Document:

EXHIBIT
10.28

 

THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED,
OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS, SUCH COMPLIANCE, AT THE OPTION
OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF WARRANTHOLDER’S COUNSEL,
IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION
PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.

 

 

SERIES “AA-1” COMMON STOCK PURCHASE WARRANT

 

Bioject Medical Technologies Inc.

 

 

                THIS CERTIFIES that for good and
valuable consideration received, MEDACorp, Inc., or registered assigns, is
entitled, upon the terms and subject to the conditions hereinafter set forth,
to acquire from Bioject Medical Technologies Inc., an Oregon corporation (the
“Corporation”) up to 15,000 fully paid and nonassessable shares of common
stock, without par value, of the Corporation (“Warrant Stock”) at a purchase
price per share (the “Exercise Price”) of $4.85.

 

1.             Term
of Warrant

 

                Subject to the terms and
conditions set forth herein, this Warrant shall be exercisable, in whole or
from time to time in part, at any time on or after the date hereof and at or
prior to 11:59 p.m., Pacific time, on May 31, 2005 (the “Expiration Time”).

 

2.                                      Exercise of Warrant

 

                The purchase rights represented
by this Warrant are exercisable by the registered holder hereof, in whole or in
part, at any time and from time to time at or prior to the Expiration Time by
the surrender of this Warrant and the Notice of Exercise form attached hereto
duly executed to the office of the Corporation at 7620 S.W. Bridgeport Road,
Portland, Oregon  97224 (or such other
office or agency of the Corporation as it may designate by notice in writing to
the registered holder hereof at the address of such holder appearing on the
books of the Corporation), and upon payment of the Exercise Price for the
shares thereby purchased (by cash or by check or bank draft payable to the order
of the Corporation or by cancellation of indebtedness of the Corporation to the
holder hereof, if any, at the time of exercise in an amount equal to the
purchase price of the shares thereby purchased); whereupon the holder of this
Warrant shall be entitled to receive from the Corporation a stock certificate
in proper form representing the number of shares of Warrant Stock so purchased.

 

3.             Issuance
of Shares; No Fractional Shares of Scrip

 

                Certificates for shares
purchased hereunder shall be delivered to the holder hereof by the
Corporation’s transfer agent at the Corporation’s expense within a reasonable
time after the date on which this Warrant shall have been exercised in
accordance with the terms hereof.  Each
certificate so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or,
subject to applicable laws, other name as shall be requested by such
holder.  If, upon exercise of this
Warrant, fewer than all of the shares of Warrant Stock evidenced by this
Warrant are purchased prior to the Expiration Time, one or more new warrants
substantially in the form of, and on the terms in, this Warrant will be issued
for the remaining number of shares of Warrant Stock not purchased upon exercise
of this Warrant.  The Corporation hereby
represents and warrants that all

 

 

shares of Warrant
Stock which may be issued upon the exercise of this Warrant will, upon such
exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
holder of the Warrant Stock).  The
Corporation agrees that the shares so issued shall be and be deemed to be
issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered for
exercise in accordance with the terms hereof. 
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. 
With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the then current
price at which each share may be purchased hereunder shall be paid in cash to
the holder of this Warrant.

 

4.             Charges,
Taxes and Expenses

 

                Issuance of certificates for
shares of Warrant Stock upon the exercise of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Corporation, and such certificates shall be
issued in the name of the holder of this Warrant or in such name or names as may
be directed by the holder of this Warrant; provided, however, that in
the event certificates for shares of Warrant Stock are to be issued in a name
other than the name of the holder of this Warrant, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the holder hereof.

 

5.             No
Rights as Shareholders

 

                This Warrant does not entitle
the holder hereof to any voting rights or other rights as a shareholder of the
Corporation prior to the exercise hereof.

 

6.             Registration
Rights

 

                This Warrant is a Series “AA-1”
Warrant identified in the Registration Rights Agreement dated as of June 1,
2002 between the Corporation and the parties listed on the signature pages
thereto.  A transferee of this Warrant
may become a “Holder” as defined in such agreement upon compliance with the
requirements of such agreement.

 

7.             Exchange
and Registry of Warrant

 

                This Warrant is exchangeable,
upon the surrender hereof by the registered holder at the above-mentioned office
or agency of the Corporation, for a new Warrant of like tenor and dated as of
such exchange.  The Corporation shall
maintain at the above-mentioned office or agency a registry showing the name
and address of the registered holder of this Warrant.  This Warrant may be surrendered for exchange, transfer or
exercise, in accordance with its terms, at such office or agency of the
Corporation, and the Corporation shall be entitled to rely in all respects,
prior to written notice to the contrary, upon such registry.

 

8.             Loss,
Theft, Destruction or Mutilation of Warrant

 

                Upon receipt by the Corporation
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and in case of loss, theft or destruction of
indemnity or security reasonably satisfactory to it, and upon reimbursement to
the Corporation of all reasonable expenses incidental thereto, and upon
surrender and cancellation of this Warrant, if mutilated, the Corporation will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.

 

9.             Saturdays,
Sundays and Holidays

 

                If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday, Sunday or legal holiday.

 

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10.          Merger, Sale of Assets, Etc.

 

                If at any time the Corporation
proposes to merge or consolidate with or into any other corporation, effect any
reorganization, or sell or convey all or substantially all of its assets to any
other entity, then, as a condition of such reorganization, consolidation,
merger, sale or conveyance, the Corporation or its successor, as the case may
be, shall enter into a supplemental agreement to make lawful and adequate
provision whereby the holder shall have the right to receive, upon exercise of
the Warrant, the kind and amount of equity securities which would have been
received upon such reorganization, consolidation, merger, sale or conveyance by
a holder of a number of shares of common stock equal to the number of shares
issuable upon exercise of the Warrant immediately prior to such reorganization,
consolidation, merger, sale or conveyance. 
If the property to be received upon such reorganization, consolidation,
merger, sale or conveyance is not equity securities, the Corporation shall give
the holder of this Warrant ten (10) business days prior written notice of the
proposed effective date of such transaction, and if this Warrant has not been
exercised by or on the effective date of such transaction, it shall terminate.

 

11.          Subdivision,
Combination, Reclassification, Conversion, Etc.

 

                If the Corporation at any time
shall, by subdivision, combination, reclassification of securities or
otherwise, change the Warrant Stock into the same or a different number of
securities of any class or classes, this Warrant shall thereafter entitle the
holder to acquire such number and kind of securities as would have been
issuable in respect of the Warrant Stock (or other securities which were
subject to the purchase rights under this Warrant immediately prior to such
subdivision, combination, reclassification or other change) as the result of
such change if this Warrant had been exercised in full for cash immediately
prior to such change.  The Exercise
Price hereunder shall be adjusted if and to the extent necessary to reflect
such change.  If the Warrant Stock or
other securities issuable upon exercise hereof are subdivided or combined into
a greater or smaller number of shares of such security, the number of shares
issuable hereunder shall be proportionately increased or decreased, as the case
may be, and the Exercise Price shall be proportionately reduced or increased,
as the case may be, in both cases according to the ratio which the total number
of shares of such security to be outstanding immediately after such even bears
to the total number of shares of such security outstanding immediately prior to
such event.  The Corporation shall give
the holder prompt written notice of any change in the type of securities
issuable hereunder, any adjustment of the Exercise Price for the securities
issuable hereunder, and any increase or decrease in the number of shares
issuable hereunder.

 

12.          Transferability;
Compliance with Securities Laws

 

                (a)           This Warrant may not be transferred or assigned in whole
or in part without compliance with all applicable federal and state securities
laws by the transferor and transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Corporation, if requested by the Corporation). Subject such restrictions, prior
to the Expiration Time, this Warrant and all rights hereunder are transferable
by the holder hereof, in whole or in part, at the office or agency of the
Corporation referred to in Section 1 hereof. 
Any such transfer shall be made in person or by the holder’s duly
authorized attorney, upon surrender of this Warrant together with the
Assignment Form attached hereto properly endorsed.

 

                (b)           The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Warrant Stock issuable upon exercise
hereof are being acquired solely for the holder’s own account and not as a
nominee for any other party, and for investment, and that the holder will not
offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock
to be issued upon exercise hereof except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws.  Upon exercise of this
Warrant, the holder shall, if requested by the Corporation, confirm in writing,
in a form satisfactory to the Corporation, that the shares of Warrant Stock so
purchased are being acquired solely for holder’s own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale.

 

                (c)           The Warrant Stock has not been and will not be registered
under the Securities Act of 1933, as amended, and this Warrant may not be
exercised except by (i) the original purchaser of this Warrant from the
Corporation or (ii) an “accredited investor” as defined in Rule 501(a) under
the Securities Act of 1933, as amended. Each certificate representing the
Warrant Stock or other securities issued in respect of the Warrant Stock upon
any

 

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stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall be
stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required under applicable securities laws):

 

                THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES
LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED
FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE
BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL
APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER’S COUNSEL, IN FORM
ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION
PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.

 

13.          Representations
and Warranties

 

                The Corporation hereby
represents and warrants to the holder hereof that:

 

                (a)           during the period this Warrant is outstanding, the
Corporation will reserve from its authorized and unissued common stock a
sufficient number of shares to provide for the issuance of Warrant Stock upon
the exercise of this Warrant;

 

                (b)           the issuance of this Warrant shall constitute full
authority to the Corporation’s officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for the shares of Warrant Stock issuable upon exercise of this Warrant;

 

                (c)           the Corporation has all requisite legal and corporate
power to execute and deliver this Warrant, to sell and issue the Warrant Stock
hereunder, to issue the common stock issuable upon exercise of the Warrant
Stock and to carry out and perform its obligations under the terms of this
Warrant;

 

                (d)           all corporate action on the part of the Corporation, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Warrant by the Corporation, the authorization, sale,
issuance and delivery of the Warrant Stock, the grant of registration rights as
provided herein and the performance of the Corporation’s obligations hereunder
has been taken;

 

                (e)           the Warrant Stock, when issued in compliance with the
provisions of this Warrant and the Corporation’s Articles of Incorporation (as
they may be amended from time to time (the “Articles”)), will be validly
issued, fully paid and nonassessable, and free of all taxes, liens or
encumbrances with respect to the issue thereof, and will be issued in
compliance with all applicable federal and state securities laws; and

 

                (f)            the issuance of the Warrant Stock will not be subject to
any preemptive rights, rights of first refusal or similar rights.

 

14.          Corporation

 

                The Corporation will not, by
amendment of its Articles or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Warrant and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of the
Warrant against impairment.

 

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15.          Governing
Law

 

                This Warrant shall be governed
by and construed in accordance with the laws of the State of Oregon.

 

 

                IN WITNESS WHEREOF, the
Corporation has caused this Warrant to be executed by its duly authorized
officers.

 

Dated:   June 19, 2002

 

 

 

BIOJECT MEDICAL
TECHNOLOGIES INC.

 

 

 

	
  By:

  	
   

  	 

	
  Name: 

  	
  Christine M. Farrell

  
	
  Title:

  	
  Controller & Secretary

  
				

 

 

 

 

5

 

NOTICE OF EXERCISE

 

To:          Bioject Medical
Technologies Inc.

 

                (1)           The undersigned hereby elects to purchase
           shares of common
stock of Bioject Medical Technologies Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in full,
together with all applicable transfer taxes, if any.

 

                (2)           In exercising this Warrant, the
undersigned hereby confirms and acknowledges that the shares of common stock to
be issued upon exercise hereof are being acquired solely for the account of the
undersigned and not as a nominee for any other party, and for investment, and
that the undersigned will not offer, sell or otherwise dispose of any such
shares of common stock except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws.

 

                (3)           Please issue a certificate or
certificates representing said shares of common stock in the name of the
undersigned or in such other name as is specified below:

 

 

	
   

  
	
  (Name)

  

 

 

	
   

  
	
  (Address)

  

 

 

                (4)           The undersigned represents that (a)
he, she or it is the original purchaser from the Corporation of the attached
Warrant or an “accredited investor” within the meaning of Rule 501(a) under the
Securities Act of 1933, as amended and (b) the aforesaid shares of common stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.

 

 

	
   

  	
   

  	
   

  
	
  (Date)

  	
   

  	
  (Signature)

  

 

 

 

 

 

 

6

ASSIGNMENT
FORM

 

(To assign the foregoing Warrant, execute this form and supply required
information.  Do not use this form to
purchase shares.)

 

 

 

                FOR VALUE RECEIVED,
the undersigned registered owner of this Warrant hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
under the within Warrant, with respect to the number of shares of common stock
of Bioject Medical Technologies Inc. set forth below:

 

	
  Name of Assignee

  	
   

  	
  Address

  	
   

  	
  No. of Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

                                                                                                

 

 

 

 

and does hereby irrevocably constitute and appoint                                    Attorney to make such transfer on the
books of Bioject Medical Technologies Inc., maintained for the purpose, with
full power of substitution in the premises.

 

                The undersigned
also represents that, by assignment hereof, the Assignee acknowledges that this
Warrant and the shares of stock to be issued upon exercise hereof are being
acquired for investment and that the Assignee will not offer, sell or otherwise
dispose of this Warrant or any shares of stock to be issued upon exercise
hereof except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended, or any state securities laws.  Further, the Assignee shall, if requested by
the Corporation, confirm in writing, in a form satisfactory to the Corporation,
that the shares of stock so purchased are being acquired for investment and not
with a view toward distribution or resale.

 

 

 

	
   

  	
  Dated:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
					

 

 

Guaranteed
Signature:

 

NOTE:  The signature to this
Assignment Form must correspond with the name as it appears on the face of the
Warrant, without alteration or enlargement or any change whatever, and must be
guaranteed by a bank or trust company. 
Officers of corporations and those action in a fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.

 

 

7Exhibit 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

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