**Exhibit 10.2**

 

**SEVERANCE/CHANGEOF CONTROL AGREEMENT**

***Christian R.Rasmussen***

 

 

This Severance/Change of Control Agreement(“Agreement”) signed November 7, 2002, between PACIFIC NORTHWEST BANCORP andPACIFIC NORTHWEST BANK (hereinafter referred to jointly as “Pacific” unlessPacific Northwest Bank is specifically mentioned) and CHRISTIAN R. RASMUSSEN(“Executive”) takes effect on the effective date of the Merger of Bank of theNorthwest into Pacific Northwest Bank (“Effective Date”).

 

RECITALS

 

WHEREAS, on the EffectiveDate, Pacific desires to employ Executive; and

 

WHEREAS, Executive wishes tobe employed by Pacific but desires assurance that he will be protected in theevent of termination of his employment without cause or a Change of Control asdefined below; and

 

WHEREAS, Pacific wishes toassure itself of continuity of management in the event of a Change of Controlof Pacific;

 

NOW, THEREFORE, inconsideration of the foregoing and of the mutual covenants and agreements ofthe parties set forth in this Agreement, and of other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereto, intending to be legally bound, agree as follows:

 

1.     Severance Benefits.

 

(a)   If Executive’s employment is involuntarilyterminated (other than a Discharge for Cause as defined below), Executive shallbe entitled to receive, in a lump sum payable on the first day of the firstcalendar month following discontinuance of his employment due to involuntarytermination, a cash payment in an amount equal to the Total Compensation paidto Executive over the last twelve (12) months of his employment with Pacificpreceding the month in which the involuntary termination occurs. For purposesof this Agreement, “Total Compensation” shall be defined as an amount equal toExecutive’s W-2 income before salary deferrals, excluding any one-time paymentmade to Executive relating to the termination of his employment under hisSecond Restated Employment Agreement with Bank of the Northwest dated December31, 2001, as amended in June, 2002.

 

(b)   If Executive’s employment is involuntarilyterminated (other than a Discharge for Cause) before a Change of Control butafter the Board of Directors has authorized proceeding with negotiations whichresult in a Change of Control, Executive shall be entitled to the severancebenefits described in Paragraph 2(d), said benefits to be paid after the Changeof Control actually occurs, less any amount paid under Paragraph 1(a) hereof.

 

(c)   The amounts paid to Executive hereunder shallbe considered severance pay in consideration of his continued service from theEffective Date to his entitlement to those payments.

 

(d)   Once entitled to receive severance benefitsunder Paragraph (1) of this Agreement, Executive shall have no duty to mitigatethe obligation of Pacific to make severance payments due by seeking otheremployment.  Should Executive actuallyreceive compensation from any such other employment, the payments called forhereunder shall not be reduced or offset by any such future earnings.

 

2.     Change of Control. Upon a Change inControl, Executive shall be entitled to receive a four-year employment contract(“Employment Contract”) with the successor entity that provides:

 

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(a)   Executive a position with the survivor entitywith duties and responsibilities commensurate with those performed by Executiveat the time of the change of control, although the title held by Executive neednot be the same;

 

(b)   That Executive’s services shall be performedin the same geographical location where Executive is employed at the time ofthe Change in Control;

 

(c)   That Executive’s salary and benefits arecomparable to those received by Executive over the twelve (12) months prior tothe Change in Control;

 

(d)   That the successor entity may terminateExecutive’s employment at any time prior to the expiration of the four-yearcontract term by paying Executive an amount equal to the Total Compensationpaid to Executive over the last twenty-four (24) months of his employment withPacific preceding the month in which the Change of Control occurs payable onthe first day of the first calendar month following discontinuance of hisemployment.

 

(e)   Notwithstanding the foregoing, the successorentity may provide in the Employment Contract that Executive may be terminatedfor reasons constituting a Discharge for Cause, as defined in thisAgreement.  If Executive is terminatedunder such provision, Executive shall not be entitled to receive any paymentsunder this Agreement.

 

(f)    That, during the period commencing with the25th month following a Change in Control through the 30thmonth following a Change in Control, Executive may terminate his EmploymentAgreement for any reason or no reason by delivering written notice to thesuccessor entity.  If Executive does so,the successor entity will pay Executive a single cash payment in an amountequal to Executive’s Total Compensation for the prior twelve (12) month periodpayable on the first day of the first calendar month following discontinuanceof his employment.

 

(g)   Payments under this Paragraph 2 shall bereduced by any amount paid Executive under Paragraph 1(a), above.

 

3.     CertainDefinitions.

 

(a)   Change of Control.  A “Change of Control” of Pacific shall bedeemed to have occurred as of the first day any one or more of the followingconditions is satisfied:

 

(i)            Any individual,corporation (other than Pacific), partnership, trust, association, pool,syndicate or any other entity or any group of persons acting in concert becomesthe beneficial owner, as that concept is defined in Rule 13d-3 promulgated bythe Securities and Exchange Commission under the Securities Exchange Act of1934, of securities of Pacific possessing fifty percent (50%) or more of thevoting power for the election of directors of Pacific;

 

(ii)           There shall beconsummated any consolidation, merger, or other business combination involvingPacific or the securities of Pacific in which holders of voting securities ofPacific immediately prior to such consummation own, as a group, immediatelyafter such consummation, voting securities of Pacific (or, if Pacific does notsurvive such transaction, voting securities of the corporation surviving suchtransaction) having less than sixty percent (60%) of the total voting power in anelection of directors of Pacific (or such other surviving corporation);

 

(iii)          During any periodof two (2) consecutive years, individuals who at the beginning of such periodconstitute the directors of Pacific cease for any reason to constitute at leasta majority thereof unless the election, or the nomination for election byPacific’s shareholders, of each new director of Pacific was approved by a voteof at least two-thirds (2/3) of the directors of Pacific then still in officewho were directors of Pacific at the beginning of any such period; or

 

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(iv)          There shall beconsummated any sale, lease, exchange or other transfer (in one transaction ora series of related transactions) of all, or substantially all, of the assetsof Pacific (on a consolidated basis) to a party which is not controlled by orunder common control with Pacific.

 

(b)   Discharge for Cause.  For purposes of this Agreement, thetermination of Executive’s employment shall be deemed to be a “Discharge forCause” only upon termination as a result of:

 

(i)            An act ofdishonesty on the part of Executive constituting a felony and resulting orintended to result directly or indirectly in gain or personal enrichment ofExecutive at the expense of Pacific;

 

(ii)           A deliberate act ofproven fraud having a material adverse impact on the business or consolidatedfinancial condition or results of operations of Pacific and its subsidiaries;or

 

(iii)          The deliberate andcontinuing failure to comply with applicable laws and regulations having amaterial adverse impact on the business.

 

4.     Termination of the Agreement.  This Agreement shall terminate if Executiveshall voluntarily resign, retire, become permanently and totally disabled, ordie; *provided,however*, if Executive becomes permanently and totally disabled ordies after the Board of Directors has authorized proceeding with negotiationswhich result in a Change of Control or within twelve (12) months after a Changeof Control, if Executive is then employed by Pacific, Executive or his personalor legal representatives, executors, administrators, successors, heirs,distributees, devisees and legatees, as the case may be, shall be entitled toreceive the Change of Control payment under Paragraph 2(d) hereof.

 

5.     Effect on Other Benefits.  The arrangements called for by thisAgreement are not intended to have any effect on Executive’s participation inany other benefits available to executive personnel or to preclude othercompensation or additional benefits as may be authorized by the Board ofDirectors from time to time.

 

6.     Limitations on Payments Related toSeverance Benefits.  The followinglimitations apply, notwithstanding any other provision of this Agreement:

 

(a)   The severance benefits payable underParagraph 1 shall not exceed an amount that would cause it to be a “parachutepayment” within the meaning of Section 280G(b)(2)(A) of the Internal RevenueCode; and

 

(b)   Pacific shall not be obligated to make, andExecutive shall not be entitled to, any payment under this Agreement if suchpayment would constitute a “golden parachute” payment prohibited by 12 U.S.C.1828(k) or 12 CFR §359.0 *et seq.* Pacific shall have no liability to Executive under or in relationto this Agreement should any payment be deemed a prohibited “golden parachute”payment.

 

7.     Confidentiality.  From the date of this Agreement, Executivewill not, directly or indirectly, disclose to any third party not affiliatedwith Pacific, Confidential Information of Pacific and its subsidiaries andaffiliates, except as to any of the Confidential Information which shall be orbecome in the public domain or shall be required to be disclosed by applicablelaws or regulations, any judicial or administrative authority or stock exchangerule or regulation.  For the purposes ofthis Paragraph 7, “Confidential Information” shall mean: (i) internal policiesand procedures, (ii) financial information, (iii) marketing strategies, (iv)customer information, and (v) other non-public information relating toPacific’s business or financial condition.

 

8.     Noncompetition.

 

(a)   Participation in a Competing Business.  During the period Executive is employed byPacific and for twelve (12) months after Executive’s employment with Pacificterminates, Executive will not become 

 

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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*, that Executive may acquireand passively own an interest not exceeding 1% of the total equity interest inany Competing Business.

 

(b)   No Solicitation. During the periodExecutive is employed with Pacific and for twelve (12) months after Executive’semployment with Pacific terminates, Executive will not directly or indirectlysolicit or attempt to solicit (1) any employees of Pacific, or any of Pacific’sSubsidiaries, to leave their employment or (2) any customers of Pacific, or anyof Pacific’s Subsidiaries, to remove their business from Pacific or toparticipate in any manner in a Competing Business.  Solicitation prohibited under this Section includes solicitationby any means, including, without limitation, meetings, letters or othermailings, electronic communications of any kind, and internet communications.

 

(c)   Employment Outside the Restricted Area.  Nothing in this Agreement prevents Executivefrom accepting employment after the end of the Term outside the Restricted Area(defined below) from a Competing Business, as long as Executive will not (a)act as an employee or other representative or agent of the Competing Businesswithin the Restricted Area or (b) have any responsibilities for the CompetingBusiness’ operations within the Restricted Area.

 

(d)   Competing Business.  “Competing Business” means any financialinstitution (“financial institution” means a state or national bank, a state orfederal savings and loan association, a mutual savings bank, or a state orfederal credit union), trust company or mortgage company (including withoutlimitation, any start-up or other financial institution, trust company ormortgage company) that competes with, or will compete with, Pacific in thestates of Washington and/or Oregon (the “Restricted Area”).

 

9.     Enforcement.

 

(a)   Pacific and Executive stipulate that, inlight of all of the facts and circumstances of the relationship betweenExecutive and Pacific, the agreements referred to in Section 7 (includingwithout limitation their scope, duration and geographic extent) are fair andreasonably necessary for the protection of Pacific’s confidential information,goodwill and other protectable interests. If a court of competent jurisdiction should decline to enforce any ofthose covenants and agreements, Executive and Pacific request the court toreform these provisions to restrict Executive’s use of confidential informationand Executive’s ability to compete with Pacific to the maximum extent, in time,scope of activities and geography, the court finds enforceable.

 

(b)   Executive acknowledges that Pacific willsuffer immediate and irreparable harm that will not be compensable by damagesalone, if Executive repudiates or breaches any of the provisions of Section 7or threatens or attempts to do so. For this reason, under these circumstances,Pacific, in addition to and without limitation of any other rights, remedies ordamages available to it at law or in equity, will be entitled to obtaintemporary, 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.

 

10.   Adequate Consideration**.**  Executive specifically acknowledges thereceipt of adequate consideration for the covenants contained in Section 7 andthat Pacific is entitled to require him to comply with this Section.  These Sections will survive termination of thisAgreement.  Executive represents that ifhis employment is terminated, whether voluntarily or involuntarily, Executivehas experience and capabilities sufficient to enable Executive to obtainemployment in areas which do not violate this Agreement and that the Bank’senforcement of a remedy by way of injunction will not prevent Executive fromearning a livelihood.

 

11.   Assignment.

 

(a)   By Pacific.  This Agreement may and shall be assigned or transferred to, andshall be binding upon and inure to the benefit of, any successor of Pacific,and any such successor shall be deemed substituted for all 

 

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purposes of the “Company”under the terms of this Agreement.  Asused in this Agreement, the term “successor” shall mean any person, firm,corporation or business entity that at any time causes a Change of Control asdescribed in Paragraph 2. Notwithstanding such assignment, Pacific shall remain, with suchsuccessor, jointly and severally liable for all its obligations hereunder.  Except as herein provided, Pacific may nototherwise assign this Agreement.

 

(b)   By Executive.  This Agreement shall inure to the benefit ofand be enforceable by Executive’s personal or legal representatives, executorsand administrators, successors, heirs, distributees, devisees andlegatees.  If Executive should die whileany amounts payable to Executive hereunder remain outstanding, all suchamounts, unless otherwise provided herein, shall be paid in accordance with theterms of this Agreement to Executive’s devisees, legatee or other designee, or,in the absence of such designee, to Executive’s estate.  This Agreement is not otherwise assignableby Executive.

 

12.   Jurisdiction/Venue/Mandatory Arbitration.  Any legal action brought to resolve disputesarising out of this Agreement, or any amendments thereto, shall be commenced inKing County Superior Court in Seattle, Washington and shall be resolved inaccordance with the Superior Court Mandatory Arbitration Rules and the KingCounty Local Rules for Mandatory Arbitration, if any, with the parties agreeingto waive the jurisdictional limits.  Thedecision of the arbitrator shall be binding on the parties, and the partieswaive the right of *de novo*appeal from such decision.  It is agreed that the arbitrator shall awardto the prevailing or substantially prevailing party all fees incurred by suchparty with regard to such arbitration, including reasonable legal, accounting,and expert witness fees.  If thearbitrator determines that there is no prevailing or substantially prevailingparty, the reasonable legal, accounting, and expert witnesses fees shall be theresponsibility of each party.

 

13.   Miscellaneous.

 

(a)   *Gender and Number*.  Except where otherwise indicated by thecontext, any masculine term used herein also shall include the feminine; theplural shall include the singular and the singular shall include the plural.

 

(b)   *Entire Agreement*.  This Agreement supersedes any prioragreements or understandings, oral or written, between Executive and Pacific,with respect to the subject matter hereof and constitutes the entire agreementof the parties with respect thereto.

 

(c)   *Modification*.  This Agreement shall not be varied, altered, modified, canceled,changed or in any way amended except by mutual agreement of the parties in awritten instrument executed by the parties hereto or their legalrepresentatives.

 

(d)   *Reviewed with Independent Counsel/Construction ofAgreement*.  Each party hadthe opportunity to review this Agreement with legal counsel of their choosing,and this Agreement is the outcome of that review process. This Agreement hasbeen entered into after negotiation and review of its terms and conditions byparties under no compulsion to execute and deliver a disadvantageous agreement.  This Agreement incorporates provisions,comments and suggestions proposed by both parties.  No ambiguity or omission in this Agreement shall be construed orresolved against any party on the ground that this Agreement or any of itsprovisions was drafted or proposed by that party.

 

(e)   *Severability*.  In the event any provision or portion of this Agreement shall bedetermined to be invalid or unenforceable for any reason, the remainingprovision of this Agreement shall be unaffected thereby and shall remain infull force and effect.

 

(f)    *Counterparts*.  This Agreement may be executed in one or more counterparts, eachof which shall be deemed to be an original, but all of which together willconstitute one and the same Agreement.

 

(g)   *Tax Withholding*.  Pacific may withhold from any benefits payable under thisAgreement all federal, state, city or other taxes as may be required pursuantto any law or governmental regulation or ruling.

 

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(h)   *Beneficiaries*. Executive may designate oneor more persons or entities as the primary and/or contingent beneficiaries ofany amounts to be received under this Agreement. Such designation must be inthe form of a signed writing acceptable to the Board or the Board’s designee.Executive may make or change such designation at any time.

 

(i)    *Governing Law*.  To the extent not preempted by federal law, the provisions ofthis Agreement shall be construed and enforced in accordance with the laws ofthe state of Washington.  Venue for anyaction arising under this Agreement shall lie in Seattle, Washington.

 

IN WITNESS WHEREOF,Executive and Pacific have executed this Agreement, as of the day and yearfirst above written.

 
|   | 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/ Christian R. Rasmussen |                                 |
|   | CHRISTIAN R. RASMUSSEN     |                                 |

 

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