

 

1.     Employer:     PACIFIC NORTHWEST BANK (the “Bank”)

 

2.     Executive:     BETTEJ. FLORAY

 

3.     Duties:  The Bank hereby agrees to continue theemployment of Executive as an officer of Pacific Northwest Bank with suchduties and responsibilities as may be determined from time to time by the Boardof Directors and by the President of the Bank, subject to the terms hereof.

 

4.     Successors:  This Agreement shall inure to the benefit ofand be binding upon the Bank and its successors and assigns.

 

5.     SeverancePay:  Except as provided inParagraph 8 below, if the Bank or successor terminates Executive, Executiveshall be entitled to receive Severance Pay as follows:

 

5.1.    Executiveshall be entitled to a minimum of an amount equal to six (6) months TotalCompensation; and

 

5.2.    Afterfour (4) years employment, in addition to the six (6) months TotalCompensation, Executive shall be entitled to an amount equal to an additionalone (1) month Total Compensation for each additional twelve (12) months ofemployment by Executive with the Bank and/or its successors; provided, however,

 

5.3.    Thetotal Severance Pay compensation shall not exceed an amount equal to twelve(12) months Total Compensation.

 

6.     Changeof Control.

 

6.1.    Inthe event of a Change of Control during the term of Employment, Executive willbe entitled to Severance Pay in an amount equal to twelve (12) months TotalCompensation; *provided, however*, Executive shall not be eligible forSeverance Pay if Executive is not terminated by such successor entity withinone (1) year following such Change of Control and Executive is offeredsubstantially equivalent employment by a successor entity that:

 

(a)    Includescomparable salary and benefits;

 

(b)    Includes aposition with duties and responsibilities commensurate with those customarilyperformed by a person with the status of Executive Vice President in thefinance area; and

 

(c)    Does notrequire Executive to relocate beyond a reasonable commuting distance, whichdistance may, but need not be, established by the Bank as a matter of policy.

 

6.2.    Forthe purposes of this Agreement, the term “Change of Control” shall mean theacquisition of Pacific Northwest Bank, or a substantial part thereof, byanother company; the merger of Pacific Northwest Bank into another company withthe other company surviving; the sale of substantially all of the assets ofPacific Northwest Bank to another company; or a hostile acquisition ofsubstantially all of the stock of Pacific Northwest Bank.  For purposes of Change of Control, the term“Pacific Northwest Bank” includes Pacific Northwest Bank and its holdingcompany, Pacific Northwest Bancorp.

 

7.     OtherBenefits:  The Severance Paycompensation provided herein shall be in addition to other benefits to whichExecutive may otherwise be entitled.

 

8.     Termination.  Executive shall not be entitled to SeverancePay if her Employment is terminated for any of the following reasons:

 

8.1.    Voluntaryelection by Executive to terminate her employment with the Bank.

 

8.2.    Terminationby the Bank for gross misconduct, which includes, but is not limited to chronicalcoholism or controlled substance abuse, as determined by a doctor mutuallyacceptable to the Bank and Executive, and continuing failure by Executive tocommence and pursue with due diligence appropriate treatment for same inaccordance with such doctor’s recommendations; dishonesty; insubordination orwillful failure to discharge assigned duties; harassment of fellow employees orcustomers of the Bank; violation of the conflict of interest policy of the Bankor its subsidiaries; theft; possession of unauthorized weapons or firearms(loaded or unloaded) on the premises of the Bank or its subsidiaries; orconviction of a criminal offense constituting a felony.

 

8.3.    Death ofExecutive.

 

8.4.    Physical ormental illness or incapacity which renders Executive unable (with reasonableaccommodation) to perform substantially all of the duties and services requiredof her under this agreement for a period of sixty (60) days in the aggregateduring any twelve-month period.

 

9.     Definitions.  For purposes of this Agreement, the term“Total Compensation” shall mean an amount equal to Executive’s W-2 incomebefore salary deferrals over the twelve (12) months preceding the month oftermination, divided by twelve (12).

 
| PACIFIC  NORTHWEST BANK |                            | EXECUTIVE |
|-------------------------|---------------------------------|-----------|
|                    |                            |      |   |   |
|                    |                            |      |   |   |
| By:                     | /s/  Patrick M. Fahey      |      | By: | /s/  Bette J. Floray |
|                    | Patrick M. Fahey, President/CEO |      |   | Bette J. Floray, Executive Vice |
|                    |                            |      |   | President/Chief Financial Officer |