Exhibit 10.1


 


EMPLOYMENT
AGREEMENT


 


Daniel J. Durkin


 


This Employment Agreement (“Agreement”) signed October
28, 2002, between PACIFIC NORTHWEST BANCORP (“Pacific”), PACIFIC NORTHWEST BANK
and DANIEL J. DURKIN (“Executive”) takes effect on the Effective Date of the
Merger of Bank of the Northwest into Pacific Northwest Bank (“Effective Date”).


 


RECITALS


 


A.            Pacific
and Pacific Northwest Bank have entered into a Plan and Agreement of Merger
(“Plan”) with Bank of the Northwest, pursuant to which Bank of the Northwest
will merge into Pacific Northwest Bank (“Merger”).


 


B.            Executive
is presently the Chairman and Chief Executive Officer of Bank of the
Northwest.  Pacific and Pacific
Northwest Bank wish to retain Executive’s services in the capacity set forth
herein following the Merger, and Executive wishes to accept employment with
Pacific and Pacific Northwest Bank in such capacity following the Merger.


 


AGREEMENT


 


The parties agree as follows:


 


1.)           Employment.  Pacific and Pacific Northwest Bank agree to employ
Executive, and Executive agrees to accept employment with Pacific and Pacific
Northwest Bank.  During the Term of his
employment under this Agreement, Executive will have the title of Vice Chairman
of the Board of Pacific Northwest Bancorp and Pacific Northwest Bank (hereafter
referred to jointly as “Pacific” unless Pacific Northwest Bank is specifically
mentioned) and Chairman of the Oregon Advisory Board of Pacific Northwest Bank.


 


2.)           Effective Date, Term and Office.


a)     Effective Date.  This Agreement is effective as of the
Effective Date.


b)     Term.  The term of this Agreement (“Term”) is three years, beginning on
the Effective Date.


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


 


d)     Office.  During the Term, Executive shall retain the office occupied, and
have access to the staff support available to him immediately preceding the
Effective Date, and the duties to be provided by Executive as set forth below
shall be performed (other than attending Board, committee and other meetings at
Pacific’s principal office in Seattle) at the location where Executive was
employed immediately prior to the Effective Date, or at any other office of
Pacific in the Portland, Oregon metropolitan area, which becomes the principal
office of Pacific in Oregon.


 


3.)           Duties.  Executive will perform the duties assigned
to Executive from time to time by the Board of Directors and the Chief
Executive Officer of Pacific and Pacific Northwest Bank.  These duties will include, without
limitation, the following:


 


a)     Executive will serve as Vice Chairman and a
member of the Board of Directors of Pacific and Pacific Northwest Bank and
Chairman of the Oregon Advisory Board of Pacific Northwest Bank.


 


b)     Executive will advise and consult with the
Chief Executive Officer of Pacific and will assist with the development,
expansion and preservation of community and 


 


 

















 


customer relationships in the Oregon market and serve on
appropriate civic and charitable boards and/or committees.


 


c)     Executive will maintain relationships with
other Oregon bankers, attend association meetings as appropriate, and advise
and consult with the Chief Executive Officer of Pacific regarding possible
business combination opportunities within the Oregon market.


 


During the Term, Executive agrees to devote such time as
necessary to discharge the duties assigned to him and to use his best efforts
to perform such duties faithfully and efficiently.


 


4.)           Compensation.  Executive will
receive a salary from Pacific Northwest Bank of $221,208 per year, to be paid
in accordance with Pacific Northwest Bank’s regular payroll schedule
(“Compensation”).  Executive will
receive no additional compensation for serving as a member of the Board of
Directors of Pacific and Pacific Northwest Bank and the Oregon Advisory Board
of Pacific Northwest Bank.


 


 


5.)           Change of Control.  In the event of a
Change of Control (defined below) during the Term, Executive shall have the
option, at his sole discretion, to terminate this Agreement and receive on the
date of termination a lump sum payment in an amount equal to the Compensation
he would have received for the balance of the Term, in which case Pacific will
continue Executive’s coverage under all employee welfare and health benefit
plans as in effect on the termination date (or provide Executive with
equivalent benefits) through the expiration of the Term..


 


For the purpose of this
Agreement, a Change of Control shall be deemed to have occurred as of the first
day any one or more of the following conditions is satisfied:


 


a)     Any individual, corporation, 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;


 


b)     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);


 


c)     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


 


d)     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.


 


6.)           Benefit Plans.  During the Term
of his employment, Executive shall be entitled to participate in any and all
employee welfare and health benefit plans and other employee benefit plans,
including but not limited to qualified pension plans established by Pacific
from time to time for the benefit of all employees of Pacific.  Executive shall be required to comply with
the conditions attendant to coverage by such plans and shall comply with and be
entitled to benefits only in accordance with the terms and conditions of such
plans as they may be amended from time to 


 


 


2

















 


time.  Nothing
herein contained shall be construed as requiring Pacific to establish or continue
any particular benefit plan in discharge of its obligations under this
Agreement.


 


7.)           Business Expenses.  Pacific will
reimburse Executive for ordinary and necessary expenses (e.g. travel, entertainment,
club dues and similar expenses) incurred in performing and promoting Pacific’s
business.  The level of reimbursement
will be comparable to the reimbursement Executive currently receives at Bank of
the Northwest.  Executive will present
from time to time itemized accounts of these expenses, subject to any rules and
regulations of the Internal Revenue Service.


 


8.)           Termination.


 


a)     Termination By Pacific for Cause.  If, before the end of the Term, Pacific
terminates Executive’s employment for Cause or Executive terminates his
employment without Good Reason (defined below), Pacific will pay Executive a
lump sum equal to $5,934 times the number of months remaining in the Term.  Partial months shall be prorated.


 


b)     Other Termination By Pacific.  If, before the end of the Term, Pacific
terminates Executive’s employment without Cause or Executive terminates his
employment for Good Reason (defined below), Pacific will pay Executive a lump
sum payment in an amount equal to the Compensation he would have received for
the balance of the Term if his employment had not terminated, and Pacific will
continue Executive’s coverage under all employee welfare and health benefit
plans as in effect on the termination date (or provide Executive with
equivalent benefits) through the expiration of the Term.


 


c)     Death or Disability.  This Agreement terminates (1) if Executive
dies or (2) if Executive 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 accommodation Executive could continue to perform his duties under
this Agreement and making these accommodations would not pose undue hardship to
Pacific.  If termination occurs under
this Section 8(c), Executive or his estate will be entitled to receive a lump
sum equal to $5,934 times the number of months remaining in the Term.  Partial months shall be pro-rated.


 


d)     Return of Bank Property.  If and when Executive ceases, for any
reason, to be employed by Pacific, Executive must return to Pacific all keys,
pass cards, identification cards and any other property of Pacific. At the same
time, Executive also must return to Pacific 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 Pacific.  The obligations in this paragraph include
the return of documents and other materials which may be in Executive’s desk at
work, in Executive’s car or place of residence, or in any other location under
Executive’s control.


 


9.)           Definition of “Cause”. “Cause” means any one or more of the following, as
reasonably determined by Pacific:


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


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


c)     Conduct demonstrably and significantly
harmful to Pacific, as reasonably determined by the Board of Directors of
Pacific on the advice of legal counsel that continues for more than 30 days
after written notice to Executive specifying the harmful conduct.


d)     Conviction of a felony.


e)     Breach of the covenants set forth in
Sections b) and i) of this Agreement.


 


Notwithstanding
the foregoing, Executive will not be deemed to have been terminated for Cause
unless and until there has been delivered to Executive a copy of a resolution
duly adopted by the affirmative vote of not less than 


 


 


3

















 


three-quarters
of the entire membership of the Board of Directors of Pacific at a meeting of
the Board of Directors called and held for that purpose (after reasonable
notice to Executive and an  opportunity
for Executive, together with his counsel, to be heard before the Board of
Directors), finding that in the good faith opinion of the Board of Directors,
Executive was guilty of conduct constituting Cause as defined above and
specifying the particulars for such finding in detail.


 


10.)     Definition of “Good Reason”.  “Good Reason”
means only any one or more of the following:


a)     Reduction, without Executive’s consent, of
Executive’s Compensation.


b)     Reduction or elimination of any benefit
plan benefiting Executive, unless the reduction or elimination is generally
applicable to substantially all similarly situated Pacific employees formerly
benefited.


c)     The assignment to Executive without his
consent of any duties materially inconsistent with those set forth in this
Agreement.


d)     The requirement by Pacific that Executive’s
employment be based at any office or location other than that set forth in
Section 2(d) hereof.


 


11.)     Confidentiality.  Executive 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 Pacific or their business operations or customers,
unless (1) Pacific consents to the use or disclosure of their respective
confidential information, (2) the use or disclosure is consistent with
Executive’s duties under this Agreement, or (3) disclosure is required by law
or court order.


 


12.)     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 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 2% 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, 


 


4

















 


any start-up or other financial institution, trust company
or mortgage company) that competes with Pacific in the states of Washington
and/or Oregon (the “Restricted Area”).


 


13.)     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 Sections h) and i)
(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 Sections h)
and i) 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.


 


14.)     Adequate Consideration.  Executive
specifically acknowledges the receipt of adequate consideration for the
covenants contained in Sections h) and i) and that Pacific is entitled to
require him to comply with these Sections. 
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.


 


15.)     Arbitration.


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.


 


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.


 


c)     Exception to Arbitration.  Notwithstanding the above, if Executive
violates Section h) or i), Pacific will have the right to initiate the court
proceedings described in Section b), in lieu of an arbitration proceeding under
this Section c) Pacific may initiate these proceedings wherever
appropriate within Washington State; but Executive will consent to venue and
jurisdiction in King County, Washington.


 


5

















 


16.)     Miscellaneous Provisions.


 


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.


 


b)            Regulation O. Executive will not be an “executive
officer” for purposes of Federal Reserve Board Regulation O.


 


c)             Automobile. 
Executive shall receive an automobile allowance of $750 per month.


 


d)            Entire Agreement. 
This Agreement constitutes the entire understanding between the parties
concerning its subject matter and supersedes all prior agreements


 


e)             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.


 


f)             Binding Effect. 
This Agreement will bind and inure to the benefit of Pacific’s and
Executive’s heirs, legal representatives, successors and assigns.


 


g)            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.


 


h)            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.


 


i)              Assignment. 
The services to be rendered by Executive under this Agreement are unique
and personal.  Accordingly, Executive
may not assign any of his rights or duties under this Agreement.


 


j)              Amendment. 
This Agreement may be modified only through a written instrument signed
by all parties.


 


k)             Severability. 
The provisions of this Agreement are severable.  The invalidity of any provision will not
affect the validity of other provisions of this Agreement.


 


l)              Governing Law. 
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.


 


	
   

  	
  PACIFIC NORTHWEST BANCORP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Patrick M. Fahey

  
	
   

  	
   

  	
  Patrick M. Fahey,
  President and CEO

  



 


6

















 


	
   

  	
  PACIFIC NORTHWEST BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Patrick M. Fahey

  
	
   

  	
   

  	
  Patrick M. Fahey,
  President and CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Daniel J. Durkin

  
	
   

  	
  DANIEL J. DURKIN

  



 


7