SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-26556
OREGON TRAIL FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Oregon 91-1829481
- --------------------------------------------------------------------------
State or other jurisdiction of (I.R.S. Employer or organization)
incorporation Identification Number)
2055 First Street, Baker City, Oregon 97814
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (541) 523-6327
---------------
Securities registered pursuant to Section 12(b) of the Act: None
---------------
Securities registered pursuant to
Section 12(g) of the Act: Common Stock. Par value $.01 per share
--------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. YES [ X ] NO [ ]
As of October 31, 1998, there were issued 4,272,336 shares of the
Registrant's Common Stock. The Registrant's voting common stock is traded
over-the-counter and is listed on the Nasdaq National Market under the symbol
"OTFC".
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OREGON TRAIL FINANCIAL CORP.
TABLE OF CONTENTS
Part I. Financial Information
- ------ ---------------------
Item I. Financial Statements (Unaudited) Page
----
Consolidated Statements of Financial Condition 2
as of September 30, 1998 and March 31, 1998
Consolidated Statements of Income; For the Three and Six 3
Months Ended September 30, 1998 and 1997
Consolidated Statements of Shareholders' Equity
(For the Six Months Ended September 30, 1998 and for
the Year Ended March 31, 1998). 4
Consolidated Statements of Cash Flows (For the
Six Months Ended September 30, 1998 and 1997) 5 - 6
Notes to Consolidated Financial Statements 7 - 10
Item II. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-17
Item III. Quantitative and Qualitative Disclosures about Market Risk 17
Part II. Other Information
- ------- -----------------
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
(1)
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OREGON TRAIL FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 1998 and MARCH 31, 1998
(UNAUDITED)
($ in thousands)
September 30, March 31,
ASSETS 1998 1998
------------- -----------
Cash (including interest earning
accounts of $7,102 and $18,667) $8,780 $20,311
Securities
Available for sale, at fair value
(amortized cost: $74,462 and $63,566) 76,148 65,003
Held to maturity, at amortized cost
(fair value: $11,086 and $13,225) 10,768 12,805
Loans receivable, net of allowance for loan
losses of $1,011 and $847 166,985 153,838
Accrued interest receivable 1,750 1,676
Premises and equipment, net 6,404 5,582
Stock in Federal Home Loan Bank of Seattle,
at cost 3,101 2,985
Real estate owned 111 313
Other assets 528 711
-------- --------
TOTAL ASSETS $274,575 $263,224
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Interest-bearing $79,634 $79,187
Noninterest-bearing 11,333 8,647
Time certificates 97,312 104,900
Total deposits 188,279 192,734
-------- --------
Advances from Federal Home Loan Bank of Seattle 7,500 0
Accrued expenses and other liabilities 14,451 2,400
Advances from borrowers for taxes and insurance 1,843 789
-------- --------
Total liabilities 212,073 195,923
SHAREHOLDERS' EQUITY:
Preferred Stock - $.01 par value;
1,000,000 shares authorized;
no shares issued or outstanding
Common stock, $.01 par value; 8,000,000 shares
authorized September 30, 1998, 4,694,875 issued,
3,950,402 outstanding; March 31, 1998, 4,694,875
issued, 4,346,113 outstanding 43 47
Additional paid-in capital 39,451 45,885
Retained earnings (substantially restricted) 25,141 23,968
Unearned shares issued to the
Employee Stock Ownership Plan (3,219) (3,488)
Unrealized gain on securities
available for sale, net of tax 1,086 889
-------- --------
Total shareholders' equity 62,502 67,301
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $274,575 $263,224
======== ========
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
(2)
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OREGON TRAIL FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
($ in thousands except per share data)
3 Mos Ended 3 Mos Ended 6 Mos Ended 6 Mos Ended
30-Sep-98 30-Sep-97 30-Sep-98 30-Sep-97
INTEREST INCOME ----------- ----------- ----------- -----------
Interest and fees
on loans receivable $3,546 $3,170 $6,860 $6,227
Securities:
Mortgage-backed and
related securities 773 664 1,509 1,307
U.S. government and
government agencies 482 458 1,162 804
Other interest and
dividends 122 264 178 331
----- ----- ----- -----
Total interest income 4,923 4,556 9,709 8,669
INTEREST EXPENSE:
Deposits 1,797 2,094 3,614 3,950
Securities sold under
agreements to repurchase 0 12 0 23
FHLB of Seattle advances 15 84 15 150
----- ----- ----- -----
Total interest expense 1,812 2,190 3,629 4,123
Net interest income 3,111 2,366 6,080 4,546
Provision for Loan Losses 111 43 196 74
----- ----- ----- -----
Net interest income
after provision for
loan losses 3,000 2,323 5,884 4,472
NONINTEREST INCOME:
Service charges on
deposit accounts 191 167 345 337
Loan servicing fees 71 88 152 140
Other Income (expense) (17) (4) (14) 49
----- ----- ----- -----
Total noninterest income 245 251 483 526
NONINTEREST EXPENSE:
Employee compensation
and benefits 1,060 788 2,118 1,592
Supplies, postage,
and telephone 136 113 261 224
Depreciation 117 103 229 190
Occupancy and equipment 125 92 226 173
FDIC insurance premium 30 28 61 57
Customer account 65 68 139 136
Advertising 124 74 209 124
Professional fees 66 34 120 68
Other 148 102 303 197
----- ----- ----- -----
Total noninterest expense 1,871 1,402 3,666 2,761
Income before
income taxes 1,374 1,172 2,701 2,237
Provision for
income taxes 544 450 1,095 860
------ ------ ------ ------
NET INCOME $ 830 $ 722 $1,606 $1,377
====== ====== ====== ======
Basic Earnings
per share (1) $ 0.20 $ 0.38
====== ======
Weighted Average
Number of Shares
Outstanding (2) 4,160,528 4,252,886
(1) Per share information for the prior period is not presented as the Company
did not complete its stock offering until October 3, 1997. See Note 2.
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
(3)
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OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND THE YEAR ENDED MARCH 31, 1998
(UNAUDITED)
($ in thousands)
Unearned
Shares Issue
Unrealized
to Employee
Gain(Loss)
Additional Stock on Securities
Common Stock Paid-in Retained Ownership Available
Shares Amount Capital Earnings Trust For Sale Total
------ ------ ------- -------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1997 $21,149 ($122) $21,027
Net income 3,036 3,036
Cash dividends declared (217)
(217)
Issuance of
common stock, net 4,694,875 $47 $45,682 45,729
Unearned ESOP shares (375,590) ($3,756) (3,756)
Earned ESOP shares 26,828 203 268 471
Change in unrealized
gain on securities
available for sale,
net of tax 0 1,011 1,011
--------- ------- ------- ------- ------- ------ -------
Balance, March 31, 1998 4,346,113 47 45,885 23,968 (3,488) 889 67,301
Net income 1,606 1,606
Cash dividends declared (433) (433)
Earned ESOP shares 26,828 117 269 386
Stock Repurchased (422,539) (4) (6,551) (6,555)
Change in unrealized
gain on securities
available for sale,
net of tax 197 197
--------- ------- ------- ------- ------- ------ -------
Balance,
September 30, 1998 3,950,402 $43 $39,451 $25,141 ($3,219) $1,086 $62,502
========= ======= ======= ======= ======= ====== =======
The accompanying notes are an integral part of these unaudited consolidated financial statements.
-4-
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OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
($ in thousands)
30-Sep-98 30-Sep-97
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,606 $1,377
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES;
Depreciation 229 190
Amortization/accretion of premiums/discounts on (55) (17)
Amortization of deferred loan fees, net (98) (107)
Provision for loan loss 196 74
Deferred taxes (54) (438)
Accretion of discounts on loans purchased (13) (6)
Federal Home Loan Bank of Seattle dividends (115) (108)
Compensation expense related to ESOP benefit 386 0
Other 13 (37)
CHANGES IN ASSETS AND LIABILITIES
Loans held for sale 0 428
Accrued interest receivable (74) (496)
Prepaid and other assets 183 (483)
Accrued expenses and other liabilities 12,051 1,743
--------- ---------
Net cash provided by operating activities 14,255 2,120
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations (39,544) (23,404)
Loan principal repayments 29,477 18,546
Loans purchased (3,163) (213)
Purchase of securities available for sale (29,198) (72,293)
Maturity of securities available for sale 15,687 6,000
Purchase of securities held to maturity 0 (17)
Principle repayments of securities available for 2,458 1,483
Principle repayments of securities held to maturity 2,249 1,285
Proceeds from sales of real estate owned 189
Proceeds from sales of premises and equipment 0 248
Purchases of premises and equipment (1,054) (837)
--------- ---------
Net cash used in investing activities (22,899) 69,202)
--------- ---------
(5)
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CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in deposits, net of withdraw ($4,455) $8,318
Decrease in securities sold under agreements to 0 (154)
Change in advances from borrowers for taxes and 1,056 1,376
Proceeds from Federal Home Loan Bank of Seattle 17,800 22,450
Repayment of Federal Home Loan Bank of Seattle a (10,300) (18,150)
Proceeds from issuance of Common Stock 0 42,053
Proceeds from excess stock subscriptions 0 78,050
Payment of cash dividend (433) 0
Repurchase of stock (6,555) 0
--------- ---------
Net cash provided by (used) in financing
activities (2,887) 133,943
--------- ---------
Net increase (decrease) in cash (11,531) 66,861
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 20,311 4,975
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $8,780 $71,836
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits and other borrowings $3,721 $4,041
Income taxes 1,376 895
Noncash investing activities:
Unrealized gain(loss) on securities available for 197 (712)
The accompanying notes area an integral part of these unaudited consolidated
financial statements
(6)
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OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary for a fair presentation
of Oregon Trail Financial Corp.'s (the "Company") financial condition as of
September 30, 1998 and March 31, 1998, the results of operations for the three
and six months ended September 30, 1998 and 1997 and the cash flows for the
six months ended September 30, 1998 and 1997. All adjustments are of a normal
recurring nature. Certain information and note disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. It is suggested that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
to Stockholders filed as an exhibit to the Company's Form 10-K for the year
ended March 31, 1998. The results of operations for the three and six months
ended September 30, 1998 are not necessarily indicative of the results which
may be expected for the entire fiscal year.
6. REORGANIZATION
On October 3, 1997, Pioneer Bank, A Federal Savings Bank, (the "Bank")
completed a mutual-to-stock conversion. The Company sold 4,694,875 shares of
common stock at $10 per share, 8% or 375,590 of which shares were purchased by
an Employee Stock Ownership Plan (the "ESOP"). Proceeds from the sale were
recorded as $46,949 of Common Stock at $.01 par value and $45,681,982 of Paid
in Capital. The Common Stock and Paid in Capital at September 30, 1998 are
offset by the unissued ESOP shares.
The Company purchased all of the stock of the Bank for one-half of the net
investable proceeds of the offering. The retained earnings of the Company
represent all prior earnings of the Bank as a mutual savings bank.
The primary business of the Company is directing the officers of the Bank.
Accordingly, the information presented herein relates primarily to the Bank.
3. RECENTLY ADOPTED/ISSUED ACCOUNTING PRONOUNCEMENTS
Earnings Per Share. SFAS No. 128 "Earnings Per Share", adopted effective
December 31, 1997, establishes standards for computing and presenting earnings
per share ("EPS") and applies to entities with publicly held common stock or
potential common stock. It replaces the presentation of primary EPS with a
presentation of basic EPS and requires the dual presentation of basic and
diluted EPS on the face of the income statement. The Company had a simple
capital structure for all periods presented, and accordingly has computed
basic earnings per share presented on the Income Statement.
(7)
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Comprehensive Income. SFAS No. 130, "Reporting Comprehensive Income,"
issued in July 1997, establishes standards for reporting and presentation of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. It requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is presented with the same prominence as other financial statements. SFAS No.
130 requires that companies (I) classify items of other comprehensive income
by their nature in a financial statement and (ii) display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of the statement of financial
condition. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier
periods provided for comprehensive purposes are required.
Effective April 1, 1998, the Company adopted SFAS No. 130. Comprehensive
income was approximately $1.1 million and $980,000 for the three months ended
September 30, 1998 and 1997 respectively. Comprehensive income was
approximately $1.8 million and $2.1 million for the six months ended September
30,1998 and 1997 respectively. The difference between comprehensive income
and net income is due to changes in unrealized gains (losses) on available for
sale securities net of tax.
Segment Disclosures. SFAS No. 131, In June 1997, the FASB issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 131 establishes standards for disclosure about operating segments in
annual financial statements and selected information in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. This statement
supersedes SFAS No. 14, "Financial Reporting for Segments of Business
Enterprise." The new standard becomes effective for the Company's fiscal year
ending March 31, 1999, and requires that comparative information from earlier
years be restated to conform to the requirements of this standard. The
adoption of provisions of SFAS No. 131 is not expected to have a material
impact on the Company.
4. ALLOWANCE FOR LOAN LOSSES
September 30, 1998 March 31, 1998
(In Thousands) (In Thousands)
------------------ --------------
Balance, beginning of
period $ 847 $ 725
Charge-offs (41) (49)
Recoveries 9 33
Provision for loan losses 196 138
------- -----
Balance, end of period $ 1,011 $ 847
======= =====
Amounts presented are for the year ended March 31, 1998 and for the six months
ended September 30, 1998.
(8)
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5. ADVANCES FROM FEDERAL HOME LOAN BANK
Borrowings at September 30,1998 consisted of two five year advances totaling
$7.5 million from the Federal Home Loan Bank of Seattle ("FHLB"). The
advances are collateralized in aggregate as provided for in the Advances
Security and Deposit Agreement with the FHLB by certain mortgages or deeds of
trust, government agency securities and cash on deposit with the FHLB. The
company had no borrowings from the FHLB at March 31,1998. Scheduled
maturities of advances from the FHLB were as follows at September 30, 1998:
Due within one to five years:
- ----------------------------
Amount Range of Interest Weighted
Rates Average
Interest
Rate
- -------------------------------------------------
$7,500,000 5.20% - 5.29% 5.24%
6. REGULATORY CAPITAL
The Company is not subject to separate regulatory capital requirements. The
following table illustrates the Bank's compliance with currently applicable
regulatory capital requirements at September 30, 1998 and March 31, 1997.
As of September 30, 1998:
Actual For Capital Categorized as
(In Thousands) Adequacy "Well
Purposes Capitalized"
(In Thousands) Under Prompt
Corrective
Action
Provision
(In Thousands)
---------------- -------------- ---------------
Amount Ratio Amount Ratio Amount Ratio
As of September 30, 1998:
Total Capital:
(To Risk Weighted Assets) $ 49,562 35.68% $11,111 8.0% $13,890 10.0%
Tier I Capital:
(To Risk Weighted Assets) 48,588 34.98 N/A N/A 8,334 6.0
Tier I Capital:
(To Tangible Assets) 48,588 17.78 10,930 4.0 13,663 5.0
Tangible Capital:
(To Tangible Assets) 48,588 17.78 4,099 1.5 N/A N/A
(9)
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As of March 31, 1998
Actual For Capital Categorized as
(In Thousands) Adequacy "Well
Purposes Capitalized"
(In Thousands) Under Prompt
Corrective
Action
Provision
(In Thousands)
---------------- -------------- ---------------
Amount Ratio Amount Ratio Amount Ratio
As of March 30, 1998:
Total Capital:
(To Risk Weighted Assets) $47,768 37.5% $10,180 8.0% $12,725 10.0%
Tier I Capital:
(To Risk Weighted Assets) 46,921 36.9 N/A N/A 7,635 6.0
Tier I Capital:
(To Tangible Assets) 46,921 17.9 10,462 4.0 13,122 5.0
Tangible Capital:
(To Tangible Assets) 46,921 17.9 3,923 1.5 N/A N/A
7. SHAREHOLDERS' EQUITY
In August 1998, the Company received approval from the Office of Thrift
Supervision to repurchase 9%, or 422,539, of its outstanding shares. The
repurchase program was begun on August 13, 1998 and completed by August 27,
1998. It was recorded as a $4,225 reduction in common stock and a $6,550,989
reduction in paid in capital. The shares were purchased at an average price of
$15.51. The shares were repurchased in order to fund the Management
Recognition and Development Plan and the Employee Stock Option Plan. These
plans were approved by shareholders in August 1998 and will be implemented in
October 1998.
(10)
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ITEM 111.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Safe Harbor Clause. This report contains certain "forward-looking
statement's". The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is
including this statement for the express purpose of availing itself of the
protection of such safe harbor with respect to all of such forward-looking
statements. These forward-looking statements, which are included in
Management's Discussion and Analysis, describe future plans or strategies and
include the Company's expectations of future financial results. The words
"believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward-looking statements. The Company's ability to
predict results or the effect of future plans or strategies is inherently
uncertain. Factors which could affect actual results include interest rate
trends, the general economic climate in the Company's market area and the
country as a whole, loan delinquency rates, and changes in federal and state
regulation. These factors should be considered in evaluating the forward-
looking statements, and undue reliance should not be placed on such
statements.
General
The Bank is regulated by the Office of Thrift Supervision ("OTS") and its
deposits are insured up to applicable limits under the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
The Bank is a member of the Federal Home Loan Bank of Seattle, conducting its
business through seven office facilities, with the headquarters located in
Baker City, Oregon. The primary market areas of the Bank are the counties of
Wallowa, Union, Baker, Malheur, Harney and Grant in Eastern Oregon.
As a traditional, community-oriented savings bank, the Bank focuses on
customer service within its principal market area. The Bank's primary market
activity is attracting deposits from the general public and using those and
other available sources of funds to originate permanent residential one-to-
four family real estate loans within its market area and, to a lesser extent,
loans on commercial property and multi-family dwellings. At September 30,
1998, one to four family residential mortgage loans totaled $102.6 million, or
61.4% of total loans receivable. The Bank began supplementing its traditional
lending activities in 1996 with the development of commercial business loans,
agricultural loans and the purchase of dealer-originated automobile contracts.
The Bank has hired experienced commercial lending officers familiar with the
Bank's primary market area in an attempt to develop commercial business and
agricultural lending and to expand the purchase of dealer-originated
automobile contracts. As a result of these activities at September 30, 1998
the Bank had agricultural loans of $7.9 million, commercial business loans of
$10.8 million, commercial real estate loans of $8.3 million, and automobile
loans of $ 8.7 million (including $7.1 million of purchased dealer-originated
contracts).
(11)
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Net interest income, which is the difference between interest and dividend
income on interest-earning assets, primarily loans and investment securities,
and interest expense on interest-bearing deposits and borrowings, is the major
source of income for the Company. Because the Company depends primarily on
net interest income for its earnings, the focus of the Company's management is
to create and implement strategies that will provide stable, positive spreads
between the yield on interest-earning assets and the cost of interest-bearing
liabilities. Such strategies include increasing the origination of commercial
and agricultural loans with rates that are adjustable based upon the Wall
Street Journal prime rate. Commercial and agricultural loans outstanding
totaled $6.0 million and $5.0 million, respectively at March 31, 1998 and
increased to $10.8 million and $7.9 million respectively at September 30,
1998. The Bank has also increased origination of shorter term consumer loans,
increasing auto loans from $5.7 million at March 31, 1998 to $8.7 million at
September 30, 1998.
To a lesser degree, the net earnings of the Company rely on the level of its
non-interest income. The Company is pursuing strategies to improve its
service charge and fee income, and control its non-interest expense, which
includes employee compensation and benefits, occupancy and equipment expense,
deposit insurance premiums and miscellaneous other expenses, as well as
federal and state income tax expense. At September 30, 1998, the Bank
recognized additional employee compensation and benefit expenses associated
with the ESOP amounting to approximately $174,000 related to the release of
1/28th of the 375,590 ESOP shares. Shares were valued at $13.00, the closing
price of the Company's stock on September 30, 1998. The release of the shares
resulted in a reduction of $134,139 in unearned ESOP shares and an increase of
$40,243 in additional paid-in Capital. The implementation of the Management
Recognition and Development Plan (MRDP) in October 1998 will result in
recognition of additional material employee compensation and benefit expense
in future periods. Based upon shares granted as of October 8, 1998 and
related vesting schedules the actual aggregate amount of this new expense will
approximate $190,000 in fiscal year 1999, and $379,000 for fiscal years 2000,
2001, and 2002. The expense for fiscal year 2003 is estimated at $252,000 and
$64,000 for fiscal year 2004. Estimates of expense are based upon the average
market price of $11.15 per share on the date of grant. An approximate 40,000
shares remain in the plan and have not been granted. Accordingly, the actual
aggregate amount of any new expense related to the uncommitted shares cannot
be currently predicted because generally accepted accounting principals
require that such expense be based on the fair market value of the shares of
common stock when the remaining shares are granted.
Year 2000
Data Processing for the Bank is done in-house primarily on an AS400 IBM
computer. In December 1997 the Company converted to new core software which
was purchased at a cost of approximately $250,000. The software purchased is
used to process all savings, loan and related general ledger transactions.
The vendor has given assurance that their software is Year 2000 compliant and
that no problems will arise from the turn of the century. Testing of the Jack
Henry system by the vendor and all users for Year 2000 compliance commenced in
September 1998 with satisfactory results on tests completed. The Bank
anticipates that further tests will be successful based upon representations
received from the vendor.
(12)
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However, in the event that testing the Jack Henry system is not successful,
the Bank's contingency plan is to pursue conversion to a third party service
bureau. In addition to the core software, the Bank uses various personal
computer software products, some of which are already Year 2000 compliant.
Others are being monitored and the Bank is proactively communicating with
vendors to determine their course of action to become fully compliant. The
Bank anticipates replacing some computer hardware related to Year 2000
compliance with an approximate cost of $80,000 over the next 15 months. The
entire cost of the Year 2000 compliance project is estimated at approximately
$375,000 which includes awareness, assessment, renovation, validation and
implementation. Of this total estimate $ 270,000 has been spent to date.
Changes in Financial Condition
At September 30, 1998, the consolidated assets of the Company totaled $274.6
million, an increase of $11.4 million, or 4.3%, from $263.2 million at March
31, 1998. The primary reason for the increase was a $13.1 million increase in
net loans receivable and an $11.1 million increase in securities available for
sale. These increases were partially offset by an $11.5 million decrease in
cash and cash equivalents and a $2.0 million decrease in securities held to
maturity. Approximately $6.8 million of the decrease in cash was due to the
maturity of a short-term deposit in April 1998.
Net loans receivable increased by $13.1 million, or 8.5%, to $167.0 million at
September 30, 1998 compared to $153.8 million at March 31, 1998. The increase
was primarily the result of continued new loan demand for all types of loans
exceeding loan repayments.
Nonperforming assets, consisting of non-accruing loans and other repossessed
assets, decreased $32,000 from $588,000 at March 31, 1998 to $556,000 at
September 30, 1998, primarily due to the sale of approximately $189,000 of
real estate owned in April 1998, resulting in no gain or loss, partially
offset by the addition of $170,000 of residential mortgage loans to nonaccrual
status in September 1998. Real estate owned amounted to $111,000 at September
30, 1998 compared to $313,000 at March 31, 1998. Nonperforming assets were
.20% of total assets at September 30, 1998, compared to .22% at March 31,
1998. The allowance for loan losses was 227% of nonperforming loans at
September 30, 1998, compared to 308% at March 31, 1998.
Investment securities increased $9.1 million, from $77.8 million at March 31,
1998 to $86.9 million at September 30, 1998. The increase included the
purchase of $18.0 million of fixed rate government agency mortgage backed
securities and $3.5 million of government agency medium term notes and
$405,000 of AAA rated municipal bonds of several Oregon municipalities. These
increases were partially offset by $10.7 million of government agency medium
term notes that were either called or matured and $2.4 million of principal
payments on government agency mortgage backed securities. Savings deposits
decreased $4.4 million, or 2.3%, from $192.7 million at March 31, 1998 to
$188.3 million at September 30, 1998. The decrease is primarily attributable
to the maturity of a $6.8 million short term time certificate in April 1998
partially offset by a $2.7 million increase in non-interest bearing checking
accounts.
(13)
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<PAGE>
Other liabilities increased $12.1 million due to the purchase of $12.1 million
of government agency mortgage backed securities which did not settle until
October 1998. Advances from borrowers for taxes and insurance increased $1.1
million, or 133.6%, from $789,000 at March 31, 1998 to $1.8 million at
September 30, 1998. Taxes are paid annually in November and accordingly, such
deposits increase ratably from December to November when the taxes are paid.
The Bank had $7.5 million in advances from the FHLB at September 30, 1998.
There were no such advances at March 31, 1998.
Total shareholders' equity decreased $4.8 million to $62.5 million at
September 30, 1998 from $67.3 million at March 31, 1998. The decrease is
primarily due to the repurchase of 9% or 422,539 of outstanding shares in
August 1998, which decreased common stock by $4,000 and paid in capital by
$6.6 million. These decreases were partially offset by earnings for the six
month period ended September 30, 1998 of $1.6 million. The release of 1/14th
of the 375,590 ESOP shares during the six month period ended September 30,
1998 increased equity by $386,000 and dividends paid of $433,000 offset this
increase. The tax effected increase in market value of securities available
for sale accounted for $197,000 of the remaining increase.
Results of Operations
Comparison of Six Months Ended September 30, 1998 and 1997
General. The increase in net income of $229,000 was primarily due to an
increase in net interest income partially offset by increased non-interest
expense. Net interest income increased $1.5 million, or 33.7%, comparing the
six month period ending September 30, 1998 to the same period in the prior
year. Interest income increased $1.0 million while interest expense decreased
$494,000. Non-interest income decreased $43,000 while the provision for loan
losses increased $122,000. Non-interest expense increased $905,000, and
income taxes increased $235,000. This resulted in net income increasing by
$229,000, or 16.6% for the six months ended September 30, 1998.
Interest Income. The increase of $1.0 million in interest income was
generated by an additional $30.8 million in average interest earning assets
for the six months ended September 30, 1998 compared to the same period in
1997. The increase in average interest earning assets was primarily due to
increases in the average loan portfolio of $17.2 million and the average
investment portfolio of $12.5 million.
The average yield on interest earning assets decreased from 7.96% for the six
months ending September 30, 1997 to 7.81% for the same period in the current
year. The decrease in the average yield was primarily due to the $12.5
million increase in the average balance of investments, mostly medium term
notes yielding at a lower rate. In addition, there was a significant amount
of mortgage refinance activity whereby mortgage loans were refinanced with
larger balances at lower rates.
(14)
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<PAGE>
Interest Expense. Interest expense on savings deposits decreased by $336,000
for the six months ended September 30, 1998 compared to the same period of
1997. Average deposits decreased by $7.1 million for the same period. The
average interest paid on deposits declined 21 basis points from 4.06% for the
six months ended September 30, 1997 to 3.85% for the same period in 1998. The
cost of deposits declined primarily due to an increased balance of lower
costing core deposits in the deposit mix.
Provision for Loan Losses. The provision for loan losses was $74,000 and net
charge-offs amounted to $19,000 during the six months ended September 30, 1997
compared to a provision for loan losses of $196,000 and net charge-offs of
$32,000 for the six month period ended September 30, 1998. The provision was
increased during the quarter ended September 30, 1998 primarily in response to
portfolio growth, especially in commercial, agricultural and consumer loans,
and additionally due to net charge-offs. At September 30, 1998, the allowance
for loan losses was equal to 227% of non-performing loans compared to 308% at
March 31, 1998. The decrease in the coverage ratio at September 30, 1998 was
the result of an increase in non-performing loans from $275,000 at March 31,
1998 to $445,000 at September 30, 1998 due to an increase in past due
residential mortgage loans.
Non-Interest Income. Non-interest income decreased $43,000, or 8.2%, to
$483,000 for the six months ended September 30, 1998 from $526,000 for the six
months ended September 30, 1997. The decrease was attributable to a $51,000
gain on the sale of a branch building located in La Grande, Oregon in the
prior year period. Non-interest income primarily fee income on customer
accounts, which has remained level year over year, was partially offset by a
$13,000 write down on real estate owned in the current year due to an
adjustment in estimate of net realizable value.
Non-Interest Expense. Non-interest expense increased $905,000, or 32.8% to
$3.7 million for the six months ended September 30, 1998, from $2.8 million
for the comparable period in 1997. The increase is primarily attributable to
an increase in employee compensation and benefits of $526,000. Non-cash ESOP
expense of $386,000 related to the release of 1/14th of the ESOP shares during
the six months ended September 30, 1998 was included in compensation expense.
The remaining increase was due to staff additions, salary increases and an
increase in the cost of employee benefits which includes health insurance.
The remaining $379,000 of increased non-interest expense included an $85,000
increase in advertising expense due to stockholder communications such as the
annual report and proxy statement, as well as a $106,000 increase in other
expense related to the increase in core deposit accounts, loan growth and
extensive employee training efforts. Supplies, postage and telephone
increased $37,000 due to regular price increases and the addition of more and
newer efficient phone lines to outlying branches. Depreciation increased
$39,000 due to the purchase of capitalized technology upgrades. Finally,
professional fees increased $52,000 due to more extensive use of attorneys and
auditors as a public company.
(15)
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<PAGE>
Income Taxes. The provision for income taxes increased $235,000 for the six
months ended September 30, 1998 compared with the same period in the prior
year. The increase was attributable to a higher level of net income before
taxes, as well as $386,000 of ESOP compensation expense which is not entirely
deductible for taxes in the current or future periods.
Results of Operations
Comparison of Three Months Ended September 30, 1998 and 1998
General. Net income increased $108,000 from $722,000 for the three months
ended September 30, 1997 to $830,000 for the three months ended September 30,
1998. This increase was primarily attributable to increased net interest
income of $745,000 partially offset by an increase of $469,000 in non-interest
expense and a $94,000 increase in the tax provision due to the partially
nondeductible nature of ESOP expense and additional net taxable income.
Interest Income. Additional interest income generated by the $17.4 million
increase in average interest earning assets contributed to an increase of
$367,000 in interest income for the three months ended September 30, 1998
compared to the same period in 1997. The average yield on interest earning
assets increased from 7.87% for the three months ended September 30, 1997 to
7.90% for the three months ended September 30, 1998. The increase is
primarily due to an adjustment to deferred loan fee amortization. Without
this adjustment the average yield for the three months ended September 30,
1998 would have been only 7.82%.
Interest Expense. Interest expense on savings deposits decreased $297,000 for
the three months ended September 30, 1998 as compared to the same period
in1997 due to a decrease in average deposits of approximately $21.6 million.
The decrease in the average balance was due to subscription proceeds related
to the mutual to stock conversion, which had been collected at September 30,
1997 and were held in deposit accounts until October 3, 1997. The average
interest paid on deposits decreased 17 basis points from 4.00% for the three
months ended September 30, 1997 to 3.83% for the same period in the current
year as a result of an increase in the average balance of non-interest bearing
checking accounts.
Provision for Loan Losses. The provision for loan losses was $111,000 and net
charge-offs amounted to $28,000 during the three months ended September 30,
1998 compared to a $43,000 provision and $16,000 of net charge-offs during the
three months ended September 30, 1997. The provision was increased during the
quarter ended June 30, 1998 primarily in response to portfolio growth
especially in commercial, agricultural and consumer loans, and also due to net
charge-offs.
Non-Interest Income. Non-interest income decreased $6,000, or 2.4%, to
$245,000 for the three months ended September 30, 1998 from $251,000 for the
three months ended September 30, 1997 primarily due to a $13,000 write down of
real estate owned.
(16)
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<PAGE>
Non-Interest Expense. Non-interest expense increased $469,000, or 33.5%, to
$1.9 million for the three months ended September 30, 1998 from $1.4 million
in the comparable period in 1997. The increase is primarily attributable to
$272,000 of increased compensation and benefits expense. Of the increase,
$174,000 is due to the release of 1/28th of the ESOP shares on September 30,
1998 and the remainder is due to staff increases, normal salary increases and
increased employee benefit expense. Advertising expense increased $50,000 due
to increased radio and newspaper advertising. Professional fees increased
$32,000 primarily due to increased audit and legal fees related to doing
business as a public entity. An increase of $46,000 in other expenses is
attributable to employee training and relocation of new employees to the
Bank's market area as well as increased expenses related to checking account
and loan growth. Increases in utilities and supplies expenses relate to space
and staff additions.
Income Taxes. The provision for income taxes increased $94,000 for the three
months ended September 30, 1998 compared with the same period in the prior
year. The increase was attributable to a higher level of net income before
taxes, as well as $174,000 of ESOP compensation expense which is not entirely
deductible for taxes in the current or future periods.
Item No. 3 Quantitative and Qualitative Disclosures about Market Risk
During the quarter ended September 30, 1998, there was no material change in
the market risk disclosures included in the Company's Form 10-K for the year
ended March 31, 1998.
(17)
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is involved in various claims and legal actions arising
in the normal course of business. Management believes that these
proceedings will not result in a material loss to the Company.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's Annual Meeting of Stockholders ("Meeting") was held on
August 4, 1998. The results of the vote on the matters presented at
the Meeting were as follows:
1. The following individuals were elected as directors for the terms
specified:
Vote For Vote Withheld
-------- -------------
Albert H. Durgan 4,105,969 101,919
(Term Expires 1999)
Edward H. Elms 4,103,747 104,141
(Term Expires 1999)
Jerry F. Aldape 4,103,208 104,680
(Term Expires 1999)
Stephen R. Whittemore 4,098,002 109,886
(Term Expires 2000)
Charles Rouse 4,107,627 100,261
(Term Expires 2000)
John Gentry 4,101,786 106,102
(Term Expires 2001)
John Lienkeamper 4,104,647 103,241
(Term Expires 2001)
The above individuals constitute all of the members of the Company's
Board of Directors.
2. The Company's 1998 Stock Option Plan was approved by stockholders by
the following vote:
For 2,630,026; Against 296,424; Abstain 44,936
3. The Company's Management Recognition and Development Plan was
approved by stockholders by the following vote:
For 2,557,442; Against 373,652; Abstain 40,291
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
3(a) Articles of Incorporation of the Registrant*
3(b) Bylaws of the Registrant*
(18)
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10(a) Employment Agreement with Jerry F. Aldape
10(b) Severance Agreement with Nadine J. Johnson**
10(c) Severance Agreement with William H. Winegar**
10(d) Employment Agreement with Zane Lockwood
10(e) Severance Agreement with Thomas F. Bennett
10(f) Severance Agreement with Jerry Kincaid
10(g) Employee Severance Compensation Plan**
10(h) Pioneer Bank, a Federal Savings Bank Employee Stock
Ownership Plan
10(i) Pioneer Bank, a Federal Savings Bank 401(k) Plan*
10(j) Pioneer Bank Director Emeritus Plan***
10(k) 1998 Stock Option Plan***
10(l) 1998 Management Recognition and Development Plan***
13 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule
99 Former Independent Auditor's Report
- -------------
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (333-30051), as amended.
** Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended September 30, 1997.
*** Incorporated by reference to the Registrant's Definitive Proxy Statement
for the 1998 Annual Meeting of Shareholders.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the quarter ended
September 30, 1998.
(19)
<PAGE>
<PAGE>
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OREGON TRAIL FINANCIAL CORP.
Date: November 13, 1998 By: /s/ Jerry F. Aldape
-------------------------------------
Jerry F. Aldape, President and
Chief Executive Officer
Date: November 13, 1998 By: /s/ Nadine J. Johnson
-------------------------------------
Nadine J. Johnson, Chief Financial
Officer and Corporate Secretary
(20)
PAGE
<PAGE>
Exhibit 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of October 6, 1998, by and between
PIONEER BANK, FSB (the "BANK"); OREGON TRAIL FINANCIAL CORP. (the "COMPANY"),
an Oregon corporation; and JERRY F. ALDAPE ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE
for the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to serve
as President and Chief Executive Officer of the BANK. During said period,
EXECUTIVE also agrees to serve, if elected, as an officer or director of the
COMPANY or any subsidiary or affiliate of the COMPANY or the BANK. Executive
shall render administrative and management duties to the BANK such as are
customarily performed by persons situated in a similar executive capacity.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of
the date first above written and shall continue for a period of eighteen (18)
full calendar months thereafter. Commencing on the first anniversary date,
and continuing at each anniversary date thereafter, the Board of Directors of
the BANK (the "Board") may extend the Agreement for an additional year. Prior
to the extension of the Agreement as provided herein, the Board of Directors
of the BANK will conduct a formal performance evaluation of EXECUTIVE for
purposes of determining whether to extend the Agreement, and the results
thereof shall be included in the minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the
approval of the Board, as evidenced by a resolution of such Board, from time
to time, EXECUTIVE may serve, or continue to serve, on the boards of directors
of, and hold any other offices or positions in, companies or organizations,
which, in such Board's judgment, will not present any conflict of interest
with the BANK, or materially affect the performance of EXECUTIVE's duties
pursuant to this Agreement.
<PAGE>
<PAGE>
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Sections 1 and 2. The
BANK shall pay EXECUTIVE as compensation a salary of $103,500 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement,
EXECUTIVE's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement.
Such review shall be conducted by a Committee designated by the Board, and the
Board may increase EXECUTIVE's Base Salary. In addition to the Base Salary
provided in this Section 3(a), the BANK shall provide EXECUTIVE at no cost to
EXECUTIVE with all such other benefits as are provided uniformly to permanent
full-time employees of the BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, and the BANK will not,
without EXECUTIVE's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect EXECUTIVE's rights or
benefits thereunder. Without limiting the generality of the foregoing
provisions of this Subsection (b), EXECUTIVE will be entitled to participate
in or receive benefits under any employee benefit plans including, but not
limited to, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health-and-accident plan, medical coverage or any other
employee benefit plan or arrangement made available by the BANK in the future
to its senior executives and key management employees, subject to, and on a
basis consistent with, the terms, conditions and overall administration of
such plans and arrangements. EXECUTIVE will be entitled to incentive
compensation and bonuses as provided in any plan, or pursuant to any
arrangement of the BANK, in which EXECUTIVE is eligible to participate.
Nothing paid to EXECUTIVE under any such plan or arrangement will be deemed to
be in lieu of other compensation to which EXECUTIVE is entitled under this
Agreement, except as provided under Section 5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable travel
and other obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the BANK of EXECUTIVE's full-time employment hereunder for any
reason other than a Change in Control, as defined in Section 5(a) hereof;
death; retirement, as defined in Section 6 hereof; or Termination for Cause,
as defined in Section 7 hereof; (ii)
2
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<PAGE>
EXECUTIVE's resignation from the BANK's employ, upon (A) unless consented to
by EXECUTIVE, a material change in EXECUTIVE's function, duties, or
responsibilities, which change would cause EXECUTIVE's position to become one
of lesser responsibility, importance, or scope from the position and
attributes thereof described in Sections 1 and 2, above (any such material
change shall be deemed a continuing breach of this Agreement), (B) a
relocation of EXECUTIVE's principal place of employment by more than 45 miles
from its location at the effective date of this Agreement, or a material
reduction in the benefits and perquisites to EXECUTIVE from those being
provided as of the effective date of this Agreement, (C) the liquidation or
dissolution of the BANK, or (D) any breach of this Agreement by the BANK.
Upon the occurrence of any event described in clauses (A), (B), (C) or (D),
above, EXECUTIVE shall have the right to elect to terminate his employment
under this Agreement by resignation upon not less than sixty (60) days prior
written notice given within a reasonable period of time not to exceed, except
in case of a continuing breach, four (4) calendar months after the event
giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to the payments due to EXECUTIVE for
the remaining term of the Agreement, including Base Salary, bonuses, and any
other cash or deferred compensation paid or to be paid (including the value of
employer contributions that would have been made on EXECUTIVE's behalf over
the remaining term of the agreement to any tax-qualified retirement plan
sponsored by the BANK as of the Date of Termination), to EXECUTIVE for the
term of the Agreement provided, however, that if the BANK is not in compliance
with its minimum capital requirements or if such payments would cause the
BANK's capital to be reduced below its minimum capital requirements, such
payments shall be deferred until such time as the BANK is in capital
compliance. All payments made pursuant to this Section 4(b) shall be paid in
substantially equal monthly installments over the remaining term of this
Agreement following EXECUTIVE's termination; provided, however, that if the
remaining term of the Agreement is less than one (1) year (determined as of
EXECUTIVE's Date of Termination), such payments and benefits shall be paid to
EXECUTIVE in a lump sum within thirty (30) days of the Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will cause
to be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the BANK for EXECUTIVE prior to his
termination. Such coverage shall cease upon the expiration of the remaining
term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall
have occurred a Change in Control of the COMPANY or the BANK. For purposes of
this Agreement, a "Change in Control" of the COMPANY or the BANK shall be
deemed to occur if and when (a) an offeror other than the Corporation
purchases shares of the stock of the Corporation or the Bank pursuant to a
tender or
3
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<PAGE>
exchange offer for such shares, (b) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the Corporation or the Bank
representing twenty-five percent (25%) or more of the combined voting power of
the Corporation's or the Bank's then outstanding securities, (c) the
membership of the board of directors of the Corporation or the Bank changes as
the result of a contested election, such that individuals who were directors
at the beginning of any twenty-four (24) month period (whether commencing
before or after the date of adoption of this Agreement) do not constitute a
majority of the Board at the end of such period, or (d) shareholders of the
Corporation or the Bank approve a merger, consolidation, sale or disposition
of all or substantially all of the Corporation's or the Bank's assets, or a
plan of partial or complete liquidation.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control has occurred, EXECUTIVE shall
be entitled to the benefits provided in paragraphs (c), (d) and (e) of this
Section 5 upon his subsequent involuntary termination following the effective
date of a Change in Control (or voluntary termination within twelve (12)
months of the effective date of a Change in Control following any demotion,
loss of title, office or significant authority, reduction in his annual
compensation or benefits (other than a reduction affecting the BANK's
personnel generally), or relocation of his principal place of employment by
more than 35 miles from its location immediately prior to the Change in
Control), unless such termination is because of his death, retirement as
provided in Section 6, termination for Cause.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of
his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, as severance pay or liquidated damages, or both, a sum equal to
2.99 times EXECUTIVE's "base amount," within the meaning of Section 280G(b)(3)
of the Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall
be made in a lump sum paid within ten (10) days of EXECUTIVE's Date of
Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. In addition,
EXECUTIVE shall be entitled to receive the value of employer contributions
that would have been made on EXECUTIVE's behalf over the remaining term of the
agreement to any tax-qualified retirement plan sponsored by the BANK as of the
Date of Termination. Such coverage and payments shall cease upon the
expiration of thirty-six (36) months.
(e) Upon the occurrence of a Change in Control, EXECUTIVE shall be
entitled to receive benefits due him under, or contributed by the COMPANY or
the BANK on his behalf, pursuant to any retirement, incentive, profit sharing,
bonus, performance, disability or other employee benefit plan maintained by
the BANK or the COMPANY on EXECUTIVE's behalf to the extent that such benefits
are not otherwise paid to EXECUTIVE upon a Change in Control.
4
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<PAGE>
(f) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in
Control, would be deemed to include an "excess parachute payment" under
Section 280G of the Code, then, at the election of EXECUTIVE, (i) such
payments or benefits shall be payable or provided to EXECUTIVE over the
minimum period necessary to reduce the present value of such payments or
benefits to an amount which is one dollar ($1.00) less than three (3) times
EXECUTIVE's "base amount" under Section 280G(b)(3) of the Code or (ii) the
payments or benefits to be provided under this Section 5 shall be reduced to
the extent necessary to avoid treatment as an excess parachute payment with
the allocation of the reduction among such payments and benefits to be
determined by EXECUTIVE.
6. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to
him. Upon termination of EXECUTIVE upon Retirement, EXECUTIVE shall be
entitled to all benefits under any retirement plan of the BANK or the COMPANY
and other plans to which EXECUTIVE is a party. Upon the death of EXECUTIVE
during the term of this Agreement, the BANK shall pay to EXECUTIVE's estate
the compensation due to EXECUTIVE through the last day of the calendar month
in which his death occurred. Upon the voluntary resignation of EXECUTIVE
during the term of this Agreement, other than in connection with an Event of
Termination, the BANK shall pay to EXECUTIVE the compensation due to EXECUTIVE
through his Date of Termination.
7. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
For purposes of this Section, no act, or the failure to act, on EXECUTIVE's
part shall be "willful" unless done, or omitted to be done, not in good faith
and without reasonable belief that the action or omission was in the best
interest of the BANK or its affiliates. Notwithstanding the foregoing,
EXECUTIVE shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to him a copy of a resolution duly
adopted by the affirmative vote of not less than three-fourths (3/4) of the
members of the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to EXECUTIVE and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, EXECUTIVE was guilty of conduct justifying
termination for Cause and specifying the reasons thereof. EXECUTIVE shall not
have the right to receive compensation or other benefits for any period after
termination for Cause. Any stock options granted to EXECUTIVE under any stock
option plan or any unvested awards granted under any
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other stock benefit plan of the BANK, the COMPANY, or any subsidiary or
affiliate thereof, shall become null and void effective upon EXECUTIVE's
receipt of Notice of Termination for Cause pursuant to Section 9 hereof, and
shall not be exercisable by EXECUTIVE at any time subsequent to such
Termination for Cause.
8. REQUIRED PROVISIONS.
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits
for any period after Termination for Cause as defined in Section 8 herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in
part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting parties
shall not be affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated (except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA
or (ii) by the Director, or his designee at the time the Director or such
designee approves a supervisory merger to resolve problems related to
operation of the BANK or when the BANK is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
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9. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of EXECUTIVE's employment under the
provision so indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day period), and (B) if
his employment is terminated for any other reason, other than Termination for
Cause, the date specified in the Notice of Termination. In the event of
EXECUTIVE's Termination for Cause, the Date of Termination shall be the same
as the date of the Notice of Termination.
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence
of a Change in Control and voluntary termination by EXECUTIVE in which case
the Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order or decree of a court of competent
jurisdiction (the time for appeal there from having expired and no appeal
having been perfected) and provided further that the Date of Termination shall
be extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
BANK will continue to pay EXECUTIVE his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
Base Salary) and continue him as a participant in all compensation, benefit
and insurance plans in which he was participating when the notice of dispute
was given, until the dispute is finally resolved in accordance with this
Agreement. Amounts paid under this Section are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.
10. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to
an Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not
to compete with the BANK and/or the COMPANY for a period of one (1) year
following such termination in any city, town or county in which the BANK and/
or the COMPANY has an office or has filed an application for regulatory
approval to establish an office, determined as of the effective date of such
termination. EXECUTIVE agrees that during such period and within said cities,
towns and counties, EXECUTIVE shall not work for or advise, consult or
otherwise serve with, directly or indirectly, any entity whose business
materially competes with the depository, lending or other business
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activities of the BANK and/or the COMPANY. The parties hereto, recognizing
that irreparable injury will result to the BANK and/or the COMPANY, its
business and property in the event of EXECUTIVE's breach of this Subsection
10(a) agree that in the event of any such breach by EXECUTIVE, the BANK and/or
the COMPANY will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by EXECUTIVE,
EXECUTIVE's partners, agents, servants, employers, employees and all persons
acting for or with EXECUTIVE. EXECUTIVE represents and admits that in the
event of the termination of his employment pursuant to Section 4 hereof,
EXECUTIVE's experience and capabilities are such that EXECUTIVE can obtain
employment in a business engaged in other lines and/or of a different nature
than the BANK and/or the COMPANY, and that the enforcement of a remedy by way
of injunction will not prevent EXECUTIVE from earning a livelihood. Nothing
herein will be construed as prohibiting the BANK and/or the COMPANY from
pursuing any other remedies available to the BANK and/or the COMPANY for such
breach or threatened breach, including the recovery of damages from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the business of the BANK. EXECUTIVE will not, during or
after the term of his employment, disclose any knowledge of the past, present,
planned or considered business activities of the BANK or affiliates thereof to
any person, firm, corporation, or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, EXECUTIVE may disclose any
knowledge of banking, financial and/or economic principles, concepts or ideas
which are not solely and exclusively derived from the business plans and
activities of the BANK. In the event of a breach or threatened breach by
EXECUTIVE of the provisions of this Section, the BANK will be entitled to an
injunction restraining EXECUTIVE from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of
the BANK or affiliates thereof, or from rendering any services to any person,
firm, corporation, other entity to whom such knowledge, in whole or in part,
has been disclosed or is threatened to be disclosed. Nothing herein will be
construed as prohibiting the BANK from pursuing any other remedies available
to the BANK for such breach or threatened breach, including the recovery of
damages from EXECUTIVE.
11. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees
all payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
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12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE (including EXECUTIVE'S prior employment
agreement dated October 6, 1997), except that this Agreement shall not affect
or operate to reduce any benefit or compensation inuring to EXECUTIVE of a
kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
13. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and
any attempt, voluntary or involuntary, to affect any such action shall be
null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act
other than that specifically waived.
15. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
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16. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
17. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Oregon,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or
state law or regulation, the provisions of such law or regulation shall
prevail.
18. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a
panel of three arbitrators sitting in a location selected by the employee
within one hundred (100) miles from the location of the BANK, in accordance
with the rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that EXECUTIVE shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if successful pursuant to a legal judgment,
arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest extent
permitted under law against all expenses and liabilities reasonably incurred
by him in connection with or arising out of any action, suit or proceeding in
which he may be involved by reason of his having been a director or officer of
the BANK (whether or not he continues to be a directors or officer at the time
of incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.
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21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent
that the BANK or the COMPANY would be required to perform if no such
succession or assignment had taken place.
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement
to be executed and their seal to be affixed hereunto by a duly authorized
officer, and EXECUTIVE has signed this Agreement, all on the 6th day of
October, 1998.
ATTEST: PIONEER BANK, FSB
/s/ Nadine J. Johnson By:/s/ Stephen R. Whittemore
- ------------------------------ ---------------------------------
[SEAL]
ATTEST: OREGON TRAIL FINANCIAL CORP.
/s/ Nadine J. Johnson By:/s/ Stephen R. Whittemore
- ------------------------------ ---------------------------------
[SEAL]
WITNESS:
/s/ Chad M. Holt /s/ Jerry F. Aldape
- ------------------------------ ---------------------------------
Jerry F. Aldape
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Exhibit 10(d)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of October 6, 1998, by and between
PIONEER BANK, FSB (the "BANK"); OREGON TRAIL FINANCIAL CORP. (the "COMPANY"),
an Oregon corporation; and ZANE F. LOCKWOOD ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE
for the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to serve
as Senior Vice President (Customer Service) of the BANK. During said period,
EXECUTIVE also agrees to serve, if elected, as an officer of the COMPANY or
any subsidiary or affiliate of the COMPANY or the BANK. Executive shall
render administrative and management duties to the BANK such as are
customarily performed by persons situated in a similar executive capacity.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of
the date first above written and shall continue for a period of eighteen (18)
full calendar months thereafter. Commencing on the first anniversary date,
and continuing at each anniversary date thereafter, the Board of Directors of
the BANK (the "Board") may extend the Agreement for an additional year. Prior
to the extension of the Agreement as provided herein, the Board of Directors
of the BANK will conduct a formal performance evaluation of EXECUTIVE for
purposes of determining whether to extend the Agreement, and the results
thereof shall be included in the minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the
approval of the Board, as evidenced by a resolution of such Board, from time
to time, EXECUTIVE may serve, or continue to serve, on the boards of directors
of, and hold any other offices or positions in, companies or organizations,
which, in such Board's judgment, will not present any conflict of interest
with the BANK, or materially affect the performance of EXECUTIVE's duties
pursuant to this Agreement.
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3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Sections 1 and 2. The
BANK shall pay EXECUTIVE as compensation a salary of $72,000 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement,
EXECUTIVE's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement.
Such review shall be conducted by a Committee designated by the Board, and the
Board may increase EXECUTIVE's Base Salary. In addition to the Base Salary
provided in this Section 3(a), the BANK shall provide EXECUTIVE at no cost to
EXECUTIVE with all such other benefits as are provided uniformly to permanent
full-time employees of the BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, and the BANK will not,
without EXECUTIVE's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect EXECUTIVE's rights or
benefits thereunder. Without limiting the generality of the foregoing
provisions of this Subsection (b), EXECUTIVE will be entitled to participate
in or receive benefits under any employee benefit plans including, but not
limited to, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health-and-accident plan, medical coverage or any other
employee benefit plan or arrangement made available by the BANK in the future
to its senior executives and key management employees, subject to, and on a
basis consistent with, the terms, conditions and overall administration of
such plans and arrangements. EXECUTIVE will be entitled to incentive
compensation and bonuses as provided in any plan, or pursuant to any
arrangement of the BANK, in which EXECUTIVE is eligible to participate.
Nothing paid to EXECUTIVE under any such plan or arrangement will be deemed to
be in lieu of other compensation to which EXECUTIVE is entitled under this
Agreement, except as provided under Section 5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable travel
and other obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the BANK of EXECUTIVE's full-time employment hereunder for any
reason other than a Change in Control, as defined in Section 5(a) hereof;
death; retirement, as defined in Section 6 hereof; or Termination for Cause,
as defined in Section 7 hereof; (ii)
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EXECUTIVE's resignation from the BANK's employ, upon (A) unless consented to
by EXECUTIVE, a material change in EXECUTIVE's function, duties, or
responsibilities, which change would cause EXECUTIVE's position to become one
of lesser responsibility, importance, or scope from the position and
attributes thereof described in Sections 1 and 2, above (any such material
change shall be deemed a continuing breach of this Agreement), (B) a
relocation of EXECUTIVE's principal place of employment by more than 45 miles
from its location at the effective date of this Agreement, or a material
reduction in the benefits and perquisites to EXECUTIVE from those being
provided as of the effective date of this Agreement, (C) the liquidation or
dissolution of the BANK, or (D) any breach of this Agreement by the BANK.
Upon the occurrence of any event described in clauses (A), (B), (C) or (D),
above, EXECUTIVE shall have the right to elect to terminate his employment
under this Agreement by resignation upon not less than sixty (60) days prior
written notice given within a reasonable period of time not to exceed, except
in case of a continuing breach, four (4) calendar months after the event
giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to the payments due to EXECUTIVE for
the remaining term of the Agreement, including Base Salary, bonuses, and any
other cash or deferred compensation paid or to be paid (including the value of
employer contributions that would have been made on EXECUTIVE's behalf over
the remaining term of the agreement to any tax-qualified retirement plan
sponsored by the BANK as of the Date of Termination), to EXECUTIVE for the
term of the Agreement provided, however, that if the BANK is not in compliance
with its minimum capital requirements or if such payments would cause the
BANK's capital to be reduced below its minimum capital requirements, such
payments shall be deferred until such time as the BANK is in capital
compliance. All payments made pursuant to this Section 4(b) shall be paid in
substantially equal monthly installments over the remaining term of this
Agreement following EXECUTIVE's termination; provided, however, that if the
remaining term of the Agreement is less than one (1) year (determined as of
EXECUTIVE's Date of Termination), such payments and benefits shall be paid to
EXECUTIVE in a lump sum within thirty (30) days of the Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will cause
to be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the BANK for EXECUTIVE prior to his
termination. Such coverage shall cease upon the expiration of the remaining
term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall
have occurred a Change in Control of the COMPANY or the BANK. For purposes of
this Agreement, a "Change in Control" of the COMPANY or the BANK shall be
deemed to occur if and when (a) an offeror other than the Corporation
purchases shares of the stock of the Corporation or the Bank pursuant to a
tender or
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exchange offer for such shares, (b) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the Corporation or the Bank
representing twenty-five percent (25%) or more of the combined voting power of
the Corporation's or the Bank's then outstanding securities, (c) the
membership of the board of directors of the Corporation or the Bank changes as
the result of a contested election, such that individuals who were directors
at the beginning of any twenty-four (24) month period (whether commencing
before or after the date of adoption of this Agreement) do not constitute a
majority of the Board at the end of such period, or (d) shareholders of the
Corporation or the Bank approve a merger, consolidation, sale or disposition
of all or substantially all of the Corporation's or the Bank's assets, or a
plan of partial or complete liquidation.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control has occurred, EXECUTIVE shall
be entitled to the benefits provided in paragraphs (c), (d) and (e) of this
Section 5 upon his subsequent involuntary termination following the effective
date of a Change in Control (or voluntary termination within twelve (12)
months of the effective date of a Change in Control following any demotion,
loss of title, office or significant authority, reduction in his annual
compensation or benefits (other than a reduction affecting the BANK's
personnel generally), or relocation of his principal place of employment by
more than 35 miles from its location immediately prior to the Change in
Control), unless such termination is because of his death, retirement as
provided in Section 6, termination for Cause.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of
his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, as severance pay or liquidated damages, or both, a sum equal to
2.99 times EXECUTIVE's "base amount," within the meaning of Section
280G(b)(3) of the Internal Revenue Code of 1986 ("Code"), as amended. Such
payment shall be made in a lump sum paid within ten (10) days of EXECUTIVE's
Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. In addition,
EXECUTIVE shall be entitled to receive the value of employer contributions
that would have been made on EXECUTIVE's behalf over the remaining term of the
agreement to any tax-qualified retirement plan sponsored by the BANK as of the
Date of Termination. Such coverage and payments shall cease upon the
expiration of thirty-six (36) months.
(e) Upon the occurrence of a Change in Control, EXECUTIVE shall be
entitled to receive benefits due him under, or contributed by the COMPANY or
the BANK on his behalf, pursuant to any retirement, incentive, profit sharing,
bonus, performance, disability or other employee benefit plan maintained by
the BANK or the COMPANY on EXECUTIVE's behalf to the extent that such benefits
are not otherwise paid to EXECUTIVE upon a Change in Control.
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(f) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in
Control, would be deemed to include an "excess parachute payment" under
Section 280G of the Code, then, at the election of EXECUTIVE, (i) such
payments or benefits shall be payable or provided to EXECUTIVE over the
minimum period necessary to reduce the present value of such payments or
benefits to an amount which is one dollar ($1.00) less than three (3) times
EXECUTIVE's "base amount" under Section 280G(b)(3) of the Code or (ii) the
payments or benefits to be provided under this Section 5 shall be reduced to
the extent necessary to avoid treatment as an excess parachute payment with
the allocation of the reduction among such payments and benefits to be
determined by EXECUTIVE.
6. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to
him. Upon termination of EXECUTIVE upon Retirement, EXECUTIVE shall be
entitled to all benefits under any retirement plan of the BANK or the COMPANY
and other plans to which EXECUTIVE is a party. Upon the death of EXECUTIVE
during the term of this Agreement, the BANK shall pay to EXECUTIVE's estate
the compensation due to EXECUTIVE through the last day of the calendar month
in which his death occurred. Upon the voluntary resignation of EXECUTIVE
during the term of this Agreement, other than in connection with an Event of
Termination, the BANK shall pay to EXECUTIVE the compensation due to EXECUTIVE
through his Date of Termination.
7. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
For purposes of this Section, no act, or the failure to act, on EXECUTIVE's
part shall be "willful" unless done, or omitted to be done, not in good faith
and without reasonable belief that the action or omission was in the best
interest of the BANK or its affiliates. Notwithstanding the foregoing,
EXECUTIVE shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to him a copy of a resolution duly
adopted by the affirmative vote of not less than three-fourths (3/4) of the
members of the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to EXECUTIVE and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, EXECUTIVE was guilty of conduct justifying
termination for Cause and specifying the reasons thereof. EXECUTIVE shall not
have the right to receive compensation or other benefits for any period after
termination for Cause. Any stock options granted to EXECUTIVE under any stock
option plan or any unvested awards granted under any
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other stock benefit plan of the BANK, the COMPANY, or any subsidiary or
affiliate thereof, shall become null and void effective upon EXECUTIVE's
receipt of Notice of Termination for Cause pursuant to Section 9 hereof, and
shall not be exercisable by EXECUTIVE at any time subsequent to such
Termination for Cause.
8. REQUIRED PROVISIONS.
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits
for any period after Termination for Cause as defined in Section 8 herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in
part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting parties
shall not be affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated (except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA
or (ii) by the Director, or his designee at the time the Director or such
designee approves a supervisory merger to resolve problems related to
operation of the BANK or when the BANK is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
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9. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of EXECUTIVE's employment under the
provision so indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day period), and (B) if
his employment is terminated for any other reason, other than Termination for
Cause, the date specified in the Notice of Termination . In the event of
EXECUTIVE's Termination for Cause, the Date of Termination shall be the same
as the date of the Notice of Termination.
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence
of a Change in Control and voluntary termination by EXECUTIVE in which case
the Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order or decree of a court of competent
jurisdiction (the time for appeal there from having expired and no appeal
having been perfected) and provided further that the Date of Termination shall
be extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
BANK will continue to pay EXECUTIVE his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
Base Salary) and continue him as a participant in all compensation, benefit
and insurance plans in which he was participating when the notice of dispute
was given, until the dispute is finally resolved in accordance with this
Agreement. Amounts paid under this Section are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.
10. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to
an Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not
to compete with the BANK and/or the COMPANY for a period of one (1) year
following such termination in any city, town or county in which the BANK and/
or the COMPANY has an office or has filed an application for regulatory
approval to establish an office, determined as of the effective date of such
termination. EXECUTIVE agrees that during such period and within said cities,
towns and counties, EXECUTIVE shall not work for or advise, consult or
otherwise serve with, directly or indirectly, any entity whose business
materially competes with the depository, lending or other business
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activities of the BANK and/or the COMPANY. The parties hereto, recognizing
that irreparable injury will result to the BANK and/or the COMPANY, its
business and property in the event of EXECUTIVE's breach of this Subsection
10(a) agree that in the event of any such breach by EXECUTIVE, the BANK and/or
the COMPANY will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by EXECUTIVE,
EXECUTIVE's partners, agents, servants, employers, employees and all persons
acting for or with EXECUTIVE. EXECUTIVE represents and admits that in the
event of the termination of his employment pursuant to Section 4 hereof,
EXECUTIVE's experience and capabilities are such that EXECUTIVE can obtain
employment in a business engaged in other lines and/or of a different nature
than the BANK and/or the COMPANY, and that the enforcement of a remedy by way
of injunction will not prevent EXECUTIVE from earning a livelihood. Nothing
herein will be construed as prohibiting the BANK and/or the COMPANY from
pursuing any other remedies available to the BANK and/or the COMPANY for such
breach or threatened breach, including the recovery of damages from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the business of the BANK. EXECUTIVE will not, during or
after the term of his employment, disclose any knowledge of the past, present,
planned or considered business activities of the BANK or affiliates thereof to
any person, firm, corporation, or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, EXECUTIVE may disclose any
knowledge of banking, financial and/or economic principles, concepts or ideas
which are not solely and exclusively derived from the business plans and
activities of the BANK. In the event of a breach or threatened breach by
EXECUTIVE of the provisions of this Section, the BANK will be entitled to an
injunction restraining EXECUTIVE from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of
the BANK or affiliates thereof, or from rendering any services to any person,
firm, corporation, other entity to whom such knowledge, in whole or in part,
has been disclosed or is threatened to be disclosed. Nothing herein will be
construed as prohibiting the BANK from pursuing any other remedies available
to the BANK for such breach or threatened breach, including the recovery of
damages from EXECUTIVE.
11. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees
all payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or
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compensation inuring to EXECUTIVE of a kind elsewhere provided. No provision
of this Agreement shall be interpreted to mean that EXECUTIVE is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.
13. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and
any attempt, voluntary or involuntary, to affect any such action shall be
null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act
other than that specifically waived.
15. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
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16. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
17. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Oregon,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or
state law or regulation, the provisions of such law or regulation shall
prevail.
18. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a
panel of three arbitrators sitting in a location selected by the employee
within one hundred (100) miles from the location of the BANK, in accordance
with the rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that EXECUTIVE shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if successful pursuant to a legal judgment,
arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest extent
permitted under law against all expenses and liabilities reasonably incurred
by him in connection with or arising out of any action, suit or proceeding in
which he may be involved by reason of his having been a director or officer of
the BANK (whether or not he continues to be a directors or officer at the time
of incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.
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21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent
that the BANK or the COMPANY would be required to perform if no such
succession or assignment had taken place.
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement
to be executed and their seal to be affixed hereunto by a duly authorized
officer, and EXECUTIVE has signed this Agreement, all on the 6th day of
October, 1998.
ATTEST: PIONEER BANK, FSB
/s/ Nadine J. Johnson By:/s/ Jerry F. Aldape
- ------------------------------ ---------------------------------
[SEAL]
ATTEST: OREGON TRAIL FINANCIAL CORP.
/s/ Nadine J. Johnson By:/s/ Jerry F. Aldape
- ------------------------------ ---------------------------------
[SEAL]
WITNESS:
/s/ Chad M. Holt /s/ Zane F. Lockwood
- ------------------------------ ---------------------------------
Zane F. Lockwood
11
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Exhibit 10(e)
AGREEMENT
THIS AGREEMENT is made effective as of October 6, 1998 by and between
PIONEER BANK, FSB (the "BANK"); OREGON TRAIL FINANCIAL CORP. ("COMPANY"); and
THOMAS F. BENNETT ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in the position of Vice President/Senior Credit
Manager of the BANK, a position of substantial responsibility; and
WHEREAS, the BANK wishes to protect his position therewith for the
period provided in this Agreement in the event of a Change in Control (as
defined herein);
NOW, THEREFORE, in consideration of the foregoing and upon the other
terms and conditions hereinafter provided, the parties hereto agree as
follows:
1. Term Of Agreement
The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for a period of eighteen (18) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the BANK ("Board") may extend the Agreement for an additional
year. The Board will conduct a performance evaluation of EXECUTIVE for
purposes of determining whether to extend the Agreement, and the results
thereof shall be included in the minutes of the Board's meeting.
2. Payments To EXECUTIVE Upon Change In Control.
(a) Upon the occurrence of a Change in Control (as herein defined)
followed within twelve (12) months of the effective date of the Change in
Control by the voluntary or involuntary termination of EXECUTIVE's employment,
other than for Cause, as defined in Section 2(c) hereof, the provisions of
Section 3 shall apply. For purposes of this Agreement, "voluntary
termination" shall be limited to the circumstances in which EXECUTIVE elects
to voluntarily terminate his employment within twelve (12) months of the
effective date of a Change in Control following any demotion, loss of title,
office or significant authority, reduction in his annual compensation or
benefits (other than a reduction affecting the Bank's personnel generally), or
relocation of his principal place of employment by more than 35 miles from its
location immediately prior to the Change in Control.
(b) A "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) an offeror other than the Corporation purchases shares
of the stock of the Corporation or the Bank pursuant to a tender or exchange
offer for such shares, (b) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of securities of the Corporation or the Bank representing
twenty-five percent (25%) or more of the combined voting power of the
Corporation's or the Bank's then outstanding securities, (c) the membership of
the board of directors of the Corporation or the Bank changes as the result of
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a contested election, such that individuals who were directors at the
beginning of any twenty-four (24) month period (whether commencing before or
after the date of adoption of this Agreement) do not constitute a majority of
the Board at the end of such period, or (d) shareholders of the Corporation or
the Bank approve a merger, consolidation, sale or disposition of all or
substantially all of the Corporation's or the Bank's assets, or a plan of
partial or complete liquidation.
(c) EXECUTIVE shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term
"Termination for Cause" shall mean termination because of EXECUTIVE's
intentional failure to perform stated duties, personal dishonesty,
incompetence, willful misconduct, any breach of fiduciary duty involving
personal profit, willful violation of any law, rule, regulation (other than
traffic violations or similar offenses) or final cease and desist order, or
any material breach of any material provision of this Agreement. In
determining incompetence, the acts or omissions shall be measured against
standards generally prevailing in the savings institution industry.
Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to EXECUTIVE and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, EXECUTIVE was guilty of conduct
justifying Termination for Cause and specifying the particulars thereof in
detail. EXECUTIVE shall not have the right to receive compensation or other
benefits for any period after Termination for Cause.
3. Termination
(a) Upon the occurrence of a Change in Control, followed within twelve
(12) months of the effective date of a Change in Control by the voluntary or
involuntary termination of EXECUTIVE's employment other than Termination for
Cause, the BANK shall be obligated to pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay, a sum equal to one and one-half (1 1/2) times
EXECUTIVE's "base amount," within the meaning of Section 280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be
made in a lump sum paid within ten (10) days of EXECUTIVE's date of
termination.
(b) Upon the occurrence of a Change in Control of the BANK followed
within twelve (12) months of the effective date of a Change in Control by
EXECUTIVE's voluntary or involuntary termination of employment, other than
Termination for Cause, the BANK shall cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage
and payments shall cease upon expiration of eighteen (18) months from the date
of EXECUTIVE's termination.
(c) Notwithstanding the preceding paragraphs of this Section 3, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with
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a Change in Control, would be deemed to include an "excess parachute payment"
under Section 280G of the Code, then, at the election of EXECUTIVE, (i) such
payments or benefits shall be payable or provided to EXECUTIVE over the
minimum period necessary to reduce the present value of such payments or
benefits to an amount which is one dollar ($1.00) less than three (3) times
EXECUTIVE's "base amount" under Section 280G(b)(3) of the Code or (ii) the
payments or benefits to be provided under this Section 3 shall be reduced to
the extent necessary to avoid treatment as an excess parachute payment with
the allocation of the reduction among such payments and benefits to be
determined by EXECUTIVE.
(d) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
4. Effect On Prior Agreements And Existing Benefit Plans
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the BANK and EXECUTIVE,
except that this Agreement shall not affect or operate to reduce any benefit
or compensation inuring to EXECUTIVE of a kind elsewhere provided. No
provision of this Agreement shall be interpreted to mean that EXECUTIVE is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
5. No Attachment
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and
any attempt, voluntary or involuntary, to affect any such action shall be
null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the COMPANY, the BANK and their respective successors and assigns.
6. Modification And Waiver
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by an estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
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7. Required Provisions
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits
for any period after Termination for Cause as defined in Section 2(c) herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in
part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting parties
shall not be affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement may be terminated: (i) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee at the time the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide assistance to
or on behalf of the BANK under the authority contained in Section 13(c) of the
FDIA and (ii) by the Director, or his or her designee at the time the Director
or such designee approves a supervisory merger to resolve problems related to
operation of the BANK or when the BANK is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
8. Severability
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
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9. Headings For Reference Only
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
10. Governing Law
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Oregon, unless
preempted by Federal law as now or hereafter in effect. In the event that any
provision of this Agreement conflicts with 12 C.F.R. Section 563.39(b), the
latter provision shall prevail.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a
panel of three arbitrators sitting in a location selected by the employee
within fifty (50) miles from the location of the BANK, in accordance with the
rules of the American Arbitration Association then in effect.
11. Source of Payments
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees
all payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
12. Payment Of Legal Fees
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK if EXECUTIVE is successful on the merits pursuant to
a legal judgment, arbitration or settlement.
13. Successor To The BANK or the COMPANY
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent
that the BANK or the COMPANY would be required to perform if no such
succession or assignment had taken place.
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14. Signatures
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement
to be executed and their seal to be affixed hereunto by a duly authorized
officer, and EXECUTIVE has signed this Agreement, all on the 6th day of
October, 1998.
ATTEST: PIONEER BANK, FSB
/s/ Nadine J. Johnson By:/s/ Jerry F. Aldape
- ------------------------------ ---------------------------------
[SEAL]
ATTEST: OREGON TRAIL FINANCIAL CORP.
/s/ Nadine J. Johnson By:/s/ Jerry F. Aldape
- ------------------------------ ---------------------------------
[SEAL]
WITNESS:
/s/ Zane F. Lockwood /s/ Thomas F. Bennett
- ------------------------------ ---------------------------------
Thomas F. Bennett
6
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Exhibit 10(f)
AGREEMENT
THIS AGREEMENT is made effective as of October 6, 1998 by and between
PIONEER BANK, FSB (the "BANK"); OREGON TRAIL FINANCIAL CORP. ("COMPANY"); and
JERREL R. KINCAID ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in the position of Vice President/Senior
Commercial Lending Officer of the BANK, a position of substantial
responsibility; and
WHEREAS, the BANK wishes to protect his position therewith for the
period provided in this Agreement in the event of a Change in Control (as
defined herein);
NOW, THEREFORE, in consideration of the foregoing and upon the other
terms and conditions hereinafter provided, the parties hereto agree as
follows:
1. Term Of Agreement
The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for a period of eighteen (18) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the BANK ("Board") may extend the Agreement for an additional
year. The Board will conduct a performance evaluation of EXECUTIVE for
purposes of determining whether to extend the Agreement, and the results
thereof shall be included in the minutes of the Board's meeting.
2. Payments To EXECUTIVE Upon Change In Control.
(a) Upon the occurrence of a Change in Control (as herein defined)
followed within twelve (12) months of the effective date of the Change in
Control by the voluntary or involuntary termination of EXECUTIVE's employment,
other than for Cause, as defined in Section 2(c) hereof, the provisions of
Section 3 shall apply. For purposes of this Agreement, "voluntary
termination" shall be limited to the circumstances in which EXECUTIVE elects
to voluntarily terminate his employment within twelve (12) months of the
effective date of a Change in Control following any demotion, loss of title,
office or significant authority, reduction in his annual compensation or
benefits (other than a reduction affecting the Bank's personnel generally), or
relocation of his principal place of employment by more than 35 miles from its
location immediately prior to the Change in Control.
(b) A "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) an offeror other than the Corporation purchases shares
of the stock of the Corporation or the Bank pursuant to a tender or exchange
offer for such shares, (b) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of securities of the Corporation or the Bank representing
twenty-five percent (25%) or more of the combined voting power of the
Corporation's or the Bank's then outstanding securities, (c) the membership of
the board of directors of the Corporation or the Bank changes as the result of
<PAGE>
<PAGE>
a contested election, such that individuals who were directors at the
beginning of any twenty-four (24) month period (whether commencing before or
after the date of adoption of this Agreement) do not constitute a majority of
the Board at the end of such period, or (d) shareholders of the Corporation or
the Bank approve a merger, consolidation, sale or disposition of all or
substantially all of the Corporation's or the Bank's assets, or a plan of
partial or complete liquidation.
(c) EXECUTIVE shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term
"Termination for Cause" shall mean termination because of EXECUTIVE's
intentional failure to perform stated duties, personal dishonesty,
incompetence, willful misconduct, any breach of fiduciary duty involving
personal profit, willful violation of any law, rule, regulation (other than
traffic violations or similar offenses) or final cease and desist order, or
any material breach of any material provision of this Agreement. In
determining incompetence, the acts or omissions shall be measured against
standards generally prevailing in the savings institution industry.
Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to EXECUTIVE and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, EXECUTIVE was guilty of conduct
justifying Termination for Cause and specifying the particulars thereof in
detail. EXECUTIVE shall not have the right to receive compensation or other
benefits for any period after Termination for Cause.
3. Termination
(a) Upon the occurrence of a Change in Control, followed within twelve
(12) months of the effective date of a Change in Control by the voluntary or
involuntary termination of EXECUTIVE's employment other than Termination for
Cause, the BANK shall be obligated to pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay, a sum equal to one and one-half (1 1/2) times
EXECUTIVE's "base amount," within the meaning of Section 280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be
made in a lump sum paid within ten (10) days of EXECUTIVE's date of
termination.
(b) Upon the occurrence of a Change in Control of the BANK followed
within twelve (12) months of the effective date of a Change in Control by
EXECUTIVE's voluntary or involuntary termination of employment, other than
Termination for Cause, the BANK shall cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage
and payments shall cease upon expiration of eighteen (18) months from the date
of EXECUTIVE's termination.
(c) Notwithstanding the preceding paragraphs of this Section 3, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with
2
<PAGE>
<PAGE>
a Change in Control, would be deemed to include an "excess parachute payment"
under Section 280G of the Code, then, at the election of EXECUTIVE, (i) such
payments or benefits shall be payable or provided to EXECUTIVE over the
minimum period necessary to reduce the present value of such payments or
benefits to an amount which is one dollar ($1.00) less than three (3) times
EXECUTIVE's "base amount" under Section 280G(b)(3) of the Code or (ii) the
payments or benefits to be provided under this Section 3 shall be reduced to
the extent necessary to avoid treatment as an excess parachute payment with
the allocation of the reduction among such payments and benefits to be
determined by EXECUTIVE.
(d) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
4. Effect On Prior Agreements And Existing Benefit Plans
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the BANK and EXECUTIVE,
except that this Agreement shall not affect or operate to reduce any benefit
or compensation inuring to EXECUTIVE of a kind elsewhere provided. No
provision of this Agreement shall be interpreted to mean that EXECUTIVE is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
5. No Attachment
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and
any attempt, voluntary or involuntary, to affect any such action shall be
null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the COMPANY, the BANK and their respective successors and assigns.
6. Modification And Waiver
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by an estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
3
<PAGE>
<PAGE>
7. Required Provisions
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits
for any period after Termination for Cause as defined in Section 2(c) herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in
part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting parties
shall not be affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement may be terminated: (i) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee at the time the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide assistance to
or on behalf of the BANK under the authority contained in Section 13(c) of the
FDIA and (ii) by the Director, or his or her designee at the time the Director
or such designee approves a supervisory merger to resolve problems related to
operation of the BANK or when the BANK is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
8. Severability
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
4
<PAGE>
<PAGE>
9. Headings For Reference Only
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
10. Governing Law
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Oregon, unless
preempted by Federal law as now or hereafter in effect. In the event that any
provision of this Agreement conflicts with 12 C.F.R. Section 563.39(b), the
latter provision shall prevail.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a
panel of three arbitrators sitting in a location selected by the employee
within fifty (50) miles from the location of the BANK, in accordance with the
rules of the American Arbitration Association then in effect.
11. Source of Payments
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees
all payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
12. Payment Of Legal Fees
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK if EXECUTIVE is successful on the merits pursuant to
a legal judgment, arbitration or settlement.
13. Successor To The BANK or the COMPANY
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent
that the BANK or the COMPANY would be required to perform if no such
succession or assignment had taken place.
5
<PAGE>
<PAGE>
14. Signatures
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement
to be executed and their seal to be affixed hereunto by a duly authorized
officer, and EXECUTIVE has signed this Agreement, all on the 6th day of
October, 1998.
ATTEST: PIONEER BANK, FSB
/s/ Nadine J. Johnson By:/s/ Jerry F. Aldape
- ------------------------------ ---------------------------------
[SEAL]
ATTEST: OREGON TRAIL FINANCIAL CORP.
/s/ Nadine J. Johnson By:/s/ Jerry F. Aldape
- ------------------------------ ---------------------------------
[SEAL]
WITNESS:
/s/ Zane F. Lockwood /s/ Jerrel R. Kincaid
- ------------------------------ ---------------------------------
Jerrel R. Kincaid
6
<PAGE>
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