Exhibit 10.2


 


SEVERANCE/CHANGE
OF CONTROL AGREEMENT


Christian R.
Rasmussen


 


 


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


 


RECITALS


 


WHEREAS, on the Effective
Date, Pacific desires to employ Executive; and


 


WHEREAS, Executive wishes to
be employed by Pacific but desires assurance that he will be protected in the
event of termination of his employment without cause or a Change of Control as
defined below; and


 


WHEREAS, Pacific wishes to
assure itself of continuity of management in the event of a Change of Control
of Pacific;


 


NOW, THEREFORE, in
consideration of the foregoing and of the mutual covenants and agreements of
the parties set forth in this Agreement, and of other good and valuable
consideration, 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 involuntarily
terminated (other than a Discharge for Cause as defined below), Executive shall
be entitled to receive, in a lump sum payable on the first day of the first
calendar month following discontinuance of his employment due to involuntary
termination, a cash payment in an amount equal to the Total Compensation paid
to Executive over the last twelve (12) months of his employment with Pacific
preceding the month in which the involuntary termination occurs. For purposes
of this Agreement, “Total Compensation” shall be defined as an amount equal to
Executive’s W-2 income before salary deferrals, excluding any one-time payment
made to Executive relating to the termination of his employment under his
Second Restated Employment Agreement with Bank of the Northwest dated December
31, 2001, as amended in June, 2002.


 


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


 


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


 


(d)   Once entitled to receive severance benefits
under Paragraph (1) of this Agreement, Executive shall have no duty to mitigate
the obligation of Pacific to make severance payments due by seeking other
employment.  Should Executive actually
receive compensation from any such other employment, the payments called for
hereunder shall not be reduced or offset by any such future earnings.


 


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


 

















 


(a)   Executive a position with the survivor entity
with duties and responsibilities commensurate with those performed by Executive
at the time of the change of control, although the title held by Executive need
not be the same;


 


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


 


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


 


(d)   That the successor entity may terminate
Executive’s employment at any time prior to the expiration of the four-year
contract term by paying Executive an amount equal to the Total Compensation
paid to Executive over the last twenty-four (24) months of his employment with
Pacific preceding the month in which the Change of Control occurs payable on
the first day of the first calendar month following discontinuance of his
employment.


 


(e)   Notwithstanding the foregoing, the successor
entity may provide in the Employment Contract that Executive may be terminated
for reasons constituting a Discharge for Cause, as defined in this
Agreement.  If Executive is terminated
under such provision, Executive shall not be entitled to receive any payments
under this Agreement.


 


(f)    That, during the period commencing with the
25th month following a Change in Control through the 30th
month following a Change in Control, Executive may terminate his Employment
Agreement for any reason or no reason by delivering written notice to the
successor entity.  If Executive does so,
the successor entity will pay Executive a single cash payment in an amount
equal to Executive’s Total Compensation for the prior twelve (12) month period
payable on the first day of the first calendar month following discontinuance
of his employment.


 


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


 


3.     Certain
Definitions.


 


(a)   Change of Control.  A “Change of Control” of Pacific shall be
deemed to have occurred as of the first day any one or more of the following
conditions 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 becomes
the beneficial owner, as that concept is defined in Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934, of securities of Pacific possessing fifty percent (50%) or more of the
voting power for the election of directors of Pacific;


 


(ii)           There shall be
consummated any consolidation, merger, or other business combination involving
Pacific or the securities of Pacific in which holders of voting securities of
Pacific immediately prior to such consummation own, as a group, immediately
after such consummation, voting securities of Pacific (or, if Pacific does not
survive such transaction, voting securities of the corporation surviving such
transaction) having less than sixty percent (60%) of the total voting power in an
election of directors of Pacific (or such other surviving corporation);


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


5.     Effect on Other Benefits.  The arrangements called for by this
Agreement are not intended to have any effect on Executive’s participation in
any other benefits available to executive personnel or to preclude other
compensation or additional benefits as may be authorized by the Board of
Directors from time to time.


 


6.     Limitations on Payments Related to
Severance Benefits.  The following
limitations apply, notwithstanding any other provision of this Agreement:


 


(a)   The severance benefits payable under
Paragraph 1 shall not exceed an 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


 


(b)   Pacific shall not be obligated to make, and
Executive shall not be entitled to, any payment under this Agreement if such
payment 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 relation
to this Agreement should any payment be deemed a prohibited “golden parachute”
payment.


 


7.     Confidentiality.  From the date of this Agreement, Executive
will not, directly or indirectly, disclose to any third party not affiliated
with Pacific, Confidential Information of Pacific and its subsidiaries and
affiliates, except as to any of the Confidential Information which shall be or
become in the public domain or shall be required to be disclosed by applicable
laws or regulations, any judicial or administrative authority or stock exchange
rule or regulation.  For the purposes of
this Paragraph 7, “Confidential Information” shall mean: (i) internal policies
and procedures, (ii) financial information, (iii) marketing strategies, (iv)
customer information, and (v) other non-public information relating to
Pacific’s business or financial condition.


 


8.     Noncompetition.


 


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


 


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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 Executive may acquire
and passively own an interest not exceeding 1% of the total equity interest in
any Competing Business.


 


(b)   No Solicitation. During the period
Executive is employed with Pacific and for twelve (12) months after Executive’s
employment with Pacific terminates, Executive will not directly or indirectly
solicit or attempt to solicit (1) any employees of Pacific, or any of Pacific’s
Subsidiaries, to leave their employment or (2) any customers of Pacific, or any
of Pacific’s Subsidiaries, to remove their business from Pacific 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.


 


(c)   Employment Outside the Restricted Area.  Nothing in this Agreement prevents Executive
from 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 Business
within the Restricted Area or (b) have any responsibilities for the Competing
Business’ operations within the Restricted Area.


 


(d)   Competing Business.  “Competing Business” means any financial
institution (“financial institution” means a state or national bank, a state or
federal savings and loan association, a mutual savings bank, or a state or
federal credit union), trust company or mortgage company (including without
limitation, any start-up or other financial institution, trust company or
mortgage company) that competes with, or will compete with, Pacific in the
states of Washington and/or Oregon (the “Restricted Area”).


 


9.     Enforcement.


 


(a)   Pacific and Executive stipulate that, in
light of all of the facts and circumstances of the relationship between
Executive and Pacific, the agreements referred to in Section 7 (including
without limitation their scope, duration and geographic extent) are fair and
reasonably 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 of
those covenants and agreements, Executive and Pacific request the court to
reform these provisions to restrict Executive’s use of confidential information
and 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 will
suffer immediate and irreparable harm that will not be compensable by damages
alone, if Executive repudiates or breaches any of the provisions of Section 7
or threatens or attempts to do so. For this reason, under these circumstances,
Pacific, 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
restrain the breach, and Pacific will not be required to post a bond as a
condition for the granting of this relief.


 


10.   Adequate Consideration.  Executive specifically acknowledges the
receipt of adequate consideration for the covenants contained in Section 7 and
that Pacific is entitled to require him to comply with this Section.  These Sections will survive termination of this
Agreement.  Executive represents that if
his employment is terminated, whether voluntarily or involuntarily, Executive
has experience and capabilities sufficient to enable Executive 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 Executive from
earning a livelihood.


 


11.   Assignment.


 


(a)   By Pacific.  This Agreement may and shall be assigned or transferred to, and
shall 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.  As
used in this Agreement, the term “successor” shall mean any person, firm,
corporation or business entity that at any time causes a Change of Control as
described in Paragraph 2. 
Notwithstanding such assignment, Pacific shall remain, with such
successor, jointly and severally liable for all its obligations hereunder.  Except as herein provided, Pacific may not
otherwise assign this Agreement.


 


(b)   By Executive.  This Agreement shall inure to the benefit of
and be enforceable by Executive’s personal or legal representatives, executors
and administrators, successors, heirs, distributees, devisees and
legatees.  If Executive should die while
any amounts payable to Executive hereunder remain outstanding, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms 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 assignable
by Executive.


 


12.   Jurisdiction/Venue/Mandatory Arbitration.  Any legal action brought to resolve disputes
arising out of this Agreement, or any amendments thereto, shall be commenced in
King County Superior Court in Seattle, Washington and shall be resolved in
accordance with the Superior Court Mandatory Arbitration Rules and the King
County Local Rules for Mandatory Arbitration, if any, with the parties agreeing
to waive the jurisdictional limits.  The
decision of the arbitrator shall be binding on the parties, and the parties
waive the right of de novo appeal from such decision.  It is agreed that the arbitrator shall award
to the prevailing or substantially prevailing party all fees incurred by such
party with regard to such arbitration, including reasonable legal, accounting,
and expert witness fees.  If the
arbitrator determines that there is no prevailing or substantially prevailing
party, the reasonable legal, accounting, and expert witnesses fees shall be the
responsibility of each party.


 


13.   Miscellaneous.


 


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


 


(b)   Entire Agreement.  This Agreement supersedes any prior
agreements or understandings, oral or written, between Executive and Pacific,
with respect to the subject matter hereof and constitutes the entire agreement
of 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 a
written instrument executed by the parties hereto or their legal
representatives.


 


(d)   Reviewed with Independent Counsel/Construction of
Agreement.  Each party had
the opportunity to review this Agreement with legal counsel of their choosing,
and this Agreement is the outcome of that review process. This Agreement has
been entered into after negotiation and review of its terms and conditions by
parties 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 or
resolved against any party on the ground that this Agreement or any of its
provisions was drafted or proposed by that party.


 


(e)   Severability.  In the event any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, the remaining
provision of this Agreement shall be unaffected thereby and shall remain in
full force and effect.


 


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


 


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


 


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(h)   Beneficiaries. Executive may designate one
or more persons or entities as the primary and/or contingent beneficiaries of
any amounts to be received under this Agreement. Such designation must be in
the 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 of
this Agreement shall be construed and enforced in accordance with the laws of
the state of Washington.  Venue for any
action arising under this Agreement shall lie in Seattle, Washington.


 


IN WITNESS WHEREOF,
Executive and Pacific have executed this Agreement, as of the day and year
first 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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