CENTENNIAL BANCORP
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
MAY 20, 1998
<PAGE>
CENTENNIAL BANCORP
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 20, 1998
NOTICE IS HEREBY GIVEN that the annual meeting of the
shareholders of Centennial Bancorp, an Oregon corporation (the "Company"), will
be held at 3:00 p.m. on May 20, 1998, in the Joplin/Seeger Room of the Eugene
Hilton, 66 East 6th Street, Eugene, Oregon, for the following purposes:
1. To consider and act upon the election of six directors of the
Company.
2. To consider and vote upon approval of an amendment to the
Company's Restated Articles of Incorporation to eliminate the
par value of the Company's authorized capital stock.
3. To consider and vote upon an amendment to the Company's
Restated 1995 Stock Incentive Plan increasing the number of
shares issuable under the Plan.
4. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on March 31,
1998 are entitled to notice of, and to vote at, the meeting or any adjournment
or adjournments thereof. Further information regarding voting rights and the
business to be transacted at the annual meeting of shareholders is given in the
accompanying Proxy Statement.
Shareholders who find it convenient are invited to attend the
meeting personally. If you are not able to do so and want your shares to be
voted, it is important that you complete, sign, date and promptly return the
accompanying proxy in the enclosed postage-paid envelope.
We hope that you will be able to attend the meeting. It is always
a pleasure to meet and become better acquainted with shareholders of the
Company.
By order of the Board of Directors.
April 10, 1998 Cordy H. Jensen
Secretary
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YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR PROXY
SO THAT YOUR VOTE CAN BE COUNTED.
- --------------------------------------------------------------------------------
<PAGE>
CENTENNIAL BANCORP
Post Office Box 1560
Eugene, Oregon 97440
(541) 342-3970
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Centennial Bancorp (the
"Company") to be used at the annual meeting of the Company's shareholders to be
held on May 20, 1998. The approximate date of mailing this Proxy Statement and
the accompanying form of proxy is April 10, 1998. The Company's 1997 Annual
Report to Shareholders is being mailed to shareholders of the Company with this
Proxy Statement.
PROXIES AND VOTING AT THE MEETING
Unless otherwise noted, all share and per share information
included in this Proxy Statement has been retroactively adjusted to reflect all
stock dividends and stock splits effected by the Company prior to the date
hereof.
The only class of outstanding stock of the Company is its Common
Stock, $2 par value. At March 31, 1998, the record date for determining
shareholders entitled to vote at the meeting, there were 14,543,909 shares of
Common Stock outstanding. Each holder of record of outstanding shares of Common
Stock on the record date is entitled to one vote for each share held on every
matter submitted at the meeting.
A majority of the outstanding Common Stock must be represented at
the meeting in person or by proxy in order to constitute a quorum for the
transaction of business. Brokers are permitted to vote the shares held by them
in "street name" on routine matters without receiving specific directions from
the beneficial owners of the shares, but brokers must receive specific
directions from beneficial owners before they may vote on nonroutine matters.
Thus, brokers enter a "broker nonvote" on nonroutine matters with respect to
shares where the broker has not received direction from the beneficial owner.
These broker nonvotes, as well as "abstentions" and "withheld" votes, are
counted in determining whether a quorum is present, but are not counted for or
against the proposal at issue.
If a proxy in the accompanying form is executed and returned, the
shares represented thereby will be voted at the meeting in accordance with the
instructions given in the proxy. If no instructions are given, the proxyholders
will vote for management's nominees for director. They will vote in their
discretion as to any other matters that may be properly brought before the
meeting. Any proxy may be revoked prior to its exercise by giving written notice
of revocation to the Secretary of the Company or by submitting to the Secretary
a duly executed proxy bearing a later date. The attendance of a shareholder at
the meeting will not revoke a proxy. Ballots and proxies will be counted by
personnel of the Company.
The cost of this proxy solicitation will be borne by the Company.
The Company does not expect to pay any compensation for the solicitation of
proxies but may reimburse brokers, banks and other nominees for their expenses
in sending proxy material to principals and obtaining their proxies. The Company
expects to solicit proxies primarily by mail. The Company may also use officers
and employees of the Company and Centennial Bank to solicit proxies, either in
person or by telephone or letter. Such persons will not be specifically
compensated for these activities.
<PAGE>
PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock at March 31, 1998 by: (i)
each person who is known by the Company to own beneficially more than 5% of the
Common Stock; (ii) each director; (iii) the executive officers named in the
Summary Compensation Table below; and (iv) all executive officers and directors
as a group. Each named beneficial owner has sole voting and investment power
with respect to the shares listed unless otherwise indicated.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial
Name of Beneficial Owners Ownership Percent of Class
- ---------------------------------------------------- --------------------- -------------------
<S> <C> <C>
Brian B. Obie 331,010(1) 2.3
Robert L. Newburn 253,898(2) 1.7
Cordy H. Jensen 292,672(3) 2.0
Dan Giustina 110,664(4) *
Richard C. Williams 571,858(5) 3.9
Ted Winnowski 1,050(6) *
Ron R. Peery 360,860(7) 2.5
Eric H. Hardin 98,777(8) *
Gary L. Stevens 193,512(9) 1.3
David M. Gazeley 196,476(10) 1.4
Key Trust Company of the Northwest 1,053,968(11) 7.3
All executive officers and directors as a group
(16 persons) 2,847,702(12) 19.0
- ----------------------------------------------------
| Less than 1% of the Company's outstanding Common Stock
(1) Includes 30,492 shares held by Mr. Obie's wife, 171,200 shares held by Obie Industries Incorporated
of which Mr. Obie is President and owns a controlling interest, and 20,652 shares which could be
acquired within 60 days by exercise of stock options.
(2) Includes 234,590 shares by The Newburn Joint Trust, of which Mr. Newburn is a trustee, 484 shares
which are held by Mr. Newburn's wife, 16,808 shares which are held by Mr. Newburn as custodian for
minors, and 2,016 shares which could be acquired within 60 days by exercise of stock options.
(3) Includes 187,138 shares which are jointly held by Mr. Jensen's wife, 814 shares which are held by
Mr. Jensen as custodian for a minor, 100 shares which are held jointly in CAC Investments, a
partnership of which Mr. Jensen is the Managing Partner, 46,524 shares which are held by Mr. Jensen
as trustee for his mother, and 20,652 shares which could be acquired within 60 days by exercise of
stock options.
<PAGE>
(4) Includes 38,920 shares which could be acquired within 60 days by exercise of stock options.
(5) Includes 186,374 shares which could be acquired within 60 days by exercise of stock options. Also
includes 184,440 shares which are held for Mr. Williams' account by Key Trust Company of the
Northwest ("Key Trust") as trustee of Centennial Bank's Employee Savings and Profit Sharing Plan
(the "Employee Savings Plan"); Key Trust has sole voting power over such shares.
(6) The shares are held jointly with Mr. Winnowski's wife.
(7) Includes 147,998 shares which are held jointly with Mr. Peery's wife, 7,978 shares which are held
jointly with Mr. Peery's mother, 26,102 shares which are held by Mr. Peery's wife, and 28,236
shares which could be acquired within 60 days by exercise of stock options. Also includes 108,334
shares which are held for Mr. Peery's account by Key Trust as trustee of the Employee Savings
Plan; Key Trust has sole voting power over such shares.
(8) Includes 26,682 shares which could be acquired within 60 days by exercise of stock options, and
72,095 shares which are held for Mr. Hardin's account by Key Trust as trustee of the Employees
Savings Plan; Key Trust has sole voting power over such shares.
(9) Includes 1,512 shares which are held jointly with Mr. Stevens' wife, 63,496 shares which are held
jointly with Mr. Stevens and his wife as trustees of the Stevens Revocable Trusts, and 105,766
shares which are held for Mr Stevens' account by Key Trust as trustee of the Employee Savings
Plan; Key Trust has sole voting power over such shares.
(10) Includes 2,294 shares which are held by Mr. Gazeley's wife, 107,106 shares which are held jointly
by Mr. Gazeley and his wife as trustees of the Gazeley Family Trust, 814 shares which are held by
Mr. Gazeley as custodian for a minor, and 86,262 shares which are held for Mr. Gazeley's account by
Key Trust as trustee of the Employee Savings Plan; Key Trust has sole voting power over such shares.
(11) Key Trust is the trustee of the Employee Savings Plan and as such is the record holder of these
shares; sole investment power over these shares is held by the respective beneficiaries of the
individual accounts maintained under such plan. Key Trust's address is 1211 S.W. Fifth Avenue,
Suite 300, Portland, Oregon 97204.
(12) Includes 430,373 shares which could be acquired within 60 days by exercise of stock options. Also
includes 761,705 shares which are held for the accounts of certain executive officers by Key Trust
as trustee of the Employee Savings Plan; Key Trust has sole voting power over such shares.
</TABLE>
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Members of the Board of Directors are elected annually. The
current members of the Board have been nominated to continue in office until the
next annual meeting of shareholders, and until their successors have been
elected and qualified. Although the Company knows of no reason why any of the
nominees may be unable or unwilling to serve, if any nominee becomes unable or
unwilling to serve, it is the intention of the persons named in the proxy to
vote for any substitute nominee the Board of Directors of the Company may
recommend. The Board does not have a standing nomination committee nor does it
have a formal procedure to receive shareholder nominations, but it will consider
any written recommendations sent to the attention of the Board at the Company's
administrative offices at 675 Oak Street, Post Office Box 1560, Eugene,
Oregon 97440.
Directors are elected by a plurality of votes cast at the
meeting, which means that the six nominees receiving the most votes at the
meeting will be elected. Accordingly, a vote withheld from a particular nominee
will not affect the outcome of an uncontested election. Shareholders are not
entitled to cumulate votes for election of officers.
Nominees for Director
- ---------------------
The following table gives certain information about each nominee
for director, as of March 31, 1998. Three nominees (Messrs. Obie, Newburn and
Williams) have served as directors of the Company since the Company's
organization in 1981. Mr. Jensen has been a director since 1994; Mr. Giustina
has been a director since 1995; and Mr. Winnowski has been a director since
January 1998. All of the nominees (together with other people) are also
directors of the Company's subsidiary, Centennial Bank (sometimes referred to
herein as the "Bank"). Mr. Williams is also Chairman of the Board of Centennial
Mortgage Co. ("Centennial Mortgage"), another subsidiary of the Company.
<TABLE>
<CAPTION>
Name (Age) and Principal Occupation
Position with Company (During the last 5 Years)
- --------------------- -------------------------
<S> <C>
Brian B. Obie (56) Chairman, President and Chief Executive Officer of Obie Media
Chairman of the Board Corporation (outdoor and transit advertising); President and Chief
Executive Officer of Obie Industries Incorporated (real estate
development); former mayor of Eugene, Oregon
Robert L. Newburn (66) President and Chief Executive Officer of Pacific Petroleum Company
Vice Chairman of the Board (retail distribution of petroleum products); Chairman of the Board of
Centennial Bank
Richard C. Williams (58) President and Chief Executive Officer of the Company; Vice Chairman of
President, Chief Executive Officer the Board of Directors of Centennial Bank; Director of Obie Media
and Director Corporation
Ted Winnowski (56) President and Chief Executive Officer of Centennial Bank since
Director January 1998; Executive Vice President of KeyCorp from 1995 to 1997;
Chairman, President and Chief Executive Officer of KeyBank of
Washington from 1996 to 1997; Chairman of KeyBank of Oregon from 1985
to 1997
<PAGE>
Cordy H. Jensen (55) President and owner of Station Masters Inc. (restaurant and lounge);
Director and Secretary Managing Partner of McKenzie Brewing Co.; Managing Partner of CAC
Investments (real estate rentals); Managing Partner of Bev's
Investment Co. (real estate holdings); Director of Jasper's Delis
Dan Giustina (48) Managing Partner of Giustina Resources (owns and manages timber and
Director timberland); member/manager of G Group LLC (owns and manages
residential and commercial real estate)
The Board of Directors held 10 meetings during 1997. Each director attended more than 75% of
the meetings of the Board of Directors and all committees of the Board on which the director served.
</TABLE>
Board Committees
- ----------------
The Board of Directors has two committees. The Audit Committee
consists of all members of the Board of Directors. It reviews the scope of
internal and external audit activities and the results of the Company's annual
audit. The Audit Committee did not meet formally in 1997, but the scope and
results of the Company's audit were reviewed at the Company's regular Board
meetings.
The Compensation Committee administers the Company's stock option
plans and determines management compensation. The members of the Compensation
Committee are Messrs. Obie, Newburn, Giustina and Jensen. The Compensation
Committee held four meetings in 1997.
In addition, Centennial Bank has an Audit and Personnel Committee
of its Board of Directors consisting of Mr. Giustina and four nonemployee
members of Centennial Bank's Board of Directors who are not also members of the
Company's Board of Directors. The Audit and Personnel Committee meets monthly
with management to ensure that appropriate audits of Centennial Bank's affairs
are being conducted. The Audit and Personnel Committee also reviews the reports
of examinations of Centennial Bank conducted by the Federal Deposit Insurance
Corporation and the Oregon Department of Consumer and Business Services.
Centennial Bank also has an Asset/Liability Committee, which has eight members,
four of whom (Messrs. Newburn, Jensen, Williams and Winnowski) are directors of
the Company. The Asset/Liability Committee meets weekly.
The Board of Directors of the Company approves the independent
auditors selected by the Company's management. The independent auditors have
direct access to the Company's Board of Directors, and the employees responsible
for conducting internal reviews have direct access to the Bank's Audit and
Personnel Committee to discuss the results of their examinations, the adequacy
of internal accounting controls and the integrity of financial reporting.
<PAGE>
Compensation of Directors
- -------------------------
Executive officers receive no compensation for serving as
directors of the Company. All other directors of the Company receive $1,000 per
month, except that the Chairman of the Board receives an additional $500 per
quarter.
The directors of the Company also serve as directors of
Centennial Bank. Executive officers receive no compensation for serving as
directors of Centennial Bank. All other directors of Centennial Bank receive
$750 per month, except that the Chairman of the Board receives an additional
$500 per quarter.
Centennial Bank's Asset/Liability Committee meets weekly;
nonemployee directors who serve on that committee receive $75 for each meeting
attended, except that the Chairman of that Committee receives $100 per meeting
attended. The Chairman of the Audit Committee receives $100 per month.
Each nonemployee director of the Company or any of its
subsidiaries who is first elected to such position after December 1993 may, in
the discretion of the Compensation Committee, receive a 10-year option to
purchase up to 18,636 shares of Common Stock at the fair market value on the
date of grant. However, to date the Compensation Committee has never granted
options to purchase more than 5,000 shares of Common Stock to any new director.
In addition to these initial stock option grants, the Company's
Board of Directors adopted a stock option program in September 1996 for
nonemployee directors of the Company and its subsidiaries. The program provides
for options to purchase 1,000 shares to be granted under the 1995 Stock
Incentive Plan annually to each nonemployee director, with the grants commencing
generally during the director's second year of service. Options will be granted
on the first business day of each calendar year, will vest over a three-year
period and will have a term of 10 years. The exercise price for the options will
be the fair market value of the Company's Common Stock on the date of grant.
Options that have vested on the date a director ceases to serve as a director
will remain exercisable for one year from the date of termination. These options
will be transferable, under specified circumstances, to members of the
director's immediate family, to family trusts and to family partnerships. When
the program was adopted in September 1996, options for 33,880 shares were
granted on the terms specified above to nonemployee directors for service during
1994 and 1995. The exercise price for those options was $5.37 per share. Options
covering a total of 21,780 shares with an exercise price of $6.66 were granted
to nonemployee directors in 1997 for service in 1996.
<PAGE>
PROPOSAL 2
AMENDMENT TO THE COMPANY'S AMENDED ARTICLES OF INCORPORATION TO ELIMINATE PAR
VALUE OF THE COMPANY'S
AUTHORIZED CAPITAL STOCK
The par value of the Company's authorized capital stock as set
forth in Article III of the Company's Restated Articles of Incorporation is $2
per share of common stock, $5 per share of voting preferred stock and $5 per
share of non-voting preferred stock. Subject to shareholder approval, the Board
of Directors of the Company has approved and adopted an amendment to the
Company's Restated Articles of Incorporation that would eliminate the per share
par value for all of the Company's capital stock. Under Proposal 2, the Company
would amend Article III of the Restated Articles of Incorporation to read as
follows:
"ARTICLE III.
"The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 60 million shares divided
into three classes, as follows:
Five million shares of voting preferred stock, without
par value (hereinafter sometimes referred to as "Voting Preferred
Stock");
Five million shares of preferred stock, without par
value, without voting rights, except with respect to voting rights in
the event of a default in the payment of any dividend or with respect
to any provisions granting the right to consent to the issuance of a
different series of Preferred Stock which would materially or
adversely affect the rights, preferences or powers of such issuance
(hereinafter sometimes referred to as "Non-voting Preferred Stock");
and
Fifty million shares of common stock, without par value
(hereinafter sometimes referred to as "Common Stock").
The elimination of par value will increase the Company's future
financial flexibility. If a stock dividend is paid in shares having par value,
accounting rules generally require that the company make an adjustment to the
balance sheet reducing retained earnings and increasing its capital stock by the
amount of the par value of the shares issued pursuant to the dividend multiplied
by the number of dividend shares issued. This adjustment, which reduces retained
earnings, while primarily an accounting adjustment, has the effect of limiting
the number of dividend shares which the Company may issue through retained
earnings. If the Company eliminates the par value, then the issuance of stock
dividends will not be restricted and will not reduce retained earnings. The
issuance of new shares as stock dividends increases the Company's "float"
(number of shares outstanding) and also serves the purpose of reducing the per
share market value with the expectation that more investors will be interested
in buying the stock at the reduced price.
The removal of par value also enhances the flexibility of corporate
planning by eliminating the need to further amend the Company's Articles of
Incorporation incident to future
<PAGE>
stock issuances. The delay in seeking regulatory or shareholder approval for
future changes in par value could impede the attainment of corporate objectives.
The availability of authorized stock without par value will enable the Company
to take timely advantage of market conditions to issue capital stock as
opportunities warrant.
Approval of the proposal to amend the Company's Articles to eliminate par
value will require that a quorum be present and that the number of votes cast in
favor of that proposal exceed the number of votes cast in opposition to that
proposal. For the reasons stated above, your Board of Directors recommends a
vote for Proposal 2.
PROPOSAL 3
APPROVAL OF AMENDMENT TO RESTATED 1995 STOCK INCENTIVE PLAN
INCREASING SHARES ISSUABLE UNDER THE PLAN
The Board has unanimously approved an amendment to the Company's 1995
Restated Stock Incentive Plan (the "1995 Plan"), contingent upon shareholder
approval of the amendment at the annual meeting, increasing the aggregate number
of shares authorized for issuance under the 1995 Plan from 559,020 to 1,100,000
(subject to adjustment in order to prevent dilution in certain cases described
below). The following summary description of the 1995 Plan is qualified in its
entirety by reference to the full text of the 1995 Plan, as proposed to be
amended, which is attached to this Proxy Statement as Appendix A, and to
agreements entered into pursuant to the Plan. As of the date of this Proxy
Statement, options covering an aggregate of 498,316 shares were outstanding
under the 1995 Plan. Thus, only 60,704 shares are currently available for new
awards under the 1995 Plan.
The purpose of the 1995 Plan and the proposed amendment is to promote the
best interests of the Company and its shareholders by providing key employees of
the Company and its affiliates with an opportunity to acquire a proprietary
interest in the Company. The 1995 Plan is intended to promote continuity of
management and to provide increased incentive and personal interest in the
welfare of the Company by those key employees who are primarily responsible for
shaping and carrying out the long-range plans of the Company and securing the
Company's continued growth and financial success.
The 1995 Plan was originally adopted by the Board on November 22, 1995 and
approved by shareholders on May 15, 1997. The 1995 Plan was amended and restated
effective as of August 20, 1996. The 1995 Plan, as amended, was adopted by the
Board on March 18, 1998. Should the amendment not be approved, the 1995 Plan
will remain in full force and effect, without the increase in the number of
shares issuable under the Plan.
Administration
- --------------
The Plan is required to be administered by the Compensation Committee (the
"Committee"). The Committee determines the persons to whom awards will be made
under the Plan, when awards will be granted, the amount of the awards, and other
terms and conditions of the awards. The Committee may also waive or modify any
restriction with respect to an award. The Committee promulgates rules and
regulations for the operation of the Plan, interprets the Plan and related
agreements and generally supervises the administration of the Plan.
<PAGE>
Eligibility
- -----------
Employees, directors (including nonemployee directors) and consultants are
eligible to participate in the Plan. Only employees are eligible to receive
incentive stock options.
At the date of this Proxy Statement, approximately 45 officers and 12
nonemployee directors of the Company and its subsidiaries are eligible to
participate in the Plan. Each person selected by the Committee to receive an
award under the Plan must be a person the Committee believes has made or will
make an important contribution to the Company. In determining to make awards
under the Plan, the Committee may take into account the nature of the services
rendered by the individual, the person's present and potential contribution to
the success of the Company, and such other factors as the Committee deems
relevant.
Number Of Shares Covered By Plan
- --------------------------------
The Restated 1995 Stock Incentive Plan currently provides that up to
559,020 shares (as such number has been adjusted for stock splits and dividends)
of Common Stock are available for issuance pursuant to the Plan. If the
shareholders approve the 1998 amendment to the Plan, a total of 1,100,000 shares
of Common Stock will be available for the granting of awards under the Plan
(including certain shares which may be granted, subject to shareholder approval
of the Plan and achievement of certain performance goals, to Mr. Winnowksi under
the Winnowski Agreement).
Term Of Plan; Amendment Of Plan
- -------------------------------
Subject to shareholder approval, the Plan, as amended, was approved by the
Board of Directors in March 1998 and will remain in effect until all awards
granted under the Plan have been satisfied or expired. However, no awards may be
granted under the Plan after November 21, 2005. To the extent that an award
lapses or terminates, any shares of Common Stock subject to such award shall
again be available for the grant of a future award under the Plan.
Generally, the Board of Directors of the Company may amend, modify or
terminate the Plan at any time subject to the requirement for shareholder
approval of certain material changes.
Stock Options
- -------------
The term of each option granted under the Plan will be as specified by the
Committee at the date of grant, except that no incentive stock option will have
a term of more than ten years from the date of grant. No incentive stock option
may be granted to an individual who owns more than 10% of the total combined
voting power of all classes of stock of the Company unless the exercise price is
at least 110% of the fair market value of the Common Stock at the time of the
grant and the term of the option is no more than five years from the date of
grant.
The Committee will determine the exercise price for all stock options. The
exercise price for incentive stock options may not be less than the fair market
value of the underlying Common Stock on the date of grant. The exercise price of
an option or portion thereof must be paid in full at the time of exercise in the
manner prescribed by the Committee.
In the event of the death of other termination of an optionee's employment
with the Company, the Plan provides that the optionee's options may be exercised
for specified periods thereafter (one year in the case of termination by reason
of death or disability and three months in the case of termination for any other
<PAGE>
reason), but only if and to the extent the optionee was entitled to exercise the
option at the date of such termination. The Plan also provides that, at the time
of grant or at any time thereafter, the Committee may extend the three-month and
one-year post-termination exercise periods for any period up to the expiration
date of the option and may increase the portion of the option that is
exercisable.
Restricted Stock
- ----------------
The Committee may grant awards of restricted Common Stock under the Plan.
The Committee will determine the persons to receive restricted stock awards and
will determine the amount and form of any payment due for the restricted stock.
The Committee also will establish a restriction period for such awards during
which the holder will have rights to receive dividends, vote the Common Stock,
and enjoy all other shareholder rights except custody of the stock certificate
and transfer rights. The restricted stock awards will be subject to such other
restrictions as the Committee may determine. Such awards are subject to
forfeiture for breach of the terms and conditions of the restricted stock
agreement entered into at the time of such award.
Transferability
- ---------------
Options granted under the 1995 Plan are not transferable or assignable by
the optionee except by will or by the laws of descent and distribution;
provided, however, that with the consent of the Committee, Nonstatutory Stock
Options may be assigned or transferred, subject to certain requirements, to the
optionee's immediate family, to trusts for the benefit of the optionee's
immediate family members, and pursuant to qualified domestic relations orders.
An Incentive Stock Option may be exercised during the lifetime of the optionee
only by the optionee, the optionee's guardian or legal representative.
Changes In Capital Structure
- ----------------------------
If any reorganization, merger, consolidation, plan of exchange,
recapitalization, reclassification, stock split-up, combination of shares or
stock dividend causes the outstanding Common Stock to increase or decrease or to
be changed into a different number or kind of securities of the Company or any
other corporation, the Committee will make appropriate adjustments in the number
and kind of shares available for awards under the Plan and in the number and
kind of shares as to which outstanding options will be exercisable, so that the
participant's proportionate interest before and after the event is maintained.
In the event of the dissolution of the Company, or of a merger,
consolidation, or plan of exchange affecting the Company, in lieu of providing
for options as provided in the preceding paragraph or in lieu of having the
options continue unchanged, the Committee may, in its sole discretion, provide a
30-day period prior to such event during which holders will have the right to
exercise options in whole or in part without any limitation on exercisability,
and upon the expiration of this 30-day period, all unexercised options will
immediately terminate.
The existence of the Plan and the awards granted under the Plan does not
affect the right or power of the Board or shareholders to make or authorize any
change in the Company's capital structure, or to do or authorize any other
corporate act or proceeding. Further, except as specifically provided in the
Plan, the Company's issuance of stock or securities convertible into stock will
not affect the number of shares of Common Stock subject to awards already
granted at the time the subsequent issuance is made or the exercise price of the
shares subject to these previously granted awards.
<PAGE>
Federal Tax Consequences
- ------------------------
The following description of U.S. federal income tax consequences is
intended merely to provide basic information with respect to the tax treatment
applied to various grants and awards under the Plan. The exact consequences to
any particular participant will depend upon the participant's particular
circumstances, including the terms of his or her award agreement. State and
local tax laws may vary from federal law.
No opinion of counsel or ruling from the Internal Revenue Service (the
"IRS") has or will be obtained by the Company as to the federal income tax
consequences to participants with respect to shares acquired pursuant to the
Plan. The federal income tax rules and regulations discussed below are subject
to change by legislative actions and judicial decisions, and may be subject to
differing interpretations.
Incentive Stock Options
-----------------------
Certain options authorized to be granted under the Plan are intended to
qualify as Incentive Stock Options for federal income tax purposes. Under
current federal income tax law, an optionee does not recognize taxable income
upon the grant or exercise of an Incentive Stock Option. However, the amount by
which the fair market value of the shares at the time of exercise exceeds the
exercise price constitutes an "item of adjustment" for purposes of the
alternative minimum tax. Exercise of an Incentive Stock Option may significantly
increase the likelihood that the optionee will be required to pay the alterative
minimum tax for the year of exercise. If the optionee pays the alternative
minimum tax, the optionee may, in a subsequent year, receive a credit for the
alternative minimum tax paid.
If the optionee does not dispose of shares acquired upon the exercise of an
Incentive Stock Option for two years after the date of grant and one year after
the date of exercise (the "holding periods"), then upon the sale of the shares,
any amount realized in excess of the exercise price is taxed to the optionee as
mid-term (if the disposition is within 18 months from the date of exercise) or
long-term capital gain (if the disposition is more than 18 months after the date
of exercise) and any loss sustained will be mid-term or long-term capital loss.
Generally, if an optionee disposes of shares acquired upon exercise of an
Incentive Stock Option within the holding periods, the optionee will have
ordinary income for the year of disposition equal to the lesser of (i) the
excess of the fair market value of the shares on the date of exercise over the
exercise price, or (ii) the amount of gain realized upon the disposition. Any
additional gain will be taxed as short-term, mid-term or long-term capital gain,
as applicable. The Company will not be allowed any deduction for federal income
tax purposes at either the time of grant or the time of exercise of an Incentive
Stock Option. Upon any disposition of shares within the holding periods by an
optionee, the Company will be entitled to a deduction in the year in which the
disposition occurs to the extent the optionee realizes ordinary income.
Although the Company believes that the options designated as Incentive
Stock Options granted under the Plan will qualify under Section 422 of the Code,
there can be no assurance that their status as such might not be successfully
challenged by the IRS. Any stock option found to be nonqualifying would not be
eligible to receive the tax treatment described above. Instead, the option would
be a Nonqualified Stock Option and receive the tax treatment described below.
<PAGE>
Nonqualified Stock Options
--------------------------
Certain options authorized to be granted under the Plan will be treated as
Nonqualified Stock Options for federal income tax purposes. The tax treatment of
Nonqualified Stock Options is different from the tax treatment of Incentive
Stock Options with respect to the time when income is recognized and the
characterization of such income. For a Nonqualified Stock Option, an optionee
generally recognizes income upon exercising the option. The amount of income
recognized upon exercise constitutes ordinary income and equals the excess of
the fair market value of the shares at the date of exercise over the exercise
price. Any gain or loss recognized on the subsequent sale or exchange of the
shares generally constitutes a short-term, mid-term or long-term capital gain or
loss, as applicable. Income tax withholding is provided for in the Option
Agreements. The Company is entitled to a deduction in an amount equal to the
income recognized by the optionee. To the extent required by the Code and
Regulations, the Company will report the optionee's income to the IRS and will
withhold income and employment taxes from the optionee's income (or require
payment by optionee to the Company of such withholding taxes.)
Restricted Stock
----------------
Restricted stock awarded under the Plan, if the shares are transferable or
are not subject to a substantial risk of forfeiture, will be taxable as ordinary
income equal to the excess of the fair market value of the shares received
(determined as of the date of the award) over the amount, if any, paid for the
shares by the participant. The Company will be entitled to a tax deduction in
the same amount.
In the case of restricted shares that are not transferable and are subject
to a substantial risk of forfeiture on the date of issuance, the participant
will generally recognize ordinary income equal to the excess of the fair market
value of shares received (determined as of the date on which the shares either
become transferable or are not subject to a substantial risk of forfeiture) over
the amount, if any, paid for the shares. The Company will be entitled to a tax
deduction in the same amount. A participant may elect to recognize income when
the shares are received, rather than upon the expiration of the transfer
restriction or risk of forfeiture, and, in such event, the amount of ordinary
income will be determined as of the date of issuance rather than upon expiration
of the applicable restriction. The Company's tax deduction will be determined at
the same time.
To the extent required by the Code and the Regulations, the Company will
report the participant's income to the IRS and will withhold income and
employment taxes from the participant's income (or require payment by the
participant to the Company of such withholding taxes).
Expenses
- --------
The Company will pay all the costs and expenses of administering the Plan.
Future Awards Under The Plan
- ----------------------------
The Committee has granted certain certain options under the Plan which are
subject to shareholder approval of the proposed amendment to the Plan. Such
options, which were granted to Mr. Winnowski, are described on page 18 of this
Proxy Statement. As of the date of this Proxy Statement, the Committee has not
decided to make any other awards under the Plan. Therefore, except for the
options granted to Mr. Winnowski, the number and type of awards to be granted
under the Plan to any particular individual cannot be determined at this time.
<PAGE>
Shareholder Approval
- --------------------
Approval of the proposal to amend the 1995 Plan to increase the number of
shares available for issuance under the 1995 Plan to 1,100,000 will require that
a quorum be present and that the number of votes cast in favor of that proposal
exceed the number of votes cast in opposition to that proposal. THE BOARD OF
DIRECTORS RECOMMENDS THAT THE PROPOSED AMENDMENT TO THE 1995 PLAN BE APPROVED.
INFORMATION REGARDING MANAGEMENT
Executive Officers
- ------------------
The following information identifies the executive officers of the
Company. Subject to certain obligations of the Company described below under
"Employment Agreements," all executive officers serve at the discretion of the
Board of Directors.
<TABLE>
<CAPTION>
Name of Individual Age Positions and Offices Held
- ------------------ --- --------------------------
<S> <C> <C>
Richard C. Williams 58 President, Chief Executive Officer and a director of the Company
since 1981; Vice Chairman of Centennial Bank since 1992; Chief
Executive Officer of Centennial Bank from 1977 to 1998; President
of Centennial Bank from 1977 to 1992; a director of Centennial
Bank since 1977; a director of Centennial Mortgage since 1987.
Ted Winnowski 56 President and Chief Executive Officer of Centennial Bank since
January 1998; a director of the Company since January 1998.
Ron R. Peery 58 Executive Vice President of the Company since 1986; Executive
Vice President and Southern Region Manager OF Centennial Bank
since January 1998; President and Southern Region Manager of
Centennial Bank from 1996 to January 1998; President and Chief
Operating Officer of Centennial Bank from 1992 through December
1995; Executive Vice President of Centennial Bank from 1982 to
1992; a director of Centennial Mortgage since 1987.
Eric H. Hardin 56 Executive Vice President of the Company and of Centennial Bank
from 1989 to February 1998; Senior Vice President of the Company
from 1986 to 1989; Senior Vice President of Centennial Bank from
1982 to 1989.
Gary L. Stevens 58 Executive Vice President of the Company since 1986; Executive
Vice President of Centennial Bank since 1982.
<PAGE>
Michael J. Nysingh 45 Chief Financial Officer of the Company since 1985; Acting Chief
Financial Officer of the Company from 1982 to 1985; Senior Vice
President of Centennial Bank since January 1995; Vice President
of Centennial Bank from 1982 through 1994; Cashier of Centennial
Bank since 1982; a director of Centennial Mortgage since 1990;
Chief Financial Officer of Centennial Mortgage since 1988.
David M. Gazeley 48 Executive Vice President of Centennial Bank since January 1998;
Senior Vice President of Centennial Bank from 1992 to January
1998; Northern Region Manager of Centennial Bank since 1996;
Manager of Pacific Corporate Center Office of Centennial Bank
from 1994 through 1996; Manager of Springfield Branch of
Centennial Bank from 1986 to 1994; Vice President of Centennial
Bank from 1986 to 1992.
Collin L. Alspach 52 Senior Vice President of Centennial Bank since 1996; Vice
President of Centennial Bank from 1994 through 1996.
Jesse Averette 52 Senior Vice President and Manager of Pacific Corporate Center
Office of Centennial Bank since 1996.
Dennis P. Huserik 55 Senior Vice President of Centennial Bank since 1996.
Thomas P. Widmer 48 Senior Vice President and Manager of Eugene Main Branch of
Centennial Bank since 1995; Vice President and Manager of Eugene
Main Branch of Centennial Bank from 1992 through 1994; Vice
President and Assistant Manager of Eugene Main Branch of
Centennial Bank from 1989 to 1992; Vice President and Manager of
Valley River Branch of Centennial Bank from 1988 to 1989;
Assistant Vice President and Manager of Valley River Branch of
Centennial Bank from 1986 to 1988.
Dennis M. Carlson 52 President and Chief Executive Officer of Centennial Mortgage
since 1988; Executive Vice President of Centennial Mortgage from
1987 to 1988; a director of Centennial Mortgage since 1987;
Senior Vice President of Centennial Bank since 1990; Vice
President of Centennial Bank from 1982 to 1990.
Loretta J. Morse 43 Senior Vice President of Centennial Bank since January 1998; Vice
President of Centennial Bank from 1991 to January 1998; Assistant
Vice President of Centennial Bank from 1983 to 1991.
</TABLE>
<PAGE>
Executive Compensation
- ----------------------
The following table sets forth certain information regarding
compensation paid by the Company during 1997, 1996 and 1995 to Mr. Williams as
the Company's Chief Executive Officer and the four other most highly compensated
executive officers:
<TABLE>
<CAPTION>
Summary Compensation Table
Long-term
compensation
Annual compensation awards
-------------------------- -----------------
Number of
securities
underlying All other
Name and principal Salary Bonus(1) options compensation
position Year ($)(2) ($)(2) (#) ($)(3)
- ------------------------------- ------- ----------- ----------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Richard C. Williams 1997 $256,090 $150,000 -- $17,662
President and Chief 1996 231,250 100,000 -- 11,270
Executive Officer of the 1995 206,250 75,000 167,706 9,841
Company
Ron R. Peery 1997 130,000 45,000 -- 9,139
Executive Vice President 1996 120,000 40,000 -- 9,470
of the Company 1995 110,000 35,000 -- 7,382
Eric H. Hardin(4) 1997 92,000 22,500 -- 6,818
Executive Vice President 1996 86,000 20,000 -- 6,633
of the Company 1995 80,000 18,000 -- 5,525
Gary L. Stevens 1997 92,000 20,000 -- 8,044
Executive Vice President 1996 86,000 17,500 -- 7,587
of the Company 1995 80,000 15,000 -- 6,129
David M. Gazeley 1997 92,000 30,000 -- 9,227
Executive Vice President 1996 85,030 30,530 4,840 9,364
and Northern Region 1995 78,865 38,190 -- 7,595
Manager of Centennial
Bank
- -------------------------------
(1) Includes bonuses paid or to be paid during the subsequent year but attributable to the year indicated.
(2) Includes amounts contributed by the named executive to the Deferred Compensation Plan.
(3) Consists of the Company's contributions to the Employee Savings Plan for the benefit of the named
executive officers.
(4) Mr. Hardin retired from service to the Company and Centennial Bank in February 1998.
</TABLE>
<PAGE>
The following table sets forth information regarding option exercises
during 1997 and option holdings at December 31, 1997 by each executive officer
named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
-----------------------------------------------
and Fiscal Year-End Option Values
---------------------------------
Value of unexercised in-the-
Shares Number of unexercised money options at
acquired options at FY-End(#) FY-End($)(1)
on Value ------------------------------- -------------------------------
exercise realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- -------------- ------------ --------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Williams -- -- 186,374 55,902 $1,983,728 $567,597
Ron R. Peery 16,500 $ 76,280 28,236 -- 321,286 --
Eric H. Hardin 10,600 78,653 26,682 -- 303,608 --
Gary L. Stevens 37,282 448,690 -- -- -- --
David M. Gazeley 23,578 231,641 -- 12,296 -- 129,112
- -----------
(1) On December 31, 1997, the closing price of the Company's Common Stock was $14.31. For purposes of the
foregoing table, stock options with an exercise price less than that amount are considered to be
"in-the-money" and are considered to have a value equal to the difference between that amount and the
exercise price of the stock option multiplied by the number of shares covered by the stock option.
</TABLE>
Employment Agreements
- ---------------------
The Company has an employment agreement with Mr. Williams (as amended,
the "Williams Agreement"). Centennial Bank has an employment agreement with Mr.
Winnowski (the "Winnowski Agreement") and a deferred compensation agreement with
Mr. Peery (the "Peery Agreement").
Richard C. Williams
-------------------
The Williams Agreement commenced on October 1, 1995 and terminates on
December 31, 2001. It was amended on December 1, 1997 to add certain provisions
regarding salary and payments upon a change of control, as described below. The
Williams Agreement provides for a base salary of $300,000 for the 12 months
ending November 30, 1998 and, for periods after September 30, 1998, amounts
approved by the Company's Board of Directors, but not less than $300,000 for
each 12-month period.
In addition to the base salary for Mr. Williams described above, the
Williams Agreement provides for a cash bonus for each calendar year if the
Company and/or Mr. Williams reach certain objectives determined by the Board of
Directors before the beginning of that year. Any cash bonus is payable 20% on
the 15th day of April, July and October and 40% on the 15th day of the following
January. As provided in the Williams Agreement, Mr. Williams was paid a bonus of
$100,000 for 1996 and $150,000 for 1997 after meeting the specified objectives
for each year. Assuming future objectives are met, his cash bonus for 1998 and
subsequent years will be determined by the Compensation Committee, but may not
be less than $25,000 per calendar quarter. The Williams Agreement also provides
for disability income benefits in the event Mr. Williams should become disabled.
<PAGE>
The Williams Agreement also acknowledges the grant to Mr. Williams of
an option to purchase 167,706 shares of the Company's Common Stock. The exercise
price for Mr. Williams' nonstatutory stock option is $4.16 per share. The option
expires on November 21, 2015. It becomes exercisable as to one-third of the
option shares on September 30 each year, commencing on September 30, 1996, until
fully vested. Exercise of the option may be accelerated if the Company is
acquired by another corporation. The option may be transferred, under certain
specified circumstances, to members of Mr. Williams' immediate family, to family
trusts and to family partnerships.
In the event of termination of employment by the Company for "cause"
or by Mr. Williams without "good reason," as such terms are defined in the
Williams Agreement, Mr. Williams is entitled to the payment of base salary, cash
bonus and benefits only through his termination date, plus vested deferred
compensation. In the event of termination of employment by the Company without
cause or by Mr. Williams for good reason, Mr. Williams is entitled to the
payment of his base salary, cash bonus, and benefits through the end of the term
of the Williams Agreement, plus all deferred compensation.
The Williams Agreement provides for deferred compensation in an amount
equal to $2,100,000 (8.4 times Mr. Williams' base salary of $250,000). The
deferred compensation is fully vested. The deferred compensation is payable in
installments beginning at the earliest to occur of the following: (1) December
31, 2001; (2) the date of Mr. Williams' death; (3) the termination of his
employment unless terminated by reason of disability; or (4) the date of the
last payment to be made under a disability income insurance policy.
The Williams Agreement further provides that, in the event of his
termination upon any change in control, both the Company and Mr. Williams have
the right to terminate the Williams Agreement. If either elects to terminate,
Mr. Williams will receive a lump-sum cash payment equal to 2 1/2 times his
"Final Compensation." "Final compensation" is the greater of (a) his base salary
and cash bonus for the most recently ended fiscal year, or (b) his base salary
for the current fiscal year. If Mr. Williams continues employment following a
change in control and is subsequently terminated within 36 months and before
December 31, 2002, then the Company will pay to Mr. Williams a lump-sum cash
payment equal to 2 1/2 times his final compensation. Change of control is
defined for this purpose as (i) the acquisition by any person, other than the
Bank, the Company or a trustee holding securities under an employee benefit plan
of either, of 30% or more of the combined voting power of Centennial Bank's or
the Company's then outstanding securities; (ii) a merger, consolidation, share
exchange or other corporate reorganization other than (A) a transaction in which
the voting securities of the Bank or the Company before the transaction continue
to represent more than 70% of the combined voting securities immediately
following the transaction, or (B) a transaction in which no person acquires more
than 30% of the combined voting power of Centennial Bank's or the Company's then
outstanding securities; or (iii) the complete liquidation, or sale or
disposition of all or substantially all, of the Bank's or the Company's assets.
In any event, the payment made to Mr. Williams under the change-of-control
provision of the Williams Agreement will be reduced until Section 280G of the
Internal Revenue Code does not limit the deductibility by the Company of the
payment.
The Williams Agreement provides that, commencing January 20, 1998,
Mr. Williams will be deemed to have fulfilled his full-time service obligation
<PAGE>
if he devotes time equivalent to three-fourths of a full-time schedule to his
duties with the Company. In addition, Mr. Williams is permitted to take a single
leave of absence of up to 180 days. He will receive full compensation and
benefits during such leave of absence.
For a period of three years following Mr. Williams' termination of
employment, unless such termination was by the Company without cause, or by Mr.
Williams for good reason, or as a result of any change of control of the Company
or Centennial Bank by a third party, Mr. Williams cannot, without the consent of
the Board of Directors, engage in or enter into any business or perform services
for another business that is in substantial competition with the Company.
Ted Winnowski
-------------
The Winnowski Agreement commenced on January 20, 1998 and terminates
on December 31, 2002. The Winnowski Agreement provides for a base salary of
$225,000 for the period beginning on January 20, 1998 and ending on December 31,
1998. Thereafter his base salary may be adjusted in the sole discretion of the
Board of Directors of Centennial Bank, but in no event may it be less
than $225,000 for each 12-month period.
In addition to Mr. Winnowski's base salary, the Winnowski Agreement
provides for a cash bonus for each calendar year if Centennial Bank attains
certain objectives determined by the Bank's Board of Directors before the
beginning of that year. Any cash bonus is payable 20% on the 15th of April, July
and October of that year and 40% on January 15th of the following year. Assuming
1998 objectives are met, Mr. Winnowski's cash bonus for 1998 will be $100,000,
with an additional $25,000 paid if 110% of the 1998 financial objectives are
achieved. Assuming future fiscal year objectives are met, his cash bonus for
1999 and subsequent years will be determined by the Board of Directors, but may
not be less than $100,000 per fiscal year, plus an additional amount of not less
than $25,000 if 110% of the fiscal year's financial objectives are achieved.
The Winnowski Agreement also acknowledges the grant to Mr. Winnowski
of an option to purchase 150,000 shares of the Company's Common Stock under the
Restated 1995 Stock Incentive Plan at an exercise price of $14.88 per share.
One-third of the option (the incentive stock option portion) expires on
January 20, 2008 and the remaining two-thirds of the option expires on January
20, 2023. The option becomes exercisable as to one-third of the option shares on
January 20 each year, commencing on January 20, 1999, until fully vested. In
addition, the Company has agreed, subject to achievement of 1998's performance
goals, to grant an additional option to purchase 50,000 shares under the 1995
Restated Stock Incentive Plan by January 20, 1999. The Company has also agreed,
beginning effective January 1, 1999 and conditioned upon achieving the
performance goals established by the Board each year, to grant annually an
additional option to purchase 20,000 shares, plus another option to purchase
10,000 shares if the Bank achieves 110% of the prior fiscal year's after-tax
profitability goal. The grant of all options to Mr. Winnowski, other than the
initial grant of 150,000 shares, is conditioned on shareholder approval of the
amendment to the Restated 1995 Stock Incentive Plan. (See Proposal 3 in this
Proxy.) Exercise of the option may be accelerated if the Company is acquired by
another corporation, upon Mr. Winnowski's death or disability or upon
termination of Mr. Winnowski's employment by the Company without cause or by
Mr. Winnowski with good reason, as such terms are defined in the Winnowski
Agreement. However, Mr. Winnowski's right to exercise a vested stock option will
not be forfeited by reason of termination for cause by the Company or by Mr.
Winnowski without good reason.
<PAGE>
The Winnowski Agreement provides that Mr. Winnowski is entitled to
participate in the Company's pension, profit-sharing, life, disability, medical
and other employee benefit plans in effect from time to time for officers in
similar positions. In addition, the Company has agreed that, if Mr. Winnowski's
401(k) plan is not fully vested due to termination of his employment on or after
December 31, 2002, the Company will make a cash payment to Mr. Winnowski equal
to the nonvested portion of such account. The Winnowski Agreement also provides
for a relocation payment of $5,000 for Mr. Winnowski's move to Eugene, Oregon,
and requires that Mr. Winnowski, at all times during the Winnowski Agreement's
effectiveness, maintain his principal residence within 20 miles of the Bank's
principal headquarters.
In the event of termination of employment by the Bank for cause or by
Mr. Winnowski without good reason, Mr. Winnowski is entitled to the payment of
his base salary and benefits only through his termination date. In the event of
termination of employment by the Bank without cause or by Mr. Winnowski for good
reason, Mr. Winnowski is entitled to payment of his base salary and benefits
through December 31, 2002, except that if Mr. Winnowski terminates because the
Bank has not moved its headquarters to Portland from Eugene, Oregon by
January 1, 2000, he shall be entitled only to one-half of his base salary
together with all benefits. If the Winnowski Agreement is terminated by either
party because of Mr. Winnowski's disability, the Bank will pay his benefits and
base salary until disability insurance benefits commence; if the agreement is
terminated due to death, the Bank will continue payments for six months.
The Winnowski Agreement further provides that, in the event of his
termination upon any change in control (defined the same as in the Williams
Agreement), both the Company and Mr. Winnowski have the right to terminate the
Winnowski Agreement. If either elects to terminate, Mr. Winnowski will receive a
lump-sum cash payment equal to 2 1/2 times his "Final Compensation." "Final
compensation" is the greater of (a) his base salary and cash bonus for the most
recently ended fiscal year, or (b) his base salary for the current fiscal year.
If Mr. Winnowski continues employment following a change in control and is
subsequently terminated without 36 months and before December 31, 2002, then the
Company will pay to Mr. Winnowski a lump-sum cash payment equal to 2 1/2 times
his final compensation.
For a period of six months following Mr. Winnowski's termination of
employment, he has agreed that he shall not engage in or enter into business or
perform services for another business that is of the same or similar type as the
Bank.
Ron R. Peery
------------
Centennial Bank entered into the Peery Agreement in 1989. It provides
for deferred compensation in the amount of $350,000, subject to vesting based
upon Mr. Peery's length of continued employment by Centennial Bank. His
employment may be terminated by Centennial Bank or Mr. Peery at any time for any
reason. The deferred compensation was 95% vested at March 31, 1998, with the
final 5% vesting on March 31, 1999. The deferred compensation is payable in
installments beginning at the date of Mr. Peery's death if he dies before
age 60, or at the later of age 60 or the termination of his employment. Mr.
Peery also is eligible for group benefits provided to other employees or
executive officers.
<PAGE>
Report of the Compensation Committee on Executive Compensation
- --------------------------------------------------------------
With the exception of Mr. Williams, who retired as Chief Executive
Officer and President of Centennial Bank in January 1998, all of the Company's
executives also hold positions with Centennial Bank and receive all of their
compensation from the Bank. The Bank has entered into intercompany agreements
with the Company and Centennial Mortgage for reimbursement for certain
compensation expenses to executive officers, including Mr. Williams. Although
compensation is paid by Centennial Bank, the Compensation Committee of the
Company establishes the compensation to be paid to the Company's executive
officers.
The Company and its subsidiaries are engaged in a highly competitive
industry. In order to succeed, the Company must be able to attract and maintain
qualified executives. To achieve this objective, the Compensation Committee has
structured executive compensation systems which include both a fixed-base
component and a contingent component tied to operating performance. The
Committee believes this compensation structure enables the Company to attract
and retain key executives.
In 1995, as the Board of Directors reviewed the Company's strategic
plans for the future, the Board determined that it would be in the best
interests of the Company to renegotiate Mr. Williams' employment contract to
extend its term. Central to the Board's interests were the long-term operation
of the Company and succession of management. The Williams Agreement is described
at pages 16-18 of this Proxy Statement. The base salary and bonus paid to
Mr. Williams for 1997 was determined by the terms of the Williams Agreement with
the Company. After extensive consideration of candidates, the Board determined
to hire Mr. Winnowski pursuant to an agreement described at pages 18-19 of this
Proxy Statement. Mr. Winnowski commenced employment with the Bank on
January 20, 1998.
In setting base compensation, the Compensation Committee considers the
overall performance of each executive with respect to the duties and
responsibilities assigned him or her. Further, periodic surveys are taken of
compensation levels and benefit programs offered by other community banks and
bank holding companies, which provide the Committee with information on which to
evaluate salary and compensation programs.
The Compensation Committee maintains a philosophy that a significant
element of compensation of executive officers, including Mr. Williams, Mr.
Winnowski and the other executive officers named in the Summary Compensation
Table, must be directly and materially linked to both operating and stock price
performance. The benefit plans provided to the executive officers are designed
to accomplish that goal. In particular, bonus compensation is available only to
the extent that the Company meets or exceeds budgeted net income. In 1997,
executive officers earned cash bonuses in specified amounts per executive, upon
the achievement of specific performance measurements by the Company each
quarter. In 1997, the performance measurements were: return on average assets;
return on average equity; net interest margin; efficiency ratio; and growth
objectives for total loans, total deposits and total assets. Cash bonuses for
1997 were paid 20% on the 15th day of April and July 1997 and 60% on
January 15, 1998.
The Company's stock incentive plans are an important component of the
Company's compensation program for executive officers and other employees. The
plans are intended to advance the interests of the Company and its shareholders
by encouraging and enabling executive officers and other employees to acquire
and retain a proprietary interest in the Company. Through stock option grants,
<PAGE>
the long-range interests of management and employees are aligned with those of
shareholders as the optionees accumulate (through the vesting of their stock
options) meaningful stakes in the Company. The Compensation Committee makes all
decisions concerning the granting of stock options, including the individuals to
whom options are granted and the respective exercise prices and vesting periods.
These decisions are made on a subjective basis and generally do not bear a
specific relationship to any particular measure of the Company's performance. No
executive officers were granted stock options in 1997. However, all of the named
executive officers own stock options. The value of these stock options is
entirely dependent on the market value of the Company's shares. See the stock
option table included in "Executive Compensation."
The Company maintains a 401(k) retirement savings plan applicable to
all eligible employees, including executive officers. Under the plan, the
Company typically matches a portion of employee contributions (during 1997, 60%
of employee contributions were matched up to a maximum of 6% of compensation).
At December 31, 1997, all employer contributions made on behalf of executive
officers were vested in accordance with the vesting schedule of the plan,
generally five years from commencement of employment, on the basis of the
offices' past service with Centennial Bank. The Company also has a deferred
compensation plan, which also is applicable to all eligible employees, including
executive officers. Although the Company may match a portion of the compensation
deferred by employees, no Company contributions were made under this plan for
1997.
The Compensation Committee believes that the base salary compensation
provided to the executive officers of the Company, including those named in the
Summary Compensation Table, is appropriate and reasonable in light of such
executives' duties, performance and responsibilities and that the contingent
forms of compensation provided through bonuses and stock options provide
additional, continuing incentives to executives in appropriate circumstances and
are consistent with the benefits derived by shareholders of the Company.
This report is submitted by the members of the Company's Compensation
Committee:
Compensation Committee
Brian B. Obie
Robert L. Newburn
Cordy H. Jensen
Dan Giustina
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the
cumulative shareholder return on the Company's Common Stock during the five
years ended December 31, 1997, with (i) the All Nasdaq U.S. Stocks Index, as
reported by the Center for Research in Security Prices; and (ii) the Nasdaq Bank
Index, as reported by the Center for Research in Security Prices. This
comparison assumes $100 was invested on December 31, 1992, in the Company's
Common Stock and in the comparison groups, and assumes the reinvestment of all
cash dividends prior to any tax effect and retention of all shares issued
pursuant to stock dividends and stock splits.
<TABLE>
<CAPTION>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHICS.
Period Ending December 31,
- ------------------------------ ---------------------------------------------------------------------
Index 1992 1993 1994 1995 1996 1997
- ------------------------------ ----------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Centennial Bancorp 100.00 125.83 126.54 209.32 291.96 632.04
Nasdaq Bank Index 100.00 114.04 113.63 169.22 223.41 377.44
All Nasdaq US Stocks 100.00 114.80 112.21 158.70 195.19 239.53
</TABLE>
The stock performance shown on the graph above is not necessarily
indicative of future performance. The Company will not make nor endorse any
predictions as to future stock performance.
CERTAIN TRANSACTIONS
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The members of the Compensation Committee are Messrs. Obie, Newburn,
Jensen and Giustina. None of them is or has been an officer or employee of the
Company or any of its subsidiaries.
Mr. Williams, the Company's President and Chief Executive Officer,
serves as a director and is on the Compensation Committee of Obie Media
Corporation. Mr. Obie, the Company's Chairman of the Board and a member of the
Company's Compensation Committee, is the Chairman of the Board and an executive
officer of Obie Media Corporation.
Banking Relationships
- ---------------------
Certain directors (including each member of the Compensation
Committee) and executive officers of the Company and its subsidiaries, members
of their immediate families, and certain companies with which such individuals
are associated are customers of and have banking transactions with Centennial
Bank in the ordinary course of business. The Bank expects to have such banking
transactions in the future. All credit transactions with these parties in excess
of $25,000 must be approved by Centennial Bank's Asset/Liability Committee and
ratified by its Board of Directors. All outstanding loans and commitments to
loan to those parties were made in compliance with applicable laws and on
substantially the same terms (including interest rates and collateral) as those
prevailing for Centennial Bank at the time for comparable transactions with
<PAGE>
other persons and, in the opinion of management, did not involve more than the
normal risk of collectibility or present other unfavorable features. Loans to
directors and executive officers of the Company and of Centennial Bank must
comply with federal and state laws, which generally prohibit any preferential
terms or rates.
COMPLIANCE WITH SECTION 16 FILING REQUIREMENTS
Section 16 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), requires that all executive officers and directors of the Company
and all persons who beneficially own more than 10% of the Company's Common Stock
file an initial report of their ownership of the Company's securities on Form 3
and report changes in their ownership of the Company's securities on Form 4 or
Form 5. These filings must be made with the Securities and Exchange Commission
with a copy sent to the Company.
Based solely upon the Company's review of the copies of the filings
that it received with respect to the year ended December 31, 1997, and written
representations from certain reporting persons, the Company believes that all
reporting persons made all required Section 16 filings with respect to 1997 on a
timely basis, except that Collin Alspach, Michael J. Nysingh, Gary L. Stevens
and Richard C. Williams each reported one sale of Form 4 late, David M. Gazeley
reported one stock purchase on Form 4 late, and Ron R. Peery reported two stock
sales on Form 4 late.
OTHER BUSINESS
The Company's management knows of no other matters to be brought
before the meeting for a vote. However, if other matters are presented for a
vote at the meeting, the proxy holders will vote the shares represented by
properly executed proxies according to their judgment on those matters. At the
meeting, management will report on the Company's business, and shareholders will
have an opportunity to ask questions.
INFORMATION AVAILABLE TO SHAREHOLDERS
The Company's 1997 Annual Report is being mailed to shareholders with
this Proxy Statement. Additional copies of the Annual Report and the Company's
Form 10-K filed with the Securities and Exchange Commission may be obtained
without charge from Michael J. Nysingh, Chief Financial Officer, Centennial
Bancorp, 675 Oak Street, Post Office Box 1560, Eugene, Oregon 97440.
The Company welcomes the views of its shareholders on its activities
and performance. Shareholders who cannot attend the annual meeting personally
may use the enclosed proxy card to ask questions or make comments.
<PAGE>
AUDITORS
Coopers & Lybrand LLP, independent auditors, were selected by the
Board of Directors to conduct an audit of the Company's financial statements for
the year ended December 31, 1997.
Representatives of Cooper & Lybrand LLP will be at the annual meeting
and will have an opportunity to make a statement if they desire to do so and
answer any appropriate questions. However, management has been advised that the
representatives of Coopers & Lybrand LLP do not plan to make a statement.
The Company will appoint at a later date independent auditors to audit
the Company's financial statements for 1998. The Board of Directors will review
the scope of any such audit and other assignments given to the auditors to
assess whether such assignments would affect their independence.
PROPOSALS OF SHAREHOLDERS
Shareholders wishing to present proposals for action at the Company's
1999 annual meeting of shareholders must submit the proposals for inclusion in
the Company's proxy statement not later than December 15, 1998.
April 10, 1998
<PAGE>
EXHIBIT A
CENTENNIAL BANCORP
RESTATED 1995 STOCK INCENTIVE PLAN
Adopted by the Board of Directors
on November 22, 1995
(Amended and Restated effective
as of March 18, 1998)
I. PURPOSE
The purpose of the Plan is to provide a means by which selected
Employees, Directors and Consultants may be given an opportunity to acquire
stock of the Company. The Company, by means of the Plan, seeks to retain the
services of persons who are currently Employees, Directors or Consultants, to
secure and retain the services of new Employees, Directors and Consultants, and
to provide incentives for such persons to exert maximum efforts for the success
of the Company. Accordingly, the Plan provides for granting Incentive Stock
Options, Nonstatutory Stock Options and Restricted Stock Awards, or any
combination of the foregoing, as is best suited to the circumstances of the
particular person as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan
unless specifically modified by any paragraph:
a. "1934 Act" means the Securities Exchange Act of
1934, as amended and in effect from time to time, or any successor
statute.
b. "Award" means, individually or collectively, any
Option or Restricted Stock Award.
c. "Board" means the Board of Directors of Centennial
Bancorp.
d. "Code" means the Internal Revenue Code of 1986, as
amended and in effect from time to time, or any successor statute.
Reference in the Plan to any section of the Code shall be deemed to
include any amendments or successor provisions to any such section.
e. "Committee" means not less than two members of the
Board who are selected by the Board as provided in Paragraph A of
Article IV.
f. "Common Stock" means the shares of Common Stock of
the Company, with par value of $2.00 per share.
g. "Company" means Centennial Bancorp and any Parent
and Subsidiary of Centennial Bancorp.
<PAGE>
h. "Consultant" means any person, including an adviser,
engaged by the Company to render services and who does not render such
services as an Employee or Director.
i. "Director" means an individual elected to the Board
by the shareholders of the Company or by the Board under applicable
corporate law who is serving on the Board on the date the Plan is
adopted by the Board or is elected to the Board after such date.
j. "Disability" means the condition of being
permanently "disabled" within the meaning of Section 22(e)(3) of the
Code, namely being unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less
than 12 months.
k. "Employee" means any person (including a Director)
in an employment relationship with the Company.
l. "Fair Market Value" means, as of any specified date:
(i) If the Common Stock is listed on any established
stock exchange, its fair market value shall be the closing sale price
of the Common Stock (or the average of the closing bid and asked
prices, if no sales were reported), as quoted on such exchange (or the
exchange with the greatest volume of trading in Common Stock) on the
business day preceding the date of such determination, as reported in
The Wall Street Journal or such other source as the Board deems
reliable; or
(ii) If the Common Stock is quoted on the National
Market System of the National Association of Securities Dealers, Inc.
Automated Quotation (Nasdaq) System, its fair market value shall be
the average of the closing bid and asked prices for the Common Stock
on the business day preceding the date of such determination, as
reported in The Wall Street Journal or such other source as the Board
deems reliable; or
(iii) In the absence of an established market for
the Common Stock, the fair market value thereof shall be determined in
good faith by the Committee.
m. "Holder" means an Employee, Consultant or a Director
who has been granted an Award, and any assignee or transferee of such
person as permitted under the Plan.
n. "Incentive Stock Option" means an incentive stock
option within the meaning of Section 422 of the Code.
o. "Nonemployee Director" means a Nonemployee Director
as defined in Rule 16b-3(b)(3)(i).
p. "Nonstatutory Stock Option" means a stock option
other than an Incentive Stock Option.
<PAGE>
q. "Option" means an Award described in Article VII of
the Plan.
r. "Option Agreement" means a written agreement between
the Company and a Holder with respect to an Option.
s. "Parent" means a "parent corporation," whether now
or hereafter existing, as defined in Section 424(e) of the Code.
t. "Plan" means the 1995 Stock Incentive Plan of
Centennial Bancorp, as set forth herein and as may be hereafter
amended from time to time.
u. "Restricted Stock Agreement" means a written
agreement between the Company and a Holder with respect to a
Restricted Stock Award.
v. "Restricted Stock Award" means an Award described in
Article VIII of the Plan.
w. "Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the 1934 Act, as such may be
amended from time to time, and any successor rule, regulation or
statute fulfilling the same or similar function.
x. "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the
Code; namely, any corporation in which the Company directly or
indirectly controls 50 percent or more of the total combined voting
power of all classes of stock having voting power.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective as of November 22, 1995, the date of
its adoption by the Board, subject to its ratification and approval by the
shareholders of Centennial Bancorp on or before November 21, 1996. Until the
Plan has been approved by shareholders, any Awards made under the Plan shall be
conditioned upon such approval. No Awards may be granted under the Plan after
November 21, 2005. The Plan shall remain in effect until all Awards granted
under the Plan have been satisfied or expired.
IV. ADMINISTRATION
A. Composition of Committee. The Plan shall be administered by a
committee which shall (i) be appointed by the Board and (ii) consist of
Nonemployee Directors.
B. Authority of the Committee. Subject to the provisions of the
Plan, the Committee shall have sole authority, in its discretion, to determine:
(i) which Employees, Directors and Consultants shall receive Awards; (ii) the
time or times when Awards shall be granted; (iii) the type or types of Awards to
be granted; and (iv) the number of shares of Common Stock which may be issued
under each Award. In making such determinations, the Committee may take into
account the nature of the services rendered by the respective individuals, their
present and potential contribution to the success of the Company, and such other
factors as the Committee in its discretion shall deem relevant. The Committee
<PAGE>
shall also have such additional powers as are delegated to it by the Plan.
Subject to the express provisions of the Plan, the Committee is authorized to
construe the Plan and the respective agreements executed hereunder, to prescribe
such rules and regulations relating to the Plan as it may deem advisable to
carry out the Plan, and to determine the terms, restrictions and provisions of
each Award, including such terms, restrictions and provisions as shall be
requisite in the judgment of the Committee to cause designated Options to
qualify as Incentive Stock Options, and to make all other determinations
necessary or advisable for administering the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in any agreement
relating to an Award in the manner and to the extent it shall deem expedient to
carry the Award into effect. The determinations of the Committee on the matters
referred to in this Article IV shall be conclusive.
C. Liability of Committee Members. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Award.
D. Costs of Plan. The costs and expenses of administering the
Plan shall be borne by the Company.
V. ELIGIBILITY
Employees, Directors and Consultants are eligible to receive
Options and Restricted Stock Awards; provided, however, only Employees are
eligible to receive Incentive Stock Options. Any Award may be granted on more
than one occasion to the same person, and may include an Incentive Stock Option,
a Nonstatutory Stock Option, a Restricted Stock Award, or any combination
thereof.
VI. SHARES SUBJECT TO THE PLAN
A. Aggregate Number of Shares. Subject to Article IX, the
aggregate number of shares of Common Stock that may be issued under the Plan
shall not exceed 1,100,000 shares. Shares shall be deemed to have been issued
under the Plan only (i) to the extent actually issued and delivered pursuant to
an Award, or (ii) to the extent an Award is settled in cash. To the extent that
an Award lapses or the rights of its Holder terminate, any shares of Common
Stock subject to such Award shall again be available for the grant of an Award
under the Plan.
B. Stock Offered. The stock to be offered pursuant to the grant
of any Award may be authorized but unissued Common Stock or Common Stock
previously issued and outstanding and reacquired by the Company.
VII. OPTIONS
A. Option Period. The term of each Option shall be as specified
by the Committee at the date of grant, except that no Incentive Stock Option
shall be exercisable after the expiration of ten years from the date of grant of
such Incentive Stock Option.
B. Limitations on Exercise of Option. An Option shall be
exercisable in whole or in such installments and at such times as determined by
the Committee.
C. Special Limitations on Incentive Stock Options. To the extent
that the aggregate Fair Market Value (determined at the time the respective
<PAGE>
Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options granted are exercisable for the first time by an
individual during any calendar year under all incentive stock option plans of
the Company exceeds $100,000, such Incentive Stock Options shall be treated as
options which do not constitute Incentive Stock Options. The Committee shall
determine, in accordance with applicable provisions of the Code, Treasury
Regulations and other administrative pronouncements, which of a Holder's Options
will not constitute Incentive Stock Options because of such limitation and shall
notify the Holder of such determination as soon as practicable after such
determination. No Incentive Stock Option shall be granted to an individual if,
at the time the Option is granted, such individual owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company, unless (i) at the time such Option is granted the exercise price is
at least 110 percent of the Fair Market Value of the Common Stock subject to the
Option and (ii) such Option by its terms is not exercisable after the expiration
of five years from the date of grant.
D. Separate Stock Certificates. Separate stock certificates shall
be issued by the Company for those shares acquired pursuant to the exercise of
an Incentive Stock Option and for those shares acquired pursuant to the exercise
of a Nonstatutory Stock Option.
E. Option Agreement. Each Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify an Incentive Stock Option
under Section 422 of the Code. An Option Agreement may provide for the payment
of the exercise price, in whole or in part, by the delivery of a number of
shares of Common Stock (plus cash if necessary) having a Fair Market Value (as
of the exercise date of the Option) equal to such exercise price. Moreover, an
Option Agreement may provide for a "cashless exercise" of the Option by
establishing procedures whereby the Holder, by a properly executed written
notice, directs: (i) an immediate market sale or margin loan respecting all or a
part of the shares of Common Stock to which the Holder is entitled upon exercise
of the Option; (ii) the delivery of the shares of Common Stock from the Company
directly to a brokerage firm; and (iii) the delivery of the exercise price from
sale or margin loan proceeds from the brokerage firm directly to the Company.
Such Option Agreement may also include, without limitation, provisions relating
to: (a) vesting of Options; (b) tax matters (including provisions covering any
applicable employee wage withholding requirements); and (c) any other matters
not inconsistent with the terms and provisions of this Plan that the Committee
shall in its sole discretion determine. The terms and conditions of the
respective Option Agreements need not be identical.
F. Exercise Price and Payment. The price at which a share of
Common Stock may be purchased upon exercise of an Option shall be determined by
the Committee, but such exercise price (i) shall not be less than the Fair
Market Value of a share of Common Stock on the date such Option is granted if
the Option is an Incentive Stock Option and (ii) shall be subject to adjustment
as provided in Article IX. An Option or portion thereof may be exercised by
delivery of an irrevocable notice of exercise to the Company. The exercise price
of an Option or portion thereof shall be paid in full in the manner prescribed
by the Committee.
<PAGE>
G. Termination of Employment or Service.
1. In the event the employment or service of a Holder of an
Option by the Company terminates for any reason other than because of
Disability or death, such Option may be exercised at any time prior to
the expiration date of the Option or the expiration of three months
after the date of such termination, whichever is the shorter period,
but only if and to the extent the Holder was entitled to exercise the
Option at the date of such termination.
2. In the event the employment or service of a Holder of an
Option by the Company terminates because of Disability, such Option
may be exercised at any time prior to the expiration date of the
Option or the expiration of one year after the date of such
termination, whichever is the shorter period, but only if and to the
extent the Holder was entitled to exercise the Option at the date of
such termination.
3. In the event of the death of a Holder of an Option while
employed by or providing service to the Company, such Option may be
exercised at any time prior to the expiration date of the Option or
the expiration of on year after the date of such death, whichever is
the shorter period, but only if and to the extent the Holder was
entitled to exercise the Option on the date of death. An Incentive
Stock Option may be exercised only by the person or persons to whom
such Holder's rights under the Option shall pass by the Holder's will
or by the laws of descent and distribution of the state or country of
domicile at the time of death.
4. The Committee, at the time of grant or at any time
thereafter, may extend the three-month and one-year post-termination
exercise periods any length of time not later than the original
expiration date of the Option, and may increase the portion of the
Option that is exercisable, subject to such terms and conditions as
the Committee may determine.
5. To the extent that the Option of any deceased Holder or
of any Holder whose employment or service terminates is not exercised
within the applicable period, all further rights to purchase Common
Stock pursuant to such Option shall cease and terminate.
H. Rights As a Shareholder. The Holder of an Option under the
Plan shall have no rights as a shareholder with respect to the Common Stock
subject to such Option until the date of issue to the Holder of a stock
certificate for such shares. Except as otherwise expressly provided in the Plan,
no adjustment shall be made for dividends or other rights for which the record
date occurs prior to the date such stock certificate is issued.
I. Options in Substitution for Stock Options Granted by Other
Corporations. Options may be granted under the Plan from time to time in
substitution for stock options held by individuals employed by corporations who
become Employees as a result of a merger or consolidation of the employing
corporation with the Company, or the acquisition by the Company of the assets of
the employing corporation, or the acquisition by the Company of stock of the
employing corporation with the result that such employing corporation becomes a
Subsidiary.
<PAGE>
VIII. RESTRICTED STOCK AWARDS
A. Restriction Period. At the time a Restricted Stock Award is
granted, the Committee shall establish a period of time (the "Restriction
Period") applicable to such Award. Each Restricted Stock Award may have a
different Restriction Period, in the discretion of the Committee. The
Restriction Period applicable to a particular Restricted Stock Award shall not
be changed except as permitted by Paragraph B of this Article VIII or by Article
IX.
B. Other Terms and Conditions. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate registered in
the name of the Holder of such Restricted Stock Award. The Holder shall have the
right to receive dividends during the Restriction Period, to vote Common Stock
subject thereto and to enjoy all other shareholder rights, except that: (i) the
Holder shall not be entitled to delivery of the stock certificate until the
Restriction Period shall have expired; (ii) the Company shall retain custody of
the stock certificate during the Restriction Period; (iii) the Holder may not
sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the stock
during the Restriction Period; and (iv) a breach of the terms and conditions
established by the Committee pursuant to the Restricted Stock Agreement shall
cause a forfeiture of the Restricted Stock Award. Stock dividends issued with
respect to Common Stock awarded pursuant to a Restricted Stock Award shall be
treated as additional Common Stock covered by the Restricted Stock Award. At the
time of such Award, the Committee may, in its sole discretion, prescribe
additional terms, conditions or restrictions relating to Restricted Stock
Awards, including, but not limited to, rules pertaining to the termination of
employment or service (by retirement, Disability, death or otherwise) of a
Holder prior to expiration of the Restriction Period. Such additional terms,
conditions or restrictions shall be set forth in a Restricted Stock Agreement
entered into in conjunction with the Award. Such Restricted Stock Agreement may
also include, without limitation, provisions relating to: (i) vesting of Awards;
(ii) tax matters (including provisions (x) covering any applicable employee wage
withholding requirements and (y) prohibiting an election by the Holder under
Section 83(b) of the Code); and (iii) any other matters not inconsistent with
the terms and provisions of this Plan that the Committee shall in its sole
discretion determine.
C. Purchase Price and Payment. The Committee shall determine the
amount and form of any payment for Common Stock received pursuant to a
Restricted Stock Award, provided that, in the absence of such a determination, a
Holder shall not be required to make any payment for Common Stock received
pursuant to a Restricted Stock Award, except to the extent otherwise required by
law.
D. Restricted Stock Agreement. At the time any Award is granted
under this Article VIII, the Company and the Holder shall enter into a
Restricted Stock Agreement setting forth each of the matters contemplated hereby
and such other matters as the Committee may determine to be appropriate. The
terms and provisions of the respective Restricted Stock Agreements need not be
identical.
<PAGE>
IX. CHANGES IN CAPITAL STRUCTURE
A. If the outstanding Common Stock is hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, plan of exchange, recapitalization,
reclassification, stock split-up, combination of shares or dividend payable in
shares, appropriate adjustment shall be made by the Committee in the number and
kind of shares available for Awards. In addition, the Committee shall make
appropriate adjustment in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable, so that the
Holder's proportionate interest before and after the occurrence of the event is
maintained. Notwithstanding the foregoing, the Committee shall have no
obligation to effect any adjustment that would or might result in the issuance
of fractional shares, and any fractional shares resulting from any adjustment
may be disregarded or provided for in any manner determined by the Committee.
Any such adjustments made by the Committee shall be conclusive. Any adjustment
provided for in this Paragraph A of Article IX shall be subject to any required
shareholder action. In the event of dissolution of the Company or a merger,
consolidation, plan of exchange or similar transaction affecting the Company, in
lieu of providing for Options as provided above in this Paragraph A of Article
IX or in lieu of having the Options continue unchanged, the Committee may, in
its sole discretion, provide a 30-day period prior to such event during which
Holders shall have the right to exercise Options in whole or in part without any
limitation on exercisability and upon the expiration of such 30-day period all
unexercised Options shall immediately terminate.
B. The existence of the Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the shareholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of debt or
equity securities senior to or affecting Common Stock or the rights thereof, the
dissolution or liquidation of the Company, or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
C. Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares of
stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Common Stock subject to Awards previously granted or the
exercise price per share, if applicable.
X. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time
with respect to any shares for which Awards have not previously been granted.
The Board shall have the right to alter or amend the Plan or any part thereof
from time to time; provided, that no change in any Award previously granted may
be made which would impair the rights of the Holder without the consent of the
Holder.
<PAGE>
XI. MISCELLANEOUS
A. No Right To An Award. Neither the adoption of the Plan by the
Company nor any action of the Board or the Committee shall be deemed to give an
Employee, a Consultant or a Director any right to be granted an Award or any of
the rights hereunder except as may be evidenced by an Award or by an Option
Agreement or Restricted Stock Agreement duly executed on behalf of the Company,
and then only to the extent and on the terms and conditions expressly set forth
therein.
B. No Employment Rights Conferred. Nothing in the Plan shall (i)
confer upon any Employee any right with respect to continuation of employment
with the Company or (ii) interfere in any way with the right of the Company to
terminate the Employee's employment (or service as a Director, in accordance
with applicable corporate law, or service as a Consultant) at any time for any
reason, with or without cause.
C. Other Laws; Withholding. The Company shall not be obligated to
issue any Common Stock pursuant to any Award granted under the Plan at any time
when the shares covered by such Award have not been registered under the
Securities Act of 1933, as amended, and such other state and federal laws, rules
or regulations as the Company or the Committee deems applicable and, in the
opinion of legal counsel for the Company, there is no exemption from the
registration requirements of such laws, rules or regulations available for the
issuance and sale of such shares. No fractional shares of Common Stock shall be
delivered, nor shall any cash in lieu of fractional shares be paid. The Company
shall have the right to deduct in connection with all Awards any taxes required
by law to be withheld and to require any payments required to enable it to
satisfy its withholding obligations.
D. No Restriction on Corporate Action. Nothing contained in the
Plan shall be construed to prevent the Company from taking any corporate action
which is deemed by the Company to be appropriate or in its best interest,
whether or not such action would have an adverse effect on the Plan or any Award
granted under the Plan. No Employee, Consultant, Director, beneficiary or other
person shall have any claim against the Company as a result of any such action.
E. Restrictions on Transfer.
1. An Award shall not be transferable otherwise than by will
or the laws of descent and distribution; provided, however, that, with
the consent of the Committee, which consent may be withheld in its
sole discretion or conditioned on such requirements as the Committee
shall deem appropriate, all or any portion of a Nonqualified Stock
Option may be assigned or transferred to the optionee's immediate
family (i.e., children, grandchildren, spouse, parents and siblings),
to trusts for the benefit of the optionee's immediate family members,
and pursuant to qualified domestic relations orders. No consideration
may be paid for the transfer of any Nonqualified Stock Option, and,
after any permitted transfer, the Nonqualified Stock Option shall
continue to be subject to the same terms and conditions as were
applicable to it immediately prior to its transfer, except that: (i)
subsequent transfers of transferred options shall be prohibited except
by will or the laws of descent and distribution; (ii) for purposes of
Section G of Article VII, the term "Holder" shall refer to the
original optionee; (iii) the events of termination of employment
specified in Section G of Article VII shall continue to be applied
with respect to the original optionee, following which the
Nonqualified Stock Option shall be exercisable by the transferee only
<PAGE>
to the extent, and for the periods specified in Section G of Article
VII; and (iv) the original optionee shall remain subject to
withholding taxes upon exercise of the Nonqualified Stock Option by
the transferee. Before permitting any transfer, the Committee may
require the transferee to agree in writing to be bound by all other
terms and conditions applicable to the Nonqualified Stock Option prior
to its transfer.
2. Incentive Stock Options may be exercisable during the
lifetime of the optionee only by the optionee, or by the optionee's
guardian or legal representative.
F. Governing Law. To the extent that federal laws (such as the
Code and the federal securities laws) do not otherwise control, the Plan shall
be construed in accordance with the laws of the state of Oregon.
G. Headings. Headings contained in the Plan are for reference
purposes and shall not affect the meaning or interpretation of the Plan.
<PAGE>
P CENTENNIAL BANCORP
Eugene Hilton, Joplin/Seeger Room
R 66 East 6th, Eugene, Oregon 97401
O Annual Meeting of Shareholders, May 20, 1998
X PROXY - SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Y
The undersigned shareholder of Centennial Bancorp hereby appoints
Brian B. Obie and Richard C. Williams, and each of them, as proxies with full
power of substitution, and authorizes them to represent and to vote on
behalf of the undersigned shareholder all shares of the common stock of
Centennial Bancorp that the undersigned is entitled to vote at the annual
meeting of shareholders of Centennial Bancorp to be held on May 20, 1998,
and any adjournment or adjournments thereof, with respect to the following:
(Continued, and to be marked, dated and signed on the other side)
<PAGE>
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark your
votes as indicated
in this example /X/
1. ELECTION OF DIRECTORS:
NOMINEES: Brian B. Obie, Robert L. Newburn, Dan Giustina, Cordy H. Jensen,
Richard C. Williams and Ted Winnowski
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
/ / For all nominees listed (except as marked above to the contrary)
/ / WITHHOLD AUTHORITY to vote for all nominees listed
2. TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO ELIMINATE PAR VALUE OF
THE COMPANY'S AUTHORIZED CAPITAL STOCK:
FOR / / AGAINST / / ABSTAIN / /
3. TO AMEND THE COMPANY'S RESTATED 1995 STOCK INCENTIVE PLAN TO INCREASE THE
NUMBER OF SHARES ISSUABLE UNDER THE PLAN TO 1,100,000 SHARES:
FOR / / AGAINST / / ABSTAIN / /
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH THE SPECIFIC
INSTRUCTIONS OF THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES LISTED FOR DIRECTOR, "FOR" THE
AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION AND "FOR" THE AMENDMENT TO
THE COMPANY'S RESTATED 1995 STOCK INCENTIVE PLAN; PROXIES MAY VOTE IN THEIR
DISCRETION AS TO SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Please sign exactly as your name appears. When shares are held jointly, both
should sign. When signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Signature(s) Signature(s)
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Date
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