EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), signed January 15, 1998, between
INTERWEST BANCORP, INC. ("InterWest"), PACIFIC NORTHWEST BANK ("Bank") and
XXXXXXX X. XXXXX ("Executive") takes effect on the effective date of the
Reorganization ("Effective Date").
RECITALS
A. 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. Executive is presently the Bank's Chairman, President, and Chief Executive
Officer ("CEO"). The Bank wishes to continue Executive's employment in that
capacity under the terms and conditions of this Agreement. In addition,
InterWest wishes to employ Executive as Vice Chairman/Commercial Banking.
C. Under the terms of this Agreement, Executive wishes to continue his
employment with the Bank and to accept employment with InterWest.
AGREEMENT
The parties agree as follows.
1. EMPLOYMENT. The Bank will continue Executive's employment during the Term,
and Executive accepts employment by the Bank and InterWest on the terms and
conditions set forth in this Agreement. Executive's title will be
"Chairman of the Board, President, and CEO." In addition, during the
Term, Executive will have the title with InterWest of "Vice
Chairman/Commercial Banking," and Executive will be considered a member of
the Executive Management Team of InterWest.
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. Executive will faithfully and diligently perform the duties
assigned to Executive from time to time by the Bank's board of directors,
by InterWest's board of directors, or by the President or CEO of InterWest.
Executive will use his best efforts to perform his duties and will devote
full time and attention to these duties during working hours. These
duties will include, without limitation, the following:
(a) BANK PERFORMANCE. Executive will be responsible for all aspects of
the Bank's performance, including, without limitation, directing that
daily operational and managerial matters are performed in a manner
consistent with InterWest's and the Bank's policies. These duties
will also include formulating and implementing the Bank's
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expansion strategies and performing all other tasks in connection with
the Bank's management and affairs that are normal and customary to
Executive's position.
(b) COMMERCIAL BANKING. Executive will participate in the management team
that is responsible for oversight of InterWest's commercial banking
activities and for the integration of these activities with
InterWest's existing operations. Executive's duties will also
include assisting InterWest management with the development and
implementation of acquisition strategies, and any other duties
assigned to Executive by the CEO of InterWest after consultation with
Executive.
(c) DEVELOPMENT AND PRESERVATION OF BUSINESS. Executive will be
responsible for the development and preservation of banking relation-
ships and other business development efforts (including appropriate
civic and community activities) in the Bank's market areas.
(d) REPORT TO BOARD. Executive will report directly to the Bank's
board of directors and to the CEO of InterWest. The Bank's or
InterWest's board of directors may, from time to time, modify
Executive's title or add to, delete from, or modify Executive's
performance responsibilities to accommodate management succession,
as well as any other management objectives of the Bank or of Inter-
West. Executive will assume any additional positions, duties, and
responsibilities as may reasonably be requested of him with or
without additional compensation, as appropriate and consistent with
Sections 3(a), 3(b),and 3(c) of this Agreement.
4. SALARY. Initially, Executive will receive a salary of $275,000 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 Executive for each year during
the Term. In making this determination, the Bank's board of directors
will consider factors such as Executive's performance of his duties and
the safety, soundness, and profitability of the Bank. Executive's bonus,
if any, will reflect Executive's contribution to the performance of the
Bank during the year.
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, Executive will be entitled to receive benefits (including stock
options) similar to those offered to other executive officers of InterWest
and its subsidiaries with position and duties comparable to those of
Executive. The foregoing notwithstanding, it is the specific and agreed
intent that the total compensation of Executive shall be, in the
aggregate, comparable to the total compensation Executive is presently
receiving at the Bank (including but not limited to benefits under the
make whole plan, retirement plans, director fees, and long-term disability
plans).
7. BUSINESS EXPENSES. The Bank will reimburse Executive for ordinary and
necessary expenses (including, without limitation, Bank automobile,
travel, entertainment, and similar expenses) incurred in performing and
promoting the Bank's business. Executive 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.
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8. TERMINATION.
(a) TERMINATION BY BANK FOR CAUSE. If, before the end of the Term, the
Bank terminates Executive's employment for Cause or Executive
terminates his employment without Good Reason, the Bank will pay
Executive the salary earned and expenses reimbursable under this
Agreement incurred through the date of Executive's termination.
Executive 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 Executive's employment without Cause or Executive
terminates his employment for Good Reason (defined below), the Bank
will pay Executive for the remainder of the Term the salary Executive
would have been entitled to under this Agreement if his employment
had not terminated.
(c) DEATH OR DISABILITY. This Agreement terminates (1) if Executive dies
or (2) if Executive is unable to perform his duties and obligations
under this Agreement for a period of 90 days as a result of a
physical or mental disability arising at any time during the term of
this Agreement, unless with reasonable accommodation Executive could
continue to perform his duties under this Agreement and making these
accommodations would not require the Bank to expend any funds. If
termination occurs under this Section 8(c), Executive or his estate
will be entitled to receive only the compensation and benefits earned
and expenses reimbursable through the date this Agreement terminated.
(d) EXECUTIVE TERMINATION WINDOW. During the period commencing with the
25th month of the Term through the 30th month of the Term, Executive
may terminate this Agreement by delivering written notice to the Bank
and to InterWest. If Executive does so, regardless of whether
Executive had Good Reason to terminate the Agreement, the Bank will
pay Executive a single cash payment in an amount equal to Executive'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 Executive's
death, disability, or Cause) (1) terminates Executive's
employment within one year following a Change in Control (as
defined below) or (2) terminates Executive's employment before a
Change in Control and a Change in Control occurs within nine
months after the termination, the Bank will pay Executive the
payment described in Section 8(e)(3).
(2) TERMINATION BY EXECUTIVE. If Executive terminates Executive's
employment, with or without Good Reason, within one year
following a Change in Control, the Bank will pay Executive 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 Executive a single payment in
an amount equal to his Total Annual Compensation (as defined in
Section 8(d) above).
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(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) Executive's right to receive the payment described in Section
8(e)(3) terminates (i) immediately, if before the Change in
Control transaction closes, Executive terminates his employment
without Good Reason or the Bank terminates Executive'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 Executive ceases, for any
reason, to be employed by the Bank, Executive must return to the
Bank all keys, pass cards, identification cards and any other property
of the Bank or InterWest. At the same time, Executive 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 Executive's desk at
work, in Executive's car or place of residence, or in any other
location under Executive's control.
9. DEFINITION OF "CAUSE". "Cause" means any one or more of the following:
(a) Willful misfeasance or gross negligence in the performance of
Executive's duties;
(b) Conviction of a crime in connection with his 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 Executive incapable of substantially performing the duties
required under this Agreement, and which is expected to continue
rendering Executive 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 Executive's consent, of Executive's salary or
elimination of any compensation or benefit plan benefiting Executive,
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 Executive without his consent of any authority or
duties materially inconsistent with Executive's position as of the
date of this Agreement; or
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(c) A relocation or transfer of Executive's principal place of employment
that would require Executive to commute on a regular basis more than
60 miles each way from his current business office at the Bank on the
date of this Agreement, unless Executive consents to the relocation
or transfer.
11. CONFIDENTIALITY. Executive will not, after signing this Agreement,
including during and after its Term, use for his own purposes or disclose
to any other person or entity any confidential information concerning 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
Executive's duties under this Agreement, or (3) disclosure is required by
law or court order.
12. NONCOMPETITION.
(a) PARTICIPATION IN A COMPETING BUSINESS. During the Term and for
eighteen (18) months after Executive's employment with the Bank,
InterWest, or any Subsidiary of InterWest ends (regardless of whether
Executive's employment ends at the end of the Term or at some other
point after the end of the Term), Executive will not become involved
with a Competing Business or serve, directly or indirectly, a
Competing Business in any manner, including, without limitation, as a
shareholder, member, partner, director, officer, manager, investor,
organizer, "founder," employee, consultant, or agent; PROVIDED,
HOWEVER, that Executive may acquire and passively own an interest not
exceeding 2% of the total equity interest in any entity (whether or
not such entity is a Competing Business).
(b) NO SOLICITATION. During the Term and for eighteen (18) months after
Executive's employment with the Bank, InterWest, or any affiliate of
InterWest ends (regardless of whether Executive's employment ends at
the end of the Term or at some other point after the end of the
Term), Executive 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 Executive from accepting employment after the end of the
Term outside Washington State from a Competing Business, as long as
Executive will not (a) act as an employee or other representative or
agent of the Competing Business within 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.
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13. ENFORCEMENT.
(a) The Bank and Executive stipulate that, in light of all of the facts
and circumstances of the relationship between Executive 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, Executive and the Bank request the
court to reform these provisions to restrict Executive's use of
confidential information and Executive's ability to compete with the
Bank and InterWest to the maximum extent, in time, scope of
activities, and geography, the court finds enforceable.
(b) Executive acknowledges that the Bank and InterWest will suffer
immediate and irreparable harm that will not be compensable by
damages alone, if Executive repudiates or breaches any of the
provisions of Sections 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. Executive specifically acknowledges the receipt of
adequate consideration for the covenants contained in Sections 11 and 12
and that the Bank is entitled to require him to comply with these
Sections. These Sections will survive termination of this Agreement.
Executive represents that if his employment is terminated, whether
voluntarily or involuntarily, Executive has experience and capabilities
sufficient to enable Executive to obtain employment in areas which do not
violate this Agreement and that the Bank's enforcement of a remedy by way
of injunction will not prevent Executive from earning a livelihood.
15. ARBITRATION.
(a) Arbitration. At either party's request, the parties must submit any
dispute, controversy or claim arising out of or in connection with,
or relating to, this Agreement or any breach or alleged breach of
this Agreement, to arbitration under the American Arbitration
Association's rules then in effect (or under any other form of
arbitration mutually acceptable to the parties). A single arbitrator
agreed on by the parties will conduct the arbitration. If the
parties cannot agree on a single arbitrator, each party must select
one arbitrator and those two arbitrators will select a third
arbitrator. This third arbitrator will hear the dispute. The
arbitrator's decision is final (except as otherwise specifically
provided by law) and binds the parties, and either party may request
any court having jurisdiction to enter a judgment and to enforce the
arbitrator's decision. The arbitrator will provide the parties with
a written decision naming the substantially prevailing party in the
action. This prevailing party is entitled to reimbursement from the
other party for its costs and expenses, including reasonable
attorneys' fees.
(b) GOVERNING LAW. All proceedings will be held at a place designated by
the arbitrator in King County, Washington. The arbitrator, in
rendering a decision as to any state law claims, will apply Washington
law.
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(c) EXCEPTION TO ARBITRATION. Notwithstanding the above, if Executive
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
Executive 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, Executive specifically waives the
terms of and all of his rights under all employment, change-in-
control and salary continuation agreements, whether written or oral,
he 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 Executive'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. Executive acknowledges that he 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 Executive under this
Agreement are unique and personal. Accordingly, Executive may not
assign any of his rights or duties under this Agreement.
(h) Amendment. This Agreement may be modified only through a written
instrument signed by both parties.
(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.
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(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.
Signed: January 15, 1998:
INTERWEST BANCORP, INC. PACIFIC NORTHWEST BANK
___/s/ Xxxxxxx X. Xxxxxx _____/s/ Xxxxxxx X. Xxxxx
By: Xxxxxxx X. Xxxxxx By: Xxxxxxx X. Xxxxx
Its: President Its: President
XXXXXXX X. XXXXX, individually
/s/ Xxxxxxx X. Xxxxx
XXXXXXX X. XXXXX
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