**Exhibit 10.4**

 

**CONSULTINGAGREEMENT**

*** ***

***Mark A. Coffey***

 

This Consulting Agreement (“Agreement”) is made this8th day of November, 2002, between PACIFIC NORTHWEST BANCORP (“Pacific”),PACIFIC NORTHWEST BANK and MARK A. COFFEY.

 

RECITALS

 

A.            Pacificand Pacific Northwest Bank have entered into a Plan and Agreement of Merger(“Plan”) with Bank of the Northwest, pursuant to which Bank of the Northwestwill merge into Pacific Northwest Bank (“Merger”).  Mr. Coffey is presently Executive Vice President and Chief FinancialOfficer of Bank of the Northwest, and his employment in that capacity willterminate on the effective date of the Merger.

 

B.            Followingthe Merger, Pacific and Pacific Northwest Bank (hereinafter referred to jointlyas “Pacific” unless Pacific Northwest Bank is specifically mentioned) desire toretain Mr. Coffey as a consultant, and Mr. Coffey wishes to perform suchservices.  (Mr. Coffey is referred tohereinafter as “Consultant.”)

 

NOW, THEREFORE, in consideration of the mutualcovenants herein recited, the sufficiency of which is hereby acknowledged, theparties agree as follows:

## **1.**                                       Effective Date and Term.

### **a)             Effective Date.  This Agreement takes effect on the effectivedate of the Merger(“Effective Date”).**

### **b)             Term.  The term of this Agreement (“Term”) is six(6) months, beginning on the Effective Date.**

### **c)             Employment Status.  During the Term Consultant shall be anemployee of Pacific Northwest Bank.**

### **d)             Office.  Consultant will have no specific officefollowing the Merger but will have access to an office at the former MainOffice of Bank of the Northwest (600 Pioneer Tower, 888 S.W. Fifth Avenue,Portland Oregon), and necessary support staff will be available to him toperform the duties assigned to him under this Agreement.**

 

2.             Compensation.  For and in consideration of the consultingservices to be performed by Consultant, and the further covenants andagreements made by him under this Agreement, Pacific shall:

a)             Pay to Consultant base monthlycompensation of $19,000 payable in accordance with Pacific Northwest Bank’sregular payroll schedule (“Compensation”).

b)            Reimburse Consultant forout-of-pocket expenses reasonably incurred by Consultant in the performance ofthe services upon Consultant’s submission of any request for reimbursement in aformat consistent with Pacific’s policies from time to time in effect.

 

### **Anypayments made pursuant to this Agreement shall be net of (i) all amountsrequired to be withheld from such payments pursuant to applicable income tax,Social Security and unemployment insurance laws and regulations, and (ii) suchother amounts as are withheld from such payments pursuant to Consultant’sauthorization.**

 

3.             Benefit Plans.  During the Term of this Agreement:

a)             Consultant shall be entitled toparticipate in the Pacific group medical plan established by Pacific from timeto time for the benefit of all full-time employees of Pacific.  Consultant shall be required to comply withthe conditions attendant to coverage by such plan and shall comply with and beentitled to 

 

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benefits only in accordancewith the terms and conditions of such plan as they may be amended from time totime.  Nothing herein contained shall beconstrued as requiring Pacific to establish or continue any particular benefitplan in discharge of its obligations under this Agreement.

b)            All outstanding stock options willcontinue to vest, and Consultant will be permitted to exercise such options,until the earlier to occur of: (1) the expiration date of the options, or (2)ninety (90) days following expiration of the term of this Agreement.

 

4.             Duties. Consultant will perform the duties assigned to him from time to time bythe Chief Executive Officer of Pacific and the President of Pacific NorthwestBank Oregon.  These duties will include,without limitation, advising and consulting with the Chief Executive Officer ofPacific and the President of Pacific Northwest Bank Oregon on an as-neededbasis only on financial issues relating to the operations of Bank of theNorthwest prior to the merger.

 

### **During the Term, Consultant agrees to devote such time asnecessary to discharge the duties assigned to him and to use his best effortsto perform such duties faithfully and efficiently.  However, it is understood that the time required to completethese duties will be limited and structured to permit Consultant to beotherwise employed on a full-time basis. If the time requirements aresignificantly greater than contemplated, Consultant’s compensation will beadjusted by agreement between Pacific and Consultant.**

 

5.             Termination.

a)             Termination By Pacific for Cause.  If, before the end of the Term, Pacificterminates Consultant’s employment for Cause or Consultant terminates his****employmentwithout Good Reason (defined below), Pacific will pay Consultant, in a lumpsum, the compensation to which he would be entitled to receive for the balanceof the Term under Section a)

b)            Other Termination By Pacific.  If, before the end of the Term, Pacificterminates Consultant’s employment without Cause or Consultant terminates hisemployment for Good Reason (defined below), Pacific will pay Consultant a lumpsum payment in an amount equal to the Compensation he would have received forthe balance of the Term if his****employment had not terminated, and Pacificwill continue Consultant’s coverage under the Pacific group medical planestablished by Pacific from time to time for the benefit of all full-timeemployees of Pacific (or provide Consultant with equivalent benefits) throughthe expiration of the Term.

c)             Death or Disability.  This Agreement terminates (1) if Consultantdies or (2) if Consultant is unable to perform his****duties and obligations underthis Agreement for a period of 90 days as a result of a physical or mentaldisability arising at any time during the Term of this Agreement, unless withreasonable accommodation Consultant could continue to perform his duties underthis Agreement and making these accommodations would not pose undue hardship toPacific.  If termination occurs underthis Section 5b), Consultant or his estate will be entitled to receive, in alump sum, an amount equal to the balance which would be owed Consultant underthis Agreement.

d)            Return of Bank Property.  If and when Consultant ceases, for anyreason, to be employed by Pacific, Consultant must return to Pacific all keys,passcards, identification cards and any other property of Pacific. At the sametime, Consultant also must return to Pacific all originals and copies (whetherin hard copy, electronic or other form) of any documents, drawings, notes,memoranda, designs, devices, diskettes, tapes, manuals and specifications whichconstitute proprietary information or material of Pacific.  The obligations in this paragraph includethe return of documents and other materials which may be in Consultant’s deskat work, in Consultant’s car or place of residence, or in any other locationunder Consultant’s control.

 

6.             Definition of “Cause”. “Cause” means any one ormore of the following, as reasonably determined by Pacific:

a)             Willful misfeasance or grossnegligence in the performance of Consultant’s duties for Pacific that continuesfor more than 30 days after written notice to Consultant specifying conduct oromission that constitutes the misfeasance or gross negligence.

 

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b)            Conviction of a crime in connectionwith his duties for Pacific.

c)             Conduct demonstrably andsignificantly harmful to Pacific, as reasonably determined by the Board ofDirectors of Pacific on the advice of legal counsel that continues for morethan 30 days after written notice to Consultant specifying the harmful conduct.

d)            Conviction of a felony.

e)             Breach of the covenants set forthin Sections h) and i) of this Agreement.

 

Notwithstandingthe foregoing, Consultant will not be deemed to have been terminated for Causeunless and until there has been delivered to Consultant a copy of a resolutionduly adopted by the affirmative vote of not less than three-quarters ofthe entire membership of the Board of Directors of Pacific at a meeting of theBoard of Directors called and held for that purpose (after reasonable notice toConsultant and an  opportunity forConsultant, together with his counsel, to be heard before the Board ofDirectors), finding that in the good faith opinion of the Board of Directors,Consultant was guilty of conduct constituting Cause as defined above andspecifying the particulars for such finding in detail.

 

7.             Definition of“Good Reason”.  “Good Reason” meansonly any one or more of the following:

a)             Reduction, without Consultant’sconsent, of Consultant’s Compensation.

b)            Reduction or elimination of anybenefit plan benefiting Consultant, unless the reduction or elimination isgenerally applicable to substantially all similarly situated full-time Pacificemployees formerly benefited.

c)             The assignment to Consultantwithout his consent of any duties materially inconsistent with those set forthin this Agreement.

d)            The requirement by Pacific thatConsultant’s employment be based at any office or location other than that set forthin Section b) hereof.

 

**8.            **Confidentiality.  Consultant will not, after signing thisAgreement, including during and after its Term, use for his own purposes ordisclose to any other person or entity any confidential information concerningPacific or their business operations or customers, unless (1) Pacific consentsto the use or disclosure of their respective confidential information, (2) theuse or disclosure is consistent with Consultant’s duties under this Agreement,or (3) disclosure is required by law or court order.

 

9.             Nonsolicitation.

 

### **For aperiod of twelve (12) months from the Effective Date, Consultant will notdirectly or indirectly solicit or attempt to solicit (1) any employees ofPacific, or any of Pacific’s Subsidiaries, to leave their employment or (2) anycustomers of Pacific, or any of Pacific’s Subsidiaries, to remove theirbusiness from Pacific or to participate in any manner in a CompetingBusiness.  Solicitation prohibited underthis Section includes solicitation by any means, including, without limitation,meetings, letters or other mailings, electronic communications of any kind, andinternet communications.**

 

10.           Enforcement.

a)             Pacific and Consultant stipulatethat, in light of all of the facts and circumstances of the relationshipbetween Consultant and Pacific, the agreements referred to in Sections h) andi) (including without limitation their scope, duration and geographic extent)are fair and reasonably necessary for the protection of Pacific’s confidentialinformation, goodwill and other protectable interests.  If a court of competent jurisdiction shoulddecline to enforce any of those covenants and agreements, Consultant andPacific request the court to reform these provisions to restrict Consultant’suse of confidential information and Consultant’s ability to compete withPacific to the maximum extent, in time, scope of activities and geography, thecourt finds enforceable.

b)            Consultant acknowledges that Pacificwill suffer immediate and irreparable harm that will not be compensable bydamages alone, if Consultant repudiates or breaches any of the provisions ofSections h) and i) or threatens or attempts to do so. For this reason, underthese circumstances, Pacific, in addition to and without limitation of anyother rights, remedies or damages available to it at law or in 

 

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equity, will be entitled toobtain temporary, preliminary and permanent injunctions in order to prevent orrestrain the breach, and Pacific will not be required to post a bond as acondition for the granting of this relief.

 

**11.         **AdequateConsideration.  Consultantspecifically acknowledges the receipt of adequate consideration for thecovenants contained in Sections h) and i) and that Pacific is entitled torequire him to comply with these Sections. These Sections will survive termination of this Agreement.  Consultant represents that if his employmentis terminated, whether voluntarily or involuntarily, Consultant has experienceand capabilities sufficient to enable Consultant to obtain employment in areaswhich do not violate this Agreement and that the Bank’s enforcement of a remedyby way of injunction will not prevent Consultant from earning a livelihood.

 

12.           Arbitration.

a)             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 mutually acceptable tothe parties).  A single arbitratoragreed on by the parties will conduct the arbitration.  If the parties cannot agree on a singlearbitrator, each party must select one arbitrator and those two arbitratorswill select a third arbitrator.  Thisthird arbitrator will hear the dispute. The arbitrator’s decision is final (except as otherwise specificallyprovided by law) and binds the parties, and either party may request any courthaving jurisdiction to enter a judgment and to enforce the arbitrator’sdecision.  The arbitrator will providethe parties with a written decision naming the substantially prevailing partyin the action.  This prevailing party isentitled to reimbursement from the other party for its costs and expenses,including reasonable attorneys’ fees.

b)            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.

c)             Exception to Arbitration.  Notwithstanding the above, if Consultantviolates Section h) or i), Pacific will have the right to initiate the courtproceedings described in Section b), in lieu of an arbitration proceeding underthis Section c) Pacific may initiate these proceedings whereverappropriate within Washington State; but Consultant will consent to venue andjurisdiction in King County, Washington.

 

13.           MiscellaneousProvisions.

a)             Defined Terms.  Capitalized terms used as defined terms, butnot defined in this Agreement, will have the meanings assigned to those termsin the Plan.

b)            Abandonment of the Merger.  If the Plan terminates before the EffectiveDate, this Agreement will not become effective and will be void.

c)             Entire Agreement.  This Agreement constitutes the entireunderstanding between the parties concerning its subject matter and supersedesall prior agreements.

d)            Reviewed with IndependentCounsel/Construction of Agreement. Each party had the opportunity to review this Agreement with legalcounsel of their choosing, and this Agreement is the outcome of that reviewprocess. This Agreement has been entered into after negotiation and review ofits terms and conditions by parties under no compulsion to execute and delivera disadvantageous agreement.  ThisAgreement incorporates provisions, comments and suggestions proposed by bothparties.  No ambiguity or omission inthis Agreement shall be construed or resolved against any party on the groundthat this Agreement or any of its provisions was drafted or proposed by thatparty.

e)             Binding Effect.  This Agreement will bind and inure to thebenefit of Pacific’s and Consultant’s heirs, legal representatives, successorsand assigns.

f)             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 of its out-of-pocket expenses and costs including, withoutlimitation, reasonable attorneys’ fees and costs incurred in connection withthe enforcement or collection.

 

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g)            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.

h)            Assignment.  The services to be rendered by Consultantunder this Agreement are unique and personal. Accordingly, Consultant may not assign any of his****rights or duties under thisAgreement.

i)              Amendment.  This Agreement may be modified only througha written instrument signed by all parties.

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

k)             Governing Law.  This Agreement will be governed by andconstrued in accordance with Washington law, except to the extent that certainmatters may be governed by federal law.

 
|   | PACIFIC NORTHWEST BANCORP |
|--------|---------------------------|
|   |                      |
|   |                      |
|   | By:                       | /s/ Patrick M. Fahey |
|   |                      | Patrick M. Fahey,  President and CEO |
|   |                      |
|   | PACIFIC NORTHWEST BANK    |
|   |                      |
|   |                      |
|   | By:                       | /s/ Patrick M. Fahey |
|   |                      | Patrick M. Fahey,  President and CEO |
|   |                      |
|   |                      |
|   | /s/ Mark A. Coffey        |
|   | MARK A. COFFEY            |

 

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