Document:

Exhibit

Strictly Private and Confidential 
    
 

                                                                                                                                                      Exhibit 10.2
                               
TRANSACTION AGREEMENT (“AGREEMENT”)
Dated 6 July 2018
     
Between:
 
Belmond Ltd. 
c/o 1st Floor
Shackleton House
4 Battle Bridge Lane
London SE1 2HP
England 
(“Belmond”)

AND

Mr. James B. Sherwood
24 The Boltons
London SW10 9SU
England 
(“Mr. Sherwood”)
 
(individually, a “Party” and, collectively, the “Parties”)

Whereas:

            A. Mr. Sherwood has certain rights under (i) a certain Amended and Restated Agreement Regarding Hotel Cipriani Interests dated as of February 8, 2005 (the “Direct Option”) and (ii) a certain Amended and Restated Right of First Refusal and Option Agreement Regarding Indirectly Held Hotel Cipriani Interests dated as of February 8, 2005 (the “Indirect Option”), including the right under specified circumstances to purchase the Belmond Hotel Cipriani (collectively, the rights and benefits to which Mr. Sherwood is entitled under the Direct Option and Indirect Option to be referred to as the “Sherwood Rights”);

B.      Belmond has certain rights under the Direct Option entitling it under specified circumstances to purchase the apartment owned by Mr. Sherwood in the Belmond Hotel Cipriani (the “Belmond Rights”), as more specifically identified in the deed of conveyance dated December 22, 1981 and any subsequent deed of conveyance relating to any addition to the apartment (the “Apartment”); and

C.  The Parties wish to enter into this Agreement pursuant to which the Belmond Rights shall be reaffirmed and the Sherwood Rights shall be terminated in exchange for the consideration described below. 

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements contained herein, the Parties agree as follows:  

		
	1.
	Payments to be Made in Exchange for the Termination of the Sherwood Rights; Events to Occur upon the Closing Date 

		
	(a)
	Guaranteed Payment.  Belmond will pay to Mr. Sherwood an aggregate amount of $3 million in cash, such amount payable in three instalments commencing with the first for $1.4 million on the date of the execution of this Agreement (the “Closing Date”) and instalment payment of $800,000 on each of the 1st and 2nd anniversaries thereof (the “Guaranteed Payments”). Subject to Section 5 of this Agreement, all Guaranteed Payments and other payments to be made pursuant to this Agreement will be wired to an account specified by Mr. Sherwood within five (5) business days after the date they are due and payable.    

  
		
	(b)
	Contingent Payment.  In addition, if either a Change in Control of Belmond (as defined below) or a transfer of the Belmond Hotel Cipriani (each a “Trigger Event”) occurs within ten years after the 

     

Closing Date, Belmond will make an additional one-time payment to Mr. Sherwood (the “Contingent Payment”) of $10 million in cash, if the Trigger Event occurs within one year after the Closing Date, which amount shall thereafter be annually decreased on each anniversary of the Closing Date by increments of $1 million so that, for example, if a Trigger Event occurred between the ninth and the tenth anniversary of the Closing Date, Mr. Sherwood would be entitled to $1 million.  For the avoidance of doubt, (i) transfers of the Belmond Hotel Cipriani to any affiliate of Belmond will not constitute a Trigger Event, provided that any subsequent transfer of the Belmond Hotel Cipriani to a non-affiliate of Belmond will constitute a Trigger Event and (ii) in no event will the Contingent Payment be payable on more than one occasion.   For purposes of this Agreement, (a) the term “transfer” means any direct or indirect sale, conveyance, lease, disposition or assignment of all or substantially all of the Belmond Hotel Cipriani pursuant to one or more transactions; the termination of the hotel business of the Belmond Hotel Cipriani by Belmond shall be deemed a transfer of the Belmond Hotel Cipriani, (b) the term “affiliate” (and any words with correlative meanings, including “affiliated”) shall mean, as to any person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such person and (c) the term “control” (including the terms controlling, controlled by and under common control with) shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.

		
	(c)
	Termination of the Sherwood Rights.  The Parties hereby acknowledge and agree that, notwithstanding anything to the contrary contained in the Direct Option or the Indirect Option, effective on the Closing Date, all of the Sherwood Rights (other than those set forth in this Agreement and the Lease (as defined below)), and any restrictions or obligations on the part of Belmond (including any of its successors or permitted assigns) in respect of the Sherwood Rights (other than those set forth in this Agreement and the Lease (as defined below)), are hereby terminated in their entirety and have no further force or effect.

		
	(d)
	Belmond to Retain the Belmond Rights. Notwithstanding anything to the contrary in this Agreement, including the termination of the Sherwood Rights hereunder, Belmond shall retain the Belmond Rights and nothing in this Agreement shall alter or impair the Belmond Rights or Mr. Sherwood’s (or his permitted transferee’s) obligations in respect thereof.   

		
	(e)
	Definition of “Change in Control of Belmond”.  For purposes of this Agreement, a “Change in Control of Belmond” shall mean any of the following events:

 
		
	(i)
	(x) any “person” (as that term is defined for the purposes of Section 13(d) or 14(d) of the U.S. Securities Exchange Act, as amended (the “Exchange Act”)), other than Mr. Sherwood or a group including Mr. Sherwood, shall directly or indirectly become the beneficial owner (as determined pursuant to Rule 13d-3 under the Exchange Act) of, or directly or indirectly acquire, Equity Interests (as defined below) representing more than 50% of (1) any of the following (A) the then outstanding class A common shares of Belmond, (B) the then outstanding class B common shares of Belmond, (C) a combination of the then outstanding class A common shares of Belmond and class B common shares of Belmond or (D) the then outstanding Equity Interests of Belmond or (2) the then outstanding Equity Interests of Belmond Holdings 1 Ltd. (including any successor thereto, “Holdings”) or the voting power of the then outstanding Equity Interests of Holdings, or (y) any “person” (as that term is defined for the purposes of Section 13(d) or 14(d) of the Exchange Act), other than Belmond, occupies or controls a majority of the seats (other than vacant seats) on the board of directors of Holdings, provided that a transaction will not be deemed to be a Change in Control of Belmond under this clause if Belmond (a) becomes a direct or indirect wholly owned subsidiary of an ultimate parent holding company and (b) the holders of the Equity Interests in such ultimate parent holding company immediately following that transaction are substantially the same as the holders of the Equity Interests in Belmond immediately before that transaction;

		
	(ii)
	individuals who (1) on June 1, 2018, constituted Belmond's Board of Directors (the “Original Directors”) or (2) are the successor to an Original Director and were (A) nominated by the Board of Directors or a committee thereof on which Original Directors constitute a majority or 

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(B) so long as Holdings is a direct or indirect wholly owned subsidiary of Belmond, were elected or appointed to the Board of Directors with the approval or consent of Holdings (or an affiliate thereof), shall cease to constitute a majority of Belmond's Board of Directors; provided, that, any successor director nominated, elected or appointed pursuant to clause 2 shall be considered an Original Director for purposes of determining future successors;

		
	(iii)
	Belmond amalgamates, merges or consolidates with or into any entity or entities not affiliated with Belmond or Mr. Sherwood, or any third person (other than Mr. Sherwood or a group including Mr. Sherwood) effects any cash tender or exchange offer or similar business combination, except (in any case) if shares representing more than 50% of the voting power of the outstanding voting shares of the surviving or resulting entity are beneficially owned (directly or indirectly) by the holders of Belmond's shares immediately before the transaction or series of transactions; or

		
	(iv)
	Belmond sells, leases, exchanges or otherwise disposes of all or substantially all of its assets and business, except (in any case) to (A) Mr. Sherwood or a group including Mr. Sherwood or (B) an entity of which at least 50% of the outstanding shares are beneficially owned (directly or indirectly) by Belmond or one of its controlled affiliates or the holders of Belmond's shares immediately before the transaction or series of transactions.

For purposes of this Agreement, (i) any issuances of securities to Holdings following the execution of this Agreement shall be excluded from any determinations or calculations made pursuant to this Agreement, (ii) the term “Equity Interests” shall mean shares of capital stock or other share capital, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any person, or any obligations convertible into or exchangeable for, or giving any person a right, option or warrant to acquire, such equity interests or such convertible or exchangeable obligations and (iii) the terms “class A common shares of Belmond” and “class B common shares of Belmond” shall include any successor Equity Interests to the class A common shares  of Belmond and class B common shares of Belmond, including any Equity Interests resulting from the conversion of such shares.  
 
 
		
	2.
	Period of Assurance

If:  

		
	(i)
	within six months after the Closing Date, a third party publicly discloses a bona fide offer for a Change in Control of Belmond (or a third-party bona fide offer for a Change in Control of Belmond otherwise becomes publicly known), and within six months after such public disclosure of an offer or the date on which an offer otherwise becomes publicly known, such third party or any other third party were to consummate such Change in Control of Belmond; or 

		
	(ii)
	within one year after the Closing Date, a transfer of Belmond Hotel Cipriani (other than to an affiliate of Belmond) were to occur, 

then Belmond will pay Mr. Sherwood $25 million in cash less any amounts already paid to him pursuant to Section 1 (or credited to him pursuant to Section 1 under the Credit Line (as described in Section 5)) and no additional amounts shall be due to him, including any Guaranteed Payments under Section 1.

		
	3.
	Certain On-going Benefits for Mr. Sherwood

In recognition of his founding of Belmond and his service to Belmond as its executive chairman, chairman and non-executive director during that period, Mr. Sherwood (i) shall be entitled to use Belmond’s travel agent services in accordance with past practice and for so long as such services are provided to executives of Belmond by a Belmond affiliate; and (ii) for his lifetime will: (A) hold the title of Founder and Chairman Emeritus and will be referred to in appropriate publications by that title; and (B) continue to enjoy the same discount on Belmond products and services which is accorded to Belmond’s directors, subject to the terms and restrictions 

3

set by the board of directors of Belmond and in effect from time to time.  Other than as expressly provided herein, this Section 3 does not amend, modify, waive or terminate any rights, benefits or privileges that were conferred to Mr. Sherwood by Belmond.  

		
	4.
	Belmond Hotel Cipriani Lease

Mr. Sherwood, as lessor, has since 1982 leased the Apartment to Belmond Hotel Cipriani SRL, as lessee (“BHC”), pursuant to a rental agreement that provides for, among other things, a sharing of revenue generated by the Apartment when it is released by Mr. Sherwood into the hotel’s inventory (the “Lease”).  The parties are generally satisfied with the terms of the Lease, but seek to supplement and amend the Lease with the following terms:  

		
	(a)
	Mr. Sherwood’s heirs would succeed him as the lessor under the Lease;

		
	(b)
	The lessee would continue to be responsible for maintenance in connection with “wear and tear” on the interior of the Apartment and maintenance generally on the exterior; the lessor would continue to be responsible for other interior maintenance and capital expenditure requirements of the Apartment, provided that lessee may in its discretion propose other interior maintenance and capital expenditure projects or initiatives on the basis that lessee would be willing to bear the cost so long as lessor approves such project or initiative; 

		
	(c)
	The lease shall be terminable by either party upon one year’s notice; provided, however, that if lessor fails to release the Apartment into the hotel’s inventory for more than thirty (30) days’ during any calendar year, lessee shall be able to terminate the lease upon thirty (30) days’ notice; 

		
	(d)
	BHC would not discriminate against the Apartment in a way that would impede access or egress from the lobby or corridors or impair the provision of utilities; and

		
	(e)
	Lessor would provide thirty (30) days’ notice of his or his guests’ upcoming stays at the Apartment.  

Separately, Belmond agrees that should Dr. Shirley Sherwood survive Mr. Sherwood, so long as she or one of Mr. Sherwood’s heirs owns the Apartment, Dr. Sherwood will benefit from the existing and ongoing rights, benefits and privileges with respect to the Belmond Hotel Cipriani afforded to Mr. Sherwood.  Belmond shall procure the compliance of BHC with the terms of this Section 4.

		
	5.
	Credit Line

Belmond shall establish a credit line for Mr. Sherwood consisting of the amounts due and payable to him as Guaranteed Payments (the “Credit Line”), as to which he shall instruct whether and to what extent he shall wish to have the balance on the Credit Line paid to him as cash or to remain as a credit against which he could offset (i) charges for his use of Belmond properties (net of applicable director discounts), (ii) airline tickets purchased for him and his spouse through Belmond’s in-house travel agency in accordance with past practice, and (iii) certain costs related to matters covered in this Agreement that may be discharged by Belmond, specifically his office staff costs in London, provided that Belmond shall be provided with requisite comfort that payment of any such cost on Mr. Sherwood’s behalf is lawful and appropriate and, in the case of his staff costs, would not imply any assumption whatsoever of employer liabilities associated with such staff. 

For illustrative purposes, the Credit Line upon execution of this Agreement shall immediately be $1 million, subject to Mr. Sherwood’s instruction to pay him all or a portion of the first installment of the Guaranteed Payments in cash.  Any balance on the Credit Line shall be available to be setoff against the costs listed in the paragraph above.  

6.    Attorney’s Fees

Within five (5) business days’ after the Closing Date, Belmond shall reimburse Mr. Sherwood up to an amount of $25,000 in cash in respect of his reasonable attorney’s fees in connection with the preparation and negotiation of this Agreement, subject to satisfactory documentation thereof.  Mr. Sherwood shall be entitled to offset any incremental amount of such attorney’s fees against the Credit Line.    

7.          Miscellaneous

4

		
	(a)
	Payments Not Dependent on Survival; Successors and Assigns.  For avoidance of doubt, the payments described in Sections 1 and 2 of this Agreement shall be made to Mr. Sherwood or his estate should he not survive the relevant payment date. This Agreement shall be binding upon, and inure to the benefit of, the Parties and their respective heirs, personal representatives, successors and permitted assigns.

		
	(b)
	Benefits, Privileges and Lease upon a Change of Control of Belmond or Transfer of the Hotel Belmond Cipriani.  Without limiting Section 7(a), in the event that a Change of Control of Belmond or a transfer of the Belmond Hotel Cipriani occurs while Mr. Sherwood or one or more of his heirs owns the Apartment, any counterparty to such transfer or Change of Control shall execute an undertaking to assume the respective obligations of Belmond and BHC pursuant to Sections 3 and 4 hereunder and the Lease; for the avoidance of doubt, such undertaking will afford Mr. Sherwood and Dr. Sherwood the rights, benefits and privileges set forth in Sections 3 and 4 hereunder and the Lease. Mr. Sherwood understands and agrees that such counterparty would be entitled to the rights of Belmond in respect of Sections 1(d), 3 and 4 hereunder.  
 

		
	(c)
	Governing Law.  This Agreement and all matters arising from or connected with it shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to the conflicts or choice of law principles thereof.

		
	(d)
	Disputes.  Any dispute arising out of or related to this Agreement shall be resolved by an arbitration proceeding conducted in accordance with the following:

		
	(i)
	The arbitration proceeding shall be governed by the rules of the Judicial Arbitration & Mediation Services (“JAMS”);

		
	(ii)
	There shall be three (3) arbitrators, named in accordance with the rules of the JAMS;

		
	(iii)
	The arbitration proceeding shall take place in New York, New York;

		
	(iv)
	The arbitration proceeding shall be conducted as expeditiously as possible with due consideration for the complexity of the dispute in question. The arbitrator shall issue its decision in writing within forty-five (45) calendar days from the hearing of final arguments by the parties;

		
	(v)
	The arbitration award shall be given in writing and shall be final and binding on the parties, and not subject to any appeal and shall deal with the question of costs of arbitration;

		
	(vi)
	Judgment upon the award may be entered in any court having jurisdiction, provided, however, that any party seeking to vacate the award shall only move to vacate the award in an appropriate court in New York County, New York or in opposition to a motion to confirm the award; and

		
	(vii)
	The parties shall keep confidential the arbitration proceedings and the terms of any arbitration award, except as may be otherwise required by applicable law.

		
	(e)
	Waiver of Jury Trial. EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES 

5

HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

		
	(f)
	Notices. Notices, requests, instructions or other documents to be given under this Agreement shall be in writing and shall be deemed given, (a) on the date sent by e-mail of a PDF document if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient, (b) when delivered, if delivered personally to the intended recipient, and (c) one business day later, if sent by overnight delivery via a national courier service (providing proof of delivery), and in each case, addressed to a Party at the following address for such Party:

(i) if to Belmond:

Belmond Ltd. 
c/o 1st Floor
Shackleton House
4 Battle Bridge Lane
London SE1 2HP
England
Attention:  Executive Vice President, Chief Legal Officer
Email:  richard.levine@belmond.com

(ii) if to Mr. Sherwood:

Mr. James B. Sherwood
24 The Boltons
London SW10 9SU
England
Email:  jamesbsherwood@jbsmanagement.com

with copies to (which shall not constitute notice):

Michael I. Frankel
Carter Ledyard & Milburn LLP
2 Wall Street
New York, NY 10005
Email:  frankel@clm.com

		
	(g)
	Entire Agreement; Amendment. This Agreement sets forth the entire understanding of the Parties with respect to its subject matter, and supersedes all prior understandings or agreements of the Parties hereto with respect to its subject matter. This Agreement may be amended or modified only by a written instrument executed by all of the Parties.

		
	(h)
	Interpretation. The Parties acknowledge and agree that (a) each Party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision, (b) in the event of any ambiguity or question of intent or interpretation, this Agreement shall be construed as jointly drafted by the Parties and the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation hereof and (c) the terms and provisions of this Agreement shall be construed fairly as to all Parties hereto, regardless of which party was generally responsible for the preparation of this Agreement, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

This Agreement may be executed in any number of counterparts, each of which is an original and all of which together evidence the same agreement.    

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of date and year first written above.  
    
JAMES B. SHERWOOD, individually

/s/ J Sherwood
__________________

BELMOND LTD.  

/s/ Roeland Vos
__________________
By:
Name: Roeland Vos
Title: CEO 

7Exhibit

Exhibit 10.13
FIRST FINANCIAL NORTHWEST, INC. 
2016 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

RS No. _______________            Grant Date: _______________

This Restricted Stock Award (“Restricted Stock Award”) is granted by First Financial Northwest, Inc. (“Company”) to ____________________ (“Grantee”) in accordance with the terms of this Restricted Stock Award Agreement (“Agreement”) and subject to the provisions of the First Financial Northwest, Inc. 2016 Equity Incentive Plan, as amended from time to time (“Plan”).  The Plan is incorporated herein by reference. Capitalized terms included herein that are not defined in this Agreement shall have the meaning ascribed to them in the Plan.

		
	1.
	Restricted Stock Award.  The Company makes this Restricted Stock Award of __________ Shares to the Grantee on the date noted above (the “Grant Date”).  These Shares are subject to forfeiture and to limits on transferability until they vest, as provided in Sections 2, 3 and 4 of this Agreement and in Article VI of the Plan.

		
	2.
	Period of Restriction:  The Shares are subject to a Period of Restriction, during which the Grantee shall not receive the Shares, be able to transfer the Shares, or otherwise have rights with respect to the Shares, subject to earlier vesting in the event of a termination of Service as provided in Section 4 or a Change in Control as provided in Section 5.  After the Period of Restriction ends with respect to a Share, such Share shall be considered vested, except as provided in this Agreement or the Plan (including but not limited to Section 16 of this Agreement). The Period of Restriction ends with respect to the Shares in accordance with the following schedule:

Date Period of Restriction Ends        With Respect to the Following 
(“Vesting Date”)            Number of Shares 

The first anniversary of the Grant Date    All Shares subject to this Grant
		
	3.
	Transferability.  The Grantee may not sell, assign, transfer, pledge or otherwise encumber any Shares that have not vested, except in the event of the Grantee’s death, by will or by the laws of descent and distribution or pursuant to a Domestic Relations Order.  The Compensation and Awards Committee, on behalf of the Committee as defined in the Plan (herein referred to in this Agreement as the “Committee”), in its sole and absolute discretion, may allow the Grantee to transfer all or any portion of this Restricted Stock Award to the Grantee’s Family Members, as provided for in the Plan.  Notwithstanding the foregoing, or anything in the Plan or this Agreement to the contrary (except as provided for in this Section 3, and in Section 5 regarding a Change in Control), no vested Shares awarded pursuant to this Restricted Stock Award may be sold, assigned, transferred, pledged or otherwise encumbered (i.e., must be continued to be held by the Grantee) until the earlier of the second anniversary of the date the Grantee vests in his Shares in accordance with Section 2, or the date of the Grantee’s death (referred to in this Agreement as the “Two-Year Hold Requirement”).  However, the Two-Year Hold Requirement 

RSA-1

may be waived by the Committee, in its sole and absolute discretion, on a case by case basis, provided that the Grantee submits to the Committee a request, in writing, that sets forth the circumstances related to this request, the number of Shares to which the request applies, and such other information that the Committee requires in order for it to determine whether or not (or to what extent) the request should be granted,   In addition, up to fifty percent (50%) of such vested Shares may be sold, assigned, transferred, pledged or otherwise encumbered by the Grantee without regard to the Two-Year Hold Requirement, in order to pay the income taxes that become due on account of the Shares becoming vested.  Any attempt to assign, transfer, pledge or otherwise encumber any vested Shares in contravention of this Section 3 shall be null and void. 
		
	4.
	Termination of Service.  If the Grantee terminates Service for any reason other than due to the death or Disability of the Grantee, any Shares that have not vested as of the date of that termination shall be forfeited to the Company.  The Shares shall never vest in the event of a Termination for Cause.  If the Grantee’s Service terminates on account of the Grantee’s death or Disability, the Period of Restriction for all Shares that have not previously vested shall end on the date of that termination of Service and the Grantee shall then be vested in the Shares.   

		
	5.
	Effect of Change in Control.  If a Change in Control occurs prior to the end of a Period of Restriction for Restricted Stock Awards, and the Grantee experiences an Involuntary Separation from Service other than a Termination for Cause during the 365-day period following the date of such Change in Control, then the Period of Restriction for any non-vested Restricted Stock Awards shall end on the date of the Grantee’s Involuntary Separation from Service, the Grantee shall then be vested in the Shares related to such Restricted Stock Awards, and the Two-Year Hold Requirement in Section 3 shall lapse.  Notwithstanding the preceding sentence, if at the effective time of the Change in Control the successor to the Company’s business and/or assets does not either assume the non-vested Restricted Stock Awards or replace the non-vested Restricted Stock Awards with an award that is determined by the Committee to be at least equivalent in value to such non-vested Restricted Stock Awards on the date of the Change in Control, then the Period of Restriction for such non-vested Restricted Stock Awards shall end on the earliest date of the Change in Control, the Grantee shall then be vested in the Shares related to such Restricted Stock Awards, and the Two-Year Hold Requirement in Section 3 shall lapse.  

		
	6.
	Stock Power.  The Grantee agrees to execute a stock power with respect to each stock certificate reflecting the Shares, or other evidence of book-entry stock ownership, in favor of the Company.  The Shares shall not be issued by the Company to the Grantee until the required stock powers are delivered by the Grantee to the Company.

		
	7.
	Delivery of Shares.  The Company shall issue stock certificates or evidence of the issuance of such Shares in book-entry form, in the name of the Grantee reflecting the Shares vesting on each Vesting Date in Section 2.  The Company shall retain these certificates or evidence of the issuance of Shares in book-entry form until the Shares represented thereby become vested.  Prior to vesting, the Shares shall be subject to the following restriction, communicated in writing to the Company’s stock transfer agent:

These shares of common stock are subject to the terms of an Award Agreement between First Financial Northwest, Inc. and __________________ dated _____________ made pursuant to the terms of the First Financial Northwest, Inc. 2016 Equity Incentive Plan, copies of which are on file at the executive offices of First Financial Northwest, Inc., and may not be sold, encumbered, hypothecated or 

RSA-2

otherwise transferred except in accordance with the terms of such Plan and Award Agreement. THE AWARD AGREEMENT INCLUDES TRANSFERABILITY RESTRICTIONS ON THE SALE, ETC. OF VESTED SHARES. 
		
	8.
	Grantee’s Rights.  As the owner of all Shares that have not vested, the Grantee shall be paid dividends by the Company with respect to those Shares at the same time as they are paid to other holders of the Company’s common stock.  The Grantee may exercise all voting rights appurtenant to the Shares.  

		
	9.
	Delivery of Unrestricted Shares to Grantee.  Upon the vesting of any Shares, the restrictions in Sections 3 and 4 shall terminate, and the Company shall deliver only to the Grantee (or, if applicable, the Grantee’s Beneficiary, estate or Family Member) a certificate (without the legend referenced in Section 7) or evidence of the issuance of Shares in book-entry form, and the related stock power in respect of the vesting Shares.  The Company’s obligation to deliver a stock certificate for vested Shares, or evidence of the issuance of vested Shares in book-entry form, can be conditioned upon the receipt of a representation of investment intent from the Grantee (or the Grantee’s Beneficiary, estate or Family Member) in such form as the Committee requires.  The Company shall not be required to deliver stock certificates for vested Shares, or evidence of the issuance of vested Shares in book-entry form, prior to: (a) the listing of those Shares on Nasdaq; or (b) the completion of any registration or qualification of those Shares required under applicable law.

		
	10.
	Adjustments in Shares.  In the event of any recapitalization, forward or reverse stock split, reorganization, merger, consolidation, spin-off, combination, exchange of Shares or other securities, stock dividend, special or recurring dividend or distribution, liquidation, dissolution or other similar corporate transaction or event, the Committee, in its sole discretion, shall adjust the number of Shares or class of securities of the Company covered by this Agreement.  Any additional Shares or other securities received by the Grantee as a result of any such adjustment shall be subject to all restrictions and requirements applicable to Shares that have not vested.  The Grantee agrees to execute any documents required by the Committee in connection with an adjustment under this Section 10.

		
	11.
	Tax Election.  The Grantee understands that an election may be made under Section 83(b) of the Code to accelerate the Grantee’s tax obligation with respect to receipt of the Shares from the date the Shares would otherwise vest under this Agreement to the Grant Date by timely submitting an election to the Internal Revenue Service substantially in the form attached hereto (or in accordance with the Internal Revenue Service rules in effect at the time the election is made).

		
	12.
	Tax Withholding.  The Company shall have the right to require the Grantee to pay to the Company the amount of any tax that the Company is required to withhold with respect to such Shares, or in lieu thereof, to retain or sell without notice, a sufficient number of Shares to cover the minimum amount required to be withheld.  The Company shall have the right to deduct from all dividends paid with respect to the Shares the amount of any taxes that the Company is required to withhold with respect to such dividend payments.

		
	13.
	Plan and Committee Decisions are Controlling.  This Agreement and the award of Shares to the Grantee are subject in all respects to the provisions of the Plan, which are controlling.  Capitalized terms herein not defined in this Agreement shall have the meaning ascribed to them in 

RSA-3

the Plan.  All decisions, determinations and interpretations by the Committee respecting the Plan, this Agreement or the award of Shares shall be binding and conclusive upon the Grantee, any Beneficiary of the Grantee or the legal representative thereof.   The Grantee acknowledges and agrees that this Award and receipt of any Shares hereunder by any person is subject to (a) Plan Section 9.10, including possible reduction, cancellation, forfeiture or recoupment (clawback), and (b) any policies which the Company may adopt in furtherance of any regulatory requirements (including, but not limited to, the Dodd-Frank Wall Street Reform and Consumer Protection Act) or otherwise.
		
	14.
	Grantee’s Service.  Nothing in this Agreement shall limit the right of the Company or any of its Affiliates to terminate the Grantee’s Service as a Director or Employee, or otherwise impose upon the Company or any of its Affiliates any obligation to employ or accept the services or employment of the Grantee.

		
	15.
	Amendment.  The Committee may waive any conditions of or rights of the Company or modify or amend the terms of this Agreement; provided, however, that the Committee may not amend, alter, suspend, discontinue or terminate any provision of this Agreement if such action may adversely affect the Grantee without the Grantee’s written consent.  To the extent permitted by applicable laws and regulations and the terms of the Plan, the Committee shall have the authority, in its sole discretion but with the permission of the Grantee, to accelerate the vesting of the Shares or remove any other restrictions imposed on the Grantee with respect to the Shares, whenever the Committee may determine that such action is appropriate.

		
	16.
	Clawback Provisions.  The Grantee understands, acknowledges and agrees that the Company may claw back (recover), or not pay, up to fifty percent (50%) of the Grantee’s vested Shares, and/or cause the Grantee to forfeit up to one hundred percent (100%) of any of the Grantee’s Shares that have not yet vested pursuant to this Agreement, upon the occurrence of any of the following conditions: (a) as required pursuant to law, rule, regulation or stock exchange listing requirement or any policy of the Company adopted pursuant to any such law, rule, regulation or stock exchange listing requirement; (b) the Company issues a material restatement of its financial statements; (c) a subsequent finding that the financial information or performance metrics used to determine the amount of the incentive compensation are materially inaccurate, regardless of individual fault; (d) the Grantee engages in unethical or illegal conduct, or intentional misconduct that would give rise to a Termination for Cause; (e) the Company determines that the Grantee acted in a manner which is not in good faith and which materially disrupts, damages, impairs or interferes with the business of the Company and its affiliates, including First Financial Northwest Bank (the “Bank”); and (f) the Bank’s asset quality (determined by reference to past due and non-accrual loans divided by total loans, as calculated in the FDIC’s state profile for each comparable period) equals or exceeds 125% of the median level of banks headquartered in the State of Washington and remains above that 125% level for three consecutive quarters.   In the case of a clawback, the Board must provide written notice to the Grantee (the “Clawback Notice”), no later than the third anniversary of the Grant Date (the “Clawback Notice Deadline”), that the Board intends to invoke the clawback provisions of this Section 16, with the Clawback Notice providing a summary of the reasons therefor.  For the avoidance of doubt, the actual clawback need not occur by the Clawback Notice Deadline.  In the case of a forfeiture of unvested Shares, the Clawback Notice must be provided to the Grantee before the end of the Period of Restriction to which the Shares relate, and the forfeiture shall occur as of the date of the Clawback Notice (even if the Grantee has not yet terminated Service).  In the event a clawback event occurs, the Board shall consider all relevant factors to determine the appropriate amount to recoup as well as the 

RSA-4

time and form of recoupment.  The failure of the Company to exercise its clawback rights with respect to any clawback event shall not preclude it from exercising its clawback right should another clawback event occur.  The provisions of this Section 16 shall apply only to Shares awarded under this Agreement, and not to any other Award.  The provisions of this Section 16 may not be invoked by any person after the effective time of a Change in Control.  Nor shall the provisions of this Section 16 be invoked after the Grantee terminates Service on account of death, Disability or in connection with an Involuntary Separation from Service. 
		
	17.
	Grantee Acceptance.  The Grantee shall signify acceptance of the terms and conditions of this Agreement and acknowledge receipt of a copy of the Plan by signing in the space provided below and returning the signed copy to the Company.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.
FIRST FINANCIAL NORTHWEST, INC. 

By ________________________________
Its ________________________________

ACCEPTED BY GRANTEE
___________________________________
(Signature)

___________________________________
(Print Name)

___________________________________
(Street Address)
___________________________________
(City, State & Zip Code)

STOCK POWER

(One stock power for each stock certificate or grant in book-entry form issued)

For value received, I hereby sell, assign, and transfer to First Financial Northwest, Inc. (the “Company”) ____________ shares of the capital stock of the Company, standing in my name on the books and records of the aforesaid Company, represented by Certificate No. ____________________ or otherwise identified in book-entry form as ___________________, and do hereby irrevocably constitute and appoint the Secretary of the Company as attorney-in-fact, with full power of substitution, to transfer this stock on the books and records of the aforesaid Company.

________________________________

Dated:

________________________

In the presence of:

________________________

 83(b) ELECTION FORM

TO:    Internal Revenue Service Center
[Address where the employee files his or her personal income tax return]

ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986

Name:         __________________________________________________________________
Address:     __________________________________________________________________
____________________________________________________________________________________________________________________________________

Social Security Number ____ - __ - ____

Property with respect to which this Election is made: _______ shares of the common stock of First Financial Northwest, Inc.

Date of Grant or Transfer: ____________, _____.

Taxable Year for which Election is made:  Calendar Year _____.

Nature of the Restrictions to which the Property is Subject:  (i) a vesting schedule pursuant to which the taxpayer will not be fully vested in the property until ___________.

Fair Market Value of the Property upon receipt by taxpayer $___________.

Amount Paid for the Property: ____________.

Copies of this Election have been furnished to ___________________________.

A copy of this Election also shall be attached to my IRS Form 1040 for calendar year _____.

__________                _____________________________________
Date                    Signature

RSA-5

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