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EXHIBIT 10.2  

  
 

    SEVERANCE/CHANGE OF CONTROL AGREEMENT
  Patrick M. Fahey    
  

    This Agreement dated November 21, 2000, by and between PACIFIC NORTHWEST BANCORP and PACIFIC NORTHWEST BANK (hereinafter referred to jointly as the
"Company") and PATRICK M. FAHEY (the "Executive"): 

    WHEREAS,
the Executive is presently employed by the Company in the capacity of President and Chief Executive Officer; and 

    WHEREAS,
the Company wishes to assure itself of continuity of management in the event of a Change of Control of the Company, and 

    WHEREAS,
the Executive wishes to continue to serve the Company but desires assurance that he will be protected in the event of termination of his employment without cause or a Change
of Control; 

    NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 

    1.  Severance Benefits.  

    (a) If
the Executive's employment is involuntarily terminated (other than discharge for cause as defined below), the Executive shall be entitled to receive, in a lump
sum payable on the first day of the first calendar month following discontinuance of his employment due to involuntary termination, a cash
payment in an amount equal to the Executive's W-2 income before salary deferrals over the twelve (12) months preceding the month of termination, excluding any one-time payment made to the Executive
relating to the termination of his employment under his Employment Contract with Pacific Northwest Bank dated January 15, 1998. 

    (b) If
the Executive's employment is involuntarily terminated (other than discharge for cause as defined below) before a Change of Control but after the Board of
Directors has authorized proceeding with negotiations which result in a Change of Control, the effective date of which is on or after October 17, 2001, the Executive shall be entitled to the
severance benefits described in Paragraph 1(c), said benefits to be paid after the Change of Control actually occurs, less any amount paid under Paragraph 1(a) hereof. 

    (c) If
there is a Change of Control of the Company on or after October 17, 2001, and the Executive leaves the employment of the Company, whether voluntarily or
involuntarily (other than discharge for cause as defined below), within twelve (12) months after such Change of Control, the Executive shall receive, in a lump sum payable on the first day of the
first calendar month following discontinuance of his employment due to a Change of Control, a cash payment in an amount equal to two times the Executive's W-2 income before salary deferrals over the
last twelve (12) months of his employment with the Company preceding the month in which the Change of Control occurs, excluding any one-time payment made to the Executive relating to the termination
of his employment under his Employment Contract with Pacific Northwest Bank dated January 15, 1998. Payment under this Paragraph 1(c) shall be reduced by any amount paid the Executive
under Paragraph 1(a), above. 

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    2.  Consideration.  

    (a) The
amounts paid to the Executive hereunder shall be considered severance pay in consideration of the past services he has rendered to the Company and in
consideration of his continued service from the date hereof to his entitlement to those payments. 

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

    3.  Definition of "Change of Control".  A "Change of Control" of the Company shall be deemed to have
occurred as of the first day any one or more of the following conditions is satisfied: 

    (a) Any
individual, corporation (other than the Company), partnership, trust, association, pool, syndicate or any other entity or any group of persons acting in concert
becomes the beneficial owner, as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, of securities of the
Company possessing fifty percent (50%) or more of the voting power for the election of directors of the Company; 

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

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

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

    4.  Discharge for Cause.  For purposes of this Agreement, the termination of the Executive's employment
shall be deemed to have been made for cause only upon termination as a result of: 

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

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

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

    5.  Termination of the Agreement.  This Agreement shall terminate if the Executive shall voluntarily
resign, retire, become permanently and totally disabled, or die; provided, however, if the 

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Executive becomes permanently and totally disabled or dies after the Board of Directors has authorized proceeding with negotiations which result in a Change of Control or within twelve (12) months
after a Change of Control, if the Executive is then employed by the Company, the Executive or his personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees, as the case may be, shall be entitled to receive the Change of Control payment under Paragraph 1(c) hereof. 

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

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

    (a) The
severance benefits payable under Paragraph 1 shall not exceed an amount that would cause it to be a "parachute payment" within the meaning of Section
280G(b)(2)(A) of the Internal Revenue Code; and 

    (b) The
Company shall not be obligated to make, and the Executive shall not be entitled to, any payment under this Agreement if such payment would constitute a "golden
parachute" payment prohibited by 12 U.S.C. 1828(k) or 12 CFR §359.0 et seq. The Company shall have no liability to the Executive under or in
relation to this Agreement should any payment be deemed a prohibited "golden parachute" payment. 

    8.  Confidentiality and Noncompetition.  

    (a)  Confidentiality.  From the date of this Agreement the Executive will not, directly or indirectly,
disclose to any third party not affiliated with the Company, Confidential Information of the Company and its subsidiaries and affiliates, except as to any of the Confidential Information which shall
be or become in the public domain or shall be required to be disclosed by applicable laws or regulations, any judicial or administrative authority or stock exchange rule or regulation. For the
purposes of this Paragraph 8(a), "Confidential Information" shall mean: (i) internal policies and procedures, (ii) financial information, (iii) marketing strategies,
(iv) customer information, and (v) other non-public information relating to the Company's business or financial condition. 

    (b)  Noncompetition.  During the one (1) year period following a Change of Control or a
termination of Executive's employment resulting in Executive's right to receive the severance benefit under paragraph 1(a) hereof ("Restricted Period"), the Executive shall not engage in
Competition with the Company. For purposes of this Paragraph 8(b), "Competition" shall mean the Executive engaging in or otherwise being a director, officer, employee, principal, agent, stockholders,
member, owner or partner of, or permitting his name to be used in connection with the activities of any business or organization in the financial services industry in direct competition with the
Company, but shall not preclude the Executive becoming the registered or beneficial owner of up to two percent (2%) of any class of capital stock of any such corporation which is registered under the
Securities Exchange Act of 1934, as amended, provided the Executive does not actively participate in the business of such corporation until expiration of the Restricted Period. 

    9.  Assignment.  

    (a)  By the Company.  This Agreement may and shall be assigned or transferred to, and shall be binding
upon and inure to the benefit of, any successor of the Company, and any such successor shall be deemed substituted for all purposes of the "Company" under the terms of this 

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Agreement. As used in this Agreement, the term "successor" shall mean any person, firm, corporation or business entity that at any time causes a Change of Control as described in Paragraph 3.
Notwithstanding such assignment, the Company shall remain, with such successor, jointly and severally liable for all its obligations hereunder. 

    Except
as herein provided, the Company may not otherwise assign this Agreement. 

    (b)  By the Executive.  This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors and administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts payable to the
Executive hereunder remain outstanding, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisees, legatee or other
designee, or, in the absence of such designee, to the Executive's estate. This Agreement is not otherwise assignable by the Executive. 

    10.  Jurisdiction/Venue/Mandatory Arbitration.  Any legal action brought to resolve disputes arising out
of this Agreement, or any amendments thereto, shall be commenced in King County Superior Court in the state of Washington and shall be resolved in accordance with the Superior Court Mandatory
Arbitration Rules and the King County Local Rules for Mandatory Arbitration, if any, with the parties agreeing to waive the jurisdictional limits. The decision of the arbitrator shall be
binding on the parties, and the parties waive the right of de novo appeal from such decision. 

    It
is agreed that the arbitrator shall award to the prevailing or substantially prevailing party all fees incurred by such party with regard to such arbitration, including reasonable
legal, accounting, and expert witness fees. If the arbitrator determines that there is no prevailing or substantially prevailing party, the reasonable legal, accounting, and expert witnesses fees
shall be the responsibility of each party. 

    11.  Miscellaneous.  

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

    (b)  Entire Agreement.  This Agreement supersedes any prior agreements or understandings, oral or
written, between the Executive and the Company, with respect to the subject matter hereof and constitutes the entire agreement of the parties with respect thereto. 

    (c)  Modification.  This Agreement shall not be varied, altered, modified, canceled, changed or in any
way amended except by mutual agreement of the parties in a written instrument executed by the parties hereto or their legal representatives. 

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

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

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

    (g)  Beneficiaries.  The Executive may designate one or more persons or entities as the primary and/or
contingent beneficiaries of any amounts to be received under this Agreement. Such 

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designation must be in the form of a signed writing acceptable to the Board or the Board's designee. The Executive may make or change such designation at any time. 

    (h)  Governing Law.  To the extent not preempted by federal law, the provisions of this Agreement shall
be construed and enforced in accordance with the laws of the state of Washington. 

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

	 	 	PACIFIC NORTHWEST BANCORP
	

 	
 	

By:	
 	

/s/ STEPHEN M. WALDEN

	

 	
 	

/s/ PATRICK M. FAHEY
 PATRICK M. FAHEY

5

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EXHIBIT 10.3 

 
 

FIRST AMENDMENT TO
  PACIFIC NORTHWEST BANK EMPLOYMENT AGREEMENT    
  

(KIM S. BRACE)  

    This First Amendment to Employment Agreement ("Amendment") is made on the 20th day of March, 2000, between INTERWEST BANCORP, INC. and PACIFIC NORTHWEST BANK
(hereinafter jointly referred to as "Bank") and KIM S. BRACE ("Employee"), who agree as follows: 

 
 

RECITALS    
  

    This Amendment is made with reference to the following facts and objectives: 

    A.  Pacific
Northwest Bank, in conjunction with a Plan and Merger Agreement of Reorganization whereby Pacific Northwest Bank was acquired by InterWest
Bancorp, Inc., entered into an Employment Agreement with Employee ("Agreement"). 

    B.  Bank
and Employee now wish to amend the Agreement to make it advantageous for Employee to continue her employment after June 16, 2000, the first date upon
which Employee has the right to terminate employment with Bank and receive a one-time cash payment as provided under the "Employment Termination Window" provision of the Agreement. 

    C.  To
achieve the goal set forth in B, above, the parties agree to amend the Agreement as set forth hereafter. 

 
 

AMENDMENT    
  

    1.  Subparagraph
2(b) of the Agreement, Term, is deleted in its entirety and the following shall be inserted in
its place: 

    (b)  Term.  The term of this Agreement ("Term") shall commence on the Effective Date and terminate on
June 15, 2001, unless extended by written agreement. 

    2.  Paragraph
4, Salary, is deleted in its entirety and the following shall be inserted in its place: 

    4.  Salary.  Employee shall receive a salary set by the Compensation Committee for employees with
comparable duties and experience, but not less than $130,000 per year, to be paid in accordance with the Bank's regular payroll schedule. Employee's salary shall be reviewed annually. 

    3.  Paragraph
5, Incentive Compensation, is modified to add the following paragraphs: 

    If
Employee is not terminated for Cause and continues in employment with Bank until December 15, 2000, Employee shall receive, in addition to any other compensation provided
under this Agreement (including that payable under Section 8(d)), a bonus comparable to that paid to employees performing comparable duties. Payment shall be made with the mid-January, 2001,
payroll. 

    If
Employee is not terminated for Cause and continues in employment with Bank through June 15, 2001, Employee shall receive, in addition to any other compensation provided
under this Agreement (including that payable under Section 8(d)), a bonus equal to 50 percent of the bonus paid to employees performing comparable duties. Payment shall be made with the
mid-January, 2002, payroll. 

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    4.  Subparagraph
8 (c) of the Agreement, Termination, is amended to add the following at the end of the
paragraph: 

".
 . ., together with a single cash payment in an amount equal to Employee's W-2 income before salary deferrals over the 12 months preceding the death or disability, provided,
however, if the death or disability occurs after June 16, 2000, the amount paid shall in no event be less than the amount Employee would receive if Employee terminated
employment on June 16, 2000." 

    5.  Subparagraph 8(d) of
the Agreement, Employee Termination Window, is deleted in its entirety and
replaced with the following: 

    (d)  Employee Termination Window.  During the period commencing with June 16, 2000 through
June 16, 2001, Employee may terminate this Agreement by delivering written notice to Bank. If Employee does so, regardless of whether Employee had Good Reason to terminate the Agreement, Bank
will pay Employee a single cash payment, payable within 30 days of termination, in an amount equal to Employee's W-2 income before salary deferrals over the twelve (12) months preceding the
date of termination ("Total Annual Compensation"); provided, however, that the amount paid under this section shall in no event be less than the amount
Employee would receive if Employee terminated employment on June 16, 2000. 

    6   Paragraph
12, Noncompetition, is deleted in its entirety and all references in the Agreement to Section 12 shall be
deleted. 

    7   Except
as set forth in this Amendment, all the provisions of the Agreement shall remain unchanged and in full force and effect. 

	 	 	INTERWEST BANCORP, INC.
	

 	
 	

By:	

/s/ STEPHEN M. WALDEN   
 Stephen M. Walden, President and CEO
	

 	
 	
PACIFIC NORTHWEST BANK
	

 	
 	
By:	

/s/ PATRICK M. FAHEY   
 Patrick M. Fahey, President and CEO
	

 	
 	

/s/ KIM S. BRACE   
 Kim S. Brace

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PACIFIC NORTHWEST BANK
  EMPLOYMENT AGREEMENT    
  

    THIS EMPLOYMENT AGREEMENT ("Agreement"), signed January 15, 1998, between PACIFIC NORTHWEST BANK ("Bank") and KIM S. BRACE ("Employee") takes
effect on the effective date of the Reorganization ("Effective Date"). 

 
 

RECITALS    
  

	A.
	InterWest
Bancorp, Inc. ("InterWest") has entered into a Plan and Agreement of Reorganization ("Plan") with the Bank, under which the Bank will become
a wholly owned subsidiary of InterWest ("Reorganization").

	B.
	Employee
is presently the Bank's Senior Vice President and Manager of Administrative Services. The Bank wishes to continue Employee's employment in
that capacity under the terms and conditions of this Agreement.

	C.
	Employee
wishes to continue her employment at the Bank under the terms and conditions of this Agreement. 

 
 

AGREEMENT    
  

    The parties agree as follows: 

	1.
	Employment.  The Bank will continue Employee's employment during the Term of this
Agreement, and Employee accepts employment by the Bank on the terms and conditions set forth in this Agreement. Employee's title will be "Senior Vice President/Manager, Administrative Services."

	2.
	Effective Date and Term.

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

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

	(c)
	Abandonment of the Reorganization.  If the Plan terminates before Closing, this Agreement will not become effective
and will be void. 

	3.
	Duties.  Employee will faithfully and diligently perform the duties assigned to
Employee from time to time by the Bank's Chairman or President, consistent with the duties that have been normal and customary to Employee's position. Employee will use her best efforts to perform her
duties and will devote full time and attention to these duties during working hours. Employee will report directly to the Bank's President. The Bank's board of directors may, from time to time, modify
Employee's title or performance responsibilities to accommodate management succession, as well as any other management objectives of the Bank or of InterWest. Employee will assume any additional
positions, duties, and responsibilities as may reasonably be requested of her with or without additional compensation, as appropriate and consistent with this Section 3.

	4.
	Salary.  Initially, Employee will receive a salary of $125,000 per year, to be paid in
accordance with the Bank's regular payroll schedule.

	5.
	Incentive Compensation.  The Bank's board of directors, subject to ratification by
InterWest's board of directors, will determine the amount of bonus, if any, to be paid by the Bank to Employee for each year during the Term. In making this determination, the Bank's board of
directors will consider factors such as Employee's performance of her duties and the safety, soundness, and profitability of the Bank. Employee's bonus, if any, will reflect Employee's contribution to
the performance of the Bank during the year. 

1

 
	6.
	Income Deferral and Benefits.  Subject to eligibility requirements and in accordance
with and subject to any policies adopted by the Bank's or InterWest's board of directors with respect to any benefit plans or programs, Employee will be entitled to receive benefits (including stock
options) similar to those offered to other employees of the Bank or InterWest with position and duties comparable to those of Employee. The foregoing notwithstanding, it is the specific and agreed
intent that the total compensation of Employee shall be, in the aggregate, comparable to the total compensation Employee is presently receiving at the Bank (including but not limited to benefits under
any retirement plans or long-term disability plans).

	7.
	Business Expenses.  The Bank will reimburse Employee for ordinary and necessary
expenses (including, without limitation, Bank automobile, travel, entertainment, and similar expenses) incurred in performing and promoting the Bank's business. Employee will present from time to time
itemized accounts of these expenses, subject to any limits of Bank policy or the rules and regulations of the Internal Revenue Service.

	8.
	Termination.

	(a)
	Termination By Bank for Cause.  If, before the end of the Term, the Bank terminates Employee's employment for Cause or
Employee terminates her employment without Good Reason, the Bank will pay Employee the salary earned and expenses reimbursable under this Agreement incurred through the date of Employee's termination.
Employee will have no right to receive compensation or other benefits for any period after termination under this Section 8(a).

	(b)
	Other Termination By Bank.  If, before the end of the Term, the Bank terminates Employee's employment without Cause or
Employee terminates her employment for Good Reason (defined below), the Bank will pay Employee for the remainder of the Term the salary Employee would have been entitled to under this Agreement if her
employment had not terminated.

	(c)
	Death or Disability.  This Agreement terminates (1) if Employee dies or (2) if Employee is unable to perform her
duties and obligations under this Agreement for a period of 90 days as a result of a physical or mental disability arising at any time during the term of this Agreement, unless with reasonable
accommodation Employee could continue to perform her duties under this Agreement and making these accommodations would not require the Bank to expend any funds. If termination occurs under this
Section 8(c), Employee or her estate will be entitled to receive only the compensation and benefits earned and expenses reimbursable through the date this Agreement terminated.

	(d)
	Employee Termination Window.  During the period commencing with the 25th month of the Term through the
30th month of the Term, Employee may terminate this Agreement by delivering written notice to the Bank and to InterWest. If Employee does so, regardless of whether Employee had Good
Reason to terminate the Agreement, the Bank will pay Employee a single cash payment in an amount equal to Employee's W-2 income before salary deferrals over the twelve (12) months preceding the date
of termination ("Total Annual Compensation").

	(e)
	Termination Related to a Change in Control.

	(1)
	Termination by Bank.  If the Bank, or its successor in interest by merger, or its transferee in the event of a
purchase and assumption transaction, (for reasons other than Employee's death, disability, or Cause) (1) terminates Employee's employment within one year following a Change in Control (as defined
below) or (2) terminates Employee's employment before a Change in Control and a Change in Control occurs within nine 

2

 

months
after the termination, the Bank will pay Employee the payment described in Section 8(e)(3). 

	(2)
	Termination by Employee.  If Employee terminates Employee's employment, with or without Good Reason, within one year
following a Change in Control, the Bank will pay Employee the payment described in Section 8(e)(3).

	(3)
	Payments.  If Section 8(e)(1) or (2) is triggered as described in those Sections, the Bank will pay Employee her Total
Annual Compensation (as defined in Section 8(d) above). 

	(f)
	Limitations on Payments Related to Change in Control.  The following apply notwithstanding any other provision of
this Agreement:

	(1)
	the
payment described in Section 8(e)(3) will be less than the amount that would cause it to be a "parachute payment" within the meaning of Section 280G(b)(2)(A) of the
Internal Revenue Code; and

	(2)
	Employee's
right to receive the payment described in Section 8(e)(3) terminates (i) immediately, if before the Change in Control transaction closes, Employee terminates her
employment without Good Reason or the Bank terminates Employee's employment for Cause, or (ii) one year after a Change in Control occurs. 

	(g)
	Definition of "Change in Control".  "Change in Control" means a change "in the ownership or effective control" or "in
the ownership of a substantial portion of the assets" of InterWest, within the meaning of section 280G of the Internal Revenue Code.

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

	9.
	Definition of "Cause".  "Cause" means any one or more of the following:

	(a)
	Willful
misfeasance or gross negligence in the performance of Employee's duties;

	(b)
	Conviction
of a crime in connection with her duties;

	(c)
	Conduct
demonstrably and significantly harmful to the Bank, as reasonably determined by the Bank's board of directors on the advice of legal counsel; or

	(d)
	Permanent
disability, meaning a physical or mental impairment which renders Employee incapable of substantially performing the duties required under this Agreement, and which is
expected to continue rendering Employee so incapable for the reasonably foreseeable future. 

	10.
	Definition of "Good Reason".  "Good Reason" means only any one or more of the
following:

	(a)
	Reduction,
without Employee's consent, of Employee's salary or elimination of any compensation or benefit plan benefiting Employee, unless the reduction or elimination is generally
applicable to substantially all similarly situated Bank employees (or employees of a successor or controlling entity of the Bank) formerly benefited;

	(b)
	The
assignment to Employee without her consent of any authority or duties materially inconsistent with Employee's position as of the date of this Agreement; or 

3

 

	(c)
	A
relocation or transfer of Employee's principal place of employment that would require Employee to commute on a regular basis more than 60 miles each way from her current business
office at the Bank on the date of this Agreement, unless Employee consents to the relocation or transfer. 

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

	12.
	Noncompetition.

	(a)
	Participation in a Competing Business.  During the Term and for eighteen (18) months after Employee's employment with
the Bank, InterWest, or any Subsidiary of InterWest ends (regardless of whether Employee's employment ends at the end of the Term or at some other point after the end of the Term), Employee will not
become involved with a Competing Business or serve, directly or indirectly, a Competing Business in any manner, including, without limitation, as a shareholder, member, partner, director, officer,
manager, investor, organizer, "founder," employee, consultant, or agent, provided, however, that Employee may acquire and passively own an interest not
to exceed 2% of the total equity interest in any entity (whether or not such entity is a Competing Business).

	(b)
	No Solicitation.  During the Term and for eighteen (18) months after Employee's employment with the Bank, InterWest,
or any affiliate of InterWest ends (regardless of whether Employee's employment ends at the end of the Term or at some other point after the end of the Term), Employee will not directly or indirectly
solicit or attempt to solicit (1) any employees of the Bank, InterWest, or any of InterWest's Subsidiaries, to leave their employment or (2) any customers of the Bank, InterWest, or any of InterWest's
Subsidiaries to remove their business from the Bank, InterWest, or any of InterWest's Subsidiaries, or to participate in any manner in a Competing Business. Solicitation prohibited under this Section
includes solicitation by any means, including, without limitation, meetings, letters or other mailings, electronic communications of any kind, and internet communications.

	(c)
	Employment Outside the Washington State.  Nothing in this Agreement prevents Employee from accepting employment after
the end of the Term outside Washington State from a Competing Business, as long as Employee will not (a) act as an employee or other representative or agent of the Competing Business within Washington
State or (b) have any responsibilities for the Competing Business' operations within Washington State.

	(d)
	Competing Business.  "Competing Business" means any financial institution or trust company that competes with, or will
compete in Washington State with, InterWest, the Bank, or any of InterWest's Subsidiaries. The term "Competing Business" includes, without limitation, any start-up or other financial institution or
trust company in formation. 

	13.
	Enforcement.

	(a)
	The
Bank and Employee stipulate that, in light of all of the facts and circumstances of the relationship between Employee and the Bank, the agreements referred to in Sections 11 and
12 (including without limitation their scope, duration and geographic extent) are fair and reasonably necessary for the protection of the Bank's and InterWest's confidential information, goodwill and
other protectable interests. If a court of competent jurisdiction should decline to enforce any of those covenants and agreements, Employee and the Bank request the court to reform these provisions to
restrict Employee's use of confidential information and Employee's 

4

 

ability
to compete with the Bank and InterWest to the maximum extent, in time, scope of activities, and geography, the court finds enforceable. 

	(b)
	Employee
acknowledges that the Bank and InterWest will suffer immediate and irreparable harm that will not be compensable by damages alone, if Employee repudiates or breaches any of
the provisions of Sections 11 or 12 or threatens or attempts to do so. For this reason, under these circumstances, the Bank and InterWest, 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 neither the Bank
nor InterWest will be required to post a bond as a condition for the granting of this relief. 

	14.
	Adequate Consideration.  Employee specifically acknowledges the receipt of adequate
consideration for the covenants contained in Sections 11 and 12 and that the Bank is entitled to require her to comply with these Sections. These Sections will survive termination of this Agreement.
Employee represents that if her employment is terminated, whether voluntarily or involuntarily, Employee has experience and capabilities sufficient to enable Employee to obtain employment in areas
which do not violate this Agreement and that the Bank's enforcment of a remedy by way of injunction will not prevent Employee from earning a livelihood.

	15.
	Arbitration.

	(a)
	Arbitration.  At either party's request, the parties must submit any dispute, controversy or claim arising out of or
in connection with, or relating to, this Agreement or any breach or alleged breach of this Agreement, to arbitration under the American Arbitration Association's rules then in effect (or under any
other form of arbitration mutually acceptable to the parties). A single arbitrator agreed on by the parties will conduct the arbitration. If the parties cannot agree on a single arbitrator, each party
must select one arbitrator and those two arbitrators will select a third arbitrator. This third arbitrator will hear the dispute. The arbitrator's decision is final (except as otherwise specifically
provided by law) and binds the parties, and either party may request any court having jurisdiction to enter a judgment and to enforce the arbitrator's decision. The arbitrator will provide the parties
with a written decision naming the substantially prevailing party in the action. This prevailing party is entitled to reimbursement from the other party for its costs and expenses, including
reasonable attorneys' fees.

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

	(c)
	Exception to Arbitration.  Notwithstanding the above, if Employee violates Section 11 or 12, the Bank will have the
right to initiate the court proceedings described in Section 13(b), in lieu of an arbitration proceeding under this Section 15. The Bank may initiate these proceedings wherever appropriate within
Washington State; but Employee will consent to venue and jurisdiction in King County, Washington. 

	16.
	Miscellaneous Provisions.

	(a)
	Defined Terms.  Capitalized terms used as defined terms, but not defined in this Agreement, will have the meanings
assigned to those terms in the Plan.

	(b)
	Entire Agreement.  This Agreement constitutes the entire understanding between the parties concerning its subject
matter and supersedes all prior agreements. Accordingly, Employee specifically waives the terms of and all of her rights under all employment, change-in-control 

5

 

and
salary continuation agreements, whether written or oral, she has previously entered into with the Bank or any of its Subsidiaries or affiliates. 

	(c)
	Binding Effect.  This Agreement will bind and inure to the benefit of the Bank's, InterWest's, and Employee's heirs,
legal representatives, successors and assigns.

	(d)
	Litigation Expenses.  If either party successfully seeks to enforce any provision of this Agreement or to collect any
amount claimed to be due under it, this party will be entitled to reimbursement from the other party for any and all of its out-of-pocket expenses and costs including, without limitation, reasonable
attorneys' fees and costs incurred in connection with the enforcement or collection.

	(e)
	Waiver.  Any waiver by a party of its rights under this Agreement must be written and signed by the party waiving its
rights. A party's waiver of the other party's breach of any provision of this Agreement will not operate as a waiver of any other breach by the breaching party.

	(f)
	Counsel Review.  Employee acknowledges that she has had the opportunity to consult with independent counsel with
respect to the negotiation, preparation, and execution of this Agreement.

	(g)
	Assignment.  The services to be rendered by Employee under this Agreement are unique and personal. Accordingly,
Employee may not assign any of her rights or duties under this Agreement.

	(h)
	Amendment.  This Agreement may be modified only through a written instrument signed by both parties and consented to
by InterWest in writing.

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

	(j)
	Governing Law and Venue.  This Agreement will be governed by and construed in accordance with Washington law, except
to the extent that certain matters may be governed by federal law. Except as otherwise provided in Section 15(c), the parties must bring any legal proceeding arising out of this Agreement in King
County, Washington, and the parties will submit to jurisdiction in that county.

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

 
 

[Signatures on Next Page]    
  

6

 

Signed January 15, 1998: 

	 	 	PACIFIC NORTHWEST BANK
	

 	
 	

 	
 	

/s/ PATRICK M. FAHEY   
 By: Patrick M. Fahey

Its: President
	

 	
 	

 	
 	
KIM S. BRACE, individually
	

 	
 	

 	
 	

/s/ KIM S. BRACE   
 Kim S. Brace

7

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