WEST COAST BANCORP
Form 10-K for the year ended December 31, 1995
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission File Number: 0-10897
WEST COAST BANCORP
(Exact name of registrant as specified in its charter)
California 95-3586860
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4770 Campus Drive, Suite 250
Newport Beach, California 92660-1833
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (714)442-9330
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
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 reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (subsection 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.[X]
As of February 28, 1996, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $2,843,000 based
upon the last sale price on such date.
Number of shares of Common Stock of the registrant outstanding as of February
28, 1996:
9,168,942
Documents Incorporated by Reference
Part III of this Form 10-K is incorporated by reference from registrant's
definitive proxy statement for the 1996 annual meeting of shareholders
which will be filed within 120 days of the fiscal year ended December 31,
1995.
This is page 1 of 182 pages.
West Coast Bancorp
From 10-K for the year ended December 31, 1995
TABLE OF CONTENTS
PART I Page
Item 1 Business 3
General 3
The Bank 4
Non-Bank Subsidiaries 5
Competition 6
Effect of Governmental Policies and
Recent Legislation 6
Supervision and Regulation 15
Potential and Existing Enforcement Actions 18
Employees 20
Selected Statistical Information 21
Item 2 Properties 29
Item 3 Legal Proceedings 29
Item 4 Submission of Matters to a Vote of Security Holders 30
Item 4.(A) Executive officers of the registrant 30
PART II
Item 5 Market for Common Equity and Related Shareholder Matters 31
Item 6 Selected Consolidated Financial Information 32
Item 7 Management's Discussion and Analysis 33
Item 8 Financial Statements and Supplementary Data 46
Item 9 Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 47
PART III
Item 10 Directors and Executive Officers of the Registrant 47
Item 11 Executive Compensation 47
Item 12 Security Ownership of Certain Beneficial
Owners and Management 47
Item 13 Certain Relationships and Related Transactions 47
PART IV
Item 14 Exhibits and Reports on Form 8-K 48
This is page 2 of 182 pages.
West Coast Bancorp
From 10-K for the year ended December 31, 1995
PART I
ITEM 1. BUSINESS
GENERAL
West Coast Bancorp (separately, "West Coast" and, with its
subsidiaries on a consolidated basis, the "Company") is a California
corporation organized in February 1981 and is a registered bank holding
company subject to the Bank Holding Company Act of 1956, as amended ("BHC
Act"). West Coast's principal operating subsidiary is its wholly-owned
subsidiary, Sunwest Bank ("Sunwest"). On February 29, 1996, West Coast and
Sunwest entered into an agreement with Western Acquisitions, L.L.C.
("Western"), an affiliate of Hovde Financial, Inc., for West Coast to sell
35 existing shares of Sunwest for $2,520,000 and for Sunwest to issue and
sell 15 new shares for $1,080,000. On consummation of the stock sale
contemplated by the agreement, West Coast and Western will own
approximately 57% and 43% of Sunwest, respectively. West Coast will record
a loss of approximately $400,000 on the sale of the 35 shares of Sunwest
stock during the first quarter of 1996. The new 15 shares of Sunwest stock
will result in approximately a $100,000 charge to paid-in-capital at West
Coast with an offsetting amount for minority interest. This will occur
because the selling price of Sunwest stock is $72,000 per share versus a
book value of outstanding shares at December 31, 1995 of $83,500 per share.
The actual loss on sale will depend on the book value per share of Sunwest
Bank at the time of closing. The stock sales are subject to Western
obtaining various regulatory approvals.
West Coast entered into an agreement on June 22, 1994 to sell its 93%
ownership of Sacramento First National Bank ("Sacramento First") to
Business & Professional Bank ("B&PB"). On January 20, 1995 the sale closed
and West Coast received $3.6 million of cash and 243,500 shares or 14.5% of
B&PB common shares outstanding. The B&PB stock is included in assets held
for sale. See "ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -
Note 1 of the notes to the consolidated financial statements" for
accounting treatment of the sale. Sunwest and Sacramento First are
sometimes collectively referred to herein as "the Banks."
West Coast entered into an agreement with Western on February 29,
1996, which is currently being amended, whereby Western will acquire all of
the remaining 213,384 shares of B&PB common stock at $8.81 per share. The
sale is to be completed in three phases. Phase one occurred on March 8,
1996 and resulted in proceeds of approximately $407,000. Phase two is for
93,007 shares and is to occur by May 28, 1996. Phase three is for 74,178
shares and is to occur by November 15, 1996. Phase two and three are
subject to Western being able to come to an agreement with B&PB regarding
certain restrictions imposed by B&PB regarding subsequent sale and voting
of the shares. Phase three is also subject to Western obtaining certain
regulatory approvals. The principals of Western have agreed to lend West
Coast on a non-recourse basis approximately $819,000. The loan will be
secured by 12 shares of Sunwest stock. The loan will be due upon the
earlier of the sale of Phase II shares, the sale of the shares of the
Sunwest common stock to Western or March 31, 1997.
If the sale of Sunwest stock does not occur as planned, West Coast
will seek to renegotiate and extend its debt to affiliates, including the
$1.8 million of debentures held by insiders and their affiliates. If the
remaining B&PB shares are not acquired by Western the shares will be sold
on the open market to raise sufficient funds to repay the loan to be made
by the principals of Western, and repay the $1.2 million of debentures held
by the public and to provide funds for West Coast to continue its
operations.
This is page 3 of 182 pages.
West Coast Bancorp
From 10-K for the year ended December 31, 1995
West Coast also currently has six other direct and indirect wholly-
owned subsidiaries which are either in the process of liquidation or
inactive - West Coast Realty Finance ("West Coast Realty"), North Orange
County Bancorp ("North Orange"), which acts as a holding company for WCV,
Inc. and Chancellor Financial Services, Inc. ("Chancellor"), Sunwest
Leasing Corp. ("Sunwest Leasing"), a wholly-owned subsidiary of Sunwest,
and Centennial Beneficial Loan Company ("Centennial Loan") (See nonbank
subsidiaries below).
The assets of Sunwest and WCV, Inc. carried on the books of the
Company at December 31, 1995 and the net income reported in the financial
statements of the Company as of and for the year ended December 31, 1995
are as follows:
Net
(dollars in thousands) Assets Earnings
-----------------------
Sunwest and its subsidiary $112,066 $3,296
Gain on liquidation of WCV, Inc. - 629
-----------------------
The Company had net losses of $339,000 or $.04 per share in 1995,
$5,205,000 or $.57 per share in 1994 and $12,107,000 or $1.32 per share in
1993.
West Coast and Sunwest are subject to regulatory agreements and orders
with the bank regulatory authorities. See "ITEM 1. SUPERVISION AND
REGULATION - West Coast" and "Sunwest Bank" and "ITEM 8. - FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA - NOTE 21 - REGULATORY MATTERS."
West Coast's liquidity is limited. In the event the above
transactions are not completed as contemplated, West Coast would need to
come to an agreement with certain affiliates to extend indebtedness to a
future date when sufficient funds can be obtained to repay the debts. In
the event West Coast is unable to raise funds to increase its liquidity,
West Coast may not be able to meet its current obligations and may be
forced into bankruptcy. If this event were to occur, West Coast
shareholders could suffer the elimination of the value of their investments
in the Company. See "ITEM 1. BUSINESS - SUPERVISION AND REGULATION -- AND
POTENTIAL AND EXISTING ENFORCEMENT ACTIONS" and "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS."
In 1995, Sunwest retroactively removed the carrying value of certain
assets by a $557,000 charge to retained earnings. The assets were adjusted
to fair value in 1985 as a result of West Coast's purchase of Sunwest. The
underlying assets for which this fair value adjustment was recorded were
either sold in previous years or were no longer considered to have any
remaining economic value at December 31, 1992. The effects of such
restatement on operations for the years ended December 31, 1994 and 1993
has not been reflected as the amounts would not be material to those years.
THE BANK
Sunwest Bank
Sunwest commenced operations as a California state-chartered bank in
1970 and is the oldest commercial bank founded in Orange County,
California. West Coast acquired Sunwest in June 1985. At December 31,
1995, Sunwest had total consolidated assets of $112,066,000, total
consolidated loans and leases of $79,000,000 and total consolidated
deposits of $102,880,000. For the year ended December 31, 1995, Sunwest
had net income of $3,296,000, however $3,400,000 represented nonrecurring
revenue from the parent.
Sunwest presently has three banking offices within Orange County,
California. The main office is located in Tustin at 535 East First Street.
Sunwest's two branch offices are located at 4770 Campus Drive, Newport
Beach and 501 South Main Street, Orange. During March 1996, Sunwest
converted a banking office at 600 Santa Ana Boulevard, Santa Ana to an
operations facility.
This is page 4 of 182 pages.
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Banking Services
Through its network of banking offices, Sunwest emphasizes
personalized service combined with services primarily directed to small and
medium-sized businesses and professionals. Although Sunwest focuses its
marketing of services to businesses and professionals, a wide range of
consumer banking services are made available to its customers.
Sunwest offers a wide range of deposit instruments. These include
personal and business checking and savings accounts, including interest-
bearing negotiable order of withdrawal ("NOW") accounts, Super NOW accounts
and money market accounts, time deposits and individual retirement
accounts.
Sunwest also engages in the full complement of lending activities,
including commercial, consumer installment and real estate loans.
Commercial loans are loans to local community businesses and may be
unsecured or secured by assets of the business and/or its principals.
Consumer installment loans include loans for automobiles, home
improvements, debt consolidation and other personal needs. Real estate
loans include secured short-term mini-permanent real estate loans and
construction loans. Sunwest originates loans that are guaranteed under the
Small Business Investments Act and periodically sold the guaranteed and
unguaranteed portion of such loans in the secondary market.
Sunwest also offers a wide range of specialized services designed to
attract and service the needs of commercial customers and account holders.
These services include extended weekday banking, drive-up and walk-up
facilities, merchant windows, traveler's checks, safe deposit, Mastercard
and Visa merchant deposit services, and computer accounting services, which
include payroll and escrow accounting services. Sunwest currently does not
operate a trust department.
NON-BANK SUBSIDIARIES
West Coast Realty Finance
West Coast Realty, a California corporation organized in March 1981,
is licensed as a real estate broker and operated as a mortgage banker.
West Coast Realty does not have any assets, revenues and earnings for the
periods presented.
North Orange County Bancorp
North Orange, a wholly-owned subsidiary of West Coast, acts solely as
a holding company for WCV, Inc. and Chancellor. North Orange does not have
assets, revenues or earnings that are material to the Company other than
its investment in WCV, Inc.
WCV, Inc.
WCV, Inc., formerly Heritage Thrift and Loan Association, was
organized in June 1981 and commenced business in March 1982 as a licensed
California thrift and loan company. During 1992, the Company began
liquidating the assets of WCV, Inc. As of March 9, 1993, WCV, Inc. had no
remaining deposits and it surrendered its license to act as a California
thrift and loan company during March 1993. WCV, Inc.'s assets are now
substantially liquidated and its operations are limited to the restoration
and sale of its one remaining property. See "ITEM 3 - LEGAL PROCEEDINGS."
Chancellor Financial Services, Inc.
Chancellor was organized in June 1981 and commenced business in March
1982 as a licensed California personal property broker. Chancellor is
inactive and has no assets, revenues and earnings for the periods
presented.
Centennial Beneficial Loan Company
Centennial Loan was organized in March 1981 and engaged in limited
loan servicing activities. Centennial Loan is inactive and its assets,
revenues and earnings are not material to the Company.
This is page 5 of 182 pages.
West Coast Bancorp
From 10-K for the year ended December 31, 1995
COMPETITION
The banking and financial services business in California generally,
and in Sunwest's market areas specifically, is highly competitive. The
increasingly competitive environment is a result primarily of changes in
regulation, changes in technology and product delivery systems, and the
accelerating pace of consolidation among financial services providers.
Sunwest competes for loans and deposits and customers for financial
services with other commercial banks, savings and loan associations,
securities and brokerage companies, mortgage companies, insurance
companies, finance companies, money market funds, credit unions and other
nonbank financial service providers. Many of these competitors are much
larger in total assets and capitalization, have greater access to capital
markets and offer a broader array of financial services than Sunwest. In
order to compete with the other financial services providers, Sunwest
principally relies upon local promotional activities, personal
relationships established by officers, directors and employees with its
customers, and specialized services tailored to meet its customers' needs.
In those instances where Sunwest is unable to accommodate a customer's
needs, Sunwest will arrange for those services to be provided by its
correspondents.
EFFECT OF GOVERNMENTAL POLICIES AND RECENT LEGISLATION
Banking is a business that depends on rate differentials. In general,
the difference between the interest rate paid by Sunwest on its deposits
and its other borrowings and the interest rate received by Sunwest on loans
extended to its customers and securities held in Sunwest's portfolio
comprise the major portion of the Company's earnings. These rates are
highly sensitive to many factors that are beyond the control of Sunwest.
Accordingly, the earnings and growth of the Company are subject to the
influence of domestic and foreign economic conditions, including inflation,
recession and unemployment.
The commercial banking business is not only affected by general
economic conditions but is also influenced by the monetary and fiscal
policies of the federal government and the policies of regulatory agencies,
particularly the Federal Reserve Board. The Federal Reserve Board
implements national monetary policies (with objectives such as curbing
inflation and combating recession) by its open-market operations in United
States Government securities, by adjusting the required level of reserves
for financial institutions subject to its reserve requirements and by
varying the discount rates applicable to borrowings by depository
institutions. The actions of the Federal Reserve Board in these areas
influence the growth of bank loans, investments and deposits and also
affect interest rates charged on loans and paid on deposits. The nature
and impact of any future changes in monetary policies cannot be predicted.
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations
governing the operations and taxation of banks, bank holding companies and
other financial institutions are frequently made in Congress, in the
California legislature and before various bank regulatory and other
professional agencies. The Financial Services Modernization Act recently
proposed in the House of Representatives would generally permit banks to
expand activities further into the areas of securities and insurance, and
would reduce the regulatory and paperwork burden that currently affects
banks. Additionally, the proposed legislation would force the conversion
of savings and
loan holding companies into bank holding companies, although unitary
savings and loan holding companies authorized to engage in activities as of
January 1, 1995 would be
This is page 6 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
exempted. Similar legislation has also been proposed in the Senate. In
addition, legislation was recently introduced in Congress that would merge
the deposit insurance funds applicable to commercial banks and savings
associations and impose a one-time assessment on savings associations to
recapitalize the deposit insurance fund applicable to savings associations.
The likelihood of any major legislative changes and the impact such changes
might have on the Company are impossible to predict. See "ITEM 1. BUSINESS
- - SUPERVISION AND REGULATION."
Capital Standards
The Federal Reserve Board and the FDIC have adopted risk-based minimum
capital guidelines intended to provide a measure of capital that reflects
the degree of risk associated with a banking organization's operations for
both transactions reported on the balance sheet as assets and transactions,
such as letters of credit and recourse arrangements, which are recorded as
off balance sheet items. Under these guidelines, nominal dollar amounts of
assets and credit equivalent amounts of off balance sheet items are
multiplied by one of several risk adjustment percentages, which range from
0% for assets with low credit risk, such as certain U.S. Treasury
securities, to 100% for assets with relatively high credit risk, such as
business loans.
A banking organization's risk-based capital ratios are obtained by
dividing its qualifying capital by its total risk-adjusted assets. The
regulators measure risk-adjusted assets, which includes off-balance sheet
items, against both total qualifying capital (the sum of Tier 1 capital and
limited amounts of Tier 2 capital) and Tier 1 capital. Tier 1 capital
consists primarily of common stock, retained earnings, noncumulative
perpetual preferred stock (cumulative perpetual preferred stock for bank
holding companies) and minority interests in certain subsidiaries, less
most intangible assets. Tier 2 capital may consist of a limited amount of
the allowance for possible loan and lease losses, cumulative preferred
stock, long term preferred stock, eligible term subordinated debt and
certain other instruments with some characteristics of equity. The
inclusion of elements of Tier 2 capital is subject to certain other
requirements and limitations of the federal banking agencies. The federal
banking agencies require a minimum ratio of qualifying total capital to
risk-adjusted assets of 8% and a minimum ratio of Tier 1 capital to risk-
adjusted assets of 4%.
In addition to the risk-based guidelines, federal banking regulators
require banking organizations to maintain a minimum amount of Tier 1
capital to total assets, referred to as the leverage ratio. For a banking
organization rated in the highest of the five categories used by regulators
to rate banking organizations, the minimum leverage ratio of Tier 1 capital
to total assets is 3%. For all banking organizations not rated in the
highest category, the minimum leverage ratio must be at least 100 to 200
basis points above the 3% minimum, or 4% to 5%. In addition to these
uniform risk-based capital guidelines and leverage ratios that apply across
the industry, the regulators have the discretion to set individual minimum
capital requirements for specific institutions at rates significantly above
the minimum guidelines and ratios. Sunwest has been required by the FDIC
to maintain a leverage ratio of 6.5%.
In August 1995, the federal banking agencies adopted final regulations
specifying that the agencies will include, in their evaluations of a bank's
capital adequacy, an assessment of the exposure to declines in the economic
value of the bank's capital due to changes in interest rates. The final
regulations, however, do not include a measurement framework for assessing
the level of a bank's exposure to interest rate risk, which is the subject
of a proposed policy statement issued by the federal banking agencies
concurrently with the final regulations. The proposal would measure
interest rate risk in relation to the effect of a 200 basis point change in
market interest rates on
This is page 7 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
the economic value of a bank. Banks with high levels of measured exposure
or weak management systems generally will be required to hold additional
capital for interest rate risk. The specific amount of capital that may be
needed would be determined on a case-by-case basis by the examiner and the
appropriate federal banking agency. Because this proposal has only
recently been issued, the Bank currently is unable to predict the impact of
the proposal on the Bank if the policy statement is adopted as proposed.
In January 1995, the federal banking agencies issued a final rule
relating to capital standards and the risks arising from the concentration
of credit and nontraditional activities. Institutions which have
significant amounts of their assets concentrated in high risk loans or
nontraditional banking activities and who fail to adequately manage these
risks, will be required to set aside capital in excess of the regulatory
minimums. The federal banking agencies have not imposed any quantitative
assessment for determining when these risks are significant, but have
identified these issues as important factors they will review in assessing
an individual bank's capital adequacy.
In December 1993, the federal banking agencies issued an interagency
policy statement on the allowance for loan and lease losses which, among
other things, established certain benchmark ratios of loan loss reserves to
classified assets. The benchmark set forth by such policy statement is the
sum of (a) assets classified loss; (b) 50 percent of assets classified
doubtful; (c) 15 percent of assets classified substandard; and (d)
estimated credit losses on other assets over the upcoming 12 months.
Federally supervised banks and savings associations are currently
required to report deferred tax assets in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109." The federal banking
agencies recently issued final rules, effective April 1, 1995, which limit
the amount of deferred tax assets that are allowable in computing an
institution's regulatory capital. The standard has been in effect on an
interim basis since March 1993. Deferred tax assets that can be realized
for taxes paid in prior carryback years and from future reversals of
existing taxable temporary differences are generally not limited. Deferred
tax assets that can only be realized through future taxable earnings are
limited for regulatory capital purposes to the lesser of (i) the amount
that can be realized within one year of the quarter-end report date, or
(ii) 10% of Tier 1 Capital. The amount of any deferred tax in excess of
this limit would be excluded from Tier 1 Capital and total assets and
regulatory capital calculations. The Company does not have any deferred
tax asset at December 31, 1995.
Future changes in regulations or practices could further reduce the
amount of capital recognized for purposes of capital adequacy. Such a
change could affect the ability of the Bank to grow and could restrict the
amount of profits, if any, available for the payment of dividends.
The following table presents the amounts of regulatory capital and the
capital ratios for Sunwest Bank, compared to its minimum regulatory capital
requirements as of December 31, 1995.
December 31, 1995
Minimum
Actual Capital
(In thousands) Amount Ratio Requirement
Leverage ratio $8,327 7.30% 4.0%
Tier 1 risk-based ratio $8,327 9.57 4.0
Total risk-based ratio $9,449 10.86 8.0
This is page 8 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Prompt Corrective Action and Other Enforcement Mechanisms
Federal law requires each federal banking agency to take prompt
corrective action to resolve the problems of insured depository
institutions, including but not limited to those that fall below one or
more prescribed minimum capital ratios. The law required each federal
banking agency to promulgate regulations defining the following five
categories in which an insured depository institution will be placed, based
on the level of its capital ratios: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized.
In September 1992, the federal banking agencies issued uniform final
regulations implementing the prompt corrective action provisions of federal
law. An insured depository institution generally will be classified in the
following categories based on capital measures indicated below:
"Well capitalized" "Adequately capitalized"
Total risk-based capital of 10%; Total risk-based capital of 8%;
Tier 1 risk-based capital of 6% and; Tier 1 risk-based capital of 4%;
Leverage ratio of 5%. and Leverage ratio of 4% (3%
if the institution receives the
highest rating from its
primary regulator)
"Undercapitalized" "Significantly undercapitalized"
Total risk-based capital less than 8%; Total risk-based capital
Tier 1 risk-based capital less than 4%; less than 6%;
or Leverage ratio less than 4% (3% if Tier 1 risk-based capital
the institution receives the highest less than 3%; or
rating from its primary regulator) Leverage ratio less than 3%.
"Critically undercapitalized"
Tangible equity to total assets less than 2%.
An institution that, based upon its capital levels, is classified as
"well capitalized," "adequately capitalized" or "undercapitalized" may be
treated as though it were in the next lower capital category if the
appropriate federal banking agency, after notice and opportunity for
hearing, determines that an unsafe or unsound condition or an unsafe or
unsound practice warrants such treatment. At each successive lower capital
category, an insured depository institution is subject to more
restrictions. The federal banking agencies, however, may not treat an
institution as "critically undercapitalized" unless its capital ratio
actually warrants such treatment.
The law prohibits insured depository institutions from paying
management fees to any controlling persons or, with certain limited
exceptions, making capital distributions if after such transaction the
institution would be undercapitalized. If an insured depository
institution is undercapitalized, it will be closely monitored by the
appropriate federal banking agency, subject to asset growth restrictions
and required to obtain prior regulatory approval for acquisitions,
branching and engaging in new lines of business. Any undercapitalized
depository institution must submit an acceptable capital restoration plan
to the appropriate federal banking agency 45 days after becoming
undercapitalized. The appropriate federal banking agency cannot accept a
capital plan unless, among other things, it determines that the plan
(i) specifies the steps the institution will take to become adequately
capitalized, (ii) is based on realistic assumptions and (iii) is likely to
succeed in restoring the depository institution's capital. In addition,
each company controlling an undercapitalized depository institution must
guarantee that the institution will comply with the capital plan until the
depository institution has been adequately
This is page 9 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
capitalized on an average basis during each of four consecutive calendar
quarters and must otherwise provide adequate assurances of performance.
The aggregate liability of such guarantee is limited to the lesser of (a)
an amount equal to 5% of the depository institution's total assets at the
time the institution became undercapitalized or (b) the amount which is
necessary to bring the institution into compliance with all capital
standards applicable to such institution as of the time the institution
fails to comply with its capital restoration plan. Finally, the
appropriate federal banking agency may impose any of the additional
restrictions or sanctions that it may impose on significantly
undercapitalized institutions if it determines that such action will
further the purpose of the prompt correction action provisions.
An insured depository institution that is significantly
undercapitalized, or is undercapitalized and fails to submit, or in a
material respect to implement, an acceptable capital restoration plan, is
subject to additional restrictions and sanctions. These include, among
other things: (i) a forced sale of voting shares to raise capital or, if
grounds exist for appointment of a receiver or conservator, a forced
merger; (ii) restrictions on transactions with affiliates; (iii) further
limitations on interest rates paid on deposits; (iv) further restrictions
on growth or required shrinkage; (v) modification or termination of
specified activities; (vi) replacement of directors or senior executive
officers; (vii) prohibitions on the receipt of deposits from correspondent
institutions; (viii) restrictions on capital distributions by the holding
companies of such institutions; (ix) required divestiture of subsidiaries
by the institution; or (x) other restrictions as determined by the
appropriate federal banking agency. Although the appropriate federal
banking agency has discretion to determine which of the foregoing
restrictions or sanctions it will seek to impose, it is required to force a
sale of voting shares or merger, impose restrictions on affiliate
transactions and impose restrictions on rates paid on deposits unless it
determines that such actions would not further the purpose of the prompt
corrective action provisions. In addition, without the prior written
approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to its senior executive
officers or provide compensation to any of them at a rate that exceeds such
officer's average rate of base compensation during the 12 calendar months
preceding the month in which the institution became undercapitalized.
Further restrictions and sanctions are required to be imposed on
insured depository institutions that are critically undercapitalized. For
example, a critically undercapitalized institution generally would be
prohibited from engaging in any material transaction other than in the
ordinary course of business without prior regulatory approval and could
not, with certain exceptions, make any payment of principal or interest on
its subordinated debt beginning 60 days after becoming critically
undercapitalized. Most importantly, however, except under limited
circumstances, the appropriate federal banking agency, not later than 90
days after an insured depository institution becomes critically
undercapitalized, is required to appoint a conservator or receiver for the
institution. The board of directors of an insured depository institution
would not be liable to the institution's shareholders or creditors for
consenting in good faith to the appointment of a receiver or conservator or
to an acquisition or merger as required by the regulator.
In addition to measures taken under the prompt corrective action
provisions, commercial banking organizations may be subject to potential
enforcement actions by the federal regulators for unsafe or unsound
practices in conducting their businesses or for violations of any law,
rule, regulation or any condition imposed in writing by the agency or any
written agreement with the agency. Enforcement actions may include the
imposition of a conservator or receiver, the issuance of a cease and desist
order that can be judicially enforced, the termination of insurance of
deposits (in the case of a depository institution), the imposition of civil
money penalties, the issuance of directives to increase capital, the
issuance of formal and informal agreements, the issuance of
This is page 10 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
removal and prohibition orders against institution-affiliated parties and
the enforcement of such actions through injunctions or restraining orders
based upon a judicial determination that the agency would be harmed if such
equitable relief was not granted.
Safety and Soundness Standards
In July 1995, the federal banking agencies adopted final guidelines
establishing standards for safety and soundness, as required by FDICIA.
The guidelines set forth operational and managerial standards relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth
and compensation, fees and benefits. Guidelines for asset quality and
earnings standards will be adopted in the future. The guidelines establish
the safety and soundness standards that the agencies will use to identify
and address problems at insured depository institutions before capital
becomes impaired. If an institution fails to comply with a safety and
soundness standard, the appropriate federal banking agency may require the
institution to submit a compliance plan. Failure to submit a compliance
plan or to implement an accepted plan may result in enforcement action.
In December 1992, the federal banking agencies issued final
regulations prescribing uniform guidelines for real estate lending. The
regulations, which became effective on March 19, 1993, require insured
depository institutions to adopt written policies establishing standards,
consistent with such guidelines, for extensions of credit secured by real
estate. The policies must address loan portfolio management, underwriting
standards and loan to value limits that do not exceed the supervisory
limits prescribed by the regulations.
Appraisals for "real estate related financial transactions" must be
conducted by either state certified or state licensed appraisers for
transactions in excess of certain amounts. State certified appraisers are
required for all transactions with a transaction value of $1,000,000 or
more; for all nonresidential transactions valued at $250,000 or more; and
for "complex" 1-4 family residential properties of $250,000 or more. A
state licensed appraiser is required for all other appraisals. However,
appraisals performed in connection with "federally related transactions"
must now comply with the agencies' appraisal standards. Federally related
transactions include the sale, lease, purchase, investment in, or exchange
of, real property or interests in real property, the financing or
refinancing of real property, and the use of real property or interests in
real property as security for a loan or investment, including mortgage-
backed securities.
Premiums for Deposit Insurance
Federal law has established several mechanisms to increase funds to
protect deposits insured by the Bank Insurance Fund ("BIF") administered by
the FDIC. The FDIC is authorized to borrow up to $30 billion from the
United States Treasury; up to 90% of the fair value of assets of
institutions acquired by the FDIC as receiver from the Federal Financing
Bank; and from depository institutions that are members of the BIF. Any
borrowings not repaid by asset sales are to be repaid through insurance
premiums assessed to member institutions. Such premiums must be sufficient
to repay any borrowed funds within 15 years and provide insurance fund
reserves of $1.25 for each $100 of insured deposits. The result of these
provisions is that the assessment rate on deposits of BIF members could
increase in the future. The FDIC also has authority to impose special
assessments against insured deposits.
The FDIC implemented a final risk-based assessment system effective
January 1, 1994, under which an institution's premium assessment is based
on the probability that the deposit insurance fund will incur a loss with
respect to the institution, the likely amount of any such loss, and the
revenue needs of the deposit insurance fund. As long
This is page 11 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
as the BIF's reserve ratio is less than a specified "designated reserve
ratio," 1.25%, the total amount raised from BIF members by the risk-based
assessment system may not be less than the amount that would be raised if
the assessment rate for all BIF members were .023% of deposits. On August
8, 1995, the FDIC announced that the designated reserve ratio had been
achieved and, accordingly, issued final regulations adopting an assessment
rate schedule for BIF members of 4 to 31 basis points effective on June 1,
1995. On November 14, 1995, the FDIC further reduced deposit insurance
premiums to a range of 0 to 27 basis points effective for the semi-annual
period beginning January 1, 1996.
Under the risk-based assessment system, a BIF member institution such
as the Bank is categorized into one of three capital categories (well
capitalized, adequately capitalized, and undercapitalized) and one of three
categories based on supervisory evaluations by its primary federal
regulator (in the Bank's case, the FDIC). The three supervisory categories
are: financially sound with only a few minor weaknesses (Group A),
demonstrates weaknesses that could result in significant deterioration
(Group B), and poses a substantial probability of loss (Group C). The
capital ratios used by the FDIC to define well-capitalized, adequately
capitalized and undercapitalized are the same in the FDIC's prompt
corrective action regulations. The BIF assessment rates are summarized
below; assessment figures are expressed in terms of cents per $100 in
deposits.
Assessment Rates Effective January 1, 1996
Group A Group B Group C
Well Capitalized 0* 3 17
Adequately Capitalized 3 10 24
Undercapitalized 10 24 27
*Subject to a statutory minimum assessment of $1,000 per semi-
annual period (which also applies to all other assessment risk
classifications).
A number of proposals have recently been introduced in Congress to
address the disparity in bank and thrift deposit insurance premiums. On
September 19, 1995, legislation was introduced and referred to the House
Banking Committee that would, among other things: (i) impose a requirement
on all Savings Association Insurance Fund ("SAIF") member institutions to
fully recapitalize the SAIF by paying a one-time special assessment of
approximately 85 basis points on all assessable deposits as of March 31,
1995, which assessment would be due as of January 1, 1996; (ii) spread the
responsibility for FICO interest payments across all FDIC-insured
institutions on a pro-rata basis, subject to certain exceptions; (iii)
require that deposit insurance premium assessment rates applicable to SAIF
member institutions be no less than deposit insurance premium assessment
rates applicable to BIF member institutions; (iv) provide for a merger of
the BIF and the SAIF as of January 1, 1998; (v) require savings
associations to convert to state or national bank charters by January 1,
1998; (vi) require savings associations to divest any activities not
permissible for commercial banks within five years; (vii) eliminate the bad-
debt reserve deduction for savings associations, although savings
associations would not be required to recapture into income their
accumulated bad-debt reserves; (viii) provide for the conversion of savings
and loan holding companies into bank holding companies as of January 1,
1998, although unitary savings and loan holding companies authorized to
engage in activities as of September 13, 1995 would have such authority
grandfathered (subject to certain limitations); and (ix) abolish the OTS
and transfer the OTS' regulatory authority to the other federal banking
agencies. The legislation would also provide that any savings association
that would
This is page 12 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
become undercapitalized under the prompt corrective action regulations as
a result of the special deposit premium assessment could be exempted from
payment of the assessment, provided that the institution would continue to
be subject to the payment of semiannual assessments under the current rate
schedule following the recapitalization of the SAIF. The legislation was
considered and passed by the House Banking Committee's Subcommittee on
Financial Institutions on September 27, 1995, and has not yet been acted on
by the full House Banking Committee.
On September 20, 1995, similar legislation was introduced in the
Senate, although the Senate bill does not include a comprehensive approach
for merging the savings association and commercial bank charters. The
Senate bill remains pending before the Senate Banking Committee.
The future of both these bills is linked with that of pending budget
reconciliation legislation since some of the major features of the bills
are included in the Seven-Year Balanced Budget Reconciliation Act. The
budget bill, which was passed by both the House and Senate on November 17,
1995 and vetoed by the President on December 6, 1995, would: (i)
recapitalize the SAIF through a special assessment of between 70 and 80
basis points on deposits held by institutions as of March 31, 1995; (ii)
provide an exemption to this rule for weak institutions, and a 20%
reduction in the SAIF-assessable deposits of so-called "Oakar banks"; (iii)
expand the assessment base for FICO payments to include all FDIC-insured
institutions; (iv) merge the BIF and SAIF on January 1, 1998, only if no
insured depository institution is a savings association on that date; (v)
establish a special reserve for the SAIF on January 1, 1998; and (vi)
prohibit the FDIC from setting semiannual assessments in excess of the
amount needed to maintain the reserve ratio of any fund at the designated
reserve ratio. The bill does not include a provision to merge the charters
of savings associations and commercial banks.
In light of ongoing debate over the content and fate of the budget
bill, the different proposals currently under consideration and the
uncertainty of the Congressional budget and legislative processes in
general, management cannot predict whether any or all of the proposed
legislation will be passed, or in what form. Accordingly, the effect of
any such legislation on the Bank cannot be determined.
Interstate Banking and Branching
In September 1994, the Riegel-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") became law. Under the
Interstate Act, beginning one year after the date of enactment, a bank
holding company that is adequately capitalized and managed may obtain
approval under the BHC Act to acquire an existing bank located in another
state without regard to state law. A bank holding company would not be
permitted to make such an acquisition if, upon consummation, it would
control (a) more than 10% of the total amount of deposits of insured
depository institutions in the United States or (b) 30% or more of the
deposits in the state in which the bank is located. A state may limit the
percentage of total deposits that may be held in that state by any one bank
or bank holding company if application of such limitation does not
discriminate against out-of-state banks. An out-of-state bank holding
company may not acquire a state bank in existence for less than a minimum
length of time that may be prescribed by state law except that a state may
not impose more than a five year existence requirement.
The Interstate Act also permits, beginning June 1, 1997, mergers of
insured banks located in different states and conversion of the branches of
the acquired bank into branches of the resulting bank. Each state may
permit such combinations earlier than June 1, 1997, and may adopt
legislation to prohibit interstate mergers after that date in that state or
in other states by that state's banks. The same concentration limits
discussed in the preceding paragraph apply. The Interstate Act also
permits a national
or state bank to establish branches in a state other than its home state
if permitted by the laws of that state, subject to the same requirements
and conditions as for a merger transaction. This is page 13 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
In October 1995, California adopted "opt in" legislation under the
Interstate Act that permits out-of-state banks to acquire California banks
that satisfy a five-year minimum age requirement (subject to exceptions for
supervisory transactions) by means of merger or purchases of assets,
although entry through acquisition of individual branches of California
institutions and de novo branching into California are not permitted. The
Interstate Act and the California branching statute will likely increase
competition from out-of-state banks in the markets in which the Company
operates, although it is difficult to assess the impact that such increased
competition may have on the Company's operations.
Community Reinvestment Act and Fair Lending Developments
The Bank is subject to certain fair lending requirements and reporting
obligations involving home mortgage lending operations and Community
Reinvestment Act ("CRA") activities. The CRA generally requires the
federal banking agencies to evaluate the record of a financial institution
in meeting the credit needs of their local communities, including low and
moderate income neighborhoods. In addition to substantial penalties and
corrective measures that may be required for a violation of certain fair
lending laws, the federal banking agencies may take compliance with such
laws and CRA into account when regulating and supervising other activities.
The FDIC has rated the Bank "satisfactory" in complying with its CRA
obligations.
In May 1995, the federal banking agencies issued final regulations
which change the manner in which they measure a bank's compliance with its
CRA obligations. The final regulations adopt a performance-based
evaluation system which bases CRA ratings on an institution's actual
lending service and investment performance rather than the extent to which
the institution conducts needs assessments, documents community outreach or
complies with other procedural requirements. In March 1994, the Federal
Interagency Task Force on Fair Lending issued a policy statement on
discrimination in lending. The policy statement describes the three
methods that federal agencies will use to prove discrimination: overt
evidence of discrimination, evidence of disparate treatment and evidence of
disparate impact.
Current Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 121 (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". SFAS 121 requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events
or circumstances indicate that the carrying amount of an asset may not be
recoverable. However, SFAS 121 does not apply to financial instruments,
core deposit intangibles, mortgage and other servicing rights or deferred
tax assets. SFAS 121 is effective for fiscal years beginning after December
15, 1995. Management believes that the adoption of this statement will not
have a material impact on the Company's operations.
In May 1995, the FASB issued Statement of Financial Accounting
Standards No. 122 (SFAS 122), "Accounting for Mortgage Servicing Rights",
an amendment to Statement of Financial Accounting Standards No. 65. SFAS
122 requires an institution that purchases or originates mortgage loans and
sells or securitizes those loans with servicing rights retained to allocate
the total cost of the mortgage loans to the mortgage servicing rights and
the loans (without the mortgage servicing rights) based on their relative
fair values. In addition, institutions are required to assess impairment
of the capitalized mortgage servicing portfolio based on the fair value of
those rights on a stratum-by-stratum basis with any impairment recognized
through a valuation allowance for each impaired stratum. Capitalized
mortgage servicing rights are to be stratified
This is page 14 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
based upon one or more of the predominate risk characteristics of the
underlying loans such as loan type, size, note rate, date of origination,
term and/or geographic location. SFAS 122 is effective for fiscal years
beginning after December 15, 1995. Management believes that the adoption
of SFAS 122 will not have a material impact on the Company's operations.
In November 1995 the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", (SFAS 123).
This statement establishes financial accounting standards for stock-based
employee compensation plans. SFAS 123 permits the Company to choose either
a new fair value based method or the current APB Opinion 25 intrinsic value
based method of accounting for its stock-based compensation arrangements.
SFAS 123 requires proforma disclosures of net earnings and earnings per
share computed as if the fair value based method had been applied in
financial statements of companies that continue to follow current practice
in accounting for such arrangements under Opinion 25. SFAS 123 applies to
all stock-based employee compensation plans in which an employer grants
shares of its stock or other equity instruments to employees except for
employee stock ownership plans. SFAS 123 also applies to plans in which
the employer incurs liabilities to employees in amounts based on the price
of the employer's stock, i.e., stock option plans, stock purchase plans,
restricted stock plans, and stock appreciation rights. The statement also
specifies the accounting for transactions in which a company issues stock
options or other equity instruments for services provided by nonemployees
or to acquire goods or services from outside suppliers or vendors. The
recognition provision of SFAS 123 for companies choosing to adopt the new
fair value based method of accounting for stock-based compensation
arrangements may be adopted immediately and will apply to all transactions
entered into in fiscal years that begin after December 15, 1995. The
disclosure provisions of SFAS 123 are effective for fiscal years beginning
after December 15, 1995 however disclosure of the proforma net earnings and
earning per share, as if the fair value method of accounting of stock-based
compensation had been elected, is required for all awards granted in fiscal
years beginning after December 31, 1994. The Company will continue to
account for stock-based compensation under APB Opinion 25 and, as a result,
SFAS 123 will not have a material impact on the Company's operations.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both
federal and state law. Set forth below is a summary description of certain
laws which relate to the regulation of the Company and the Bank. The
description does not purport to be complete and is qualified in its
entirety by reference to the applicable laws and regulations.
West Coast
West Coast, as a registered bank holding company, is subject to
regulation under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). West Coast is required to file with the Federal Reserve Board
quarterly and annual reports and such additional information as the Federal
Reserve Board may require pursuant to the BHCA. The Federal Reserve Board
may conduct examinations of West Coast and its subsidiaries.
The Federal Reserve Board may require that West Coast terminate an
activity or terminate control of or liquidate or divest certain
subsidiaries or affiliates when the Federal Reserve Board believes the
activity or the control of the subsidiary or affiliate constitutes a
significant risk to the financial safety, soundness or stability of any of
its banking subsidiaries. The Federal Reserve Board also has the authority
to regulate provisions of certain bank holding company debt, including
authority to impose interest ceilings and reserve requirements on such
debt. Under certain circumstances, West Coast must file written notice and
obtain approval from the Federal Reserve Board prior to purchasing or
redeeming its equity securities.
This is page 15 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Under the BHCA and regulations adopted by the Federal Reserve Board, a
bank holding company and its nonbanking subsidiaries are prohibited from
requiring certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services.
West Coast is required to obtain the prior approval of the Federal
Reserve Board for the acquisition of more than 5% of the outstanding shares
of any class of voting securities or substantially all of the assets of any
bank or bank holding company. Prior approval of the Federal Reserve Board
is also required for the merger or consolidation of West Coast and another
bank holding company.
West Coast is prohibited by the BHCA, except in certain statutorily
prescribed instances, from acquiring direct or indirect ownership or
control of more than 5% of the outstanding voting shares of any company
that is not a bank or bank holding company and from engaging directly or
indirectly in activities other than those of banking, managing or
controlling banks or furnishing services to its subsidiaries. However,
West Coast, subject to the prior approval of the Federal Reserve Board, may
engage in any, or acquire shares of companies engaged in, activities that
are deemed by the Federal Reserve Board to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto. In
making any such determination, the Federal Reserve Board is required to
consider whether the performance of such activities by the Company or an
affiliate can reasonably be expected to produce benefits to the public,
such as greater convenience, increased competition or gains in efficiency,
that outweigh possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest or
unsound banking practices. The Federal Reserve Board is also empowered to
differentiate between activities commenced de novo and activities commenced
by acquisition, in whole or in part, of a going concern.
Under Federal Reserve Board regulations, a bank holding company is
required to serve as a source of financial and managerial strength to its
subsidiary banks and may not conduct its operations in an unsafe or unsound
manner. In addition, it is the Federal Reserve Board's policy that in
serving as a source of strength to its subsidiary banks, a bank holding
company should stand ready to use available resources to provide adequate
capital funds to its subsidiary banks during periods of financial stress or
adversity and should maintain the financial flexibility and capital-raising
capacity to obtain additional resources for assisting its subsidiary banks.
A bank holding company's failure to meet its obligations to serve as a
source of strength to its subsidiary banks will generally be considered by
the Federal Reserve Board to be an unsafe and unsound banking practice or a
violation of the Federal Reserve Board's regulations or both. This
doctrine has become known as the "source of strength" doctrine. Although
the United States Court of Appeals for the Fifth Circuit found the Federal
Reserve Board's source of strength doctrine invalid in 1990, stating that
the Federal Reserve Board had no authority to assert the doctrine under the
BHCA, the decision, which is not binding on federal courts outside the
Fifth Circuit, was recently reversed by the United States Supreme Court on
procedural grounds. The validity of the source of strength doctrine is
likely to continue to be the subject of litigation until definitively
resolved by the courts or by Congress.
West Coast is also a bank holding company within the meaning of
Section 3700 of the California Financial Code. As such, the Company and
its subsidiaries are subject to examination by, and may be required to file
reports with, the California State Banking Department.
Finally, West Coast is subject to the periodic reporting requirements
of the Securities Exchange Act of 1934, as amended, including but not
limited to, filing annual, quarterly and other current reports with the
Securities and Exchange Commission.
This is page 16 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Sunwest Bank
Sunwest, as a California state chartered bank, is subject to primary
supervision, periodic examination and regulation by the California
Superintendent of Banks ("Superintendent") and the FDIC. If, as a result
of an examination of Sunwest, the FDIC should determine that the financial
condition, capital resources, asset quality, earnings prospects,
management, liquidity or other aspects of Sunwest's operations are
unsatisfactory or that Sunwest or its management is violating or has
violated any law or regulation, various remedies are available to the FDIC.
Such remedies include the power to enjoin "unsafe or unsound" practices, to
require affirmative action to correct any conditions resulting from any
violation or practice, to issue an administrative order that can be
judicially enforced, to direct an increase in capital, to restrict the
growth of Sunwest, to assess civil monetary penalties, to remove officers
and directors and ultimately to terminate Sunwest's deposit insurance,
which for a California state-chartered bank would result in a revocation of
the Sunwest's charter. The Superintendent has many of the same remedial
powers.
The deposits of Sunwest are insured by the FDIC in the manner and to
the extent provided by law. For this protection, Sunwest pays a semiannual
statutory assessment. SEE "ITEM 1. BUSINESS - EFFECT OF GOVERNMENT POLICES
AND RECENT LEGISLATION - Premiums for Deposit Insurance." Although Sunwest
is not a member of the Federal Reserve System, it is nevertheless subject
to certain regulations of the Federal Reserve Board.
Various requirements and restrictions under the laws of the State of
California and the United States affect the operations of Sunwest. State
and federal statutes and regulations relate to many aspects of the
Sunwest's operations, including reserves against deposits, interest rates
payable on deposits, loans, investments, mergers and acquisitions,
borrowings, dividends, locations of branch offices and capital
requirements. Further, Sunwest is required to maintain certain levels of
capital. See "ITEM 1. BUSINESS- POTENTIAL AND EXISTING ENFORCEMENT ACTIONS-
Sunwest's Regulatory Orders."
Restrictions on Transfers of Funds to West Coast by Sunwest
West Coast is a legal entity separate and distinct from Sunwest. West
Coast's ability to pay cash dividends is limited by state law.
There are statutory and regulatory limitations on the amount of
dividends which may be paid to West Coast by Sunwest. California law
restricts the amount available for cash dividends by state chartered banks
to the lesser of retained earnings or the bank's net income for its last
three fiscal years (less any distributions to shareholders made during such
period). Notwithstanding this restriction, a bank may, with the prior
approval of the Superintendent, pay a cash dividend in an amount not
exceeding the greater of the retained earnings of the Bank, the net income
for such bank's last preceding fiscal year, and the net income of the bank
for its current fiscal year.
The FDIC also has authority to prohibit Sunwest from engaging in
activities that, in the FDIC's opinion, constitute unsafe or unsound
practices in conducting its business. It is possible, depending upon the
financial condition of Sunwest and other factors, that the FDIC could
assert that the payment of dividends or other payments might, under some
circumstances, be an unsafe or unsound practice. Further, the FDIC and the
Federal Reserve Board have established guidelines with respect to the
maintenance of appropriate levels of capital by banks or bank holding
companies under their jurisdiction. Compliance with the standards set
forth in such guidelines and the restrictions that are or may be imposed
under the prompt corrective action provisions of federal law could limit
the amount of dividends which Sunwest or West Coast may pay. The
Superintendent may impose similar limitations on the conduct of California-
chartered banks. Further, Sunwest is subject to regulatory orders which
require it to maintain specified levels of capital and prohibit it from
paying any cash dividends to West Coast. See "ITEM 1. BUSINESS - EFFECT
OF GOVERNMENT POLICY AND RECENT
This is page 17 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
LEGISLATION - Capital Standards and - POTENTIAL AND EXISTING ENFORCEMENT
ACTIONS - Sunwest's Regulatory Orders and West Coast's Regulatory
Agreement" for a discussion of these additional restrictions on capital
distributions.
At present, substantially all of West Coast's revenues, including
funds available for the payment of other operating expenses, are currently,
and will for the foreseeable future continue to be, proceeds from the
liquidation of the non-bank subsidiaries and sale of Sunwest and B&PB
stock. At December 31, 1995, Sunwest is unable to pay a dividend without
regulatory approval. West Coast is also restricted from charging and
collecting management fees from Sunwest per its agreement with the Federal
Reserve Board.
Sunwest is subject to certain restrictions imposed by federal law on
any extensions of credit to, or the issuance of a guarantee or letter of
credit on behalf of, West Coast or other affiliates, the purchase of or
investments in stock or other securities thereof, the taking of such
securities as collateral for loans and the purchase of assets of West Coast
or other affiliates. Such restrictions prevent West Coast and such other
affiliates from borrowing from Sunwest unless the loans are secured by
marketable obligations of designated amounts. Further, such secured loans
and investments by Sunwest to or in West Coast or to or in any other
affiliate is limited to 10% of Sunwest's capital and surplus (as defined by
federal regulations) and such secured loans and investments are limited, in
the aggregate, to 20% of the Bank's capital and surplus (as defined by
federal regulations). California law also imposes certain restrictions
with respect to transactions involving the Company and other controlling
persons of the Bank.
POTENTIAL AND EXISTING ENFORCEMENT ACTIONS
Commercial banking organizations, such as Sunwest, and its institution-
affiliated parties, which include West Coast, may be subject to potential
enforcement actions by Federal and state banking agencies for unsafe or
unsound practices in conducting their businesses or for violations of any
law, rule, regulation or any condition imposed in writing by the agency or
any written agreement with the agency. Enforcement actions may include the
imposition of a conservator or receiver, the issuance of a cease and desist
order that can be judicially enforced, the termination of insurance of
deposits, the imposition of civil monetary penalties, the issuance of a
directive to increase capital, the issuance of an order of removal or
prohibition against institution-affiliated parties and the imposition of
restrictions or sanctions under the prompt corrective action provisions of
the FDIC Improvement Act. Additionally, a holding company's inability to
serve as a source of strength to its subsidiary banking organizations could
serve as an additional basis for regulatory action against the holding
company.
West Coast's Regulatory Agreement
Based upon its examination of West Coast as of September 30, 1993, the
FRB and West Coast entered into a Written Agreement that is dated April 11,
1994 (the "Agreement"). The Agreement requires West Coast to: (a) refrain
from paying any dividends without the prior written approval of the FRB;
(b) refrain from incurring any debt, without the prior written approval of
the FRB; (c) within 90 days of the Agreement, submit to the FRB a written
plan to service its current debt without incurring additional debt or
without reliance on fees or payments from the Banks; (d) refrain from
making any cash expenditure in excess of $25,000, individually or in the
aggregate, to any individual or entities, without the prior written consent
of the FRB; (e) within 30 days of the Agreement, submit to the FRB a
written policy addressing intercorporate management fees, service fees and
other payments assessed or paid by the Banks; (f) refrain from assessing or
collecting any management or service fee from the Banks without the prior
written approval of the FRB; (g) within 10 days of the Agreement, identify
an outside director who shall submit a report to the FRB, within 60 days of
the
This is page 18 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Agreement, that fully documents all management and service fees that have
been paid by the Banks since January 1, 1992 including a justification of
such services provided by West Coast to, or on behalf of the Banks, and
explain how they are consistent with all applicable policies of West Coast;
(h) refrain from, directly or indirectly, entering into or engaging in any
financial transaction with the Banks or any of its other affiliates in any
one month in excess of $25,000, without the prior written approval of the
FRB; (i) refrain from entering into, or participating in any manner, in any
financial transaction with any of West Coast's or the Banks' institution
affiliated parties or their related interests ("insiders") in excess of
$25,000 without the prior written consent of the FRB; (j) within 90 days of
the Agreement, submit to the FRB a written statement concerning the steps
that the Board of Directors proposes to take to improve the condition of
the Company and the Banks; (k) refrain from, directly or indirectly,
increasing the salaries or fees of, or pay any bonus to, or make any other
payment to, any insiders of the Company or the Banks; (l) notify the FRB at
least 30 days before adding or replacing any director or senior executive
officer of West Coast; and (m) within 45 days of the end of each calendar
quarter following the date of the Agreement, provide various progress
reports to the FRB.
Based upon its examination of West Coast as of September 30, 1995, the
FRB concluded that West Coast was in substantial compliance with the
Agreement.
Sunwest's Regulatory Orders
Based upon an examination of Sunwest as of August 23, 1991, the FDIC issued an
Order to Cease and Desist against Sunwest (the "C&D Order") which became
effective on April 27, 1992. The C&D Order requires Sunwest to: (a) have
management with qualifications and experience commensurate with his or her
duties at the Bank which should include (i) a chief executive officer with
proven ability in managing a financial institution and experience in
upgrading low quality assets and (ii) a senior lending officer with an
appropriate level of lending, collection and loan supervision experience
for the type and quality of Sunwest's loans; (b) increase its Tier 1
capital to not less than $17.3 million on or before July 26, 1992 and to
not less than $18.3 million on or before December 31, 1992; (c) achieve a
Tier 1 capital ratio of at least 6.5% on or before July 26, 1992 and
thereafter maintain that ratio; (d) develop and adopt a plan to meet the
FDIC's minimum risk-based capital requirements; (e) eliminate from its
books certain criticized assets and reduce other criticized assets to
specified levels at various dates until April 26, 1993; (f) not extend,
directly or indirectly, any additional credit to any borrower who has a
loan or other extension of credit that has been charged off or classified,
in whole or in part, "loss" or "doubtful" and is uncollected; (g) develop
or revise, adopt and implement several policies including (i) written
lending and collection policies, (ii) a written liquidity and funds
management policy, (iii) a comprehensive policy for determining the
adequacy of the reserve for loan losses and (iv) a policy regarding
internal routine and control procedures; (h) establish and thereafter
maintain adequate reserves for loan losses; (I) develop and adopt a plan to
control overhead and other expenses; (j) eliminate and/or correct all
violations of law identified by the FDIC in its examination as of August
23, 1991 and take all necessary steps to ensure future compliance with all
applicable laws and regulations; (k) refrain from paying cash dividends
without prior written consent of the FDIC and the Superintendent; (l)
refrain from increasing the amount of brokered deposits above the amount
outstanding at April 27, 1992 and submit to the FDIC and Superintendent a
written plan for eliminating Sunwest's reliance on brokered deposits; (m)
file Consolidated Reports of Condition and Income, and all necessary
amendments thereto, that accurately reflect the financial condition of
Sunwest as of the end of each fiscal quarter on and after March 31, 1991;
and (n) furnish quarterly written progress reports to the FDIC and the
Superintendent detailing the form and manner of actions taken to secure
compliance with the C&D Order.
This is page 19 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
As a result of an examination of Sunwest conducted by the California
State Banking Department as of March 16, 1992, the Superintendent issued on
February 8, 1993 an Order under Financial Code Section 1913 (the "State
Order") against Sunwest that was effective immediately and superseded a
temporary Order under Financial Section Code 1912 dated November 12, 1992.
The State Order contains provisions that are substantially similar to the
C&D Order. However, it also requires Sunwest to: (a) formulate, adopt and
implement a comprehensive business plan by December 31, 1992 for restoring
Sunwest to a sound condition; and (b) develop and adopt by December 31,
1992, and thereafter implement, a month-by-month budget for 1993 and a
profit plan which shall include, among other things, a plan to improve
earnings.
Response To Administrative Actions
Management of West Coast and Sunwest have taken actions and
implemented programs to comply with the requirements of the agreements or
orders applicable to their respective institutions.
Based upon its examination of West Coast as of September 30, 1995, the
FRB concluded that West Coast was in substantial compliance with the
Agreement.
In their most recent examinations of Sunwest as of July 26, 1995, the
FDIC and the California State Banking Department noted that Sunwest was in
substantial compliance with the provisions of the C&D Order and the State
Order. Since the examinations, management of Sunwest has continued its
efforts to reduce the level of classified assets.
In accordance with the prompt corrective action provisions of the FDIC
Improvement Act, Sunwest submitted to the FDIC a revised capital
restoration plan and West Coast submitted to the FDIC a commitment and
guaranty and security agreement, relating to the capital restoration plan.
The capital restoration plan provided that the anticipated primary source
of additional capital for Sunwest would be provided by West Coast with the
proceeds from the sale of Sacramento First. On January 20, 1995, West
Coast sold its 93% interest in Sacramento First. West Coast received
$3,514,000 in cash net of legal costs, 243,546 shares of B&PB common stock
and a right to receive a contingent cash payment of up to $940,000 three to
five years after the sale date based upon the performance of Sacramento
First's loan portfolio and real estate owned.
Sunwest received $3.4 million of the $3,514,000 proceeds in the form
of repayment of management fees charged to Sunwest by West Coast from 1989
through 1993. This repayment resulted in eliminating the capital
impairment under the provisions of the California Financial Code. The
shares of B&PB common stock are held by Sunwest as security for West
Coast's guaranty of its capital plan.
On March 30, 1995, West Coast sold 50,000 shares of the B&PB common
stock for $7.75 per share totaling $387,500. Proceeds of $300,000 were
infused as capital into Sunwest increasing the leverage ratio to over 6.5%.
West Coast requested and received approval from the FDIC to use the
remaining cash. West Coast believes that Sunwest has met the requirements
of the capital plan. West Coast intends to seek release by the FDIC of
West Coast's guarantee of Sunwest's capital plan.
Management believes that the actions taken have brought West Coast and
Sunwest into compliance with the Agreement, the C&D Order, the State Order
and the prompt corrective action provisions of the FDIC Improvement Act.
Compliance will be determined by the regulatory authorities.
EMPLOYEES
At December 31, 1995, West Coast and its subsidiaries employed 83
persons of which 81 were full time. West Coast and its subsidiaries believe
that their employee relations are satisfactory.
This is page 20 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
SELECTED STATISTICAL INFORMATION
The following tables and data set forth, for the respective periods
shown, selected statistical information relating to the Company. The
tables and data should be read in conjunction with the other financial
information appearing elsewhere in this report.
For the tables of "Average Balance Sheet and Analysis of Net Interest
Earnings" and "Rate and Volume Variance Analysis" see "ITEM 7. -
MANAGEMENT'S DISCUSSION AND ANALYSIS - RESULTS OF OPERATION - NET INTEREST
INCOME."
Investment Securities
Investment securities are stated at cost, adjusted for amortization of
premiums and accretion of discounts. The gross unrealized gains and losses
on such securities are set forth in "NOTE 3 OF THE NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS." The following tables show the book
value of the Company's investment securities as of December 31:
Held-to-Maturity Available-for-Sale
(dollars in thousands) 1995 1994 1993 1995 1994 1993
-------------------------------------------------------
U.S. government agencies
and corporations $ 5,574 $ 5,868 $ 11,051 $ - $1,947 $ -
Obligations of State and
political subdivisions - - 4,023 - - -
Other securities - - 1,243 - 4,000 -
-------------------------------------------------------
Total $ 5,574 $ 5,868 $ 16,317 $ - $5,947 $ -
=======================================================
The following table discloses the maturity dates and average yields of
the investment securities "Held-to-maturity" at December 31, 1995 (no
securities were due after 10 years or "available-for-sale"):
Due After Due After
One Year Five Years
Due Within But Within But Within
(dollars in thousands) One Year Five Years Ten Years
-----------------------------------------------------
Amount Yield Amount Yield Amount Yield Total
-----------------------------------------------------
U.S. government agencies
and corporations $2,398 5.10% $3,176 7.02% $ - .--% $5,574
=====================================================
Loans by Type
The following table sets forth loans by type as of December 31. The
Company had no foreign loans during the periods reported.
(dollars in thousands) 1995 1994 1993 1992 1991
-------------------------------------------------------
Commercial $28,479 $33,010 $78,462 $104,704 $ 138,973
Real Estate:
Construction - - 27,558 39,227 40,045
Mortgage 47,379 49,236 98,220 108,241 126,681
Installment loans 3,515 4,694 16,874 22,937 39,439
Direct lease financing - - - 3,486 14,361
Unearned income,
discounts and fees (373) (371) (748) (2,084) (5,432)
-------------------------------------------------------
Total $79,000 $86,569 $220,366 $276,511 $ 354,067
=======================================================
This is page 21 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Commercial loans are loans to local community businesses and may be
unsecured or secured by assets of the business and/or its principals.
Mortgage loans are secured by deeds of trust on the underlying properties
and may be guaranteed by the principal borrowers. Installment loans to
individuals may be unsecured or secured by various types of assets
including automobiles, trust deeds, recreational vehicles or other personal
property.
The Company primarily funds loans based on the creditworthiness of the
borrower and supported by a minimum of two identified sources of repayment.
Advance rates on collateral provided in support of the sources of repayment
generally does not exceed 60% to 80% of collateral value.
Sunwest was the only subsidiary that had loans at December 31, 1995 and
1994. The commercial and real estate mortgage loans decreased because of
low loan demand, stringent underwriting standards and planned disengagement
from problem and potential problem credits. Installment loans decreased in
1995 because Sunwest has not been emphasizing this product.
Total loans decreased significantly from 1991 through 1994 primarily
from: the exclusion of Sacramento First in 1994; a general decrease in the
demand for loans during 1993 at Sacramento First; the liquidation of WCV,
Inc.; and a decrease of $155 million of loans at Sunwest of which $51
million and $40 million occurred during 1994 and 1993, respectively.
Sunwest's overall decreases in loans from 1992 through 1994 resulted
from lower loan demand, more stringent underwriting standards and planned
disengagement from problem and potential problem credits. The decrease in
loans during the three years, and particularly in 1994 also resulted from
Sunwest's capital position and its regulatory orders. See "ITEM 1.
BUSINESS - POTENTIAL AND EXISTING ENFORCEMENT ACTIONS - Sunwest's
Regulatory Orders." Sunwest's capital position and the presence of its
regulatory orders made it difficult for Sunwest to compete with other
financial institutions for deposits. The capital position has improved
significantly since December 31, 1994, reducing this adverse competitive
pressure.
Real estate mortgage and construction lending contains potential risks
which are not inherent in other types of commercial loans. These potential
risks include declines in market values of underlying real property
collateral and, with respect to construction lending, delays or cost
overruns, which could expose the Company to loss. In addition, risks in
commercial real estate lending include declines in commercial real estate
values, general economic conditions surrounding the commercial real estate
properties, and vacancy rates. A decline in the general economic conditions
or real estate values within the Company's market area could have a
negative impact on the performance of the loan portfolio or value of the
collateral. Because the Company lends primarily within its market areas,
the real property collateral for its loans is similarly concentrated,
rather than diversified over a broader geographic area. The Company could
therefore be adversely affected by a decline in real estate values in
Orange and Los Angeles Counties even if real estate values elsewhere in
California generally remained stable or increased.
This is page 22 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
The risks in the Company's loan portfolio stem from the individual
credits that are contained therein and the diversification among the
credits. The risks of a particular credit arise from the interplay of
various factors, including the underwriting criteria applied to originate
the credit, the creditworthiness of the borrower, the controls placed on
the disbursement of funds, the procedures employed to monitor the credit,
the interest rate charged, market interest rate increases for variable rate
loans and the external economic conditions that may affect the creditor's
ability to repay or the value of the underlying collateral. Further, with
respect to secured credits, certain additional factors include the nature
of the appraisals obtained with respect to the underlying collateral and
the loan to value ratio. Assuming all other things are equal, certain
credits have characteristics that present a higher degree of risk than
others: a secured credit is less risky than an unsecured credit; a credit
with liquid collateral is less risky than a credit secured by collateral
for which there is only a limited market; a credit with a lower interest
rate is less risky than one with a higher rate; a credit with a lower loan
to value ratio is less risky than a credit with a higher ratio; and a
credit that is underwritten pursuant to rigorous underwriting criteria and
a careful review of the borrower's creditworthiness is less risky than a
credit originated pursuant to less rigorous standards. The Company
considers these characteristics, among others, during the underwriting
process in an attempt to originate loans with an acceptable level of risk.
At December 31, 1995, the Company had no significant loan concentrations
other than those listed above.
Rate Sensitivity
Financial institutions are susceptible to fluctuations in interest
rates. To the degree that the average yield on assets responds differently
to a change in interest rates than does the average cost of funds sources,
earnings will be sensitive to interest rate changes.
The following table sets forth the maturities for commercial loans at
December 31, 1995. The Company did not have any real estate construction
loans. These loans comprised 36% of the gross loan portfolio and are
classified according to changes in interest rates.
(dollars in thousands) Maturing
------------------------------------------
Within After One After
One Year But Within Five
Or Less Five Years Years Total
------------------------------------------
Commercial $15,235 $10,751 $2,493 $ 28,479
==========================================
Loans included above with:
Fixed rates $ 1,219 $ 1,465 $ 110 $ 2,794
Variable rates 14,016 9,286 2,383 25,685
------------------------------------------
Total $15,235 $10,751 $2,493 $ 28,479
==========================================
This is page 23 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Allowance for Possible Credit Losses
The following table discloses the activity in the allowance for
possible credit losses for the years ended December 31:
(dollars in thousands) 1995 1994 1993 1992 1991
----------------------------------------------
Allowance for possible credit losses
at beginning of period $4,649 $5,557 $ 6,512 $ 6,935 $7,193
Charge-offs:
Commercial (985) (3,317) (8,396) (3,492) (5,563)
Real estate-construction - (51) - (1,603) (93)
Real estate-mortgage (1,049) (432) (973) (1,306) (1,995)
Installment loans to
individuals (119) (181) (909) (1,345) (1,265)
Direct lease financing (3) (29) (56) (532) (1,313)
Recoveries:
Commercial 773 452 518 1,774 280
Real estate - construction 2 1 - - -
Real estate - mortgage 75 5 3 - -
Installment loans to
individuals 60 142 320 312 336
Direct lease financing 28 48 68 146 220
----------------------------------------------
Net charge-offs (1,218) (3,362) (9,425) (6,046) (9,393)
Additions charged to operations 389 3,297 8,470 5,623 9,135
Transfer to assets held for sale - (843) - - -
----------------------------------------------
Balance at end of period $3,820 $4,649 $ 5,557 $ 6,512 $6,935
==============================================
Allowance for possible credit
losses as a percentage of:
Average loans 4.77% 3.08% 2.23% 2.03% 1.91%
Loans at end of period 4.84 5.37 2.49 2.33 1.96
Net charge-offs as a percentage
of average loans 1.52 2.23 3.78 1.89 2.58
==============================================
The allowance for possible credit losses is established by a provision
for possible credit losses charged against current period income. Loan and
lease losses are charged against the allowance when, in management's
judgment, the loan or lease is considered uncollectible or of such little
value that its continuance as an asset is unwarranted. The allowance is
the amount that management believes is adequate to absorb losses inherent
in existing loans and commitments to extend credit. Management's
evaluation takes into consideration several factors, including economic
conditions and their effects on particular industries and specific
borrowers, borrowers' financial data, regulatory examinations and
requirements, and continuous monitoring and review of the loan portfolio
for changes in overall quality and specific loan problems. The allowance
is available for all possible credit losses and, as such, is a general
allowance. The amount of the allowance is determined by establishing
specific allocations, general allocations and supplemental allocations.
Specific allocations are established by analyzing individual credits,
generally all loans classified as "doubtful" and certain loans classified
as "substandard" (see "ITEM 1. BUSINESS - SELECTED STATISTICAL INFORMATION
- - Classified Loans"). The general allocations are determined based upon
quantitative historical loss experience of loans classified as
"substandard" and "special mention" as well as certain categories of loans.
The supplemental allocations are additional reserves that are based on
economic conditions, trends in delinquency, restructured and nonperforming
loans, and are otherwise deemed necessary and prudent by management.
Management believes that the allowance for
This is page 24 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
possible credit losses of $3,820,000, constituting approximately 4.84% of
loans outstanding at December 31, 1995, was adequate to absorb known and
inherent risks in the loan portfolio. For additional information on the
allowance for possible credit losses and net charge-offs, see "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS - RESULTS OF OPERATIONS."
The Company established an allowance for possible credit losses at
December 31, 1995 and 1994 for each category as set forth below. The
allowance includes allocations for specific loans as well as general and
supplemental allocations for each category.
(dollars in thousands)
1995 1994
-----------------------------------------
Percent Percent
of Loan of Loan
Allowance Category Allowance Category
-----------------------------------------
Commercial $ 974 35.9% $ 2,214 38.1%
Real estate mortgage 2,691 59.7 2,247 56.5
Installment loans 155 4.4 188 5.4
-----------------------------------------
Total $ 3,820 100.0% $ 4,649 100.0%
=========================================
(dollars in thousands) 1993 1992 1991
----------------------------------------------------------
Percent Percent Percent
of Loan of Loan of Loan
Allowance Category Allowance Category Allowance
Category
----------------------------------------------------------
Commercial $2,881 36.3% $ 3,579 37.2% $ 2,355 42.9%
Real Estate:
Construction 339 12.3 602 14.0 1,110 11.1
Mortgage 1,692 43.8 1,300 38.5 1,727 28.6
Installment loans 645 7.6 831 8.2 1,190 13.4
Direct lease financing - .- 200 2.1 553 4.0
----------------------------------------------------------
Total $5,557 100.0% $ 6,512 100.0% $ 6,935 100.0%
==========================================================
Nonperforming Loans
Loans for which the accrual of interest has been discontinued are
designated nonaccrual loans. Accrual of interest on such loans is
discontinued when there reasonable doubt exists as to the full and timely
collection of either principal or interest or generally when a loan becomes
contractually 90 days past due with respect to principal or interest.
Under certain circumstances, interest accruals are continued on loans past
due 90 days which, in management's judgment, are considered to be fully
collectible. Restructured loans are those on which the terms have been
modified in favor of the borrower as a result of the borrower's inability
to meet the original terms.
This is page 25 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
The following table summarizes loans which were on nonaccrual, loans
90 days or more past due and still accruing interest and restructured loans
as of December 31:
(dollars in thousands) 1995 1994 1993 1992 1991
-----------------------------------------------
Nonaccrual loans $4,153 $5,414 $10,744 $ 8,796 $10,078
90 days past due loans and
still accruing 25 76 353 158 123
Restructured loans 2,536 5,850 5,591 - 123
Loans on nonaccrual and 90 days
past due/total loans 5.29% 6.34% 4.97% 3.21% 2.88%
Loans on nonaccrual and 90 days
past due/total assets 3.68 4.19 3.55 2.48 2.23
===============================================
The changes in the levels of nonperforming loans during 1995 and 1994
is discussed under "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Results of Operations -
Nonperforming Assets." The decrease in nonaccrual loans in 1992 resulted
primarily from charge-offs and foreclosures on real estate owned
collateral.
The five largest nonaccrual loans at December 31, 1995 totaled $3.1
million or 74% of total nonaccrual loans. At December 31, 1995, four loans
totaling $2.6 million were primarily secured by real estate with three of
these loans totaling $2.1 million being previously restructured. The
remaining loan with a balance of $476,000 at December 31, 1995 was secured
by receivables, equipment or inventory.
As of December 31, 1995, the Company had $21,000 of accrued interest
on loans on nonaccrual status. If loans on nonaccrual at December 31,
1995, 1994 and 1993 had performed in accordance with original terms,
interest income of the Company would have increased by $326,000, $354,000
and $872,000, respectively.
All restructured loans shown in the chart above were in compliance
with their modified terms.
Classified Loans
The policy of the Company is to review the loans in the portfolio to
identify problem credits and classify them based on a loan grading system.
The loan grading system includes three classifications for problem loans:
"substandard," "doubtful" and "loss." A substandard loan is inadequately
protected by the current sound net worth and paying capacity of the
borrower or by the pledged collateral, if any. A substandard loan has one
or more well defined weaknesses that jeopardize the liquidation of the
debt. A doubtful loan has critical weaknesses which make collection or
liquidation in full improbable. A loan classified as loss is considered
uncollectible or of such little value that its continuance as an asset is
unwarranted. Another category designated as "special mention" is
maintained for loans which are marginally acceptable but currently
protected by the current sound net worth and paying capacity of the
borrower or by the pledged collateral, if any. A special mention loan is
potentially weak, as the borrower is exhibiting deteriorating trends which,
if not corrected, could jeopardize the repayment of the debt and result in
a substandard classification.
This is page 26 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
The following presents loans classified as substandard, doubtful and
special mention at December 31:
(dollars in thousands) 1995 1994 1993
---------------------------------------
Substandard $14,355 $21,658 $22,543
Doubtful 226 369 1,405
---------------------------------------
Total $14,581 $22,027 $23,948
=======================================
Special mention $ 7,465 $10,708 $28,740
=======================================
There were no loans classified as loss for any of the periods
presented. Except for the loans classified as substandard or doubtful,
management is not aware of any loans at December 31, 1995 where the known
credit problems of the borrower would cause the Company to have serious
doubts as to the ability of such borrowers to comply with their present
loan repayment terms and which would result in such loans becoming
nonperforming loans at some future date. Management cannot, however,
predict the extent to which the current economic environment may persist or
worsen, or the full impact such environment may have on the Company's loan
portfolio. Furthermore, Sunwest's loan portfolio is subject to review by
federal and state regulators as part of their routine, periodic examination
and such regulators' assessment of specific credits may affect the level of
the Company's nonperforming loans and allowance for possible credit losses.
Accordingly, there can be no assurance that other loans will not become
nonperforming in the future.
Real Estate Owned
Gross real estate owned, the valuation allowance and net real estate
owned at December 31 were as follows:
(dollars in thousands) 1995 1994 1993
---------------------------------------
Gross real estate owned $ 3,229 $ 5,129 $10,944
Valuation allowance 592 777 3,206
---------------------------------------
Net real estate owned $ 2,637 $ 4,352 7,738
=======================================
Percent of assets 2.3% 3.3% 2.5%
=======================================
Real estate owned consists of real estate acquired in settlement of
loans. Real estate owned is initially recorded at fair value at the time of
foreclosure, determined by current appraisals, less selling costs. The
recognition of gains and losses on sales of real estate is dependent upon
various factors relating to the nature of the property sold, the terms of
the sale and the future involvement of the Company.
Once real estate is acquired and periodically thereafter, management
obtains a valuation and an allowance for estimated losses is provided
against income if the carrying value of real estate exceeds estimated fair
value less selling costs. Legal fees and direct costs, including
foreclosure, appraisal and other related costs, are expensed as incurred.
While management uses currently available information to provide for losses
on real estate, future additions to the allowance may be necessary based on
future economic conditions. In addition, the regulatory agencies
periodically review the allowance for real estate losses and such agencies
may require the Company to recognize additions to the allowance based on
information and factors available to them at the time of their
examinations. Accordingly, no assurance can be given that the
This is page 27 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Company will not recognize additional losses with respect to its real
estate owned. The net cost of operation of other real estate owned
includes write-downs of real estate owned, gains and losses on disposition
and real estate owned operating expenses, net of related income. The net
cost of operation of other real estate owned totaled $296,000 during 1995,
representing 2.6% of the Company's total income for that year, as compared
with $88,000 or .5% of total income for 1994 and $3,493,000 or 12.4% of
total income for 1993.
Deposits
The following table discloses the average outstanding balance of
deposits and the average rates paid thereon for each of the years ended
December 31:
(dollars in thousands) 1995 1994 1993
----------------------------------------------------------
Average Interest Average Interest Average Interest
Balance Rate Balance Rate Balance Rate
----------------------------------------------------------
Noninterest-bearing
demand deposits $34,042 -.--% $ 58,238 -.--% $ 96,776 -.--%
Interest-bearing
demand deposits 33,376 1.98 63,680 2.18 96,415 2.61
Savings deposits 5,486 1.95 9,334 2.15 11,956 2.42
Time deposits 36,976 5.62 65,039 4.08 102,158 3.97
----------------------------------------------------------
Total $109,880 2.59% $196,291 2.16% $307,305 2.23%
==========================================================
The maturities of the time certificates of deposit of $100,000 or more
and the ratio of such deposits to total deposits at December 31, 1995 were
as follows (dollars in thousands):
Percentage
Maturity Amount of Total
------------------------
0-3 Months $4,120 4.02%
3-6 Months 2,179 2.12
6-12 Months 903 .88
Over 12 Months 406 .40
------------------------
Total $7,608 7.41%
========================
Generally, the holders of these deposits are highly sensitive to
changes in interest rates thereby increasing the competition for such
deposits as well as the interest rates paid thereon.
This is page 28 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Selected Financial Ratios
The following table sets forth the ratios of net loss to average total
assets and to average shareholders' equity for the years ended December 31,
as indicated. In addition, the ratios of average shareholders' equity to
average total assets are presented. West Coast has not declared or paid
any cash dividends during the periods presented.
1995 1994 1993
--------------------------------
Ratio of net loss to:
Average total assets (.28)% (2.45)% (3.62)%
Average shareholders' equity (5.71)% (57.44) (62.38)
Ratio of average shareholders'
equity to average total assets 4.88 4.26 5.80
================================
ITEM 2. PROPERTIES
Sunwest occupies its offices under long-term leases expiring at various
dates through 2006. The Company's total occupancy expense for the year
ended December 31, 1995, 1994 and 1993 were approximately $982,000,
$1,546,000, and $2,303,000, respectively. For additional information
concerning properties, see "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA - Notes 7, 15 and 19 of the Notes to the Consolidated Financial
Statements appearing elsewhere in this report.
ITEM 3. LEGAL PROCEEDINGS
In 1992, WCV, Inc. was named a "responsible party" under state and
federal environmental laws with respect to the contamination of certain
real property located in San Bernardino, California (the "Property"). In
1995, WCV, Inc. filed a claim with the California Underground Tank Cleanup
Fund ("UTCF") and was reimbursed for "eligible" cleanup costs associated
with the contaminated property. WCV, Inc. expects that all future cleanup
costs to total $50,000 will qualify as "eligible" costs and be reimbursed
by UTCF. The cost to remediate the Property has been tentatively estimated
at $850,000 of which $800,000 has been incurred through December 31, 1995.
In December 1995, a class action lawsuit was brought against Sunwest
and two other banks who were custodians of the class action members' IRA
accounts. Qualified Pension, Inc. ("QPI") was the administrator of the IRA
accounts, and had a contract with Sunwest for Sunwest to open a pooled
money market account and also act as custodian of certain non-cash assets.
The complaint alleges that QPI and its president misappropriated $9 million
or more of the class members' IRA money over a two year period and that
some of the money was withdrawn from the accounts maintained at Sunwest
without the appropriate written authorization of IRA depositors. The
action seeks recovery of the lost funds from Sunwest and the other banks.
To date, no formal discovery has commenced and no class has been certified.
Sunwest contests the allegations and intends to vigorously defend the
lawsuit. Management, based in part upon the opinion of counsel, does not
believe the ultimate resolution of this matter will have a material impact
on the financial condition or results of operations of the Company.
In addition, West Coast and its subsidiaries are parties to various
other legal proceedings, none of which individually or in the aggregate are
considered by West Coast or its subsidiaries, based in part upon opinions
of counsel, to be material to the financial condition or results of
operations of West Coast or its subsidiaries.
This is page 29 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to shareholders during the fourth quarter of
1995.
ITEM 4(A) EXECUTIVE OFFICERS OF THE REGISTRANT
As of March 4, 1996, the executive officers of the Company are as
follows (Includes Name, Age, Position, and Principal Occupation and
Affiliation During Last Five Years):
John B. Joseph, Age 57
Chairman of the Board, President and Chief Executive Officer, West
Coast; Chairman of the Board and President, North Orange, WCV, Inc., West
Coast Realty and Centennial Loan; Co-Chairman of the Board, Sunwest;
Chairman of the Board, Sunwest Leasing, North Orange; Chairman of the Board
and CEO, Chancellor.
John B. Joseph is currently the Chairman of the Board, President and
Chief Executive Officer of West Coast. He has been Chairman of the Board
of Directors of West Coast since its inception in 1981, President since
April 1993 and Chief Executive Officer since April 1991. Mr. Joseph also
serves, or has served, in the following capacities during the past five
years: President of West Coast from April 1987 to April 1991; Vice
Chairman of the Board of Directors of The Centennial Group, Inc., a
Delaware corporation ("CGI"), since February 1987; Senior Executive Vice
President and Secretary of CGI from July 1987 to July 1993; General Partner
of various limited partnerships engaged in real estate development and
lending activities. Mr. Joseph presently holds and has held, over the past
five years, various positions in the subsidiaries of West Coast. Mr.
Joseph has held, over the past five years up until July 1993 various
positions in the subsidiaries of CGI.
Ronald R. White, Age 49
Vice Chairman of the Board of Directors and Executive Vice President,
West Coast, West Coast Realty, Centennial Loan; Director, WCV, Inc., North
Orange, Sunwest Leasing and Chancellor; Co-Chairman of the Board, Sunwest.
Ronald R. White is currently Executive Vice President and Vice Chairman
of the Board of Directors of West Coast. Mr. White has served in these
capacities since April 1987. Mr. White also serves, or has served, in the
following capacities during the past five years: Chairman of the Board of
Directors, President and Chief Executive Officer of CGI since February
1987; General Partner of various limited partnerships engaged in real
estate development and lending activities. Mr. White presently holds and
has held, over the past five years, various positions in the subsidiaries
of West Coast and CGI.
Frank E. Smith, Age 45
Senior Vice President, Chief Financial Officer and Secretary, West
Coast, West Coast Realty; Senior Vice President, Chief Financial Officer,
Secretary and Treasurer, Sunwest; Vice President, Secretary and Chief
Financial Officer, Sunwest Leasing and North Orange; Senior Vice President,
Treasurer and Secretary, Centennial Loan; Treasurer and Secretary,
Chancellor; Treasurer, WCV, Inc.
Frank E. Smith has served as Senior Vice President, Chief Financial
Officer and Secretary of West Coast since September 1987 and as Senior Vice
President and Chief Financial Officer of Sunwest since February 1993.
This is page 30 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
James G. LeSieur, Age 54
Director, President and Chief Executive Officer, Sunwest and Sunwest
Leasing.
James G. LeSieur has served as President and Chief Executive Officer of
Sunwest since April 1991 and Executive Vice President and Chief Financial
Officer of Sunwest from November 1985 to April 1991. Mr. LeSieur joined
Sunwest in 1975 as Vice President and Cashier and was later promoted to
Senior Vice President and Controller.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
Securities Market Information
West Coast's common stock currently trades over the counter under the
symbol WCBC. West Coast's common stock was traded on the Nasdaq Stock
Market until December 1994. The stock was delisted because the Company's
total market value fell below $3 million. The following table sets forth,
for the calendar quarters indicated, the range of high and low sales prices
for the common stock as reported by Nasdaq through December 1994.
Subsequently, over the counter market quotations were provided. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions:
1995 1994
High Low High Low
-----------------------------------
First Quarter $ .25 $ .25 $ .69 $ .34
Second Quarter .25 .18 .75 .38
Third Quarter .28 .21 .47 .31
Fourth Quarter .31 .12 .38 .31
Holders of Record
As of February 29, 1996, there were approximately 3,000 holders of
record of West Coast's common stock.
Dividends
No dividends have been paid by West Coast since inception. At the
present time, West Coast plans to retain any earnings to increase its
liquidity and capital levels. Further, pursuant to the terms of the
Agreement, West Coast may not pay any cash dividends without the prior
written approval of the FRB. For additional information on dividends, see
"ITEM 1. BUSINESS - SUPERVISION AND REGULATION - West Coast and -
Restrictions on Transfers of Funds to West Coast by Sunwest" and "ITEM 1.
BUSINESS - POTENTIAL AND EXISTING ENFORCEMENT ACTIONS - West Coast's
Regulatory Agreement."
This is page 31 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial data for
the years ended December 31 as indicated with respect to the Company and is
qualified in its entirety by, and should be read in conjunction with, the
1993 through 1995 consolidated financial statements, the related notes and
the independent auditors' report. The data was derived from the
consolidated financial statements of the Company, which were audited by
KPMG Peat Marwick LLP, whose report for December 31, 1995 and 1994 and for
each of the years in the three-year period ended December 31, 1995 is
included elsewhere in this report.
(in thousands,
except per share data) 1995 1994 1993 1992 1991
------------------------------------------------------
RESULTS OF OPERATIONS DATA
Interest income $ 10,494 $ 16,134 $ 25,078 $36,113 $ 47,501
Interest expense 3,487 4,735 7,407 12,575 20,411
Net interest income 7,007 11,399 17,671 23,538 27,090
Provision for possible
credit losses 389 3,297 8,470 5,623 9,135
Other operating income 958 2,683 3,110 4,045 3,490
Other operating expenses 8,537 13,064 23,883 28,006 24,750
Gain (loss) on disposition
of businesses 629 (2,913) (550) (1,546) -
Income tax expense
(benefit) 7 13 (15) (595) (1,600)
Net loss $ (339) $ (5,205) $(12,107) $(6,997) $ (1,705)
NET LOSS PER SHARE
Net loss $ (.04) $ (.57) $ (1.32) $ (.76) $ (.19)
FINANCIAL POSITION DATA
Total assets $113,654 $130,353 $311,706 $361,184 $458,124
Net loans and direct
lease financing 75,180 81,920 217,786 272,502 347,132
Total deposits 102,662 119,269 292,950 330,843 415,710
Shareholders' equity (1) 5,286 5,646 10,854 22,937 30,491
Notes Payable &
Debentures 3,983 3,755 3,441 3,558 3,630
======================================================
(1) No cash dividends have been declared or paid by West Coast Bancorp.
This is page 32 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following presents management's discussion and analysis of West
Coast Bancorp as a separate entity "West Coast" and together with its
subsidiaries (the "Company") for the years ended December 31, 1995, 1994
and 1993. This discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto appearing elsewhere
in this report.
GENERAL
The Company posted a net loss of $339,000 or $.04 per share in 1995,
$5,205,000 or $.57 per share in 1994 and $12,107,000 or $1.32 per share in
1993. The net loss narrowed in 1995 from a lower provision for possible
credit losses in 1995 and the 1994 loss on sale of Sacramento First.
Losses from the high levels of nonperforming assets were reduced in 1995
despite the continued weak economy and depressed real estate values.
West Coast entered into an agreement to sell Sacramento First National
Bank ("Sacramento First") on June 22, 1994. On January 20, 1995, the sale
closed and West Coast received from Business & Professional Bank ("B&PB")
as part of the sales proceeds 14.5% of its common stock. All assets and
liabilities of Sacramento First are included in "Net assets held for sale"
at December 31, 1994. Sacramento First's operating results were included
in the consolidated statements of operations for all periods through the
measurement date of June 30, 1994.
On February 29, 1996, West Coast and Sunwest entered into an agreement
with Western Acquisitions, L.L.C. ("Western"), an affiliate of Hovde
Financial, Inc., for West Coast to sell 35 existing shares of Sunwest for
$2,520,000 and for Sunwest to issue and sell to Western 15 new shares of
its common stock for $1,080,000. On consummation of the stock sale
contemplated by the agreement, West Coast and Western will own
approximately 57% and 43% of Sunwest, respectively. West Coast will record
a loss of approximately $400,000 on the sale of the 35 shares of Sunwest
stock during the first quarter of 1996. The newly issued 15 shares of
stock issued by Sunwest will result in approximately a $100,000 charge to
paid-in-capital at West Coast with an offsetting amount for minority
interest. This will occur because the selling price of Sunwest stock of
$72,000 per share is less than the book value of $83,500 per share for the
outstanding shares at December 31, 1995. The actual loss on sale will
depend on the book value of Sunwest Bank at the time of closing. The stock
sales are subject to Western obtaining various regulatory approvals.
West Coast entered into an agreement with Western on February 29,
1996, which is currently being amended, whereby Western will acquire all of
the remaining 213,384 shares of B&PB common stock at $8.81 per share. The
sale is to be completed in three phases. Phase one occurred on March 8,
1996 and resulted in proceeds of approximately $407,000. Phase two is for
93,007 shares and is to occur by May 28, 1996. Phase three is for 74,178
shares and is to occur by November 15, 1996. Phase two and three are
subject to Western being able to come to an agreement with B&PB regarding
certain restrictions imposed by B&PB regarding subsequent sale and voting
of the shares. Phase three is also subject to Western obtaining certain
regulatory approvals. The principals of Western have agreed to lend West
Coast on a non-recourse basis approximately $819,000. The loan will be
secured by 12 shares of Sunwest stock. The loan will be due upon the
earlier of the sale of Phase II shares, the sale of the shares of the
Sunwest common stock to Western or March 31, 1997.
West Coast's liquidity is limited. If the remaining B&PB shares are
not acquired by Western the shares will be sold on the open market to raise
sufficient funds to repay the loan to be made by the principals of Western,
and repay the $1.2 million of debentures held by the public and to provide
funds for West Coast to continue its operations. In the event the above
transactions are not completed as contemplated,
This is page 33 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
West Coast would need to come to an agreement with certain affiliates to
extend indebtedness to a future date when sufficient funds can be obtained
to repay the debts. In the event West Coast is unable to raise funds to
increase its liquidity, West Coast may not be able to meet its current
obligations and may be forced into bankruptcy. If this event were to
occur, West Coast shareholders could suffer the elimination of the value of
their investments in the Company. See "Liquidity" and "ITEM 1. BUSINESS -
SUPERVISION AND REGULATION -- AND POTENTIAL AND EXISTING ENFORCEMENT
ACTIONS."
Exclusive of Sacramento First's earnings and loss on sale, the
Company's loss would not have changed in 1995 and would have been
$2,539,000 or $.28 per share in 1994 and $11,541,000 or $1.26 per share in
1993.
In 1995, Sunwest retroactively removed the carrying value of certain
assets by a $557,000 charge to retained earnings. The assets were adjusted
to fair value in 1985 as a result of West Coast's purchase of Sunwest. The
underlying assets for which this fair value adjustment was recorded were
either sold in previous years or were no longer considered to have any
remaining economic value at December 31, 1992. The effects of such
restatement on operations for the years ended December 31, 1994 and 1993
has not been reflected as the amounts would not be material to those years.
The Company had total assets, loans and deposits as of December 31 as
follows:
(dollars in millions) 1995 1994 1993
----------------------------------
Total assets $ 114 $ 130 $ 312
Total loans and leases 79 87 223
Total deposits 103 119 293
==================================
The 1995 deposit reductions resulted primarily from the intentional
runoff of higher cost time certificate of deposits at Sunwest as asset
levels have decreased. Loans decreased in 1995 and 1994 due to lower loan
demand and more stringent underwriting standards. The 1994 reductions
resulted primarily from the accounting treatment for the sale of Sacramento
First and reductions in loans partially caused by Sunwest's capital
position and regulatory orders.
RESULTS OF OPERATIONS
GENERAL
The 1995 loss resulted primarily from lower net interest income, the
high percentage of nonperforming assets, high debt service at West Coast
and high operating costs. This loss was reduced by a $629,000 gain on
liquidation of WCV, Inc. The 1994 loss reflected the accrued loss on the
sale of Sacramento First which was completed on January 20, 1995. Other
factors affecting the 1994 loss and the primary factors contributing to the
1993 loss were loan losses and expenses associated with high levels of
nonperforming assets and lower net interest income.
Income and expense categories were generally lower in 1995 versus 1994
and in 1994 versus 1993 primarily from Sacramento First being included only
through June 1994 and asset declines at Sunwest.
Other operating income was lower in 1995 due principally to lower gain
on sales of loans. Other operating expenses decreased from 1993 to 1995
due primarily to the inclusion of Sacramento First during only the first
half of 1994 and cost control efforts at Sunwest.
This is page 34 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
NET INTEREST INCOME
The decline in net interest income in 1995 and 1994 resulted primarily
from the sale of Sacramento First and, to a lesser extent, lower interest-
earning asset volumes in 1995.
In 1995, the net interest margin (yield on earning assets less the rate
paid on interest-bearing liabilities) decreased slightly while the net
yield on interest-earning assets (net interest income divided by average
earning assets) increased slightly. The net interest margin decreased
because rates on interest-bearing liabilities increased more than yields on
earning assets. The yield on earning assets and rates on interest-bearing
liabilities both increased by nearly 100 basis points in 1995 because the
Company received/incurred a full year's income and expense from the general
market rate increases that occurred in 1994. In 1994 the "prime" rate
increased from 6.00% to 8.50%. In February 1995 it increased to 9.00%
before falling back to 8.50% by year end 1995.
Increases in yield on average earning assets were affected by average
loans (the highest yielding asset) which declined from 80% of average
interest-earning assets in 1994 to 72% in 1995. Yield on interest-bearing
deposits increased 234 basis points from 1994 to 1995. These deposits
primarily represent one year CD's at other financial institutions. While
higher reinvestment rates in late 1994 and early 1995 caused the 1995 yield
to increase significantly, lower current reinvestment rates will likely
cause this yield to decrease in 1996. Federal Funds sold yield increased
200 basis points as the target rate increased by 250 basis points in 1994
and due to management's ongoing effort to receive the highest yield
possible. Investment securities yield increased only 87 basis points
because this category contains longer term fixed rate securities that do
not reprice to market yields as quickly.
Rates on interest-bearing liabilities were higher in 1995 partially
because of a lawsuit settlement with a former director which included
recognition of past interest. Exclusive of other debt, the rate on
interest-bearing liabilities would have increased by 82 basis points and
the net interest margin would have increased by 12 basis points.
The rates on time deposits increased with general market rate
increases. These are expected to decrease as current certificates mature
and reprice at the current lower rates. Savings and interest-bearing
demand deposit rates decreased by 20 basis points from 1994 to 1995. The
decrease was a result of the Sacramento First sale as Sunwest did not
change its rates during the past two years.
The net yield on interest-earning assets and net interest margin both
increased slightly in 1994 as the yield on interest-earning assets remained
unchanged and the rates on interest-bearing liabilities declined slightly.
The yield on interest-earning assets during 1994 compared to 1993
remained stable despite the increase in prime rate during 1994 because
Sunwest's yield on interest-earning assets declined from 8.80% in 1993 to
8.67% in 1994. Sunwest's decline was caused by its average loans (the
highest yielding asset) declining from 85% of average interest-earning
assets in 1993 to 80% in 1994, and the yield on loans increasing by only 19
basis points during 1994. The increase in yield on loans was lower than
the prime rate increases because of a combination of factors including the
fact that a full year of the prime rate increases were not earned, Sunwest
is trying to attract and retain higher quality (lower rate) loans,
approximately 50% of Sunwest's loans are either fixed or reprice only once
a year and the sale of $3.6 million of the unguaranteed portion of SBA
loans that were yielding 13.54%.
Loans on which the accrual of interest had been discontinued at
December 31, 1995 and 1994 amounted to $4,153,000 and $5,414,000,
respectively. If these loans had been current throughout their terms, net
interest income would have increased approximately $326,000 and $354,000 in
1995 and 1994, respectively. This would have raised both the net yield on
interest-earning assets and the net interest margin by .39% and .19% in
1995 and 1994, respectively.
This is page 35 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Average Balance Sheets and Analyses of Net Interest Earnings
Information concerning average interest-earning assets and interest-
bearing liabilities, along with the interest earned or paid thereon and the
average interest rates earned and paid thereon, is set forth in the
following table for the years ended December 31. Averages for Sunwest and
Sacramento First, the assets of which constitute 99% of the Company's
earning assets, were computed based on daily balances. Averages for the
remaining entities are based on monthly balances. Income and yields earned
on tax exempt securities are not presented in the following tables on a
taxable equivalent basis since the tax effect was not material.
(dollars in thousands) 1995 1994
------------------------------------------------------
Average Average Average Average
Balance Interest Rates Balance Interest Rates
Assets ------------------------------------------------------
Loans, net of unearned loan fees
& discounts (1) $ 80,153 $8,648 10.79% $150,837 $14,480 9.60%
Investment securities 10,196 623 6.11 12,817 671 5.24
Federal funds sold 15,272 893 5.85 21,283 820 3.85
Interest-bearing
deposits with banks 4,994 330 6.61 3,815 163 4.27
-------------------------------------------------------
Interest-earning assets 110,615 10,494 9.49 188,752 16,134 8.55
Allowance for possible
credit losses (4,175) (5,305)
Cash and due from banks 6,470 13,500
Other assets 8,638 15,740
------------------------------------------------------
Total assets $121,548 $212,687
======================================================
Liabilities and shareholders' equity
Time deposits $ 36,976 $2,077 5.62% $65,039 $2,654 4.08%
Interest-bearing
demand deposits 33,376 661 1.98 63,680 1,390 2.18
Savings deposits 5,486 107 1.95 9,334 201 2.15
N/P to affiliates 815 68 8.34 527 38 7.21
Other debt (2) 391 222 56.78 1,269 100 7.88
Convertible subord-
inated debentures 3,035 352 11.60 3,035 352 11.60
------------------------------------------------------
Total interest-bearing
liabilities 80,079 3,487 4.35 142,884 4,735 3.31
Demand deposits 34,042 58,238
Other liabilities 1,491 2,504
Shareholders' equity 5,936 9,061
------------------------------------------------------
Total liabilities and
shareholders' equity $121,548 $212,687
======================================================
Net interest income $7,007 $11,399
Net interest margin 5.13% 5.24%
Net yield on interest-earning assets 6.33 6.04
======================================================
This is page 36 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(dollars in thousands) 1993
-------------------------------------------
Average Average
Balances Interest Rates
-------------------------------------------
Assets
Loans, net of unearned
loan fees and discounts (1) $ 249,258 $23,490 9.42%
Investment securities 16,400 814 4.96
Federal funds sold 26,109 718 2.75
Interest-bearing deposits
with banks 1,379 56 4.06
-------------------------------------------
Interest-earning assets 293,146 25,078 8.55
Allowance for possible
credit losses (6,781)
Cash and due from banks 25,791
Other assets 22,288
-------------------------------------------
Total assets $ 334,444
===========================================
Liabilities and shareholders' equity
Time deposits $ 102,158 $ 4,054 3.97%
Interest-bearing
demand deposits 96,415 2,518 2.61
Savings deposits 11,956 289 2.42
N/P to affiliates 497 33 6.64
Other debt (2) 1,610 161 10.00
Convertible
subordinated debentures 3,035 352 11.60
---------------------------------------------
Total interest-bearing
liabilities 215,671 7,407 3.43
Demand deposits 96,776
Other liabilities 2,587
Shareholders' equity 19,410
---------------------------------------------
Total liabilities and
shareholders' equity $ 334,444
=============================================
Net interest income $17,671
Net interest margin 5.12%
Net yield on interest-earning assets 6.03
(1) Interest income includes loan fees of $197,000, $224,000 and
$1,542,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. Loans, net of unearned loan fees and discounts,
includes loans placed on nonaccrual.
(2) Other debt includes a capital lease, senior debt on real estate owned
and short-term debt owed to a former officer of West Coast.
This is page 37 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Rate and Volume Variance Analyses
The following schedule analyzes the rate and volume changes in net
interest income for the years ended December 31. The variances
attributable to simultaneous volume and rate changes have been allocated
based upon the absolute values of the rate and volume variance.
(dollars in thousands) 1995 vs. 1994 1994 vs. 1993
------------------------------------------------------
Volume Rate Total Volume Rate Total
------------------------------------------------------
Interest Income:
Loans and leases $(7,451) $1,619 $(5,832) $(9,440) $430 $(9,010)
Investment securities (150) 102 (48) (186) 43 (143)
Federal funds sold (274) 347 73 (150) 252 102
Interest-bearing
deposits with banks 60 107 167 104 3 107
-------------------------------------------------------
Total (7,815) 2,175 (5,640) (9,672) 728 (8,944)
------------------------------------------------------
Interest Expense:
Time deposits (1,375) 798 (577) (1,512) 112 (1,400)
Interest-bearing
demand deposits (610) (119) (729) (760) (368) (1,128)
Savings deposits (77) (17) (94) (59) (29) (88)
Notes payable to
affiliates 23 7 30 2 3 5
Other debt (114) 236 122 (31) (30) (61)
-------------------------------------------------------
Total (2,153) 905 (1,248) (2,360) (312) (2,672)
-------------------------------------------------------
Net change in net
interest income $(5,662) $1,270 $(4,392) $(7,312)$1,040 $(6,272)
=======================================================
(dollars in thousands) 1993 vs. 1992
-----------------------------------------
Volume Rate Total
-----------------------------------------
Interest Income:
Loans and leases $ (7,014) $(3,723) $ (10,737)
Investment securities 150 (130) 20
Federal funds sold (107) (120) (227)
Interest-bearing deposits with banks (74) (17) (91)
----------------------------------------
Total (7,045) (3,990) (11,035)
----------------------------------------
Interest Expense:
Time deposits (2,593) (1,585) (4,178)
Interest-bearing demand deposits (52) (530) (582)
Savings deposits (143) (150) (293)
Notes payable to affiliates (4) (5) (9)
Other debt (144) 37 (107)
Convertible subordinated debentures - 1 1
----------------------------------------
Total (2,936) (2,232) (5,168)
----------------------------------------
Net change in net interest income $ (4,109) $(1,758) $ (5,867)
========================================
This is page 38 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
INTEREST INCOME AND YIELD ON EARNING ASSETS
Interest income declined in 1995, 1994 and 1993 as a result of lower
earning asset volumes partially offset by more favorable rates in 1995.
Average interest-earning assets decreased by $78 million from 1994 to
1995, by $104 million from 1993 to 1994 and by $74 million from 1992 to
1993. The decrease in average loans as a percentage of average interest-
earning assets from 87% in 1992 to 72% in 1995 also exerted downward
pressure on interest income.
The average interest rates on interest-earning assets increased by 94
basis points from 1994 to 1995, remained unchanged from 1993 to 1994 and
decreased by 129 basis points from 1992 to 1993 primarily because of
changes in market rates of interest. The changes in the rates on interest-
earning assets tends to lag behind the changes in market rates, as interest-
earning assets reprice. This lag is caused by fixed rate loans and
investments maturing and repricing to current market rates and variable
rate loans that only reprice to market rates periodically (i.e. annually).
The prime rate was at 6% in early March 1994 and then increased to 9.0% by
February 1995 until falling back to 8.5% before December 31, 1995.
INTEREST EXPENSE AND COST OF FUNDS
Interest expense declined in 1995, 1994 and 1993 primarily from lower
volumes. In 1994 and 1993 lower rates also contributed to the decline.
Average interest-bearing liabilities decreased by $63 million from 1994 to
1995, by $73 million from 1993 to 1994 and by $67 million from 1992 to
1993.
The average rates paid on interest-bearing liabilities increased by 104
basis points from 1994 to 1995, decreased by 12 basis points from 1993 to
1994 and decreased by 102 basis points from 1992 to 1993. The changes
occurred largely as a result of the market rate changes, and, like interest-
earning assets, the Bank's changes tend to lag behind the market changes.
This is page 39 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
PROVISION FOR POSSIBLE CREDIT LOSSES
The Company's allowance for possible credit losses, net charge-offs and
provision for possible credit losses are summarized for the years ended
December 31 as follows:
(dollars in thousands) 1995 1994 1993
----------------------------------------
Allowance for possible credit losses
at beginning of period $ 4,649 $ 5,557 $ 6,512
Charge-offs:
Commercial (985) (3,317) (8,396)
Real estate - construction - (51) -
Real estate - mortgage (1,049) (432) (973)
Installment loans to individuals (119) (181) (909)
Direct lease financing (3) (29) (56)
----------------------------------------
Total charge-offs (2,156) (4,010) (10,334)
Recoveries 938 648 909
----------------------------------------
Net charge-offs (1,218) (3,362) (9,425)
Provision for possible credit losses 389 3,297 8,470
Transfer to assets held for sale - (843) -
----------------------------------------
Allowance for possible credit losses
at end of period $ 3,820 $ 4,649 $ 5,557
========================================
Allowance/Total loans 4.8% 5.4% 2.5%
Allowance/Loans on nonaccrual and
90 days past due 91.4% 84.7% 50.1%
========================================
The Company had a high provision for possible credit losses in 1994 and
1993 and high charge-offs during all periods as a result of the economic
recession and depressed real estate values, particularly in southern
California. The lower provision for possible credit losses in 1995 and 1994
is attributable to lower net charge-offs.
Management has maintained the Company's allowance for possible credit
losses at a historically high percentage of total loans. The high level of
reserves reflects management's assessment of the current economic
environment and its impact on the portfolio as well as the result of a
comprehensive risk assessment system to identify and quantify risk in the
portfolio. Management believes that the allowance for possible credit
losses at December 31, 1995 is adequate to absorb known and inherent risks
in the Company's credit portfolio. See "ITEM 1 - SELECTED STATISTICAL
INFORMATION - Classified loans" for a summary of classified loans.
The ultimate collectibility of a substantial portion of the Company's
loans, as well as its financial condition, is affected by general economic
conditions and the real estate market in California. California has
experienced, and may continue to experience, adverse economic conditions.
These conditions have adversely affected certain borrowers' ability to
repay loans. The continuation of these conditions or further economic
decline in the Company's market area could result in a further
deterioration in the quality of the loan portfolio and high levels of
nonperforming assets, classified assets and charge-offs, which would
require increased provisions for possible credit losses and would adversely
affect the financial condition and results of operations of the Company.
This is page 40 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
CHARGE-OFFS
A summary of net charge-offs (recoveries) by company for the years
ended December 31 follows:
(dollars in thousands) 1995 1994 1993
-------------------------------
West Coast $ - $ (67) $ (65)
Sacramento First - 746 2,295
Sunwest 1,218 2,683 7,195
-------------------------------
$ 1,218 $3,362 $9,425
===============================
Charge-offs decreased at Sacramento First during 1995 and 1994 as a
result of the sale. The decrease related to Sunwest is a result of
management's ongoing efforts to reduce the classified assets in its
portfolio. Gross charge-offs of commercial loans at Sunwest represented
46% of charge-offs in 1995 and 79% in 1994 and 1993. The level of charge-
offs relates primarily to the weak economy, high business failures and
falling real estate values in southern California. The Company's charge-
offs as a percentage of average loans were 1.52% in 1995 and 2.23% in 1994.
NONPERFORMING ASSETS
Nonperforming assets include nonperforming loans and real estate owned.
Nonperforming loans include loans for which the accrual of interest has
been discontinued and loans that are contractually past due 90 days or more
with respect to principal and are still accruing interest. Real estate
owned consists of real estate collateral for which the Company has legally
taken ownership and real estate collateral that is still legally owned by
the borrower, but has been accounted for as an "in-substance" foreclosure.
See "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTE 1 -
Allowance for Possible Credit Losses" for a discussion of Statement of
Financial Accounting Standards No 114, ("SFAS 114") "Accounting by
Creditors for Impairment of a Loan." This pronouncement was implemented
during the first quarter of 1995.
Nonperforming loans totaled $4,178,000 and $5,490,000 at Sunwest and
the Company at December 31, 1995 and 1994, respectively. This amounted to
5.3% and 6.3% of total loans for the same respective periods. In 1994,
this excludes $1,031,000 of Sacramento First loans classified as Net Assets
Held-for-Sale. At December 31, 1993 nonperforming loans totaled $46,000 at
West Coast, $1,372,000 at Sacramento First, $9,679,000 at Sunwest and
$11,097,000 for the Company. This amounted to 5.0% of total loans for the
Company.
In 1995, nonperforming loans decreased by $1.3 million primarily
because $2.2 million were transferred to real estate owned and $2.2 million
were charged off. These decreases were offset by three restructured loans
totaling $2.6 million being transferred to nonaccrual status during 1995.
In 1994, nonperforming loans decreased as $4.0 million were charged-off,
$2.8 million were transferred to real estate owned and $1.0 million that
relates to Sacramento First was classified as Net Assets Held-for-Sale.
Real estate owned totaled $53,000, $2,584,000 and $2,637,000 at
December 31, 1995 at West Coast, Sunwest and the Company, respectively. At
December 31, 1994, real estate owned totaled $53,000, $4,299,000 and
$4,352,000 at West Coast, Sunwest and the Company, respectively, and at
December 31, 1993 real estate owned totaled $433,000 at West Coast,
$3,229,000 at Sacramento First, $4,076,000 at Sunwest and $7,738,000 at the
Company, respectively. This represented 2.3%, 3.3% and 5.0% of the
Company's assets at December 31, 1995, 1994 and 1993, respectively. In
1994, Sacramento First's real estate owned of $1,399,000 was classified as
Net Assets Held-for-Sale. Real estate owned decreased by $1.7 million in
1995 because of $3.4 million of sales and $.5 million of write-downs offset
by $2.2 million of transfers from loans during 1995. The 1994 decrease is
primarily attributable to Sacramento First.
This is page 41 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Nonperforming assets (nonperforming loans and real estate owned
combined) totaled $53,000, $6,762,000 and $6,815,000 at December 31, 1995
at West Coast, Sunwest and the Company, respectively. At December 31,
1994, nonperforming assets totaled $53,000, $9,789,000 and $9,842,000 at
West Coast, Sunwest and the Company and in 1993 nonperforming assets
totaled $479,000 at West Coast, $4,601,000 at Sacramento First, $13,755,000
at Sunwest and $18,835,000 for the Company, respectively. This represented
6.0%, 7.5% and 6.0% of the Company's assets at December 31, 1995, 1994 and
1993, respectively. In 1994, Sacramento First's nonperforming assets of
$2,430,000 were classified as Net Assets Held-for-Sale.
Restructured loans which were performing in compliance with their
modified terms totaled $2,536,000, $5,850,000 and $5,591,000 at December
31, 1995, 1994 and 1993, respectively. Restructured loans totaling
$2,309,000 and $605,000 were on nonaccrual status at December 31, 1995 and
1994. No such loans existed at year-end 1993. The decrease in the
Company's restructured loans in 1995 resulted from reclassifying $2.6
million to nonperforming loans and incurring $617,000 of charge-offs.
OTHER OPERATING INCOME
A summary of other operating income by category is presented in NOTE 14
of the Notes to the Consolidated Financial Statements. Other operating
income decreased to $958,000 in 1995, from $2.7 million in 1994 and $3.1
million in 1993.
From 1994 to 1995 the combined decrease of $400,000 in depositor
charges was due to $206,000 from the sale of Sacramento First and by
$194,000 from lower deposit balances at Sunwest. From 1993 to 1994
depositor charges decreased by $254,000 as a result of the exclusion of
Sacramento First and by $268,000 from lower deposit balances at Sunwest.
Depositor charges are not expected to change significantly from 1995 to
1996.
The decrease in service charges, commissions and fees from 1993 to 1995
resulted primarily from the sale of Sacramento First.
Gain on sale of loans were lower in 1995 versus 1994 because Sunwest
sold its unguaranteed portion of SBA loans for a gain of $536,000 in 1994.
As a result of the sale of Sacramento First, Sacramento First's gain on
sale decreased $126,000 from 1994 to 1995. The Company plans on retaining
SBA loans to supplement loan volume, therefore no gain on sale of loans is
expected during 1996.
The net gain on sale of premises and equipment in 1994 relates to
Sunwest's conversion of a capital lease to an operating lease in December
1994.
OTHER OPERATING EXPENSES
Other operating expenses decreased significantly from 1994 to 1995. A
summary of the operating expenses is presented in NOTE 15 of the Notes to
the Consolidated Financial Statements.
A summary of other operating expenses follows:
(dollars in thousands) 1995 1994 1993
----------------------------
Other operating expenses $8,537 $13,064 $23,883
Other operating expenses/Interest
and other operating income 74.5% 69.4% 84.7%
Other operating expenses/Average assets 7.0% 6.1% 7.1%
============================
Other operating expenses decreased by $4.5 million or 35% from 1994 to
1995. Sunwest decreased its other operating expenses by $1.4 million or
14%, expenses for
This is page 42 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Sacramento First decreased $3.1 million or 100% and West Coast decreased
its expenses (excluding the management fee repayment to Sunwest) by $70,000
or 15%. The most significant changes from 1994 to 1995 at Sunwest were
salaries decreasing $764,000 because total employees decreased from 142 at
the beginning of 1994 to 81 at the end of 1995. Collection expenses
decreased $512,000 from reductions in problem assets, cost control efforts
and a $195,000 recovery of previously charged expenses. Occupancy expenses
decreased $251,000 from various lease renegotiations in late 1994. Other
decreases at Sunwest occurred in regulatory fees and assessments,
depreciation and amortization, and data processing expenses. REO expenses
increased $266,000 at Sunwest primarily from a $257,000 increase in write-
downs. A $155,000 loss from facility lease adjustment was recorded at
Sunwest in 1995 with no corresponding loss in 1994. West Coast's $70,000
decrease resulted primarily from salaries decreasing $69,000 from 1994 to
1995. The Company's' other significant decreases were a result of the sale
of Sacramento First.
Other operating expenses decreased by $10.8 million or 45% from 1993 to
1994. Sunwest decreased its other operating expenses by $6.7 million or
41%, expenses for Sacramento First decreased $3.5 million or 53% and West
Coast decreased its expenses by $951,000 or 67%. Decreases occurred in
every category and typically varied from 20% to 50%. A significant
exception included the net cost of operation of real estate owned which
decreased $3.4 million or 97% for the period. Sunwest accounted for $3.0
million of this decrease primarily because it incurred net gains on the
sales of real estate owned in 1994 and had lower levels of real estate
owned in 1994.
Salaries decreased by $3.7 million or 37% from 1993 to 1994.
Sacramento First's salaries decreased $1.7 million as a result of the sale,
Sunwest's salaries decreased $1.6 million from reducing staff by 37% in
1994 and West Coast's salaries decreased by $423,000 from a reorganization
in 1993. All other expenses decreased $3.7 million or 35% from 1993 to
1994 as a result of lower asset levels, management's cost control efforts
and the exclusion of Sacramento First.
Other operating expenses are expected to decrease in 1996 primarily
because of decreases in salaries and employee benefits. The Company has
gradually reduced its full time equivalent employees from 91 at the
beginning of 1995, to 82 at year-end 1995 and to 74 by February 29, 1996.
GAIN (LOSS) ON LIQUIDATION OF WCV, INC.
The Company recorded a gain on the liquidation of WCV, Inc. of $629,000
in 1995 versus losses of $125,000 in 1994 and $550,000 in 1993.
WCV, Inc. was substantially liquidated in 1993. Remaining activity in
1996 consists of the environmental clean-up and disposition of the sole
remaining real estate owned property. The gain in 1995 relates to the
refund of $469,000 received in November 1995 from the California
Underground Storage Tank Cleanup Fund ("USTF") and reversal of future
estimated costs because reimbursement is expected from the USTF.
An additional refund of $123,000 was received in February 1996 from the
original claim. This will be recognized as income during the first quarter
of 1996. Approximately $30,000 of additional past costs are included in
other liabilities that WCV, Inc. expects to be reimbursed for with future
claim filings. This will be recognized as income when received. Future
costs totaling $60,000 are expected to be reimbursed by the USTF.
LOSS ON SALE OF SACRAMENTO FIRST
The sale of Sacramento First to Business & Professional Bank ("B&PB")
closed on January 20, 1995 and provided West Coast with net cash proceeds
of $3.5 million and 243,000 shares of B&PB stock valued at $1.8 million.
No value was assigned to the right to receive a contingent cash payment.
The sale resulted in a loss of $2.8 million in 1994 as the sum of the net
cash proceeds and value of B&PB stock was less than the book value of
Sacramento First.
This is page 43 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
INCOME TAXES
A summary indicating the differences between the effective income tax
rate and the Federal statutory rate is presented in NOTE 11 of the Notes to
the Consolidated Financial Statements. The 1995 and 1994 tax benefits were
less than expected principally because of the change in the valuation
allowance for deferred taxes. The valuation allowance was increased to
offset the Company's deferred tax asset. The Company may not record a
deferred tax asset for deductible temporary differences, operating loss or
tax credit carryforwards until it is more likely than not that the tax
benefits will be realized.
LIQUIDITY
THE COMPANY
Liquidity, as it relates to banking, represents the ability to obtain
funds to meet loan commitments and to satisfy demand for deposit
withdrawals. The principal sources of funds that provide liquidity to West
Coast's subsidiary, Sunwest, are maturities of investment securities,
collections on loans, increased deposits and temporary borrowings. The
Company had loan commitments of $10,637,000 and standby and commercial
letters of credit totaling $425,000 at December 31, 1995. The majority of
outstanding loan commitments are not expected to be drawn upon.
All the outstanding loan commitments were at Sunwest. Sunwest manages
its liquidity as well as interest rate risk through an asset and liability
management committee. The asset and liability management committee obtains
estimates from the bank's loan officers of how much of the commitments will
ultimately be funded and when. The committee reviews and evaluates these
estimates in conjunction with projections of loan and time deposit run-off,
other expected deposit fluctuations and investment maturities. The
committee uses the projections to assess liquidity and manage asset levels.
The Company's liquid asset ratio (the sum of cash, investments
available-for-sale and Federal funds sold divided by total assets) was 19%
at December 31, 1995 and 23% at December 31, 1994. The Company believes
that it has sufficient liquid resources, as well as available credit
facilities, to enable it to meet its operating needs.
The Company's cash and cash equivalents decreased by $1.7 million
during 1995. The operating activities increased cash by $1.1 million. The
$339,000 net loss was offset by non-cash expenses including a net decrease
in receivables, payables and other assets of $722,000, $566,000 of
depreciation and amortization and $479,000 of write-downs on real estate
owned. Investing activities provided $10.0 million in cash and cash
equivalents which consisted primarily of loan decreases of $4.2 million and
proceeds from sales of real estate owned of $3.6 million. Net cash of
$12.9 million was used in financing activities and consisted almost
entirely of decreases in deposits.
THE PARENT COMPANY
West Coast's liquidity is limited. West Coast has relied on sales of
assets and borrowings from officers/directors as sources of liquidity.
Dividends from subsidiaries ordinarily provide a source of liquidity to a
bank holding company. Sunwest is prohibited from paying cash dividends by
the Order to Cease and Desist ("the C&D") issued by the FDIC and an Order
issued by the California Superintendent of Banks (the "State order")
without their prior consent.
During 1995, West Coast did not receive any dividends from its
subsidiaries. West Coast does not expect to receive dividends from its
subsidiaries during 1996.
West Coast's primary sources of cash in 1996 are expected to be from
sales of its B&PB stock and Sunwest stock. On March 8, 1996, West Coast
received $407,000 of cash from the sale of 46,199 shares of its B&PB stock.
West coast has an agreement to
This is page 44 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
sell the remaining B&PB shares for approximately $1.5 million. The B&PB
shares and any proceeds received from their sale are pledged as collateral
for West Coast's guarantee of Sunwest's capital plan. West Coast will
request from the FDIC release of these shares during 1996. An agreement to
sell 35 shares of Sunwest stock for $2.5 million was entered into between
West Coast, Sunwest and Western. Sales of other property are forecasted to
provide $50,000 during 1995. Advances from WCV, Inc. are expected to
provide approximately $70,000 of cash during 1996 because refunds from the
USTF are expected to exceed payments for the restoration of the real estate
owned. At December 31, 1995, West Coast had cash totaling $203,000.
West Coast anticipates cash expenditures during 1996 to consist of debt
service payments and other operating expenses. West Coast's projected debt
service for 1996 includes quarterly interest payments on the 10%
subordinated debentures of $76,000 each, payoff of the other borrowed funds
totaling $240,000 and subordinated debentures totaling $3,035,000.
Paydowns on the notes payable to affiliates may occur based on cash
availability. West Coast anticipates that other operating expenses will be
approximately $230,000 during 1996, of which $120,000 relates to salaries
and directors' fees that are currently being deferred.
West Coast's liquidity is limited. If the remaining B&PB shares are
not acquired by Western the shares will be sold on the open market to raise
sufficient funds to repay the loan to be made by the principals of Western,
and repay the $1.2 million of debentures held by the public and to provide
funds for West Coast to continue its operations. In the event the above
transactions are not completed as contemplated, West Coast would need to
come to an agreement with certain affiliates to extend indebtedness to a
future date when sufficient funds can be obtained to repay the debts. In
the event West Coast is unable to raise funds to increase its liquidity,
West Coast may not be able to meet its current obligations and may be
forced into bankruptcy. If this event were to occur, West Coast
shareholders could suffer the elimination of the value of their investments
in the Company. See and "ITEM 1. BUSINESS - SUPERVISION AND REGULATION --
AND POTENTIAL AND EXISTING ENFORCEMENT ACTIONS."
CAPITAL RESOURCES AND DIVIDENDS
Sunwest had a 9.57%, 10.86% and 7.00% Tier 1 risk-based capital, total
risk-based capital and leverage ratio at December 31, 1995, respectively.
These are above the regulatory minimums of 4.00%, 8.00% and 4.00%,
respectively and above the regulatory orders that require Sunwest to
maintain a minimum leverage ratio of 6.5%. Sunwest's capital ratios are
above amounts necessary for a depository institution to be deemed to be
"Well Capitalized." However, because Sunwest is still subject to
regulatory agreements it can only be deemed "Adequately Capitalized."
The Company had no material commitments for capital expenditures as of
December 31, 1995.
ASSET AND LIABILITY MANAGEMENT
Management of assets and liabilities in terms of rate, maturity and
quality has an important effect on liquidity and net interest margin, and
rate sensitivity is of particular importance. Rate sensitivity is
determined by calculating the ratio of rate sensitive assets to rate
sensitive liabilities. Rate sensitivity ratios that are close to one-to-
one tend to stabilize earnings and provide a company with flexibility in
managing liquidity. Rate sensitivity ratios in which rate sensitive assets
exceed rate sensitive liabilities tend to produce an expanded net yield on
interest earning assets in rising interest rate environments and a reduced
net yield on interest earning assets in declining interest rate
environments. Conversely, when rate sensitive liabilities exceed rate
sensitive assets, the net yield on interest earning assets generally
declines in rising interest rate environments and increases in declining
interest rate environments. However, because
This is page 45 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
interest rates for different asset and liability products offered by
depository institutions respond differently to changes in the interest rate
environment, the interest sensitivity table set forth below is only a
general indicator of interest rate sensitivity.
The Company had a net asset sensitivity of $32.6 million at December
31, 1995. Market rates of interest increased dramatically during 1994 and
held steady during 1995. The Company's net yield on interest-earning
assets increased from 6.04% in 1994 to 6.33% in 1995.
The following table sets forth the interest-earning assets and interest-
bearing liabilities of the Company on the basis of when they reprice or
mature and sets forth the rate sensitivity positions of the Company at
December 31, 1995:
Over
Two 91 181 One Year Over
(dollars in Through Through Through Through Five
thousands) Immediate 90 Days 180 Days 365 Days Five Years Years Total
-----------------------------------------------------------
INTEREST-EARNING ASSETS
Loans $27,685 $7,131 $15,419 $13,668 $12,497 $2,600$ 79,000
Investments 15,400 4,071 990 1,270 3,177 - 24,908
-----------------------------------------------------------
Total interest- $43,085 $11,202 $16,409 $14,938 $15,674 $2,600$103,908
earning assets===========================================================
INTEREST-BEARING LIABILITIES
Time certificates of deposit of
$100,000 or more $ - $4,120 $ 2,179 $ 903 $ 406 $ - $7,608
Time certificates of deposit
under $100,000 - 8,509 7,439 5,432 992 - 22,372
Other interest-bearing
deposits 36,707 - - - - - 36,707
Other interest-bearing
liabilities 770 3 3 3,129 677 - 4,582
-----------------------------------------------------------
Total interest-bearing
liabilities $37,477 $12,632 $ 9,621 $ 9,464 $ 2,075 $ - $71,269
===========================================================
Rate sensitive gap $ 5,608 $(1,430)$ 6,788 $ 5,474 $13,599 $2,600 $32,639
===========================================================
Cumulative rate
sensitive gap $ 5,608 $4,178 $10,966 $16,440 $30,039 $32,639$32,639
===========================================================
Cumulative assets divided
by liabilities 114.96% 108.34% 118.36% 123.76% 142.15%145.80% 145.80%
===========================================================
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K" below for consolidated financial statements filed as a part of
this report.
This is page 46 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Except as presented below, the information concerning directors and
executive officers of the Company is incorporated by reference from the
sections entitled "DIRECTORS AND EXECUTIVE OFFICERS - Election of Directors
and - Compliance with Section 16(a) of the Securities Exchange Act of 1934"
of the Company's definitive Proxy Statement to be filed pursuant to
Regulation 14A within 120 days after the end of the last fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning management remuneration and transactions is
incorporated by reference from the section entitled "DIRECTORS AND
EXECUTIVE OFFICERS - Compensation of Executive Officers and Directors" of
the Company's definitive Proxy Statement to be filed pursuant to Regulation
14A within 120 days after the end of the last fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners
and management is incorporated by reference from the section entitled
"Security Ownership of Certain Beneficial Owners and Management" of the
Company's definitive Proxy Statement to be filed pursuant to Regulation 14A
within 120 days after the end of the last fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions
with management is incorporated by reference from the section entitled
"DIRECTORS AND EXECUTIVE OFFICERS - Compensation of Executive Officers and
Directors - Certain Transactions" of the Company's definitive Proxy
Statement to be filed pursuant to Regulation 14A within 120 days after the
end of the last fiscal year.
This is page 47 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report.
1. Consolidated Financial Statements. Reference is made to the
Index to Consolidated Financial Statements at page F-1 for a list
of financial statements filed as part of this report.
2. Financial Statement Schedules. No financial statement
schedules are included in this report on the basis that they are
either inapplicable or the information required to be set forth
therein is contained in the financial statements filed herewith.
3. Exhibits. Reference is made to the Index of Exhibits at
page F-32 for a list of the exhibits filed as part of this re
port.
Executive Compensation Plans and Arrangements. The
following compensation plan and arrangement is filed as exhibits
to this report: None.
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K during
the fourth quarter of 1995.
(c) Exhibits required by Item 601 of Regulation S-K. See Item 14(a) 3.
(d) Additional financial statements. Inapplicable.
UNDERTAKING FOR REGISTRATION STATEMENT ON S-8
For the purpose of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking
shall be incorporated by reference into registrant's Registration Statement
on Form S-8 No. 33-25859 (filed December 1, 1988):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
This is page 48 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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, on the
28th day of March, 1996.
WEST COAST BANCORP
(Registrant)
By /s/ John B. Joseph
----------------------
John B. Joseph
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
/s/ John B. Joseph Chairman of the Board, March 29, 1996
- ------------------- President and
John B. Joseph Chief Executive Officer
(Principal Executive Officer)
/s/ Ronald R. White Executive Vice President March 29, 1996
- ------------------- and Director
Ronald R. White
/s/ Frank E. Smith Chief Financial Officer March 29, 1996
- ------------------- (Principal Financial
Frank E. Smith and Accounting Officer)
/s/ J. David Cheshier Director March 29, 1996
- -------------------
J. David Cheshier
/s/ Dr. L. Wayne Gertmenian Director March 29, 1996
- -------------------
Dr. L. Wayne Gertmenian
/s/ Thomas A. Jones Director March 29, 1996
- -------------------
Thomas A. Jones
/s/ Lacy G. Marlette, Jr. Director March 29, 1996
- -------------------
Lacy G. Marlette, Jr.
This is page 49 of 182 pages
West Coast Bancorp
From 10-K for the year ended December 31, 1995
ITEMS 8, 14(a)(1) and 14(a)(2)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
West Coast Bancorp and Subsidiaries:
Consolidated Balance Sheets -
December 31, 1995 and 1994 F-2
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 F-3
Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-5
Notes to Consolidated Financial Statements F-7
Independent Auditors' Report F-30
Responsibility for Financial Reporting F-31
All schedules are omitted because they are not applicable, not material or
because the information is included in the consolidated financial
statements or the notes thereto.
This is page 50 of 182 pages (F-1)
CONSOLIDATED BALANCE SHEETS West Coast Bancorp and Subsidiaries
(in thousands, except share data)
At December 31,
1995 1994
ASSETS -------------------------
Cash and due from banks $ 6,507 $ 9,437
Interest-bearing deposits with
financial institutions 3,933 4,028
Federal funds sold 15,400 10,200
Investment securities held-to-maturity -
approximate fair value of $5,616
and $5,708 in 1995 and 1994, respectively 5,574 5,868
Investment securities available-for-sale at fair value - 5,947
Loans and direct lease financing held for sale - 59
Loans 79,000 86,569
Less allowance for possible credit losses (3,820) (4,649)
-------------------------
Net loans 75,180 81,920
-------------------------
Real estate owned, net 2,637 4,352
Premises and equipment, net 1,790 1,790
Net assets held for sale 1,452 5,351
Other assets 1,181 1,401
-------------------------
$113,654 $ 130,353
=========================
LIABILITIES
Deposits:
Demand, non-interest bearing $ 35,983 $ 36,027
Savings, money market and interest bearing demand 36,699 38,815
Time certificates under $100,000 22,372 39,134
Time certificates of $100,000 or more 7,608 5,293
-------------------------
Total deposits 102,662 119,269
Notes payable to affiliates 948 720
Other borrowed funds 599 171
Other liabilities 1,124 1,512
10% Convertible subordinated debentures 3,035 3,035
-------------------------
Total liabilities 108,368 124,707
-------------------------
Commitments and contingencies
Subsequent event
-------------------------
SHAREHOLDERS' EQUITY
Common stock, no par value; 30,000,000 shares
authorized; 9,168,942 and 9,192,942 shares issued
and outstanding in 1995 and 1994, respectively 30,176 30,200
Securities valuation allowance - (3)
Accumulated deficit (24,890) (24,551)
-------------------------
Total shareholders' equity 5,286 5,646
-------------------------
$113,654 $ 130,353
=========================
(See accompanying notes to consolidated financial statements)
This is page 51 of 182 pages (F-2)
CONSOLIDATED STATEMENTS OF OPERATIONS West Coast Bancorp and Subsidiaries
(in thousands, except loss per share)
Years ended December 31,
1995 1994 1993
INTEREST INCOME -------------------------------
Loans, including fees $8,648 $14,480 $ 23,490
Federal funds sold 893 820 718
Investment securities 623 671 814
Interest-bearing deposits with banks 330 163 56
-------------------------------
Total interest income 10,494 16,134 25,078
-------------------------------
INTEREST EXPENSE
Savings, money market and interest
bearing demand deposits 768 1,591 2,807
Time certificate deposits under $100,000 1,725 2,162 2,944
Time certificate deposits of $100,000 or more 352 492 1,110
-------------------------------
Total interest on deposits 2,845 4,245 6,861
Other 642 490 546
--------------------------------
Total interest expense 3,487 4,735 7,407
-------------------------------
Net interest income 7,007 11,399 17,671
Provision for possible credit losses 389 3,297 8,470
-------------------------------
Net interest income after provision
for possible credit losses 6,618 8,102 9,201
Other operating income 958 2,683 3,110
Other operating expenses 8,537 13,064 23,883
Gain (loss) on liquidation of WCV, Inc. 629 (125) (550)
Loss on sale of Sacramento First - 2,788 -
-------------------------------
Loss before income taxes (332) (5,192) (12,122)
Income taxes (benefit) 7 13 (15)
-------------------------------
Net loss (339) (5,205) (12,107)
===============================
Net loss per common share $ (.04) $ (.57) $
(1.32)
===============================
Weighted average number of common
shares outstanding 9,177 9,193 9,185
===============================
(See accompanying notes to consolidated financial statements)
This is page 52 of 182 pages (F-3)
CONSOLIDATED STATEMENTS OF CHANGES West Coast Bancorp and Subsidiaries
IN SHAREHOLDERS' EQUITY
(in thousands)
Common Stock Securities Share-
------------- Valuation Accum. holders'
Shares Amount Allowance Deficit Equity
------------------------------------------------
Balance at December 31, 1992
as previously reported 9,169 $30,176 $ - $(6,682) $ 23,494
Restated (Note 1) - - - (557) (557)
------------------------------------------------
Balance at December 31, 1992
as restated 9,169 30,176 - (7,239) 22,937
Shares issued to employee 24 24 - - 24
Net loss - - - (12,107) (12,107)
------------------------------------------------
Balance at December 31, 1993 9,193 30,200 - (19,346) 10,854
Net loss - - - (5,205) (5,205)
Change in securities
valuation allowance - - (3) - (3)
------------------------------------------------
Balance at December 31, 1994 9,193 30,200 $ (3) (24,551) 5,646
Net loss - - - (339) (339)
Reversal of shares previously
issued to employee (24) (24) - - (24)
Change in securities
valuation allowance - - 3 - 3
------------------------------------------------
Balance at December 31, 1995 9,169 $30,176 $ - $(24,890) $ 5,286
================================================
(See accompanying notes to consolidated financial statements)
This is page 53 of 182 pages (F-4)
CONSOLIDATED STATEMENTS OF CASH FLOWS West Coast Bancorp and
Subsidiaries
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES Years ended December 31,
1995 1994 1993
------------------------------
Net loss $ (339) $ (5,205) $(12,107)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 566 821 1,081
Provision for possible credit losses 389 3,297 8,470
Net change in receivables, payables
and other assets 746 1,880 128
Gain on sales of loans (126) (1,054) (825)
Proceeds from sales of loans
originated for sale 1,996 5,359 10,084
Loans originated for sale (1,863) (4,417) (10,423)
Write-down of real estate owned 479 286 3,469
Gain on sales of real estate owned (111) (309) (453)
(Gain) loss on disposal of premises & equipment - (144) -
(Gain) loss on sale and liquidation
of subsidiaries (629) 2,913 550
------------------------------
Net cash provided by (used in)
operating activities 1,108 3,427 (26)
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of
interest bearing balances 3,854 4,874 1,476
Purchases of interest bearing balances (3,759) (5,902) (4,583)
Proceeds from maturity of
investment securities 2,307 3,447 11,706
Purchase of investment securities - (10,587) (11,914)
Net decrease in loans 4,167 45,468 38,610
Proceeds from sales of loans - 4,490 2,313
Proceeds from sales of real estate owned 3,620 5,278 11,913
Transfer cash equivalents to net
assets held for sale - (14,023) -
Proceeds from sales of premises and equipment 205 372 -
Purchases of premises and equipment (393) (106) (614)
Capital expenditures for real estate owned (37) (491) (448)
------------------------------
Net cash provided by
investing activities 9,964 32,820 48,459
------------------------------
(See accompanying notes to consolidated financial statements)
This is page 54 of 182 pages (F-5)
CONSOLIDATED STATEMENTS OF CASH FLOWS West Coast Bancorp and
Subsidiaries
(in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES Years ended December 31,
1995 1994 1993
--------------------------------
Net decrease in deposits $(16,607) $(67,612) $
(37,893)
Sale of Sacramento First National Bank 3,512 - -
Sale of Business & Professional Bank shares 387 -
- -
Borrowings from affiliates 391 314 -
Repayments of notes payable to affiliates (163) - (117)
Repayment of subordinated debt and other
borrowed funds (322) (1,107) (1,442)
--------------------------------
Net cash used in financing activities (12,802) (68,405) (39,452)
--------------------------------
(Decrease) increase in cash and
cash equivalents (1,730) (32,158) 8,981
Cash and cash equivalents at
beginning of year 23,637 55,795 46,814
--------------------------------
Cash and cash equivalents at end of year $21,907 $23,637 $ 55,795
================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest $ 3,511 $ 5,463 $ 7,480
Income taxes 7 (98) (84)
Supplemental schedule of non-cash
investing and financing activities:
Transfer of loans to real estate owned 2,236 2,812 6,353
Increase in premises & equipment and
other borrowed funds to establish
a capital lease 378 - -
Reclassification of other liabilities
to other borrowed funds 372 - -
Assumption of notes payable upon
possession of real estate owned - 931 1,523
Loans made to purchaser of real estate owned - 309 1,057
Land transferred to prepaid rent for future
operating lease payment concessions - 218 -
Assumption of senior mortgage debt by
purchasers of real estate owned - 94 -
Increase in other receivables from
sales of loans and real estate owned - - 1,675
================================
(See accompanying notes to consolidated financial statements)
This is page 55 of 182 pages (F-6)
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
West Coast Bancorp, through its remaining active subsidiary Sunwest
Bank, provides banking services in Orange County and is subject to
competition from other financial institutions. West Coast Bancorp and
Sunwest Bank are regulated by certain Federal and State agencies and
undergo periodic examinations by those regulatory authorities.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of West
Coast Bancorp, a bank holding company ("West Coast"), and its subsidiaries
(the "Company"). West Coast's primary wholly owned subsidiary is Sunwest
Bank ("Sunwest"). West Coast entered into an agreement to sell its
majority-owned subsidiary, Sacramento First National Bank ("Sacramento
First") on June 22, 1994. On January 20, 1995 the sale closed and West
Coast received from Business & Professional Bank ("B&PB") as part of the
sales proceeds 14.5% of B&PB common stock. The B&PB stock is included in
assets held for sale. The other formerly active subsidiary during the
periods presented was WCV, Inc. which ceased operations in November 1992.
All inter-company balances and transactions have been eliminated in
consolidation.
All assets and liabilities of Sacramento First are included in "Net
assets held for sale" at December 31, 1994 (Note 8). Sacramento First's
operating results were included in the consolidated statements of
operations for all periods through the measurement date of June 30, 1994.
In 1995, Sunwest retroactively removed the carrying value of certain
assets by a $557,000 charge to retained earnings. The assets were adjusted
to fair value in 1985 as a result of West Coast's purchase of Sunwest. The
underlying assets for which this fair value adjustment was recorded were
either sold in previous years or were no longer considered to have any
remaining economic value at December 31, 1992. The effects of such
restatement on operations for the years ended December 31, 1994 and 1993
has not been reflected as the amounts would not be material to those years.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles and prevailing practices
within the banking industry. In preparing the consolidated financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the period. Actual results
could differ significantly from those estimates.
INTEREST BEARING DEPOSITS WITH FINANCIAL INSTITUTIONS
Interest bearing deposits with financial institutions generally
represent certificates of deposit of $100,000 or less held at other
financial institutions with FDIC insurance. At December 31, 1995 all
interest-bearing deposits with financial institutions matured in less than
one year.
INVESTMENT SECURITIES
The Company's securities portfolios include U.S. Treasury, U.S.
federal agency, and mutual fund securities. Securities are classified as
available-for-sale when the Company intends to hold the securities for an
indefinite period of time but not necessarily to maturity. Any decision to
sell a security classified as available-for-sale would be based on various
factors, including significant movements in interest rates, changes in the
maturity mix of the Company's assets and liabilities, liquidity demands,
regulatory capital considerations, and other similar factors. Securities
available-for-sale
This is page 56 of 182 pages (F-7)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
are carried at fair value with unrealized gains and losses, net of related
income taxes, reported as a separate component of stockholders' equity.
Securities are classified as held-to-maturity when the Company has the
ability and intent to hold the securities to maturity. Securities held-to-
maturity are carried at cost, adjusted for amortization of premiums and
accretion of discounts to maturity or, in the case of mortgage-backed
securities, over the estimated life of the security. The cost of
securities sold is based on the specific identification method.
The Company has no investments classified as trading securities.
LOANS
Loans are reported at the principal amount outstanding, net of
unearned income. Loans on which the accrual of interest has been
discontinued are designated as non-accrual loans. Accrual of interest on
loans is discontinued when reasonable doubt exists as to the full, timely
collection of interest or principal and, generally, when a loan becomes
contractually past due by ninety days or more with respect to principal or
interest. The accrual of interest may be continued on a loan contractually
past due 90 days or more with respect to principal or interest if the loan
is in the process of collection or collection of the principal and interest
is deemed probable.
When a loan is placed on non-accrual status, all interest previously
accrued but not collected is reversed against current period income.
Income on such loans is then recognized only to the extent that cash is
received and where the future collection of principal is probable.
Accruals are resumed on loans only when, in the judgment of management, the
loan is estimated to be fully collectible. Restructured loans are returned
to accrual status when the remaining loan balance, net of any charge-offs
related to the renegotiation, is estimated to be fully collectible by
management.
A loan is classified as a restructured loan when certain
modifications, such as the reduction of interest rates to below market or
forgiveness or deferral of principal payments, are made to contractual
terms due to a borrower's financial condition. Certain restructured loan
agreements call for additional interest or principal to be paid on a
deferred or contingent basis.
LOAN ORIGINATION FEES AND COSTS
Loan origination fees and direct costs associated with lending are
netted, deferred and amortized to interest income as an adjustment to yield
over the respective lives of the loans using the interest method. The
amortization of deferred fees and costs is discontinued on loans that are
contractually 90 days delinquent. When a loan is paid off, any unamortized
net loan origination fees are recognized in interest income. Net deferred
loan fees of approximately $373,000 and $371,000 are included as an offset
to loans at December 31, 1995 and 1994, respectively.
SALES OF LOANS
The Company has realized gains from the sale of the guaranteed and
unguaranteed portions of Small Business Administration loans. When only a
portion of a loan is sold the gain or loss is recognized upon completion of
the sale (net of related commissions paid that are directly attributable to
the sale) and is based on the difference between the net sales proceeds and
the relative fair value of the portion of the loan sold versus the portion
of the loan retained.
ALLOWANCE FOR POSSIBLE CREDIT LOSSES
The allowance for possible credit losses is established through a
provision for possible credit losses charged to operations. Loans and
leases are charged against the allowance for possible credit losses when
management believes that the collectibility of the principal is unlikely.
The allowance is an amount that management believes will be
This is page 57 of 182 pages (F-8)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
adequate to absorb losses inherent in existing loans, leases and
commitments to extend credit, based on evaluations of the collectibility
and prior loss experience. The evaluations take into consideration such
factors as changes in the nature and volume of the portfolio; overall
portfolio quality; loan concentrations; specific problem loans, leases and
commitments; and current and anticipated economic conditions that may
affect the borrowers' ability to pay.
While management uses available information to recognize losses on
loans, future additions to the allowance may be necessary based on changes
in economic conditions. Material estimates relating to the determination
of the allowance for possible credit losses are particularly susceptible to
significant change in the near term. In addition, both Federal and State
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for possible credit losses.
These agencies may require the Company to recognize additions to the
allowance based on their judgment about information available to them at
the time of their examinations.
The Company adopted SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures" effective January
1, 1995. SFAS No. 114 does not apply to large groups of smaller balance
homogeneous loans that are collectively evaluated for impairment. For the
Company, loans collectively reviewed for impairment include all single-
family loans excluding loans which are individually reviewed based on
specific criteria, such as delinquency, debt coverage, LTV ratio and
condition of collateral property. The Company's impaired loans within the
scope of SFAS No. 114 include nonaccrual loans (excluding those
collectively reviewed for impairment), certain troubled debt restructurings
("TDRs"), and certain performing loans less than 90 days delinquent ("other
impaired loans") that the Company believes it is probable will not be
collected in accordance with contractual terms of the loans.
The Company considers a loan to be impaired when, based upon current
information and events, it believes it is probable the Company will be
unable to collect all amounts due according to the contractual terms of the
loan agreement. The Company continues to accrue interest on TDRs and other
impaired loans since full payment of principal and interest is expected and
such loans are performing or less than 90 days delinquent and therefore do
not meet the criteria for nonaccrual status.
The Company bases the measurement of loan impairment on the fair value
of the loans' collateral properties in accordance with SFAS No. 114.
Impairment losses are included in the allowance for loan losses through a
charge to provision for loan losses. Adjustments to impairment losses due
to changes in the fair value of impaired loans' collateral properties are
included in the provision for loan losses.
REAL ESTATE OWNED
Real estate owned consists of real estate acquired in settlement of
loans. Real estate owned is initially recorded at fair value at the time of
foreclosure, determined by current appraisals, less selling costs. The
recognition of gains and losses on sales of real estate is dependent upon
various factors relating to the nature of the property sold, the terms of
the sale and the future involvement of the Company.
Once real estate is acquired and periodically thereafter, management
obtains a valuation and an allowance for estimated losses is provided
against income if the carrying value of real estate exceeds estimated fair
value less selling costs. Legal fees and direct costs, including
foreclosure, appraisal and other related costs, are expensed as incurred.
While management uses currently available information to provide for losses
on real estate, future additions to the allowance may be necessary based on
This is page 58 of 182 pages (F-9)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
future economic conditions. In addition, the regulatory agencies
periodically review the allowance for real estate losses and such agencies
may require the Company to recognize additions to the allowance based on
information and factors available to them at the time of their
examinations. Accordingly, no assurance can be given that the Company will
not recognize additional losses with respect to its real estate owned. The
net cost of operation of other real estate owned includes write-downs of
real estate owned, gains and losses on disposition and real estate owned
operating expenses, net of related income.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated
depreciation and amortization which is charged to expense on a straight-
line basis over the estimated useful lives of 3 to 10 years. Premises
under leasehold improvements are amortized on a straight-line basis over
the term of the lease or the estimated useful lives of the improvements,
whichever is shorter. Expenditures for major renewals and betterments of
premises and equipment are capitalized and those for maintenance and
repairs are charged to expense as incurred.
INCOME TAXES
The Company accounts for income taxes using the asset and liability
method. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents
include cash and due from banks, investment securities with original
maturities of less than 90 days and Federal funds sold. Generally, Federal
Funds are purchased and sold for one-day periods.
NET LOSS PER SHARE
The employee stock options, the convertible debentures and common
stock warrants were not included in the net loss per share computations as
the effects would have been anti-dilutive. Primary shares approximate
fully diluted shares.
RECLASSIFICATIONS
Certain amounts in the 1994 and 1993 consolidated financial statements
have been reclassified to conform to the 1995 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 121 (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". SFAS 121 requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events
or circumstances indicate that the carrying amount of an asset may not be
recoverable. However, SFAS 121 does not apply to financial instruments,
core deposit intangibles, mortgage and other servicing rights or deferred
tax assets. SFAS 121 is effective for fiscal years beginning after December
15, 1995. Management believes that the adoption of this statement will not
have a material impact on the Company's operations.
In May 1995, the FASB issued Statement of Financial Accounting
Standards No. 122 (SFAS 122), "Accounting for Mortgage Servicing Rights",
an amendment to Statement of Financial Accounting Standards No. 65. SFAS
122 requires an institution that purchases or originates mortgage loans and
sells or securitizes those loans with
This is page 59 of 182 pages (F-10)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
servicing rights retained to allocate the total cost of the mortgage loans
to the mortgage servicing rights and the loans (without the mortgage
servicing rights) based on their relative fair values. In addition,
institutions are required to assess impairment of the capitalized mortgage
servicing portfolio based on the fair value of those rights on a stratum-by-
stratum basis with any impairment recognized through a valuation allowance
for each impaired stratum. Capitalized mortgage servicing rights are to be
stratified based upon one or more of the predominate risk characteristics
of the underlying loans such as loan type, size, note rate, date of
origination, term and/or geographic location. SFAS 122 is effective for
fiscal years beginning after December 15, 1995. Management believes that
the adoption of SFAS 122 will not have a material impact on the Company's
operations.
In November 1995 the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", (SFAS 123).
This statement establishes financial accounting standards for stock-based
employee compensation plans. SFAS 123 permits the Company to choose either
a new fair value based method or the current APB Opinion 25 intrinsic value
based method of accounting for its stock-based compensation arrangements.
SFAS 123 requires proforma disclosures of net earnings and earnings per
share computed as if the fair value based method had been applied in
financial statements of companies that continue to follow current practice
in accounting for such arrangements under Opinion 25. SFAS 123 applies to
all stock-based employee compensation plans in which an employer grants
shares of its stock or other equity instruments to employees except for
employee stock ownership plans. SFAS 123 also applies to plans in which
the employer incurs liabilities to employees in amounts based on the price
of the employer's stock, i.e., stock option plans, stock purchase plans,
restricted stock plans, and stock appreciation rights. The statement also
specifies the accounting for transactions in which a company issues stock
options or other equity instruments for services provided by nonemployees
or to acquire goods or services from outside suppliers or vendors. The
recognition provision of SFAS 123 for companies choosing to adopt the new
fair value based method of accounting for stock-based compensation
arrangements may be adopted immediately and will apply to all transactions
entered into in fiscal years that begin after December 15, 1995. The
disclosure provisions of SFAS 123 are effective for fiscal years beginning
after December 15, 1995, however disclosure of the proforma net earnings
and earning per share, as if the fair value method of accounting of stock-
based compensation had been elected, is required for all awards granted in
fiscal years beginning after December 31, 1994. The Company will continue
to account for stock-based compensation under APB Opinion 25 and, as a
result, SFAS 123 will not have a material impact on the Company's
operations.
NOTE 2
RESTRICTED CASH BALANCES
Non-interest earning cash reserves of $1,115,000 were maintained by
Sunwest to satisfy Federal regulatory requirements at December 31, 1995.
This is page 60 of 182 pages (F-11)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
NOTE 3
INVESTMENT SECURITIES
A summary of investment securities held-to-maturity follows:
December 31, 1995
---------------------------------------------
(in thousands) Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------
U.S. Treasury securities and
obligations of other U.S.
Government agencies
and corporations $ 5,574 $ 42 $ - $5,616
=============================================
December 31, 1994
---------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------
U.S. Treasury securities and
obligations of other U.S.
Government agencies and corp. $ 5,868 $ - $(160) $5,708
=============================================
At December 31, 1995, investment securities held-to-maturity with a
book value of $899,000 were pledged as collateral to secure court ordered
and public deposits and treasury, tax and loan accounts. Additionally,
investment securities held-to-maturity with a book value of $3,176,000 were
pledged at Sunwest as collateral for a Federal Funds line of credit with a
correspondent bank. There were no sales of investment securities held-to-
maturity during 1995 or 1994.
Maturities of investment securities held-to-maturity at December 31,
1995 are as follows:
Due After One
Due In Year Through
(in thousands) One Year Five Years Total
--------------------------------------
Amortized cost $ 2,398 $3,176 $5,574
Estimated fair value 2,398 3,218 5,616
======================================
At December 31, 1995 the Company had no available-for-sale securities.
At December 31, 1994 available-for-sale securities consisted of $1,947,000
of U.S. Treasury securities and $4 million of other securities. The
unamortized cost of available-for-sale U.S. Treasury securities were
adjusted to the estimated fair value through a $3,000 charge to retained
earnings in 1994. All available-for-sale securities at December 31, 1994
matured within one year and none were pledged. There was no gain or loss
recognized from sales of available-for-sale securities during 1995 or 1994.
This is page 61 of 182 pages (F-12)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
NOTE 4
LOANS
A summary of loans follows:
(in thousands) 1995 1994
-----------------------
Commercial $ 28,479 $ 33,010
Real estate mortgage 47,379 49,236
Installment 3,515 4,694
Unearned income, discounts and fees (373) (371)
-----------------------
$ 79,000 $ 86,569
=======================
Loans on which the accrual of interest had been discontinued or
reduced at December 31, 1995, 1994 and 1993 amounted to $4,153,000,
$5,414,000 and $10,744,000, respectively. If these loans had been current
throughout their terms, interest income would have increased approximately
$326,000, $354,000 and $872,000 in 1995, 1994 and 1993, respectively.
Restructured loans performing in accordance with their current terms
totaled $2,536,000 and $5,850,000 at December 31, 1995 and 1994. Under the
original terms of the restructured loans, interest earned would have
totaled $305,000, $540,000 and $648,000 for the years ended December 31,
1995, 1994 and 1993. Under the restructured terms of the loans, interest
income recorded amounted to $249,000, $439,000 and $581,000 in 1995, 1994
and 1993, respectively. The Company did not incur any charge-offs in 1995
or 1994 and charged off $605,000 in 1993 in connection with restructured
loans. Restructured loans totaling $2,309,000 and $491,000 were on non-
accrual status at December 31, 1995 and 1994.
The Company serviced loans for others totaling $4,749,000, $3,340,000
and $36,273,000 at December 31, 1995, 1994 and 1993 respectively. These
loans are not included in the accompanying consolidated balance sheets.
Loans totaling $7,671,000 at December 31, 1995 were pledged as
collateral with the Federal Reserve Bank to secure purchases of Federal
funds. There were no purchases of Federal funds from the Federal Reserve
Bank during 1995 and 1994.
NOTE 5
ALLOWANCE FOR POSSIBLE CREDIT LOSSES
A summary of activity in the allowance for possible credit losses
follows:
(in thousands) 1995 1994 1993
------------------------------
Balance at beginning of year $ 4,649 $ 5,557 $ 6,512
Credits charged off (2,156) (4,010) (10,334)
Recoveries on credits previously charged off 938 648 909
------------------------------
Net charge-offs (1,218) (3,362) (9,425)
Provision for possible credit losses 389 3,297 8,470
Transfer to net assets held for sale - (843) -
------------------------------
Balance at end of year $ 3,820 $ 4,649 $ 5,557
==============================
This is page 62 of 182 pages (F-13)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
A summary of investment in impaired loans by type at December 31, 1995
follows:
(in thousands)
Nonaccrual loans:
Single family residences $ 185
Nonresidential real estate mortgage 2,583
Commercial 1,385
TDR loans 2,536
---------
$ 6,689
=========
The Company had no "other impaired loans" at December 31, 1995. The
related impairment valuation allowance at December 31, 1995 was $1,074,000
which is included as part of the allowance for possible credit losses on
loans in the accompanying consolidated balance sheets. The provision for
losses and any related recoveries are recorded as part of the provision for
possible credit losses on loans in the accompanying statements of
operations. During the year ended December 31, 1995, the Company's average
investment in impaired loans was $8,586,000 and interest income recorded
during this period was $409,000 of which $46,000 was recorded utilizing the
cash basis method of accounting described above.
NOTE 6
VALUATION ALLOWANCE FOR REAL ESTATE OWNED
A summary of activity in the valuation allowance for real estate owned
follows:
(in thousands) 1995 1994 1993
----------------------------------
Balance at beginning of year $ 777 $3,206 $1,927
Losses charged off (664) (2,715) (2,190)
Provision for estimated losses 479 286 3,469
----------------------------------
Balance at end of year $ 592 $ 777 $3,206
==================================
NOTE 7
PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
(in thousands) 1995 1994
----------------------
Premises $ - $ 210
Furniture, fixtures and equipment 3,554 3,215
Leasehold improvements 2,227 2,267
Property under capital leases 439 -
----------------------
6,220 5,692
Accumulated depreciation and amortization (4,430) (3,902)
----------------------
$ 1,790 $ 1,790
======================
This is page 63 of 182 pages (F-14)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
NOTE 8
NET ASSETS HELD FOR SALE
Net assets held for sale at December 31, 1995 represented 203,223
shares of B&PB valued at approximately $7.14 per share. The B&PB stock had
a closing price at December 31, 1995 of $9.88 per share or a $2.0 million
fair value for West Coast's shares. On January 31, 1996, a 5% stock
dividend was effected that increased the shares to 213,384 and decreased
the book value to approximately $6.80 per share. At December 31, 1994 net
assets held for sale primarily represents all assets and liabilities of
Sacramento First as follows:
(in thousands)
Amount
-----------
Cash and due from banks $ 7,696
Interest-bearing deposits with bank 1,278
Investment securities 15,597
Federal funds 12,200
Loans and direct financing leases, less allowance for
possible credit losses of $1,185 74,133
Real estate owned 1,399
Premises and equipment 1,905
Other assets 1,817
Deposits (105,229)
Other borrowed funds (729)
Other liabilities (986)
Minority interest (466)
Accrued loss on proposed sale of Sacramento First (2,788)
Earnings subsequent to the signing of the sale agreement (63)
Adjusted consolidated deferred tax payable as a result of the sale (413)
-----------
$ 5,351
===========
NOTE 9
OTHER BORROWED FUNDS
Other borrowed funds at December 31, 1995 consisted of an agreement
for payment of judgment with a former officer totaling $223,000 and a
capital lease obligation totaling $376,000. The agreement with the former
officer carries interest at 10% and is due on April 15, 1996. The
agreement requires, among other things, West Coast to place nine shares 9%
of Sunwest stock in escrow to secure payment of said judgment and that one
third of any amount refunded by the California Underground Storage Tank
Cleanup Fund ("USTF") be paid to the former officer as partial settlement
of this judgment. In December, a partial payment of $156,000 was made from
USTF proceeds. This payment reduced the required shares of Sunwest Bank
stock in escrow to six shares. The capital lease obligation outstanding at
December 31, 1995 had a calculated annual interest rate of 45%. Other
borrowed funds at December 31, 1994 consisted of encumbrances by senior
lien holders against real estate owned being a weighted average rate of
interest on the notes outstanding at December 31, 1994 of 6.3% which was
paid off during 1995.
This is page 64 of 182 pages (F-15)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
NOTE 10
10% CONVERTIBLE SUBORDINATED DEBENTURES
The 10% convertible subordinated debentures (the "10% debentures")
mature December 15, 1996 and have a conversion price of $7.75 per share
until maturity. The 10% debentures are redeemable at the option of the
Company at the principal amount for their remaining term. Offering costs
of $375,000 have been deferred and are being amortized to expense over the
life of the debentures. Amounts owed to affiliates totaled $1.8 million
with the remaining $1.2 million owed to non-affiliated parties at December
31, 1995. Also see "NOTE 23 - Condensed Financial Information of Parent
Company Only."
NOTE 11
INCOME TAXES
The Company had a $7,000 and $13,000 State current income tax expense
during 1995 and 1994 and a $15,000 State current income tax benefit in
1993. No deferred Federal or State tax expense or benefit was recognized
and no current Federal tax expense or benefit was recognized for the three
year period ending December 31, 1995.
The actual income tax expense (benefit) differed from the expected
Federal statutory rate as follows:
(in thousands) 1995 1994 1993
-------------------------------
Expected tax benefit at 34% $ (113) $(1,765) $ (4,121)
Change in beginning-of-the-year balance of the
valuation allowance for deferred tax assets 74 1,346 5,361
Net state franchise tax (24) (201) (1,025)
Adjustment to the valuation allowance for
deferred tax assets from the sale
of Sacramento First - 606 -
Other 70 27 (230)
------------------------------
$ 7 $ 13 $ (15)
==============================
This is page 65 of 182 pages (F-16)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31 are as
follows:
(in thousands) 1995 1994
-------------------
Deferred tax assets
Net operating loss carryforwards $5,287 $5,090
Net capital loss carryforwards 1,297 1,297
Loans, due to allowance for possible credit losses,
deferred loan origination fees and costs, market
value adjustment of loans held for sale and leases 789 835
Alternative minimum tax credit carryforwards 508 508
Real estate owned 269 353
Loss and expense accruals and other 319 335
General business tax credit carryforwards 130 130
--------------------
Total gross deferred tax assets 8,599 8,548
Less valuation allowance (8,092) (8,018)
--------------------
Net deferred tax assets 507 530
--------------------
Deferred tax liabilities
Deferred State income taxes 285 -
Premises and equipment 222 530
--------------------
Total gross deferred tax liabilities 507 530
--------------------
Net deferred tax asset $ - $ -
====================
In 1995 and 1994 the total valuation allowance increased $74,000 and
$1,346,000, respectively.
No current income tax refund receivable or payables existed at
December 31, 1995 or 1994.
The Company had net operating loss carryforwards of $14.0 million for
Federal income tax purposes at December 31, 1995 which expire from 2005 to
2010 and $4.6 million for State franchise tax purposes which expire from
2008 to 2010. The Company had a net capital loss carryforward of $2.9
million for Federal and State purposes. The Federal capital loss expires
in 2000 versus no expiration for the State capital loss. The Company had
general business tax credit carryforwards of $130,000 available for tax
purposes at December 31, 1995 which expire from 1997 to 2000. The Company
had alternative minimum tax credit carryforwards of $194,000 available for
Federal income tax purposes and $314,000 available for State franchise tax
purposes at December 31, 1995.
NOTE 12
STOCK OPTION PLAN
During 1988, the Company adopted the West Coast Bancorp 1988 Stock
Option Plan (the "1988 Plan"). The 1988 Plan provides for the grant of
both options that are incentive options, as well as options that do not
qualify as incentive options ("non-qualified options"), to purchase
1,250,000 of authorized but unissued shares of the Company's common stock.
All employees, employee directors and non-employee directors of the Company
are eligible to receive options. Non-employee directors of the
This is page 66 of 182 pages (F-17)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
Company are only eligible to receive non-qualified options. The 1988 Plan
is administered by the Board of Directors or a committee thereof, and such
board or committee determines the persons to whom options will be granted,
the vesting schedule and the purchase price of the common stock subject to
each option, provided that such purchase price may not be less than 100% of
the fair value of the common stock at the time the option is granted. No
options may extend more than ten years from the date of grant. Incentive
options to persons owning more than 10% of the total combined voting power
of all classes of stock of West Coast or its affiliates shall expire not
later than 5 years from the date of grant. The 1988 Plan expires in
September 1998.
A summary of stock option transactions for the 1988 Plan follows:
Number Price
of per
Shares Share
------------------------
Options outstanding at December 31, 1992 664,500 $.88-2.75
Canceled (67,500) 1.06-2.75
------------------------
Options outstanding at December 31, 1993 597,000 .88-2.75
Canceled (182,000) 1.00-2.75
------------------------
Options outstanding at December 31, 1994 415,000 .88-2.75
Canceled (57,500) .88-2.75
------------------------
Options outstanding at December 31, 1995 357,500 1.06-2.75
========================
Options exercisable at December 31, 1995 286,000 $1.06-2.75
========================
NOTE 13
RELATED PARTY TRANSACTIONS
Related party receivables and payables are summarized as follows:
Loans Notes 10%
(in thousands) Receivable Payable Debentures
-----------------------------------
Balance at December 31, 1993 $ 627 $ 406 $1,217
Additions - 314 -
Purchase by holders - - 600
Transfer to assets held for sale (627) - -
-----------------------------------
Balance at December 31, 1994 - 720 1,817
Additions - 389 -
Collections/payments - (161) -
-----------------------------------
Balance at December 31, 1995 $ - $ 948 $1,817
===================================
Loans receivable were extensions of credit by Sacramento First to
certain of its or the Company's directors, officers and/or companies in
which they have an interest.
The notes payable are to certain Officers or Directors or their
affiliates. Approximately $468,000 are payable to the Centennial Group,
Inc. ("CGI") and its subsidiaries. These are due with interest upon
maturity at June 30, 1996 and bear
This is page 67 of 182 pages (F-18)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
interest at prime plus 2%. Various other notes payable are due to Mr.
Joseph or affiliates of Mr. Joseph and are due either on demand or in 1996
and bear interest at either prime plus 2% or 10% fixed. On December 31,
1995 prime was 8.5%.
The 10% debentures represent West Coast's 10% Convertible Subordinated
Debentures owned by certain officer/directors and mature in December 1996.
In the opinion of management, all transactions with related parties
are either on terms similar to transactions with non-affiliated parties or
on term beneficial to the company as compared with similar transactions
with non-affiliated parties.
NOTE 14
OTHER OPERATING INCOME
A summary of other operating income is as follows:
(in thousands) 1995 1994 1993
---------------------------
Depositor charges $ 663 $1,063 $1,585
Net gain on sales of loans 126 1,054 825
Service charges, commissions and fees 65 335 507
Net gain on sales of premises and equipment - 144 -
Nonrecurring income - - 100
Other income 104 87 93
---------------------------
$ 958 $2,683 $3,110
===========================
NOTE 15
OTHER OPERATING EXPENSES
A summary of other operating expenses is as follows:
(in thousands) 1995 1994 1993
----------------------------
Salaries and employee benefits $4,002 $ 6,247 $ 9,969
Occupancy 982 1,546 2,303
Depreciation and amortization 566 821 1,081
Data processing 434 599 819
Professional services 385 633 925
Regulatory fees and assessments 362 666 936
Customer service expense 350 353 426
Net cost of operation of real estate owned 296 88 3,493
Loss from facility lease adjustment 155 - -
Stationary and supplies 153 153 270
Insurance 143 232 291
Printing and postage 112 179 243
Advertising and promotion 100 178 414
Directors fees 54 89 304
Collection 41 597 813
Miscellaneous 402 683 1,596
-----------------------------
$8,537 $13,064 $ 23,883
=============================
This is page 68 of 182 pages (F-19)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
NOTE 16
GAIN (LOSS) ON LIQUIDATION OF WCV, INC.
During November 1992, the Board of Directors of WCV, Inc., resolved to
liquidate WCV, Inc. The liquidation of WCV, Inc. was substantially
completed in 1993. The remaining net liability related to WCV, Inc. of
$99,000 at December 31, 1995 is included in other liabilities. In addition
to a loss accrual in 1992, losses of $550,000 and $125,000 were recorded in
1993 and 1994, respectively, as compared to a gain of $629,000 recorded in
1995. The losses in 1993 and 1994 relate primarily to expenses associated
with disposition of loans and real estate owned including one contaminated
property. The gain in 1995 relates to the refund of $469,000 received in
November 1995 from the USTF and reversal of future estimated costs based on
an expected reimbursement from the USTF.
An additional refund of $123,000 was received in February 1996 from
this claim. This will be recognized as a gain during the first quarter of
1996. Approximately $30,000 of additional past costs are included in other
liabilities that WCV, Inc. expects to be reimbursed for with future claim
filings. This will be recognized as income when received. Future costs
totaling $60,000 are expected to be reimbursed by the USTF.
WCV, Inc.'s net assets (liabilities) held for sale included in other
liabilities at December 31 are as follows:
(in thousands) 1995 1994
-----------------
Cash and Federal Funds sold $ 14 $ -
Other assets - 3
Other liabilities (113) (479)
Accrued loss on liquidation of WCV, Inc. - (16)
-----------------
$ (99) $(492)
=================
NOTE 17
DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosures About
the Fair Value of Financial Instruments," requires that the Company
disclose estimated fair values of its financial instruments. Fair value
estimates, methods and assumptions are set forth below.
CASH, INTEREST BEARING BALANCES AND FEDERAL FUNDS
The carrying values approximate fair value because of the short
maturity of these instruments.
INVESTMENT SECURITIES
For investment securities, fair value is based on quoted market
prices.
LOANS AND DIRECT LEASE FINANCING
For loans and direct lease financing, fair value is estimated using
quoted market prices for similar loans. For loans and direct lease
financing for which no quoted market price is readily available and for all
other loans and direct lease financing, fair value is estimated by
discounting the future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings and for the
same maturities.
This is page 69 of 182 pages (F-20)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
DEPOSIT LIABILITIES
The fair value of demand, savings and money market deposits is the
amount payable on demand at the reporting date. The fair value of time
certificates of deposit is estimated using the rates currently offered for
deposits of similar remaining maturities.
OTHER INTEREST BEARING LIABILITIES
Other interest bearing liabilities include notes payable to
affiliates, other borrowed funds and the 10% convertible subordinated
debentures. The fair value of other interest bearing liabilities is
estimated using market rates for instruments with similar characteristics.
The estimated fair values of the Company's financial instruments are
as follows:
December 31, 1995
--------------------
Estimated
Carrying Fair
(in thousands) Amount Value
--------------------
Financial assets:
Cash, interest bearing balances and Federal Funds $25,840 $ 25,840
Investment securities 5,574 5,616
Net loans and direct lease financing 75,180 75,217
Financial liabilities:
Deposits 102,662 102,724
Other interest bearing liabilities 4,582 4,582
===================
December 31, 1994
--------------------
Estimated
Carrying Fair
(in thousands) Amount Value
--------------------
Financial assets:
Cash, interest bearing deposits and Federal Funds $23,665 $ 23,665
Investment securities 11,815 11,655
Net loans and direct lease financing 81,979 81,687
Financial liabilities:
Deposits 119,269 119,107
Other interest bearing liabilities 3,926 3,926
===================
This is page 70 of 182 pages (F-21)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
NOTE 18
401(k) PROFIT SHARING PLAN
The Company has a 401(k) profit sharing plan (the "Plan") that covers
all employees eighteen years of age or older who have completed 500 hours
of service. Each employee eligible to participate in the Plan may
contribute up to 15% of his or her compensation, subject to certain
statutory limitations. Once an employee has completed 1,000 hours of
service, the Company will match 50% of the participant's contribution until
the participant's contribution equals 6% of his or her compensation. The
Company may also make an additional profit sharing contribution on behalf
of the eligible employees. The Company's contributions of approximately
$66,000, $86,000, and $133,000 were included in salaries and employee
benefits in 1995, 1994, and 1993, respectively.
NOTE 19
COMMITMENTS
LEASES
The Company leases certain facilities for corporate offices and branch
operations and equipment under non-cancellable long-term operating leases.
Facility lease expense, net of rental income, for the years ended December
31, 1995, 1994 and 1993 was approximately $573,000, $1,034,000 and
$1,530,000, respectively.
Future minimum lease commitments under all non-cancellable leases at
December 31, 1995 are as follows:
Capital Operating
(in thousands) Leases Leases
--------- ---------
Year ending December 31:
1996 $ 181 $ 658
1997 189 690
1998 197 685
1999 205 653
2000 196 614
Thereafter - 2,217
--------- ---------
Total minimum lease payments $ 968 $ 5,517
========= =========
Less amounts representing interest at
approximately 45% and executory costs 592 -
--------- ---------
Present value of minimum capital lease
payments included in other liabilities $ 376 $ -
========= =========
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Company makes various
commitments and incurs certain contingent liabilities which are not
reflected in the accompanying consolidated financial statements. These
commitments and contingencies include various guarantees, commitments to
extend credit and standby and commercial letters of credit. At December
31, 1995 and 1994, the Company had standby and commercial letters of credit
of $425,000 and $438,000 outstanding and commitments to extend credit,
including mortgage warehouse lines of credit, totaling $10,637,000 and
$13,075,000, respectively.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Standby and commercial letters of credit and financial guarantees written
are conditional commitments issued by the Company to guaranty the
performance of a customer to a third party. Commitments generally have
fixed expiration dates or other termination clauses and may require payment
of a fee. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not
This is page 71 of 182 pages (F-22)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
necessarily represent future cash requirements. The credit risk involved
in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. The Company evaluates each
customer's creditworthiness on a case by case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the counter-party.
Collateral held varies but may include deposits, accounts receivable,
inventory, property, plant and equipment, motor vehicles and real estate.
NOTE 20
CONTINGENCIES
In December 1995, a class action lawsuit was brought against Sunwest
and two other banks who were custodians of the class action members' IRA
accounts. Qualified Pension, Inc. ("QPI") was the administrator of the IRA
accounts, and had a contract with Sunwest for Sunwest to open a pooled
money market account and also act as custodian of certain non-cash assets.
The complaint alleges that QPI and its president misappropriated $9 million
or more of the class members' IRA money over a two year period and that
some of the money was withdrawn from the accounts maintained at Sunwest
without the appropriate written authorization of IRA depositors. The
action seeks recovery of the lost funds from Sunwest and the other banks.
To date, no formal discovery has commenced and no class has been certified.
Sunwest contests the allegations and intends to vigorously defend the
lawsuit. Management, based in part upon the opinion of counsel, does not
believe the ultimate resolution of this matter will have a material impact
on the financial condition or results of operations of the Company.
The Company is party to various lawsuits which have arisen in the
course of business. While it is not possible to predict with certainty the
outcome of such litigation, it is the opinion of Company management, based
in part upon opinions of counsel, that the liability, if any, arising from
such lawsuits would not have a material adverse effect on the Company's
consolidated financial statements.
NOTE 21
REGULATORY MATTERS
WEST COAST
Based upon its examination of West Coast as of September 30, 1993, the
FRB and West Coast entered into a Written Agreement that is dated April 11,
1994 (the "Agreement"). The Agreement requires West Coast to, among other
things, submit plans to improve the condition of the Company and the Banks
and to service its current debt; identify an outside director who shall
submit a report that fully documents all management and service fees paid
by the Banks since January 1, 1992 including a justification of such
services and explain how they are consistent with all applicable policies
of West Coast, and refrain from paying dividends, incurring debt, assessing
or collecting management or service fees from the Banks or engaging in
financial transactions with its affiliates in any one month in excess of
$25,000 without the prior approval of the FRB.
Based upon its examination of West Coast as of September 30, 1995, the
FRB concluded that West Coast was in substantial compliance with the
Agreement.
SUNWEST
As a result of its examination as of August 23, 1991, the FDIC issued
an Order to Cease and Desist (the "C&D") against Sunwest, effective April
27, 1992 (the "Effective Date"). The C&D requires Sunwest to, among other
things, have and retain qualified management; achieve and thereafter
maintain a ratio of Tier 1 capital to total assets of at least 6.5%;
develop and adopt plans to meet the FDIC's minimum risk-based capital
This is page 72 of 182 pages (F-23)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
requirements and control overhead and other expenses; eliminate from its
books certain criticized assets to specified levels; refrain from paying
cash dividends without the prior written consent of the FDIC and the
California Superintendent of Banks ("Superintendent") and refrain from
increasing the amount of brokered deposits above the amount outstanding on
the Effective Date and submit to the FDIC and Superintendent a written plan
for eliminating Sunwest's reliance on brokered deposits.
In accordance with the prompt corrective action provisions of the
FDICIA, Sunwest submitted to the FDIC a capital restoration plan and West
Coast submitted to the FDIC a guaranty of the capital restoration plan.
The capital restoration plan was accepted by the FDIC on March 14, 1995.
To be considered "adequately capitalized," an institution must
generally have a leverage ratio of at least 4%, a Tier 1 risk-based capital
ratio of at least 4%, and a total risk-based capital ratio of at least 8%.
As a result of an examination conducted by the California State
Banking Department as of March 16, 1992, the Superintendent issued an Order
effective November 12, 1992 against Sunwest (the "State Order"). The State
Order contains provisions that are substantially similar to the C&D.
However, it also required Sunwest to formulate, adopt and implement by
December 31, 1992 a comprehensive business plan for restoring Sunwest to a
sound condition and to develop and implement by December 31, 1992 a month-
by-month budget for 1993 and a profit plan which included, among other
things, a plan to improve earnings.
In addition, Sunwest Bank received three orders during 1994 from the
California State Banking Department that its contributed capital was
impaired under the provisions of California Financial Code and that the
Bank must correct such impairment of its contributed capital within 60 days
of the respective order. During 1995, Sunwest received $3.7 million from
West Coast increasing Sunwest's capital to the "well capitalized" levels
and curing the impairment under the state orders. However, because Sunwest
remains subject to regulatory agreements it may only be considered
"adequately capitalized".
Management of Sunwest has taken actions to address the C&D, the State
Order and the prompt corrective action provisions of the FDICIA. If the
FDIC determines that Sunwest is not in compliance with the C&D, and the
prompt corrective action provisions of the FDICIA, it would have various
remedies available to it, including the power to assess civil monetary
penalties, to remove officers and directors and, ultimately, to place
Sunwest and West Coast in receivership or conservatorship. If any of these
events were to occur, West Coast's shareholders could suffer the
elimination of the value of their investment in the Company.
In their most recent examinations of Sunwest as of June 30, 1995, the
FDIC and the State Banking Department found that Sunwest was in substantial
compliance with the provisions of the C&D, the State Order and the Capital
Plan. West Coast believes that Sunwest has met the capital requirements of
the prompt corrective action provisions of the FDICIA and West Coast
intends to request to be released from the guarantee of Sunwest's capital
restoration plan.
NOTE 22
DIVIDEND AND ADVANCE RESTRICTIONS
The Federal Reserve Act restricts Sunwest from making loans or
advances to West Coast in excess of 10% of its capital stock and surplus.
Such loans or extensions of credit to West Coast must be secured at the
time of transaction by collateral having a market value of 100% to 130%,
depending on the collateral, of the amount funded. No loans were permitted
from Sunwest at December 31, 1995.
Various laws and regulations limit the amount of dividends which a
bank can pay without obtaining prior approval from bank regulators. At
December 31, 1995 the C&D and State Order preclude Sunwest from paying any
cash dividend without prior regulatory approval.
This is page 73 of 182 pages (F-24)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
NOTE 23
CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY
Following are condensed balance sheets for West Coast Bancorp as of
December 31, 1995 and 1994 and condensed statements of operations and cash
flows for each of the years in the three-year period ended December 31,
1995:
CONDENSED BALANCE SHEETS
(in thousands) 1995 1994
----------------------
Assets
Cash and short-term investments $ 203 $ 8
Investment in:
Sunwest 8,349 4,775
Sacramento First (1) - 5,351
Business & Professional Bank 1,452 -
WCV, Inc. (2) 98 -
Other assets 144 339
----------------------
$ 10,246 $ 10,473
======================
Liabilities and Shareholders' Equity
Notes payable $ 1,171 $ 720
10% Convertible subordinated debentures 3,035 3,035
Other liabilities 754 1,072
----------------------
Total liabilities 4,960 4,827
----------------------
Shareholders' equity:
Common stock 30,176 30,200
Accumulated deficit (24,890) (24,554)
----------------------
Total shareholders' equity 5,286 5,646
----------------------
$ 10,246 $ 10,473
======================
(1) Balances were reported as "Net Assets Held for Sale" in the
Consolidated Balance Sheet in 1994.
(2) Balances were reported as a net liability held-for-sale and included
in other liabilities in 1994.
This is page 74 of 182 pages (F-25)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
CONDENSED STATEMENTS OF OPERATIONS
(in thousands) 1995 1994 1993
---------------------------------
Income
Income from subsidiaries:
Management fees $ - $ - $ 517
Interest - 1 4
Other interest income - - 6
Other operating income 13 97 2
---------------------------------
13 98 529
---------------------------------
Expenses
Interest expense 474 392 390
Salaries and employee benefits 239 308 731
Professional services 70 155 266
Provision for possible credit losses - (88) (44)
Management Fees repaid to Sunwest Bank 3,400 - -
Other expenses 89 4 422
---------------------------------
4,272 771 1,765
---------------------------------
Equity in undistributed net income (loss)
of subsidiaries (1) 3,924 (1,781) (11,145)
Loss on sale of Sacramento First - (2,788) -
Dividends from:
Bank subsidiary - - 70
Non-bank subsidiary - - 11
---------------------------------
Loss before income taxes (335) (5,242) (12,300)
Income taxes (benefit) 4 (37) (193)
---------------------------------
Net loss $ (339) $(5,205) $(12,107)
=================================
(1) Includes a $3.4 million management fee
repayment from West Coast to Sunwest.
This is page 75 of 182 pages (F-26)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands) 1995 1994 1993
---------------------------------
Cash flows from operating activities
Net loss $ (339) $(5,205) $(12,107)
Equity in net (income) loss of subsidiaries (3,924) 1,781 11,064
Loss on sale of Sacramento First - 2,788 -
---------------------------------
Net cash used in operating activities (4,263) (636) (1,043)
---------------------------------
Cash flows from investing activities
Decrease (increase) in advances
to subsidiaries 273 (33) (85)
Capital infusion into Sunwest Bank (300) - -
Decrease in other assets 195 507 39
---------------------------------
Net cash provided by (used in)
investing activities 168 474 (46)
---------------------------------
Cash flows from financing activities
Increases (decreases) in notes payable
and subordinated debt 140 222 (25)
Increase (decrease) in other liabilities 251 (85) 772
Sale of Sacramento First 3,511 - -
Sale of B&PB shares 388 - -
---------------------------------
Net cash provided by financing activities 4,290 137 747
---------------------------------
Increase (decrease) in cash 195 (25) (342)
Cash at beginning of year 8 33 375
---------------------------------
Cash at end of year $ 203 $ 8 $ 33
=================================
Supplemental schedule of non-cash
financing activities
Reclassify other liability to Notes Payable $ 311 $ - $ -
Reclassify deferred tax payable to
net assets held for sale - 413 -
Transfer of real estate owned from
discontinued business - - 336
=================================
Supplemental disclosure of cash
flow information
Cash paid during the year for interest $ 474 $ 392 $ 390
=================================
This is page 76 of 182 pages (F-27)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
West Coast's liquidity is limited. West Coast has relied on sales of
assets and borrowings from officers/directors as sources of liquidity.
Dividends from subsidiaries ordinarily provide a source of liquidity to a
bank holding company. Sunwest is prohibited from paying cash dividends by
the C&D issued by the FDIC and the State Order issued by the California
Department of Corporations without their prior consent.
During 1995, West Coast did not receive any dividends from its
subsidiaries. West Coast does not expect to receive dividends from its
subsidiaries during 1996.
West Coast's primary sources of cash in 1996 are expected to be from
sales of its B&PB stock and Sunwest stock. West Coast has an agreement to
sell its B&PB shares with Western Acquisition, L.L.C. ("Western"), an
affiliate of Hovde Financial Services for $1.9 million. See Note 24 -
Subsequent Event. The B&PB shares and any proceeds received from their
sale are pledged as collateral for West Coast's guarantee of Sunwest's
capital plan. West Coast will request from the FDIC release of these
shares during 1996. An agreement to sell 35 shares of Sunwest stock for
$2.5 million was entered into between West Coast, Sunwest and Western.
If the remaining B&PB shares are not acquired by Western the shares
will be sold on the open market to raise sufficient funds to repay the loan
to be made by the principals of Western, and repay the $1.2 million of
debentures held by the public and to provide funds for West Coast to
continue its operations. In the event the above transactions are not
completed as contemplated, West Coast would need to come to an agreement
with certain affiliates to extend indebtedness to a future date when
sufficient funds can be obtained to repay the debts. In the event West
Coast is unable to raise funds to increase its liquidity, West Coast may
not be able to meet its current obligations and may be forced into
bankruptcy. If this event were to occur, West Coast shareholders could
suffer the elimination of the value of their investments in the Company.
NOTE 24
SUBSEQUENT EVENT
On February 29, 1996, West Coast and Sunwest entered into an agreement
with Western Acquisitions, L.L.C. ("Western"), an affiliate of Hovde
Financial, Inc., for West Coast to sell 35 existing shares of Sunwest for
$2,520,000 and for Sunwest to issue and sell 15 new shares for $1,080,000.
On consummation of the stock sale contemplated by the agreement, West Coast
and Western will own approximately 57% and 43% of Sunwest, respectively.
West Coast will record a loss of approximately $400,000 on the sale of the
35 shares of Sunwest stock during the first quarter of 1996. The new 15
shares of Sunwest stock will result in approximately a $100,000 charge to
paid-in-capital at West Coast with an offsetting amount for minority
interest. This will occur because the selling price of Sunwest stock is
$72,000 per share versus a book value of outstanding shares at December 31,
1995 of $83,500 per share. The actual loss on sale will depend on the book
value per share of Sunwest Bank at the time of closing. The stock sales
are subject to Western obtaining various regulatory approvals.
West Coast concurrently entered into an agreement with Western on
February 29, 1996, which is currently being amended, whereby Western will
acquire all of the remaining 213,384 shares of B&PB common stock at $8.81
per share. The sale is to be completed in three phases. Phase one
consists of selling 46,199 shares at $8.81 per share by March 8, 1996.
Phase two is for 93,007 shares and is to occur by May 28, 1996. Phase
three is for 74,178 shares and is to occur by November 15, 1996. Phase two
and three are subject to Western being able to come to an agreement with
B&PB regarding certain restrictions imposed by B&PB regarding subsequent
sale and voting of the shares. Phase three is also subject to Western
obtaining certain regulatory approvals. The principals of Western have
agreed to lend West Coast on a nonrecourse
This is page 77 of 182 pages (F-28)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS West Coast Bncorp & Subs.
December 31, 1995, 1994 and 1993
basis approximately $819,000. The loan will be secured by 12 shares of
Sunwest stock. The loan will be due upon the earlier of the sale of Phase
II shares, the sale of the shares of the Sunwest common stock to Western or
March 31, 1997.
West Coast's liquidity is limited. If the remaining B&PB shares are
not acquired by Western the shares will be sold on the open market to raise
sufficient funds to repay the loan to be made by the principals of Western,
and repay the $1.2 million of debentures held by the public and to provide
funds for West Coast to continue its operations. In the event the above
transactions are not completed as contemplated, West Coast would need to
come to an agreement with certain affiliates to extend indebtedness to a
future date when sufficient funds can be obtained to repay the debts. In
the event West Coast is unable to raise funds to increase its liquidity,
West Coast may not be able to meet its current obligations and may be
forced into bankruptcy. If this event were to occur, West Coast
shareholders could suffer the elimination of the value of their investments
in the Company.
NOTE 25
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data follows for the three months ended
(in thousands, except per share data):
March 31 June 30 September 30 December 31 Total
1995 ------------------------------------------------------
Total interest income $2,646 $2,634 $2,673 $2,541 $10,494
Total interest expense 871 817 999 800 3,487
Net interest income 1,775 1,817 1,674 1,741 7,007
Provision for possible
credit losses 178 (116) 152 175 389
Net income (loss) before
income taxes (239) (36) (320) 263 (332)
Net income (loss) (239) (43) (320) 263 (339)
Net income (loss) per
common share (.03) - (.04) .03 (.04)
======================================================
1994
Total interest income $5,254 $5,271 $2,913 $2,696 $16,134
Total interest expense 1,553 1,400 892 890 4,735
Net interest income 3,701 3,871 2,021 1,806 11,399
Provision for possible
credit losses 1,272 872 895 258 3,297
Loss before income taxes (1,384) (2,025) (630) (1,153) (5,127)
Net loss (1,384) (2,038) (630) (1,153) (5,140)
Net loss per common share (.15) (.22) (.07) (.13) (.56)
======================================================
During the fourth quarter of 1995, West Coast recorded a $629,000 gain
from liquidation of WCV, Inc. This resulted from the USTF reimbursement
and the expectation that future costs will be reimbursed. During the
second quarter of 1994, West Coast recorded a $1.8 million loss on the sale
of Sacramento First. An additional charge of $988,000 was added during the
fourth quarter of 1994 primarily to reflect a lower valuation basis for the
B&PB stock to be received upon closing the transaction.
This is page 78 of 182 pages (F-29)
INDEPENDENT AUDITORS' REPORT
The Board of Directors
West Coast Bancorp
Newport Beach, California:
We have audited the accompanying consolidated balance sheets of West Coast
Bancorp and subsidiaries (the Company) as of December 31, 1995 and 1994,
and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1995. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of West
Coast Bancorp and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995 in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
- ----------------------------------
Orange County, California
February 29, 1996
This is page 79 of 182 pages (F-30)
RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements included in this report are the
responsibility of management. These statements have been prepared in
conformity with generally accepted accounting principles and include
amounts based on our best estimates and judgments. Financial information
appearing elsewhere in this report is consistent with that in the
consolidated financial statements. To meet management's responsibility for
financial reporting, internal accounting control systems and procedures are
designed to provide reasonable assurance at a reasonable cost as to the
reliability of financial records. In addition, the Company maintains a
program for communicating corporate policy throughout the organization. As
a further safeguard, an internal audit staff monitors compliance with these
policies and internal accounting control systems and procedures.
West Coast Bancorp's consolidated financial statements have been
audited by KPMG Peat Marwick LLP. In accordance with generally accepted
auditing standards, the independent auditors obtained a sufficient
understanding of the Company's internal control structure to plan their
audit and determine the nature, timing and extent of tests to be performed.
The Audit Committee of the Board of Directors meets with the independent
auditors and representatives of management, including West Coast Bancorp's
internal auditors - both jointly and separately - to discuss financial
reporting matters and audit and control functions.
/s/ Frank E. Smith /s/ John B. Joseph
- ------------------------------- --------------------------------
Frank E. Smith John B. Joseph
Senior Vice President and Chairman of the Board and
Chief Financial Officer President
February 29, 1996 February 29, 1996
This is page 80 of 182 pages (F-31)
EXHIBITS
Number Description Page No.
3.1 Amended Articles of Incorporation of West Coast, *
filed as Exhibit 3.1(c)
3.2 Amended Bylaws of West Coast, filed as Exhibit *
3.2(d)
4.1 Form of 10% Convertible Subordinated Debenture *
Indenture, including Form of 10% Convertible
Subordinated Debenture Due 1996, filed as Exhibit
4.4(a)
4.2 Amendment No. 1 to Indenture dated as of October *
26, 1989 by and between West Coast and First
Interstate Bank of California, filed as Exhibit
4.5(c)
10.1 Form of Indemnification Agreement entered into and *
between West Coast and its directors and certain
of its officers, filed as Exhibit 10.13(a)
10.2 Form of West Coast 1988 Stock Option Plan, filed *
as Exhibit 10.14(b)
10.3 Promissory Note of West Coast dated as of June 30, *
1991 and payable to The Centennial Group, Inc.
filed as Exhibit 10.4(d)
10.4 Promissory Note of West Coast dated as of June 30, *
1991 and payable to Centennial Capital, Inc. filed
as Exhibit 10.5(d)
10.5 West Coast Bancorp 401(k) Profit Sharing Plan *
Document, Trust and Summary Plan Description (e)
10.6 West Coast's guaranty of Sunwest's 1993 capital *
restoration plan (f)
10.7 Agreement between West Coast and B&PB to sell *
Sacramento First to B&PB dated June 30, 1994 (g)
10.8 Promissory note of West Coast dated as of May 4, *
1994 and payable to Pacific Advisors Inc. Pension
Plan Trust (h)
10.9 West Coast's commitment and guaranty of Sunwest's *
1994 capital restoration plan (h)
10.10 West Coast's security agreement pledging B&PB *
stock to Sunwest Bank (h)
10.11 Promissory note of West Coast dated as of December F-36
14, 1994 and payable to John B. Joseph
This is page 81 of 182 pages (F-32)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
10.12 Promissory note of West Coast dated as of December F-39
14, 1994 and payable to Tremont Associates,
Limited Partnership
10.13 Promissory note of West Coast dated as of March F-42
14, 1995 and payable to John B. Joseph Family
Trust
10.14 Promissory note of West Coast Bancorp dated as of F-45
March 14, 1995 and payable to Citadel Financial
Corp.
10.15 Promissory note of West Coast dated as of F-48
September 14, 1995 and payable to Ronald R. White
10.16 Promissory note of West Coast dated as of F-50
September 14, 1995 and payable to Tremont
Associates, Limited Partnership
10.17 Promissory note of West Coast dated as of December F-52
15, 1995 and payable to John & Suzanne Joseph
Foundation
10.18 Promissory note of West Coast dated as of December F-54
15, 1995 and payable to Citadel Financial
Corporation
10.19 Stock Purchase agreement among Western, West Coast F-56
and Sunwest to purchase Sunwest stock
10.20 Stock Purchase agreement among Western and West F-180
Coast to purchase B&PB stock
21 Subsidiaries of West Coast, filed as Exhibit 22(e) *
23 Consent of Independent Auditors F-181
27 Financial Data Schedule F-182
This is page 82 of 182 pages (F-33)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(a) to West Coast's Registration Statement on Form S-1
(Registration No. 33-24069) filed with the
Commission on August 31, 1988, and which is
incorporated herein by reference
(b) to Amendment No. 1 to West Coast's Registration
Statement on Form S-1 (Registration No. 33-24069)
filed with the Commission on October 21, 1988, and
which is incorporated herein by reference
(c) to West Coast's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 filed with the
Commission, and which is incorporated herein by
reference
(d) to West Coast's Annual Report on form 10-K for the
fiscal year ended December 31, 1991 filed with the
Commission, and which is incorporated herein by
reference
(e) to West Coast's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 filed with the
Commission, and which is incorporated herein by
reference
(f) to West Coast's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 filed with the
Commission, and which is incorporated herein by
reference
(g) to West Coast's Quarterly Report on Form 10-Q for
the six months ended June 30, 1994 filed with the
commission, and which is incorporated herein by
reference
(h) To West Coast's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 filed with the
commission, and which is incorporated herein by
reference
* Not Applicable
This is page 83 of 182 pages (F-34)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Exhibit 10.11
Promissory Note
Borrower: West Coast Bancorp Lender: John B. Joseph
a California Corporation 4770 Campus Drive, Suite 250
(TIN: 95-3586860) Newport Beach, CA 92660
4770 Campus Drive, Suite 250
Newport Beach, CA 92660
Principal Amount: $75,000.00 Interest Rate: 10.000% Date of Note:
December 14, 1994
Promise to Pay. West Coast Bancorp, a California Corporation ("Borrower")
promises to pay John B. Joseph ("Lender"), or order, In lawful money of the
United States of America, the principal amount of Seventy Five Thousand &
00/100 Dollars ($75,000.00), together with interest at the rate of 10.000%
per annum on the unpaid outstanding principal balance of each advance.
Interest shall be calculated from the date of each advance until repayment
of each advance.
Payment. Borrower will pay this loan Immediately upon Lender's demand.
Interest on this Note is computed on a 365/365 simple interest basis; that
is, by applying the ratio of the annual interest rate over the number of
days in a year, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such other
place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued
unpaid interest, then to principal, and any remaining amount to any unpaid
collection costs and late charges.
Default. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this Note, or in any
other agreement or loan Borrower has with Lender. (c) Borrower defaults
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's obligations under this Note or any
of the Related Documents. (d) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or
furnished. (e) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit
of creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (f) Any credit tries to
take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's
accounts with
This is page 84 of 182 pages (F-35)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Lender. (g) Any of the events described in this default section occurs with
respect to any guarantor of this Note. (h) A material advance change occurs
in Borrower's financial condition, or Lender believes the prospect of
payment or performance of the indebtedness is impaired.
Lender's Rights. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, do one or both of the following:
(a) increase the interest rate on this Note 5.000 percentage points, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses where or not here is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of California.
If there is a lawsuit, Borrower agrees upon Lender's request to submit to
the jurisdiction of the courts of Orange County, the State of California.
Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower
against the other. (Initial Here ___________) This Note shall be governed
by and construed in accordance with the laws of the State of California.
Collateral. This Note is secured by A CERTAIN PLAN AND AGREEMENT OF
CONSOLIDATION AND MERGER AS AMENDED (THE "PLAN") DATED AS OF JUNE 22, 1994.
PURSUANT TO THE PLAN, ON CONSUMMATION THEREOF, THE BANK WILL ISSUE TO
BORROWER A WRITING TERMED A CONTINGENT PAYMENT RIGHT EVIDENCING THE
HOLDER'S RIGHT, UNDER CERTAIN CIRCUMSTANCES, TO RECEIVE MONIES IN THE
FUTURE. BORROWER HAS OBTAINED, OR DESIRES TO OBTAIN, FROM LENDER THE LOANS
AND ADVANCES DESCRIBED IN THE AGREEMENT AND DESIRES TO SECURE REPAYMENT OF
SAME BY GRANTING THE LENDER A SECURITY INTEREST IN OR LIEN ON ALL OF
BORROWER'S RIGHT, TITLE AND INTEREST IN AND TO (1) THE CONTINGENT PAYMENT
RIGHT TO BE ISSUED TO IT UNDER AND PURSUANT TO THE PLAN, AND IN THE
PROCEEDS THEREOF AND (2) CERTAIN REAL PROPERTY KNOWN AS 1935 LAS PALAMOS,
LA HABRA HEIGHTS, CA.
Line of Credit. This Note evidences a straight line of credit. Once the
total amount of principal has been advanced, Borrower is not entitled to
further loan advances. Advances under this Note may be requested either
orally or in writing by Borrower or by an authorized person. Lender may,
but need not, require that all oral requests be confirmed in writing. All
communications, instructions, or directions by telephone or otherwise to
Lender are to be directed to Lender's office shown above. The following
This is page 85 of 182 pages (F-36)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
party or parties are authorized to request advances under the line or
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: JOHN B. JOSEPH,
President. Borrower agrees to be liable for all sums either (a) advanced
in accordance with the instructions of an authorized person or (b) credited
to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this
Note or by Lender's internal records, including daily computer print-outs.
Lender will have no obligation to advance funds under this Note if: (a)
Borrower or any guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender, including any
agreement made in connection with signing of this Note; (b) Borrower or any
guarantor ceases doing business or is insolvent; c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; or (d) Borrower has
applied funds provided pursuant to this Note for purposes other than those
authorized by Lender.
General Provisions. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Note on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without
losing them. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive any applicable
statute of limitations, presentment, demand for payment, protest and notice
of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note,
whether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice to
anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom
the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THIS NOTE.
BORROWER:
WEST COAST BANCORP, a California Corporation
By:_________________________
John B. Joseph, President
This is page 86 of 182 pages (F-37)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Exhibit 10.12
Promissory Note
Borrower: West Coast Bancorp Lender: Tremont Associates Limited
a California Corporation Partnership, a Nevada Limited
(TIN: 95-3586860) Partnership
4770 Campus Drive, Suite 250 5344 Valencia Drive
Newport Beach, CA 92660 Orange, CA 92669
Principal Amount: $75,880.00 Interest Rate: 10.000% Date of Note:
December 14, 1994
Promise to Pay. West Coast Bancorp, a California Corporation ("Borrower")
promises to pay Tremont Associates Limited Partnership, A Nevada Limited
Partnership ("Lender"), or order, In lawful money of the United States of
America, the principal amount of Seventy Five Thousand Eight Hundred Eighty
& 00/100 Dollars ($75,880.00), together with interest at the rate of
10.000% per annum on the unpaid principal balance from December 14, 1994,
until paid in full.
Payment. Borrower will pay this loan on demand, or if no demand is made,
In one principal payment of $75,880.00 plus Interest on December 13, 1996.
This payment due December 13, 1996, will be for the principal and accrued
interest not yet paid. Interest on this Note is computed on a 365/365
simple interest basis; that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and
any remaining amount to any unpaid collection costs and late charges.
Prepayment. Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they will
reduce the principal balance due.
Default. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this Note, or in any
other agreement or loan Borrower has with Lender. (c) Borrower defaults
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's
This is page 87 of 182 pages (F-38)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a
receiver is appointed for any part of Borrower's property, Borrower makes
an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency
laws. (f) Any credit or tries to take any of Borrower's property on or in
which Lender has a lien or security interest. This includes a garnishment
of any of Borrower's accounts with Lender. (g) Any of the events described
in this default section occurs with respect to any guarantor of this Note.
(h) A material adverse change occurs in Borrower's financial condition, or
Lender believes the prospect of payment or performance of the indebtedness
is impaired.
Lender's Rights. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, do one or both of the following:
(a) increase the interest rate on this Note 5.000 percentage points, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses where or not here is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of California.
If there is a lawsuit, Borrower agrees upon Lender's request to submit to
the jurisdiction of the courts of Orange County, the State of California.
Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower
against the other. (Initial Here ___________) This Note shall be governed
by and construed in accordance with the laws of the State of California.
Collateral. This Note is secured by A CERTAIN PLAN AND AGREEMENT OF
CONSOLIDATION AND MERGER AS AMENDED (THE "PLAN") DATED AS OF JUNE 22, 1994.
PURSUANT TO THE PLAN, ON CONSUMMATION THEREOF, THE BANK WILL ISSUE TO
BORROWER A WRITING TERMED A CONTINGENT PAYMENT RIGHT EVIDENCING THE
HOLDER'S RIGHT, UNDER CERTAIN CIRCUMSTANCES, TO RECEIVE MONIES IN THE
FUTURE. BORROWER HAS OBTAINED, OR DESIRES TO OBTAIN, FROM LENDER THE LOANS
AND ADVANCES DESCRIBED IN THE AGREEMENT AND DESIRES TO SECURE REPAYMENT OF
SAME BY GRANTING THE LENDER A SECURITY INTEREST IN OR LIEN ON ALL OF
BORROWER'S RIGHT, TITLE AND INTEREST IN AND TO (1) THE CONTINGENT PAYMENT
RIGHT TO BE ISSUED TO IT UNDER AND
This is page 88 of 182 pages (F-39)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
PURSUANT TO THE PLAN, AND IN THE PROCEEDS THEREOF AND (2) CERTAIN REAL
PROPERTY KNOWN AS 1935 LAS PALOMAS, LA HABRA HEIGHTS, CA.
General Provisions. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Note on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without
losing them. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive presentment, demand
for payment, protest and notice of dishonor. Upon any change in the terms
of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that
Lender may renew or extend (repeatedly and for any length of time) this
loan, or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this
loan without the consent of or notice to anyone other than the party with
whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THIS NOTE.
BORROWER:
WEST COAST BANCORP, a California Corporation
By:_________________________
John B. Joseph, President
This is page 89 of 182 pages (F-40)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Exhibit 10.13
PROMISSORY NOTE
Borrower: West Coast Bancorp Lender: John B. Joseph Family Trust
(TIN: 95-3586860) 4770 Campus Drive, Suite 100
4770 Campus Drive, Suite 100 Newport Beach, CA 982660
Newport Beach, CA 92660
Principal Amount: $43,383.00 Interest Rate: 10.00% Date of Note:
March 14, 1995
Promise to Pay. West Coast Bancorp, a California Corporation ("Borrower")
promises to pay to John B. Joseph Family Trust ("Lender"), or order, In
lawful money of the United States of America, the principal amount of Forty
Three Thousand Three Hundred Eighty Three & 11/100 Dollars ($43,282.00),
together with interest at the rate of 10.000% per annum on the unpaid
principal balance from March 14, 1995, until paid in full.
Payment. Borrower will pay this loan on demand, or if no demand is made,
In one principal payment of $43,383.00 plus Interest on March 13, 1997.
This payment due March 13, 1997, will be for the principal and accrued
interest not yet paid. Interest on this Note is computed on a 365/365
simple interest basis; that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and
any remaining amount to any unpaid collection costs and late charges.
Prepayment. Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they will
reduce the principal balance due.
Default. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this Note, or in any
other agreement or loan Borrower has with Lender. (c) Borrower defaults
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's obligations under this Note or any
of the Related Documents. (d) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or
furnished. (e) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property,
This is page 90 of 182 pages (F-41)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Borrower makes an assignment for the benefit of creditors, or any
proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws. (f) Any credit or tries to take any of
Borrower's property on or in which Lender has a lien or security interest.
This includes a garnishment of any of Borrower's accounts with Lender. (g)
Any of the events described in this default section occurs with respect to
any guarantor of this Note. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment
or performance of the indebtedness is impaired.
Lender's Rights. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, do one or both of the following:
(a) increase the interest rate on this Note 5.000 percentage points, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses where or not here is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of California.
If there is a lawsuit, Borrower agrees upon Lender's request to submit to
the jurisdiction of the courts of Orange County, the State of California.
Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower
against the other. (Initial Here ___________) This Note shall be governed
by and construed in accordance with the laws of the State of California.
Collateral. This Note is secured by A CERTAIN PLAN AND AGREEMENT OF
CONSOLIDATION AND MERGER AS AMENDED (THE "PLAN") DATED AS OF JUNE 22, 1994.
PURSUANT TO THE PLAN, ON CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY
THE PLAN, THE BANK ISSUED TO BORROWER A WRITING TERMED A CONTINGENT PAYMENT
RIGHT EVIDENCING THE HOLDER'S RIGHT, UNDER CERTAIN CIRCUMSTANCES, TO
RECEIVE MONIES IN THE FUTURE. BORROWER HAS OBTAINED, OR DESIRES TO OBTAIN,
FROM LENDER THE LOANS AND ADVANCES DESCRIBED IN THE AGREEMENT AND DESIRES
TO SECURE REPAYMENT OF SAME BY GRANTING THE LENDER A SECURITY INTEREST IN
OR LIEN ON ALL OF BORROWER'S RIGHT, TITLE AND INTEREST IN AND TO THE
CONTINGENT PAYMENT RIGHT ISSUED TO IT UNDER AND PURSUANT TO THE PLAN, AND
IN THE PROCEEDS THEREOF.
This is page 91 of 182 pages (F-42)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
General Provisions. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Note on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without
losing them. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive presentment, demand
for payment, protest and notice of dishonor. Upon any change in the terms
of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that
Lender may renew or extend (repeatedly and for any length of time) this
loan, or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this
loan without the consent of or notice to anyone other than the party with
whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THIS NOTE.
BORROWER:
WEST COAST BANCORP, a California Corporation
By:_________________________
John B. Joseph, President
This is page 92 of 182 pages (F-43)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Exhibit 10.14
Promissory Note
Borrower: West Coast Bancorp, Lender: Citadel Financial Corporation
a California Corporation a Nevada Corporation
4770 Campus Drive, Suite 100 1280 Terminal Way, #15
Newport Beach CA 92660 Reno, NV 89502
Principal Amount : $32,496.00 Interest Rate: 10.00% Date of Note:
March 14, 1996
Promise to Pay. West Coast Bancorp, a California Corporation ("Borrower")
promises to pay to CITADEL Financial Corporation, a Nevada Corporation
("Lender"), or order, in lawful money of the United States of America, the
principal amount of Thirty Two Thousand Four Hundred Ninety Six & 00/100
Dollars ($32,496.00), together with interest at the rate of 10.000% per
annum on the unpaid principal balance from March 14, 1995, until paid in
full.
Payment. Borrower will pay this loan on demand, or if no demand is made,
In one principal payment of $32,496.00 plus Interest on March 13, 1997.
This payment due March 13, 1997, will be for the principal and accrued
interest not yet paid. Interest on this Note is computed on a 365/365
simple interest basis; that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and
any remaining amount to any unpaid collection costs and late charges.
Prepayment. Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they will
reduce the principal balance due.
Default. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this Note, or in any
other agreement or loan Borrower has with Lender. (c) Borrower defaults
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's obligations under this Note or any
of the Related Documents. (d) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or
furnished. (e)
This is page 93 of 182 pages (F-44)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Borrower becomes insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (f) Any credit or tries
to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's
accounts with Lender. (g) Any of the events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes
the prospect of payment or performance of the indebtedness is impaired.
Lender's Rights. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, do one or both of the following:
(a) increase the interest rate on this Note 5.000 percentage points, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses where or not here is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of Nevada. If
there is a lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of _____ County, the State of Nevada (initial
Here). Lender and Borrower hereby waive the right to any jury trial in
any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other. (Initial Here ___________) This Note shall be
governed by and construed in accordance with the laws of the State of
Nevada.
Collateral. This Note is secured by A CERTAIN PLAN AND AGREEMENT OF
CONSOLIDATION AND MERGER AS AMENDED (THE "PLAN") DATED AS OF JUNE 22, 1994.
PURSUANT TO THE PLAN, ON CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY
THE PLAN, THE BANK ISSUED TO BORROWER A WRITING TERMED A CONTINGENT PAYMENT
RIGHT EVIDENCING THE HOLDER'S RIGHT, UNDER CERTAIN CIRCUMSTANCES, TO
RECEIVE MONIES IN THE FUTURE. BORROWER HAS OBTAINED, OR DESIRES TO OBTAIN,
FROM LENDER THE LOANS AND ADVANCES DESCRIBED IN THE AGREEMENT AND DESIRES
TO SECURE REPAYMENT OF SAME BY GRANTING THE LENDER A SECURITY INTEREST IN
OR LIEN ON ALL OF BORROWER'S RIGHT, TITLE AND INTEREST IN AND TO THE
CONTINGENT PAYMENT RIGHT ISSUED TO IT UNDER AND PURSUANT TO THE PLAN, AND
IN THE PROCEEDS THEREOF.
General Provisions. This Note is payable on demand. The inclusion of
specific default
This is page 94 of 182 pages (F-45)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waive presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this
Note, whether as maker, guarantor, accommodation maker or endorser, shall
be released from liability. All such parties agree that Lender may renew
or extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice to
anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom
the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THIS NOTE.
BORROWER:
WEST COAST BANCORP, a California Corporation
By:_________________________
John B. Joseph, President
This is page 95 of 182 pages (F-46)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Exhibit 10.15
Promissory Note
Borrower: West Coast Bancorp Lender: Ronald R. White
a California Corporation 1000 E. Cerritos
(TIN: 95-3586860) Anaheim, CA 92805
4770 Campus Drive, Suite 250
Newport Beach, CA 92660
Principal Amount: $32,496.00 Interest Rate: 10.000% Date of Note:
September 15, 1995
Promise to Pay. West Coast Bancorp, a California Corporation ("Borrower")
promises to pay Ronald R. White ("Lender"), or order, In lawful money of
the United States of America, the principal amount of Thirty Two Thousand
Four Hundred Ninety Six & 00/100 Dollars ($32,496.00), together with
interest at the rate of 10.000% per annum on the unpaid principal balance
from September 15, 1995, until paid in full.
Payment. Borrower will pay this loan on demand, or if no demand is made,
In one principal payment of $32,496.00 plus Interest on September 14, 1997.
This payment due March 13, 1997, will be for the principal and accrued
interest not yet paid. Interest on this Note is computed on a 365/365
simple interest basis; that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and
any remaining amount to any unpaid collection costs and late charges.
Prepayment. Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they will
reduce the principal balance due.
This is page 96 of 182 pages (F-47)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Default. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this Note, or in any
other agreement or loan Borrower has with Lender. (c) Borrower defaults
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's obligations under this Note or any
of the Related Documents. (d) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or
furnished. (e) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit
of creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (f) Any credit or tries
to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's
accounts with Lender. (g) Any of the events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes
the prospect of payment or performance of the indebtedness is impaired.
Lender's Rights. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, do one or both of the following:
(a) increase the interest rate on this Note 5.000 percentage points, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses where or not here is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of California.
If there is a lawsuit, Borrower agrees upon Lender's request to submit to
the jurisdiction of the courts of Orange County, the State of California.
Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower
against the other. (Initial Here ___________) This Note shall be governed
by and construed in accordance with the laws of the State of California.
This is page 97 of 182 pages (F-48)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
General Provisions. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Note on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without
losing them. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive presentment, demand
for payment, protest and notice of dishonor. Upon any change in the terms
of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that
Lender may renew or extend (repeatedly and for any length of time) this
loan, or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this
loan without the consent of or notice to anyone other than the party with
whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THIS NOTE.
BORROWER:
WEST COAST BANCORP, a California Corporation
By:_________________________
John B. Joseph, President
This is page 98 of 182 pages (F-49)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Exhibit 10.16
Promissory Note
Borrower: West Coast Bancorp Lender: Tremont Associate
a California Corporation A Limited Partnership
(TIN: 95-3586860) 4770 Campus Drive, Suite 250
4770 Campus Drive, Suite 250 Newport Beach, CA 92660
Newport Beach, CA 92660
Principal Amount: $43,383.00 Interest Rate: 10.000% Date of Note:
September 15, 1995
Promise to Pay. West Coast Bancorp, a California Corporation ("Borrower")
promises to pay Tremont Associate, A Limited Partnership ("Lender"), or
order, In lawful money of the United States of America, the principal
amount of Forty Three Thousand Three Hundred Eighty Three & 00/100 Dollars
($43,383.00), together with interest at the rate of 10.000% per annum on
the unpaid principal balance from September 15, 1995, until paid in full.
Payment. Borrower will pay this loan on demand, or if no demand is made,
In one principal payment of $43,383.00 plus Interest on September 14, 1997.
This payment due March 13, 1997, will be for the principal and accrued
interest not yet paid. Interest on this Note is computed on a 365/365
simple interest basis; that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and
any remaining amount to any unpaid collection costs and late charges.
Prepayment. Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they will
reduce the principal balance due.
Default. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this Note, or in any
other agreement or loan Borrower has with Lender. (c) Borrower defaults
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's obligations under this Note or any
of the Related Documents. (d) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
This is page 99 of 182 pages (F-100)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
misleading in any material respect either now or at the time made or
furnished. (e) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit
of creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (f) Any credit or tries
to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's
accounts with Lender. (g) Any of the events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes
the prospect of payment or performance of the indebtedness is impaired.
Lender's Rights. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, do one or both of the following:
(a) increase the interest rate on this Note 5.000 percentage points, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses where or not here is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of California.
If there is a lawsuit, Borrower agrees upon Lender's request to submit to
the jurisdiction of the courts of Orange County, the State of California.
Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower
against the other. (Initial Here ___________) This Note shall be governed
by and construed in accordance with the laws of the State of California.
General Provisions. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Note on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without
losing them. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive presentment, demand
for payment, protest and notice of dishonor. Upon any change in the terms
of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that
Lender may renew or extend
This is page 100 of 182 pages (F-51)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(repeatedly and for any length of time) this loan, or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All
such parties also agree that Lender may modify this loan without the
consent of or notice to anyone other than the party with whom the
modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THIS NOTE.
BORROWER:
WEST COAST BANCORP, a California Corporation
By:_________________________
John B. Joseph, President
This is page 101 of 182 pages (F-52)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Exhibit 10.17
Promissory Note
Borrower: West Coast Bancorp Lender: John and Suzanne Joseph
a California Corporation Foundation
(TIN: 95-3586860) 4770 Campus Drive, Suite 250
4770 Campus Drive, Suite 250 Newport Beach, CA 92660
Newport Beach, CA 92660
Principal Amount: $43,383.00 Interest Rate: 10.000% Date of Note:
December 15, 1995
Promise to Pay. West Coast Bancorp, a California Corporation ("Borrower")
promises to pay John and Suzanne Joseph Foundation ("Lender"), or order, In
lawful money of the United States of America, the principal amount of Forty
Three Thousand Three Hundred Eighty Three & 00/100 Dollars ($43,383.00),
together with interest at the rate of 10.000% per annum on the unpaid
principal balance from December 15, 1995, until paid in full.
Payment. Borrower will pay this loan on demand, or if no demand is made,
In one principal payment of $43,383.00 plus Interest on December 14, 1997.
This payment due March 13, 1997, will be for the principal and accrued
interest not yet paid. Interest on this Note is computed on a 365/365
simple interest basis; that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and
any remaining amount to any unpaid collection costs and late charges.
Prepayment. Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they will
reduce the principal balance due.
Default. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this Note, or in any
other agreement or loan Borrower has with Lender. (c) Borrower defaults
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's obligations under this Note or any
of the Related Documents. (d) Any representation or
This is page 102 of 182 pages (F-53)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
statement made or furnished to Lender by Borrower or on Borrower's behalf
is false or misleading in any material respect either now or at the time
made or furnished. (e) Borrower becomes insolvent, a receiver is appointed
for any part of Borrower's property, Borrower makes an assignment for the
benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any credit or
tries to take any of Borrower's property on or in which Lender has a lien
or security interest. This includes a garnishment of any of Borrower's
accounts with Lender. (g) Any of the events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes
the prospect of payment or performance of the indebtedness is impaired.
Lender's Rights. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, do one or both of the following:
(a) increase the interest rate on this Note 5.000 percentage points, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses where or not here is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of California.
If there is a lawsuit, Borrower agrees upon Lender's request to submit to
the jurisdiction of the courts of Orange County, the State of California.
Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower
against the other. (Initial Here ___________) This Note shall be governed
by and construed in accordance with the laws of the State of California.
General Provisions. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Note on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without
losing them. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive presentment, demand
for payment, protest and notice of dishonor. Upon any change in the terms
of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that
Lender may renew or extend (repeatedly and for any length of time) this
loan, or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender's security interest in the
This is page 103 of 182 pages (F-54)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
collateral; and take any other action deemed necessary by Lender without
the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THIS NOTE.
BORROWER:
WEST COAST BANCORP, a California Corporation
By:_________________________
Frank E. Smith, Chief Financial Officer
This is page 104 of 182 pages (F-55)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Exhibit 10.18
Promissory Note
Borrower: West Coast Bancorp Lender: Citadel Financial Corp.
a California Corporation 1000 E. Cerritos
(TIN: 95-3586860) Anaheim, CA 92805
4770 Campus Drive, Suite 250
Newport Beach, CA 92660
Principal Amount: $32,496.00 Interest Rate: 10.000% Date of Note:
December 15, 1995
Promise to Pay. West Coast Bancorp, a California Corporation ("Borrower")
promises to pay Ronald R. White ("Lender"), or order, In lawful money of
the United States of America, the principal amount of Thirty Two Thousand
Four Hundred Ninety Six & 00/100 Dollars ($32,496.00), together with
interest at the rate of 10.000% per annum on the unpaid principal balance
from December 15, 1995, until paid in full.
Payment. Borrower will pay this loan on demand, or if no demand is made,
In one principal payment of $32,496.00 plus Interest on December 14, 1997.
This payment due March 13, 1997, will be for the principal and accrued
interest not yet paid. Interest on this Note is computed on a 365/365
simple interest basis; that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and
any remaining amount to any unpaid collection costs and late charges.
Prepayment. Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they will
reduce the principal balance due.
Default. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this Note, or in any
other agreement or loan Borrower has with Lender. (c) Borrower defaults
This is page 105 of 182 pages (F-56)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's obligations under this Note or any
of the Related Documents. (d) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or
furnished. (e) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit
of creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (f) Any credit or tries
to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's
accounts with Lender. (g) Any of the events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes
the prospect of payment or performance of the indebtedness is impaired.
Lender's Rights. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, do one or both of the following:
(a) increase the interest rate on this Note 5.000 percentage points, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses where or not here is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of California.
If there is a lawsuit, Borrower agrees upon Lender's request to submit to
the jurisdiction of the courts of Orange County, the State of California.
Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower
against the other. (Initial Here ___________) This Note shall be governed
by and construed in accordance with the laws of the State of California.
General Provisions. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Note on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without
losing them. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive
This is page 106 of 182 pages (F-57)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
presentment, demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All
such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral;
or impair, fail to realize upon or perfect Lender's security interest in
the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THIS NOTE.
BORROWER:
WEST COAST BANCORP, a California Corporation
By:_________________________
Frank E. Smith, Chief Financial Officer
This is page 107 of 182 pages (F-58)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
STOCK PURCHASE AGREEMENT
AMONG
WESTERN ACQUISITIONS, L.L.C.
Buffalo Grove, Illinois
WEST COAST BANCORP
Newport Beach, California
AND
SUNWEST BANK
Tustin, California
dated February 29, 1996
This is page 108 of 182 pages (F-59)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
STOCK PURCHASE AGREEMENT
Stock Purchase Agreement ("Agreement"), dated as of February 29, 1996,
by and among Western Acquisitions, L.L.C., an Illinois limited liability
company("Western"), West Coast Bancorp, a California corporation and a
registered bank holding company ("West Coast") and Sunwest Bank, a
California corporation engaged in the commercial banking business
("Sunwest").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to provide for Western's purchase
of certain shares of the common stock of Sunwest currently owned by West
Coast and certain shares of the common stock of Sunwest to be issued by
Sunwest on the terms and conditions herein contained;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby
agree as follows:
ARTICLE I--DEFINITIONS
"Act" shall mean the California Corporations Code, as amended.
"Affiliate" shall mean a person, corporation or similar entity which
controls, is controlled by, or is under common control with Western.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
This is page 109 of 182 pages (F-60)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"DOJ" shall mean the Department of Justice.
"Department" shall mean the Department of Banking of the California
Business and Transportation Agency.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.3 hereof as the effective time of the Purchase (as defined in
Section 2.1 hereof).
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from
the presence, or release into the environment, of any Materials of
Environmental Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with
any governmental entity relating to (1) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource),
and/or (2) the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of Materials of Environmental Concern. The term "Environmental
Law" includes without limitation (1) the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. 9601, et
seq; the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
6901, et seq; the Clean Air Act, as amended, 42 U.S.C. 7401, et seq; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251, et seq;
the Toxic Substances Control Act, as amended, 15 U.S.C. 2601, et seq; the
Emergency Planning and Community Right to Know Act, 42 U.S.C. 11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. 300f, et seq; and all
comparable state and local laws, and (2) any common law (including without
limitation common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
This is page 110 of 182 pages (F-61)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
"FDIA" shall mean the Federal Deposit Insurance Act and the rules and
regulations promulgated thereunder.
"FDIC" shall mean the Federal Deposit Insurance Corporation, or any
successor thereto.
"FFIEC" shall mean the Federal Financial Institutions Examination
Council.
"Financial Code" shall mean the California Financial Code, as amended.
"FRA" shall mean the Federal Reserve Act, as amended.
"FRB" shall mean the Board of Governors of the Federal Reserve System.
"GAAP" shall mean generally accepted accounting principles.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"New Sunwest Stock" shall mean the shares of Sunwest Common Stock to
be issued by Sunwest to Western and to be purchased by Western pursuant to
Section 2.1 hereof.
"Permit" shall mean the permit required by Section 691 of the
Financial Code or any successor provision thereto.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the
date hereof delivered from the disclosing party to the other party
specifically referring to this Agreement and describing in reasonable
detail the matters contained therein and the section of this Agreement to
which such matters pertain, or (ii) a letter dated after the date hereof
from the disclosing party specifically referring to this Agreement and
describing in reasonable detail the matters contained therein and delivered
by the other party pursuant to Section 5.8 hereof.
"Purchase Consideration" shall mean the aggregate purchase price to be
paid at Closing by Western for the Sunwest Stock and the New Sunwest Stock
pursuant to Section 2.1 hereof.
This is page 112 of 182 pages (F-63)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
"Real Estate Owned" shall mean real estate acquired by foreclosure or
by deed-in-lieu of foreclosure, real estate in judgment and subject to
redemption and in-substance foreclosures under generally accepted
accounting principles.
"Regulatory Reports" shall mean the quarterly Report of Condition and
Income on FFIEC Form 033 ("Call Report") and other periodic reports and all
similar documents filed, or required to be filed with the Superintendent,
the FDIC and the FRB.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed,
or required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act, the Exchange Act and
the rules and regulations of the Commission and the FDIC, as applicable,
promulgated thereunder.
"Subsidiaries" shall mean any corporation, bank, savings association,
partnership, joint venture or other organization more than 25% of the stock
or ownership interest of which is owned, directly or indirectly, by an
entity.
"Superintendent" shall mean the Superintendent of Banking of the
Department.
"Sunwest Common Stock" shall mean the common stock, no par value per
share, of Sunwest.
"Sunwest Stock" shall mean the shares of Sunwest Common Stock to be
purchased from West Coast by Western pursuant to Section 2.1 hereof.
"Sunwest Subsidiary" shall mean the entity(ies), if any, disclosed by
Sunwest pursuant to Section 3.5 hereof.
"West Coast Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of West
Coast as of December 31, 1994 and 1993 and the consolidated statements of
income, changes in stockholders' equity and cash flows (including related
notes and schedules, if any) of West Coast for each of the two years ended
December 31, 1994, and 1993 as filed by West Coast in its Securities
Documents and (ii) the consolidated balance sheets (including related notes
and schedules, if any) of West Coast and the
This is page 113 of 182 pages (F-64)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
consolidated statements of income, changes in stockholders' equity and
cash flows (including related notes and schedules, if any) of West Coast
included in the Securities Documents filed by West Coast with respect to
the quarterly and annual periods ended subsequent to December 31, 1994.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
ARTICLE II--PURCHASE
2.1 Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.3 hereof) and in accordance with,
as applicable, the Act, the Financial Code, the BHCA, the FDIA and the
rules and regulations promulgated thereunder: (a) subject to the provisions
of this Section 2.1 and to the provisions of Section 2.2 hereof, West Coast
shall sell, transfer, convey and assign and shall deliver to Western and
Western shall purchase from and acquire, subject to adjustment as
hereinafter provided, all of West Coast's right, title and interest in
thirty-five (35) shares of the Sunwest Common Stock (the "Sunwest Stock")
owned and held of record as of the date hereof by West Coast for a purchase
price of Seventy-Two Thousand Dollars and No Cents ($72,000.00) per share,
or an aggregate purchase price of Two Million Five Hundred Twenty Thousand
Dollars and No Cents ($2,520,000.00) and (b) subject to the provisions of
this Section 2.1 and to the provisions of Section 2.2 hereof, Sunwest shall
offer for sale to Western and Western shall purchase from Sunwest fifteen
(15) shares of Sunwest Common Stock to be issued by Sunwest to Western (the
"New Sunwest Stock") at the Effective Time for a purchase price of Seventy-
Two Thousand Dollars and No Cents ($72,000.00) per share, or an aggregate
purchase price of One Million Eighty Thousand Dollars and No Cents
($1,080,000.00), such purchase transactions referred to in (a) and (b)
hereof collectively hereinafter referred to as the "Purchase." In the
event, after the date hereof but prior to the Effective Time, West Coast
purchases additional shares of Sunwest Common Stock, West Coast shall sell,
transfer, convey and assign and shall deliver to Western and Western shall
purchase from and acquire all of West Coast's right, title and interest in
such number of such additional shares of Sunwest Common Stock (the
"Additional Stock") which, together with the Sunwest Stock and the New
Sunwest Stock to be purchased pursuant to this Section 2.1, equals not less
than 43.48 percent of the then issued and outstanding shares of the Sunwest
Common Stock and, upon the occurrence of the foregoing event, the term
"Sunwest Stock" to be purchased by Western pursuant to 2.1(a) hereof shall
be deemed to include such Additional Stock. In the event any such
Additional Stock is purchased pursuant hereto, the aggregate purchase price
for the Sunwest Stock shall be adjusted and shall equal Two Million Five
Hundred Twenty Thousand Dollars and No Cents ($2,520,000.00) plus the
aggregate of the per share purchase price paid by West Coast for the
Additional Stock.
This is page 115 of 182 pages (F-61)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
The Purchase Consideration shall be paid by Western (x) to West Coast,
if for the purchase of shares pursuant to 2.1(a) hereof and (y) to Sunwest,
if for the purchase of any shares pursuant to 2.1(b) hereof.
2.2 Repricing of Sunwest Stock and New Sunwest Stock
(a) In the event that the total equity capital of Sunwest (as such
capital would be required to be reflected in item 13 of Schedule RI-A -
Changes in Equity Capital of a Call Report if such a Call Report were then
due) as of the date immediately prior to the date of the Effective Time
(the "Closing Equity Capital") is less than such total equity capital of
Sunwest as reported in Sunwest's December 31, 1995 Call Report (the
"Opening Equity Capital"), the purchase price per share to be paid by
Western for the Sunwest Stock (other than the Additional Stock, if any) and
the New Sunwest Stock at the Closing shall be reduced to an amount equal to
85.73% times the quotient obtained by dividing the Closing Equity Capital
by 100 (the "Adjusted Per Share Purchase Price"). In the event of any
such adjustment to the per share purchase price of the Sunwest Stock (other
than the Additional Stock, if any) and the New Sunwest Stock as required by
this Section 2.2(a), the aggregate purchase price to be paid by Western
for each of the Sunwest Stock (other than the Additional Stock, if any) and
the New Sunwest Stock pursuant to Section 2.1 hereof shall be determined by
multiplying the number of shares of Sunwest Stock (other than the
Additional Stock, if any) and the number of shares of the New Sunwest
Stock, respectively, by the Adjusted Per Share Purchase Price.
(b) In the event the total equity capital of Sunwest as reported in
Sunwest's December 31, 1996 Call Report less the sum of (i) the amount of
any capital contributed by West Coast to Sunwest between the date of this
Agreement and December 31, 1996 and (ii) the amount of consideration paid
by Western for the New Sunwest Stock (the "Year End Equity Capital")
exceeds the lesser of the Opening Equity Capital or the Closing Equity
Capital by more than Five Hundred Thousand Dollars and No Cents
($500,000.00), Western shall pay to West Coast an amount equal to the Year
End Equity Capital less the sum of (x) the lesser of the Opening Equity
Capital or the Closing Equity Capital and (y) Five Hundred Thousand Dollars
and No Cents ($500,000.00) multiplied by .434785 (the "Excess Capital").
Such amount shall be paid by Western within five (5) business days after
receipt from Sunwest of a copy of its December 31, 1996 Call Report and a
statement setting forth the calculation of the Excess Capital. Such amount
shall be payable by wire transfer in immediately available funds to an
account designated in writing by West Coast.
This is page 117 of 182 pages (F-68)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
2.3 Closing; Effective Time
A closing (the "Closing") shall take place at 10:00 a.m. on a business
day designated by Western in a written notice given to West Coast and
Sunwest which shall be a day within three (3) business days following the
satisfaction or waiver, to the extent permitted hereunder, of the
conditions to the consummation of the Purchase specified in Section 6.1 of
Article VI of this Agreement, at the offices of West Coast, or at such
other place, at such other time, or on such other date as the parties may
mutually agree upon. At the Closing, there shall be delivered to Western,
West Coast and Sunwest the certificates and other documents required to be
delivered under Article VI hereof. The "Effective Time" shall be 10:00
a.m. (Pacific Standard Time) on the date of Closing or as otherwise
specified by law, in accordance with the provisions of, as applicable, the
Act, the BHCA, the Financial Code, the FDIA and the rules and regulations
thereunder.
2.4 Delivery of Stock
Upon delivery by Western of the Purchase Consideration, West Coast and
Sunwest, as the case may be, shall deliver to Western the certificates for
the Sunwest Stock duly endorsed in the name of Western and the certificates
for the New Sunwest Stock.
ARTICLE III--REPRESENTATIONS AND WARRANTIES
OF WEST COAST AND SUNWEST
West Coast and Sunwest represent and warrant to Western as follows
provided, however, that, notwithstanding anything to the contrary contained
herein, Sunwest shall only be deemed to have made representations and
warranties concerning itself and not West Coast alone or on a consolidated
basis:
3.1 Capital Structure
The authorized capital stock of Sunwest consists of 1,000,000 shares
of Sunwest Common Stock and 1,000,000 shares of serial preferred stock (the
"Sunwest Preferred Stock"). As of the date hereof, there are 100 shares of
Sunwest Common Stock issued and outstanding, no shares of the Sunwest
Preferred Stock issued and outstanding, and no shares of Sunwest Common
Stock or of the Sunwest Preferred Stock are directly or indirectly held as
treasury stock by Sunwest. All outstanding shares of Sunwest Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable except to the extent and in the manner provided in the
Financial Code, and when issued, the New Sunwest Stock will be duly
authorized and validly issued and will be fully paid and nonassessable
except to the extent and in the manner provided in the Financial Code. As
of the date hereof, except as Previously Disclosed, there are no Rights
authorized, issued or outstanding with respect to the capital stock of
Sunwest. None of the shares of Sunwest capital stock has been issued in
violation of the preemptive rights of any person, firm or entity.
This is page 118 of 182 pages (F-69)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
3.2 Organization, Standing and Authority of West Coast
West Coast is a California corporation duly organized, validly
existing and in good standing under the laws of the State of California
with full corporate power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted. West
Coast has delivered to Western true and complete copies of the Articles of
Incorporation and Bylaws of West Coast as in effect as of the date hereof.
3.3 Ownership of Sunwest
Except as Previously Disclosed, the outstanding shares of the capital
stock of Sunwest are directly owned by West Coast free and clear of all
liens, claims, encumbrances, charges, restrictions or rights of third
parties of any kind whatsoever. Except as Previously Disclosed, there are
no agreements, understandings or commitments relating to the right of West
Coast to vote or to dispose of said shares or other ownership interests.
3.4 Organization, Standing and Authority of Sunwest
Sunwest is a California corporation engaged in the commercial banking
business, duly organized, validly existing and in good standing under the
laws of the State of California. Sunwest (i) has full power and authority
to own or lease all of its properties and assets and to carry on its
business as now conducted, and (ii) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires
such qualification and where the failure to be so licensed, qualified or in
good standing would have a material adverse effect on the financial
condition, results of operations, business or prospects of Sunwest.
Sunwest has heretofore delivered to Western true and complete copies of the
Articles of Incorporation and Bylaws of Sunwest as in effect as of the date
hereof.
This is page 119 of 182 pages (F-70)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
3.5 Ownership of Sunwest Subsidiary
Except as Previously Disclosed, Sunwest has no direct or indirect
Subsidiary, nor does it own directly or indirectly more than 10% and less
than 25% of the equity of any corporation, bank, savings association,
partnership, joint venture or other organization. Except as Previously
Disclosed and except for securities and other interests taken in
consideration of debts previously contracted or taken as security for loans
or other indebtedness or obligations owed to Sunwest, Sunwest does not own
or have the right to acquire, directly or indirectly, any outstanding
capital stock or other voting securities or ownership interests of any
corporation, bank, savings association, partnership, joint venture or other
organization.
3.6 Authorized and Effective Agreement
(a) Each of West Coast and Sunwest has all requisite corporate power
and corporate authority to enter into this Agreement and (subject to
receipt of all necessary governmental approvals) to perform all of its
obligations under this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate
action in respect thereof on the part of West Coast and Sunwest. This
Agreement has been duly and validly executed and delivered by West Coast
and Sunwest and constitutes a legal, valid and binding obligation of West
Coast and Sunwest which is enforceable against each of West Coast and
Sunwest, as the case may be, in accordance with its terms, subject, as to
enforceability, to bankruptcy, receivership, conservatorship, insolvency
and other laws of general applicability relating to or affecting the rights
of creditors of companies that are bank holding companies and FDIC-insured
banking companies and to general equity principles.
(b) Except for consents and approvals of, filings or registrations
with, notices to or non-objections by, as applicable, the Superintendent,
the FDIC, the FRB, the DOJ, and state securities administrators under the
blue sky laws, no consents or approvals of, or filings or registrations
with, or notices to any governmental body or authority are necessary on
behalf of West Coast or Sunwest in connection with (i) the execution and
delivery by West Coast and Sunwest of this Agreement or (ii) the
consummation by West Coast and Sunwest, as applicable, of the transactions
contemplated hereby.
This is page 120 of 182 pages (F-71)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(c) Except as Previously Disclosed, neither the execution and
delivery of this Agreement nor consummation of the transactions
contemplated hereby nor compliance by West Coast and Sunwest with any of
the provisions hereof (i) conflict with or result in a breach of any
provisions of the Articles of Incorporation or Bylaws of West Coast or
Sunwest, (ii) violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of West Coast or Sunwest pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which West Coast or Sunwest
or by which either of its properties or assets may be bound or affected
which breach, violation or default would have a material adverse effect on
the financial condition, results of operations, business or prospects of
Sunwest or which would affect the Sunwest Stock, or (iii) subject to
receipt of all required governmental approvals, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to West Coast or
Sunwest.
3.7 Shareholder Communications and Regulatory Reports
(a) West Coast has previously delivered or made available to Western
a complete copy of all Securities Documents filed by West Coast pursuant to
the Securities Laws or mailed by West Coast to its shareholders as a class
since January 1, 1994. Such Securities Documents did not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, at
the time and in light of the circumstances under which they were made, not
misleading, provided that information as of a later date shall be deemed to
modify information as of an earlier date.
(b) Since January 1, 1994, except as Previously Disclosed or with
respect to exceptions which are not material, each of West Coast and
Sunwest has duly filed with the Superintendent, the FDIC and the FRB, as
the case may be, in correct form the Regulatory Reports required to be
filed under applicable laws and regulations and such Regulatory Reports
were in all material respects complete and accurate and in compliance with
the requirements of applicable laws and regulations, provided that
information as of a later date shall be deemed to modify information as of
an earlier date; and each of West Coast and Sunwest has previously
delivered or made available to Western accurate and complete copies of all
such Regulatory Reports. Except as Previously Disclosed in connection with
the most recent examinations of West Coast and Sunwest by the
Superintendent, the FDIC and the FRB, neither West Coast nor Sunwest was
required to correct or change any
action, procedure or proceeding which either West Coast or Sunwest believes
in good faith has not been now corrected or changed as required.
This is page 121 of 182 pages (F-72)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
3.8 Financial Statements
(a) West Coast has delivered to Western accurate and complete copies
of the West Coast Financial Statements which, in the case of the
consolidated balance sheets of West Coast as of December 31, 1994 and 1993
and the consolidated statements of income, changes in stockholders' equity
and cash flows of West Coast for each of the two years ended December 31,
1994 and 1993, are accompanied by the audit reports of KPMG Peat Marwick,
L.L.P., independent public accountants with respect to West Coast. West
Coast has also delivered to Western an accurate and complete copy of the
unaudited West Coast financial statement for the year ended December 31,
1995. The West Coast Financial Statements have been prepared in accordance
with GAAP and fairly present in all material respects, as the case may be,
the consolidated financial condition of West Coast as of the respective
dates set forth therein, and the consolidated results of operations,
shareholders' equity and cash flows of West Coast for the respective
periods or as of the respective dates set forth therein subject, in the
case of interim financial statements, to the adjustments which have been
Previously Disclosed, all of which are normal recurring year-end
adjustments and none of which are material, and the absence of notes
thereto. The consolidated audits of West Coast have been conducted in
accordance with generally accepted auditing standards.
(b) The books and records of West Coast and Sunwest are being
maintained in material compliance with applicable legal and accounting
requirements, and such books and records accurately reflect in all material
respects all dealings and transactions in respect of the business, assets,
liabilities and affairs of West Coast and Sunwest.
(c) Except and to the extent set forth (i) in any matters Previously
Disclosed relating to any of the other representations and warranties in
this Agreement, and/or (ii) in the notes to the West Coast Financial
Statement for the year ended 1994 and/or in the notes to any Form 10-Q or 8-
K of West Coast or in any Call Report of Sunwest for any period ended
subsequent to December 31, 1994, and except for liabilities incurred since
December 31, 1995 in the ordinary course of business, Sunwest does not have
any liabilities, whether absolute, accrued, contingent or otherwise,
material to the financial condition, results of operations, business or
prospects of Sunwest which are not reflected, disclosed or provided for in
the unaudited West Coast financial statement for the year ended December
31, 1995 and in the Sunwest Call Report for December 31, 1995.
3.9 Material Adverse and Other Changes
There has not occurred any material adverse change in West Coast's
consolidated financial condition, results of operations, business or
prospects since December 31, 1995 through the date of this Agreement which
would adversely affect West Coast's ability to consummate the transactions
contemplated hereby. There has not occurred any material adverse change in
Sunwest's financial condition, results of operation, business or prospects
since December 31, 1995, other than changes resulting from or attributable
to changes in laws or regulations, generally accepted accounting principles
or interpretations of either thereof that affect the banking industry
generally or reasonable expenses incurred by Sunwest in connection with the
transactions contemplated by this Agreement and attributable to the New
Sunwest Stock. Except as Previously Disclosed, neither West Coast nor
Sunwest has taken any action subsequent to December 31, 1995 which if taken
after the date hereof would violate the provisions of Section 5.5 hereof.
This is page 122 of 182 pages (F-73)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
3.10 Environmental Matters
(a) Except as Previously Disclosed, to the best knowledge of Sunwest,
Sunwest is in compliance with all Environmental Laws, except for any
violations of any Environmental Laws which would not singly or in the
aggregate, have a material adverse effect on the financial condition,
results of operations, business or prospects of Sunwest. Sunwest has not
received any communication alleging that Sunwest is not in such compliance
and, to the best knowledge of Sunwest and except as Previously Disclosed,
there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) Except as Previously Disclosed and to the best knowledge of
Sunwest, none of the properties owned, leased or operated by Sunwest as of
the date hereof has been or is in violation of or liable under any
Environmental Law, except for any violations of any Environmental Laws
which would not singly or in the aggregate, have a material adverse effect
on the financial condition, results of operations, business or prospects of
Sunwest. To the best knowledge of Sunwest and except as Previously
Disclosed, there has been no disposal or release of any Materials of
Environmental Concern on, under or from such properties.
(c) Except as Previously Disclosed, Sunwest has no actual knowledge
of any past or present actions, activities, circumstances, conditions,
events or incidents that could reasonably be expected to result in the
imposition of any material liability arising under any Environmental Law
against Sunwest.
(d) West Coast and Sunwest have Previously Disclosed any
environmental studies conducted by either of them, on the behalf of either
of them or as to which either of them has possession during the past five
years with respect to any properties owned, leased or operated by Sunwest
as of the date hereof.
(e) Except as Previously Disclosed, neither West Coast nor Sunwest has
received any written communication issued by any governmental authority nor
has West Coast or Sunwest provided any written communication to any
governmental authority which written communication states that there have
been Materials of Environmental Concern disposed or released on, under or
from any real property in which Sunwest has a security interest in or that
there is any Environmental Claim in connection with such properties which,
individually or in the aggregate, could have a material adverse effect on
the financial condition, results of operations, business or prospects of
Sunwest.
3.11 Allowance for Loan Losses and Real Estate Owned
This is page 123 of 182 pages (F-74)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
The allowance for loan losses reflected in the most recent Regulatory
Report of Sunwest is, in the opinion of Sunwest's management, adequate in
all material respects as of their respective dates under the requirements
of GAAP to provide for reasonably anticipated losses on outstanding loans
net of recoveries. Except as Previously Disclosed, neither West Coast nor
Sunwest has become aware, or been advised by the examination staff of the
Department, the FDIC or the FRB, of the need for Sunwest to make additional
specific provisions for reserves or loan losses. The Real Estate Owned
reflected on the most recent Regulatory Report of Sunwest is carried at the
lower of cost or fair value, less (or with a valuation allowance for)
estimated costs to sell, as required by GAAP.
3.12 Tax Matters
(a) Except as Previously Disclosed, during the three years prior
hereto, each of West Coast and Sunwest has timely filed or caused to be
filed with the appropriate government entity all tax returns and reports
required to be filed, including income, withholding, employment, and
estimated tax and informational returns ("Tax Returns") and no Tax Returns
have been amended. Except as Previously Disclosed, all Tax Returns are
true, correct, and complete in all material respects. To the best
knowledge of West Coast and Sunwest, there are no grounds for assertion of
any understatement penalty under Section 6661 of the Code (prior to repeal)
or Section 6662 of the Code, except penalties, if imposed, which would not
have a material adverse effect on the financial condition, results of
operations, business or prospects of Sunwest.
(b) All Taxes (whether or not reflected in Tax Returns as filed)
payable by West Coast with respect to all periods reflected on Tax Returns
have been timely and fully paid (except for Taxes Previously Disclosed not
yet due or which have been contested in good faith, or where the failure to
timely file would not have a material adverse effect on the financial
condition, results of operations, business or prospects of Sunwest) and, to
the best knowledge of West Coast, there are no grounds for the assertion or
assessment of any additional Taxes against West Coast or its assets with
respect to such periods. The U.S. federal income Tax Returns of West Coast
have never been audited by the Internal Revenue Service and, to the best
knowledge of West Coast, there are no audits of any Tax Returns pending or
threatened. There is no waiver of any statute of limitations in effect
with respect to any Tax Returns and there are currently no agreements in
effect with respect to West Coast to extend the period of limitations for
the assessment or collection of taxes.
(c) The consolidated balance sheet of West Coast at September 30,
1995 and, to the best knowledge of West Coast, the unaudited consolidated
balance sheet of West Coast at December 31, 1995 provide an adequate
reserve for all Taxes due or to become due up to and including such date,
whether or not a Tax Return has been filed for such period, except for
Taxes which in the aggregate are not material.
This is page 125 of 182 pages (F-76)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(d) Except as Previously Disclosed, West Coast is not required to
include in income any adjustment under Section 481(a) of the Code by reason
of a change in accounting method initiated by West Coast and the Internal
Revenue Service has not proposed any such adjustment or change in
accounting method. West Coast does not have pending any private letter
ruling with the Internal Revenue Service.
(e) No consent has been filed relating to West Coast pursuant to
section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply.
(f) Except as Previously Disclosed, neither West Coast nor Sunwest is
a party to or bound by any tax allocation agreement, tax sharing agreement
or tax indemnification agreement.
As used in this Agreement, "Taxes" means all taxes, charges, fees,
levies, or other like assessments, including without limitation income,
gross receipts, ad valorem, value added, premium, excise, real property,
personal property, windfall profit, sales, use, transfer, license,
withholding, employment, payroll, bank, and franchise taxes imposed by:
the United States or any other nation, state, or bilateral or multilateral
governmental authority, any local governmental unit or subdivision thereof,
or any branch, agency, or judicial body thereof; and shall include any
interest, fines, penalties, assessments, or additions to tax resulting
from, attributable to, or incurred in connection with any such Taxes or any
contest or dispute thereof.
3.13 Legal Proceedings
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the
best knowledge of West Coast and/or Sunwest, threatened (or unasserted but
considered by West Coast and/or Sunwest probable of assertion and which if
asserted would have at least a reasonable probability of a materially
unfavorable outcome) (a) against West Coast and/or Sunwest or against any
asset, interest or right of either of West Coast or Sunwest or against any
officer, director or employee in such capacity of either that in any such
case, if decided adversely, could have a material adverse effect on the
financial condition, results of operations, business or prospects of
Sunwest or on the ability of West Coast to consummate the transactions
contemplated hereby or (b) challenging this Agreement or any of the
transactions contemplated hereby. Neither West Coast nor Sunwest is a
party to any order, judgment or decree which has or could have a material
adverse effect on the financial condition, results of operations, business
or prospects of Sunwest or which would otherwise adversely effect either
West Coast's or Sunwest's ability to consummate the transactions
contemplated hereby.
This is page 126 of 182 pages (F-77)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
3.14 Compliance with Laws
(a) Each of West Coast and Sunwest has all permits, licenses,
certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are necessary in order to
permit it to carry on its business as it is presently being conducted and
the absence of which could have a material adverse effect on the financial
condition, results of operations, business or prospects of Sunwest or on
the ability of West Coast to consummate the transactions contemplated
hereby; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect, and, to the best knowledge of West
Coast and Sunwest, no suspension or cancellation of any of the same is
threatened.
(b) Neither West Coast nor Sunwest is in material violation of its
Articles of Incorporation, Bylaws, or of any applicable federal, state or
local law or ordinance or any order, rule or regulation of any federal,
state, local or other governmental agency or body (including, without
limitation, all banking, securities, municipal securities, safety, health,
environmental, zoning, anti-discrimination, antitrust, and wage and hour
laws, ordinances, orders, rules and regulations) (collectively "Laws"), or
in default with respect to any order, writ, injunction or decree of any
court, or in default under any order, license, regulation or demand of any
governmental agency, any of which violations or defaults could have a
material adverse effect on the financial condition, results of operations,
business or prospects of Sunwest or on the ability of West Coast to
consummate the transactions contemplated hereby; and, except as Previously
Disclosed, neither West Coast nor Sunwest has received any notice or
communication from any federal, state or local governmental authority
asserting that West Coast or Sunwest is in violation of any of the
foregoing. Except as Previously Disclosed, neither West Coast nor Sunwest
is subject to any regulatory or supervisory cease and desist order,
agreement, written directive, memorandum of understanding or written
commitment (other than those of general applicability to all banks and bank
holding companies issued by governmental authorities), and except as
Previously Disclosed, neither West Coast nor Sunwest has received any
written communication requesting that it enter into any of the foregoing.
3.15 Deposit Insurance and Other Regulatory Matters
The deposit accounts of Sunwest are insured by the Bank Insurance Fund
administered by the FDIC to the maximum extent permitted by the FDIA, and
Sunwest has paid all premiums and assessments required by the FDIA and the
regulations thereunder.
3.16 Compliance with Certain Agreements
This is page 127 of 182 pages (F-78)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Except as Previously Disclosed, neither West Coast nor Sunwest is in
material non-compliance, which non-compliance would have a material adverse
effect on the financial condition, results of operations, business or
prospects of West Coast on a consolidated basis on the one hand or of
Sunwest on the other hand or the transactions contemplated hereby, under
any regulatory or supervisory cease and desist order, agreement, written
directive, memorandum of understanding or written commitment (other than
those of general applicability to banks or bank holding companies issued by
governmental authorities).
3.17 Employee Benefit Plans
(a) Sunwest has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, bonus or group insurance contract, any plan or
policy providing for "fringe benefits" to its employees (including but not
limited to, vacation, disability, sick leave, medical, hospitalization,
life insurance and other insurance plans and related benefits), any
employment or consulting agreement and any other incentive, welfare or
employee benefit plan or agreement maintained for the benefit of directors,
former directors, employees or former employees of Sunwest, and Sunwest has
furnished to Western accurate and complete copies of the same together with
(i) the most recent actuarial and financial reports prepared with respect
to any qualified plans, (ii) the most recent annual reports filed with any
governmental agency, and (iii) all rulings and determination letters and
any open requests for rulings or letters that pertain to any qualified
plan, and (iv) general notification to employees of their rights under Code
Section 4980B and form of letter(s) distributed upon the occurrence of a
qualifying event described in Code Section 4980B, in the case of a Plan
that is a "group health plan" as defined in Code Section 162(i). There are
no negotiations, demands or proposals which are pending or have been made
which concern matters now covered, or that would be covered, by the
employee benefit plans.
(b) None of Sunwest, any pension plan maintained by it and qualified
under Section 401 of the Code or, to the best of Sunwest's knowledge, any
fiduciary of such plan has incurred any material liability to the Pension
Benefit Guaranty Corporation (the "PBGC") or the Internal Revenue Service
with respect to any employees of Sunwest, except liabilities to the PBGC
pursuant to Section 4007 of ERISA, all of which have been fully paid. To
the best of Sunwest's knowledge, no reportable event, except reportable
events for which the 30-day notice requirement has been waived By PBGC
Regulation 2615, under Section 4043(b) of ERISA has occurred with respect
to any such pension plan.
(c) Sunwest (i) does not participate in nor has it ever participated
in a multi-employer plan (as such term is defined in ERISA), (ii) has not
been a member of a controlled group which contributed to a multi-employer
plan, nor (iii) has it been under common control with an employer which
contributed to a multi-employer plan.
This is page 128 of 182 pages (F-79)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each "employee pension plan" (as defined in
Section 3(2) of ERISA) of Sunwest which is intended to qualify under
Section 401 of the Code to the effect that such plan is qualified under
Section 401 of the Code and the trust associated with such employee pension
plan is tax exempt under Section 501 of the Code. No such letter has been
revoked or, to the best of Sunwest's knowledge, is threatened to be revoked
and Sunwest does not know of any ground on which such a revocation could be
based. Sunwest does not have any material liability under any such plan
that is not reflected on the consolidated statement of financial condition
of West Coast at September 30, 1995 included in the West Coast Financial
Statements, other than liabilities incurred in the ordinary course of
business in connection therewith subsequent to the date thereof.
(e) To the best of Sunwest's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and
not exempt under Section 408 of ERISA or Section 4975 of the Code) has
occurred with respect to any employee benefit plan maintained by Sunwest,
which would result in the imposition directly or indirectly, of a material
excise tax under Section 4975 of the Code or otherwise have a material
adverse effect on the financial condition, results of operations, business
or prospects of Sunwest.
(f) Sunwest does not maintain any defined benefit plans or other
plans subject to Section 412 of the Code or Title IV of ERISA.
(g) Each employee benefit plan of Sunwest complies and, to the best
knowledge of Sunwest, has been operated in compliance in all material
respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and
all other applicable governmental laws and regulations.
(h) There are no pending or, to the best knowledge of Sunwest,
threatened or anticipated claims, actions, proceedings or investigations or
facts which would give rise to claims, actions proceedings or
investigations (other than routine claims for benefits) by, on behalf of or
against any of the employee benefit plans maintained by Sunwest or any
trust related thereto or any fiduciary
thereof which if adversely determined would have a material adverse effect
on the financial condition of Sunwest.
(i) Except as Previously Disclosed, all required reports and
descriptions of each employee benefit plan (including IRS Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) have been
timely filed and distributed.
(j) Any notices required by ERISA or the Code or any other state or
federal law or any ruling or regulation of any state or federal
administrative agency with respect to each employee benefit plan have been
appropriately given except in instances which would not have a material
adverse effect on the financial condition of Sunwest.
This is page 129 of 182 pages (F-80)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(k) All contributions for all periods ending prior to the Effective
Time (including periods from the first day of the current plan year to the
Effective Time) will be made by Sunwest in accordance with past practice.
(l) All insurance premiums (including premiums to the PBGC) have been
paid in full, subject only to normal retrospective adjustments in the
ordinary course, with regard to the Plans for policy years or other
applicable policy periods ending on or before the Effective Time.
(m) To the best knowledge of Sunwest, all of the employee benefit
plans, to the extent applicable, are in compliance with Section
1862(b)(4)(A)(i) of the Social Security Act and Sunwest does not have any
liability for any excise tax imposed by Code Section 5000.
(n) With respect to any employee benefit plan which is an employee
welfare benefit plan (within the meaning of ERISA Section 3(1)) (a "Welfare
Plan") and to the best knowledge of Sunwest: (i) each such Welfare Plan
which is intended to meet the requirements for tax-favored treatment under
Subchapter B of Chapter 1 of the Code meets such requirements; (ii) there
is no disqualified benefit (as such term is defined in Code Section
4976(b)) which would subject Sunwest or Western to a tax under Code Section
4976(a); (iii) each and every such Welfare Plan which is a group health
plan (as such term is defined in Code Section 162(i)(3)) complies and in
each and every case has complied with the applicable requirements of Code
Section 4980B, Title XXII of the Public Health Service Act and the
applicable provisions of the Social Security Act; and (iv) each such
Welfare Plan (including any such plan covering former employees of Sunwest)
may be amended or terminated by Sunwest.
(o) No employee benefit plan sponsored by Sunwest provides post-
employment welfare benefits.
(p) All expenses and liabilities relating to all of the plans have
been, and will on the Effective Time be fully and properly accrued on
Sunwest's books and records and West Coast's Financial Statements reflect
all of such liabilities in a manner satisfying the requirements of
Financial Accounting Standards 87 and 88.
This is page 130 of 182 pages (F-91)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
3.18 Certain Contracts
(a) Except as Previously Disclosed, Sunwest is not a party to, is not
bound or affected by, nor is it obligated to pay, benefits under (i) any
agreement, arrangement or commitment, including without limitation any
agreement, indenture or other instrument, relating to the borrowing of
money by Sunwest or the guarantee by Sunwest of any obligation, (ii) any
agreement, arrangement or commitment relating to the employment of a
consultant, advisor, broker or finder or the employment, election or
retention in office of any present or former director or officer of
Sunwest, (iii) any agreement, arrangement or understanding pursuant to
which any payment (whether of severance pay or otherwise) became or may
become due to any director, officer, employee, advisor or consultant of
Sunwest upon execution of this Agreement upon or following consummation of
the transactions contemplated by this Agreement (either alone or in
connection with the occurrence of any additional acts or events), (iv) any
agreement, arrangement or understanding to which West Coast or Sunwest is
a party or by which it is bound which limits the freedom of Sunwest to
compete in any line of business or with any person, or (v) any other
agreement, arrangement or understanding which would be required to be filed
as an Exhibit to an Annual Report on Form 10-K under the Exchange Act.
(b) Neither West Coast or Sunwest is in default or in non-compliance
(which default or non-compliance would have a material adverse effect on
the financial condition, results of operations, business or prospects of
Sunwest) under any contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party or by which its
assets, business or operations may be bound or affected, whether entered
into in the ordinary course of business or otherwise and whether written or
oral, and there has not occurred any event that with the lapse of time or
the giving of notice, or both, would constitute such a default or non-
compliance.
3.19 Insurance
Sunwest is insured, and since January 1, 1993 has been insured, for
reasonable amounts with financially sound and reputable insurance companies
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations.
Sunwest has Previously Disclosed to Western a list identifying all
insurance policies maintained by it or on its behalf or for its benefit by
West Coast as of the date hereof.
This is page 131 of 182 pages (F-92)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
3.20 Loans, Real Estate Owned, Etc.
(a) Each loan on the books and records of Sunwest, including unfunded
portions of outstanding lines of credit and loan commitments, was made and
has been serviced in all material respects in accordance with customary
lending standards in the ordinary course of business (except for loans or
deviations from customary lending standards which in the aggregate are not
material to the financial condition, results of operations, business or
prospects of Sunwest or any Subsidiaries thereof), is evidenced in all
material respects by appropriate and sufficient documentation and to the
best knowledge of Sunwest and except as Previously Disclosed constitutes
the legal, valid and binding obligation of the obligor named therein,
subject to bankruptcy, insolvency, fraudulent conveyance and other laws of
general applicability relating to or affecting creditor's rights and to
general equity principles or which in the aggregate are not material to the
financial condition, results of operations, business or prospects of
Sunwest.
(b) Sunwest, has Previously Disclosed to Western as of December 31,
1995: (i) any loan or similar agreement under the terms of which the
obligor is 60 or more days delinquent in payment of principal or interest
or; (ii) each loan or similar agreement which is on a "watch list" or which
has been classified as "substandard," "doubtful" or "loss" or designated
"special mention" by Sunwest or an applicable regulatory authority; (iii) a
listing of the Real Estate Owned held by Sunwest; and (iv) unfunded
commercial loan commitments and letters of credit of Sunwest.
3.21 Properties
All real and personal property owned by Sunwest or presently used by
it in its business is in condition (ordinary wear and tear excepted)
sufficient to carry on the business of Sunwest in the ordinary course of
business consistent with its past practices. Sunwest has good and
marketable title free and clear of all liens, encumbrances, charges,
defaults or equities (other than equities of redemption under applicable
foreclosure laws) to all of the properties and assets, real and personal,
reflected on the books and records of Sunwest as of September 30, 1995 and
included in the West Coast Financial Statements or acquired after such
date, except (i) liens for current taxes not yet due or payable (ii)
pledges to secure deposits and other liens incurred in the ordinary course
of its banking business, (iii) such imperfections of title, easements and
encumbrances, if any, as are not material in character, amount or extent
and (iv) except as Previously Disclosed. All real and personal property
which is leased or licensed by Sunwest and is material to the business of
Sunwest is held pursuant to leases or licenses which are valid and
enforceable in accordance with their respective terms and such leases will
not terminate or lapse prior to the Effective Time or as a result of the
consummation of the transactions contemplated hereby. Sunwest has
Previously Disclosed an accurate listing of each such lease or license
referred to in the immediately preceding sentence pursuant to which Sunwest
acts as lessor or lessee, including the expiration date and the terms of
any renewal options which relate to the same, as well as a listing of each
real property owned by Sunwest and/or used in the conduct of its business.
This is page 132 of 182 pages (F-93)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
3.22 Labor
No work stoppage involving Sunwest is pending or, to the best
knowledge of Sunwest, threatened. Sunwest is not involved in, nor to the
best knowledge of Sunwest threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding involving the
employees of Sunwest. Employees of Sunwest are not represented by any
labor union nor are any collective bargaining agreements otherwise in
effect with respect to such employees, and to the best knowledge of
Sunwest, there have been no efforts to unionize or organize any employees
of Sunwest during the past five years.
3.23 Transactions with Affiliates
Except as Previously Disclosed, (i) no "affiliate" or an "insider" of
Sunwest, as defined in Section 23A of the FRA (12 U.S.C. 371c) and 12
C.F.R. 215.2(h), respectively, has engaged in any transaction with
Sunwest since January 1, 1995 which was not in compliance with applicable
laws and regulations (ii) and as of the date hereof, there is no loan or
extension of credit outstanding to any of the same.
3.24 Regulatory Approvals
Neither West Coast nor Sunwest is aware of any reasons why all
consents, approvals and non-objections (including the Permit), as
applicable, of the transactions contemplated hereby from the
Superintendent, the FDIC and the FRB and any other state or federal
governmental agency, department or body, the consent, approval or
non-objection of which is required for the consummation of the Purchase
shall not be received or would be received subject to conditions that would
so materially adversely affect the business of Sunwest or economic benefits
of the transactions contemplated by this Agreement as to render
consummation of such transactions unduly burdensome.
3.25 Disclosures
None of the representations and warranties of West Coast and Sunwest
in this Agreement or in any supplement or certificate furnished pursuant to
this Agreement, and, to the best knowledge of West Coast and Sunwest, none
of the other information or documents furnished or to be furnished by West
Coast and Sunwest to Western in connection with this Agreement or the
consummation of the transactions contemplated hereby and thereby, is or
will be false or misleading in any material respect or contains or will
contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to be stated or necessary to make any such
information or document, at the time and in light of the circumstances, not
misleading. Copies of all documents referred to in this Article III are
true, correct and complete copies thereof and include all amendments,
supplements and modifications thereto and all waivers thereunder.
This is page 133 of 182 pages (F-94)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
3.26 Brokers and Finders
Neither West Coast nor Sunwest, nor any of their respective directors,
officers or employees has employed any broker, finder, investment banker,
financial advisor or consultant or incurred any liability for any fees,
commissions or other transaction-based compensation in connection with the
transactions contemplated hereby (other than fees to attorneys, auditors,
proxy solicitors and similar professionals).
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF WESTERN
Western represents and warrants to West Coast and Sunwest as follows:
4.1 Organization, Standing and Authority of Western
Western is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Illinois with
full power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted and is duly licensed or
qualified to do business and is in good standing in each jurisdiction in
which its ownership or leasing of property or the conduct of its business
requires such licensing or qualification and where the failure to be so
licensed, qualified or in good standing would have a material adverse
effect on the financial condition, results of operations, business or
prospects of Western . Western has delivered to West Coast a true and
correct copy of its Articles of Organization and its Operating Agreement.
4.2 Financial Ability
At the Effective Time, Western will have adequate financial resources
and cash available to consummate the transactions contemplated by this
Agreement.
4.3 Investor Status
(a) Western and any person holding a membership interest in Western
has the knowledge and experience in financial and business matters as to be
capable of evaluating the information regarding the Purchase as well as the
risks of the Purchase. Western and any person holding a membership
interest in Western has the financial ability to bear the economic risk of
this investment, has adequate means of providing for current needs and
possible contingencies, and has no need for liquidity with respect to the
investment in the Sunwest Stock or in the New Sunwest Stock [and each of
the foregoing is an "accredited investor" as defined in Rule 501 of the
regulations promulgated by the Commission pursuant to the Securities Act.
This is page 134 of 182 pages (F-95)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(b) Western is acquiring the Sunwest Stock and the New Sunwest Stock
for investment purposes only, for its own account, not as nominee or agent
for any other person, firm or corporation, and not with a view to, or for
resale in connection with, a distribution or public offering thereof within
the meaning of the Securities Act. Western has no agreement, understanding
or arrangement with any other person, firm or corporation, or any intention
of entering into any such agreement, understanding or arrangement, to sell,
transfer or assign, in violation of any state or federal securities law,
any or all of the Sunwest Stock or the New Sunwest Stock or which would
permit any person, firm or corporation, in violation of any state or
federal securities law, to participate in or otherwise be entitled to any
rights or interest as to any or all of the Sunwest Stock or the New Sunwest
Stock.
(c) Each of West Coast and Sunwest has made available to Western and
its independent investment representative, if any, and any person holding a
membership interest in Western, all financial and other information
concerning Sunwest which was requested by Western in order for Western to
make an informed investment decision concerning the purchase of the Sunwest
Stock and the New Sunwest Stock.
(d) The Sunwest Stock and the New Sunwest Stock was offered to Western
by means of direct communication between West Coast and Sunwest on the one
hand and Western on the other hand and the Sunwest Stock and the New
Sunwest Stock was not offered to Western by means of any general
solicitation or general advertising by West Coast or Sunwest or any person
or entity acting on their behalf.
4.4 Consents and Approvals
Except for consents and approvals of, filings or registrations with,
notices to or non-objections, as applicable, by the Superintendent, the
FRB, the FDIC and the DOJ, if required, no consents or approvals of, or
filings or registrations with, or notices to any governmental body or
authority or other person are necessary on behalf of Western in connection
with (i) the execution and delivery by Western of this Agreement or (ii)
the consummation by Western of the transactions contemplated thereby.
4.5 Authorized and Effective Agreement
(a) Western has all requisite power and authority to enter into this
Agreement and to perform all of its obligations under this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by
all necessary action in respect thereof on the part of Western. This
Agreement has been duly and validly executed and delivered by Western and
constitutes a legal, valid and binding obligation of Western which is
enforceable against Western in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
This is page 135 of 182 pages (F-96)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(b) Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby and thereby, nor
compliance by Western with any of the provisions hereof or thereof (i)
conflict with or result in a breach of any provisions of Articles of
Organization or the Operating Agreement of Western, (ii) violate, conflict
with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of
Western pursuant to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Western is a party, or by which any of its properties or assets may be
bound or affected, or (iii) subject to receipt of all required governmental
approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Western.
4.6 Certain Information
None of the information relating to Western provided to West Coast or
Sunwest in writing to be contained in any applications or filings, as of
the date(s) thereof, required to be made by West Coast or Sunwest in order
to obtain any regulatory approval referred to in Section 3.24 hereof, will
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of
an earlier date.
4.7 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Western,
threatened (or unasserted but considered by Western probable of assertion
and which if asserted would have at least a reasonable probability of a
materially unfavorable outcome) against Western which present a claim to
prohibit, restrict or make illegal consummation of the Purchase or any of
the other transactions contemplated hereby or which would otherwise
adversely effect Western's ability to consummate the transactions
contemplated hereby.
4.8 Regulatory Approvals
Western is not aware of any reasons why all consents, approvals and
non-objections, as applicable, of the transactions contemplated hereby from
the Superintendent, the FDIC, the FRB and any other state or federal
governmental agency, department or body, the consent, approval or
non-objection of which is required for the consummation of the Purchase
shall not be received or would be received subject to conditions that would
so materially adversely affect the business or economic benefits or the
transactions contemplated by this Agreement as to render consummation of
such transactions unduly burdensome.
This is page 136 of 182 pages (F-97)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
4.9 Disclosures
None of the representations and warranties of Western in this
Agreement or in any supplement or certificate furnished pursuant to this
Agreement and, to the best knowledge of Western, none of the other
information or documents furnished or to be furnished by Western to West
Coast and Sunwest in connection with this Agreement or the consummation of
the transactions contemplated hereby, is or will be false or misleading in
any material respect or contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact required to
be stated or necessary to make any such information or document, as of the
time and in light of the circumstances under which they were made, not
misleading. Copies of all documents referred to in this Article IV are
true, correct and complete copies thereof and include all amendments,
supplements and modifications thereto and all waivers thereunder.
ARTICLE V--COVENANTS
5.1 Applications
Not more than forty-five (45) days after the date of execution of this
Agreement, Western shall prepare and submit applications for prior approval
of the transactions contemplated hereby to the Superintendent, the FDIC,
the FRB, as may be applicable, and any other federal, state or local
governmental agency, department or body, the approval or non-objection of
which is required for consummation of the transactions contemplated hereby.
Sunwest shall prepare and submit to the Superintendent contemporaneously
with the filing of Western's application pursuant to Section 700 of the
Financial Code an application for the Permit. West Coast and Sunwest, on
the one hand, and Western, on the other hand, shall have the right to
review and comment on the portions of any such applications that relate
directly to it at least five (5) business days prior to the filing thereof
by West Coast, Sunwest or Western, as the case may be, provided, however,
no such application shall be filed which contains information relating to
any party hereto as to which such party objects within such two (2)
business days after receipt thereof. West Coast, Sunwest and Western each
represent and warrant to the other that all information concerning it and
its respective directors, officers and shareholders which has been made
available to the other party for inclusion in any such application shall be
true, correct and complete in all material respects. Each of West Coast,
Sunwest and Western hereby agree to provide to each other any and all
correspondence relating to any application or filing made with respect to
the transactions contemplated hereby, subject to the receipt of a written
agreement of confidentiality with respect thereto if requested by the party
providing any such correspondence,
This is page 137 of 182 pages (F-98)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
5.2 Best Efforts
Western, West Coast and Sunwest shall each use its best efforts in
good faith to (i) furnish such information as may be required in connection
with and otherwise cooperate in the preparation and filing of the documents
referred to in or contemplated by Section 5.1 hereof, (ii) subject to the
terms and conditions set forth in this Agreement, and in the case of West
Coast or Sunwest to actions taken by its Board of Directors pursuant to or
as a result of the second parenthetical clause in Section 5.5(a) hereof,
take or cause to be taken all action necessary or desirable on its part so
as to permit consummation of the Purchase and the other transactions
contemplated hereby at the earliest possible date, and (iii) to remove
and/or modify any term or condition referred to in Section 6.1(d) hereof.
Subject in the case of West Coast and Sunwest to actions taken by its
respective Board of Directors pursuant to or as a result of the second
parenthetical clause in Section 5.5(a), neither Western, West Coast nor
Sunwest shall take, or cause or to the best of its ability permit to be
taken, any action that would substantially delay or impair the prospects of
completing the Purchase or cause any of the representations and warranties
contained in Articles III and IV hereof to become incorrect in any material
respect.
5.3 Investigation and Confidentiality
(a) Subject to applicable requirements of law and banking regulations
and matters covered by the attorney-client privilege, Sunwest shall permit
upon reasonable notice, Western and its representatives reasonable access
during normal business hours to its properties and personnel, and shall
disclose and make available to Western all books, papers and records
relating to the assets, stock ownership, properties, operations,
obligations and liabilities of Sunwest, including, but not limited to, all
books of account (including the general ledger), tax records, minute books
of meetings of boards of directors (and any committees thereof) and
shareholders, organizational documents, bylaws, material contracts and
agreements, filings with any regulatory authority, litigation files, loan
files, plans affecting employees, and any other business activities or
prospects. In addition, subject to applicable requirements of law and
banking regulations, Sunwest shall allow a representative of Western,
strictly as an observer, to attend all meetings of the Board of Directors
of Sunwest and any committee thereof, and shall give Western reasonable
notice of all such meetings, other than a meeting or portion thereof, at
which this Agreement, the transactions contemplated hereby or any actions
or proposed actions pursuant to or as a result of the second parenthetical
clause in Section 5.5(a) hereof or matters covered by the attorney-client
privilege are discussed.
This is page 138 of 182 pages (F-99)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Any information learned by Western pursuant to the access and
disclosure described in the preceding paragraph shall not affect the
warranties and representations of West Coast and Sunwest contained in this
Agreement; provided, however, Western shall promptly disclose to West Coast
or Sunwest any fact or circumstance it discovers as a result of such
information which Western believes renders any representation or warranty
made by West Coast or Sunwest herein incorrect in any respect, provided
further, however, no such disclosure by Western shall constitute a waiver
of, or be deemed to have modified the representations, warranties and
covenants of the parties for the purpose of determining whether the
conditions set forth in Article VI or compliance by West Coast or Sunwest
with the covenants set forth in Section 5.5 hereof have been satisfied. In
the event that Sunwest is prohibited by law or banking regulations from
providing any of the access referred to in the preceding sentence to
Western, it shall use its best efforts to obtain promptly waivers thereof
so as to permit such access. Each of West Coast and Sunwest shall use its
best efforts to make its directors, officers, employees and agents and
authorized representatives (including counsel and independent public
accountants) available to confer with Western and its representatives
provided that nothing herein shall be construed as a consent to the
disclosure of a privileged communication or a waiver of the attorney-client
privilege.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be
treated as the sole property of the party furnishing the information until
consummation of the transactions contemplated hereby and, if such
transactions shall not occur, the party receiving the information shall
return to the party which furnished such information all documents or other
materials containing, reflecting or referring to such information, shall
use its best efforts to keep confidential all such information, and shall
not directly or indirectly use such information for any competitive or
other commercial purposes. The obligation to keep such information
confidential shall not apply to (i) any information which (x) the party
receiving the information can establish by convincing evidence was already
in its possession prior to the disclosure thereof by the party furnishing
the information; (y) was then generally known to the public; or (z) became
known to the public through no fault of the party receiving the
information; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction, provided
that the party which is the subject of any such legal requirement or order
shall use its best efforts to give the other party at least ten business
days prior notice thereof.
5.4 Press Releases
Western, West Coast and Sunwest shall agree with each other as to the
form and substance of any press release related to this Agreement or the
transactions contemplated hereby, and consult with each other as to the
form and substance of other public disclosures which may relate to the
transactions contemplated by this Agreement, provided, however, that
nothing contained herein shall prohibit any party, following notification
to the other party, from making any disclosure which it determines in good
faith is required by law or regulation.
This is page 139 of 182 pages (F-100)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
5.5 Forbearance of West Coast and Sunwest
(a) Except as expressly contemplated hereby, between the date hereof
and the Effective Time, West Coast and Sunwest shall not solicit or
encourage inquiries or proposals with respect to, furnish any information
relating to, or participate in any negotiations or discussions concerning,
any acquisition, or purchase of all or a substantial portion of the assets
of, Sunwest or of any shares of the Sunwest Common Stock or enter into any
agreement, arrangement or commitment with respect thereto (other than in
connection with the Agreement for Satisfaction of Judgment and Stock Pledge
Agreement, dated as of August 25, 1995, by and between (sic) William J.
Mylymok, West Coast and First American Title Insurance Company) or any
business combination with Sunwest other than as contemplated by this
Agreement (unless the Board of Directors of West Coast or Sunwest is
advised in writing by outside legal counsel that, in the exercise of the
applicable fiduciary obligations of the Board of Directors, such
information should be provided, or such discussions or negotiations
undertaken, or such agreement or business combination entered into); or
authorize or permit any officer, director, agent or affiliate of it to do
any of the above; or fail to promptly notify Western if any such inquiries
or proposals are received by, and such information is required from, or any
such negotiations or discussions are sought to be initiated with, West
Coast or Sunwest;
(b) Except with the prior written consent of Western or as expressly
contemplated hereby or necessary to consummate the Purchase, between the
date hereof and the Effective Time, Sunwest shall not:
(i) enter into (w) any agreement, arrangement or commitment not
made in the ordinary course of business (unless the Board of Directors of
Sunwest is advised in writing by outside legal counsel that, in the
exercise of the applicable fiduciary obligations of the Board of Directors,
such agreement, arrangement or commitment should be entered into), (x) any
agreement, indenture or other instrument relating to the borrowing of money
by Sunwest or guarantee by Sunwest of any such obligation of West Coast,
except for deposits, advances from the FRB of San Francisco, federal funds
transactions and other transactions in the ordinary course of business
consistent with past practice, (y) any agreement, arrangement or
commitment relating to the employment of, or severance of, an officer,
employee or consultant or amend any such existing agreement except in the
ordinary course of business or as Previously Disclosed, or (z) any
contract, agreement or understanding with a labor union;
This is page 140 of 182 pages (F-101)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(ii) change its method of accounting in effect for the year ended
December 31, 1994, except as required by changes in laws or regulations or
generally accepted accounting principles concurred in by its independent
certified public accountants, or change any of its methods of reporting
income and deductions for federal income tax purposes from those employed
in the preparation of its federal income tax returns for the year ended
December 31, 1994, except as required by changes in laws or regulations or
IRS rulings thereunder.
(iii) carry on its business other than in the usual, regular
and ordinary course in substantially the same manner as heretofore
conducted, or establish or acquire any new subsidiary or cause or permit
any subsidiary to engage in any new activity or materially expand any
existing activities;
(iv) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Sunwest Common Stock;
(v) issue any shares of its capital stock other than as
contemplated by Section 2.1 hereof);
(vi) issue, grant, modify or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(vii) amend its Articles of Incorporation or Bylaws or waive
or release any material right or cancel or compromise any material debt or
claim other than in the ordinary course of business or in accordance with
any matter Previously Disclosed pursuant to Section 3.13 hereof;
(viii) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any bonus or
severance to, or provide any other new employee benefit or incentive to,
any of its directors, officers or employees, except such as may be granted
in the ordinary course of business;
(ix) except as Previously Disclosed, enter into or (except as may
be required by applicable law or is advisable in the written opinion of
counsel to maintain the tax qualified status of the plan) modify any
pension, retirement, stock option, stock purchase, stock appreciation
right, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or employees;
or make any contributions to any defined contribution or defined benefit
plan in each case not in the ordinary course of business consistent with
past practice;
(x) purchase or otherwise acquire, or sell or otherwise dispose
of, any assets or voluntarily incur any liabilities other than in the
ordinary course of business consistent with past practice and policies;
This is page 141 of 182 pages (F-102)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(xi) make any capital expenditures or enter into any contract or
other agreement for capital expenditures in excess of $20,000 individually
or $80,000 in the aggregate, other than pursuant to binding commitments
existing on the date hereof and other than capital expenditures necessary
to maintain existing assets in good repair;
(xii) except as Previously Disclosed, file any applications
or make any contract with respect to branching or site location or
relocation;
(xiii) acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) any business or entity;
(xiv) engage in any transaction with an "affiliate" or
"insider," in each case as defined in Section 3.24 hereof, other than loans
to directors, officers and employees in the ordinary course of business and
which are in compliance with the requirements of applicable laws and
regulations;
(xv) enter into any futures contract, option contract, interest
rate caps, interest rate floors, interest rate exchange agreement or other
agreement for purposes of hedging the exposure of its interest-earning
assets and interest-bearing liabilities to changes in market rates of
interest;
(xvi) invest in "high risk" mortgage derivative investments
or any other investment securities outside the ordinary course of business;
(xvii) except as Previously Disclosed, discharge or satisfy
any lien or encumbrance or pay any material obligation or liability
(absolute or contingent) other than in the ordinary course of business;
(xviii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its assets
or rights or requiring the consent of any party to the transfer and
assignment of any such assets or rights other than in the ordinary course
of business and, provided, no such agreement or arrangement shall relate to
the Sunwest Stock; or
(xix) agree to do any of the foregoing.
5.6 Current Information
During the period from the date of this Agreement to the Effective
Time, each of West Coast and Sunwest shall, upon the request of Western,
cause one or more of its designated representatives to confer on a monthly
or more frequent basis with representatives of Western regarding its
financial condition, operations, business and prospects and matters
relating to the completion of the transactions contemplated hereby. During
the period from the date of this Agreement to the Effective Time, as soon
as reasonably available, but in no event later than three (3) business days
after the time such documents are filed with the Superintendent, the FDIC,
the FRB or the Commission, as the case may be, West Coast and Sunwest will
deliver to Western its annual report on Form 10-K, its quarterly reports on
Form 10-Q, any current report on Form 8-K and its Call Report, as the case
may be. Sunwest shall promptly provide, but in no event more than two (2)
days after the receipt by the directors of Sunwest, Western with the
internal financial statements and supplementary information normally
prepared for directors.
This is page 142 of 182 pages (F-103)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
5.7 Directors, Officers and Employees
(a) Between the date hereof and the Effective Time, Sunwest shall use
its best efforts to retain its existing directors, officers, employees and
other business and customer relationships as of the date hereof; provided
that Sunwest will have the right to use its business judgment on an ongoing
basis as to the employment of any particular employee.
(b) At the Effective Time, West Coast and Sunwest shall take such
action as may be necessary to appoint to the Board of Directors of Sunwest
four (4) persons as designated by Western; provided, however, that the
persons designated by Western shall have received any governmental or
regulatory approvals necessary to serve as directors of Sunwest.
Concurrent with the execution and delivery of this Agreement, West Coast,
Sunwest and Western shall enter into a Shareholder Agreement in the form of
Exhibit A hereto covering, inter alia, the matters set forth in this
Section 5.7(b) and matters relating to the Sunwest Common Stock.
5.8 Disclosure Supplements
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and
delivered to the other party pursuant hereto with respect to any matter
hereafter arising which, if existing, occurring or known at the date of
this Agreement, would have been required to be set forth or described in
materials Previously Disclosed to the other party or which is necessary to
correct any information in such materials which has been rendered
materially inaccurate thereby. No such supplement or amendment to such
materials shall be deemed to have modified the representations, warranties
and covenants of the parties for the purpose of determining whether the
conditions set forth in Article VI or compliance by West Coast or Sunwest
with the covenants set forth in Section 5.5 hereof have been satisfied;
provided, however, if the Purchase is consummated, then, as of and after
the Effective Time, all representations and warranties of the parties shall
be deemed modified for purposes of Article VIII hereof to the extent and in
the manner set forth in all supplements and amendments to the materials
Previously Disclosed.
5.9 Failure to Fulfill Conditions
Each party will promptly inform the other party of any facts
applicable to it that would be likely to prevent or materially delay
approval of the Purchase by any governmental authority or third party or
which would otherwise prevent or materially delay completion of the
Purchase.
5.10 Activities of Western
Between the date hereof and the Effective Time, except with respect to
actions taken in order to purchase shares of the common stock of Business
and Professional Bank, Woodland, California, from West Coast, Western shall
not make any investment in any other person or entity or engage in any
activity other than those required to obtain all governmental and
regulatory approvals necessary to consummate the Purchase, provided,
however, nothing contained in this Section 5.10 shall limit or otherwise
prohibit Western from exploring, discussing or considering other investment
opportunities or, except with the written consent of West Coast, which
consent shall not be unreasonably withheld, entering into any agreements or
understandings which would require Western to seek regulatory approval,
consent or non-objection prior to the Effective Time with respect to any
other investment opportunity.
This is page 143 of 182 pages (F-104)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
5.11 December 31, 1996 Call Report
The Sunwest Call Report for December 31, 1996 referred to in Section
2.1 hereof and to the be filed with the FDIC shall be in correct form and
shall in all material respects be complete and accurate and in compliance
with the requirements of applicable laws and regulations.
5.12 Allowance for Loan Losses
Between the date hereof and date of the filing of the December 31,
1996 Call Report, Sunwest shall maintain the adequacy of its allowance for
loan losses by making provisions for loan losses in such amounts which, in
the opinion of Sunwest's management, are adequate in all material respects
as of their respective dates under the requirements of GAAP to provide for
reasonably anticipated losses on outstanding loans but excluding any
anticipated recoveries on outstanding loans, loans previously charged off
or REO and in amounts not less than required by the policies of Sunwest
with respect thereto in effect as of the date hereof.
ARTICLE VI--CONDITIONS PRECEDENT
6.1 Conditions Precedent - Western, West Coast and Sunwest
The respective obligations of Western, West Coast and Sunwest to
effect the transactions contemplated by this Agreement shall be subject to
satisfaction of the following conditions at or prior to the Effective Time.
(a) All corporate or similar action necessary to authorize the
execution and delivery of this Agreement and consummation of the
transactions contemplated hereby shall have been duly and validly taken by
Western, West Coast and Sunwest.
This is page 144 of 182 pages (F-105)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(b) All consents, approvals and non-objections, as applicable, of the
transactions contemplated hereby from the Superintendent, the FDIC, the FRB
and any other state or federal governmental agency, department or body, the
consent, approval or non-objection of which is required for the
consummation of the Purchase shall have been received and all notice
periods and waiting periods required after the granting of any such
approvals shall have passed and all such approvals shall remain in full
force and effect. Sunwest shall have obtained a Permit authorizing the
sale and issuance of the New Sunwest Stock and such Permit shall be in
effect at the Effective Time.
(c) None of Western, West Coast and Sunwest shall be subject to any
statute, rule, regulation, order or decree which shall have been enacted,
entered, promulgated or enforced by any governmental or judicial authority
which prohibits, restricts or makes illegal consummation of the Purchase or
any of the other transactions contemplated hereby.
(d) There shall have been obtained all permits, consents, waivers,
clearances, approvals and authorizations of all third parties which are
necessary in connection with the consummation of the Purchase and the other
transactions contemplated hereby the failure of which to obtain would have
a material adverse effect on the ability of Western, West Coast or Sunwest
to consummate the transactions contemplated hereby, and none of such
permits, consents, waivers, clearances, approvals and authorizations shall
contain any term or condition which in the reasonable opinion of Western
would materially impair the value of Sunwest, the Sunwest Stock or the New
Sunwest Stock to Western or have a material adverse effect on the
financial condition, results of operations, business or prospects of
Sunwest.
(e) The parties referred to in Section 5.7(b) shall have entered into
the agreement referred to therein and such agreement shall be in full force
and effect.
6.2 Conditions Precedent - West Coast and Sunwest
This is page 145 of 182 pages (F-106)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
The obligations of West Coast and Sunwest to effect the transactions
contemplated by this Agreement shall be subject to satisfaction of the
following conditions at or prior to the Effective Time unless waived by
West Coast or Sunwest, as the case may be, pursuant to Section 7.4 hereof.
(a) The representations and warranties of Western as set forth in
Article IV hereof shall be true and correct as of the date of this
Agreement and as of the Effective Time as though made on and as of the
Effective Time (or on the date when made in the case of any representation
and warranty which specifically relates to an earlier date), provided,
however, that notwithstanding anything herein to the contrary, this Section
6.2(a) shall be deemed to have been satisfied even if such representations
or warranties are not true and correct unless the failure of any of the
representations or warranties to be so true and correct (without reference
to any limitation as to materiality or knowledge contained in such
representations and warranties) could have, individually or in the
aggregate, a material adverse effect on the ability of Western to
consummate the Purchase and the other transactions contemplated hereby.
(b) Western shall have performed all obligations and covenants
required to be performed by it on or prior to the Effective Time, except to
the extent such nonperformance would not have, individually or in the
aggregate, a material adverse effect on the ability of Western to
consummate the Purchase and the other transactions contemplated hereby.
(c) Western shall have delivered to West Coast and to Sunwest a
certificate, dated the date of the Closing and signed by an authorized
officer of Western to the effect that the conditions set forth in Sections
6.2(a) and 6.2(b) have been satisfied.
(d) Western shall have furnished West Coast and Sunwest with such
certificates of its respective officers or others and such other documents
to evidence fulfillment of the conditions set forth in Sections 6.1 and 6.2
as such conditions relate to Western as West Coast and Sunwest may
reasonably request.
6.3 Conditions Precedent - Western
The obligations of Western to effect the transactions contemplated by
this Agreement shall be subject to satisfaction of the following conditions
at or prior to the Effective Time unless waived by Western pursuant to
Section 7.4 hereof.
(a) The representations and warranties of each of West Coast and
Sunwest set forth in Article III hereof shall be true and correct as of the
date of this Agreement and as of the Effective Time as though made on and
as of the Effective Time (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
provided, however, that notwithstanding anything herein to the contrary,
this Section 6.3(a) shall be deemed to have been satisfied even if such
representations or warranties are not true and correct unless the failure
of any of the representations or warranties to be so true and correct
(without reference to any limitation as to materiality or knowledge
contained in such representations and warranties) would have, individually
or in the aggregate, a material adverse effect on the financial condition,
results of operations, business or prospects of Sunwest.
This is page 146 of 182 pages (F-107)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(b) Each of West Coast and Sunwest shall have performed all
obligations and covenants required to be performed by it on or prior to the
Effective Time, except to extent such non-performance would not have,
individually or in the aggregate, a material adverse effect on the
financial condition, results of operations, business or prospects of
Sunwest.
(c) Each of West Coast and Sunwest shall have delivered to Western a
certificate, dated the date of the Closing and signed by its Chairman or
President, to the effect that the conditions set forth in Sections 6.3(a)
and 6.3(b) have been satisfied.
(d) Each of West Coast and Sunwest shall have furnished Western with
such certificates of its officers or others and such other documents to
evidence fulfillment of the conditions set forth in Sections 6.1 and 6.3 as
such conditions relate to West Coast or Sunwest, as the case may be, as
Western may reasonably request.
(e) There shall have been no material adverse change in the
financial condition, results of operation, business or prospects of Sunwest
following the date hereof other than changes resulting from or attributable
to or resulting from (i) changes in laws, regulations, generally accepted
accounting principles, or interpretations thereof, that affect the banking
industry generally, or (ii) reasonable expenses incurred in connection with
transactions contemplated by this Agreement.
ARTICLE VII--TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by Western in
writing if West Coast or Sunwest has, or by West Coast or Sunwest in
writing if Western has, breached (and such breach has not been waived in
writing) (i) any covenant or undertaking
This is page 147 of 182 pages (F-108)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
contained herein, which breach, individually or in the aggregate, would
have a material adverse effect on the financial condition, results of
operations, business or prospects of Sunwest or on West Coast's or
Sunwest's ability to consummate the transactions contemplated hereby (if
the breach is by West Coast or Sunwest) or on Western's ability to
consummate the transactions contemplated hereby (if the breach is by
Western), or (ii) any representation or warranty contained herein, which
breach, individually or in the aggregate, would have a material adverse
effect on the financial condition, results of operations, business or
prospects of Sunwest or on West Coast's or Sunwest's ability to consummate
the transactions contemplated hereby (if the breach is by West Coast or
Sunwest) or on Western's ability to consummate the transactions
contemplated hereby (if the breach is by Western), in any case if such
breach has not been cured by the earlier of thirty (30) days after the date
on which written notice of such breach is given to the party committing
such breach or the Effective Time;
(c) at any time, by Western in writing, if any of the applications
for prior approval referred to in Section 5.1 hereof are denied or are
approved contingent upon the satisfaction of any condition or requirement
which, in the reasonable opinion of Western, would have a material adverse
effect on the financial condition, results of operations, business or
prospect of Sunwest or would materially impair the value of the Sunwest
Stock or of the New Sunwest Stock to Western, and the time period for
appeals and requests for reconsideration has run;
(d) at any time, by West Coast or Sunwest in writing, if any of the
applications for prior approval referred to in Section 5.1 hereof are
denied or are approved contingent upon the satisfaction of any condition or
requirement which, in the reasonable opinion of West Coast or Sunwest would
materially affect the business or economic benefits of the transactions
contemplated by this Agreement or have a material adverse effect on the
financial condition, results of operations, business or prospects of
Sunwest, and the time period for appeals and requests for reconsideration
has run;
(e) by any party hereto in writing, if the Purchase has not occurred
by October 31, 1996; and
(f) at any time by any party hereto in writing if such party is not
in default hereunder and such party determines in good faith that any
condition precedent to such party's obligations to consummate the Purchase
and the other transactions contemplated hereby is or would be impossible to
satisfy, and such condition is not waived by such party.
7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that
(i) the provisions relating to confidentiality, indemnification, expenses
and liquidated damages and dispute resolution set forth in Section 5.4,
Article VIII, Section 9.1 and Section 9.6, respectively, shall survive any
such termination, (ii) a termination pursuant to Section 7.1(b), (d), (e)
or (f) shall not relieve the breaching party from liability for willful
breach of any covenant, undertaking, representation or warranty giving rise
to such termination.
This is page 148 of 182 pages (F-109)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
7.3 Survival of Representations, Warranties and Covenants
All representations and warranties of the parties hereto in this
Agreement or in any instrument delivered pursuant hereto or thereto shall
expire on, and be terminated and extinguished at, the date which is one (1)
year after the Effective Time (the "Termination Date")..
7.4 Waiver
Each party hereto by written instrument signed by an executive officer
of such party or the individual, if a natural person, may at any time
extend the time for the performance of any of the obligations or other acts
of the other party hereto and may waive (i) any inaccuracies of the other
party in the representations or warranties contained in this Agreement, or
any document delivered pursuant hereto, (ii) compliance with any of the
covenants, undertakings or agreements of the other party or, to the extent
permitted by law, satisfaction of any of the conditions precedent to its
obligations contained herein or (iii) the performance by the other party of
any of its obligations set forth herein or therein.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of Western, West Coast and Sunwest. Any such amendment or
supplement must be in writing and in the case of West Coast and Sunwest,
approved by its respective Board of Directors.
ARTICLE VIII -- INDEMNIFICATION
8.1 Indemnification of Western
After the Effective Time and subject to Sections 7.3, 8.4 and 8.5
hereof, West Coast shall indemnify and hold Western, and its successors,
assigns, officers, members and employees, harmless from and against any and
all claims, losses, damages, costs, assessments, judgments, awards,
liabilities and expenses ("Losses") resulting from, arising out of or in
connection with a material breach of any representation or warranty made by
West Coast in Sections 3.3, 3.6, 3.12 and 3.26 hereof as of the Effective
Time and solely as any such representation or warranty pertains to West
Coast alone (and not as any representation or warranty pertains to West
Coast on a consolidated basis or to Sunwest in any respect) as of the
Effective Time or in any document delivered as of the Effective Time by
West Coast in connection therewith.
8.2 Indemnification of West Coast and Sunwest
This is page 149 of 182 pages (F-110)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
After the Effective Time and subject to Sections 7.3, 8.4 and 8.5
hereof, Western shall indemnify and hold West Coast and Sunwest, and their
successors, assigns, officers, directors and employees, harmless from and
against any and all Losses resulting from, arising out of or in connection
with a material breach of any representation or warranty made by Western in
this Agreement as of the Effective Time or in any document delivered by
Western as of the Effective Time in connection therewith.
8.3 Third Party Claims
The obligations of the indemnifying person(s) hereunder with respect
to claims resulting from the assertion of any liability by third parties
shall be subject to the following terms and conditions:
(a) The indemnified person(s) shall promptly give written notice to
the indemnifying person(s) of any assertion of liability by a third party
which might give rise to a claim by the indemnified person(s) against the
indemnifying person(s) based on the indemnity agreements contained in this
Article VIII, stating the nature and basis of said assertion and the amount
thereof, to the extent known. No indemnification provided for herein shall
be available to any indemnified person who shall fail to give such notice,
if the indemnifying person(s) was/were unaware of the assertion of
liability to which such notice would have related and was/were prejudiced
by the failure to give the notice.
(b) In the event any action, suit or proceeding is brought against the
indemnified person(s) with respect to which the indemnifying person(s) may
have liability under any indemnity agreement contained in this Article
VIII, the action, suit or proceeding shall, upon the written agreement of
the indemnifying person(s) that it/they is/are obligated to indemnify under
the indemnity agreement contained in this Article VIII, be defended
(including all proceedings on appeal or review which counsel for the
defendant shall deem appropriate) by the indemnifying person(s). The
indemnified person(s) shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of such indemnified person(s) unless (i) the employment
of such counsel shall have been authorized by the indemnifying person(s) in
connection with the defense of such action, suit or proceeding, (ii) the
indemnifying person(s) shall not have agreed, promptly after the notice to
it/them provided in subsection (a) above, that it/they is/are obligated to
indemnify under any indemnity agreement contained in this Article VIII or
(iii) such indemnified person(s) shall have reasonably concluded that such
action, suit or proceeding involves to a significant extent matters beyond
the scope of any applicable indemnity agreement contained in this Article
VIII, or that there may be defenses available to it (or them) that are
different from or additional to those available to the indemnifying
person(s), in any of which events the indemnifying person(s) shall not have
the right to direct the defense of such action, suit or proceeding on
behalf of the indemnified person(s) and that portion of such
This is page 150 of 182 pages (F-111)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
fees and expenses reasonably related to matters covered by the indemnity
agreements contained herein shall be borne by the indemnifying person(s),
provided, however, that the indemnifying person(s) shall not be required to
pay for more than one firm of counsel to represent the indemnified
person(s) in any such claim, action, suit or proceeding. The indemnified
and indemnifying person(s) shall be kept fully informed of such action,
suit or proceeding at all stages thereof whether or not they are so
represented. The indemnifying and the indemnified person(s) shall make
available to the other persons and their attorneys and accountants all
books and records of the indemnifying person(s) relating to such
proceedings or litigation and the parties hereto agree to render to each
other such assistance as they may reasonably require of each other in order
to ensure the proper and adequate defense of any such action, suit or
proceeding. The parties hereto agree to cooperate in such a manner as to
preserve in full the confidentiality of all confidential business records
and the attorney-client and work-product privileges. In connection
therewith, each party agrees that (x) it will use its reasonable efforts,
in any action, suit or proceeding in which it has assumed or participated
in the defense, to avoid production of confidential business records and
(y) all communications between any party hereto and counsel responsible for
or participating in the defense of any action, suit or proceeding shall, to
the extent possible, be made so as to preserve any applicable attorney-
client or work-product privilege.
(c) The indemnifying person(s) shall not make any settlement of any
claims relating to Losses covered by the indemnity agreements contained in
this Article VIII without the written consent of the indemnified person(s),
which consent shall not be unreasonably withheld unless the indemnified
person(s) shall have reasonably concluded that the claim or settlement
thereof involves to a significant extent matters beyond the scope of any
applicable indemnity agreement contained in this Article VIII.
8.4 Limitations on Indemnification
(a) Notwithstanding anything contained herein to the contrary, no
indemnifying person(s) shall have any liability under this Article VIII:
(i) For any Losses or other liabilities to the extent
covered by the proceeds of any insurance carried by the
indemnified person;
(ii) Until the aggregate amount of the Losses for which
such indemnifying person would otherwise be liable
under this Article VIII shall exceed $100,000, in which
case the indemnifying person's obligation shall apply
only to Losses that exceed $100,000; provided, however,
the limitation contained in this Section 8.4(a)(ii)
shall not apply in the case of a breach of the
representations made by West Coast in Sections 3.3 or
3.6 hereof.
This is page 151 of 182 pages (F-112)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(b) No indemnified person(s) shall be entitled to make a claim against
any indemnifying person pursuant to this Article VIII unless notice of such
claim shall have been given in accordance with Sections 8.3(a) and 9.4
hereof prior to the Termination Date as provided in Section 7.3 hereof.
8.5 Maximum Liability
The maximum liability of the indemnifying person(s) for Losses and
other liabilities under this Article VIII and any expenses incurred in
connection with investigating, defending or asserting any claim, action,
suit or proceeding incident to any matter indemnified against hereunder,
shall not exceed $200,000; provided, however, in the event of Losses
attributable to a breach of the representations made by West Coast in
Sections 3.3 or 3.6 hereof, the maximum liability of West Coast therefor
shall be an amount equal to the purchase consideration paid by Western for
the Sunwest Stock.
ARTICLE IX--MISCELLANEOUS
9.1 Expenses and Liquidated Damages
(a) Each party hereto shall bear and pay all costs and expenses
incurred by it in connection with the transactions contemplated by this
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel, provided that in the event of a termination of
this Agreement resulting from a breach of a representation, warranty,
covenant or undertaking, the party committing such breach shall be liable
for the reasonable documented out-of-pocket expenses of the other parties
without prejudice to any other remedies as may be available to the non-
breaching party in an aggregate amount not to exceed One Hundred Thousand
Dollars and No Cents ($100,000.00). Such amount shall be paid by such
breaching party within five (5) business days of receipt of written
documentation in accordance with this Section 9.1
(b) In the event this Agreement is terminated pursuant to: (i) Section
7.1(b) because of Western's breach of the representations set forth in
Section 4.2 or the covenant contained in Section 5.10; or (ii) Sections
7.1(d), (e) or (f) and Western has not obtained the necessary regulatory
approvals to consummate the Purchase or Western has received a denial of
any of such applications, or (iii) pursuant to Section 7.1(a) because the
parties believe the regulatory approvals necessary for Western to
consummate the Purchase will not be forthcoming, West Coast and Sunwest
shall be entitled, if not already covered by Section 9.1(a), to
reimbursement from Western for all reasonable documented out-of-pocket
expenses of West Coast and Sunwest up to an aggregate of $100,000. In
addition, the parties agree that it would be impracticable or extremely
difficult to fix the actual damages resulting from a termination of this
Agreement for any of the reasons set forth in this Section 9.1(b) and,
therefore, the parties agree that Western shall pay to West Coast, in
addition to the reimbursement amounts above, as liquidated damages and not
as a penalty, concurrently with the termination of the Agreement, the sum
of $100,000 in respect thereof. The parties hereby further agree that such
amount represents a reasonable endeavor on their parts to estimate a fair
compensation for the foreseeable damages that might be suffered as a result
thereof. In the event this Agreement is terminated for any reason set
forth in this Section 9.1(b), Sunwest hereby agrees that its sole remedy
therefor shall be for the out-of-pocket reimbursement amounts provided for
above, and West Coast hereby agrees that its sole remedy therefor shall be
the liquidated damages and the out-of pocket reimbursement amounts (less
any such reimbursement amounts paid to Sunwest pursuant hereto) provided
for herein.
This is page 152 of 182 pages (F-113)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
9.2 Entire Agreement
This Agreement, including the exhibits and annexes hereto and the
documents referred to herein, contains the entire agreement between the
parties with respect to the transactions contemplated hereby and supersedes
all prior arrangements or understandings with respect thereto, written or
oral, other than documents referred to herein or therein. The terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and thereto and their respective successors.
Except as specifically provided herein, nothing in this Agreement ,
expressed or implied, is intended to confer upon any party, other than the
parties hereto and thereto, and their respective successors, any rights,
remedies, obligations or liabilities.
9.3 Assignment
Neither West Coast nor Sunwest may assign any of its rights or
obligations under this Agreement to any other person. Upon receipt by West
Coast of documentation supporting the assignees ability to consummate the
transactions contemplated hereby, with the prior written consent of West
Coast, which consent shall not be unreasonably withheld, Western
Acquisitions, L.L.C. may assign, in whole or in part, its rights and/or
obligations under this Agreement. Upon an assignment by Western
Acquisitions, L.L.C. pursuant to this Section 9.3, provided the assignee
agrees in writing to be bound by the terms and conditions of this Agreement
and the Escrow Agreement (as defined in Section 9.9 hereof), Western
Acquisitions, L.L.C. shall be released and forever discharged of any and
all obligations and or liabilities arising out of or under this Agreement,
including but not limited to the obligation to pay the Purchase
Consideration.
9.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally,
delivered by facsimile (with confirmation) or sent by overnight express or
by certified mail, postage prepaid, addressed as follows:
This is page 153 of 182 pages (F-114)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
If to Western:
Western Acquisitions, L.L.C.
1110 Lake Cook Road, Suite 165
Buffalo Grove, Illinois 60089
Attn: Eric D. Hovde
Fax: (202) 775-8365
With a required copy to:
Levi, Perry, Simmons & Loots, P.C.
805 Fifteenth Street, N.W., Suite 1101
Washington, D.C. 20005
Attn: Richard J. Perry, Jr., Esquire
Fax: (202) 289-0184
If to West Coast:
West Coast Bancorp
4770 Campus Drive, Suite 250
Newport Beach, California 92660
Attention: President
Fax: (714) 442-9339
If to Sunwest:
Sunwest Bank
535 East 1st Street
Tustin, California 92680
Attention: President
Fax: (714) 573-8153
With a required copy to:
Manatt Phelps Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attn: William T. Quicksilver, Esquire
Fax: (310) 312-4224
This is page 154 of 182 pages (F-115)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
9.5 Interpretation
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement and shall not be used to help
construe the meaning hereof.
9.6 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
9.7 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of California applicable to agreements made and
entirely to be performed within such jurisdiction except to the extent
federal law may be applicable.
9.8 Dispute Resolution
In the event of a dispute relating to this Agreement or the
interpretation hereof or in the event any of the parties to this Agreement
brings an action or suit against any other party by reason of the breach of
any covenant, agreement, representation, warranty or other provision
hereof, or any breach of any duty or obligation created hereunder by such
other party, the parties hereby agree to submit the dispute to binding
arbitration under the rules and procedures of the American Arbitration
Association and that, as determined by the arbitrator (or any court which
may thereupon or thereafter have jurisdiction), the prevailing party shall
be entitled to have and to recover from the losing party or parties all
reasonable costs and expenses incurred or sustained by such prevailing
party in connection with such arbitration (or any judicial proceeding),
including, without limitation, legal fees and court costs (whether or not
taxable as such).
9.9 Escrow Agreement
Concurrent with the execution and delivery of this Agreement, West
Coast, Sunwest and Western shall execute and deliver the escrow agreement
by and among West Coast, Sunwest, Western and Levi, Perry, Simmons & Loots,
P.C. in the form attached hereto as Exhibit B (the "Escrow Agreement"), and
Western shall concurrently with the execution of the Escrow Agreement
deposit with the Escrow Agent (as defined in the Escrow Agreement) an
amount (in cash or in marketable securities) (the "Escrow Amount")
sufficient to cover any obligation of Western in the event Western shall be
liable for the payment of such amount (or any portion thereof) pursuant to
either Article VIII or Section 9.1(b) hereof.
This is page 155 of 182 pages (F-116)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in counterparts by their duly authorized officers and their
corporate seal to be hereunto affixed and attested by their officers
thereunto duly authorized, all as of the day and year first above written.
WESTERN ACQUISITIONS, L.L.C.
By: /s/ Eric D. Hovde
---------------------------------------------
- ---
Name: Eric D. Hovde
WEST COAST BANCORP
/s/ John B. Joseph
By: ---------------------------------------------
- ---
Name: John B. Joseph
Title: Chairman
SUNWEST BANK
/s/ John B. Joseph
By: ---------------------------------------------
- ---
Name: John B. Joseph
Title: Chairman
This is page 156 of 182 pages (F-117)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
EXHIBIT A
AGREEMENT OF SHAREHOLDERS
OF
SUNWEST BANK
AGREEMENT, dated February 29, 1996, among WESTERN ACQUISITIONS,
L.L.C., an Illinois limited liability company, and its permitted assignees
("Western"), WEST COAST BANCORP, a California corporation and a registered
bank holding company ("West Coast") (the aforesaid parties, together with
all subsequent owners of the capital stock of Sunwest Bank, Tustin,
California, a California corporation engaged in the business of commercial
banking ("Sunwest"), being hereinafter referred to collectively as
"Shareholders" and individually as a "Shareholder"); and SUNWEST.
W I T N E S S E T H :
WHEREAS, the Shareholders are the owners of the shares of the capital
stock of Sunwest listed in Exhibit A hereto, being all of the issued and
outstanding stock of Sunwest (said shares, together with any other shares
of capital stock of Sunwest hereafter issued and outstanding, being
hereinafter referred to as the "Shares"); and
WHEREAS, the parties hereto desire to set forth their agreement with
respect to the Shares as well as certain other matters relating to the
relationship of the Shareholders in furtherance of that certain Stock
Purchase Agreement by and among West Coast, Sunwest and Western entered
into as of February 29, 1996 (the "Stock Purchase Agreement') and the
corporate governance of Sunwest;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Restrictions On Transfers of Shares
No Shareholder shall, directly or indirectly, sell, donate, pledge,
hypothecate, encumber or otherwise transfer all or any part of the Shares
now or hereafter owned by it without complying with the provisions of this
Agreement.
Notwithstanding any other provision of this Agreement to the contrary,
no sale, donation, pledge, hypothecation, encumbrance or other transfer of
Shares shall be recognized or deemed effective unless the transferee shall
execute and agree to be bound by this Agreement.
Any sale, donation, pledge, hypothecation, encumbrance or other
transfer which is not in compliance with the provisions of this Agreement
shall be null and void, and shall not be recognized by Sunwest or the
Shareholders, and the transferee shall not be entitled to vote any of the
shares of Sunwest, nor receive any dividends, profits or other
distributions in respect thereof, nor shall the transferee have any other
rights as a shareholder of Sunwest. Sunwest shall not permit any Shares
owned by the Shareholders to be transferred on its books except in
accordance with the provisions of this Agreement and shall cooperate in
making all transfers required by such provisions.
This is page 156 of 182 pages (F-117)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
2. Transfers To Affiliates
Notwithstanding the provisions of Articles 1 and 3 hereof, a
Shareholder may transfer all or a part of its Shares by gift or otherwise
to an affiliate, as hereinafter defined, of such Shareholder, or to a trust
for the benefit of one or more of such affiliates of the Shareholder, pro
vided that each such transferee executes and agrees to be bound by this
Agreement. Any trustee to whom Shares are transferred in accordance with
this Article 2 may transfer such Shares to one or more of such
Shareholder's affiliates in accordance with the terms of the trust,
provided that each such transferee executes and agrees to be bound by this
Agreement. Notwithstanding any such transfer, the Shares transferred shall
remain subject to the provisions of this Agreement, and each transferee
shall be bound by the terms, covenants and conditions of this Agreement.
As used in this Agreement, the term "affiliate" shall mean a person (as
defined in the first sentence of Section 2(2) of the Securities Act of
1933, as amended, without regard to the limitation contained in the second
sentence thereof) which controls, is controlled by, or is under common
control with a Shareholder and if an individual, any relative or spouse of
such person, or any relative of such spouse, who has the same home as such
person or who is a director or officer of, or a person performing similar
functions for, West Coast, Sunwest or Western.
3. Voluntary Transfers Of Shares
If a Shareholder desires to sell or otherwise transfer any Shares
pursuant to a bona fide written offer, other than a transfer to affiliates
or trusts therefor as provided in Article 2 above, such Shareholder (the
"offeror") shall give written notice thereof to the other Shareholders
(which, for purposes of this Article 3 shall be deemed to include any
permitted transferee or other shareholder of Sunwest permitted hereunder
and bound by the terms of this Agreement) (such other Shareholders
hereinafter referred to in this Article 3 as the "offerees") and Sunwest,
which notice shall set forth the number of Shares to be transferred, the
name and address of the proposed transferee or other parties in question
(the "transferee"), the proposed price or consideration to be paid or given
(the "purchase price"), and all other pertinent details of the proposed
sale (the "offeror's notice"). The offeror's notice also shall contain an
offer to sell such Shares to the offerees for the purchase price, in
accordance with the provisions of this Article 3.
For a period of thirty (30) days after receipt of the offeror's notice
(the "initial option period"), the offerees, or any of them, shall have the
right to purchase all or any part of the Shares offered for the price and
upon the terms and conditions provided in this Article 3, by giving notice
of intention to purchase to the offeror, the other offerees, if any, and
Sunwest within the initial option period.
This is page 157 of 182 pages (F-118)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Each of the other offerees shall have the right to purchase that
portion of the Shares offered as the number of Shares owned by each bears
to the total number of Shares owned by all of the offerees (other than the
offeror). If a Shareholder does not elect to purchase its full portion of
said Shares before the expiration of the initial option period, the
remaining offerees shall have the right to purchase, in the aforesaid
proportions, all of the Shares not purchased by giving notice of intention
to purchase to the offeror and all other parties hereto on or before the
date which is twenty (20) days after the expiration of the initial option
period (the "second option period"). Sunwest shall have the right to
purchase all of the Shares not purchased by the offerees, by giving notice
of intention to purchase to the offeror and all other parties hereto within
thirty (30) days after the expiration of the initial option period.
The purchase price for each of the Shares purchased by the other
offerees or Sunwest pursuant to the options provided in this Article 3
shall be the purchase price set forth in the offeror's notice.
If there is a purchase of any Shares pursuant to the options provided
in this Article 3, the purchase price of the Shares shall be paid in cash
or by certified check by the purchasers to the offeror within ten (10)
business days after the notice of intention to purchase was given by the
purchasers and there is a final determination of the number of Shares to be
purchased by such offeree in accordance with this Article 3; provided,
however, in the event that the number of Shares to be purchased hereunder
requires the consent, approval or non-objection by any federal or state
governmental agency, department or body, the consent, approval or non-
objection of which is required for the consummation of such purchase (the
"Regulatory Approval"), payment of the purchase price shall be made within
fifteen (15) days after the last of the Regulatory Approvals required has
been received (which shall be not later than ninety (90) days after the
date the offeree gives the offeror notice of its intention to purchase any
such Shares and there is a final determination of the number of shares to
be purchased) and all notice periods and waiting periods required after the
granting of any such Regulatory Approvals shall have passed and all such
Regulatory Approvals shall remain in full force and effect. In the event
the offeree or Sunwest shall not obtain the required Regulatory Approvals
within such ninety- (90-)day period, the offeree or Sunwest shall have no
right to purchase the Shares and shall be deemed a defaulting offeree as
defined in this Article 3. Upon payment of the purchase price, the
certificate(s) evidencing the Shares purchased shall be delivered to
Sunwest, with any other instruments required by Sunwest, so that full and
complete title to the Shares can be transferred on the books of Sunwest.
When the Shares purchased have been so transferred, the certificates
therefor shall be delivered to the purchasers.
In the event that a purchase of the Shares by an offeree requires that
such offeree obtain Regulatory Approvals, as soon as practicable after such
offeree gives notice of intent to purchase and there is a final
determination of the number of Shares to be purchased by such offeree in
accordance with this Article 3, the offeree shall promptly prepare and
submit such applications or notices as may be required to obtain the
Regulatory Approvals for the purchase of such Shares pursuant to the
options provided in this Article 3.
This is page 158 of 182 pages (F-119)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
In the event an offeree or Sunwest gives notice of its intention to
purchase to an offeror pursuant to the provisions of this Article 3 and,
thereafter, the offeree fails to consummate the purchase of the Shares as
set forth in the offeree's notice hereunder (a "defaulting offeree"), such
defaulting offeree, any affiliate of such defaulting offeree or other
person to whom any of the defaulting offeree's Shares have been or are
transferred pursuant to Article 2 hereof shall have no further rights under
this Article 3 to purchase Shares under this Article 3.
If the other offerees and Sunwest do not elect to purchase all of the
Shares which are the subject of the offeror's notice, the offeror may sell,
donate, pledge, hypothecate, encumber or otherwise transfer the Shares not
purchased to the transferee designated in offeror's notice, for the
consideration and upon the terms and conditions set forth therein, but not
otherwise. If the transfer of any Shares by the offeror is not completed
in accordance with this Article 3 within (60) sixty days after the
expiration of the aforesaid options, such Shares may not thereafter be
transferred unless they again are offered to the other Shareholders and
Sunwest in accordance with this Article 3; provided, however, in the event
such transferee is required to obtain any Regulatory Approvals for the
purchase of such Shares, the foregoing sixty- (60-)day period referred to
in this sentence shall be a two hundred ten- (210-)day period.
If the Shares of any Shareholder are involuntarily transferred to a
pledgee, judgment creditor, assignee for the benefit of creditors,
receiver, trustee in bankruptcy or other person, such transfer shall be
deemed to constitute a notice to the other Shareholders and Sunwest, as of
the date of such transfer, offering to sell all of the Shares affected upon
the terms and conditions provided in this Article 3 for a price determined
by an independent appraiser mutually agreed to by the other Shareholders
and/or Sunwest and any such creditor, receiver, trustee in bankruptcy or
other holder of such Shares. No pledgee, judgment creditor, assignee for
the benefit of creditors, receiver, trustee in bankruptcy or other holder
of Shares, without regard to the manner of acquisition of the Shares or the
nature of the interest therein, shall sell or otherwise transfer any Shares
without complying with the provisions of this Agreement in the same manner
as if such holder or person asserting the interest in such Shares was named
as a Shareholder herein.
4. Co-Sale Obligation
This is page 159 of 182 pages (F-120)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
In the event either West Coast or Western offers Shares equal to forty
percent (40%) or more of the total issued and outstanding shares of the
Sunwest Common Stock to the other Shareholders (ie., the offerees) pursuant
to Article 3 hereof and either (a) Sunwest does not elect to purchase all
of such Shares pursuant to Article 3 hereof or (b) the other Shareholders
do not elect to purchase all of such Shares offered pursuant to Article 3
hereof, and West Coast or Western elects to sell all of the Shares to the
transferee named in the notice to the other Shareholders pursuant to
Article 3 hereof, West Coast or Western, as the case may be, shall notify,
not later than five (5) business days after the expiration of the second
option period, each of the other Shareholders (the "Co-Sale Shareholders")
of such proposed sale, transfer or other disposition and permit the Co-Sale
Shareholders or any of them, as each Co-Sale Shareholder may elect, to
participate in such sale, transfer or other disposition as set forth in
this Article 4. Such election shall be exercised, if at all, by written
notice (the "Co-Sale Notice") given by each of the electing Co-Sale
Shareholders to West Coast or Western, as the case may be, and the other Co-
Sale Shareholders within fifteen (15) days after the date the notice given
by West Coast or Western, as the case may be, pursuant to this Article 4 is
effective. The Co-Sale Notice shall state the number of shares the Co-Sale
Shareholder giving such Co-Sale Notice wishes to sell to the proposed
transferee.
Following receipt of any Co-Sale Notice, West Coast or Western, as the
case may be, shall use its best efforts to interest the transferee in
purchasing all of the Shares that the Co-Sale Shareholders desire to sell,
together with the Shares of West Coast or Western, as the case may be. If
the transferee does not wish to purchase the full amount of the shares of
the Sunwest Common Stock which West Coast and/or Western and the Co-Sale
Shareholders desire to sell, then West Coast or Western, as the case may
be, shall be entitled to sell that proportion which equals the number of
such shares the transferee is willing to purchase multiplied by a fraction
the numerator of which is the number of the shares of the Sunwest Common
Stock West Coast or Western, as the case may be, desires to sell and the
denominator of which is the aggregate number of the shares of the Sunwest
Common Stock West Coast or Western, as the case may be, and the Co-Sale
Shareholders desire to sell. The Co-Sale Shareholders shall be entitled to
sell that number of its/their shares of the Sunwest Common Stock equal to
the difference between the number of shares the transferee is willing to
purchase and the number of such shares West Coast or Western, as the case
may be, is entitled to sell pursuant to the foregoing formula.
Absent any material change in the terms or conditions of sale or other
transfer from the terms and conditions specified in the offeror's notice
specified in Article 3 hereof, West Coast or Western, as the case may be,
shall be entitled to complete the sale or other transfer of all of the
Shares of West Coast or of Western, as the case may be, if no Co-Sale
Shareholder notifies West Coast or Western, as the case may be, in writing
by the end of the fifteen- (15-)day period referred to in the first
paragraph of this Article 4, or, if West Coast or Western, as the case may
be, does receive a Co-Sale Notice within such fifteen- (15-)day period, at
the same time as the electing Co-Sale Shareholder(s) complete(s) the sale
of Shares in connection with the valid exercise of the co-sale rights
granted pursuant to this Article 4.
This is page 160 of 182 pages (F-121)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
West Coast or Western, as the case may be, shall keep the electing Co-
Sale Shareholders fully informed of the progress of each sale or other
transfer and shall use its best efforts to assist each electing Co-Sale
Shareholder in completing such sale or other transfer. If any Co-Sale
Shareholder elects not to participate in such sale or other transfer and
thereafter the terms or conditions of such sale or other transfer
materially change from the terms or conditions specified in the offeror's
notice referred to in Article 3 hereof, or, if West Coast or Western, as
the case may be, fails to consummate its sale or other transfer to the
transferee within thirty (30) days after the transferee has received all
necessary regulatory approvals and the other conditions to the purchase are
satisfied, West Coast or Western, as the case may be, shall again offer the
Co-Sale Shareholders the ability to participate in such sale or other
transfer in accordance with this Article 4.
5. Extraordinary Transactions
After the date hereof, Sunwest shall not issue or sell any additional
voting stock or any securities (debt or equity) convertible into voting
stock to West Coast or Western, or any affiliate of either thereof, whether
by way of original issue or sale of treasury shares, grant to West Coast or
Western or any affiliate of either any options, warrants or other rights
with respect to such shares of Sunwest Common Stock or any such securities,
make any dividend of shares of Sunwest Common Stock or of such other
securities other than on a pro rata basis to all shareholders of Sunwest,
redeem or effect a reverse stock split or a reclassification of any
outstanding securities which in any way affects the voting rights or voting
power (including the elimination of cumulative voting for the election of
directors) of West Coast or Western without the prior written consent of
West Coast and Western. In the event Sunwest offers after the date hereof
to sell shares of Sunwest Common Stock or other voting securities of
Sunwest (including securities convertible into securities with voting
rights)( the "Offering"), Sunwest hereby grants West Coast and Western, and
any transferee of West Coast or Western who acquires twenty-five percent
(25%) or more of the Shares hereunder (for purposes of this Article 5, West
Coast, Western and any such transferee hereinafter collectively referred to
as "right of first refusal parties," a right of first refusal to purchase
pro rata (based on their respective ownership interests), in their sole
discretion, any or all of such shares of Sunwest Common Stock or other
voting securities to be issued in connection with the Offering on the same
terms as would otherwise be applicable to any other purchaser of such
shares of Sunwest Common Stock or other voting securities in the Offering.
In the event any right of first refusal parties elect not to purchase all
or any portion of its/their pro rata portion of any such shares of Sunwest
Common Stock or other voting securities of Sunwest offered in the Offering,
then the other right of first refusal parties shall have a
This is page 161 of 182 pages (F-122)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
right of first refusal to purchase such shares of Sunwest Common Stock or
other voting securities not purchased. In the event any shares of Sunwest
Common Stock or other voting securities of Sunwest in the Offering are not
purchased by any or all of the right of first refusal parties pursuant
hereto, Sunwest shall be free to offer any such unpurchased shares of
Sunwest Common Stock or other voting securities to third parties. Sunwest
agrees to provide the right of first refusal parties with not less than
thirty (30) days' written notice of its intention to sell or issue any such
shares of Sunwest Common Stock or other voting securities, and the right of
first refusal parties agree to give notice to Sunwest within fifteen (15)
days of each of their receipt of the notice of intention from Sunwest as to
the number of such shares of Sunwest Common Stock or other voting
securities, if any, such right of first refusal parties will purchase.
Without the prior written consent of Western and West Coast, Sunwest
shall not amend Sections 2.3 or 2.7(c) of its By-Laws as in effect on
February 12, 1996.
The consummation of any of the foregoing actions shall be ineffective
unless authorized and/or approved in accordance with this Article 5
notwithstanding any provision of the Articles of Incorporation or Bylaws of
Sunwest or of any statute or laws to the contrary unless such limitation is
clearly against public policy or is specifically prohibited by any such
statute or laws.
6. Legend On Certificates
Every certificate representing the Shares shall bear the following
legend:
The stock represented by this certificate is subject
to, and may not be transferred except in accordance
with, the provisions of that certain Agreement of
Shareholders, dated as of
, to which Sunwest and its Shareholders are parties, an
executed copy of which Agreement of Shareholders is on
file at the principal office of Sunwest. Such
Agreement of Shareholders imposes certain obligations
on the holder of these shares in certain circumstances,
which obligations and circumstances are described
therein. No transfer of such shares will be made on
the books of Sunwest unless accompanied by evidence of
compliance with the terms of such Agreement of
Shareholders.
The Shareholders agree to promptly deliver to the appropriate officer
of Sunwest any certificates previously issued for the purpose of adding the
foregoing legend thereto.
7. Public Offering Rights/Listing Privileges
This is page 162 of 182 pages (F-123)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(a) Each time Sunwest shall propose the public offering of any of the
securities of Sunwest, Sunwest shall give written notice of such proposed
offering to West Coast and Western. If requested by West Coast and/or
Western within thirty (30) days of the date of such written notice, Sunwest
shall, except as herein provided, cause any shares of the Sunwest Common
Stock (or portion thereof) beneficially owned by West Coast and/or Western
as West Coast and/or Western shall designate in writing to be included in
any such offering; provided, however, if any such public offering shall be
underwritten in whole or in part, Sunwest may require that any shares of
the Sunwest Common Stock requested for inclusion pursuant to this Article 7
be included on the same terms and conditions as the securities otherwise
being sold through the underwriters. In the event that the Sunwest Common
Stock requested for inclusion pursuant to this Article 7 would, in the good
faith judgment of the managing underwriter, interfere with the successful
marketing of the shares of stock offered by Sunwest, the number of shares
of the Sunwest Common Stock otherwise to be included in the underwritten
public offering may be reduced to zero; provided, however, if such number
of shares is not reduced to zero, West Coast and Western shall be entitled
to have included in the Offering, pro rata, such number of shares of the
Sunwest Common Stock as each has requested for inclusion. Sunwest will use
its best efforts to effect any such public offering and, if any such public
offering shall be underwritten, to cause such underwritten public offering
to maximize the number of shares of the Sunwest Common Stock requested for
inclusion; provided, however, Sunwest shall not be prevented from
abandoning or delaying a public offering at any time.
If, at any time, Sunwest proposes to list the Sunwest Common Stock on
an exchange or on the National Association of Securities Dealers Automated
Quotation System, Sunwest will include in any such listing the shares of
Sunwest Common Stock beneficially owned by West Coast and Western.
Subject to the requirements or limitations of applicable law, Sunwest
shall bear the following fees, costs and expenses: all application,
registration, stock exchange listing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for Sunwest, fees and
disbursements of counsel for the underwriter or underwriters of such
securities (if Sunwest, West Coast and/or Western are required to bear such
fees and disbursements), and all legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified. Fees and disbursements of counsel and accountants for West
Coast and/or Western, underwriting discounts and commissions and transfer
taxes for West Coast and/or Western and any other expenses incurred by West
Coast and/or Western not expressly included above shall be borne by West
Coast and/or Western as incurred by and/or as attributable to each such
party.
(b) When required by the provisions of this Article 7, Sunwest will:
(i) prepare and file with the Superintendent an offering circular
with respect to such securities and use its reasonable efforts to obtain
the consent of the Superintendent and any other governmental or regulatory
authority to conduct the offering described therein;
This is page 163 of 182 pages (F-124)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(ii) prepare and file with the Superintendent such amendments and
supplements to such offering circular as may be necessary;
(iii) furnish to each of West Coast and/or Western and the
underwriter, if any, participating in the offering such number of offering
circulars and such other documents as West Coast and/or Western and such
underwriter may reasonably request in order to facilitate the public sale
or other disposition of the securities being sold by West Coast and/or
Western and the underwriter;
(iv) use its best efforts to register or qualify the securities
covered by the offering circular under such state securities or blue sky
laws of such jurisdictions as West Coast and/or Western or the underwriter,
if any, may reasonably request;
(v) if applicable, enter into and perform its obligations under
an underwriting agreement, in usual and customary form, with the managing
underwriter of such offering;
(vi) notify West Coast and/or Western and such underwriter, if
any, of the securities covered by such offering circular at any time when
the offering circular is being circulating of the happening of any event as
a result of which the offering circular, as then in effect, includes any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; and
(vii) in connection with an underwritten public offering, at the
request of West Coast and/or Western, furnish on the date(s) provided for
in the underwriting agreement an opinion of counsel representing Sunwest
for the purpose of such offering, addressed to the underwriters and to West
Coast and/or Western, covering such matters as such underwriters and West
Coast and/or Western may reasonably request and are customarily covered by
Sunwest's counsel at that time; and (ii) a letter from Sunwest's
independent certified public accountants, addressed to the underwriters and
to West Coast and/or Western, covering such matters as such underwriters or
West Coast and/or Western may reasonably request, and that they are
independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements and other financial data of Sunwest included in the offering
circular or any amendment or supplement thereto comply in all material
respects with applicable accounting requirements.
(c)(i) Subject to the requirements or limitations of applicable law,
Sunwest will indemnify and hold harmless West Coast and/or Western and any
underwriter (as defined in the Securities Act) and each person, if any, who
controls West Coast and/or Western or such underwriter within the meaning
of the Securities Act, from and against any and all loss, damage,
liability, cost and expense to which West Coast and/or Western or any such
underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs or
expenses are caused by any untrue statement or alleged untrue statement of
any material fact contained in any application, any offering circular, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading. However, Sunwest
will not be liable in any such case to the extent that any such loss,
damage, liability, cost or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by West Coast and/or Western,
such underwriter or such controlling persons in writing specifically for
use in the preparation thereof.
This is page 164 of 182 pages (F-125)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
(c)(ii) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (c)(i) of this Article 7 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to
be made against the indemnifying party pursuant to the provision of such
paragraph (c)(i), promptly notify the indemnifying party of the
commencement thereof. However, the omission to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise hereunder. In case such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party. However, if the defendants
in any action include both the indemnified party and the indemnifying party
and there is a conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party, the
indemnified party or parties shall have the right to select one separate
counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof, the
indemnifying party or parties shall indemnify and hold harmless the
indemnified party pursuant to the provisions of paragraph (c)(i) for any
legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (A) the indemnified party shall have employed counsel
in accordance with the provision of the preceding sentence, (B) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after the notice of the commencement of the action, or (C) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
8. Election of Directors
(a) On and after the consummation of the Purchase, as defined in
Section 2.1 of the Stock Purchase Agreement, and through the date of the
first annual meeting of shareholders of Sunwest following the Closing,
Western shall be entitled to not less than four (4) representatives on the
board of directors of Sunwest as designated by Western from time to time,
subject to the receipt of all necessary regulatory approvals for such
designees to serve on the board of directors. Each of West Coast and
Sunwest, as the case may be, hereby agrees to take, and West Coast hereby
agrees to cause Sunwest to take, any and all actions as may be necessary to
maintain or establish the composition of the Board of Directors of Sunwest
in accordance with this Article 8 (including, but not limited to,
increasing the number of authorized directors and using its best efforts to
obtain any necessary regulatory approvals for such designees to serve on
the board of directors. The Shareholders hereby consent, without any
further action and from time to time, to an amendment, if required, to the
By-Laws of Sunwest to increase the size of
This is page 165 of 182 pages (F-126)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
the Board of Directors solely for the purpose of complying with the terms
of this Article 8 and, further, to vote their Shares in favor of any such
amendment. Western shall provide Sunwest with a written notice which
shall identify each nominee(s) of Western who is/are to serve as its
representative(s) and background information regarding the nominee(s).
Western hereby agrees to provide, and Western shall cause each of its
nominees to provide, to Sunwest such information (including financial
statements and finger print cards) as may be required to obtain any
necessary regulatory approval of such nominee or as may be required for
purposes of any proxy statement or other report required to be filed
pursuant to any securities law or other laws applicable to Sunwest.
(b) At all times during the term of this Agreement, each committee of
the Board of Directors of Sunwest shall at all times include at least one
(1) Western representative.
(c) On and after the consummation of the Purchase, as defined in
Section 2.1 of the Stock Purchase Agreement, and throughout the period of
effectiveness of this Agreement, West Coast shall allow a representative of
Western to attend all meetings of the Board of Directors of West Coast and
any committee thereof, other than a meeting or portion thereof at which the
transactions contemplated by the Stock Purchase Agreement or matters
covered by the attorney-client privilege are discussed and shall give
Western reasonable notice of all such meetings.
9. Cooperation
Sunwest shall use its best efforts in good faith to (i) furnish such
information about Sunwest as may be reasonably required for any actions to
be taken or required to be taken by the Shareholders, and Western and
Sunwest shall each use its best efforts in good faith to provide such
information to each other as may be reasonably required for any actions to
be taken or required to be taken by any of them (including but not limited
to applications or notices related to the appointment of Western's
nominee(s) pursuant to Article 8 hereof, the preparation of any proxy
statements, regulatory reports or any other applications, notices or
filings required by any of them to be filed pursuant to the securities laws
or any other laws applicable to any of them and (iii) to take or cause to
be taken all action necessary or desirable on its part in furtherance of
this Agreement.
10. Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or
sent by overnight express or by facsimile (with confirmation), by certified
mail, postage prepaid, addressed as follows:
This is page 166 of 182 pages (F-127)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
If to Western:
Western Acquisitions, L.L.C.
1110 Lake Cook Road, Suite 165
Buffalo Grove, Illinois 60089
Attn: Eric D. Hovde
Fax: (202) 775-8365
With a required copy to:
Levi, Perry, Simmons & Loots, P.C.
805 Fifteenth Street, N.W., Suite 1101
Washington, D.C. 20005
Attn: Richard J. Perry, Jr., Esquire
Fax: (202) 289-0184
If to West Coast:
West Coast Bancorp
4770 Campus Drive, Suite 250
Newport Beach, California 92660
Attention: President
Fax: (714) 442-9339
If to Sunwest:
Sunwest Bank
535 East 1st Street
Tustin, California 92680
Attention: President
Fax: (714) 573-8153
With a required copy to:
Manatt Phelps Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attn: William T. Quicksilver, Esquire
Fax: (310) 312-4224
11. Corporate Books And Records
Sunwest shall maintain true, complete and accurate records and books
of account. All books and records of Sunwest shall at all times be made
accessible and available to the parties hereto and their duly authorized
representatives, for examination during reasonable hours, provided that
reasonable notice of a party's intention to exercise such rights is given
to Sunwest.
This is page 168 of 182 pages (F-129)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
12. Term
This Agreement shall become effective at the consummation of the
Purchase as defined in Section 2.1 of the Stock Purchase Agreement and,
except as otherwise provided herein, shall terminate as to West Coast or
Western on the date either West Coast or Western owns of record and
beneficially Shares representing less than twenty-five percent (25%) of the
Shares then outstanding and as to each other holder of Shares who becomes,
or is deemed to become, a party hereto, on the date such holder owns of
record and beneficially Shares representing five percent (5%) or less of
the total Shares then outstanding.
13. Certain Transactions Excluded from Coverage
Notwithstanding the provisions of Articles 1, 2, 3 or 4 hereof,
nothing contained herein shall be construed to prohibit and the provisions
of Articles 1, 2, 3 and 4 shall not be applicable to a distribution by West
Coast and/or Western of the shares of Sunwest Common Stock owned of record
or beneficially by, in the case of West Coast to the shareholders of West
Coast and, in the case of Western, to the members of Western, a merger or
acquisition of, in the case of West Coast or Sunwest, with another person
or entity including West Coast, Sunwest or any subsidiary thereof, or, in
the case of Western, with another person or entity including Sunwest or a
subsidiary thereof, or to any sale of shares pursuant to the provisions of
Article 7 hereof.
14. Miscellaneous
This Agreement shall be governed by the laws of the State of
California. If any provision or provisions of this Agreement is found to
be void or unenforceable, the remaining provisions of this Agreement shall
remain binding and in full force and effect.
Wherever appropriate, the singular shall include the plural, and vice
versa. The captions in this Agreement are for convenience only, and shall
not affect the construction of the provisions hereof.
This Agreement may be terminated, waived or modified only by a written
agreement executed by the party against which enforcement of such
termination, waiver or modification is sought. No waiver of any breach of
any provision of this Agreement shall be deemed a waiver of a party's right
to demand strict performance of all of the terms of this Agreement, nor
shall it constitute a waiver of any subsequent breach of any provision of
this Agreement. The parties hereto (and any person or entity who agrees
to be bound hereby pursuant to the terms hereof) acknowledge and agree that
their respective remedies at law for a breach or a threatened breach of any
of the provisions of this Agreement would be inadequate and, in recognition
of that fact, agree that, in the event of a breach or threatened breach by
the other party (or any of such persons or entities) of the provisions of
this Agreement, in addition to any remedies at law, they shall,
respectively, without posting any bond, be entitled to obtain equitable
relief in the form of specific performance, a temporary restraining order,
a temporary or permanent injunction or any other equitable remedy which may
then be available.
This is page 169 of 182 pages (F-130)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
This Agreement merges and supersedes all prior understandings and oral
or written agreements of the parties hereto with respect to the subject
matter hereof.
This Agreement may be executed in several counterparts, each of which
shall constitute an original, but all counterparts shall constitute but one
and the same agreement. Sunwest agrees that a copy of this Agreement shall
be kept at the principal office of Sunwest, for inspection by the
Shareholders. Any Shareholder shall have the right to inspect said copy of
this Agreement and the books and records of Sunwest at reasonable times
after reasonable notice.
The execution and performance of this Agreement has been duly
authorized and approved by the Boards of Directors of West Coast and
Sunwest by Western in accordance with its Operating Agreement.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, personal representatives,
executors, administrators, successors and permitted assigns. This
Agreement shall apply to all stock and equity securities of Sunwest now or
hereafter acquired by the Shareholders or any of their successors in
interest.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WESTERN ACQUISITIONS, L.L.C.
/s/ Eric D. Hovde
By: ---------------------------------------------
- ---
Name: Eric D. Hovde
WEST COAST BANCORP
/s/ John B. Joseph
By: ---------------------------------------------
- ---
Name: John B. Joseph
Title: Chairman
SUNWEST BANK
/s/ John B. Joseph
By: ---------------------------------------------
- ---
Name: John B. Joseph
Title: Chairman
This is page 170 of 182 pages (F-131)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
EXHIBIT A
SHARES OWNED BY THE SHAREHOLDERS
Name of Number of
Certificate
Shareholder Shares Number
[TO BE COMPLETED AT CLOSING]
This is page 171 of 182 pages (F-132)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is made as of the 29th
day of February, 1996 by and between WESTERN ACQUISITIONS, L.L.C.
("Western"), WEST COAST BANCORP, SUNWEST BANK (West Coast Bancorp and
Sunwest, individually and collectively, hereinafter referred to as
"Reimbursed Party(ies)") and LEVI, PERRY, SIMMONS & LOOTS, P.C. (the
"Escrow Agent") (Western, the Reimbursed Party(ies) and the Escrow Agent
sometimes hereinafter referred to as "the Parties").
WHEREAS, the Reimbursed Party(ies) and Western have entered into a
Stock Purchase Agreement dated as of even date herewith (the "Agreement");
and
WHEREAS, the Agreement provides for the deposit in escrow of cash or
marketable securities (hereinafter referred to as the "assets") as set
forth in Section 9.9 of the Agreement and for certain payments and
disbursements, as more specifically set forth in the Agreement, with
respect to the transactions contemplated by the Agreement; and
WHEREAS, the Parties hereto wish to establish an Escrow Account, as
defined in Section 4 hereof, from which the Reimbursed Party(ies) can
obtain payments in accordance with the terms and conditions of the
Agreement, and state the procedures which will govern such assets
(including the Escrow Account) held by the Escrow Agent.
NOW, THEREFORE, in consideration of the mutual promises herein set
forth and other valuable consideration, the Parties hereto agree as
follows:
1. Agreements: The Agreement is specifically incorporated by
reference into this document. All words and phrases defined or capitalized
in the Agreement shall have the same meanings when used in this document
unless otherwise defined herein or expressly inconsistent with the meaning
hereof.
2. Scope: Sections 9.1(a) and 9.1(b) of the Agreement provides for
the payment to the Reimbursed Party(ies) of certain amounts upon the
occurrence of certain events as set forth therein.
This document addresses the procedures to be followed when the Parties
intend to make a claim for release of assets hereunder. Neither this
document nor any assets placed in escrow pursuant to this document relate
to, or are a source of funds or other satisfaction for, other claims
arising outside of the Agreement.
This is page 172 of 182 pages (F-133)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
3. Appointment of Escrow Agent: In order to provide assurances that
Sections 9.1(a) and 9.1(b) of the Agreement will be properly performed,
Western and the Reimbursed Party(ies) have asked the Escrow Agent to act as
escrow agent for the purposes hereinafter described and under the following
terms and conditions, and by signing this Escrow Agreement, Levi, Perry,
Simmons & Loots, P.C. hereby confirms its acceptance of an agreement to act
as Escrow Agent hereunder.
The Escrow Agent acts hereunder as depository only and is not a party
to, or bound by, the Agreement or any other agreement or undertaking
relating, directly or indirectly, to the Agreement, other than this Escrow
Agreement. The duties of the Escrow Agent shall be only as specifically
set forth herein, and the Escrow Agent, as such, shall have no duty to
determine the performance or nonperformance of, or otherwise, any term or
condition of the Agreement.
4. Establishment of Escrow: Upon execution of this Escrow Agreement
by the Escrow Agent, the Escrow Agent shall establish an interest bearing
account at Union Bank in Orange County, California or in such other
national or state-chartered bank having a location in Orange County,
California as the Escrow Agent shall determine, the deposits of which are
federally insured ("Escrow Account"). On the date hereof, Western shall
deliver the sum of Two Hundred Thousand Dollars and No Cents ($200,000.00)
pursuant to Section 9.9 of the Agreement (the "Escrow Amount") to the
Escrow Agent in accordance with the provisions of the Agreement and the
Escrow Agent shall, not later than the next business day, deposit same in
the Escrow Account which shall be invested. All monies in excess of the
Escrow Amount and all property (both tangible and intangible) received by
the Escrow Agent pursuant to the Agreement (including the earnings thereof
and income therefrom) are hereinafter referred to as the "Escrowed Assets"
which assets shall be held in escrow for Western and the Reimbursed
Party(ies) subject to claims that the Reimbursed Party(ies) may have from
time to time in connection with the Agreement. Further, Western hereby
grants to the Reimbursed Party(ies), its/their permitted successors or
assigns, a security interest in the Escrowed Assets, which, subject to the
right to payment of expenses of the Escrow Agent set forth in Section 11,
shall be superior to the interest or claims of any party of any kind
whatsoever, to secure the Western's obligations under Sections 9.1(a) and
9.1(b) of the Agreement; and the Escrow Agent shall be deemed the agent
and/or bailee of the Reimbursed Party(ies), its successors or assigns,
holding the funds for the Reimbursed Party(ies) for the purpose of
perfection of said security interest.
5. Funds Held as Security: The Escrow Agent understands and
acknowledges that the Escrowed Assets secure Western's obligations under
Sections 9.1(a) and 9.1(b) of the Agreement.
This is page 173 of 182 pages (F-134)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
6. Disbursal Upon Mutual Agreement: Subject to the provisions of
Sections 8 and 9 hereof, the Escrow Agent agrees that it will from time to
time disburse assets from the Escrowed Assets, promptly upon receipt of
written joint instructions from Western and the Reimbursed Party(ies)
specifying (a) the amount to be paid or the assets to be distributed to the
Reimbursed Party(ies) or Western, or both, subject to the terms of this
Escrow Agreement, and (b) the date by when disbursement is due, which date
shall be no earlier than two (2) business days from the date the Escrow
Agent receives actual written joint instructions. The Escrow Agent shall
disburse funds from the Escrowed Assets to the Reimbursed Party(ies) by
wire transfer to such account as may be designated by the Reimbursed
Party(ies) in such instructions and to Western by wire transfer to such
account as may be designated by Western in such instructions; Escrowed
Assets other than funds shall be disbursed to the Reimbursed Party(ies) or
Western, as the case may be, in accordance with such instructions. Except
as provided in Sections 8 and 9 hereof, each such disbursement and all such
disbursements to each of the Reimbursed Party(ies) and Western shall be
made by the Escrow Agent only upon receipt of, and in accordance with,
written instructions from both the Reimbursed Party(ies) and Western.
The Reimbursed Party(ies) and Western hereby mutually agree that in
the event Western purchases the Sunwest Stock and the New Sunwest Stock
pursuant to the Agreement, upon receipt by the Escrow Agent of written
notice from Western and the Reimbursed Party(ies) to the Escrow Agent that
the Purchase (as defined in Section 2.1 of the Agreement) has occurred in
accordance with Section 2.3 of the Agreement, and without further notice or
instructions, the Escrow Agent shall release the Escrow Amount to Western.
7. Retention of Funds: The Escrow Agent shall continue to hold
assets and to hold and invest any undisbursed balance of funds until the
Escrow Agent (i) delivers such assets or the balance of such funds to the
Reimbursed Party(ies) and/or Western pursuant to instructions given under,
or otherwise pursuant to, the Escrow Agreement or (ii) is directed by a
court of competent jurisdiction to disburse or otherwise deal with such
assets, or to disburse or deposit such funds, or (iii) interpleads the
assets and/or the funds pursuant to this Escrow Agreement. Upon making all
such deliveries, disbursements and deposits as aforesaid, this Escrow
Agreement shall terminate and the Escrow Agent shall be relieved from
further liability or responsibility hereunder. It is expressly understood
that the sole obligation of the Escrow Agent hereunder with respect to
assets other than funds shall be to hold such assets in safekeeping
pursuant to the terms and conditions of this Escrow Agreement.
8. Disbursal Upon Termination: At the later of (i) the termination
of the Agreement or (ii) November 30, 1996 (the "Escrow Period"), the
Escrow Agent shall disburse all remaining Escrowed Assets to Western,
including any accumulated interest thereon, if any, except to the extent
any such Escrowed Assets are subject to a Disbursement Notice as described
in Section 9 hereof.
This is page 174 of 182 pages (F-135)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
9. Claims and Objections: In the event Western shall become liable
under the provisions of any of Sections 9.1(a) and/or 9/1(b) of the
Agreement for which the Reimbursed Party(ies) is/are otherwise entitled to
receive any assets pursuant to any of such sections of the Agreement and
Western is unwilling or refuses to join with the Reimbursed Party(ies) in
giving the written instruction to the Escrow Agent as provided for in
Section 6 hereof, the Reimbursed Party(ies) may seek disbursement from the
Escrow Agent out of the Escrowed Assets. To obtain disbursement out of the
Escrowed Assets, the Reimbursed Party(ies) must furnish written notice to
Western and the Escrow Agent that the Reimbursed Party(ies) was entitled to
receive a distribution of assets and/or the release/payment of funds
pursuant to the terms of the Agreement, specifying the nature and extent of
Western's failure to perform or of the Reimbursed Party(ies)'s right to a
disbursement, release or payment, as the case may be, which notice (a)
identifies the assets and/or itemizes the amount the Reimbursed Party(ies)
claim(s) as a result thereof and (b) contains a representation that the
Reimbursed Party(ies) previously gave Western written notice of the
Reimbursed Party's(ies') demand for release and (c) contains a copy of the
original written notice from the Reimbursed Party(ies) to Western (the
"Disbursement Notice"). Western is entitled to defend any such claim or
demand at the Western's cost and expense. The Escrow Agent shall release
from the Escrowed Assets the full sum requested by the Reimbursed
Party(ies) if the Escrow Agent has not received written notice disputing
the Reimbursed Party's(ies') Disbursement Notice, or disputing or objecting
to the Reimbursed Party's(ies') right to any portion or all of the Escrowed
Assets, within five (5) business days following receipt of the Reimbursed
Party's(ies') Disbursement Notice. If the Escrow Agent does receive
notice, as provided herein, that Western is disputing the Reimbursed
Party's(ies') claim for disbursement, the Escrow Agent shall not have the
authority nor be under any duty to disburse assets or funds to the
Reimbursed Party(ies) until it receives joint written notice that the
dispute has been resolved or written order from a court of competent
jurisdiction or duly designated arbitration. The Escrow Agent is hereby
instructed to release any other assets or funds that are not the subject of
the dispute in accordance with the terms of this Escrow Agreement.
10. Other Disputes: In the event that either Western or the
Reimbursed Party(ies) objects to or disputes the release or failure to
release any assets or funds requested or required to be disbursed, pursuant
to Paragraphs 6 or 8 (but excluding requests for disbursements referenced
in Paragraph 9 hereinabove, which shall be governed by the provisions
therein), then written notice of such dispute or objection shall be
delivered to the Escrow Agent and the other party at least forty-eight (48)
hours prior to the date on which disbursement is due. Under no
circumstances may the Escrow Agent release any Escrowed Assets to Western
or the Reimbursed Party(ies) that are the subject of such a notice of
dispute, properly delivered, until both Western and the Reimbursed
Party(ies) give written notice to the Escrow Agent that the dispute has
been resolved, which notice shall specify the amount of disputed Escrowed
Assets to be released to Western or the Reimbursed Party(ies), as the case
may be, or upon written order from a court of competent jurisdiction or of
a duly designated arbitration. The Escrow Agent is hereby instructed to
release any other assets or funds that are not the subject of the dispute
in accordance with the terms of this Escrow Agreement.
This is page 175 of 182 pages (F-136)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
11. Expenses: The Escrow Agent shall be entitled to recover, as an
extraordinary expense, all attorney's fees and expenses it incurs by way of
consultation referenced in Paragraph 13, or any litigation expenses or
costs relating to this Escrow Agreement. All ordinary and extraordinary
expenses and fees of the Escrow Agent shall be paid from the Escrowed
Assets as the same come due, and the Escrow Agent shall be authorized to
retain any portions or all of the fees or expenses due, at any time during
the Escrow Period, to the extent not paid in full prior to disbursement in
an aggregate amount not to exceed Five Thousand Dollars and No Cents
($5,000.00).
12. Authorized Signatures: The following individuals are hereby
authorized to issue written directions to the Escrow Agent with respect to
the payment and distribution of the Escrowed Assets on behalf of Western
and the Reimbursed Party(ies):
FOR WESTERN:
Eric D. Hovde /s/ Eric D. Hovde
- -------------------------------- -----------------------------------
- --
Name: Signature
/s/
- -------------------------------- -----------------------------------
- --
Name: Signature
- -or-
/s/
- -------------------------------- -----------------------------------
- --
Name: Signature
FOR WEST COAST:
/s/ John B. Joseph
Name: John B. Joseph -----------------------------------
- --
Title: Chairman Signature
/s/ Frank E. Smith
Name: Frank E. Smith -----------------------------------
- --
Title: Sr. V.P./CFO Signature
- -or-
/s/
- -------------------------------- -----------------------------------
- --
Name: Signature
This is page 176 of 182 pages (F-137)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
FOR SUNWEST:
/s/ James G. LeSieur, III
Name: James G. LeSieur, III -----------------------------------
- --
Title: President/CEO Signature
/s/ John B. Joseph
Name: John B. Joseph -----------------------------------
- --
Title: Chairman Signature
- -or-
/s/ Frank E. Smith
Name: Frank E. Smith -----------------------------------
- --
Title: Sr. V.P./CFO Signature
The Escrow Agent, in carrying out the provisions of this Escrow
Agreement, shall be entitled to rely upon the authority of such individuals
to issue such directions, and the Escrow Agent may continue to so rely
until such authority is revoked or supplemented by a notice in writing
(which revocation or supplement shall include the specifications of a
replacement authorized individual) and such revocation or supplement is
received by the Escrow Agent.
13. Liability of Escrow Agent: The Escrow Agent may act in reliance
upon the advice of counsel in reference to any matter relating hereto and
shall not be liable for anything which it in good faith does nor refrains
from doing in connection herewith, unless done with gross negligence or
willful misconduct. Without limiting the foregoing, the Reimbursed
Party(ies) and Western shall not take or file any actions or initiate any
proceeding of any kind against or naming the Escrow Agent, or pertaining to
the Escrowed Assets, unless and until the Escrow Agent shall have received
written notice thereof at least ten (10) business days prior thereto.
This is page 177 of 182 pages (F-138)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
14. Litigation: In the event (a) any charges, accusations, disputes,
objections, controversies or conflict, of any kind, shall arise as to (i)
the right, or claim of right, to any portion or all of the Escrowed Assets,
or (ii) the discharge of the duties of the Escrow Agent hereunder, or (b)
there is any dispute or litigation, threatened or pending, among the
parties, or by any party, as to (i) the proper construction of this Escrow
Agreement, (ii) the rights of the parties under the Agreement or this
Escrow Agreement, or to any portion or all of the Escrowed Assets, or (iii)
discharge of the Escrow Agent's duties hereunder, in the Escrow Agent's
sole, exclusive, and unrestricted discretion with respect to (a) and (b),
the Escrow Agent may remove itself from any such conflict, dispute or
litigation, etc., by filing an interpleader action, and by depositing the
Escrowed Assets, together with a copy of this Escrow Agreement in the
registry of the appropriate federal district court or, if such court lacks
jurisdiction, in a court of competent jurisdiction for the State of
California together with a complaint requesting resolution of such
differences and a proper construction of this Escrow Agreement or, in the
alternative, and upon the mutual agreement of the Escrow Agent, Western and
the Reimbursed Party(ies), their permitted successors or assigns, the
Escrow Agent shall promptly refer the dispute to the American Arbitration
Association to be settled by arbitration in accordance with the rules of
the American Arbitration Association or such other arbitration association
mutually agreed upon by the parties (the "Arbitration Association"), and,
thereupon, the Escrow Agent shall have no obligation to testify in court or
before an arbitration panel pertaining to any dispute between the
Reimbursed Party(ies) and Western relating to the Agreement, or otherwise
engage itself in the dispute resolution process except to the extent that
the dispute pertains to this Escrow Agreement and the Escrow Agent's
performance hereunder.
15. Indemnification: The Reimbursed Party(ies) and Western (the
("Indemnitors"), jointly and severally, agree to indemnify the Escrow Agent
and its officers, directors, agents and employees (herein, jointly and
severally the "Indemnitees"), against, and hold them harmless of and from,
any and all loss, liability, cost, damage and expense, including without
limitation, reasonable attorneys' fees, which the Indemnitees may suffer or
incur by reason of any action, claim or proceeding brought by any third
party against the Indemnitees, arising out of or relating in any way to
this Escrow Agreement or transaction contemplated by this Escrow Agreement.
16. Books and Records: All money held as a part of the Escrowed
Assets shall at all times be clearly identified as being held by the Escrow
Agent hereunder. Any party hereto may at any reasonable time during the
Escrow Agent's business hours, and upon reasonable notice, inspect the
records pertaining to the Escrowed Assets.
17. Assignment: Neither the Reimbursed Party(ies) nor Western may
assign its rights or obligations hereunder, without the express written
consent of the other.
18. Notice: Any notice, request, claim, demand or other
communication to be given by any party hereunder shall be in writing and
shall be deemed sufficient if delivered personally, sent by commercial
overnight delivery service, or sent by facsimile (with confirmation) or by
registered or certified mail, postage prepaid to the addresses shown in the
Agreement and if to the Escrow Agent, to:
This is page 178 of 182 pages (F-139)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
Levi, Perry, Simmons & Loots, P. C.
Suite 1101
805 Fifteenth Street, N.W.
Washington, D. C. 20005
Fax: (202) 289-0184
19. Reliance: The Escrow Agent may conclusively rely, and shall be
protected in acting or refraining from acting upon any written notice,
certificate, instrument or signature believed by it to be genuine and to
have been signed or presented by the proper party or parties duly
authorized to do so. The Escrow Agent shall be under no obligation to fund
any disbursement requests for more than the funds remaining in the Escrow
Account.
Notwithstanding anything herein to the contrary, the Escrow Agent may
act upon any written instructions given jointly by the Reimbursed
Party(ies) and Western, but shall be under no obligation to disburse, or
refrain from disbursing, as the case may be, pursuant to instructions or
notice which fails to conform, in whole or in part, to any requirement of
this Escrow Agreement.
20. Amendment: This Escrow Agreement shall not be amended or
modified except in a writing executed by all parties hereto.
21. Governing Law: This Escrow Agreement shall be construed in
accordance with the laws of the State of California
22. Counterparts: This Escrow Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
23. Resignation: The Escrow Agent may resign at any time by giving
thirty (30) days written notice to the Reimbursed Party(ies) and Western.
Such resignation shall take effect upon (i) the appointment of a successor
Escrow Agent by the Reimbursed Party(ies) and Western, and (ii) delivery of
all the Escrowed Assets to the successor Escrow Agent.
24. Termination of Agreement: This Escrow Agreement shall terminate
when all Escrowed Assets held hereunder have been disbursed as a result of
payments to the Reimbursed Party(ies) pursuant to any of Sections 9.1(a)
and/or 9.1(b) of the Agreement exhausting the resources available in the
Escrow Account, as a consequence of disbursing the Escrowed Assets to
Western as a result of the occurrence of the consummation of the Purchase
pursuant to the Agreement, or as a result of a combination of the two, or
other disbursement or deposit of the Escrowed Assets pursuant to this
Escrow Agreement. Upon the request of The Reimbursed Party(ies) and
Western, the Escrow Agent shall furnish an itemized final accounting to
Western and The Reimbursed Party(ies) of the Escrowed Assets within fifteen
(15) days after this Escrow Agreement ends.
This is page 179 of 182 pages (F-140)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
25. Benefit: This Escrow Agreement shall be binding upon and inure
to the benefit of Western and The Reimbursed Party(ies), their successors
and permitted assigns; provided, however, no party hereto shall assign its
rights or obligations hereunder without the prior written consent of the
other parties hereto.
26. Waiver: No waiver of any term, provision, or condition of this
Escrow Agreement, by conduct or otherwise, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of
any such term, provision or condition, or of any other term, provision or
condition of this Escrow Agreement.
IN WITNESS WHEREOF, the parties have evidenced their acceptance of an
agreement to the foregoing escrow arrangements by executing and returning
the copies of this Escrow Agreement provided for such purpose, whereupon
this Escrow Agreement shall be deemed in full force and effect and a
contract among the parties.
WESTERN ACQUISITIONS, L.L.C.:
/s/ Eric D. Hovde
- -----------------------------------
Name: Eric D. Hovde
Title:
WEST COAST BANCORP:
/s/ John B. Joseph
- ------------------------------------
Name: John B. Joseph
Title: Chairman
SUNWEST BANK:
/s/ John B. Joseph
- ------------------------------------
Name: John B. Joseph
Title: Chairman
LEVI, PERRY, SIMMONS & LOOTS, P.C.:
/s/ Richard J. Perry, Jr.
- ------------------------------------
Name: Richard J. Perry, Jr.
Title:Vice President
This is page 180 of 182 pages (F-141)
West Coast Bancorp
From 10-K for the year ended December 31, 1995
STOCK PURCHASE AGREEMENT
for shares of
BUSINESS AND PROFESSIONAL BANK
THIS STOCK PURCHASE AGREEMENT (the "Agreement") made and entered into
the 29th day of February 1996, by and between WESTERN ACQUISITIONS, L.L.C,
an Illinois limited liability company (hereinafter "Western") and WEST
COAST BANCORP (hereinafter "West Coast").
RECITALS
WHEREAS, West Coast is a shareholder of Business and Professional
Bank, a California corporation engaged in the commercial banking business,
headquartered in Woodland, California ("B&PB");
WHEREAS, West Coast desires to effect a sale of Two Hundred Thirteen
Thousand Three Hundred Eighty-Four (213,384) shares of the common stock of
B&PB, no par value (the "B&PB Common Stock"), which represents all of the
shares of the B&PB Common Stock owned of record or beneficially by West
Coast as of the date hereof and the number of shares (estimated to be
10,161 shares) to be received by West Coast on March 1, 1996 as a result of
the Stock Dividend (the "B&PB Stock"), subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained herein, and intending
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided herein or as defined in the Agreement,
the capitalized terms set forth below shall have the following meanings:
"Act" shall mean the California Corporations Code, as amended.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Control Act" shall mean the Change in Bank Control Act of 1978, as
amended.
"Department" shall mean the Department of Banking of the California
Business and Transportation Agency.
"FDIA" shall mean the Federal Deposit Insurance Act and the rules and
regulations promulgated thereunder.
"Financial Code" shall mean the California Financial Code, as amended.
"Phase I Closing" shall mean the day as set forth in Section 2.3(a)
hereof for the purchase of the Phase I Stock.
"Phase I Purchase Consideration" shall mean the aggregate purchase
price to be paid at the Phase I Closing by Western for the Phase I Stock
pursuant to Section 2.2(a) hereof.
"Phase I Stock" shall mean 46,199 shares of the B&PB Stock.
"Phase II Closing" shall mean the day designated by West Coast in the
written notice as set forth in Section 2.3(b) hereof for the purchase of
the Phase II Stock.
"Phase II Purchase Consideration" shall mean the aggregate purchase
price to be paid at the Phase II Closing by Western for the Phase II Stock
pursuant to Section 2.2(b) hereof.
"Phase II Stock" shall mean 93,007 shares of the B&PB Stock.
"Phase III Closing" shall mean the day designated by West Coast in the
written notice as set forth in Section 2.3(c) hereof for the purchase of
the Phase III Stock.
"Phase III Purchase Consideration" shall mean the aggregate purchase
price to be paid at the Phase III Closing by Western for the Phase III
Stock pursuant to Section 2.2(c) hereof.
"Phase III Stock" shall mean 74,178 shares of the B&PB Stock.
Previously Disclosed" shall mean disclosed (i) in a letter dated the
date hereof delivered from the disclosing party to the other party
specifically referring to this Agreement and describing in reasonable
detail the matters contained therein and the section of this Agreement to
which such matters pertain, or (ii) a letter dated after the date hereof
from the disclosing party specifically referring to this Agreement and
describing in reasonable detail the matters contained therein and delivered
by the other party pursuant to Section 5.4 hereof.
"Stock Dividend" shall mean the five percent (5%) stock dividend
declared on the B&PB Common Stock by B&PB on January 17, 1996 to be paid on
March 1, 1996 to the B&PB shareholders of record on January 31, 1996.
"Stock Dividend Shares" shall mean the shares of the B&PB Common Stock
received by West Coast pursuant to the Stock Dividend.
"Superintendent" shall mean the Superintendent of Banking of the
Department.
ARTICLE II
PURCHASE AND DELIVERY OF STOCK
2.1. Purchase of Stock. Subject to the terms and conditions hereof,
at the Effective Time of (a) the Phase I Closing, West Coast shall sell,
transfer, convey and assign and shall deliver to Western and Western shall
purchase from and acquire all of West Coast's right, title and interest in
and to the Phase I Stock; (b) the Phase II Closing, West Coast shall sell,
transfer, convey and assign and shall deliver to Western and Western shall
purchase from and acquire all of West Coast's right, title and interest in
and to the Phase II Stock; and (c) the Phase III Closing, West Coast shall
sell, transfer, convey and assign and shall deliver to Western and Western
shall purchase from and acquire all of West Coast's right, title and
interest in and to the Phase III Stock.
2.2. Purchase Price. The purchase price per share for the B&PB Stock
shall be Eight Dollars and Eighty-One Cents ($8.81). The purchase price
(a) for the Phase I Stock shall be an amount equal to Four Hundred Seven
Thousand Thirteen Dollars and Nineteen Cents ($407,013.19) (the "Phase I
Purchase Consideration") at the Phase I Closing pursuant to Section 2.1(a)
hereof; (b) for the Phase II Stock shall be an amount equal to Eight
Hundred Nineteen Thousand Three Hundred Ninety-One Dollars and Sixty-Seven
Cents ($819,391.67) (the "Phase II Purchase Consideration") at the Phase II
Closing pursuant to Section 2.1(b) hereof; and (c) for the Phase III Stock
shall be an amount equal to Six Hundred Fifty-Three Thousand Five Hundred
Eight Dollars and Eighteen Cents ($653,508.18) (the "Phase III Purchase
Consideration") at the Phase III Closing pursuant to Section 2.1(c) hereof,
in each such case payable by wire transfer to an account designated by West
Coast in immediately available funds at the Effective Time of each such
Closing.
2.3 Closings; Effective Times. A closing (the "Closing") shall take
place at 10:00 a.m. on a business day if with respect to the purchase of
(a) the Phase I Stock pursuant to Section 2.1(a) hereof, on March 8, 1996;
(b) the Phase II Stock pursuant to Section 2.1(b) hereof, on a date
designated by Western in a written notice given to West Coast but in no
event later than March 29, 1996; and (c) the Phase III Stock pursuant to
Section 2.1(c) hereof, on a day designated by Western in a written notice
given to West Coast which shall be a day within five (5) business days
following satisfaction or waiver, to the extent permitted hereunder, of the
conditions to the consummation of the purchase of the B&PB Stock specified
in Section 6.1 of Article VI of this Agreement, in each such case, at the
offices of West Coast, or at such other place, at such other time, or on
such other date as the parties may mutually agree upon. The "Effective
Time" shall be 10:00 a.m. (Pacific Standard Time) on the date of each
respective Closing or as otherwise specified by law, in accordance with the
provisions of the Act, the BHCA, the Control Act, the Financial Code, the
FDIA and the rules and regulations thereunder. Notwithstanding anything to
the contrary contained herein, Western shall not be under any obligation to
purchase the Phase II Stock or the Phase III Stock in the event Western, in
its sole discretion, does not agree, on or before March 29, 1996, to be
bound by the terms of that certain shareholder agreement entered into by
and between West Coast and B&PB, dated June 22, 1994 relating to the Phase
II Stock and the Phase III Stock.
2.4. Delivery of Stock. Upon delivery of the Phase I Purchase
Consideration, the Phase II Purchase Consideration and the Phase III
Purchase Consideration, as the case may be, West Coast shall deliver to
Western all certificates for the Phase I Stock, the Phase II Stock and the
Phase III Stock, respectively, as the case may be, duly endorsed in the
name of Western.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WEST COAST
3.1 Organization, Standing and Authority of West Coast. West Coast
is a California corporation duly organized, validly existing and in good
standing under the laws of the State of California with full corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted. West Coast has delivered to
Western true and complete copies of the Articles of Incorporation and
Bylaws of West Coast as in effect as of the date hereof.
3.2 Ownership of B&PB Stock. Except as Previously Disclosed, the
B&PB Stock (including the Stock Dividend Shares) is directly owned by West
Coast free and clear of all liens, claims, encumbrances, charges,
restrictions or rights of third parties of any kind whatsoever. Except as
Previously Disclosed, there are no agreements, understandings or
commitments relating to the right of West Coast to vote or to dispose of
said shares or other ownership interests.
3.3 Authorized and Effective Agreement. (a) West Coast has all
requisite corporate power and corporate authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals)
to perform all of its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by
all necessary corporate action in respect thereof on the part of West
Coast. This Agreement has been duly and validly executed and delivered by
West Coast and constitutes a legal, valid and binding obligation of West
Coast which is enforceable against West Coast in accordance with its terms,
subject, as to enforceability, to bankruptcy, receivership,
conservatorship, insolvency and other laws of general applicability
relating to or affecting the rights of creditors of companies that are bank
holding companies and to general equity principles.
(b) Except for consents and approvals of, filings or registrations
with, notices to or non-objections by, as applicable, the Superintendent,
the FDIC, the FRB and the DOJ, no consents or approvals of, or filings or
registrations with, or notices to any governmental body or authority are
necessary on behalf of West Coast in connection with (i) the execution and
delivery by West Coast of this Agreement or (ii) the consummation by West
Coast of the transactions contemplated hereby.
(c) Except as Previously Disclosed, neither the execution and
delivery of this Agreement nor consummation of the transactions
contemplated hereby nor compliance by West Coast with any of the provisions
hereof (i) conflict with or result in a breach of any provisions of the
Articles of Incorporation or Bylaws of West Coast, (ii) violate, conflict
with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of
West Coast pursuant to, any material note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to
which West Coast or by which its properties or assets may be bound or
affected, or (iii) subject to receipt of all required governmental
approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to West Coast.
3.4 Regulatory Approvals. West Coast is not aware of any reasons why
all consents, approvals and non-objections, as applicable, of the
transactions contemplated hereby from the Superintendent, the FDIC and the
FRB and any other state or federal governmental agency, department or body,
the consent, approval or non-objection of which is required for the
consummation of the transactions contemplated hereby shall not be received
or would be received subject to conditions that would so materially
adversely affect the economic benefits or the transactions contemplated by
this Agreement as to render consummation of such transactions unduly
burdensome.
3.5 Disclosures. None of the representations and warranties of West
Coast in this Agreement or in any supplement or certificate furnished
pursuant to this Agreement, and, to the best knowledge of West Coast, none
of the other information or documents furnished or to be furnished by West
Coast to Western in connection with this Agreement or the consummation of
the transactions contemplated hereby and thereby, is or will be false or
misleading in any material respect or contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material
fact required to be stated or necessary to make any such information or
document, at the time and in light of the circumstances, not misleading.
Copies of all documents referred to in this Article III are true, correct
and complete copies thereof and include all amendments, supplements and
modifications thereto and all waivers thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WESTERN
Western represents and warrants to West Coast as follows:
4.1 Organization, Standing and Authority of Western. Western is a
limited liability company duly organized, validly existing and in good
standing under the laws of the State of Illinois with full power and
authority to own or lease all of its properties and assets and to carry on
its business as now conducted and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires
such licensing or qualification and where the failure to be so licensed,
qualified or in good standing would have a material adverse effect on the
financial condition, results of operations, business or prospects of
Western. Western has delivered to West Coast a true and correct copy of
its Articles of Organization and its Operating Agreement.
4.2 Financial Ability. At each Effective Time, Western will have
adequate financial resources and cash available to consummate the
transactions contemplated by this Agreement.
4.3 Consents and Approvals. Except for consents and approvals of,
filings or registrations with, notices to or non-objections, as applicable,
by the Superintendent, the FRB, the FDIC and the DOJ, if required, no
consents or approvals of, or filings or registrations with, or notices to
any governmental body or authority are necessary on behalf of Western in
connection with (i) the execution and delivery by Western of this Agreement
or (ii) at each Closing the consummation by Western of the transactions
contemplated thereby.
4.4 Authorized and Effective Agreement. (a) Western has all
requisite power and authority to enter into this Agreement and to perform
all of its obligations under this Agreement . The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary action in
respect thereof on the part of Western. This Agreement has been duly and
validly executed and delivered by Western and constitutes a legal, valid
and binding obligation of Western which is enforceable against Western in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby and thereby, nor
compliance by Western with any of the provisions hereof or thereof (i)
conflict with or result in a breach of any provisions of Articles of
Organization or of the Operating Agreement of Western, (ii) violate,
conflict with or result in a breach of any term, condition or provision of,
or constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of
Western pursuant to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Western is a party, or by which any of its properties or assets may be
bound or affected, or (iii) subject to receipt of all required governmental
approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Western.
4.5 Legal Proceedings. There are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the
best knowledge of Western, threatened (or unasserted but considered by
Western probable of assertion and which if asserted would have at least a
reasonable probability of a materially unfavorable outcome) against Western
which present a claim to prohibit, restrict or make illegal consummation of
any of the transactions contemplated hereby.
4.6 Regulatory Approvals. Western is not aware of any reasons why
all consents, approvals and non-objections, as applicable, of the
transactions contemplated hereby from the Superintendent, the FDIC, the FRB
and any other state or federal governmental agency, department or body, the
consent, approval or non-objection of which is required for the
consummation of the transactions contemplated hereby shall not be received
or would be received subject to conditions that would so materially
adversely affect the business of Western or the economic benefits of the
transactions contemplated by this Agreement as to render consummation of
such transactions unduly burdensome. Western is not aware of any reason
why all consents and approvals shall not be procured from all other persons
and entities whose consent or approval shall be necessary for consummation
of the transactions contemplated by this Agreement. There are no consents,
approvals or non-objections, as applicable, required to be procured by
Western from the Superintendent, the FDIC, the FRB or any other state or
federal governmental agency, department or body in order to consummate the
purchase of the Phase I Stock or the Phase II Stock.
4.7 Disclosures. None of the representations and warranties of
Western in this Agreement or in any supplement or certificate furnished
pursuant to this Agreement and, to the best knowledge of Western, none of
the other information or documents furnished or to be furnished by Western
to West Coast in connection with this Agreement or the consummation of the
transactions contemplated hereby, is or will be false or misleading in any
material respect or contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact required to
be stated or necessary to make any such information or document, as of the
time and in light of the circumstances under which they were made, not
misleading. Copies of all documents referred to in this Article IV are
true, correct and complete copies thereof and include all amendments,
supplements and modifications thereto and all waivers thereunder.
ARTICLE V
COVENANTS
5.1 Applications. Within forty-five (45) days following the date of
execution of this Agreement, Western shall prepare and submit applications
for prior approval of the purchase of the Phase III Stock to the
Superintendent, the FDIC, and the FRB, as may be applicable, and any other
federal, state or local governmental agency, department or body, the
approval or non-objection of which is required for consummation of the
transactions contemplated hereby.
5.2 Best Efforts. Western and West Coast shall each use its best
efforts in good faith to (i) furnish such information as may be required in
connection with and otherwise cooperate in the preparation and filing of
the documents referred to in or contemplated by Sections 5.1 hereof, and
(ii) subject to the terms and conditions set forth in this Agreement, take
or cause to be taken all action necessary or desirable on its part so as to
permit consummation of the transactions contemplated hereby at the earliest
possible date. Neither Western nor West Coast shall take, or cause or to
the best of its ability permit to be taken, any action that would
substantially delay or impair the prospects of completing the transactions
contemplated hereby.
5.3 Press Releases. Western and West Coast shall agree with each
other as to the form and substance of any press release related to this
Agreement or the transactions contemplated hereby, and consult with each
other as to the form and substance of other public disclosures which may
relate to the transactions contemplated by this Agreement, provided,
however, that nothing contained herein shall prohibit either party,
following notification to the other party, from making any disclosure which
it determines in good faith is required by law or regulation.
5.4 Disclosure Supplements. From time to time prior to the earlier
of the Phase III Closing or the termination of this Agreement, each party
shall promptly supplement or amend any materials Previously Disclosed and
delivered to the other party pursuant hereto with respect to any matter
hereafter arising which, if existing, occurring or known at the date of
this Agreement, would have been required to be set forth or described in
materials Previously Disclosed to the other party or which is necessary to
correct any information in such materials which has been rendered
materially inaccurate thereby; no such supplement or amendment to such
materials shall be deemed to have modified the representations, warranties
and covenants of the parties for the purpose of determining whether the
conditions set forth in Article VI hereof have been satisfied.
5.5 Failure to Fulfill Conditions. Each party will promptly inform
the other party of any facts applicable to it that would be likely to
prevent or materially delay approval of the transactions contemplated
hereby by any governmental authority or third party or which would
otherwise prevent or materially delay completion of the transactions
contemplated hereby. Western will promptly advise West Coast in writing if
either (i) it has made a final determination that it will not agree to be
bound by the terms of the shareholder agreement referred to in Section 2.3
hereof or (ii) that it has reached an agreement with B&PB which does not
require Western to be bound by the terms of such shareholder agreement in
order to consummate that transactions contemplated hereby.
5.6 Notice of Material Adverse Change in B&PB. Western will promptly
give notice to West Coast in writing if it believes that there has been a
material adverse change in the financial condition, results of operation,
business or prospects of B&PB as set forth in Section 6.2(c) hereof.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - Western and West Coast. The respective
obligations of Western and West Coast to effect the transactions
contemplated by this Agreement shall be subject to satisfaction of the
following conditions at or prior to each of the Effective Times set forth
in Section 2.3 hereof, as the case may be:
(a) All corporate or similar action necessary to authorize the
execution and delivery of this Agreement and consummation of the
transactions contemplated hereby shall have been duly and validly taken by
Western and West Coast.
(b) All consents, approvals and non-objections as may be required for
the consummation of the purchase of the Phase I Stock, the Phase II Stock
or the Phase III Stock, as applicable, from the Superintendent, the FDIC,
the FRB and any other state or federal governmental agency, department or
body, the consent, approval or non-objection of which is required for the
consummation of the transactions contemplated hereby shall have been
received and all notice periods and waiting periods required after the
granting of any such approvals shall have passed and all such approvals
shall remain in full force and effect.
(c) There shall have been obtained all permits, consents, waivers,
clearances, approvals and authorizations of all third parties which are
necessary in connection with the consummation of the transactions
contemplated hereby the failure of which to obtain would have a material
adverse effect on the ability of Western or West Coast to consummate the
transactions contemplated hereby, and none of such permits, consents,
waivers, clearances, approvals and authorizations shall contain any term or
condition which would materially impair the value of the B&PB Stock to
Western.
(d) Neither Western nor West Coast shall be subject to any statute,
rule, regulation, order or decree which shall have been enacted, entered,
promulgated or enforced by any governmental or judicial authority which
prohibits, restricts or makes illegal consummation of the transactions
contemplated hereby.
(e) B&PB shall have given its written consent to the purchase by
Western of each of the Phase I Stock, the Phase II Stock and of the Phase
III Stock, as the case may be (the "Consent"), as required by the terms of
that certain shareholder agreement referred to in Section 2.3 hereof.
6.2 Conditions Precedent - Western. All obligations of Western under
this Agreement shall be subject to the fulfillment of each of the following
conditions at or prior to each of the Effective Times set forth in Section
2.3 hereof, as the case may be, except to the extent any such conditions
are expressly waived in writing by Western:
(a) All of the representations and warranties made by West Coast
herein are true as of the date hereof and shall likewise be true in all
material respects as of each of the Effective Times as set forth in
Section 2.3 hereof, as the case may be, as if made at and as of such date
(or on the date when made in the case of any representation and warranty
which specifically relates to an earlier date), provided, however, that
notwithstanding anything to the contrary, this Section 6.2(a) shall be
deemed to have been satisfied even if such representations or warranties
are not true and correct unless the failure of any of the representations
or warranties to be so true and correct (without reference to any
limitation as to materiality or knowledge contained in such representations
and warranties) could have, individually or in the aggregate, a material
adverse effect on the ability of West Coast to consummate the sale of the
Phase I Stock, the Phase II Stock or the Phase III Stock.
(b) West Coast shall have performed or complied with all covenants
and agreements required of it by this Agreement, except to the extent such
nonperformance would not have, individually or in the aggregate, a material
adverse effect on the ability of West Coast to consummate the sale of the
Phase I Stock, the Phase II Stock or the Phase III Stock.
(c) There shall have been no material adverse change in the financial
condition, results of operation, business or prospects of B&PB following
the date hereof other than changes resulting from or attributable to or
resulting from changes in laws, regulations, generally accepted accounting
principles, or interpretations thereof, that affect the banking industry
generally.
6.3 Conditions Precedent - West Coast. All obligations of West Coast
hereunder shall be subject to the fulfillment of each of the following
conditions at or prior to each of the Effective Times set forth in Section
2.3 hereof, as the case may be, except to the extent any such conditions
are expressly waived in writing by West Coast:
(a) All of the representations and warranties made by Western in the
Agreement are true as of the date hereof and shall likewise be true in all
material respects as of each of the Effective Times as set forth in Section
2.3 hereof, as the case may be, as if made at and as of such date (or on
the date when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however, that
notwithstanding anything to the contrary, this Section 6.3(a) shall be
deemed to have been satisfied even if such representations or warranties
are not true and correct unless the failure of any of the representations
or warranties to be so true and correct (without reference to any
limitation as to materiality or knowledge contained in such representations
and warranties) could have, individually or in the aggregate, a material
adverse effect on the ability of Western to consummate the purchase of the
Phase I Stock, the Phase II Stock or the Phase III Stock.
(b) Unless waived prior to or at each of the Effective Times as set
forth in Section 2.3 hereof, as the case may be, Western shall have
performed or complied with all covenants and agreements required by the
Agreement, except to the extent such nonperformance would not have,
individually or in the aggregate, a material adverse effect on the ability
of Western to consummate the purchase of the Phase I Stock, the Phase II
Stock or the Phase III Stock.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated:
(a) at any time on or prior to the Effective Time of the Phase III
Closing, by the mutual consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time of the Phase III
Closing, by Western in writing if West Coast has, or by West Coast in
writing if Western has, breached (and such breach has not been waived in
writing) (i) any covenant or undertaking contained herein, which breach,
individually or in the aggregate, would have a material adverse effect on
West Coast's ability to consummate the transactions contemplated hereby (if
the breach is by West Coast) or on Western's ability to consummate the
transactions contemplated hereby (if the breach is by Western), or (ii) any
representation or warranty contained herein, which breach (without
reference to any limitation as to materiality or knowledge contained in
such representation or warranty), individually or in the aggregate, would
have a material adverse effect on West Coast's ability to consummate the
transactions contemplated hereby (if the breach is by West Coast) or on
Western's ability to consummate the transactions contemplated hereby (if
the breach is by Western), in any case if such breach has not been cured by
the earlier of ten (10) business days after the date on which written
notice of such breach is given to the party committing such breach or the
Effective Time of the next closing to occur as set forth in Section 2.3
hereof;
(c) at any time by Western in writing, if any of the applications for
prior approval referred to in Section 5.1 hereof are denied or are approved
contingent upon the satisfaction of any condition or requirement which, in
the reasonable opinion of Western, would so materially adversely affect the
business or economic benefits of the transactions contemplated by this
Agreement as to render consummation of such transactions unduly burdensome,
and the time period for appeals and requests for reconsideration has run;
(d) by West Coast in writing, if (i) the Phase I Closing has not
occurred by March 8, 1996 or (ii) the Phase III Closing has not occurred by
November 15, 1996;
(e) by any party hereto in writing, if Phase II Closing has not
occurred by March 29, 1996;
(f) by any party hereto in writing, if (i) Western advises West Coast
in writing pursuant to Section 5.5 hereof that it will not agree to be
bound by the terms of the shareholder agreement referred to in Section 2.3
hereof or (ii) Western gives West Coast the notice referred to in Section
5.6 hereof; and
(g) at any time by any party hereto in writing if such party is not
in default hereunder and such party determines in good faith that any
condition precedent to such party's obligations to consummate the
transactions contemplated hereby is or would be impossible to satisfy, and
such condition is not waived by such party.
7.2 Effect of Termination. In the event that this Agreement is
terminated pursuant to Section 7.1 hereof, this Agreement shall become void
and have no effect, except that (i) the provisions relating to expenses set
forth in 8.1 hereof shall survive any such termination and (ii) a
termination pursuant to Section 7.1(b), (d) or (e) shall not relieve the
any party from liability for willful breach of any covenant, undertaking,
representation or warranty giving rise to such termination.
7.3 Survival of Representations, Warranties. All representations and
warranties of the parties hereto shall expire on, and be terminated and
extinguished at each of the Effective Times as set forth in Section 2.3
hereof but only as to the shares of the B&PB Stock purchased as of each
such Effective Time; provided, however, the representations and warranties
made by West Coast in Section 3.2 hereof shall survive all such Effective
Times and shall expire on, and be terminated and extinguished at, the date
which is one (1) year after the Effective Time of the Phase III Closing
(the "Termination Date").
7.4 Waiver. Each party hereto by written instrument signed by an
executive officer of such party, may at any time extend the time for the
performance of any of the obligations or other acts of the other party
hereto and may waive (i) any inaccuracies of the other party in the
representations or warranties contained in this Agreement, or any document
delivered pursuant hereto, (ii) compliance with any of the covenants,
undertakings or agreements of the other party or, to the extent permitted
by law, satisfaction of any of the conditions precedent to its obligations
contained herein or (iii) the performance by the other party of any of its
obligations set forth herein or therein.
7.5 Amendment or Supplement. This Agreement may be amended or
supplemented at any time by mutual agreement of Western and West Coast in a
writing executed by the parties hereto.
ARTICLE VIII
EXPENSES AND INDEMNIFICATION
8.1 Expenses. Each party hereto shall bear and pay all costs and
expenses incurred by it in connection with the transactions contemplated by
this Agreement, including fees and expenses of its own financial
consultants, accountants and counsel, provided that in the event of a
termination of this Agreement resulting from a breach of a representation,
warranty, covenant or undertaking, the party committing such breach shall
be liable for the reasonable documented out-of-pocket expenses of the other
party without prejudice to any other remedies as may be available to the
non-breaching party in an aggregate amount not to exceed Twenty-Five
Thousand Dollars and No Cents ($25,000.00). Such amount shall be paid by
the breaching party within five (5) business days of receipt of written
documentation in accordance with this Section 8.1.
8.2 Indemnification of Western. After the Effective Time of the
Phase I Closing and subject to Sections 7.3, 8.4 and 8.5 hereof, West Coast
shall indemnify and hold Western, and its successors, assigns, officers,
members and employees, harmless from and against any and all claims,
losses, damages, costs, assessments, judgments, awards, liabilities and
expenses ("Losses") resulting from, arising out of or in connection with a
material breach of any representation or warranty made by West Coast in
Section 3.2 as of such Effective Time or in any document delivered as of
such Effective Time by West Coast in connection therewith and as of each
such subsequent Effective Time.
8.3 Third Party Claims. The obligations of the indemnifying
person(s) hereunder with respect to claims resulting from the assertion of
any liability by third parties shall be subject to the following terms and
conditions:
(a) The indemnified person(s) shall promptly give written notice to
the indemnifying person(s) of any assertion of liability by a third party
which might give rise to a claim by the indemnified person(s) against the
indemnifying person(s) based on the indemnity agreements contained in this
Article VIII, stating the nature and basis of said assertion and the amount
thereof, to the extent known. No indemnification provided for herein shall
be available to any indemnified person who shall fail to give such notice,
if the indemnifying person(s) was/were unaware of the assertion of
liability to which such notice would have related and was/were prejudiced
by the failure to give the notice.
(b) In the event any action, suit or proceeding is brought against the
indemnified person(s) with respect to which the indemnifying person(s) may
have liability under any indemnity agreement contained in this Article
VIII, the action, suit or proceeding shall, upon the written agreement of
the indemnifying person(s) that it/they is/are obligated to indemnify under
the indemnity agreement contained in this Article VIII, be defended
(including all proceedings on appeal or review which counsel for the
defendant shall deem appropriate) by the indemnifying person(s). The
indemnified person(s) shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of such indemnified person(s) unless (i) the employment
of such counsel shall have been authorized by the indemnifying person(s) in
connection with the defense of such action, suit or proceeding, (ii) the
indemnifying person(s) shall not have agreed, promptly after the notice to
it/them provided in subsection (a) above, that it/they is/are obligated to
indemnify under any indemnity agreement contained in this Article VIII or
(iii) such indemnified person(s) shall have reasonably concluded that such
action, suit or proceeding involves to a significant extent matters beyond
the scope of any applicable indemnity agreement contained in this Article
VIII, or that there may be defenses available to it (or them) that are
different from or additional to those available to the indemnifying
person(s), in any of which events the indemnifying person(s) shall not have
the right to direct the defense of such action, suit or proceeding on
behalf of the indemnified person(s) and that portion of such fees and
expenses reasonably related to matters covered by the indemnity agreements
contained herein shall be borne by the indemnifying person(s), provided,
however, that the indemnifying person(s) shall not be required to pay for
more than one firm of counsel to represent the indemnified person(s) in any
such claim, action, suit or proceeding. The indemnified and indemnifying
person(s) shall be kept fully informed of such action, suit or proceeding
at all stages thereof whether or not they are so represented. The
indemnifying and the indemnified person(s) shall make available to the
other persons and their attorneys and accountants all books and records of
the indemnifying person(s) relating to such proceedings or litigation and
the parties hereto agree to render to each other such assistance as they
may reasonably require of each other in order to ensure the proper and
adequate defense of any such action, suit or proceeding. The parties
hereto agree to cooperate in such a manner as to preserve in full the
confidentiality of all confidential business records and the attorney-
client and work-product privileges. In connection therewith, each party
agrees that (x) it will use its reasonable efforts, in any action, suit or
proceeding in which it has assumed or participated in the defense, to avoid
production of confidential business records and (y) all communications
between any party hereto and counsel responsible for or participating in
the defense of any action, suit or proceeding shall, to the extent
possible, be made so as to preserve any applicable attorney-client or work-
product privilege.
(c) The indemnifying person(s) shall not make any settlement of any
claims relating to Losses covered by the indemnity agreements contained in
this Article VIII without the written consent of the indemnified person(s),
which consent shall not be unreasonably withheld unless the indemnified
person(s) shall have reasonably concluded that the claim or settlement
thereof involves to a significant extent matters beyond the scope of any
applicable indemnity agreement contained in this Article VIII.
8.4 Limitations on Indemnification. (a) Notwithstanding anything
contained herein to the contrary, no indemnifying person(s) shall have any
liability under this Article VIII for any Losses or other liabilities to
the extent covered by the proceeds of any insurance carried by the
indemnified person
(b) No indemnified person(s) shall be entitled to make a claim against
any indemnifying person pursuant to this Article VIII unless notice of such
claim shall have been given in accordance with Sections 8.3(a) and 9.3
hereof prior to the Termination Date as provided in Section 7.3 hereof.
8.5 Maximum Liability. The maximum liability of the indemnifying
person(s) for Losses and other liabilities under this Article VIII and any
expenses incurred in connection with investigating, defending or asserting
any claim, action, suit or proceeding incident to any matter indemnified
against hereunder, shall not exceed an amount equal to the purchase
consideration paid by Western for the B&PB Stock.
ARTICLE IX
MISCELLANEOUS
9.1 Entire Agreement. This Agreement, including the exhibits and
annexes hereto and the documents referred to herein, contains the entire
agreement between the parties with respect to the transactions contemplated
hereby and supersedes all prior arrangements or understandings with respect
thereto, written or oral, other than documents referred to herein or
therein. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and thereto and their
respective successors. Except as specifically provided herein, nothing in
this Agreement , expressed or implied, is intended to confer upon any
party, other than the parties hereto and thereto, and their respective
successors, any rights, remedies, obligations or liabilities.
9.2 Assignment. West Coast may not assign any of its rights or
obligations under this Agreement to any other person. Upon receipt by West
Coast of documentation supporting the assignees ability to consummate the
transactions contemplated hereby and its agreement to be bound by the
obligations of Western hereunder in form reasonably satisfactory to West
Coast, Western Acquisitions, L.L.C. may assign, in whole or in part, its
rights and/or obligations under this Agreement to Financial Institution
Partners, L.P., a Delaware limited partnership, having a principal place of
business at 1110 Lake Cook Road, Suite 165, Buffalo Grove, Illinois Upon an
assignment by Western Acquisitions, L.L.C. pursuant to this Section 9.2,
Western Acquisitions, L.L.C. shall be released and forever discharged to
the extent of such assignment of any and all obligations and or
liabilities arising out of or under this Agreement, including but not
limited to the obligation to pay the purchase consideration for any of the
B&PB Stock as set forth in Section 2.2 hereof.
9.3 Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally, delivered by facsimile (with confirmation) or sent by overnight
express or by certified mail, postage prepaid, addressed as follows:
If to Western:
Western Acquisitions, L.L.C.
1110 Lake Cook Road, Suite 165
Buffalo Grove, Illinois 60089
Attn: Eric D. Hovde
Fax: (202) 775-8365
With a required copy to:
Levi, Perry, Simmons & Loots, P.C.
805 Fifteenth Street, N.W., Suite 1101
Washington, D.C. 20005
Attn: Richard J. Perry, Jr., Esquire
Fax: (202) 289-0184
If to West Coast:
West Coast Bancorp
4770 Campus Drive, Suite 250
Newport Beach, California 92660
Attention: President
Fax: (714) 442-9339
With a required copy to:
Manatt Phelps Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attn: William T. Quicksilver, Esquire
Fax: (310) 312-4224
9.4 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
9.5 Interpretations. Headings are for the convenience of the parties
and shall not amend or modify any term or condition hereof.
9.6 Severability.. If any provision of this Agreement shall be
determined by a court of competent jurisdiction to be invalid or
unenforceable, such determination shall not affect the remaining provisions
of this Agreement, all of which shall remain in full force and effect.
9.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to
agreements made and entirely to be performed within such jurisdiction
except to the extent federal law may be applicable.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement as of the date first above
written.
WESTERN ACQUISITIONS, L.L.C.
/s/ Eric D. Hovde
By: ----------------------------------------
- --
Name: Eric D. Hovde
WEST COAST BANCORP
/s/ John B. Joseph
By: ----------------------------------------
- --
Name: John B. Joseph
Title: Chairman
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
West Coast Bancorp
Newport Beach, California:
We consent to incorporation by reference in the registration statement (No.
33-25859) on Form S-8 of West Coast Bancorp of our report dated February
29, 1996 relating to the consolidated balance sheets of West Coast Bancorp
and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, changes in shareholders' equity, and
cash flows for each of the years in the three-year period ended December
31, 1995 which report appears in the December 31, 1995 Annual Report on
Form 10-K of West Coast Bancorp.
/s/ KPMG Peat Marwick LLP
- --------------------------------------------
Orange County, California
March 29, 1996
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