Document:

ex101-113007.htm

    EMPLOYMENT
      AGREEMENT

    CAROL
      KOBUKE NELSON

    

    THIS
      EMPLOYMENT AGREEMENT (“Agreement”) is made this 27th day of November, 2007, by
      and between CASCADE FINANCIAL CORPORATION and CASCADE BANK (hereinafter jointly
      referred to as “Cascade”) and CAROL KOBUKE NELSON (“Nelson”) and will become
      effective upon execution.  Cascade and Nelson are sometimes
      collectively referred to herein as “the Parties.”

     

    RECITALS

     

    WHEREAS,
      Nelson currently serves as the President and Chief Executive Officer of Cascade
      under the terms of an Employment Agreement last amended on July 12, 2005;
      and

     

    WHEREAS,
      the Parties wish to replace that Employment Agreement with this
      Agreement;

     

    NOW
      THEREFORE, in consideration of the mutual covenants and agreements contained
      herein, and other good and valuable consideration, the receipt and sufficiency
      of which is hereby acknowledged, the Parties agree as follows:

     

    1.  Term.  Nelson’s
      term of employment (“Term”) under this Agreement shall commence on the date of
      execution of this Agreement and continue until terminated as provided in the
      Termination provision of this Agreement.

     

    2.  Duties.  Nelson
      is engaged as President and Chief Executive Officer of Cascade Financial
      Corporation and Cascade Bank, and is responsible for the overall operation
      and
      conduct of Cascade’s business, in accordance with the laws of the State of
      Washington and the federal government and pursuant to the general guidelines
      and
      directions as established from time to time by the Board of Directors of Cascade
      (the “Board”).  Subject to any required approval by the shareholders
      of Cascade, the Board of Directors of Cascade Bank and Cascade Financial
      Corporation shall appoint or nominate and recommend Nelson for election as
      a
      member of their respective Boards of Directors and, if so appointed or elected,
      Nelson shall serve in that capacity as long as she is employed as the President
      and Chief Executive Officer of Cascade Financial Corporation and Cascade
      Bank.

     

    3.  Exclusive
      Services and Best Efforts.  Nelson shall render services solely on
      behalf of Cascade, and in no event shall she render services directly to a
      customer of Cascade for the individual gain of Nelson, without Cascade’s prior
      written consent.  Nelson shall devote her full time, attention and
      energies, during regular business hours, to the business of
      Cascade.  Nelson further agrees that she shall perform any and all
      duties to the best of her abilities.  In addition to any other
      responsibilities which Cascade may from time to time require her to perform,
      Nelson shall:

     

            (a)  Use
      her
      diligent efforts to promote the business and further the goals of
      Cascade;

    
      
         

      

      
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        (b)  Conduct
        her business and regulate her habits so as to maintain and increase the goodwill
        and reputation of both Cascade and its business and to abide by all codes
        of
        ethics and other professional duties which are binding upon or applicable
        to
        general good business practices;

    

     

            (c)  Not
      render to others, during her employment with Cascade, services of any kind
      or
      promote, participate or engage in any other business activity which would
      interfere with the performance of her duties under this Agreement, including,
      without limitation, providing consulting services or otherwise engaging in
      business with any person or entity which directly or indirectly competes with
      Cascade, unless she first obtains Cascade’s prior written consent to engage in
      such outside activities.

     

    Although
      Nelson is required to devote her entire time, attention and energies to the
      business of Cascade and cannot, during the term of this Agreement, be engaged
      in
      any other business activity which interferes with her duties hereunder, whether
      or not such business activity is pursued for gain, profit or other pecuniary
      advantage, this shall not be construed as preventing Nelson from investing
      her
      assets in such manner as will not require any services on her part in the
      operation of the affairs of the companies in which such investments are made,
      or
      in making other investments which do not interfere with her duties under this
      Agreement.

     

    4.  Compensation.  Cascade
      shall pay Nelson, as compensation for her full-time services during the Term
      of
      Employment, the following:

     

            (a)  Base
      Compensation.  Nelson will receive a monthly salary, the amount of
      which will be set annually by the Board (“Base Compensation”), payable in
      accordance with Cascade’s regular payroll schedule. Base Compensation will be
      reviewed annually by the Compensation Committee. Nelson will receive no
      additional compensation for serving as a member of the Board of Directors of
      Cascade.

     

            (b)  Bonus.  Nelson
      shall receive an annual bonus set by the Compensation Committee
      (“Bonus”).  In determining the amount of the Bonus, the Compensation
      Committee shall consider earnings, asset quality, factors affecting shareholder
      value and such other factors as the Compensation Committee shall deem
      appropriate.

     

            (c)  Benefit
      Plans.  During the Term, Nelson shall be entitled to participate
      in any and all employee benefit plans, including, but not be limited to, 401(k)
      Plan, Stock Option Plan, Deferred Compensation Plan and employee welfare and
      health benefit plans, established by Cascade from time to time for the benefit
      of all executives of Cascade.  Nelson 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 time.

     

    5.  Business
      Expenses.  Cascade will pay or reimburse Nelson for reasonable and
      necessary business expenses incurred by Nelson, which are directly related
      to
      the performance of her duties of employment, including travel, professional
      memberships and professional development, subject to documentation by Nelson
      and
      approval of the Chairman of the Audit Committee.  Cascade will pay
      Nelson’s current monthly club membership dues at the Everett Golf and Country
      Club.

    
      
         

      

      
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    6.  Automobile.  Nelson
      shall provide her own automobile, and Cascade shall provide her an automobile
      allowance of $700 per month for use of such automobile incident to her duties
      as
      President and Chief Executive Officer of Cascade.  The automobile
      allowance may be increased from time to time as deemed appropriate by the
      Board.

     

    7.  Working
      Facilities.  Nelson shall be furnished with such working
      facilities as are reasonably required by Nelson to perform her duties as
      President and Chief Executive Officer of Cascade, which working facilities
      shall
      include, but not be limited to, an office and secretarial and staff
      support.

     

    8.  Termination.  This
      Agreement may be terminated by Cascade upon written notice to Nelson, and by
      Nelson upon 90 days written notice to Cascade.  If Nelson resigns from
      Cascade, except for Good Reason as defined in paragraph 8(a)
      or Retirement as defined in paragraph 8(d)
      hereafter, she will receive only her
      compensation, benefits earned and expenses reimbursable through the date this
      Agreement is terminated.  If Nelson’s employment is terminated by
      Cascade or by Nelson for Good Reason, she shall receive the compensation
      provided hereafter.

     

            (a)  Termination
      Without Cause/For Good Reason.  If Nelson’s employment is
      terminated by Cascade, except for cause as provided in paragraph 8(b),
      or by Nelson for Good Reason, Nelson
      shall be entitled to receive a severance benefit equal to two (2) times her
      Base
      Compensation plus Bonus before salary deferrals over the twelve (12) months
      preceding the month of termination, less statutory payroll deductions. Such
      payment shall, at the option of Cascade, be made in a lump sum or in accordance
      with Cascade’s regular payroll schedule and shall be paid or payments commenced
      as soon as practicable, but not less than six (6) months, after the date that
      Nelson’s entitlement to such payment arose.  For purposes of this
      Agreement, “Good Reason” means any one or more of the following: Reduction of
      Nelson’s Base Compensation during the term of this Agreement without Nelson’s
      consent (other than as part of an overall program applied uniformly to all
      members of senior management of the Bank); the assignment to Nelson without
      her
      consent of any duties materially inconsistent with Nelson’s position as of the
      date of this Agreement; or a relocation or transfer of Nelson’s principal place
      of employment that would require Nelson to commute on a regular basis more
      than
      30 miles each way from Cascade’s main office as of the date of this
      Agreement.

     

            (b)  Termination
      for Cause. The compensation payable on termination as provided in paragraph
8(a)
      shall not be payable in the event
      Nelson’s employment is terminated for cause.  Termination shall be
      determined to be for cause only in the event: (i) Nelson is convicted of a
      felony or crime involving moral turpitude, or charged with a felony or crime
      involving moral turpitude if the Board, in its sole discretion, determines
      that
      the adverse publicity/notoriety stemming from such charge will make it difficult
      for Nelson to perform her duties and/or Cascade to carry on its normal business
      activities; or (ii) Nelson fails or refuses, after written request, to
      comply with any material policies adopted by the Board; (iii) Nelson is
      terminated for fraud, embezzlement, or willful misconduct (including, but not
      limited to, violation of Cascade’s anti-discrimination and harassment policies);
      or (iv) Nelson is removed from office by the Board in order to comply with
      a requirement, request or recommendation from the Supervisor of Banking for
      the
      State of Washington or the Federal Deposit Insurance Corporation
      (“FDIC”).

    
      
         

      

      
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            (c)  Death
      or Disability.  This Agreement will terminate immediately upon
      Nelson’s death.  If Nelson is unable to perform her duties and
      obligations under this Agreement for an aggregate period of ninety (90) days
      as
      a result of a physical or mental disability and cannot continue to perform
      her
      duties with reasonable accommodation, the Board may terminate this
      Agreement.  If termination occurs due to Nelson’s death, her estate
      will be entitled to receive only the compensation, benefits earned, and expenses
      reimbursable through the date this Agreement is terminated.  If
      termination occurs due to Nelson’s disability, she shall continue to receive her
      Salary until payments under Cascade’s long-term disability plan commence, or in
      the event Cascade has no long-term disability plan on the date of disability,
      Nelson’s salary shall continue for a period of six (6) months.  In the
      event of Nelson’s death or disability while employed by Cascade, all of her then
      outstanding stock-based compensation  which has not vested will be
      accelerated and fully vested.  For purposes of this paragraph,
“disability” shall be determined using the definition of that term in the
      Cascade long-term disability plan in effect at the time of the disability,
      or if
      no such plan is then in effect, the definition of “disability” contained in such
      other plan providing a disability benefit.  If there is no such plan
      then in effect, the definition of “disability” found in Internal Revenue Code
      Section 22(e), as may be amended from time to time, shall apply.

     

            (d)  Retirement.  If
      Nelson retires from Cascade after attaining age fifty-seven (57), she will
      receive as a severance benefit: (1) payment in an amount equal to two (2) times
      her Base Compensation plus Bonus before salary deferrals over the twelve (12)
      months prior to her retirement, with such amounts payable in twenty-four (24)
      consecutive, equal monthly installments, with the first such payment due on
      the
      first day of the seventh month following retirement; (2) vesting of all
      stock-based compensation; and (3) the following health benefit coverage for
      her
      and her spouse:

     

                (i)  Cascade
      will pay all premiums for benefits to Nelson and her spouse under and subject
      to
      the term of the Consolidated Omnibus Budget Reconciliation Act
      (“COBRA”);

     

                (ii)  Upon
      expiration of any applicable COBRA coverage period, if Nelson and/or her spouse
      are not then entitled to enroll for Medicare, Cascade shall provide at its
      expense an individual health insurance policy for Nelson and her spouse which
      will provide them with health care benefits as nearly equivalent as possible
      to
      those provided Nelson by Cascade prior to Nelson’s retirement.

     

                (iii)  Upon
      reaching an age when Nelson and her spouse are entitled to receive Medicare,
      but
      in no event after Nelson reaches age 65, this benefit shall
      terminate.

     

    If
      Nelson
      receives benefits under this paragraph, she foregoes any entitlement to receive
      any other benefits under any other provisions of this Agreement, including
      any
      right to receive a “Change of Control” payment.

    
      
         

      

      
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    9.  Change
      of Control. If there is a Change of Control of Cascade as hereinafter
      defined, all Nelson’s equity grants/benefits shall become fully vested upon the
      effective date of the Change of Control.  If Nelson leaves the
      employment of Cascade, whether voluntarily or involuntarily, within twelve
      (12)
      months after such Change of Control, Nelson shall be entitled to receive an
      amount equal to two (2) times her Base Compensation plus Bonus before salary
      deferrals over the twelve (12) month period prior to the Change of Control.
      Such
      payment shall not be made less than six (6) months after Nelson’s entitlement to
      the payment arose.  “Change of Control” as used herein will be deemed
      to have occurred when there is a Change in the Ownership of Cascade or a Change
      in the Ownership of a Substantial Portion of the Assets of Cascade, as defined
      below:

     

            (a)  Change
      in the Ownership of Cascade. For the purposes of this Agreement, a Change in
      the Ownership of Cascade shall be deemed to occur when any one person, or more
      than one person acting as a group, acquires ownership of Cascade stock that,
      together with stock held by such person or group, constitutes more than fifty
      percent (50%) of the total fair market value or total voting power of
      Cascade.  A Change in Ownership of Cascade will not occur when any one
      person, or more than one person acting as a group, owning more than fifty
      percent (50%) of the total fair market value or total voting power of the stock
      of Cascade acquires additional stock. For the purposes of this section, an
      increase in the percentage of stock owned by any one person, or more than one
      person if acting as a group, as a result of a transaction in which Cascade
      acquires its stock in exchange for property will be treated as an acquisition
      of
      stock.

     

            (b)  Change
      in the Ownership of a Substantial Portion of the Assets of Cascade. For the
      purposes of this Agreement, a Change in the Ownership of a Substantial Portion
      of the Assets of Cascade shall be deemed to occur on the date that any one
      person, or more than one person acting as a group, acquires (or has acquired
      during the twelve (12) month period ending on the date of the most recent
      acquisition by such person or persons) assets from the corporation that have
      a
      total gross fair market value equal to or more than forty percent (40%) of
      the
      total gross fair market value of all of the assets of Cascade immediately prior
      to such acquisition or acquisitions.  For the purpose of this section,
      gross fair market value means the value of the assets of Cascade or the value
      of
      the assets being disposed of, determined without regard to any liabilities
      associated with such assets.  A Change in the Ownership of a
      Substantial Portion of the Assets of Cascade shall not be deemed to occur where
      the assets transferred by Cascade are transferred to (1) a shareholder of the
      corporation (immediately before the asset transfer) in exchange for or with
      respect to its stock; (2) an entity fifty percent (50%) or more of the total
      value or voting power of which is owned, directly or indirectly, by Cascade;
      (3)
      a person, or more than one person acting as a group, that owns directly or
      indirectly, fifty percent (50%) or more of the total value or voting power
      of
      all the outstanding stock of Cascade; or (4) an entity, at least fifty percent
      (50%) of the total value or voting power of which is owned, directly or
      indirectly, by a person or more than one persons acting as a group, that owns,
      directly or indirectly, fifty percent (50%) or more of the total value or voting
      power of all the outstanding stock of Cascade.

     

            (c)  Nelson
      shall, under no circumstances, receive a payment under 8(d) and a Change of Control
      payment.

    
      
         

      

      
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    10.  Federal
      Regulatory Provisions.

     

            (a)  If
      Nelson
      is suspended and/or temporarily prohibited from participating in the conduct
      of
      Cascade's affairs by a notice served under section 8 (e)(3) or (g)(1) of Federal
      Deposit Insurance Act (12 U.S.C. 1818 (e)(3) and (g)(1)) Cascade’s obligations
      under this Agreement shall be suspended as of the date of service unless stayed
      by appropriate proceedings. If the charges in the notice are dismissed, Cascade
      may in its discretion (i) pay Nelson all or part of the compensation withheld
      while its obligations under this Agreement were suspended, and (ii) reinstate
      (in whole or in part) any of its obligations which were suspended.

     

            (b)  If
      Nelson
      is removed and/or permanently prohibited from participating in the conduct
      of
      Cascade’s affairs by an order issued under section 8 (e)(4) or (g)(1) of the
      U.S.C. 1818 (e)(4) or (g)(1)), all obligations of Cascade under this Agreement
      shall terminate as of the effective date of the order, but vested rights of
      the
      Parties shall not be affected.

     

            (c)  If
      Cascade is in default (as defined in section 3(x)(1) of the Federal Deposit
      Insurance Act), all obligations under this Agreement shall terminate as of
      the
      date of default, but this paragraph (c) shall not affect any vested rights
      of
      the Parties.

     

            (d)  All
      obligations under this Agreement shall be terminated, except to the extent
      determined that continuation of this Agreement is necessary to the continued
      operation of Cascade:

     

                (i)           By
      the Director of the Federal Deposit Insurance Corporation ("Director") or his
      or
      her designee, at the time the Federal Deposit Insurance Corporation enters
      into
      an agreement to provide assistance to or on behalf of Cascade under the
      authority contained in 13(c) of the Federal Deposit Insurance Act;
      or

     

                (ii)           By
      the Director or his or her designee, at the time the Director or his or her
      designee approves a supervisory merger to resolve problems related to operation
      of Cascade or when Cascade is determined by the Director to be in an unsafe
      or
      unsound condition.

     

    11.  Confidentiality.  Nelson
      acknowledges that she will have access to certain proprietary and confidential
      information of Cascade and its clients.  Nelson will not, after
      signing this Agreement, including during and after its Term, use for her own
      purposes or disclose to any other person or entity any confidential information
      concerning Cascade or its business operations or customers, unless: (i) Cascade
      consents to the use or disclosure of said confidential information, (ii) the
      use
      or disclosure is consistent with Nelson’s duties under this Agreement, or (iii)
      disclosure is required by law or court order.

     

    12.  Competition
      Restriction.  During the Term and for twenty-four (24) months
      thereafter, if Nelson receives compensation under paragraph 8(d), she shall not become or serve as
      an
      officer, director, founder or employee of any financial institution with its
      main office in King, Snohomish or Pierce Counties, or any other financial
      institution which, in the judgment of the Board, is in substantial competition
      with Cascade, unless Nelson has first obtained the Board’s written
      consent.  In the event Nelson breaches this condition, which breach is
      not corrected within fifteen (15) days of notice to Nelson of such breach,
      Nelson shall forfeit all right to receive all benefits or other payments
      remaining unpaid on the date of any such breach, and shall refund any payments
      received pursuant to paragraph 8(d)
      hereof, and all unexercised stock options which will be forfeited.

    
      
         

      

      
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    13.  No
      Solicitation.  During the Term and for twenty-four (24) months
      thereafter, if Nelson receives compensation under paragraphs 8(d) or 9, she will not, directly or
      indirectly, solicit or attempt to solicit: (i) any employees of Cascade to
      leave
      their employment, or (ii) any customers of Cascade to remove their business
      from
      Cascade to participate in any manner in a competing business (“Competing
      Business”).  “Competing Business” means any financial institution or
      trust company that competes with or will compete with Cascade in King, Snohomish
      or Pierce County, or any start-up or other financial institution or trust
      company in King, Snohomish or Pierce County.

     

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

     

    15.  Enforcement
      of Confidentiality and Non-Competition Covenants.  Cascade and
      Nelson stipulate that, in light of all of the facts and circumstances of the
      relationship between them, the covenants referred to in paragraphs 10, 12,
13,
      and 14 above, including, without limitation,
      their scope, duration and geographic extent, are fair and reasonably necessary
      for the protection of Cascade’s confidential information, goodwill and other
      protectable interests.  If a court of competent jurisdiction should
      decline to enforce any of those covenants and agreements, Nelson and Cascade
      request the court to reform these provisions to restrict Nelson’s use of
      confidential information and Nelson’s ability to compete with Cascade, to the
      maximum extent, in time, scope of activities, and geography, as the court finds
      enforceable.

     

    Nelson
      acknowledges that Cascade will suffer immediate and irreparable harm that will
      not be compensable by damages alone, if Nelson repudiates or breaches any of
      the
      provisions in paragraphs 10, 12,
13,
      and 14 above or threatens or attempts to
      do
      so.  For this reason, under these circumstances, Cascade, 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 Cascade
      will not be required to post a bond as a condition for the granting of this
      relief.

     

    16.  Adequate
      Consideration.  Nelson specifically acknowledges the receipt of
      adequate consideration for the covenants contained in paragraphs 10, 12,
13,
      and 14 above and that Cascade is entitled
      to
      require her to comply with these paragraphs.  These paragraphs will
      survive termination of this Agreement.  Nelson represents that if her
      employment is terminated, whether voluntarily or involuntarily, she has the
      experience and capabilities sufficient to enable her to obtain employment in
      areas which do not violate this Agreement and that Cascade’s enforcement of a
      remedy by way of injunction will not prevent Nelson from earning a
      livelihood.

    
      
         

      

      
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    17.  No
      Employee Contract Rights.  Nothing contained in this Agreement
      shall be construed to abrogate, limit or affect the powers, rights and
      privileges of the Board to remove Nelson as President or Chief Executive Officer
      of Cascade, with or without the cause.

     

    18.  Regulatory
      Agencies.  The Parties fully acknowledge and recognize that
      Cascade and Nelson (insofar as she conducts Cascade’s business) are regulated
      and governed by the Division of Banks for the State of Washington and the
      FDIC.  In the event the Division of Banks, the FDIC or any other
      governmental agency with authority to regulate Cascade objects to, and requires
      modification of, any of the terms of this Agreement, the Parties agree that
      they
      shall abide by and modify the terms of this Agreement to comply with any and
      all
      requirements of that governmental agency.

     

    19.  Dispute
      Resolution.  The Parties agree to attempt to resolve all disputes
      arising out of this Agreement by mediation.  Any party desiring
      mediation may begin the process by giving the other party a written Request
      to
      Mediate, describing the issues involved and inviting the other party to join
      with the calling party to name a mutually agreeable mediator and a timeframe
      for
      the mediation meeting.  The Parties and mediator may adopt any
      procedural format that seems appropriate for the particular
      dispute.  The contents of all discussions during the mediation shall
      be confidential and non-discoverable in subsequent arbitration or litigation,
      if
      any.  If the Parties can, through the mediation process, resolve the
      dispute(s), the agreement reached by the Parties shall be reduced to writing,
      signed by the Parties, and the dispute shall be at an end.

     

    If
      the
      result of the mediation is a recognition that the dispute cannot be successfully
      mediated, or if either party believes mediation would be unproductive or too
      slow, then either party may seek to resolve the dispute in accordance with
      the
      procedures established by Judicial Arbitration and Mediation Services,
      Inc.

     

    The
      award
      rendered by the arbitrator (whether through Judicial Arbitration and Mediation
      Services, Inc. or otherwise) shall be final, and judgment may be entered upon
      it
      in accordance with applicable law in any court having jurisdiction
      thereof.

     

    The
      arbitrator shall allocate the costs charged by Judicial Arbitration and
      Mediation Services, Inc., or other arbitrator as the case may be, for the
      arbitration between the Parties in a manner which the arbitrator considers
      equitable.  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 and accounting
      fees.  If the arbitrator determines that there is no prevailing or
      substantially prevailing party, the legal and accounting fees shall be the
      responsibility of each party.

     

    20.  Governing
      Law.  All proceedings will be held at a place designated by the
      arbitrator in Snohomish County, Washington.  The arbitrator, in
      rendering a decision as to any state law claims, will apply Washington
      law.

    
       

    

    21.  Exception
      to Arbitration.  Notwithstanding the above, if Nelson violates
      paragraphs 10, 12,
13,
      and 14 above, Cascade will have the right
      to
      initiate the court proceedings described in paragraph 15 above, in lieu of an arbitration
      proceeding.  Cascade may initiate these proceedings wherever
      appropriate within Washington state, but Nelson will consent to venue and
      jurisdiction in Snohomish County, Washington.

    
      
         

      

      
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    22.  Notice.  Any
      notice to be delivered under this Agreement shall be given in writing and
      delivered personally or by certified mail, postage prepaid, addressed to Cascade
      or to Nelson at their last known address.

     

    23.  Independent
      Legal Counsel.  Nelson acknowledges that she has had the
      opportunity to review and consult with her own personal legal counsel regarding
      this Agreement.

     

    24.  Non-Waiver.  No
      delay or failure by either party to exercise any right under this Agreement,
      and
      no partial single exercise of that right, shall constitute a waiver of that
      or
      any other right.

     

    25.  Severability.  If
      any provision of this Agreement shall be held by a court of competent
      jurisdiction to be invalid or unenforceable, the remaining provisions shall
      continue to be fully effective.

     

    26.  Entire
      Agreement.  This Agreement represents the entire agreement of the
      Parties.  This Agreement supersedes any prior oral or written
      agreement between the Parties on the subject matter hereof.  This
      Agreement may be superseded by another written agreement entered into between
      Nelson and Cascade on mutually agreeable terms, provided such agreement
      expressly by its terms supersedes this Agreement.  The offer by
      Cascade to enter into any such agreement, or the entering into such agreement,
      shall not be considered to have terminated this Agreement, triggering the
      payment of benefits under paragraph 8
      hereof.

     

    27.  Binding
      Effect.  It is agreed that all covenants, terms and conditions of
      this Agreement shall extend, apply to and firmly bind the heirs, executors,
      administrators, assigns and successors in interest of the respective parties
      hereto as fully as the respective parties themselves are bound.  It is
      specifically understood that in the event of Nelson’s death prior to the full
      payment of any benefit to which she is entitled under this Agreement, such
      payment(s) shall be made to her spouse and/or heirs as the case may
      be.

     

    28.  Compliance
      with Internal Revenue Code Section 409A.  Where required, the
      provisions of this Agreement are intended to comply with the requirements of
      Section 409A of the Internal Revenue Code. Notwithstanding any other
      provision of this Agreement, this Agreement shall be interpreted and
      administered in accordance with the requirements of Section 409A of the
      Internal Revenue Code.

     

    IN
      WITNESS WHEREOF, the Parties have signed this Agreement on the day and year
      first above written.

     

    
      	
              CASCADE
                FINANCIAL CORPORATION

               

              By:
                /s/ Janice
                Halladay                                                                

              Title:
                Director

               

            	
               

               

              /s/
                Carol
                Nelson                                                                   

              CAROL
                KOBUKE NELSON

            
	
              CASCADE
                BANK

               

              By:
                s/ Janice
                Halladay                                                                

              Title:
                Director

            	 

    

    
      
         

      

      
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          9
          -ex102-113007.htm

    AMENDED
      AND RESTATED

    CHANGE
      OF CONTROL/SEVERANCE AGREEMENT

    

    THIS
      AMENDED AND RESTATED CHANGE OF CONTROL/SEVERANCE AGREEMENT (this “Agreement”)
      dated this ___ day of __________, 2006, by and between CASCADE FINANCIAL
      CORPORATION and CASCADE BANK (hereinafter jointly referred to as “Cascade”) and
      ______________________________ (“Executive”) amends and restates the Change of
      Control/Severance Agreement entered into between Cascade Bank and
      _________________________________ on _________________, 2001.  Upon
      execution of this Agreement, the Change of Control/Severance Agreement entered
      into in 2001 shall be null and void and of no further force and
      effect.

     

    WHEREAS,
      Executive is currently serving as ______________________________ and has agreed
      to continue to serve in the employ of Cascade; and

     

    WHEREAS,
      the Board of Directors of Cascade recognizes the substantial contribution
      Executive has made to Cascade and wishes to provide Executive with certain
      benefits for the period provided in this Agreement in the event of a change
      of
      control (as defined herein) of Cascade;

     

    NOW,
      THEREFORE, in consideration of the foregoing and of the respective covenants
      and
      agreements of the parties herein, the parties hereto agree as
      follows:

     

    1.  Certain
      Definitions.

     

            (a)  “Change
      of Control” as used herein will be deemed to have occurred when there is a
      Change in the Ownership of Cascade or a Change in the Ownership of a Substantial
      Portion of the Assets of Cascade, as defined below:

     

                (i)  Change
      in the Ownership of Cascade. For the purposes of this Agreement, a Change in
      the Ownership of Cascade shall be deemed to occur when any one person, or more
      than one person acting as a group, acquires ownership of Cascade stock that,
      together with stock held by such person or group, constitutes more than fifty
      percent (50%) of the total fair market value or total voting power of
      Cascade.  A Change in Ownership of Cascade will not occur when any one
      person, or more than one person acting as a group, owning more than fifty
      percent (50%) of the total fair market value or total voting power of the stock
      of Cascade acquires additional stock. For the purposes of this section, an
      increase in the percentage of stock owned by any one person, or more than one
      person if acting as a group, as a result of a transaction in which Cascade
      acquires its stock in exchange for property will be treated as an acquisition
      of
      stock.

     

                (ii)  Change
      in the Ownership of a Substantial Portion of the Assets of Cascade. For the
      purposes of this Agreement, a Change in the Ownership of a Substantial Portion
      of the Assets of Cascade shall be deemed to occur on the date that any one
      person, or more than one person acting as a group, acquires (or has acquired
      during the twelve (12) month period ending on the date of the most recent
      acquisition by such person or persons) assets from Cascade that have a total
      gross fair market value equal to or more than forty percent (40%) of the total
      gross fair market value of all of the assets of Cascade immediately prior to
      such acquisition or acquisitions.  For the purposes of this section,
“gross fair market” value means the value of the assets of Cascade or the value
      of the assets being disposed of, determined without regard to any liabilities
      associated with such assets.  A Change 

    
      
         

      

      
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    in
      the
      Ownership of a Substantial Portion of the Assets of Cascade shall not be deemed
      to occur where the assets transferred by Cascade are transferred to: (1) a
      shareholder of Cascade (immediately before the asset transfer) in exchange
      for
      or with respect to its stock; (2) an entity fifty percent (50%) or more of
      the
      total value or voting power of which is owned, directly or indirectly, by
      Cascade; (3) a person, or more than one person acting as a group, that owns,
      directly or indirectly, fifty percent (50%) or more of the total value or voting
      power of all the outstanding stock of Cascade; or (4) an entity, at least fifty
      percent (50%) of the total value or voting power of which is owned, directly
      or
      indirectly, by a person or more than one persons acting as a group, that owns,
      directly or indirectly, fifty percent (50%) or more of the total value or voting
      power of all the outstanding stock of Cascade.

     

            (b)  “Good
      Reason” as used in this Agreement means the occurrence, without Executive’s
      express written consent, of a material diminution of Executive’s duties,
      responsibilities or benefits, including (without limitation) any of the
      following circumstances:

     

                (i)  A
      requirement that Executive be based at any location not within forty (40) miles
      of Executive’s then existing job location, providing that such new location is
      not closer to Executive’s home;

     

                (ii)  A
      material demotion, or loss of title or loss of significant authority of
      Executive, excluding for this purpose, an isolated, insubstantial or inadvertent
      action not taken in bad faith which is remedied by Cascade immediately after
      notice thereof is given by Executive;

     

                (iii)  A
      reduction in Executive’s salary or a material adverse change in Executive’s
      perquisites, benefits or vacation, other than as part of an overall program
      applied uniformly and with equitable effect to all members of the senior
      management of Cascade; or

     

                (iv)  A
      successor bank or company fails or refuses to assume Cascade’s obligations under
      this Agreement, as required in Section 4(a) hereof.

     

            (c)  “Cause”
      as used in this Agreement means termination of the employment of Executive
      because of Executive’s personal dishonesty, incompetence, willful misconduct,
      breach of a fiduciary duty involving personal profit, intentional failure to
      perform stated duties, insubordination, willful violation of any law, rule,
      or
      regulation (other than traffic violations or similar offenses) or final
      cease-and-desist order, or material breach of any provision of this Agreement
      or
      any other agreement between Executive and Cascade. Executive shall not be
      entitled to any payment or benefit hereunder in the event a termination occurs
      by reason of a voluntary retirement, voluntary termination (other than for
      reasons specified in Section 1(b) hereof), disability
      or for
      Cause.

    
      
         

      

      
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            (d)  “Change
      of Control Period” as used in this Agreement shall mean the period of time
      starting six (6) months prior to the date the Change of Control is effected
      and
      ending twenty-four (24) months following such Change of Control.

     

    2.  At-Will
      Employment.  Executive’s relationship with Cascade continues to be
      an at-will employment relationship.  Cascade or Executive shall have
      the right to terminate Executive’s employment with Cascade at any time with or
      without Cause and with or without notice.  Nothing in this Agreement
      shall confer upon Executive any right to continue in the employ of Cascade
      prior
      to or after a Change of Control of Cascade or shall in any way limit the rights
      of Cascade, except as expressly stated herein, to discharge Executive at any
      time prior to or after the date of a Change of Control of Cascade for any reason
      whatsoever with or without Cause.

     

    3.  Change
      of Control/Severance Benefits.

     

            (a)  If
      during
      the Change of Control Period Cascade shall terminate Executive’s employment
      other than for Cause, or Executive shall terminate employment with Cascade
      for
      Good Reason, Cascade shall: (i) pay Executive (or in the event of Executive’s
      subsequent death, Executive’s beneficiary or estate, as the case may be), as
      severance pay, a sum equal to two (2) times the salary and bonus paid by Cascade
      to Executive during the twelve (12) month period ending on the last day of
      the
      month preceding the effective date of a Change of Control (excluding any gains
      resulting from exercise of stock options or vesting of restricted stock awards
      or other similar forms of stock compensation); (ii) cause to be continued
      for twenty-four (24) months after the effective date of a Change of Control,
      life, medical, dental, and disability coverage substantially identical to the
      coverage maintained by Cascade for Executive prior to the effective date of
      a
      Change of Control, except to the extent such coverage may be changed in its
      application to all Cascade employees on a nondiscriminatory basis; and (iii)
      accelerate any unvested stock-based compensation so any such stock-based
      compensation shall be 100% vested and immediately exercisable in full as of
      the
      date of such termination.  Payments due under (i) above shall be paid
      to Executive in a lump sum no sooner than six (6) months after the date of
      Executive’s termination.

     

            (b)  Notwithstanding
      the provisions of Section 1(a) above, if a payment
      to Executive
      who is a “disqualified individual” shall be in an amount which includes an
“excess parachute payment,” the payment hereunder to Executive shall be reduced
      to the maximum amount which does not include an “excess parachute
      payment.”  The terms “disqualified individual” and “excess parachute
      payment” shall have the meaning defined in Section 280G of the Internal Revenue
      Code of 1986, as amended.

     

            (c)  Executive
      shall not be required to mitigate the amount of any payment or benefit provided
      for in Section 1(a) of this
      Agreement by seeking other employment or otherwise, nor shall the amount of
      any
      payment or benefit provided for in Section 1(a) of this Agreement be
      reduced by
      any compensation earned or benefit received by Executive as the result of
      employment by another employer.  This Agreement shall not be construed
      as a contract of employment or as providing Executive any right to be retained
      in the employ of Cascade or any affiliate thereof.

    
      
         

      

      
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            (d)  Prior
      to
      Executive’s gaining the right to receive, and in exchange for, the severance
      compensation, benefits and option acceleration provided in Section 3(a),
      above, to which Executive would not otherwise be entitled, Executive shall
      first
      enter into and execute a release substantially in the form attached hereto
      as
      Exhibit A (the “Release”) upon Executive’s termination of
      employment.  Unless the Release is executed by Executive and delivered
      to Cascade within twenty-one (21) days after the termination of Executive’s
      employment with Cascade, Executive shall not receive any severance benefits
      provided under this Agreement, acceleration, if any, of Executive’s equity
      grants/benefits as provided in this Agreement shall not apply and Executive’s
      equity grants/benefits in such event may be exercised following the date of
      Executive’s termination only to the extent provided under their originals terms
      in accordance with the applicable equity plans and agreements.

     

    4.  Assignment.

     

            (a)  This
      Agreement is personal to each of the parties hereto, and neither party may
      assign or delegate any of its rights or obligations hereunder without first
      obtaining the written consent of the other party; provided,
      however, that Cascade shall require any successor or assignee of (whether
      direct or indirect, by purchase, merger, consolidation, operation of law or
      otherwise) to all or substantially all of the business and/or assets of Cascade,
      to expressly assume and agree to perform Cascade’s obligations under this
      Agreement.

     

            (b)  This
      Agreement shall be binding upon and inure to the benefit of Executive and
      Cascade, and their respective successors and assigns.

     

    5.  Required
      Regulatory Provisions.  Any payments made to Executive pursuant to
      this Agreement, or otherwise, are subject to and conditioned upon compliance
      with 12 U.S.C. Section 1828(k) and any rules and regulations promulgated
      thereunder, including 12 C.F.R. Part 359.

     

    6.  Notices.  Any
      notices provided hereunder must be in writing and shall be deemed effective
      upon
      personal delivery (including personal delivery by facsimile transmission) or
      the
      third day after mailing by first class mail, to Cascade at its primary office
      location and to Executive at their address as listed on Cascade’s payroll (which
      address may be changed by written notice).

     

    7.  Amendments.  No
      amendments or additions to this Agreement shall be binding unless in writing
      and
      signed by both parties, except as herein otherwise provided.

     

    8.  Headings.  The
      headings used in this Agreement are included solely for convenience and shall
      not affect, or be used in connection with, the interpretation of this
      Agreement.

     

    9.  Severability.  The
      provisions of this Agreement shall be deemed severable and the invalidity or
      unenforceability of any provision shall not affect the validity of the other
      provisions hereof.

     

    10.  Governing
      Law.  This Agreement shall be governed by the laws of the State of
      Washington.

    
      
         

      

      
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    11.  Arbitration.  Any
      dispute or controversy arising under or in connection with this Agreement shall
      be settled exclusively by binding arbitration, conducted before a panel of
      three
      arbitrators in a location selected by Executive within 50 miles of the location
      of Cascade, in accordance with the rules of the American Arbitration Association
      then in effect. Judgment may be entered on the arbitrators’ award in any court
      having jurisdiction.

     

    12.  Reimbursement
      of Fees.  All reasonable legal fees and expenses paid or incurred
      by Executive pursuant to any dispute or question of interpretation relating
      to
      this Agreement shall be paid or reimbursed by Cascade if Executive is successful
      on the merits pursuant to an arbitration award or legal judgment.

     

    13.  Compliance
      with Internal Revenue Code Section 409A. Where required, the provisions of
      this Agreement are intended to comply with the requirements of Section 409A
      of the Internal Revenue Code. Notwithstanding any other provision of this
      Agreement, this Agreement shall be interpreted and administered in accordance
      with the requirements of Section 409A of the Internal Revenue
      Code.

     

    IN
      WITNESS WHEREOF, the parties have executed this Agreement as of the day and
      year
      first above written.

     

    THIS
      AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
      THE
      PARTIES.

     

    
      	
              CASCADE
                FINANCIAL CORPORATION

              CASCADE
                BANK

               

               

              By:___________________________________________________________                   

              Its:___________________________________________________________

              Address: ______________________________________________________

                              
                ______________________________________________________

            	
              EXECUTIVE

               

               

              ___________________________________________________

              Address: ____________________________________________

                              
                ____________________________________________

            

    

    
      
         

      

      
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