<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
- ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ to _________________
Commission file number 0-10794
-------
STERLING WEST BANCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3712404
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3287 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90010
- ------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(213) 384-4444
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has field 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
----- -----
Number of shares outstanding of the registrant's sole class of common stock at
April 30, 1997: 1,710,214
This Form 10Q contains 28 pages.
1
<PAGE> 2
STERLING WEST BANCORP
MARCH 31, 1997 QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operations
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
2
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Sterling West Bancorp and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 13,545,000 $ 24,322,000
Securities held to maturity 12,241,000 7,224,000
(fair value of $12,108,000 at March 31, 1997
and $7,204,000 at December 31, 1996)
Loans receivable, net 67,586,000 67,629,000
Real estate held for sale 2,322,000 2,749,000
Fixed assets
Land and building 246,000 243,000
Furniture and equipment 3,120,000 3,088,000
Leasehold improvements 1,408,000 1,408,000
------------- -------------
4,774,000 4,739,000
Less: accumulated depreciation (3,648,000) (3,583,000)
------------- -------------
1,126,000 1,156,000
Accrued interest receivable 693,000 589,000
Other assets 1,026,000 892,000
------------- -------------
$ 98,539,000 $ 104,561,000
============= =============
LIABILITIES
Deposits
Demand $ 25,379,000 $ 32,541,000
Savings and NOW 48,689,000 50,786,000
Money market 6,616,000 5,778,000
Time deposits $100,000 or greater 6,310,000 3,720,000
Other time deposits 3,032,000 3,361,000
------------- -------------
90,026,000 96,186,000
Other liabilities 1,193,000 1,114,000
------------- -------------
91,219,000 97,300,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock - authorized 5,000,000
shares without par value; issued and
outstanding 1,710,214 shares in 1997 and 1996 $ 8,686,000 8,686,000
Accumulated deficit, restricted (1,366,000) (1,425,000)
------------- -------------
7,320,000 7,261,000
------------- -------------
$ 98,539,000 $ 104,561,000
============= =============
</TABLE>
3
<PAGE> 4
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Sterling West Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, March 31,
1997 1996
------------- -------------
<S> <C> <C>
Interest income
Loans $1,720,000 $1,964,000
Federal funds sold 165,000 175,000
Securities held to maturity 159,000 115,000
---------- ----------
2,044,000 2,254,000
Interest expense
Savings and NOW 473,000 539,000
Money market 32,000 10,000
Time deposits $100,000 or greater 77,000 65,000
Other time deposits 22,000 17,000
Notes payable -- 26,000
---------- ----------
604,000 657,000
---------- ----------
Net interest income 1,440,000 1,597,000
Provision for loan losses 389,000 61,000
---------- ----------
Net interest income after provision
for loan losses 1,051,000 1,536,000
Non-interest income
Service charges on deposit accounts 174,000 95,000
Gain on sale of SBA loans 228,000 --
Other 34,000 101,000
---------- ----------
436,000 196,000
Non-interest expenses
Salaries, wages and employee benefits 714,000 785,000
Occupancy 203,000 221,000
Furniture and equipment 53,000 57,000
Real estate operations, net -- 134,000
Other 456,000 469,000
---------- ----------
1,426,000 1,666,000
---------- ----------
Income before income taxes 61,000 66,000
Income tax provision 2,000 30,000
---------- ----------
Net income $ 59,000 $ 36,000
========== ==========
Net income per share $ 0.03 $ 0.02
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Sterling West Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 59,000 $ 36,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 65,000 43,000
Provision for loan losses 389,000 61,000
Provision for real estate held for sale 25,000 100,000
Increase in accrued interest receivable (104,000) (22,000)
(Increase) decrease in other assets (134,000) 24,000
Increase in other liabilities 79,000 407,000
------------ ------------
Total adjustments: 320,000 613,000
------------ ------------
Net cash provided by operating activities 379,000 649,000
Cash flows from investing activities
Proceeds from maturities of securities 500,000 --
Purchase of securities (5,517,000) --
Net (increase) decrease in loans receivable (793,000) 154,000
Proceeds from sale of real estate 849,000 1,666,000
Purchase of fixed assets (35,000) (29,000)
------------ ------------
Net cash provided by investment(used in)
investing activities (4,996,000) 1,791,000
Cash flows from financing activities
Net decrease in demand deposits, savings
and other money market accounts (8,420,000) (22,995,000)
Net increase (decrease) in time deposits 2,260,000 (99,000)
Net decrease in note payable -- (975,000)
------------ ------------
Net cash used in financing activities (6,160,000) (24,069,000)
------------ ------------
Net decrease in cash and cash equivalents (10,777,000) (21,629,000)
Cash and cash equivalents at beginning of period 24,322,000 35,835,000
------------ ------------
Cash and cash equivalents at end of period $ 13,545,000 $ 14,206,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NOTE 1. PRESENTATION OF FINANCIAL INFORMATION
The accompanying unaudited consolidated interim financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information and are in compliance with the instructions
for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial
statements. The accompanying unaudited consolidated interim financial statements
should be read in conjunction with the financial statements and the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations filed with the Annual Report on Form 10-K for the year ended December
31, 1996 of Sterling West Bancorp (the "Company"). In the opinion of Management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. The Results of Operations
for the three months ended March 31, 1997, are not necessarily indicative of
results that may be expected for the entire year ending December 31, 1997.
Certain prior period amounts have been reclassified to conform to the current
period presentation.
NOTE 2. COMMITMENTS TO EXTEND CREDIT
In the ordinary course of business the Company enters into commitments to extend
credit to its customers. These commitments are not reflected in the accompanying
consolidated financial statements and Management does not expect any loss to
result from such commitments. As of March 31, 1997 and December 31, 1996 the
Company had entered into the following commitments:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Letters of Credit $41,000 $255,000
Undisbursed Loan Commitments $9,017,000 $8,188,000
</TABLE>
NOTE 3. EARNINGS PER SHARE
Earnings per share amounts have been computed using the weighted average number
of common shares and dilutive common equivalent shares outstanding. The number
of such primary shares are 1,710,214 for the periods ended March 31, 1997 and
December 31, 1996.
NOTE 4. CASH AND CASH EQUIVALENTS
The cash and cash equivalents at March 31, 1997 and December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Cash & non-interest bearing deposits $4,592,000 $5,929,000
Federal funds sold $8,953,000 $18,393,000
</TABLE>
6
<PAGE> 7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations is intended to provide a better understanding of the material changes
in trends relating to the financial condition, results of operations, and
liquidity of the Company. The discussion and analysis for the first quarters
ended March 31, 1997 and March 31, 1996, primarily reflect the operations of
Sterling Bank ("the Bank"). Sterling Business Credit, Inc. ("Business Credit")
made no material contribution to the financial results for the quarters ended
March 31, 1997 and 1996, respectively. The Bank and Business Credit are
wholly-owned subsidiaries of the Company. Unless otherwise specified, the
discussion below relates to the Company's consolidated financial condition and
operations.
Discussions of certain matters contained in this Quarterly Report on Form 10-Q
may constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act") and as such, may
involve risks and uncertainties. These forward-looking statements relate to,
among other things, expectations of the business environment in which the
Company operates, projections of future performance, perceived opportunities in
the market and statements regarding the Company's mission and vision. The
Company's actual results, performance or achievements may differ significantly
from the results, performance, or achievements expressed or implied in such
forward-looking statements. For discussion of the factors that might cause such
a difference, see "Item 1. Business -- Factors That May Affect Future Results"
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
Financial Condition
At March 31, 1997, assets of the Company were $98,539,000, a decrease of $6.0
million or 5.8% from $104,561,000 at December 31, 1996. The change in assets was
primarily attributable to decreases in cash and cash equivalents and real estate
held for sale, offset by an increase in securities held to maturity.
Cash and cash equivalents decreased to $13.5 million at March 31, 1997 from
$24.3 million at December 31, 1996. Securities held to maturity increased to
$12.2 million at March 31, 1997 from $7.2 million at December 31, 1996. This
shift is primarily related to the decision by the asset-liability committee of
the Bank, to employ excess liquidity at the beginning of the first quarter in
securities held to maturities. See Liquidity and Capital Resources discussions
below.
Total nonperforming assets at March 31, 1997 increased by 31.0% from December
31, 1996, and 14.5% from March 31, 1996, and represented 6.25%, 4.51% and 5.45%
of total assets, respectively for those periods. The following table summarizes
the nonperforming assets of the Company at the dates indicated:
<TABLE>
<CAPTION>
(Dollars in thousands) March 31, December 31, March 31,
1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
Nonaccrual loans $3,839 $1,964 $1,629
Real estate held for sale $2,322 $2,749 $3,750
------ ------ ------
Total nonperforming assets $6,161 $4,713 $5,379
====== ====== ======
Nonperforming assets as a % of total assets 6.25% 4.51% 5.45%
Nonaccrual loans as a % of total loans receivable 5.57% 2.85% 2.30%
</TABLE>
7
<PAGE> 8
Financial Condition (continued)
Nonaccrual loans increased to $3.8 million at March 31, 1997 from $1.9 million
and $1.6 million at December 31, 1996 and March 31, 1996, respectively. The
increase was the result of 2 loans at the Bank that were placed on nonaccrual
during the first quarter of 1997. In addition, nonperforming assets included
approximately $1.1 million of remaining Business Credit assets. Business Credit
has distributed substantially all of its assets to Sterling West Bancorp
effective March 31, 1997.
Real estate held for sale at March 31, 1997, is stated at the estimated fair
value less estimated selling costs. Management expects that further foreclosures
may occur and no assurance can be given that additional losses will not occur in
excess of existing allowances.
Liquidity
The Company's most liquid assets are cash and cash equivalents and its
investment portfolio. The levels of these assets are dependent on the Company's
operating, financing and investing activities during any given period. The
liquidity needs of the Company primarily relate to the Bank. The liquidity needs
of Sterling West Bancorp at this time are minimal.
The Bank's primary sources of funds are deposits and principal and interest
payments on its loan and securities portfolios. While maturities and scheduled
amortization of loans and securities are, in general, a predictable source of
funds, deposit flows and loan prepayments are greatly influenced by general
interest rates, economic conditions and competition.
The Bank had available $8.9 million of federal funds sold and a $12.2 million
investment portfolio at March 31, 1997, all of which could be used as immediate
sources of funds. In addition, the Bank has access to a $3.5 million federal
funds purchase line of credit from Community Bank, subject to cancellation,
which the Bank can use to meet short term needs. The Bank also has access to
funds through the Federal Reserve Bank discount window. The Bank maintained at
March 31, 1997, approximately 26% of its total assets in liquid assets.
Total deposits decreased by $6.2 million, or 6.4%, consisting of a $7.2 million
decrease in demand deposits and a $2.1 million decrease in savings and NOW
accounts, which were offset by a $0.8 million increase in money market accounts
and a $2.6 million increase in time deposits $100,000 or greater, at March 31,
1997 as compared to December 31, 1996. The decrease, particularly in demand
deposits was primarily related to an outflow of demand deposits to federal and
local taxing authorities from the Bank's customers during the first quarter of
1997 as compared to the fourth quarter of 1996. Average demand deposits remained
relatively unchanged at $27.1 million for the first quarter of 1997 as compared
to the fourth quarter of 1996. The additional changes in deposit accounts are
results of what management believes to be normal fluctuations in these accounts.
Capital Resources
Management seeks to maintain a level of capital adequate to support asset growth
and credit risks and to ensure that the Company is within established regulatory
guidelines and industry standards. The Company and the Bank are required to
achieve certain risk-based capital standards and leverage capital standards. The
risk-based capital standards establish capital requirements that are more
sensitive to risk differences
8
<PAGE> 9
Capital Resources (continued)
between various assets, consider off balance sheet activities in assessing
capital adequacy, and minimize the disincentive to holding liquid, low risk
assets.
The following table sets forth the regulatory capital ratios of the
Company and the Bank at March 31, 1997 (dollars in thousands):
<TABLE>
<CAPTION>
Company Bank
------- ----
Risk Weighted Amount Ratio Amount Ratio
- ------------- -------- ----- -------- -----
<S> <C> <C> <C> <C>
Tier 1 Capital $ 7,320 10.10% $ 7,566 10.50%
Tier 1 Capital
minimum requirement $ 2,899 4.00% $ 2,882 4.00%
-------- ----- -------- -----
Excess $ 4,421 6.10% $ 4,684 6.50%
Total capital $ 8,232 11.36% $ 8,472 11.76%
Total capital
minimum requirement $ 5,797 8.00% $ 5,764 8.00%
-------- ----- -------- -----
Excess $ 2,435 3.36% $ 2,708 3.76%
Risk-weighted assets $ 72,463 $ 72,053
Average Total Assets
Tier 1 capital $ 7,320 7.12% $ 7,566 7.47%
Tier 1 capital
minimum
requirement $ 4,114 4.00%
-------- -----
Memorandum
requirement $ 6,839 6.75%
-------- -----
Excess $ 3,206 3.12% $ 727 0.72%
Average total assets $102,838 $101,314
</TABLE>
The leverage ratio consists of tangible Tier 1 capital divided by total average
assets. As of March 31, 1997, the Company and the Bank had leverage ratios of
7.12% and 7.47%, respectively.
In the year 1995, the Board of Directors of the Company and the Bank entered
into Memorandums of Understanding (collectively, the "Memorandums") with the
Federal Reserve Bank ("the FRB Memorandum"), the Federal Deposit Insurance
Corporation ("FDIC Memorandum) and the State Banking Department ("SBD
Memorandum"). Under these Memorandums, the Company, among other things, may not
directly or indirectly, acquire or sell any interest in any entity, line of
business, problem loans or other assets, without the prior written approval of
the Federal Reserve Bank; and may not pay cash dividends without the prior
written consent of the Federal Reserve Bank. The Bank is also required, among
other things, to maintain Tier 1 capital equal to or above 6.75% of total
assets; establish and
9
<PAGE> 10
Capital Resources (continued)
maintain an adequate allowance for loan losses; and not pay cash dividends
without the prior written consent of the FDIC and the California Superintendent
of Banks.
The Company and the Bank believe they are currently in full compliance, and
management believes that it can continue to comply with the terms of the FRB
Memorandum, the FDIC Memorandum and the SBD Memorandum, and otherwise meet
regulatory capital requirements, and that any actions taken to so comply in the
future will not have a material adverse effect on the Company's financial
condition or results of operations. However, failure to comply with any
Memorandum could result in regulatory action.
The Company expects that the ability of the Company to pay dividends in the
future will depend on continued profitability and the maintenance of acceptable
financial results.
Results of Operations
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the interest income earned on its loan
portfolio, investment securities and other earning assets, and its cost of
funds, consisting of interest paid on its deposits and borrowings. The Company's
operating results are also impacted by provisions for loan losses, and to a
lesser extent service charges on deposit accounts and other noninterest income.
In addition, the Company's operating expenses principally consist of salaries,
wages and employee benefits, occupancy expenses, real estate operations expense
and other general noninterest expenses. The Company's results of operations are
also significantly affected by general economic and competitive conditions,
particularly changes in interest rates and actions of regulatory authorities.
Net Income
During the first quarter of 1997, the Company had net income of $59,000 as
compared to net income of $36,000 for the first quarter of 1996. The improved
results for the 1997 period relates primarily to gains recognized on the sale of
SBA loans and reductions in non-interest expenses and income taxes, offset by an
increase in the provision for loan losses.
Net Interest Income
Net interest income is the difference between interest and fees received on
earning assets and interest paid on deposits and other sources of funds. The
Company's net interest income is affected by the change in the amount and mix of
interest-earning assets and interest-earning liabilities. It is also affected by
the change in the amount and mix of interest-earning assets and rates paid on
deposits and other borrowed funds. Net interest income decreased 9.9% for the
first quarter of 1997 as compared to the first quarter of 1996 from $1.6 million
to $1.4 million.. The decrease was due primarily to a decline in interest income
received on loans outstanding offset partially by lower interest expense paid on
interest bearing deposits in the 1997 period as compared to 1996.
10
<PAGE> 11
Allowance and Provision for Losses
The provision for loan losses is determined by management based upon the
Company's loan loss experience, the performance of loans in the Company's
portfolio, the quality of loans in the Company's portfolio, evaluation of
collateral for such loans, the economic conditions affecting collectibility of
loans, the prospects and financial condition of the respective borrowers or
guarantors and such other factors which in management's judgment deserve
recognition in the estimation of probable loan losses. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowance for loan losses. Such agencies may require the Bank to
recognize additions to the allowance or to take charge-offs (reductions in the
allowance) in anticipation of losses.
At March 31, 1997, the allowance for loan losses was $1.4 million or 1.98% of
total loans, as compared to $1.3 million or 1.83% of total loans at December 31,
1996 and $1.4 million or 2.00% of total loans at March 31, 1996. The allowance
for loan losses was 36% of nonaccrual loans at March 31, 1997 as compared to 64%
at December 31, 1996 and 86% at March 31, 1996. During the first three months of
1997, the Company made additions to the allowance of $389,000 compared to
$61,000 of additions during the same period in 1996. The increase in the
allowance during the first quarter of 1997 was the result of the increase in
nonaccrual loans during the period. Reductions from the allowance in the form of
net charge-offs amounted to $282,000 for the first three months of 1997 as
compared to $173,000 for the same period in 1996.
Taking into account economic trends in the condition of the loan portfolio
management believes that the allowance for loan losses at March 31, 1997 is
adequate to absorb known and inherent risks in the loan portfolio. However, no
assurance can be given that the Company will not incur additional losses on
these loans or that additional provisions for loan losses will not be required.
In addition, the Company has established a separate allowance for losses on real
estate held for sale which amounted to $0.1 million, at each of March 31, 1997,
December 31, 1996 and March 31, 1996. This allowance is carried as a reduction
of real estate held for sale. Further, the Company maintains an allowance for
losses on loan repurchases which amounted to $0.4 million at March 31, 1997,
$0.4 million at December 31, 1996 and $0.6 million at March 31, 1996. This
allowance is carried in Other Liabilities on the balance sheet. In determining
the amount of this allowance, the Company considered the exposure of the Company
to repurchases which takes into account the Company's past experience with
repurchases, the potential for future repurchases and any losses thereon.
Management believes that the allowance for losses on loan repurchases at March
31, 1997 is adequate to absorb future losses on loan repurchases. However, no
assurance can be given that the Company will not incur additional losses on such
repurchases.
Noninterest Income
Noninterest income for the first quarter of 1997 was $0.4 million compared to
$0.2 million for the same period in 1996. The increase was primarily due to a
$229,000 gain on the sale of SBA loans during the first quarter of 1997. In
addition, the Bank continues to benefit from increases in service charges
assessed on deposit accounts during the first quarter of 1997 as compared to the
same period in 1996.
11
<PAGE> 12
Noninterest Expenses
Noninterest expenses decreased 14.4% for the first quarter of 1997 to $1.4
million compared to $1.7 million for the same period in 1996. The reduction is
primarily a result of (i) lower costs associated with real estate operations and
(ii) continued savings achieved in salaries and employee benefits, as a result
of the continued downsizing of the Bank. In addition, the Company and the Bank
have benefited from lower cost expended on professional consulting and legal
fees, during the first quarter of 1997, as compared to the same period in 1996.
Income taxes
Income tax expense for the first quarter of 1997 amounted to $2,000 compared to
$30,000 for the first quarter in 1996. The provision for income taxes reflects
state minimum tax, which considers the effect of the net operating loss
carryforwards available for California Franchise Tax , as well as Federal Income
Tax purposes.
12
<PAGE> 13
PART II: OTHER INFORMATION
ITEM 1-5. Not applicable.
ITEM 6. Exhibits and Reports on 8-K .
(A) EXHIBITS:
EXHIBIT 10.31.1 -- Employment Agreement, dated January 2,
1997, between the Company and Allan E. Dalshaug.
EXHIBIT 10.21.3 -- Employment Agreement, dated January 2,
1997, between Sterling Bank and Joseph C. Carona.
EXHIBIT 27 -- Financial Data Schedule
(B) Report on Form 8-K: None.
SIGNATURES
Pursuant to the requirement 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.
STERLING WEST BANCORP
(Registrant)
DATED: May 13, 1997 By /s/ JOSEPH C. CARONA
---------------------
Joseph C. Carona
Chief Financial and
Accounting officer
13
<PAGE> 1
EXHIBIT 10.21.3
AGREEMENT
THIS AGREEMENT is made and entered into as of the 2ND DAY OF JANUARY
1997 by and between STERLING BANK, a California corporation, hereinafter
referred to as "Employer", and JOSEPH CARONA, hereinafter referred to as
"Employee" and replaces the agreement dated January 1, 1994.
The parties contract with reference to the following facts:
A. Employer desires to employ Employee as its President
and Employee desires to accept employment with Employer in such capacity.
B. The parties are willing to enter into an agreement
providing for such employment upon the terms and conditions hereinafter set
forth.
1. EMPLOYMENT. Employer hereby agrees to
employ and does hereby employ Employee, and Employee agrees to accept and hereby
accepts employment by Employer, on the terms and subject to the conditions set
forth in this Agreement.
2. COMPENSATION.
2.1 Salary. Employer agrees to pay to
Employee salary at the rate of One Hundred and Forty Thousand, Two Hundred and
Eighty dollars ($140,280.00). Increases in the salary rate shall be at the
discretion of the Board of Directors of Employer. Salary called for by this
Agreement shall be Prorated and paid out weekly, semi-monthly or monthly, as the
Employer normally pays salary to executive officers.
2.2 Bonus. Upon completion of each
fiscal year of Employer, Employer shall consider a bonus for Employee based upon
Employee's performance during the completed fiscal year and the overall
financial performance of Employer. Employer may award Employee bonuses based
upon such consideration, and intends to do so. However, Employer shall not be
obligated in any way whatsoever to grant such bonuses which shall be granted, if
at all, at the sole discretion of Employer.
3. DUTIES, TIME AND EFFORTS. Employee Shall
serve as President of Employer and as such, shall report to the Chairman of the
Board of Directors, and his duties shall include generally, but without
limitation, authority and responsibility for the whole and overall supervision
of the banking aspects of Employer's business, the managing of the portfolio of
loans and deposit liabilities and the procurement of new business for Sterling
Bank; and he shall also undertake such other reasonable duties similar
managerial nature as the Chairman may at any time or from time to time, direct
him to perform including, but not limited to, providing services to subsidiaries
and/or affiliates of Employer without additional compensation. Employee shall
devote his full productive time, energies and abilities to the proper and
efficient performance of Employer's business pursuant to the employment
hereunder. Employee shall at all times during the term hereof be furnished with
such office, stenographic and other necessary secretarial assistance, and such
other facilities, amenities and services as are suitable to Employee's duties
hereunder. Unless otherwise
22
<PAGE> 2
agreed to by Employer, the Employee's offices shall be maintained at the
premises of the principal office of the Employer in Los Angeles, California;
provided, however, that in connection with the performance of his duties and
responsibilities, the Employee acknowledges that he may be required to undertake
reasonable business traveling. Employee may not without the prior express
authorization of Employer's Board of Directors directly or indirectly during the
term of this Agreement engage in any activity competitive with the business of
Employer, whether acting alone, as an owner, shareholder, partner, or
consultant, as an officer, director, or employee of any other corporation, or
otherwise; provided, however, that nothing herein contained shall prevent
employee from purchasing and/or holding less than one percent (1%) of the issued
and outstanding stock of a publicly-held corporation.
4. VACATION. Employee shall be entitled to a vacation of
three (3) weeks during each twelve (12) month period of the term of this
Agreement. The date or dates of said vacation shall be determined by Employee
and the Chairman of Employer. If for any reason Employee does not take his full
three (3) weeks of vacation as provided above, he may carry over a maximum of
one (1) week into the following year, but if he does not use the carried over
vacation week in that year it shall expire. Therefore, under no circumstances
regardless of employees failure to take vacations, would he be entitled to more
than four (4) weeks vacation during any twelve (12) month period.
5. TERM
5.1 The term of employment shall commence upon
the date of this Agreement and terminate on the 31st day of December 1997 unless
sooner terminated pursuant to Section 5.4 below, or upon the happening of any of
the following events:
(a) Whenever Employer and Employee shall
otherwise mutually agree to termination;
(b) Conviction of Employee for any crime
involving a dishonest act or involving any behavior not expected of an executive
of a bank which would make the continuance of his employment detrimental to
Employer;
(c) Death of Employee;
(d) Disability of Employee not arising
out of an injury sustained while on Employer's business extending beyond ninety
(90) consecutive days or totaling more than ninety (90) days in any period of
three hundred sixty-five (365) days (not limited to any calendar or fiscal
year);
(e) Commission of a dishonest act by the
Employee in the course of his employment;
(f) For "good cause" as defined in Section
5.2 below and pursuant thereto.
(g) At Employee's sole option,
exerciseable at any time upon ninety (90) days written notice.
23
<PAGE> 3
5.2 Termination for Good Cause After Notice
and Failure To Cure. Employer may at any time during the term of this Agreement
terminate this Agreement for good cause by written notice to the Employee by
complying with the notice requirements and restriction in Section 5.3. Good
cause shall include, for purposes of illustration, but shall not be limited to
the following reasons:
(a) Persistent unwillingness or inability
to perform his duties.
(b) Persistent malfeasance, misfeasance
of nonfeasance in connection with the performance of his duties; such conduct to
be determined solely by the Employer.
(c) Willful and intentional acts having
the effect of injuring the reputation, business or business relationships of
Employer.
(d) Breach of any material provision of
this Agreement.
5.3 Notice Requirements and Restrictions.
Provided, however, and by restriction to the right of Employer set forth in
Section 5.2, in the event Employer contends that Employee is not performing the
services required by this Agreement or that it has good cause to terminate
Employee pursuant to Section 5.2 of this Agreement, Employer shall provide
Employee with a written notice specifying in reasonable detail the services or
matters which it contends Employee has not been adequately performing and why
Employer has good cause to terminate this Agreement and what Employee should do
to adequately perform his obligations hereunder. If Employee performs the
required services within seven (7) days of receipt of the notice or immediately
modifies his performance to correct the matters complained of, Employee's breach
will be deemed cured and he shall not be terminated; provided, however, if the
nature of the service not performed by the Employee or the matters complained of
are such that more than seven (7) days are reasonably required to perform the
required service or to correct such matters, then Employee's breach will be
deemed cured if Employee commences to perform such services or to correct such
matters within said seven (7) day period and thereafter diligently prosecutes
such performance or correction to completion. If in the opinion of the Employer
the Employee does not perform the required services or modify his performance to
correct the matters complained of within said seven (7) day period, Employer
shall have the right by written notice to terminate this Agreement at the end of
said seven (7) day period.
If Employer terminates the Employee under the provisions in Section
5.2, for good cause as the Employer shall in its sole discretion determine, the
Employee shall receive an amount equal to ninety (90) days of salary, at the
then current rate, subject to deduction for all required federal or state taxes,
on the date of such termination, in lieu of any and all other compensation.
5.4 Termination of Employment Without Cause
Because of Governmental Restrictions on Continued Operations of Employer or
Bank.
The Employee understands that the conduct of Employer's business and the banking
business is, and during the term of this Agreement will be, subject to
regulation by law and by rules, regulations, permits and licenses of various
governmental bodies. If the continuation of Employer's business or the
continuation of the banking business by Sterling Bank is for any reason whatever
prohibited, prevented, or substantially restricted by a Court of law or such
governmental bodies, Employer shall
24
<PAGE> 4
thence forward have the right, at its option, to terminate this Agreement by
giving written notice of such termination without liability other than for such
compensation as shall then have accrued but not yet been paid.
6. EMPLOYERS AUTHORITY. To the extent that the following
is not inconsistent with the other provisions of this Agreement, Employee agrees
to observe and comply with the rules and regulations of Employer as adopted by
Employer's Board of Directors respecting performance of his duties and to carry
out and perform orders, directions and policies of Employer as they may be, from
time to time, stated to him either orally or in writing.
7. EXPENSES AND FRINGE BENEFITS.
7.1 Employer and Employee agree that Proper
discharge of the duties imposed upon Employee shall require the frequent use of
an automobile. The Corporation hereby agrees that it shall provide Employee with
a standard mid-size automobile, chosen by the Employee and Employer and suitable
for use by a President of an institution such as Employer. Such automobile shall
be purchased or leased by Employer and provided to Employee for his exclusive
use, or at the option of Employee, Employee shall purchase or lease an
automobile and the reasonable cost thereof shall be reimbursed by Employer for
so long as he is employed hereunder. Notwithstanding the foregoing, Employer
shall not be required to expend more than Five Hundred Dollars ($500.00) per
month in connection with such purchase, lease or reimbursement inclusive of
insurance, license, taxes and operating expenses. Employee may, at his option,
receive the aforementioned sum of $500.00 as an automobile allowance, in lieu of
being provided with a bank-owned automobile.
7.2 Employer shall pay or reimburse all expenses
reasonably incurred by Employee in discharge of Employee's duties hereunder.
Such expenses shall include, without limitation, the following:
(a) Education expenses incurred for the purpose of
maintaining or improving Employee's skills;
(b) Expenses for travel, lodging, and related
expenses in connection with conventions or meetings, attendance at which is
necessary or appropriate in connection with the performance by Employee of his
duties required hereunder;
(c) Expenses for meals, entertainment and similar
items reasonably incurred by Employee in connection with the business of the
Employer; and
(d) Monthly dues for employees membership in the
Jonathan Club.
(e) Such other expenses incurred by the Employee
reasonably related to the discharge by Employee of his duties as set forth
herein.
7.3 Employer shall require, as a condition of payment or
reimbursement for any item pursuant to Section 7.2, that Employee furnish
Employer with reasonable documentation evidencing that the expense has been
incurred and the relationship of such item to the business of Employer or the
duties of Employee.
25
<PAGE> 5
7.4 Notwithstanding any provisions herein to the
contrary, Employer shall provide to Employee all other Employee fringe benefits
which are generally provided for or made available to the employees of Employer.
Without limiting the generality of the preceding sentence, Employee shall be
entitled to participate in any group life and health insurance plans, any
qualified or non-qualified pension or profit sharing plan adopted or maintained
by the Employer and participation in Employer's Stock Ownership Plan (ESOP) , if
continued. Such participation shall be on the same basis as the majority of
participants in such plan. In addition, Employer will provide a $100,000 term
life insurance policy payable as designated by Employee. The premiums on such
policy will be paid by the Employer and will aggregate approximately $1,200 per
year.
8. CONFIDENTIAL DISCLOSURE. Except to the extent that
the proper performance of the Employee's duties pursuant to this Agreement may
require disclosure, Employee agrees that he will not for any reason or at any
time during or subsequent to the term of this Agreement disclose to any person
any secret of confidential information relating to the services of Employer or
any trade secrets of Employer or any other secret or confidential information
relating to Employer or the products or services of Employer. Employee agrees
that the remedy at law for any breach of the foregoing will be inadequate, and
that Employer shall be entitled to injunctive relief for any such breach.
9. MISCELLANEOUS
9.1 Assignability of Agreement. The provisions
of this agreement shall inure to the benefit of the Parties hereto, and their
respective permitted heirs, legal representatives, successors and assigns. The
obligations of Employee under this Agreement shall be personal and not delegable
by him in any manner whatsoever.
9.2 Notices. Any notice, request, instruction
or other document to be given hereunder by either party hereto to the other
shall be in writing and delivered personally or sent by certified or registered
mail, postage prepaid, and if mailed to any addressee in a state other than the
state of mailing, by air mail, addressed as follows:
IF TO EMPLOYEE: Joseph Carona
210 Hacienda Drive
Arcadia, CA 91006
IF TO EMPLOYER: Allan E. Dalshaug, Chairman
Sterling Bank
3287 Wilshire Blvd.
Los Angeles, California 90010
26
<PAGE> 6
Any notice so given shall be deemed received when delivered personally,
or (if mailed) when dispatched. Any party may change the address to which
notices are to be sent by giving written notice of such change of address to the
other party in the manner herein provided for giving notice.
9.3 Waiver. No waiver of any breach of any warranty,
representation, covenant or other term or provision of this Agreement shall be
deemed to be a waiver of any preceding or succeeding breach of the same or any
other warranty, representation, covenant, term or provision. No extension of the
time for performance of any obligation or other act shall be deemed to be an
extension of the time for the performance of any other obligation or any other
act.
9.4 Amendment to Agreement. This Agreement contains the
entire agreement between the Parties hereto with respect to the transactions
contemplated herein, and may not be amended, supplemented or discharged except
by an instrument in writing signed by both Parties hereto.
9.5 Disputes/Attorneys Fees. Should any dispute arise
concerning the terms or the interpretations of this Agreement, the prevailing
Party shall be entitled to and be awarded reasonable attorneys' fees and costs
in addition to any other relief to which it may be entitled.
9.6 Time of the Essence. Time is of the essence of each
provision of this Agreement in which time is an element.
9.7 Arbitration. The parties agree if any controversy or
claim shall arise out of this Agreement or the breach hereof and either party
shall request that the matter be settled by arbitration. The matter shall be
settled exclusively by arbitration in accordance with the rules then in effect
of the American Arbitration Association in the city of Los Angeles, California,
as the same may be modified by the statutes of California then in effect, by a
single arbitrator, if the parties shall agree upon one, or by one arbitrator
appointed by each party and a third arbitrator appointed by the other
arbitrators. In case of any failure of a party to make an appointment referred
to above within two (2) weeks after written notice of controversy, such
appointment shall be made by the Association. All arbitration proceedings shall
be held in the City of Los Angeles, California, and each party agrees to comply
in all respects with any award made in such proceeding and to the entry of a
judgment in any jurisdiction upon any award rendered in such Proceeding. All
costs and expenses of arbitration (including costs of preparation therefor and
reasonable attorneys' fees incurred in connection therewith) of the party
prevailing in such arbitration shall be borne by the losing party to such
arbitration, unless otherwise directed by the arbitrators. Notwithstanding any
provision of this section herein set forth no party may make a request for
arbitration hereunder with respect to any matter at any time following the
expiration of thirty (30) days after notice of the filing of a legal action with
respect to such matters in a court of competent jurisdiction.
27
<PAGE> 7
IN WITNESS WHEREOF, the parties have duly executed this Agreement effective as
of: JANUARY 2, 1997
STERLING BANK JOSEPH C. CARONA
"Employer" "Employee"
By: /s/ ALLAN E. DALSHAUG By: /s/ JOSEPH C. CARONA
- ------------------------- ------------------------
Name: Allan E. Dalshaug
Title: Chairman of the Board
28
<PAGE> 1
EXHIBIT 10.31.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into effective as of JANUARY 2, 1997 by and between STERLING WEST
BANCORP, a California corporation, hereinafter referred to as the "Employer,"
and ALLAN E. DALSHAUG, hereinafter referred to as the "Employee."
The parties contract with reference to the following facts:
A. The Employer desires to appoint and employ the Employee in the
capacities of Chairman of the Board of Directors, Chief Executive Officer and
President of the Employer, and the Employee desires to accept such appointment
and employment with the Employer.
B. The parties are willing to enter into an agreement providing
for such appointment and employment upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. EMPLOYMENT. The Employer hereby agrees to appoint and
employ, and does hereby appoint and employ, the Employee as its Chairman, Chief
Executive Officer and President for and during the Employment Period (as defined
in Section 5 herein), and the Employee agrees to accept and hereby accepts such
appointment and employment by the Employer, on the terms and subject to the
conditions set forth in this Agreement.
2. COMPENSATION.
2.1 Salary. As compensation for the services
to be rendered by the Employee hereunder, the Employer agrees to pay to the
Employee during the Employment Period a salary at the rate of One Hundred and
Sixty-Six Thousand Five Hundred Dollars ($166,500) per year, subject to
applicable law respecting withholding of federal, state and/or local taxes or
their equivalent. All salary, less income tax and other applicable withholding,
shall be prorated and paid out periodically in accordance with the Employer's
normal payroll procedures with respect to executive officers.
2.2 Incentive Compensation. In addition to the
salary provided for in Section 2.1 above, the Employee may receive, during the
Employment Period, such incentive compensation as the Board of Directors of the
Employer (the "Board") may, in its sole and absolute discretion, determine to
pay to the Employee from time to time, in a form and in an amount to be
determined solely by the Board. However, the Board is under no obligation to
provide for any such incentive compensation.
14
<PAGE> 2
3. DUTIES, TIME AND EFFORTS.
3.1 Duties. During the Employment Period, the
Employee shall serve as Chairman of the Board, Chief Executive Officer and
President of the Employer and shall report to the Board, and his duties shall
include generally, but without limitation, authority and responsibility for the
overall management of the affairs and business of the Employer, serving as
Chairman of the Board and Chief Executive OFFICER of Sterling Bank, serving as
Chairman of the Board and Chief Executive Officer of Sterling Business Credit,
Inc., and such additional duties as may be assigned by the Board to the
Employee. It is specifically understood that the Employee may be required to
provide services to other subsidiaries of the Employer not presently in
existence or for businesses not presently conducted by the Employer, consistent
with his status as an executive officer.
3.2 Time. The Employee shall devote his full
productive time, energies, and abilities to the proper and efficient performance
of the duties, responsibilities and authorities described above. However, the
expenditure of reasonable amounts of time by the Employee for educational,
charitable and professional activities that do not otherwise conflict with the
terms of this Agreement or the duties and responsibilities of the Employee,
including without limitation, serving as a member of the Board of Directors of
L.A. Gear, Inc. and Jalate, Ltd. (or related companies), shall not be deemed a
breach of this Agreement, provided that such activities do not materially
interfere with the services required of the Employee under this Agreement, and
shall not require the prior consent of the Employer.
3.3 Non-Competition. During the Employment
Period, the Employee may not, without the prior express authorization of the
Board, directly or indirectly engage in any activity competitive with the
Employer's businesses or those of any of its subsidiaries, whether acting alone
or as an officer, director, owner or employee of any other corporation or
business, whether professional or otherwise. Nothing contained in this Section
3.3, however, shall prevent the Employee from purchasing and/or holding less
than one-tenth of one percent (0.10%) of the issued and outstanding stock of a
publicly-held corporation.
3.4 Other. The Employee shall, at all times
during the Employment Period, be furnished with such office, stenographic and
other necessary and secretarial assistance, and such facilities, amenities and
services as are suitable to the Employee's position as an executive officer and
adequate for the performance of the Employee's duties under this Agreement.
Unless otherwise agreed to by the Employee, the Employee's offices shall be
maintained at the premises of the principal place of business of the Employer in
Los Angeles, California; provided, however, that in connection with the
performance of his duties and responsibilities, the Employee acknowledges that
he may be required to undertake significant travel as the needs of his position
may reasonably require.
4. VACATION. The Employee shall be entitled to take
vacation at the rate of five (5) weeks during each twelve (12) month period
during the Employment Period. The date or dates of said vacation shall be
determined by the Employee and the Board. To the extent the Employee does not
use the full amount of such vacation as provided above, the unused balance, up
to a maximum of one (1) week, shall accrue and be carried over into the
following year, if any, during which the Employee is employed by the Employer.
Under no circumstances, regardless of the Employee's failure to take vacations,
may the Employee take more than six (6) weeks vacation during any twelve (12)
month period.
15
<PAGE> 3
5. TERM.
5.1 Term. The term of the Employee's
employment and the Employer's obligations pursuant to this Agreement shall
commence upon the date of this Agreement and terminate on January 2, 1998,
unless sooner extended by agreement between the parties or sooner terminated
upon the happening of any of the following events (the "Employment Period"):
(a) If the Employer and the Employee shall
mutually agree to such sooner termination;
(b) Conviction of the Employee for any
crime involving a dishonest act or any behavior not befitting the Employee's
position as an executive officer of a bank or bank holding company, which could
reasonably make the continued employment of the Employee by the Employer
damaging to the Employer or its public reputation;
(c) Death of the Employee;
(d) The Employee is prevented, by reason
of any accident. illness, or mental or physical disability, not arising out of
an injury sustained while on the Employer's business, from fully performing his
duties and responsibilities under this Agreement for a period of ninety (90)
consecutive days or an aggregate of ninety (90) days during any three hundred
and sixty-five (365) day period (not limited to any calendar or fiscal year).
(e) Commission of any dishonest or
fraudulent act by the Employee in the course of his employment;
(f) For Good Cause, as defined in Section
5.2 below, and pursuant to the procedures described therein and in Section 5.3;
or
(g) Due to governmental restrictions on
continued operations of the Employer or its banking subsidiary, as more fully
set forth and provided for in Section 5.4 herein.
5.2 Termination for Good Cause After Notice and Failure
to Cure. The Employer may, at any time during the Employment Period, terminate
the employment of the Employee and its obligations under this Agreement for good
cause, by written notice to the Employee in accordance with the notice
requirements and restrictions contained in Section 5.3 herein. For purposes of
illustration, good cause shall include, but shall not be limited to, the
following (collectively, "Good Cause"):
(a) The persistent unwillingness or inability
of the Employee to perform his duties or responsibilities hereunder;
(b) The persistent malfeasance, misfeasance or
nonfeasance in connection with the performance of the Employee's duties, such
conduct to be determined solely by the Employer;
(c) Willful and intentional acts having the
effect or consequence of injuring the reputation, business or business
relationships of the Employer;
16
<PAGE> 4
(d) Breach of any material provision of this
Agreement.
Notwithstanding the foregoing, however, Good Cause shall not exist solely due to
the financial performance or results of operation of the Employer.
5.3 Notice Requirement and Restrictions. Prior to
terminating the Employee's employment pursuant to Sections 5.1 (f) or 5.2
herein, the Employer shall provide the Employee with a written notice specifying
in reasonable detail (i) the duties or responsibilities which it contends that
the Employee has not been adequately performing, (ii) why the Employer believes
that it has good cause to terminate the Employee's employment and (iii) what
actions the Employee should perform to adequately execute his obligations under
this Agreement. If the Employee corrects such performance failure within thirty
(30) days of receipt of such notice or otherwise modifies his performance to
correct the matters indicated in the notice, the Employee's breach will be
deemed cured and his employment shall not be terminated; provided, however, that
if the nature of any material performance failure by the Employee described in
the notice are such that more than thirty (30) days are reasonably required to
correct such failure, then the Employee's breach will be deemed cured and the
Employee's employment shall not be terminated if the Employee substantially
commences to correct such performance failure within thirty (30) days of receipt
of the notice and thereafter diligently prosecutes such corrective actions.
Otherwise, the Employer shall have the right to terminate the Employee's
employment and its obligations under this Agreement at the end of the thirty
(30) day period following receipt of such notice by the Employee.
5.4 Governmental Restrictions on Continued Operations.
The Employee understands that the conduct of the Employer's business and that of
its banking subsidiary, Sterling Bank, is, and during the term of this Agreement
shall be, subject to the laws, rules, regulations, permits and licenses of
various governmental bodies and agencies, including without limitation, the
California State Banking Department, the Federal Deposit Insurance Corporation
and the Board of Governors of the Federal Reserve System. Notwithstanding
anything, to the contrary contained herein, if the commencement or continuation
of the Employer's business or that of Sterling Bank is, for any reason,
prohibited, prevented or substantially restricted by a court of law or any such
governmental body or agency, the Employer shall thereafter have the right to
terminate the employment of the Employee and its obligations under this
Agreement, at its sole option, by giving written notice of such termination to
the Employee, with no further liability on the part of the Employer other than
for any accrued but unpaid compensation to the Employee.
6. EMPLOYER'S AUTHORITY. To the extent not inconsistent with other
terms of this Agreement, the Employee agrees to observe and comply with the
reasonable rules and regulations of the Employer, as adopted by the Board,
respecting performance of his duties and to carry out and perform the reasonable
orders, directions and policies of the Employer as they may be, from time to
time, stated to him either orally or in writing.
17
<PAGE> 5
7. EXPENSES AND FRINGE BENEFITS.
7.1 Automobile Allowances. The Employer and Employee
agree that the proper discharge of the duties of the Employee will require the
frequent use of an automobile. The Employer hereby agrees to provide the
Employee with the use of an automobile chosen jointly by the Employee and the
Employer, and suitable for use by an executive officer of a bank or bank holding
company. Such automobile shall be purchased or leased by the Employer and
provided to the Employee for his exclusive use and at the termination of the
Employment Period, the Employee shall have the right to purchase such automobile
from the Bank for its depreciated book value or have the Employer take steps to
transfer such lease to him as lessee or sublessee. In lieu of the right to the
use of an automobile as provided for in this paragraph, however, at the
Employee's option he may directly purchase or lease an automobile and the
Employer shall, during the Employment Period, pay to the Employee additional
compensation of $750.00 per month and pay or reimburse all reasonable expenses
incurred by the Employee in connection with the use and operation of such
automobile, including, but not limited to insurance, licensing, taxes and other
operating expenses.
7.2 Business Expenses. Subject to Section 7.3 below, the
Employer shall pay or reimburse all expenses reasonably incurred by the Employee
in discharge of the Employee's duties hereunder. Such expenses shall include,
without limitation, the following:
(a) Educational expenses incurred for the
purpose of maintaining or improving the Employee's skills;
(b) Expenses for travel, lodging, and related
expenses in connection with conventions or meetings, attendance at which is
necessary or appropriate in connection with the performance by the Employee of
his duties required hereunder;
(c) Expenses for meals, entertainment and
similar items reasonably incurred by the Employee in connection with the
business of the Employer; and
(d) Such other expenses incurred by the
Employee reasonably related to the discharge by the Employee of his duties set
forth herein.
7.3 Expense Documentation. The Employer reserves the
right to require, as a condition of payment or reimbursement for any item
pursuant to Section 7.2, that the Employee furnish the Employer with reasonable
written evidence of such expense and documentation of the relationship of such
item to the business of the Employer or the duties of the Employee.
7.4 Fringe Benefits. The Employee shall be entitled to
participate in any group life and health insurance plans offered by the Employer
to its employees. Such participation shall be on the same basis as the majority
of the other employees participating in such plan. Also, if the Employer
implements any new benefit plan for its employees generally, the Employee will
be allowed to participate in such benefit plan on the same basis as the other
employees. In addition, the Employer will provide to the Employee a $250,000
whole life insurance policy, payable as designated by the Employee. The premiums
on such policy will be paid by the Employer.
18
<PAGE> 6
7.5 Club Fees. The Employer and the Employee agree that
it is necessary and proper for the Employee to maintain membership in the
Wilshire Country Club, and that such membership is in the best interests of the
Employer and in furtherance of the Employee's obligations hereunder. The
Employer agrees to pay or reimburse the initial and ongoing costs of an equity
membership in such club and understands that the initial cost of an equity
membership in such club was approximately $14,500. Such equity membership shall
be held in the name of the Employee during the term of the Employment Period
and, upon the termination thereof, the Employee shall have the right to retain
such equity membership upon payment to the Employer of an amount equal to the
initial cost thereof incurred by the Employer.
8. ADDITIONAL RIGHTS OF THE EMPLOYEE. As an additional incentive
to the Employee, it is agreed that upon any termination, prior to January 2,
1998, of this Agreement or the Employment Period for any reason other than as
set forth in Sections 5.1(b), 5.1(e), 5.1(f) or the Employee's voluntary
termination, the Employee shall receive a lump sum payment equal to four (4)
months of his then current salary, plus any accrued and unpaid compensation.
9. CONFIDENTIAL DISCLOSURE. Except in the proper performance of
the Employee's duties pursuant to this Agreement, the Employee agrees that he
will not for any reason or at any time during or subsequent to the Employment
Period disclose to any person any secret, confidential or proprietary
information relating to the products or services of the Employer or any trade
secrets of the Employer. The Employee agrees that the remedy at law for any
breach of the foregoing will be inadequate, and that the Employer shall be
entitled to injunctive relief for any such breach. The obligations of the
Employee pursuant to this Section 9 shall survive a termination of the
Employment Period and this Agreement.
10. MISCELLANEOUS.
10.1 Assignability of Agreement. The provisions of this
Agreement shall inure to the benefit of the parties hereto, and their respective
permitted heirs, legal representatives, successors and assigns. The obligations
of the Employee under this Agreement shall be personal and not delegable by him
in any manner whatsoever.
10.2 Notices. Any notice, request, instruction or other
document to be given hereunder by either party hereto to the other shall be in
writing and delivered personally or sent by certified or registered mail,
postage prepaid, addressed as follows:
If to the Employee:
Mr. Allan Dalshaug
3346 Deer Creek Lane
Glendale, California 91208
If to the Employer:
Corporate Secretary
Sterling West Bancorp
3287 Wilshire Boulevard
Los Angeles, California 90010
19
<PAGE> 7
Any notice so given shall be deemed received when delivered personally,
or (if mailed) when dispatched. Any party may change the address to which
notices are to be sent by giving written notice of such change of address to the
other party in the manner herein provided for giving of notice.
10.3 Waiver. No waiver of any breach of any warranty,
representation, covenant or other term or provision of this Agreement shall be
deemed to be a waiver of any preceding or succeeding breach of same or any
warranty, representation, covenant, term or provision. No extension of the time
for performance of any obligation or other act shall be deemed to be an
extension of the time for the performance of any other obligation or any other
act.
10.4 Amendment to Agreement. This Agreement contains the
entire agreement between the parties hereto with respect to the subject matter
contemplated herein, and may not be amended, supplemented or discharged except
by an instrument in writing signed by both par-ties hereto.
10.5 Dispute/Attorney's Fees. Should any dispute arise
concerning the terms or the interpretation of this Agreement, the prevailing
party shall be entitled to and be awarded reasonable attorney's fees and costs,
in addition to any other relief to which it may be entitled.
10.6 Time of the Essence. Time is of the essence of each
provision of this Agreement in which time is an element.
10.7 Arbitration. Any controversy or claim arising out of
or relating to this Agreement will, at the written request of any party, be
determined by binding arbitration under the auspices and rules then in effect of
the American Arbitration Association (the "Association") in Los Angeles,
California, as the same may be modified by the statues of California then in
effect. Such arbitration shall be conducted by a single arbitrator if the
parties shall agree upon one, or else by one arbitrator appointed by each party
and a third arbitrator appointed by the two arbitrators. In case of any failure
of a party to make any such appointment within two (2) weeks after written
notice of the controversy, such appointment shall be made by the Association.
All arbitration proceedings shall be held in Los Angeles, California, and each
party agrees to comply in all respects with any award made in such proceeding
and to the entry of a judgment in any jurisdiction of any award rendered in such
proceeding. All costs and expenses of the arbitration (including costs of
preparation and reasonable attorney's fees) of the party prevailing in such
arbitration shall be borne by the losing party to such arbitration, unless
directed other-wise by the arbitrators. Notwithstanding any other provision of
this paragraph, however, no party may make a request for arbitration hereunder
with respect to any matter, at any time following the expiration of thirty (30)
days after notice of filing of a legal action with respect to such matter in a
court of competent jurisdiction.
10.8 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and all of which
taken together shall constitute one instrument.
20
<PAGE> 8
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
STERLING WEST BANCORP ALLAN E. DALSHAUG
"Employer" "Employee"
By: /s/ AUDREY J. FIMPLER By: /s/ ALLAN E. DALSHAUG
- ------------------------- -------------------------
Name: Audrey J. Fimpler
Title: Director
21
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (STERLING
WEST BANCORP AND SUBSIDIARIES) CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,592
<INT-BEARING-DEPOSITS> 197
<FED-FUNDS-SOLD> 8,953
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 12,044
<INVESTMENTS-MARKET> 11,911
<LOANS> 68,951
<ALLOWANCE> 1,365
<TOTAL-ASSETS> 98,539
<DEPOSITS> 90,026
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,193
<LONG-TERM> 0
0
0
<COMMON> 8,686
<OTHER-SE> (1,366)
<TOTAL-LIABILITIES-AND-EQUITY> 98,539
<INTEREST-LOAN> 1,720
<INTEREST-INVEST> 324
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,044
<INTEREST-DEPOSIT> 604
<INTEREST-EXPENSE> 604
<INTEREST-INCOME-NET> 1,440
<LOAN-LOSSES> 389
<SECURITIES-GAINS> 436
<EXPENSE-OTHER> 1,426
<INCOME-PRETAX> 61
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
<YIELD-ACTUAL> 6.49
<LOANS-NON> 3,839
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,260
<CHARGE-OFFS> 282
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,365
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
