<PAGE> 1
As filed with the Securities and Exchange Commission on April 22, 1996
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WEST COAST BANCORP
(Exact name of registrant as specified in its charter)
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OREGON 6022 93-0810577
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
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5335 S.W. MEADOWS ROAD, SUITE 201, LAKE OSWEGO, OREGON 97035 (503) 684-0884
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
VICTOR L. BARTRUFF AND RODNEY B. TIBBATTS
Co-Presidents and Co-Chief Executive Officers
5335 S.W. Meadows Road, Suite 201
Lake Oswego, Oregon 97035
(503) 684-0884
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of communications to:
STEPHEN M. KLEIN, ESQ KENNETH E. ROBERTS, ESQ.
Graham & Dunn, P.C. Foster Pepper & Shefelman
1420 Fifth Avenue, 33rd Floor 101 S.W. Main Street, 15th Floor
Seattle, Washington 98101 Portland, Oregon 97024
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
The date of mailing of the enclosed Prospectus/Proxy Statement to shareholders
of Vancouver Bancorp.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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CALCULATION OF REGISTRATION FEE
===================================================================================================
Title of Each Proposed Maximum Proposed Maximum Amount of
Class of Securities Amount Being Offering Price Aggregate Registration
Being Registered Registered(1) Per Share(2) Offering Price(3) Fee(3)
- ---------------------------------------------------------------------------------------------------
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Common Stock,
No par value 757,000 $8.09 $6,124,831.00 $2,112.01
===================================================================================================
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(1) Represents the estimated maximum number of shares of Common Stock, no
par value per share, of West Coast Bancorp that may be issued in
exchange for the 172,984 shares of Common Stock, $1.00 par value per
share, of Vancouver Bancorp that are either outstanding or subject to
presently exercisable options, pursuant to the Merger Agreement
described in this Registration Statement.
(2) Represents the maximum price per share of West Coast Bancorp Common
Stock to be issued in the calculation of the exchange ratio pursuant to
the Merger Agreement.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(2) under the Securities Act of 1933, as
amended, on the basis of the per-share book value of the Common Stock
of Vancouver Bancorp as of March 31, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 2
WEST COAST BANCORP
CROSS-REFERENCE SHEET
(SHOWING LOCATION OF INFORMATION REQUIRED BY FORM S-4)
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S-4 Item Prospectus Heading
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Cover Page; Cross Reference Sheet; Outside Front
Outside Front Cover Page of Prospectus Cover Page of Prospectus/Proxy Statement
2. Inside Front and Outside Back Cover Available Information; Table of Contents
Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Summary; Stock Price and Dividend Information;
Charges, and Other Information Selected Financial Data; Equivalent Per Common
Share Data
4. Terms of the Transaction Summary; Equivalent Per Common Share Data;
Annual Meeting of VB Shareholders; Background
of and Reasons for the Merger; The Merger;
Unaudited Pro Forma Combined Financial
Statements; Comparison of Certain Rights of
Holders of VB and WCB Common Stock
5. Pro Forma Financial Information Selected Financial Data; Equivalent Per Common
Share Data; Unaudited Pro Forma Combined
Financial Statements
6. Material Contracts with the Company Summary; The Merger
Being Acquired
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties Deemed
to be Underwriters
8. Interests of Named Experts and Counsel Background of and Reasons for the Merger --
Opinion of VB Financial Advisor; Certain Legal
Matters; Experts
9. Disclosure of SEC Position on Indemni- Not Applicable
fication for Securities Act Liabilities
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants Summary; Stock Price and Dividend Information;
Selected Financial Data; Equivalent Per Common
Share Data; Background of and Reasons for the
Merger; The Merger; Unaudited Pro Forma
Combined Financial Statements; Information
Concerning WCB; Supervision and Regulation;
Comparison of Certain Rights of Holders of VB
and WCB Common Stock; WCB Financial Statements
11. Incorporation of Certain Information by Incorporation by Reference
Reference
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<PAGE> 3
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12. Information with Respect to S-2 or S-3 Not Applicable
Registrants
13. Incorporation of Certain Information by Not Applicable
Reference
14. Information with Respect to Registrants Not Applicable
Other Than S-3 or S-2 Registrants
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies Not Applicable
16. Information with Respect to S-3 or S-2 Not Applicable
Companies
17. Information with Respect to Companies Summary; Stock Price and Dividend Information;
Other Than S-3 or S-2 Companies Selected Financial Data; Equivalent Per Common
Share Data; Background of and Reasons for the
Merger; The Merger; Unaudited Pro Forma
Combined Financial Statements; Information
Concerning VB; VB Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Management of VB; Supervision and
Regulation; Comparison of Certain Rights of
Holders of VB and WCB Common Stock; VB
Financial Statements
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Summary; Annual Meeting of VB Shareholders;
Authorizations are to be Solicited Background of and Reasons for the Merger;
The Merger; Information Concerning VB;
Comparison of Certain Rights of Holders of VB
and WCB Common Stock
19. Information if Proxies, Consents or Not Applicable
Authorizations are Not to be Solicited
or in an Exchange Offer
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<PAGE> 4
[Vancouver Bancorp Letterhead]
____________ ___, 1996
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Vancouver Bancorp ("VB"), which will be held on Tuesday May 28, 1996, at
5:00 p.m., local time, at the Royal Oaks Country Club, 8917 N.E. Fourth Plain
Boulevard, Vancouver, Washington.
At the Annual Meeting, you will be asked to consider and ratify a Plan
and Agreement of Reorganization and Merger, dated as of February 15, 1996 (the
"Merger Agreement"), between VB, West Coast Bancorp ("WCB") and HB Acquisition
Corporation ("HB"), WCB's wholly owned subsidiary, under the terms of which VB
will be merged with and into HB (the "Merger"), with the result that VB
shareholders would become shareholders of WCB. The Merger is subject to
various conditions which are contained in the Merger Agreement. The terms of
the Merger are described in the attached Proxy Statement, which also serves as
a Prospectus of WCB for its Common Stock to be issued in the Merger. The
complete text of the Merger Agreement appears as Appendix A to the
Prospectus/Proxy Statement. If the Merger is approved, each VB shareholder
will receive shares of WCB Common Stock for each share of VB Common Stock
owned, based on an exchange formula detailed in the Prospectus/Proxy Statement
which is intended to provide WCB shares with a market value of approximately
$66.95 for each share of VB exchanged in the merger. The Board of Directors
has received an opinion from Columbia Financial Advisors, Inc. to the effect
that the consideration to be received by VB's shareholders in the Merger is
fair from a financial point of view.
At the Annual Meeting, you will also be asked to elect seven directors
to VB's Board of Directors, each to serve a one- year term or until their
respective successors are elected and qualified, or until such time as the
Merger is effective.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF VANCOUVER BANCORP AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE IN FAVOR OF THE MERGER. YOUR BOARD OF DIRECTORS ALSO RECOMMENDS
THAT YOU VOTE FOR THE ELECTION OF THE SEVEN NOMINEES FOR DIRECTOR. Approval of
the Merger requires the affirmative vote of the holders of a majority of the
outstanding shares of VB Common Stock. Directors are elected by a plurality of
the votes cast for nominees. We urge you to read the attached Prospectus/Proxy
Statement and to consider your vote carefully. If you have any questions
regarding this material in advance of the Annual Meeting, please feel free to
call Anne M. Ryan, VB's Vice President and Secretary, at (360) 695-3439.
Regardless of the size of your holdings, it is important that your shares be
voted at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE BE CERTAIN
TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY, AND RETURN IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE
IN PERSON IF YOU WISH, EVEN THOUGH YOU HAVE PREVIOUSLY RETURNED YOUR PROXY. IF
FOR ANY REASON YOU SHOULD DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY
TIME BEFORE IT IS VOTED AT THE ANNUAL MEETING.
Very truly yours,
James J. Pomajevich Lee S. Stenseth
Chairman of the Board President
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
<PAGE> 5
VANCOUVER BANCORP
801 MAIN STREET
VANCOUVER, WASHINGTON 98660
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1996
TO THE SHAREHOLDERS OF VANCOUVER BANCORP:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Vancouver Bancorp ("VB") will be held on Tuesday May 28, 1996, at 5:00 p.m.,
local time, at the Royal Oaks Country Club, 8917 N.E. Fourth Plain Boulevard,
Vancouver, Washington. The Annual Meeting is for the following purposes:
1. MERGER AGREEMENT. To consider and vote upon a proposal to
approve the Plan and Agreement of Reorganization and Merger, dated as of
February 15, 1996, as more fully described in the accompanying Prospectus/Proxy
Statement, and attached as Appendix A thereto.
2. ELECTION OF DIRECTORS. To elect seven directors, each to hold
office for a one-year term, or until their respective successors are elected
and qualified, or until such time as the Merger is effective.
3. OTHER MATTERS. To act upon such other matters as may properly
come before the Annual Meeting or any adjournment thereof.
Only holders of record of the VB Common Stock, $1.00 par value per
share, at the close of business on April 18, 1996, the record date for the
Annual Meeting, are entitled to notice of and to vote at the Annual Meeting or
any adjournments or postponements thereof. Shareholders desiring to do so may
dissent from the Merger and obtain payment for their shares in accordance with
the provisions of the Washington statute, RCW 23B.13, a copy of which is
included in the Prospectus/Proxy Statement. See "THE MERGER -- Dissenters'
Rights of Appraisal" and Appendix C.
All shareholders are cordially invited to attend the Annual Meeting
personally. Whether or not you are able to do so, it is important that you
complete, sign, date, and promptly return the accompanying proxy in the
enclosed postage-paid envelope in order to vote your shares of VB Common Stock.
Shareholders may revoke proxies previously submitted by completing a later-
dated proxy, by written revocation delivered to VB's secretary at or prior to
the Annual Meeting, or by appearing and voting at the Annual Meeting in person.
Attendance at the Annual Meeting will not of itself revoke a previously
submitted proxy.
By Order of the Board of Directors,
Anne M. Ryan, Secretary
Vancouver, Washington
__________ ___, 1996
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. APPROVAL OF
THE MERGER REQUIRES THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES OF VB COMMON STOCK. IN ORDER TO ENSURE THAT THE REQUISITE
VOTES ARE OBTAINED, AND IN ORDER TO ENSURE A QUORUM, WE URGE YOU TO SIGN, DATE
AND RETURN THE ENCLOSED PROXY.
<PAGE> 6
PROXY STATEMENT OF VANCOUVER BANCORP
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 28, 1996
PROSPECTUS OF WEST COAST BANCORP
SHARES OF COMMON STOCK, NO PAR VALUE
This Prospectus/Proxy Statement is being furnished to holders of shares
of common stock, $1.00 par value per share ("VB Common Stock"), of Vancouver
Bancorp ("VB"), a Washington corporation, in connection with the solicitation
of proxies by the Board of Directors of VB (the "VB Board") for use at the
Annual Meeting of Shareholders to be held on Tuesday May 28, 1996, at 5:00
p.m., local time, at the Royal Oaks Country Club, 8917 N.E. Fourth Plain
Boulevard, Vancouver, Washington, and at any adjournments or postponements
thereof. VB shareholders will vote upon a proposal to approve the merger (the
"Merger") of VB with and into HB Acquisition Corporation ("HB"), a Washington
corporation and wholly owned subsidiary of West Coast Bancorp ("WCB"), an
Oregon corporation and bank holding company, on the terms described in the Plan
and Agreement of Reorganization and Merger (the "Merger Agreement") dated as of
February 15, 1996 between WCB, HB and VB. The Merger Agreement is incorporated
herein by reference.
This Prospectus/Proxy Statement also constitutes the Prospectus of WCB
filed as part of a Registration Statement on Form S-4 with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the shares of Common Stock, no par value per
share ("WCB Common Stock"), of WCB to be issued in the Merger. When the Merger
becomes effective, all outstanding shares of VB Common Stock will be converted
into the right to receive shares of WCB Common Stock. Cash will be paid in
lieu of fractional shares. See "THE MERGER -- Basic Terms of Merger."
Shareholders desiring to do so may dissent from the Merger and obtain payment
for their shares in accordance with the provisions of the Washington statute,
RCW 23B.13, a copy of which is included in the Prospectus/Proxy Statement. See
"THE MERGER -- Dissenters' Rights of Appraisal" and Appendix C. For a
description of certain significant considerations in connection with the
Merger, see "THE MERGER -- Conditions to the Merger; Interests of Certain
Persons in the Merger."
This Prospectus/Proxy Statement does not cover any resale of the
securities to be received by shareholders of VB upon consummation of the
Merger, and no person is authorized to make any use of this Prospectus/Proxy in
connection with any such resale. This Prospectus/Proxy Statement and the
accompanying proxy cards are first being mailed to shareholders of VB on or
about May 1, 1996.
THE SHARES OF WCB COMMON STOCK ISSUABLE IN THE MERGER ARE NOT SAVINGS OR
DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE BANK
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
THE SHARES OF WCB COMMON STOCK ISSUABLE IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OF ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus/Proxy Statement is ___________ __, 1996
<PAGE> 7
AVAILABLE INFORMATION
WCB is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, (the "Exchange Act") as amended. In
accordance with the Exchange Act, WCB files reports, proxy statements, and
other information with the SEC. Under the rules and regulations of the SEC,
the solicitation of VB shareholders to approve the Merger constitutes an
offering of the WCB Common Stock to be issued in conjunction with the Merger.
WCB has filed with the SEC a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act covering the WCB Common
Stock to be issued in connection with the Merger. The Registration Statement
and the exhibits thereto, as well as the reports, proxy statements, and other
information filed with the SEC by WCB under the Exchange Act may be inspected
and copied at prescribed rates at the public reference facilities maintained by
the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the SEC located at 7 World Trade Center,
Thirteenth Floor, New York, New York 10048, and at The Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may also be obtained at prescribed rates from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, materials filed by WCB are available for inspection at the offices of
the Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. As
permitted by the rules and regulations of the SEC, this Prospectus/Proxy
Statement omits certain information, exhibits, and undertakings contained in
the Registration Statement. Reference is made to the Registration Statement
and to the exhibits thereto for further information.
VB is not subject to the information and reporting requirements of the
Exchange Act.
This Prospectus/Proxy Statement constitutes part of the Registration
Statement on Form S-4 (File No. 33-________) filed by WCB with the SEC under
the Securities Act. This Prospectus/Proxy Statement omits certain information
contained in the Registration Statement in accordance with the rules and
regulations of the SEC. Reference is made hereby to the Registration Statement
and related exhibits for further information with respect to WCB and the WCB
Common Stock. Statements contained herein or in any document incorporated
herein by reference as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each
instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document
incorporated herein by reference. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by WCB with the SEC pursuant to the
Exchange Act are incorporated in this Prospectus/Proxy Statement by reference:
1. WCB's Annual Report on Form 10-K for the year ended December
31, 1995 (the "WCB 1995 10-K");
2. WCB's Proxy Statement for its 1996 Annual Meeting of
Shareholders (the "WCB 1996 Proxy");
3. WCB's Current Report on Form 8-K dated February 20, 1996; and
4. The description of WCB's capital stock contained in its
Registration Statement on Form S-4 filed with the SEC on
January 27, 1995 (Registration No. 33-88656).
All documents filed by WCB pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act after the date hereof and prior to the VB Annual
Meeting of Shareholders shall be deemed to be incorporated by reference herein
and to be a part hereof from the date of filing such documents. Any
<PAGE> 8
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein or in any other
subsequently filed document that also is, or is deemed to be, incorporated by
reference herein modifies or superseded such document. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part hereof.
As described above, this Prospectus/Proxy Statement incorporates by
reference documents that are not presented herein or delivered herewith. These
documents (other than exhibits to such documents that are specifically
incorporated by reference into the text of such documents) are available,
without charge, to each person, including any beneficial owner, to whom a copy
of this Prospectus/Proxy Statement is delivered, upon written or oral request
to Anne M. Ryan, Vice President and Secretary, Vancouver Bancorp, 801 Main
Street, Vancouver, Washington 98660. In order to ensure timely delivery of
the documents, any such request should be made by May 20, 1996.
All information contained in this Prospectus/Proxy Statement relating
to WCB has been furnished by WCB, and VB is relying upon the accuracy of that
information. All information contained in this Prospectus/Proxy Statement
relating to VB has been furnished by VB, and WCB is relying upon the accuracy
of that information.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY EITHER WCB OR VB. THIS PROSPECTUS/PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER,
SOLICITATION OF AN OFFER, OR PROXY SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS/PROXY STATEMENT NOR ANY
DISTRIBUTION OF THE SECURITIES OFFERED PURSUANT TO THIS PROSPECTUS/PROXY
STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF VB OR
WCB AND ITS SUBSIDIARIES SINCE THE DATE OF THIS PROSPECTUS/PROXY STATEMENT OR
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
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TABLE OF CONTENTS
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Page
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SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
VB Shareholder Meeting . . . . . . . . . . . . . . . . . . . . . . . 1
Parties to the Merger . . . . . . . . . . . . . . . . . . . . . . . 1
The Merger; Exchange Ratio . . . . . . . . . . . . . . . . . . . . . 3
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Reasons for the Merger; Recommendation of the VB Board . . . . . . . 3
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . 4
Board of Directors and Executive Officers of WCB and the Bank . . . 4
Trading Market . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Conditions; Regulatory Approvals . . . . . . . . . . . . . . . . . . 4
Termination and Amendment of the Merger Agreement . . . . . . . . . 4
Tax Treatment of the Merger . . . . . . . . . . . . . . . . . . . . 5
Accounting Treatment of the Merger . . . . . . . . . . . . . . . . . 5
Dissenters' Rights of Appraisal . . . . . . . . . . . . . . . . . . 5
Interests of Certain Persons in the Merger . . . . . . . . . . . . . 6
Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . 6
STOCK PRICE AND DIVIDEND INFORMATION . . . . . . . . . . . . . . . . . . 7
WCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
VB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA . . . . . . . 8
EQUIVALENT PER COMMON SHARE DATA . . . . . . . . . . . . . . . . . . . . 12
ANNUAL MEETING OF VB SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . 14
Date, Time, and Place . . . . . . . . . . . . . . . . . . . . . . . 14
Purpose of the Meeting . . . . . . . . . . . . . . . . . . . . . . . 14
Shares Outstanding and Entitled to Vote; Record Date . . . . . . . . 14
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Voting, Solicitation, and Revocation of Proxies . . . . . . . . . . 14
BACKGROUND OF AND REASONS FOR THE MERGER . . . . . . . . . . . . . . . . 15
Reasons for the Merger - General . . . . . . . . . . . . . . . . . . 15
Reasons for the Merger - WCB . . . . . . . . . . . . . . . . . . . . 17
Reasons for the Merger - VB . . . . . . . . . . . . . . . . . . . . 18
Opinion of VB's Financial Advisor . . . . . . . . . . . . . . . . . 19
Recommendation of the VB Board . . . . . . . . . . . . . . . . . . . 20
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Basic Terms of the Merger . . . . . . . . . . . . . . . . . . . . . 20
Cash for Fractional Shares . . . . . . . . . . . . . . . . . . . . . 23
Exchange of Stock Certificates . . . . . . . . . . . . . . . . . . . 23
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . 23
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i
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Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 24
Mechanics of the Merger . . . . . . . . . . . . . . . . . . . . . . . 24
Conduct Pending Consummation of the Merger . . . . . . . . . . . . . . 24
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . 24
Amendment of the Merger Agreement . . . . . . . . . . . . . . . . . . 25
Termination of the Merger Agreement . . . . . . . . . . . . . . . . . 25
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . 26
Certain Federal Income Tax Matters . . . . . . . . . . . . . . . . . . 26
Accounting Treatment of Merger . . . . . . . . . . . . . . . . . . . . 27
Dissenters' Rights of Appraisal . . . . . . . . . . . . . . . . . . . 28
Resales of Stock Received in the Merger by VB Affiliates . . . . . . . 28
No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . 29
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS . . . . . . . . 32
INFORMATION CONCERNING WCB . . . . . . . . . . . . . . . . . . . . . . . . 38
INFORMATION CONCERNING VB . . . . . . . . . . . . . . . . . . . . . . . . . 38
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 40
VB MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . 40
Financial Condition and Results of Operations . . . . . . . . . . . . 40
Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Summary of Loan Loss Experience . . . . . . . . . . . . . . . . . . . 47
Asset and Liability Maturity Repricing Schedule
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 49
Recent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
MANAGEMENT OF VB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . 52
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 52
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . 53
Certain Transactions and Relationships . . . . . . . . . . . . . . . . 54
Securities Ownership of Management and Certain Beneficial Owners . . . 54
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . 55
Other Principal Shareholders . . . . . . . . . . . . . . . . . . . . . 55
Committees of the Board of Directors . . . . . . . . . . . . . . . . . 56
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . . 56
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Holding Company Structure . . . . . . . . . . . . . . . . . . . . . . 56
Control Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
ii
<PAGE> 11
<TABLE>
<S> <C>
THE BANK SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Regulation of State Banks . . . . . . . . . . . . . . . . . . . . . . 58
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Regulation of Management . . . . . . . . . . . . . . . . . . . . . . . 59
Control of Financial Institutions . . . . . . . . . . . . . . . . . . 59
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
FDICIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Interstate Banking and Branching . . . . . . . . . . . . . . . . . . . 60
Capital Adequacy Requirements . . . . . . . . . . . . . . . . . . . . 61
FDIC Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
VB AND WCB COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 63
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Dividend Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Indemnification and Limitation of Liability . . . . . . . . . . . . . 65
Amendment of Articles of Incorporation and Bylaws . . . . . . . . . . 66
Repurchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 66
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Sales of Assets, Mergers and Dissolutions - Voting . . . . . . . . . . 66
Potential "Anti-Takeover" Provisions . . . . . . . . . . . . . . . . . 67
CERTAIN LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
GLOSSARY OF KEY TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
</TABLE>
APPENDIX A - Plan and Agreement of Reorganization and Merger
APPENDIX B - Stock Option Agreement
APPENDIX C - Dissenters' Rights of Appraisal
APPENDIX D - Opinion of Columbia Financial Advisors, Inc.
iii
<PAGE> 12
SUMMARY
The following material summarizes certain information contained
elsewhere in this Prospectus/Proxy Statement. This summary is not intended to
be complete and is qualified in its entirety by reference to the more detailed
information contained elsewhere in this Prospectus/Proxy Statement (including
the appendices hereto). Capitalized terms used in this Prospectus/Proxy
Statement, unless the context otherwise requires, have the meanings ascribed to
them in the Glossary of Key Terms inside the back cover. Additional terms used
principally in particular sections of this Prospectus/Proxy Statement are
defined in the sections where they are used.
INTRODUCTION
Pursuant to the Merger Agreement, WCB proposes to acquire VB by means
of a triangular merger, whereby VB would be merged with and into HB, WCB's
wholly-owned subsidiary, with the result that VB shareholders would become
shareholders of WCB, and the Bank of Vancouver (the "Bank") would become a
wholly-owned subsidiary bank of WCB.
The respective Boards of Directors ("Boards") of WCB, HB and VB have
unanimously adopted the Merger Agreement. The VB Board has unanimously
recommended that the shareholders of VB vote to approve the Merger Agreement.
Subject to approval by VB's shareholders, receipt of required regulatory
approvals, and satisfaction of certain other conditions, VB will be merged with
and into HB. VB's shareholders will receive shares of WCB Common Stock in
exchange for their shares of VB Common Stock. See "THE MERGER -- Basic Terms
of the Merger."
VB SHAREHOLDER MEETING
An Annual Meeting ("Meeting") of VB's shareholders will be held on
Tuesday May 28, 1996, at 5:00 p.m., local time, at the Royal Oaks Country Club,
8917 N.E. Fourth Plain Boulevard, Vancouver, Washington. The purposes of the
Meeting are (i) to vote to approve the Merger Agreement providing for the
merger of VB with and into HB, and (ii) to elect seven nominees to the VB
Board, each of whom will serve a one-year term, or until his or her successor
has been elected and qualified or the Merger is consummated.
Only shares of VB Common Stock held of record as of April 18, 1996 (the
"Record Date") are entitled to notice of, and to vote at, the Meeting. On the
Record Date, there were 141,461 shares of VB Common Stock outstanding. The
affirmative vote of a majority of the shares of VB Common Stock outstanding on
the Record Date is required to approve the Merger Agreement. Directors are
elected by a plurality of the votes cast at the election. As of the Record
Date, VB's directors were entitled to vote, and have agreed to vote, 50,289
shares in favor of the Merger Agreement, which represents approximately 35.5
percent of the total number of outstanding shares at such date.
For additional information about the Meeting, see "ANNUAL MEETING OF VB
SHAREHOLDERS."
PARTIES TO THE MERGER
WCB. WCB, an Oregon corporation, was organized in August 1981 as a
bank holding company under the name Commercial Bancorp ("Commercial").
Pursuant to an agreement and plan of merger
- 1 -
<PAGE> 13
between former West Coast Bancorp ("Old WCB") and Commercial, Old WCB and
Commercial were merged on February 28, 1995, with WCB as the surviving
corporation. Old WCB was a one-bank holding company headquartered in Newport,
Oregon. The combined company commenced operations on March 1, 1995 and, with
approximately $517 million in total assets at December 31, 1995, is the second
largest bank holding company based in Oregon.
WCB is headquartered in Lake Oswego, Oregon, and its principal business
activities are conducted through its three bank subsidiaries, The Commercial
Bank -- Valley Commercial Bank, and The Bank of Newport -- each of which is an
Oregon state- chartered, full-service commercial bank with deposits insured by
the Federal Deposit Insurance Corporation ("FDIC"). At February 29, 1996,
WCB's subsidiary banks had facilities in a total of 21 cities and towns in
Oregon, operating a total of 26 full-service branches and two limited service
branches.
In October 1994, WCB and The Commercial Bank entered into a merger
agreement with Great Western Bank of Dallas, Oregon. Under the terms of the
merger agreement, Great Western Bank was merged into The Commercial Bank on
March 31, 1995, and the shareholders of Great Western Bank received shares of
WCB Common Stock in exchange for their shares. At March 31, 1995, Great
Western Bank had total assets of approximately $8.1 million and shareholders'
equity of approximately $873,000.
WCB's executive offices are located at 5335 S.W. Meadows Road, Suite
201, Lake Oswego, Oregon 97035, and its telephone number is (503) 684-0884.
Additional information concerning WCB and its business is included in the
documents incorporated into this Prospectus/Proxy Statement by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
HB. HB is a Washington bank holding company that was incorporated in
1996 to facilitate WCB's acquisition of VB. HB is WCB's wholly owned
subsidiary. Immediately after Closing of the Merger, WCB intends to merge HB
with and into WCB. HB's address and telephone number are the same as WCB's.
VB. VB is a Washington corporation that was incorporated in 1994 for
the purpose of being a holding company for the Bank, under an agreement and
plan of exchange pursuant to which shareholders of the Bank became shareholders
of VB. VB is registered with the Board of Governors of the Federal Reserve
System as a bank holding company under the Bank Holding Company Act of 1956, as
amended ("BHCA"), and has no significant operations separate from the Bank.
The Bank is a state-chartered bank organized under Washington law in
June, 1989. The Bank, which has a sole office in Vancouver, Washington, is a
local community bank with a commitment to service to the businesses and
residents of Clark County, Washington. The Bank offers commercial banking
services (including commercial loans, accounts receivable and inventory
financing, consumer installment loans, acceptance of deposits, and personal
savings and checking accounts), primarily to small- and medium-size businesses,
professionals and retail customers. Its deposits are insured by the FDIC. As
of December 31, 1995, the Bank had deposits of approximately $70.7 million and
assets of approximately $78.9 million.
VB's principal offices are located at the main office of the Bank, at
801 Main St., Vancouver, Washington 98660, and its telephone number is (360)
695-3439. For additional information about VB and its business, see
"INFORMATION CONCERNING VB."
- 2 -
<PAGE> 14
THE MERGER; EXCHANGE RATIO
In accordance with the Merger Agreement, on the Effective Date, VB will
be merged with and into HB, with HB as the surviving corporation. Upon
consummation of the Merger, each holder of shares of VB Common Stock, other
than dissenting shares, will be entitled to receive, in exchange for each share
of VB Common Stock held of record by such shareholder as of the Effective Date,
the number of shares of WCB Common Stock obtained by dividing $11,581,000 by
the Average Closing Price or the Modified Average Closing Price, whichever
applies, and by further dividing such quotient by the aggregate number of
shares of VB Common Stock that are issued and outstanding, including shares
subject to unexercised options, as of the Effective Date. The formula is
designed to result in VB shareholders receiving WCB Common Stock having a
market value at the time of Closing of approximately $66.95 in exchange for
each share of VB Common Stock held, so long as the WCB Common Stock is trading
at a price between $15.30 and $18.70 per share. Cash will be paid in lieu of
issuing fractional shares of WCB Common Stock. Upon completion of the Merger,
shareholders of VB will no longer own any stock in VB.
For more detailed information concerning the Merger, and how VB
Shareholders may exchange certificates representing shares of VB Common Stock,
see "THE MERGER -- Basic Terms of the Merger; Cash for Fractional Shares;
Exchange of Stock Certificates."
EFFECTIVE DATE
The parties presently expect to consummate the Merger during the second
quarter of 1996, although the timing is subject to the satisfaction of certain
conditions. The date on which the Merger is consummated, even if this date is
the Postponed Effective Date under the Merger Agreement, is referred to in this
Prospectus/Proxy Statement as the "Effective Date." The Merger Agreement
provides that if the Merger has not been consummated by October 31, 1996, at
any time after such date, the Board of either WCB or VB may vote to abandon the
Merger. See "THE MERGER -- Basic Terms of the Merger."
REASONS FOR THE MERGER; RECOMMENDATION OF THE VB BOARD
The VB Board has unanimously determined that the Merger is fair to and
in the best interests of VB's shareholders. In making this determination, the
VB Board considered a variety of factors, including the value of the WCB Common
Stock that the shareholders of VB will receive in exchange for their shares of
VB Common Stock, the continued ability of the Bank to continue to provide
competitive and comprehensive services in the markets in which it operates, and
the parties' shared belief in community banking, which emphasizes
responsiveness to local markets and the delivery of personalized services to
customers. The VB Board believes that the Merger will allow the Bank to
continue to provide the advantages of personal community banking to VB's
current customers, and will also allow VB to realize a premium, thus enhancing
shareholder value. THE VB BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AS ADVISABLE AND IN THE BEST INTERESTS OF VB AND ITS SHAREHOLDERS AND
RECOMMENDS THAT VB'S SHAREHOLDERS APPROVE THE MERGER AGREEMENT. See
"BACKGROUND OF AND REASONS FOR THE MERGER."
- 3 -
<PAGE> 15
OPINION OF FINANCIAL ADVISOR
Columbia Financial Advisors, Inc. ("CFA"), VB's financial advisor, has
delivered a written opinion to the VB Board dated the date of this
Prospectus/Proxy Statement, to the effect that the Merger is fair, from a
financial perspective, to VB and its shareholders. A copy of CFA's opinion
setting forth the limits of its review, assumptions made, matters considered
and procedures followed, is attached to this Prospectus/Proxy Statement as
Appendix D and should be read in its entirety by VB's shareholders. See
"BACKGROUND OF AND REASONS FOR THE MERGER -- Opinion of VB Financial Advisor."
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF WCB AND THE BANK
Upon consummation of the Merger, the WCB Board will consist of 12
current directors of WCB, in addition to James J. Pomajevich, who is presently
the Chairman of the VB Board. WCB has agreed to appoint Mr. Pomajevich to the
WCB Board upon consummation of the Merger, effective as of the Effective Date.
WCB will also permit Lee S. Stenseth, the Bank's President, to attend meetings
of the WCB Board as an ex-officio member until the end of his service as
President of the Bank. The respective executive officers of WCB and the Bank
in office immediately before the Effective Date are expected to remain
unchanged following consummation of the Merger. On the Effective Date, the
Bank's Board will consist of all persons who were directors of the Bank
immediately before the Merger, plus an additional WCB director to be designated
by WCB to the Bank's Board. See "THE MERGER -- Directors and Officers;
Interests of Certain Persons in the Merger."
TRADING MARKET
The WCB Common Stock is quoted on the Nasdaq Stock Market under the
symbol "WCBO," and is registered as a class with the SEC under the Exchange
Act. Accordingly, WCB is required to file certain periodic and annual reports
with the SEC and make information about WCB available to its shareholders and
the public. VB is not subject to the information and reporting requirements of
the Exchange Act and its Common Stock is not actively traded or listed on any
market system.
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is conditioned on (a) approval of the Merger
Agreement by the holders of not less than a majority of the outstanding shares
of VB Common Stock; (b) receipt of all necessary approvals of the Merger by
governmental regulatory agencies, including the FRB and the Director of the
Washington State Department of Financial Institutions ("Washington Director");
(c) receipt by each party of a favorable tax opinion from Graham & Dunn, P.C.;
(d) receipt of a letter from Arthur Andersen LLP to the effect that the Merger
qualifies for pooling of interests accounting treatment; (e) the continuing
accuracy of the representations and warranties of each party; (f) the
performance of specified obligations by each party; and (g) certain other
conditions. WCB has filed with the FRB and the Washington Director the
appropriate applications for approval of the Merger, each of which has been
accepted for processing. See "THE MERGER -- Conditions to the Merger" and
"SUPERVISION AND REGULATION."
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT
The Merger Agreement may be terminated, and the Merger abandoned,
before the Effective Date, whether before or after its adoption by the
shareholders of VB by (i) the respective majority votes of the
- 4 -
<PAGE> 16
WCB and VB Boards, or (ii) either the WCB or the VB Board under certain
specified circumstances, including a failure to consummate the Merger by
October 31, 1996. The Merger Agreement may be amended at any time before the
Effective Date if both the WCB and VB Boards approve, but no amendment reducing
the amount or changing the form of any consideration which is to be received by
VB shareholders can be effected without the approval of VB shareholders. See
"THE MERGER -- Amendment and Termination of Merger Agreement."
TAX TREATMENT OF THE MERGER
Consummation of the Merger is conditioned upon receipt by WCB, and
delivery to VB, of an opinion from Graham & Dunn, P.C. to the effect that (i)
the Merger will constitute a tax-free reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, (the "Code") as
amended, (ii) pursuant to the provisions of Section 354(a)(i) of the Code, no
gain or loss will be recognized with respect to each shareholder of VB who
exchanges his or her shares of VB Common Stock solely for shares of WCB Common
Stock, and (iii) the payment of cash to a shareholder of VB in lieu of a
fractional share of WCB Common Stock will be treated as a distribution in
redemption of the fractional share interest, subject to the limitations of
Section 302 of the Code. See "THE MERGER -- Certain Federal Income Tax
Matters."
ACCOUNTING TREATMENT OF THE MERGER
It is anticipated that the Merger will be accounted for as a pooling of
interests by WCB under generally accepted accounting principles. The Merger
Agreement provides that, as a condition to WCB's obligation to consummate the
Merger, WCB must receive a letter from Arthur Andersen LLP, WCB's independent
auditors, to the effect that the Merger will qualify for pooling of interests
accounting treatment. See "THE MERGER -- Accounting Treatment of Merger."
DISSENTERS' RIGHTS OF APPRAISAL
Holders of VB Common Stock have the right to dissent from the Merger
and, if they follow certain procedures and the Merger is effectuated, to obtain
payment of the fair value of their shares in cash, in accordance with
applicable provisions of Washington state law. A SHAREHOLDER'S FAILURE TO
FOLLOW EXACTLY THE PROCEDURES SPECIFIED IN THE WASHINGTON STATUTE WILL RESULT
IN LOSS OF SUCH SHAREHOLDER'S DISSENTERS' RIGHTS. Accordingly, the
shareholders of VB wishing to dissent from the Merger are urged to read
carefully "THE MERGER -- Dissenters' Rights of Appraisal," and the copy of
Chapter 13 of the Washington Business Corporation Act set forth in Appendix C
to this Prospectus/Proxy Statement.
- 5 -
<PAGE> 17
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of VB's management and the VB Board may be deemed to
have interests in the Merger in addition to their interests as shareholders of
VB generally. These include, among other things, provisions in the Merger
Agreement relating to indemnification, employment agreements, and appointments
to the WCB Board.
As a condition to the execution of the Merger Agreement, the Bank has
entered into an employment agreement with Mr. Stenseth, under the terms of
which he will continue as President of the Bank after the Merger. Further, WCB
will permit Mr. Stenseth to attend meetings of the WCB Board as an ex-officio
member until the end of his service as President of the Bank. WCB has also
agreed to appoint Mr. Pomajevich, currently the Chairman of the VB Board, to
the WCB Board effective upon Closing. The directors and management of the Bank
are expected to retain in their respective positions with the Bank after the
Merger. For additional information regarding these matters, see "THE MERGER --
Interests of Certain Persons in the Merger."
COMPARISON OF SHAREHOLDERS' RIGHTS
Shareholders of VB who receive shares of WCB Common Stock in exchange
for their shares of VB Common Stock will be governed, with respect to their
rights as shareholders, by WCB's Articles of Incorporation and Bylaws, and by
Oregon law. Prior to the Merger, the rights of VB's shareholders are
determined under VB's Articles of Incorporation and Bylaws, and under
Washington law. For a discussion of certain material differences in the rights
of shareholders of WCB and VB and an explanation of certain possible
antitakeover effects of certain provisions in WCB's Articles of Incorporation
and Bylaws, see "COMPARISON OF SHAREHOLDERS' RIGHTS."
STOCK OPTION AGREEMENT
As an inducement to WCB to enter into the Merger Agreement, VB has
granted an Option to WCB, by agreement dated as of February 15, 1996, to
purchase up to approximately 19.9% of the then-outstanding VB Common Stock at a
price equal to $64.00 per share. WCB may exercise the Option only upon (i) the
occurrence of certain events (none of which have occurred), and (ii) obtaining
any regulatory approvals necessary for the acquisition of the VB Common Stock
subject to the Option. At the request of WCB, under limited circumstances, VB
will repurchase for a formula price the Option and any shares of VB Common
Stock purchased upon exercise of the Option and beneficially owned by WCB at
that time. See "THE MERGER - Stock Option Agreement."
- 6 -
<PAGE> 18
STOCK PRICE AND DIVIDEND INFORMATION
WCB
The WCB Common Stock trades on the Nasdaq Stock Market under the symbol
"WCBO." The primary market makers are: Dain Bosworth, Inc., Pacific Crest
Securities Inc., Herzog, Heine, Geduld, Inc., Wedbush Morgan Securities, Inc.,
and Black & Company, Inc. The respective high and low sale prices of the WCB
Common Stock for the periods indicated are shown below. The prices do not
include retail mark-ups, mark-downs, or commissions and may not represent
actual transactions. The per share information has been adjusted retroactively
for all stock dividends and splits previously issued. As of December 31, 1995,
there were approximately 2,700 shareholders of record of the WCB Common Stock.
<TABLE>
<CAPTION>
1995 1994
Market Price Cash Dividends Market Price Cash Dividends
------------ -------------- ------------ --------------
High Low Declared High Low Declared
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1ST QUARTER $13.26 $12.27 $0.09 $14.46 $11.68 $0.05
2ND QUARTER $13.86 $12.73 $0.07 $14.55 $13.41 $0.06
3RD QUARTER $16.59 $12.95 $0.07 $15.00 $13.86 $0.06
4TH QUARTER $17.50 $16.00 $0.07 $15.45 $12.73 $0.06
</TABLE>
VB
No broker makes a market in the VB Common Stock and trading has not
been extensive. The trades that have occurred cannot be characterized as
amounting to an established public trading market. The VB Common Stock is
traded by individuals on a personal basis and is not listed on any exchange or
traded on the over-the-counter market, and the prices reported reflect only the
transactions known to management. Due to the limited information available,
the following data may not accurately reflect the actual market value of the VB
Common Stock. The following data include trades between individual investors,
as reported to VB as its own transfer agent.
<TABLE>
<CAPTION>
VB Common Stock Prices
Number of Shares ---------------------- Cash Dividends
Period Reported as Traded High Low Paid
------ ------------------- ---- --- ----
<S> <C> <C> <C> <C>
1996 4,736 $66.95 $57.83 (1) None
1995 2,045 $50.00 $40.00 (2) None
1994 3,818 $35.10 $35.10 (3) None
- ---------------
</TABLE>
(1) 1,256 shares purchased by the Bank's KSOP at $66.95 in February 1996.
(2) 1,281 shares purchased by the Bank's KSOP at the appraised price of $40.76
in February 1995.
(3) 965 shares purchased by the Bank's KSOP at the appraised price of $35.10
in February 1994.
- 7 -
<PAGE> 19
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following table sets forth selected historical consolidated
financial data for WCB and VB, and selected unaudited pro forma combined
financial data giving effect to the Merger on a pooling of interests basis for
the periods specified. The pro forma combined financial data are not
necessarily indicative of actual or future operating results or the financial
position that would have occurred or will occur upon the consummation of the
Merger. The data has been derived in part from, and should be read in
conjunction with, the financial statements and notes thereto and other
financial information with respect to WCB and VB set forth elsewhere in this
Prospectus/Proxy Statement or incorporated herein by reference, and such data
are qualified in their entirety by reference thereto. All adjustments that the
respective managements of WCB and VB believe to be necessary for a fair
presentation of the data have been included.
- 8 -
<PAGE> 20
WEST COAST BANCORP AND VANCOUVER BANCORP CONSOLIDATED (UNAUDITED)
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------
(Dollars in thousands, except per share data) 1995 1994 1993 1992 1991
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income . . . . . . . . . . . . . . . . . . . $ 47,293 $ 38,918 $ 35,585 $ 34,469 $ 32,194
Interest expense . . . . . . . . . . . . . . . . . . 17,430 11,506 10,647 12,242 14,838
---------------------------------------------------------------
Net interest income . . . . . . . . . . . . . . . . . 29,863 27,412 24,938 22,227 17,356
Provision for loan loss . . . . . . . . . . . . . . . 943 777 1,083 1,338 921
---------------------------------------------------------------
Net interest income after provision for loan loss . . 28,920 26,635 23,855 20,889 16,435
Noninterest income . . . . . . . . . . . . . . . . . 8,095 7,087 6,644 5,360 4,942
Noninterest expense . . . . . . . . . . . . . . . . . 25,520 24,654 21,535 19,585 16,518
---------------------------------------------------------------
Income before income taxes . . . . . . . . . . . . . 11,495 9,068 8,964 6,664 4,859
Provision for income taxes . . . . . . . . . . . . . 3,245 2,752 2,425 1,878 1,382
---------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . $ 8,250 $ 6,316 $ 6,539 $ 4,786 $ 3,477
===============================================================
Per share data:
Net income . . . . . . . . . . . . . . . . . . . . $ 1.53 $ 1.23 $ 1.34 $ 0.98 $ 0.74
Cash dividends . . . . . . . . . . . . . . . . . . 0.26 0.21 0.20 0.16 0.15
Period end book value . . . . . . . . . . . . . . . 11.01 9.16 8.27 7.17 6.36
Average common shares outstanding . . . . . . . . . 5,349,967 5,100,087 4,872,991 4,862,418 4,725,145
Total assets . . . . . . . . . . . . . . . . . . . . $ 595,574 $ 515,750 $ 480,153 $ 424,370 $ 386,193
Total deposits . . . . . . . . . . . . . . . . . . . 512,774 434,175 413,935 380,690 339,242
Total long-term borrowings . . . . . . . . . . . . . 10,788 10,046 9,095 -- 850
Net loans . . . . . . . . . . . . . . . . . . . . . . 395,319 319,698 284,184 249,143 224,717
Stockholders' equity . . . . . . . . . . . . . . . . 58,981 48,884 40,342 34,962 30,518
Financial ratios:
Return on average assets . . . . . . . . . . . . . 1.49% 1.28% 1.50% 1.19% 0.99%
Return on average equity . . . . . . . . . . . . . 15.66% 14.17% 18.02% 14.69% 12.13%
Average equity to assets . . . . . . . . . . . . . 9.54% 9.04% 8.31% 8.09% 8.19%
Dividend payout ratio . . . . . . . . . . . . . . . 16.89% 17.33% 15.26% 16.43% 19.84%
Efficiency ratio . . . . . . . . . . . . . . . . . 67.25% 71.11% 68.50% 71.01% 73.26%
Net loans to total assets . . . . . . . . . . . . . 66.38% 61.99% 59.19% 58.71% 58.19%
Yield on earning assets . . . . . . . . . . . . . . 9.42% 8.66% 8.86% 9.40% 10.31%
Cost of funds . . . . . . . . . . . . . . . . . . . 4.25% 3.16% 3.20% 3.96% 5.55%
Net interest spread . . . . . . . . . . . . . . . . 5.17% 5.50% 5.65% 5.44% 4.76%
Net interest margin . . . . . . . . . . . . . . . . 5.95% 6.10% 6.21% 6.06% 5.56%
Nonperforming assets to total assets . . . . . . . 0.15% 0.11% 0.44% 0.64% 0.71%
Allowance for loan loss to total loans . . . . . . 1.39% 1.58% 1.53% 1.47% 1.37%
Allowance for loan loss to nonperforming assets . . 635.90% 927.95% 210.64% 137.67% 113.19%
</TABLE>
- 9 -
<PAGE> 21
WEST COAST BANCORP
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------
(Dollars in thousands, except per share data) 1995 1994 1993 1992 1991
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income . . . . . . . . . . . . . . . . . . . $ 40,628 $ 34,487 $ 32,161 $ 31,273 $ 29,857
Interest expense . . . . . . . . . . . . . . . . . . 14,304 9,776 9,465 10,917 13,649
---------------------------------------------------------------
Net interest income . . . . . . . . . . . . . . . . . 26,324 24,711 22,696 20,356 16,208
Provision for loan loss . . . . . . . . . . . . . . . 670 547 798 1,204 783
---------------------------------------------------------------
Net interest income after provision for loan loss . . 25,654 24,164 21,898 19,152 15,425
Noninterest income . . . . . . . . . . . . . . . . . 7,842 6,888 6,482 5,227 4,831
Noninterest expense . . . . . . . . . . . . . . . . . 23,284 22,942 20,077 18,325 15,551
---------------------------------------------------------------
Income before income taxes . . . . . . . . . . . . . 10,212 8,110 8,303 6,054 4,705
Provision for income taxes . . . . . . . . . . . . . 2,853 2,458 2,268 1,674 1,382
---------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . $ 7,359 $ 5,652 $ 6,035 $ 4,380 $ 3,323
===============================================================
Per share data:
Net income . . . . . . . . . . . . . . . . . . . . $ 1.53 $ 1.24 $ 1.39 $ 1.00 $ 0.77
Cash dividends . . . . . . . . . . . . . . . . . . 0.29 0.24 0.23 0.18 0.16
Period end book value . . . . . . . . . . . . . . . 11.07 9.22 8.36 7.24 6.43
Average common shares outstanding . . . . . . . . . 4,803,461 4,561,154 4,337,086 4,368,565 4,311,644
Total assets . . . . . . . . . . . . . . . . . . . . $ 516,647 $ 451,772 $ 430,942 $ 380,088 $ 355,321
Total deposits . . . . . . . . . . . . . . . . . . . 442,101 379,620 368,942 340,031 311,266
Total long-term borrowings . . . . . . . . . . . . . 8,838 8,546 9,095 -- 850
Net loans . . . . . . . . . . . . . . . . . . . . . . 335,191 278,467 252,755 220,109 204,189
Stockholders' equity . . . . . . . . . . . . . . . . 53,198 44,232 36,311 31,436 27,680
Financial ratios:
Return on average assets . . . . . . . . . . . . . 1.53% 1.29% 1.54% 1.20% 1.02%
Return on average equity . . . . . . . . . . . . . 15.50% 14.05% 18.54% 14.83% 12.62%
Average equity to assets . . . . . . . . . . . . . 9.86% 9.17% 8.29% 8.10% 8.10%
Dividend payout ratio . . . . . . . . . . . . . . . 18.95% 19.35% 16.55% 18.00% 20.78%
Efficiency ratio . . . . . . . . . . . . . . . . . 68.16% 72.21% 69.15% 71.61% 74.80%
Net loans to total assets . . . . . . . . . . . . . 64.88% 61.64% 58.65% 57.91% 57.47%
Yield on earning assets . . . . . . . . . . . . . . 9.65% 8.99% 9.29% 9.45% 10.33%
Cost of funds . . . . . . . . . . . . . . . . . . . 4.03% 3.03% 3.16% 3.90% 5.50%
Net interest spread . . . . . . . . . . . . . . . . 5.62% 5.96% 6.13% 5.55% 4.83%
Net interest margin . . . . . . . . . . . . . . . . 6.36% 6.54% 6.66% 6.15% 5.61%
Nonperforming assets to total assets . . . . . . . 0.12% 0.12% 0.46% 0.71% 0.77%
Allowance for loan loss to total loans . . . . . . 1.39% 1.60% 1.55% 1.51% 1.39%
Allowance for loan loss to nonperforming assets . . 784.22% 852.64% 202.39% 125.42% 104.44%
</TABLE>
- 10 -
<PAGE> 22
VANCOUVER BANCORP
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------
(Dollars in thousands, except per share data) 1995 1994 1993 1992 1991
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income . . . . . . . . . . . . . . . . . . . $ 6,665 $ 4,431 $ 3,424 $ 3,196 $ 2,337
Interest expense . . . . . . . . . . . . . . . . . . 3,126 1,730 1,182 1,325 1,189
------------------------------------------------------------
Net interest income . . . . . . . . . . . . . . . . . 3,539 2,701 2,242 1,871 1,148
Provision for loan loss . . . . . . . . . . . . . . . 273 230 285 134 138
------------------------------------------------------------
Net interest income after provision for loan loss . . 3,266 2,471 1,957 1,737 1,010
Noninterest income . . . . . . . . . . . . . . . . . 253 199 162 133 111
Noninterest expense . . . . . . . . . . . . . . . . . 2,236 1,712 1,458 1,260 967
------------------------------------------------------------
Income before income taxes . . . . . . . . . . . . . 1,283 958 661 610 154
Provision for income taxes . . . . . . . . . . . . . 392 294 157 204 0
------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . $ 891 $ 664 $ 504 $ 406 $ 154
============================================================
Per share data:
Net income . . . . . . . . . . . . . . . . . . . . $ 6.10 $ 4.71 $ 3.70 $ 3.25 $ 1.48
Cash dividends . . . . . . . . . . . . . . . . . . -- -- -- -- --
Period end book value . . . . . . . . . . . . . . . 41.24 33.95 29.62 25.91 22.74
Average common shares outstanding . . . . . . . . . 138,774 136,851 136,082 125,404 105,000
Total assets . . . . . . . . . . . . . . . . . . . . $ 78,927 $ 63,978 $ 49,211 $ 44,282 $ 30,872
Total deposits . . . . . . . . . . . . . . . . . . . 70,673 57,555 44,993 40,659 27,976
Total long-term borrowings . . . . . . . . . . . . . 1,350 1,500 -- -- --
Net loans . . . . . . . . . . . . . . . . . . . . . . 60,128 41,231 31,429 29,034 20,528
Stockholders' equity . . . . . . . . . . . . . . . . 5,783 4,652 4,031 3,526 2,838
Financial ratios:
Return on average assets . . . . . . . . . . . . . 1.26% 1.22% 1.02% 1.08% 0.44%
Return on average equity . . . . . . . . . . . . . 17.08% 15.25% 13.43% 13.33% 6.61%
Average equity to assets . . . . . . . . . . . . . 7.38% 8.00% 8.42% 8.00% 9.42%
Dividend payout ratio . . . . . . . . . . . . . . . -- -- -- -- --
Efficiency ratio . . . . . . . . . . . . . . . . . 58.97% 59.03% 60.65% 62.87% 76.81%
Net loans to total assets . . . . . . . . . . . . . 76.18% 64.45% 63.87% 65.57% 66.49%
Yield on earning assets . . . . . . . . . . . . . . 10.01% 8.70% 8.21% 8.92% 10.07%
Cost of funds . . . . . . . . . . . . . . . . . . . 5.67% 4.20% 3.54% 4.51% 6.26%
Net interest spread . . . . . . . . . . . . . . . . 4.34% 4.50% 4.67% 4.41% 3.81%
Net interest margin . . . . . . . . . . . . . . . . 5.32% 5.30% 5.37% 5.22% 4.95%
Nonperforming assets to total assets . . . . . . . 0.35% 0.03% 0.25% 0.00% 0.00%
Allowance for loan loss to total loans . . . . . . 1.39% 1.31% 1.32% 1.12% 1.16%
Allowance for loan loss to nonperforming assets . . 309.75% 3359.73% 342.74% na na
</TABLE>
- 11 -
<PAGE> 23
EQUIVALENT PER COMMON SHARE DATA
(UNAUDITED)
The following table presents selected per common share data for (i)
WCB, (ii) WCB and VB pro forma combined, (iii) VB and (iv) equivalent pro forma
data per share of VB after giving effect to the Merger on a pooling of
interests basis. The pro forma condensed combined financial data are not
necessarily indicative of actual or future operating results or the financial
position that would have occurred or will occur upon the consummation of the
Merger. The pro forma equivalent data are based on the respective pro forma
combined amounts per shared multiplied by three different exchange ratios,
assuming the Average Closing Price for WCB Common Stock was: (i) $17.00 per
share, (ii) $15.30 per share, and (iii) $18.70 per share. On April 18, 1996,
the last trading day prior to the date of this Proxy Statement/Prospectus, the
closing price of WCB Common Stock was $18.25 per share; if that price were the
Average Closing Price under the Merger Agreement, the exchange ratio would be
3.6684 WCB shares for each share of VB outstanding. This data should be read
in conjunction with the financial statements and other financial and pro forma
financial information with respect to WCB and VB included elsewhere in this
Prospectus/Proxy Statement or incorporated herein by reference.
<TABLE>
<CAPTION>
=============================================================================================================
WCB VB
------------------------ -------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL COMBINED
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BOOK VALUE PER SHARE(1)
WITH EXCHANGE RATIO AT MID POINT, 3.9381:
(Assumes Average Closing Price of $17.00)
December 31, 1995 . . . . . . . . . . . . . . . $11.07 $11.01 $41.24 $43.36
December 31, 1994 . . . . . . . . . . . . . . . 9.22 9.16 33.95 36.08
December 31, 1993 . . . . . . . . . . . . . . . 8.36 8.27 29.62 32.55
December 31, 1992 . . . . . . . . . . . . . . . 7.24 7.17 25.91 28.22
December 31, 1991 . . . . . . . . . . . . . . . 6.43 6.36 22.74 25.05
- -------------------------------------------------------------------------------------------------------------
BOOK VALUE PER SHARE(1)
WITH EXCHANGE RATIO AT 4.3757:
(Assumes Average Closing Price of $15.30)
December 31, 1995 . . . . . . . . . . . . . . . $11.07 $10.89 $41.24 $47.63
December 31, 1994 . . . . . . . . . . . . . . . 9.22 9.06 33.95 39.64
December 31, 1993 . . . . . . . . . . . . . . . 8.36 8.17 29.62 35.73
December 31, 1992 . . . . . . . . . . . . . . . 7.24 7.08 25.91 30.98
December 31, 1991 . . . . . . . . . . . . . . . 6.43 6.29 22.74 27.52
- -------------------------------------------------------------------------------------------------------------
BOOK VALUE PER SHARE(1)
WITH EXCHANGE RATIO AT 3.5801:
(Assumes Average Closing Price of $18.70)
December 31, 1995 . . . . . . . . . . . . . . . $11.07 $11.11 $41.24 $39.79
December 31, 1994 . . . . . . . . . . . . . . . 9.22 9.25 33.95 33.10
December 31, 1993 . . . . . . . . . . . . . . . 8.36 8.35 29.62 29.89
December 31, 1992 . . . . . . . . . . . . . . . 7.24 7.24 25.91 25.91
December 31, 1991 . . . . . . . . . . . . . . . 6.43 6.42 22.74 22.99
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- 12 -
<PAGE> 24
<TABLE>
<CAPTION>
============================================================================================================
WCB VB
------------------------ -------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL COMBINED
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE(2) FOR THE PERIODS ENDED
WITH EXCHANGE RATIO AT MID POINT, 3.9381:
(Assumes Average Closing Price of $17.00)
December 31, 1995 . . . . . . . . . . . . . . $1.53 $1.53 $6.10 $6.04
December 31, 1994 . . . . . . . . . . . . . . 1.24 1.23 4.71 4.86
December 31, 1993 . . . . . . . . . . . . . . 1.39 1.34 3.70 5.28
December 31, 1992 . . . . . . . . . . . . . . 1.00 0.98 3.25 3.88
December 31, 1991 . . . . . . . . . . . . . . 0.77 0.74 1.48 2.90
- -----------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE(2) FOR THE PERIODS ENDED
WITH EXCHANGE RATIO AT 4.3757:
(Assumes Average Closing Price of $15.30)
December 31, 1995 . . . . . . . . . . . . . . $1.53 $1.52 $6.10 $6.63
December 31, 1994 . . . . . . . . . . . . . . 1.24 1.22 4.71 5.34
December 31, 1993 . . . . . . . . . . . . . . 1.39 1.33 3.70 5.80
December 31, 1992 . . . . . . . . . . . . . . 1.00 0.97 3.25 4.26
December 31, 1991 . . . . . . . . . . . . . . 0.77 0.73 1.48 3.19
- -----------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE(2) FOR THE PERIODS ENDED
WITH EXCHANGE RATIO AT MID POINT, 3.5801:
(Assumes Average Closing Price of $18.70)
December 31, 1995 . . . . . . . . . . . . . . $1.53 $1.55 $6.10 $5.55
December 31, 1994 . . . . . . . . . . . . . . 1.24 1.25 4.71 4.46
December 31, 1993 . . . . . . . . . . . . . . 1.39 1.36 3.70 4.85
December 31, 1992 . . . . . . . . . . . . . . 1.00 0.99 3.25 3.56
December 31, 1991 . . . . . . . . . . . . . . 0.77 0.74 1.48 2.66
===========================================================================================================
</TABLE>
- ----------------
(1) Book value per share is calculated by dividing the total actual historical
and pro forma equity as of the date indicated by the actual historical and
pro forma number of shares outstanding as of the same date.
(2) Earnings per share is calculated by dividing total actual historical and
pro forma net income for the years ended December 31 by the actual
historical and pro forma weighted average number of shares of common stock
for the period indicated.
- 13 -
<PAGE> 25
ANNUAL MEETING OF VB SHAREHOLDERS
DATE, TIME, AND PLACE
The Meeting will be held on Tuesday May 28, 1996, at 5:00 p.m., local
time, at the Royal Oaks Country Club, 8917 N.E. Fourth Plain Boulevard,
Vancouver, Washington.
PURPOSE OF THE MEETING
The purpose of the Meeting are as follows: (i) to consider and vote
upon approval of the Merger Agreement; (ii) to elect seven directors to serve a
one-year term each, or until their respective successors have been elected and
qualified, or until the Merger is consummated; and (iii) to act upon such
matters, if any, as may properly come before the Meeting.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The VB Board has fixed the close of business on April 18, 1996 as the
Record Date for determining the holders of shares of VB Common Stock entitled
to notice of and to vote at the Meeting. At the close of business on the
Record Date, there were 141,461 shares of VB Common Stock issued and
outstanding held by approximately 200 holders of record. See "INFORMATION
CONCERNING VB -- Security Ownership of Certain Beneficial Owners and
Management." Holders of record of VB Common Stock on the Record Date are
entitled to one vote per share, and are also entitled to exercise dissenters'
rights if certain procedures are followed. See "Dissenters' Rights of
Appraisal" and Appendix C.
VOTE REQUIRED
The affirmative vote of a majority of all shares of VB Common Stock
outstanding on the Record Date is required to approve the Merger Agreement. A
plurality of the votes cast at the Meeting by holders of shares of VB Common
Stock is required for the election of persons nominated to serve as directors.
As to both the Merger and the election of each director nominee to the VB
Board, VB's shareholders are entitled to one vote for each share of VB Common
Stock held. The presence of a majority of the outstanding shares of VB Common
Stock in person or by proxy is necessary to constitute a quorum of shareholders
for the Meeting. For this purpose, abstentions and broker nonvotes (i.e.,
proxies from brokers or nominees indicating that such person has not received
instructions from the beneficial owners or other persons entitled to vote
shares as to a matter with respect to which the broker or nominees do not have
discretionary power to vote) are counted in determining the shares present at a
meeting. For voting purposes, however, only shares affirmatively voted for the
approval of the Merger Agreement, and neither abstentions nor broker nonvotes,
will be counted as favorable votes in determining whether the Merger Agreement
is approved by the holders of VB Common Stock. As a consequence, abstentions
and broker nonvotes will have the same effect as votes against approval of the
Merger Agreement.
As of the Record Date, VB's directors and executive officers and their
affiliates owned and were entitled to vote 50,855 shares at the Meeting,
representing approximately 35.9 percent of the outstanding shares of VB Common
Stock. Each VB director has agreed to vote all shares of VB Common Stock held
or controlled by him or her (a total of 50,289 shares) in favor of approval of
the Merger.
VOTING, SOLICITATION, AND REVOCATION OF PROXIES
If the enclosed proxy is duly executed and received in time for the
Meeting, it will be voted in accordance with the instructions given. If no
instruction is given, it is the intention of the persons named in the proxy to
vote the shares represented by the proxy FOR THE ELECTION OF THE BOARD'S
- 14 -
<PAGE> 26
NOMINEES FOR DIRECTOR, FOR THE APPROVAL OF THE MERGER AGREEMENT AND IN THE
PROXY'S DISCRETION ON ANY OTHER MATTER COMING BEFORE THE MEETING, unless
otherwise directed by the proxy. Any proxy given by a shareholder may be
revoked before its exercise by written notice to the Secretary of VB, or by a
subsequently dated proxy, or in open meeting before the shareholder vote is
taken. The shares represented by properly executed, unrevoked proxies will be
voted in accordance with the instructions in the proxy. With respect to both
the approval of the Merger and the election of each director nominee to the
open positions on the VB Board, shareholders are entitled to one vote for each
share of VB Common Stock held on the Record Date.
The proxy for the Meeting is being solicited on behalf of the VB Board.
VB will bear the cost of solicitation of proxies from its shareholders. In
addition to using the mails, proxies may be solicited by personal interview,
telephone, and wire. Banks, brokerage houses, other institutions, nominees,
and fiduciaries will be requested to forward their proxy soliciting material to
their principals and obtain authorization for the execution of proxies.
Officers and other employees of VB may solicit proxies personally. VB is not
expected to pay any compensation for the solicitation of proxies, but will,
upon request, pay the standard charges and expenses of banks, brokerage houses,
other institutions, nominees, and fiduciaries for forwarding proxy materials to
and obtaining proxies from their principals.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER
Since its formation in 1989, VB has enjoyed progressive earnings gains
and strong asset growth in its Vancouver, Washington market. Although VB's
founding directors anticipated that they might consider a sale of the company
after the Bank was well-established and profitable, the VB Board and management
have not seriously pursued a possible sale or merger given their record of
performance. In early 1995, VB received an unsolicited inquiry from another
community banking organization concerning a possible merger of their companies.
This inquiry gave the VB Board and management an opportunity to reassess their
organization, their success to date, the circumstances under which they might
be interested and/or required to consider a merger possibility. Discussions
with the community banking organization broke off in July of 1995.
In September 1995, Rodney B. Tibbatts, WCB's Co-President and Co-Chief
Executive Officer, contacted Mr. Stenseth, President of both VB and the Bank,
to arrange a luncheon meeting. The purpose of the meeting was to gain insight
into VB and the Bank's strategic plans for the future, along with informing Mr.
Stenseth of WCB's mission and strategic intent. Mr. Tibbatts indicated that
WCB desired to have a presence in southwest Washington and that VB could
represent a viable partner to enable this goal to be achieved. Mr. Stenseth
indicated the conversation was timely in that VB was holding a directors
retreat in the near future to discuss strategies for 1996 and beyond.
Following the VB Board retreat, it was concluded that the timing could be
opportune to pursue discussions with WCB. Accordingly, in October 1995,
Messrs. Stenseth and Pomajevich, the Chairman of the VB Board, met with Mr.
Tibbatts and Victor L. Bartruff, WCB's other Co-President and Co-Chief
Executive Officer, along with Lester Green and Gary Putnam, the Chairman and
Vice Chairman, respectively, of the WCB Board, to share the philosophies of the
two organizations in order to determine if further discussions would be
productive. The parties reported on their respective conversations at their
next Board meetings and, feeling that a combination of the two institutions
would be consistent with the objectives of both parties, on October 17, 1995,
WCB and VB signed a Confidentiality Agreement. Subsequently, in late October,
a joint dinner meeting was held involving the seven members of the VB Board,
the six- member Executive Committee of the WCB Board, and WCB's Chief Financial
Officer, Donald A. Kalkofen.
Subsequently, certain directors and management teams of both parties
held a series of meetings to further explore the possible combination of WCB
and VB. WCB and VB then conducted detailed due diligence
- 15 -
<PAGE> 27
reviews of each other's assets, business and financial conditions, consulting
on the proposed transaction with their respective independent public
accountants, legal counsel, and Board members. Also, the WCB negotiating team
of Messrs. Tibbatts, Bartruff, Green, Putnam and Kalkofen met on several
occasions with Messrs. Stenseth and Pomajevich, and on occasion other VB
directors. After reaching a consensus on a number of basic issues involving a
combination of the companies, including a stock exchange ratio, VB retained a
financial advisor. On December 12, 1995, the WCB Board met and on December 21,
1995 the VB Board met, and both approved proceeding with formal negotiations
towards a definitive Merger Agreement.
At special meetings of the VB and WCB Boards held on February 15, 1996,
the proposed combination was considered in detail. The WCB Board, along with
its counsel, Graham & Dunn, P.C., reviewed the Merger Agreement together with
its exhibits. After considering the potential benefits of the transaction, the
financial and valuation analyses of the transaction, the terms of the Merger
Agreement, and related questions and answers, the WCB Board unanimously
approved the transaction. The VB Board, with advice from its legal counsel,
Foster Pepper & Shefelman, reviewed the Merger Agreement and considered the
potential benefit of the proposed Merger to VB and its shareholders, taking
into account the financial and valuation analysis of the Merger, the terms of
the Merger Agreement and a report regarding the fairness of the transaction,
from a financial point of view, presented by VB's financial advisor, CFA. At
this meeting, the VB Board unanimously determined that the proposed Merger was
fair to and in the best interest of VB and its shareholders, and therefore
recommended that the Merger Agreement be submitted to VB's shareholders for
approval. At each meeting, the Merger, Exchange Ratio, and related
transactions were unanimously approved by all members of the respective Boards
present, subject to the approval of VB shareholders, obtaining necessary
regulatory approvals, and the further conditions set forth in the Merger
Agreement.
REASONS FOR THE MERGER - GENERAL
VB and WCB share a community banking philosophy and strategy, which
emphasizes responsiveness to local markets and delivery of personalized service
through locally managed banks. The parties believe that a bank holding company
composed of autonomous banks, emphasizing high quality personalized customer
service and strong local identification is a viable alternative to the
super-regional organizations which have acquired many smaller independent banks
in recent years and operated them as branches. WCB expects to continue to
emphasize this strategy after the Merger and intends to operate the Bank of
Vancouver along with its present subsidiaries -- The Bank of Newport, The
Commercial Bank and Valley Commercial Bank -- as separate subsidiaries with
local management and directors that are involved in, and knowledgeable about,
the respective communities of WCB's subsidiary banks.
The parties believe that the Merger will enable the Bank to provide
enhanced services to customers and to compete more effectively in the present
banking environment, which is dominated by much larger institutions. The
parties' geographic markets and products are complementary. The Bank is
located in Vancouver, Washington, with its primary market area Clark County,
Washington. This market is immediately adjacent to the greater Portland,
Oregon, market in which several offices of WCB's three present subsidiary banks
are located. The city of Vancouver, Washington, and Clark County are
considered a part of the Portland metropolitan area. VB's primary focus is on
the small- to medium-sized businesses within its market area which is
consistent with the niche banking philosophy of the three business banking
offices of The Bank of Newport located in the Portland, Oregon area.
While VB's loan portfolio focuses on business lending, with a
concentration in real estate developments, the institutions' portfolios
complement each other both geographically and by industry types. WCB's loan
portfolio has a broad diversity with some concentration in the agricultural,
manufacturing, fishing, tourism, and real estate industries. WCB offers a
range of non-traditional products, such as annuities, mutual funds and
brokerage services, which are not presently offered by VB. In addition WCB,
through its Trust Division -- West Coast Trust -- offers trust and employee
benefit plans which are not presently offered by VB. It is
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<PAGE> 28
expected that the parties' complementary market areas, product mixes and areas
of expertise will provide additional opportunity for growth, revenue
enhancement, and increased quality of customer services.
To a lesser extent, the Merger is expected to provide benefits to the
parties through increased efficiencies and other savings, particularly in the
areas of data processing, loan participation, and through enhanced marketing
efforts. Moreover, having banking offices on both sides of the Columbia River
is expected to enable the parties to more effectively pursue their strategy of
providing community-style banking services to small and medium-sized businesses
throughout the entire metropolitan area, including those in Oregon and Clark
County, Washington.
REASONS FOR THE MERGER - WCB
At its meeting on February 15, 1996, the WCB Board determined that the
Merger and Merger Agreement are fair to and in the best interests of WCB and
its shareholders. In considering the Merger, the WCB Board determined that the
Merger would be consistent with WCB's strategic intent in expanding its
community banking organization. With VB, WCB can potentially provide customers
and shareholders with certain advantages of a community banking organization as
well as the larger banking organization.
WCB determined that the Merger would advance WCB's strategic plan
because of its belief that the Merger will combine two financially-sound
institutions with complementary businesses and strategies, thereby creating a
stronger combined organization with greater size, flexibility, efficiency, and
profitability. The WCB Board believes that (i) each institution is currently
well-managed, (ii) the companies have compatible management philosophies and
strategic focuses, (iii) each institution will contribute complementary
business strengths resulting in a well meshed diversified institution, and (iv)
the strong capitalization of the combined organization will allow it to take
advantage of future acquisition opportunities. The WCB Board also believes
that the Merger will allow the combined organization to compete effectively in
the rapidly changing marketplace of banking and financial services and to take
advantage of opportunities for growth and diversification in both Oregon and
Washington.
In reaching its determination, the WCB Board consulted with WCB's
management as well as WCB's accounting and legal advisors and considered a
number of factors, including the following:
- The effectiveness of the Merger in implementing WCB's basic
strategy, and in responding to changes in the banking industry
which have made competing as a community banking organization
more difficult;
- The WCB Board review based in part on a presentation by WCB
management regarding (i) its due diligence review of VB,
including the business, operations, earnings, asset quality,
financial condition and corporate culture of VB on a
historical, prospective and pro forma basis, (ii) product mix,
the compatibility of corporate roles and the respective
contributions the parties would bring to a combined
organization, and (iii) the expanded opportunities for revenue
enhancement and synergies that are expected to result from the
Merger;
- The terms of the Merger Agreement, the VB Stock Option
Agreement and the other documents executed in conjunction with
the Merger;
- WCB's long-term strategy of seeking to expand its operations
along the I-5 corridor and particularly its stated goal of
expanding its banking operations throughout the
Portland-Metropolitan area, including southwest Washington;
and
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<PAGE> 29
- The current and prospective economic environment facing
financial institutions generally and WCB in particular.
The WCB Board did not assign any specific or relative weight to the foregoing
factors in the course of its consideration.
REASONS FOR THE MERGER - VB
The VB Board believes that the terms of the Merger, which are the
product of arms length negotiations between representatives of VB and WCB, are
fair and in the best interests of VB and its shareholders. In the course of
reaching its determination, the VB Board consulted with legal counsel with
respect to the legal duties of the VB Board, the terms of the Merger Agreement
and the issues related thereto; with its accountants with respect to certain
financial aspects of the transaction; with its financial advisor with respect
to the financial aspects and fairness of the transaction; and with senior
management regarding, among other things, operational and due diligence
matters.
At its meeting on February 15, 1996, the VB Board unanimously
determined that the Merger and Merger Agreement are fair to, and in the best
interests of VB and its shareholders and recommended the Merger Agreement be
submitted to the shareholders of VB for approval. In addition to the overall
objectives of enhancing shareholder value and providing high-quality community
banking services in Vancouver and surrounding communities, the VB Board
considered the fairness opinion of CFA, and a number of additional factors,
including the following:
- VB shareholder value would be significantly enhanced by the
value of WCB Common Stock being issued in the Merger;
- WCB stock is relatively actively traded, thus creating a far
more marketable and liquid security for VB shareholders;
- The Merger is structured as a tax-free exchange of stock,
permitting VB shareholders the opportunity to continue to
invest in a community banking organization;
- WCB's financial condition, businesses and prospects and the
economic prospects of the markets served by both parties
appear to be attractive;
- The Merger would allow VB to provide trust, investment and
mortgage services to VB customers;
- The combined organization would enable the Bank to offer
larger loans to customers due to higher legal lending limits;
- The combined organization is expected to provide increased
opportunities to employees;
- The structure of the Merger would allow the Bank to retain its
name and local identity, Board and management team, enabling
it to continue to provide responsive, quality, community
banking services to its customers; and
- The Merger is expected to receive regulatory approval and is
not conditioned upon the approval of any shareholder group
other than VB.
The VB Board did not ascribe relative or specific weights to any factor in its
evaluation of the Merger.
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<PAGE> 30
OPINION OF VB FINANCIAL ADVISOR
VB retained CFA as its exclusive financial advisor pursuant to an
engagement letter dated February 5, 1996 (the "Engagement Letter") in
connection with the Merger. CFA is a regionally recognized investment banking
firm that is regularly engaged in the valuation of businesses and securities in
connection with mergers and acquisitions. CFA is familiar with VB, having
acted as its financial advisor in connection with initiating and participating
in the negotiations with WCB leading to the Merger Agreement. The VB Board
selected CFA to act as VB's exclusive financial advisor based on CFA's
experience in mergers and acquisitions and in securities valuation generally.
On February 15, 1996, CFA issued its opinion to the VB Board that, in
its opinion as investment bankers, the terms of the Merger as provided in the
Merger Agreement are fair, from a financial view point, to VB and its
shareholders. The CFA opinion is directed only to the fairness, from a
financial point of view, of the consideration to be received and does not
constitute a recommendation to any VB shareholder as to how such shareholder
should vote at the Meeting. No limitations were imposed by the VB Board on
CFA in respect to the investigations made or procedures followed by CFA in
rendering its opinions.
In rendering its opinion to VB, CFA reviewed, among other things,
historical financial data of VB, certain internal financial data and
assumptions of VB prepared for financial planning and budgeting purposes
furnished by the management of VB and, to the extent publicly available, the
financial terms of certain change of control transactions involving Northwest
community banks. CFA discussed with VB's management the financial condition,
current operating results, and business outlook for VB. CFA also reviewed
certain publicly available information concerning WCB and certain financial and
securities data of WCB and companies deemed similar to WCB. CFA discussed with
WCB's management the financial condition, current operating results and
business outlook for WCB and WCB's plans relating to VB. In rendering its
opinion, CFA relied, without independent verification, on the accuracy and
completeness of all financial and other information reviewed by it and did not
attempt to verify or to make any independent evaluation or appraisal of the
assets of VB or WCB nor was it furnished any such appraisals. VB did not
impose any limitations on the scope of the CFA investigation in arriving at its
opinion.
CFA analyzed the total Purchase Price on a cash equivalent fair market
value basis using standard evaluation techniques (as discussed below) including
comparable sales multiples, net present value analysis, and net asset value
based on certain assumption of projected growth, earnings and dividends and a
range of discount rates from 16% to 18%.
Net Asset Value is the value of the net equity of a bank, including
every kind of property and value. This approach normally assumes the
liquidation on the date of appraisal with the recognition of the investment
securities gains or losses, real estate appreciation or depreciation,
adjustments to the loan loss reserve, discounts to the loan portfolio and
changes in the net value of other assets. As such, it is not the best
evaluation approach when valuing a going concern because it is based on
historical cost and varying account methods. Even if the assets and
liabilities are adjusted to reflect prevailing market prices and yields (which
is often of limited accuracy due to the lack of readily available data), it
still results in a liquidation value. In addition, since this approach fails
to account for the values attributable to the going concern such as the
interrelationship among VB's assets and liabilities, customer relations, market
presence, image and reputation, staff expertise and depth, little weight is
given by CFA to the net asset value approach to valuation.
Market Value is generally defined as the price, established on an
"arms-length" basis, at which knowledgeable, unrelated buyers and sellers would
agree. The "hypothetical" market value for a small bank with a thin market for
its common stock is normally determined by comparison to the average price to
stockholders equity, price to earnings, and price to total assets, adjusting
for significant differences in financial performance criteria and for any lack
of marketability or liquidity of the buyer. The market value in connection
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<PAGE> 31
with the evaluation of control of a bank is determined by the previous sales of
small banks in the state or region. In valuing a business enterprise, when
sufficient comparable trade data are available, the market value approach
deserves greater weight than the net asset value approach and similar weight as
the investment value approach as discussed below.
CFA maintains a substantial data base concerning prices paid for
banking institutions in the Northwest, particularly Washington banking
institutions, during 1988 through 1996. This data base provides comparable
pricing and financial performance data for banking institutions sold or
acquired. Organized by different peer groups, these data present medians of
financial performance and purchase price levels, thereby facilitating a valid
comparative purchase price analysis. In analyzing the transaction value of VB,
CFA has considered the market approach and has evaluated price to stockholders
equity and price to earnings multiples and the price to total assets percentage
for transactions involving Washington, Oregon, and Idaho banking organizations
with total assets less than $100 million that sold for 100% common stock from
January, 1988 to January, 1996.
Comparable Sales Multiples. CFA calculated a "merger consideration
multiple" of VB's Adjusted Book Value (using the estimated June 30, 1996,
stockholders' equity) based on the ratio of price to adjusted stockholders'
equity for a sample of Northwest banking institutions with assets below $100
million which sold between January, 1988 and January, 1996, and a sample of
banking institutions located in western Washington and western Oregon with
total assets below $100 million which sold between March, 1990 and January
1996. Based on these two samples, the merger consideration multiple values
suggested for VB shares based on the estimated June 30, 1996 stockholders'
equity were $60.42 and $74.52, respectively.
Transaction Value as a Percentage of Total Assets. CFA calculated the
percentage of total assets which the transaction represents as a price level
indicator. The transaction value as a percentage of total assets facilitates a
truer price level comparison with comparable banking organizations, regardless
of the differing levels of stockholders equity and earnings. In this instance,
a transaction value of $66.95 per share results in a transaction value as a
percentage of total assets of 13.52%. The median price as a percentage of
total assets for a sample of Northwest banking institutions with assets below
$100 million which sold between January, 1988 through January, 1996, and a
sample of Northwest banking institutions with total assets below $100 million
which sold between 1990 and 1995, was 13% and 15%, respectively.
Investment Value is sometimes referred to as the income or earnings
value. One investment value method frequented used estimates the present value
of an institution's future earnings or cash flow which is discussed below.
Net Present Value Analysis. The investment or earnings value of any
banking organization's stock is an estimate of the present value of future
benefits, usually earnings, dividends, or cash flow, which will accrue to the
stock. An earnings value is calculated using an annual future earning stream
over a period of time of not less than five years, and the residual or terminal
value of the earnings stream after five years, using VB's estimates of future
growth and an appropriate capitalization or discount rate. CFA's calculations
were based on an analysis of the banking industry, VB's earnings estimates for
1996-2000, historical levels of growth and earnings, and the competitive
situation in VB's market area. Using discount rates of 16% and 18%, acceptable
discount rates considering the risk-return relationship most investors would
demand of an investment of this type, as of the valuation date, the "Net
Present Value of Future Earnings: provided a range of $63.13 to $67.76 per
share.
When the net asset value, market value and investment value approaches
are subjectively weighed, using the appraiser's experience and judgment, it is
CFA's opinion that the proposed transaction is fair, from a financial point of
view.
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<PAGE> 32
Pursuant to the terms of the Engagement Letter, VB has agreed to pay
CFA a fee of $15,000. In addition, VB has agreed to reimburse CFA for its
reasonable out-of-pocket expenses, including the fees and disbursements of its
counsel, and to indemnify CFA against certain liabilities.
THE FULL TEXT OF THE OPINION OF CFA DATED AS OF THE DATE OF THIS
PROSPECTUS/PROXY STATEMENT, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS
CONSIDERED, AND LIMITS ON THE REVIEW UNDERTAKEN BY CFA IS ATTACHED TO THIS
PROSPECTUS/PROXY STATEMENT AS APPENDIX D. THE SHAREHOLDERS OF VB ARE ADVISED
TO READ THIS DOCUMENT IN ITS ENTIRETY. CFA'S OPINIONS ARE DIRECTED ONLY TO THE
EXCHANGE RATIO IN THE MERGER AND DO NOT CONSTITUTE RECOMMENDATIONS TO ANY VB
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE VB MEETING. FURTHER,
THE SUMMARY OF THE OPINION OF CFA SET FORTH IN HEREIN IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION CONTAINED IN APPENDIX D.
THE CFA OPINION DELIVERED TO THE VB BOARD AND DATED FEBRUARY 15, 1996, IS
SUBSTANTIALLY IDENTICAL TO THE OPINION ATTACHED HERETO.
RECOMMENDATION OF THE VB BOARD
THE VB BOARD UNANIMOUSLY RECOMMENDS THAT THE VB SHAREHOLDERS VOTE FOR
THE APPROVAL OF THE MERGER AGREEMENT.
THE MERGER
GENERAL
The following description of certain aspects of the Merger does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement. All VB shareholders are urged to read the Merger Agreement
carefully. VB shareholders are being asked to approve the Merger in accordance
with the terms of the Merger Agreement.
BASIC TERMS OF THE MERGER
The Merger Agreement provides for the merger of VB with and into HB,
WCB's wholly-owned subsidiary, with the result that VB shareholders would
become shareholders of WCB and the Bank would become a wholly-owned subsidiary
of WCB. VB would cease to exist after the Merger. While WCB and VB believe
that they will receive the requisite regulatory approvals for the Merger, there
can be no assurance that such approvals will be received or, if received, as to
the timing of such approvals or as to the ability to obtain such approvals on
satisfactory terms. See "-- Conditions to the Merger."
Under the terms of the Merger Agreement, WCB would acquire VB for an
aggregate purchase price of $11,581,000, or $66.95 per share of VB Common
Stock. WCB would acquire VB by means of a triangular merger through which VB
would be merged with and into HB, WCB's wholly-owned subsidiary organized
solely to effect this transaction. As a result, VB shareholders, other than
those who duly exercise dissenters' rights, would become shareholders of WCB
(See "THE MERGER -- Dissenters' Rights of Appraisal"). Upon consummation of
the Merger, each holder of shares of VB Common Stock, other than dissenting
shares, will be entitled to receive shares of WCB Common Stock in exchange for
the shares of VB Common Stock held of record by such shareholder as of the
Effective Date. The number of shares of WCB Common Stock to be received for
each share of VB Common Stock is the number obtained by dividing $11,581,000 by
either the Average Closing Price or the Modified Average Closing Price (as
defined in the Merger Agreement and discussed in more detail below), whichever
applies, and by further dividing such quotient by the aggregate number of
shares of VB Common Stock that are issued and outstanding or subject to
unexercised options on the Effective Date. So long as the Average Closing
Price of WCB Common Stock is between $15.30 and $18.70 per share, the formula
is designed to result in VB shareholders receiving WCB Common Stock having a
market value of approximately $66.95 for each share of VB exchanged in the
Merger.
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<PAGE> 33
The Average Closing Price is equal to the average of each Daily Sales
Price of WCB Common Stock for the ten consecutive trading days ending on and
including the fifth trading day preceding the Effective Date ("Pricing
Period"). But, the Average Closing Price in the Merger Agreement includes a
"floor" and a "ceiling" price, respectively 10% below and above a midpoint
price of $17 (representing the average closing price of WCB Common Stock prior
to the execution of the Merger Agreement). Accordingly, if the average Daily
Sales Price over the Pricing Period is less than $15.30, the Average Closing
Price will be $15.30. If, on the other hand, the Average Daily Sales Price
over the Pricing Period is greater than $18.70, the Average Closing Price will
be $18.70.
The Modified Average Closing Price is the Average Closing Price not
subject to the "floor" price described above. The Modified Average Closing
Price will be used in place of the Closing Price only if (i) the Average Daily
Sales Price over the Pricing Period is below $15.30 and has declined more than
5% in excess of any corresponding decline in a selected index of peer group
stock prices, (ii) VB is entitled to and does exercise its provisional right to
terminate the Merger Agreement under Subsection 7.2.5(a), and (iii) WCB removes
the limitation otherwise imposed by the "floor" as permitted by Subsection
7.2.5(b) of the Merger Agreement. See "Termination of the Merger Agreement --
Decline in Value of WCB Stock."
As an example of the operation of the formula for computing the
exchange ratio, recognizing the $11,581,000 Purchase Price, using the midpoint
price of $17 as the Average Closing Price, and assuming 172,984 shares of VB
Common Stock issued and outstanding or subject to unexercised options, the
number of shares of WCB Common Stock that will be exchanged for each share of
VB Common Stock would be determined as follows: 11,581,000 / 17 = 681,235.29 /
172,984 = 3.9381 shares of WCB Common Stock for each share of VB Common Stock.
The following table sets forth examples showing the approximate number
of shares of WCB Common Stock a VB shareholder would receive in exchange for
100 shares of VB Common Stock. The table is based upon various hypothetical
Average Closing Prices and assumes that 172,984 shares of VB Common Stock are
issued and outstanding or subject to unexercised options as of the Effective
Date. On April 18, 1996, the price per share of the WCB Common Stock was
$18.25. However, no assurance can be given as to the market value of WCB
Common Stock during the Pricing Period.
<TABLE>
<CAPTION>
============================================================
Assumed Average Closing No. of Shares of WCB Common
Price of WCB Common Stock for 100 Shares
Stock of VB Common Stock
----- ------------------
------------------------------------------------------------
<S> <C>
$15.30 or lower 437(1)
------------------------------------------------------------
$16.15 414
------------------------------------------------------------
$17.00 393
------------------------------------------------------------
$17.85 375
------------------------------------------------------------
$18.70 or higher 358
============================================================
</TABLE>
- -------------------
(1) However, if the Modified Average Closing Price were applicable, the
number of shares issuable would continue to increase proportionately
for values below $15.30 per share.
The Merger will close and become effective on the Effective Date (as
defined in the Merger Agreement, within five business days after the
fulfillment or waiver of each condition set forth in the Merger Agreement),
unless extended by the parties. Closing is anticipated by the summer of 1996.
If
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<PAGE> 34
Closing does not occur before October 31, 1996, either VB or WCB may terminate
the Merger Agreement. See "THE MERGER -- Conditions to the Merger."
CASH FOR FRACTIONAL SHARES
WCB will not issue certificates for fractional shares of WCB Common
Stock. Each VB shareholder who is otherwise entitled to receive a fractional
share, will receive cash in lieu thereof in an amount equal to the product of
such fraction multiplied by the Average Closing Price of WCB Common Stock, and
such VB shareholder will have no other rights with respect to such fractional
shares or other shares.
EXCHANGE OF STOCK CERTIFICATES
On and after the Effective Date, certificates representing VB Common
Stock will be deemed to represent only the right to receive WCB Common Stock or
cash as provided in the Merger Agreement. Upon surrender to the Exchange Agent
designated by WCB and VB, of certificates that, before the Effective Date,
represented shares of VB Common Stock, together with a properly executed
transmittal letter form and any other required documents, the holder
surrendering the certificates will be entitled to receive certificates
representing the number of shares of WCB Common Stock, and cash, if any, to
which he or she is entitled in accordance with the terms of the Merger
Agreement. DO NOT SEND IN YOUR CERTIFICATES AT THIS TIME. VB shareholders
will receive written instructions and the required letter of transmittal after
the Merger is effective.
All WCB Common Stock issued pursuant to the Merger Agreement will be
deemed issued as of the Effective Date. No distributions or dividends paid
upon shares of WCB Common Stock after the consummation of the Merger will be
paid to holders of VB Common Stock who are entitled under the Merger Agreement
to receive WCB Common Stock until such holders have surrendered the
certificates formerly representing shares of VB Common Stock, at which time any
accumulated dividends and distributions since the Effective Date, without
interest, will be paid.
DIRECTORS AND OFFICERS
In connection with the Merger, WCB intends to appoint Mr. Pomajevich to
the WCB Board. Mr. Pomajevich is currently the Chairman of the VB Board. This
appointment will be effective on the Effective Date. In addition, after the
Merger Mr. Stenseth will continue as the President of the Bank and, until the
end of his service as President, will be allowed to attend WCB Board meetings
as an ex-officio member of the WCB Board.
The Bank's Board before the Merger will remain the same after the
Merger, except that an additional director (one of WCB's current directors)
will be appointed by WCB to the Bank's Board. Consequently, on the Effective
Date, the Bank's Board will consist of all persons who were directors of the
Bank immediately before the Merger, plus a WCB director designated by WCB. The
Bank's directors will serve until the 1997 annual meeting of the Bank's
shareholders or until their successors have been elected and qualified. At the
1997 annual meeting of the Bank's shareholders, the directors then serving on
the Bank's Board may propose a slate of directors for election to the Bank's
Board until the 1998 annual meeting of the Bank's shareholders. WCB, as the
Bank's sole shareholder, has agreed to elect the slate of directors proposed by
the outgoing VB directors in 1997, although WCB has the right to refuse to
elect any of the proposed directors if it has good cause for such refusal.
As a condition to the execution of the Merger Agreement, each member of
the Board of VB entered into a Director Noncompetition Agreement with WCB, HB,
and VB. Except under certain
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<PAGE> 35
limited circumstances, the Director Noncompetition Agreement prohibits these
directors from competing with WCB in Clackamas, Lincoln, Marion, Multnomah and
Washington Counties, Oregon and Clark County, Washington, for the lesser of (a)
two years after the director's service as a director of the Bank, WCB, or any
affiliate of WCB, is terminated or (b) three years from Closing of the Merger.
As a further condition to the execution of the Merger Agreement, the
Bank entered into an employment agreement with Mr. Stenseth, which was
ratified by WCB. Under the employment agreement, Mr. Stenseth will continue as
President of the Bank after the Merger under the terms set forth in the
employment agreement.
EMPLOYEE BENEFIT PLANS
The Merger Agreement confirms WCB's intention to allow the Bank's
employees who continue as employees of the Bank after the Merger to participate
in certain WCB employee benefit plans. VB's employee benefit plans will be
terminated as soon as practical after the Merger, and the employee interests in
those plans will be transferred or merged into WCB's employee benefit plans.
MECHANICS OF THE MERGER
On the Effective Date, VB will be merged with and into HB which itself
will be merged into WCB immediately after Closing. At that time, all business,
assets, and liabilities formerly carried on or owned by VB will be transferred
to and vested in WCB. VB will cease to have a corporate existence separate
from WCB, and the Bank will be a directly owned subsidiary of WCB.
CONDUCT PENDING CONSUMMATION OF THE MERGER
The Merger Agreement provides that, until the Merger is effective, VB
will, and will cause the Bank to, conduct its business only in the ordinary and
usual course, and use all reasonable efforts to preserve its present business
organization, retain the services of its present management, and preserve the
goodwill of all parties with whom it has business dealings. The Merger
Agreement also provides that, unless WCB otherwise consents in writing, VB will
refrain from engaging in various activities such as, effecting any stock split
or other recapitalization, disposing of assets or making material commitments,
acquiring real property without conducting an environmental evaluation, and
entering into transactions or incurring any expenses that are not in the
ordinary course of business.
CONDITIONS TO THE MERGER
Consummation of the Merger is subject to various conditions. No
assurance can be provided as to whether these conditions will be satisfied or
waived by the appropriate party. Accordingly, there can be no assurance that
the Merger will be completed. In the event that conditions to the Merger
remain unsatisfied and the Merger has not been effected on or before October
31, 1996, the Merger Agreement may be terminated by either party to the Merger
Agreement.
The Merger can occur only if the holders of the shares of VB Common
Stock approve the transaction. In accordance with VB's Articles of
Incorporation and Washington law, approval of the Merger requires the
affirmative vote by the holders of a majority of all shares outstanding. In
addition, approval of the Merger Agreement is required from the FRB and the
Washington Director. Applications are pending with both agencies. Although no
assurance can be given, the parties expect to receive both approvals in due
course.
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<PAGE> 36
Certain conditions must be satisfied or events must occur before the
parties will be obligated to complete the Merger. Each party's obligations
under the Merger Agreement are conditioned on satisfaction by the other parties
of their conditions. Some of these conditions are as follows: (a) the
representations and warranties of each party are true in all material respects
(as of Closing), and each party has complied with its covenants in the Merger
Agreement; (b) no Material Adverse Effect has occurred with respect to a party;
(c) each party's Board and VB's shareholders have approved the Merger; (d) WCB
has appointed, effective as of Closing, a VB director to serve on WCB's board
of directors; (e) the parties have provided one another with the counsel, tax,
accounting treatment, and fairness opinions required by the Merger Agreement;
(f) WCB has assumed or paid VB's note with Security State Bank and secured a
release from Security State Bank of VB's stock pledged as security for the
note; (g) the SEC has declared the effectiveness of the registration statement
for the shares of WCB common stock to be issued in the Merger; (h) VB and the
Bank have met certain financial condition requirements; (i) no action or
proceeding has been commenced or is threatened by any governmental agency to
restrain or prohibit or invalidate the Merger; (j) the aggregate of the cash to
be paid to VB shareholders in accordance with the Merger Agreement will not
exceed 10% of the value of the WCB common stock to be issued in the Merger; and
(k) all appropriate regulatory agencies have approved the Merger.
Either WCB or VB may waive any of the other party's conditions, except
those that are required by law (such as receipt of regulatory and shareholder
approval). Either WCB or VB may also grant extended time to the other party to
complete an obligation or condition.
AMENDMENT OF THE MERGER AGREEMENT
The Merger Agreement may be amended or supplemented at any time by
written agreement of the parties, whether before or after the Meeting. To the
extent permitted under applicable law, the parties may make any amendment or
supplement without further approval of VB's shareholders, except amendments
which would reduce the amount or change the form of consideration VB
shareholders will receive in the Merger transaction.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement contains several provisions entitling either VB or
WCB to terminate the Merger Agreement under certain circumstances. The
following briefly describes these provisions:
Lapse of Time. If the Merger has not been consummated by October 31,
1996, then at any time after that date, either WCB or VB may terminate the
Merger Agreement if failure of the parties to consummate the Merger by October
31, 1996, was not due to the terminating party's breach of its obligations,
representations, or warranties under the Merger Agreement.
Mutual Consent. The parties may terminate the Merger Agreement at any
time before Closing, whether before or after approval by VB's shareholders, by
mutual consent.
Failure of VB to Recommend Approval or Stock Option Becomes
Exercisable. WCB may terminate the Merger Agreement before VB shareholders
approval if the VB Board fails to recommend (or adversely modifies, withdraws
or changes its recommendation) approval of the merger to its shareholders. WCB
may also terminate the Merger if the Option under the Stock Option Agreement
becomes exercisable by WCB, unless WCB has exercised such Option.
Decline in Value of WCB Stock. VB has certain rights, tied to a
reduction in value of WCB Common Stock, to terminate the Merger Agreement
during the three-business-day period beginning five
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<PAGE> 37
calendar days before the Effective Date of the Merger. These termination
rights are generally subject to WCB's right to avoid termination by increasing
the number of WCB shares VB shareholders will receive (the so-called "right to
fill"). However, VB may terminate the Merger Agreement, and WCB has no right
to avoid termination, if, during the three-business-day period identified
above, the Modified Average Closing Price is less than $13.60.
Impracticability. Either WCB or VB may terminate the Merger Agreement
upon written notice to the other parties if its Board determines, in good faith
and after due consultation with counsel, that the Merger is inadvisable or
impracticable by reason of the institution of litigation by the federal
government or the governments of Washington or Oregon to restrain or invalidate
the transactions contemplated by the Merger Agreement.
Allocation of Costs Upon Termination. If the Merger Agreement is
terminated, WCB and VB will each pay their own out-of- pocket costs incurred in
connection with the transaction, and will have no other liability to any other
party.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the VB Board and management may be deemed to have
interests in the Merger, in addition to their interests as shareholders of VB.
The VB Board was aware of these factors and considered them, among other
matters, in approving the Merger Agreement and the transactions contemplated
thereby.
Employment Agreement. WCB has ratified an employment agreement entered
into between the Bank and Mr. Stenseth, President of the Bank. The term of the
employment agreement begins on the Effective Date and ends on May 31, 1998.
The Bank may terminate the agreement at any time for cause without incurring
any post-termination obligation to Mr. Stenseth, or without cause, in which
case the agreement provides severance benefits. Mr. Stenseth is generally
prohibited from competing with WCB in its market area for the lesser of (a) two
years after termination or (b) three years from the Effective Date.
Appointments to the WCB Board. WCB has also agreed to appoint Mr.
Pomajevich, currently the Chairman of the VB Board, to the WCB Board, effective
on Closing. In addition, Mr. Stenseth will be allowed to attend WCB Board
meetings as an ex-officio member, until the end of his service as President of
the Bank. Finally, the current directors of the Bank will continue to serve as
directors following the Merger.
CERTAIN FEDERAL INCOME TAX MATTERS
The Merger is intended to qualify as a tax-free reorganization under
Section 368(a) of the Code for federal income tax purposes. VB and WCB will
receive at Closing an opinion from Graham & Dunn, P.C. that the Merger will
constitute a tax-free reorganization for federal tax purposes. Such opinion
will not bind the Internal Revenue Service or preclude the Internal Revenue
Service from adopting a contrary position. The opinion is based upon facts and
assumptions and representations and assurances made by VB and WCB. THE FEDERAL
INCOME TAX DISCUSSION SET FORTH BELOW MAY NOT APPLY TO PARTICULAR CATEGORIES OF
HOLDERS OF VB COMMON STOCK SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL
INCOME TAX LAWS, SUCH AS FOREIGN HOLDERS OR HOLDERS WHOSE STOCK MAY HAVE BEEN
ACQUIRED AS COMPENSATION. IN ADDITION, THERE MAY BE RELEVANT STATE, LOCAL OR
OTHER TAX CONSEQUENCES, NONE OF WHICH ARE DESCRIBED BELOW. SHAREHOLDERS ARE
URGED TO CONSULT THEIR ADVISORS TO DETERMINE THE SPECIFIC PERSONAL TAX
CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN,
STATE, LOCAL, AND OTHER TAX LAWS.
- 26 -
<PAGE> 38
The Graham & Dunn, P.C. opinion will state that:
1. The merger of VB with and into HB will constitute a tax-free
reorganization.
2. No gain or loss will be recognized by either VB or WCB as a
result of the Merger.
3. The tax basis and holding period for the VB assets that are
received by WCB in the Merger will be the same as the tax
basis and holding period of the assets held immediately before
the exchange by VB.
4. No gain or loss will be recognized by holders of VB Common
Stock upon the receipt of WCB Common Stock in exchange for VB
Common Stock pursuant to the Merger.
5. The tax basis of the WCB Common Stock received in the Merger
by VB shareholders will be the same as the tax basis of the
shares of VB Common Stock surrendered in the exchange, reduced
by any basis allocable to a fractional share interest in the
WCB Common Stock for which cash is received. The holding
period for the shares of WCB Common Stock received in the
Merger will include the holding period of VB shares exchanged,
provided that VB shares were held as capital assets at the
time of the Merger.
6. Gain or loss will be recognized by VB shareholders who receive
cash in lieu of fractional shares of WCB Common Stock, or who
exercise dissenters' rights and receive cash for their shares.
The amount of such gain or loss will be the difference between
the cash received and the basis of the shares or fractional
share interests surrendered in the exchange. Such gain or
loss will be a capital gain or loss provided that the shares
of VB Common Stock surrendered were capital assets at the time
of surrender, and will be long-term capital gain or loss if
such shares of VB have been held for more than one year.
ACCOUNTING TREATMENT OF MERGER
It is anticipated that the Merger will be accounted for as a pooling of
interests for accounting purposes. Under this method of accounting, assets and
liabilities of VB and WCB are carried forward at their previously recorded
amounts, and operating results of WCB and VB will represent the combined
results for periods before and after the Merger. No recognition of goodwill
arising from the Merger is required of any party to the Merger. Under the
Merger Agreement, receipt of a letter from Arthur Andersen LLP that the Merger
will qualify for the pooling of interests treatment is a condition to the
obligation of WCB to consummate the Merger.
The unaudited condensed pro forma combined financial information
contained in this Prospectus/Proxy Statement has been prepared using the
pooling of interests accounting method to account for the Merger. See
"UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS," including the
related Notes.
- 27 -
<PAGE> 39
DISSENTERS' RIGHTS OF APPRAISAL
Under Washington state law (RCW 23B.13), a shareholder of VB may
exercise "dissenters' rights" and receive the fair value of his or her shares
in cash, if certain procedures are followed. To exercise these rights, a VB
shareholder must (1) deliver to VB, before the vote on approval of the Merger
is taken, written notice of intent to demand payment for his or her shares if
the Merger is effected, and (2) not vote in favor of the Merger. Following
consummation of the Merger, WCB will send a Dissenters' Notice to each VB
shareholder who has properly perfected his or her dissenters' rights. A
dissenting shareholder must also follow the procedures set forth in the
Dissenters' Notice. The Dissenters' Notice will include instructions to
completing the exercise of dissenters' rights, including that the dissenting
shareholder must (1) make written demand for payment of the fair value of his
or her shares in the form sent to the shareholder by the corporation along with
the Dissenters' Notice (this notice will prescribe a time period within which
the demand must be made), (2) certify that beneficial ownership of his or her
VB Common Stock shares was acquired before the date set forth in the
Dissenters' Notice, and (3) surrender his or her stock certificates
representing shares of the VB Common Stock in accordance with the Dissenters'
Notice. If a shareholder exercises dissenters' rights, the dissenting
shareholder is entitled to receive the fair value of his or her shares in cash.
Such value may be higher or lower than the value of WCB Common Stock issuable
pursuant to the Merger Agreement.
The failure of a shareholder of VB to comply strictly with the
statutory requirements will result in a loss of dissenters' rights. A copy of
the relevant statutory provisions is attached as Appendix C. VB shareholders
should refer to this Appendix for a complete statement concerning dissenters'
rights, and the foregoing summary of such rights is qualified in its entirety
by reference to such Appendix C.
RESALES OF STOCK RECEIVED IN THE MERGER BY VB AFFILIATES
The WCB Common Stock to be issued in the Merger will be transferable
free of restrictions under the Securities Act, except for shares received by
persons, including directors and executive officers of VB, who may be deemed to
be "affiliates" of VB, as that term is used in (i) paragraphs (c) and (d) of
Rule 145 under the Securities Act and/or (ii) Accounting Series Releases 130
and 135, as amended, of the SEC. Affiliates may not sell their shares of WCB
Common Stock acquired pursuant to the Merger, except (a) pursuant to an
effective registration statement under the Securities Act covering those
shares, (b) in compliance with Rule 145, or (c) in the opinion of counsel
reasonably satisfactory to WCB, pursuant to other applicable exemptions from
the registration requirements of the Securities Act. SEC guidelines further
indicate that the pooling of interests method of accounting will generally not
be challenged on the basis of sales by affiliates of the acquiring or acquired
company if such affiliates do not dispose of any of the shares of the acquiring
or acquired company they owned before the consummation of a merger or shares of
the acquiring corporation they receive in connection with the merger during the
period beginning 30 days before the merger and ending when financial results
covering at least 30 days of post-merger operations of the combined
organization have been published. WCB has obtained customary agreements with
all VB directors, officers, and affiliates of VB and WCB, under which such
persons have represented that they will not dispose of their shares of WCB
received in the Merger or the shares of capital stock of VB or WCB held by them
before the Merger, except (i) in compliance with the Securities Act and the
rules and regulations promulgated thereunder, and (ii) in a manner that would
not adversely affect the ability of WCB to treat the Merger as a pooling of
interests for financial reporting purposes. This Prospectus/Proxy Statement
does not cover any resales of the WCB Common Stock received by affiliates of
VB.
- 28 -
<PAGE> 40
NO SOLICITATION
VB has agreed in the Merger Agreement that, except as required by law,
neither VB nor any of its officers or directors will (i) solicit, encourage,
entertain or facilitate any other proposals or inquiries for an acquisition of
the shares or assets of VB or its subsidiaries, (ii) enter into discussions
concerning any such acquisition, or (iii) furnish any nonpublic information
relating to WCB's business or organization to any person that is not affiliated
with VB or WCB.
EXPENSES
WCB and VB will each pay their own expenses in connection with the
Merger Agreement and the transactions contemplated thereby, except that
printing expenses for this Prospectus/Proxy Statement will be shared by both
parties.
STOCK OPTION AGREEMENT
As a condition to WCB's willingness to enter into the Merger Agreement,
and in consideration thereof, VB issued to WCB an irrevocable Option to
purchase, under certain conditions, up to 28,144 shares of VB Common Stock at a
price of $64.00 per share, subject to adjustment in certain circumstances, such
as in the event of issuance of additional shares (other than pursuant to stock
options). The Option was granted to WCB pursuant to the Stock Option Agreement
between WCB and VB dated as of February 15, 1996. The number of shares of VB
Common Stock subject to the Option represents approximately 19.9% of the
outstanding shares of VB Common Stock as of February 15, 1996, before giving
effect to the issuance of such shares.
Prior to exercising the Option, WCB will not have any voting rights
with respect to the shares of VB Common Stock subject to the Option. WCB may
exercise the Option only upon the occurrence of certain events (described
below) and obtaining any regulatory approvals necessary for the acquisition of
the VB Common Stock subject to the Option. To WCB and VB's knowledge, no event
which would permit the exercise of the Option has occurred as of the date of
this Prospectus/Proxy Statement. At the request of WCB, under limited
circumstances, VB will repurchase for a formula price the Option and any shares
of VB Common Stock purchased upon exercise of the Option and beneficially owned
by WCB at that time.
WCB may not exercise the Option during any period in which it is
failing in any material respect to perform its obligations or observe its
covenants under the Merger Agreement, unless the reason for such failure is
that VB is failing in any material respect to perform its obligations or
observe its covenants under the Merger Agreement. Further, WCB may not
exercise the Option if any governmental approvals required for the issuance of
the shares of VB Common Stock to be purchased under the Option have not been
obtained, or the issuance would violate applicable laws or regulations.
Otherwise, WCB may exercise the Option in whole or in part, but only if both an
Initial Triggering Event (defined below) and a Subsequent Triggering Event
(defined below) occur before the occurrence of an Exercise Termination Event
(defined below). WCB must notify VB in writing of its intention to exercise
the Option within 30 days after the Subsequent Triggering Event, or such longer
period as provided in the Stock Option Agreement.
The term "Initial Triggering Event" means any of the following events
or transactions which occurs after February 15, 1996:
(i) VB or any of its subsidiaries taking certain actions (each an
"Acquisition Transaction"), including authorizing, recommending or entering
into an agreement with any third party, without WCB's
- 29 -
<PAGE> 41
prior written consent, to effect (a) a merger, consolidation or similar
transaction involving VB or any of its significant subsidiaries, (b) a sale,
lease or other disposition of all or substantially all of the assets of VB or
any of its significant subsidiaries, (c) a sale or other disposition (including
by way of merger, consolidation, share exchange or otherwise) of securities
representing 15% or more of the voting power of VB or any of its significant
subsidiaries, or (d) a transaction substantially similar to any of the
foregoing;
(ii) A third party acquiring or having the right to acquire an
aggregate of 15% or more of the outstanding shares of VB Common Stock;
(iii) A third party making a bona fide proposal to VB or its
shareholders by public announcement or written communication that becomes the
subject of public disclosure to engage in an Acquisition Transaction;
(iv) After a proposal is made by a third party to VB or its
shareholders to engage in an Acquisition Transaction, VB breaching any covenant
or obligation contained in the Merger Agreement that would entitle WCB to
terminate the Merger Agreement and is not cured during the period provided; or
(v) A third party filing an application or notice with the Federal
Reserve Board or other federal or state bank regulatory authority, that is
accepted for processing, for approval to engage in an Acquisition Transaction.
The term "Subsequent Triggering Event" means either of the following
events or transactions which occurs after February 15, 1996, such an event also
constituting an Initial Triggering Event:
(i) A third party acquiring beneficial ownership of 25% or more of
the then outstanding shares of VB Common Stock; or
(ii) VB or any of its subsidiaries taking certain actions,
including authorizing, recommending or entering into an agreement with any
third party, without WCB's prior written consent, to effect (a) a merger,
consolidation or similar transaction involving VB or any of its significant
subsidiaries, (b) a sale, lease or other disposition of all or substantially
all of the assets of VB or any of its significant subsidiaries, (c) a sale or
other disposition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 25% or more of the voting power of VB or
any of its significant subsidiaries, or (d) a transaction substantially similar
to any of the foregoing.
The term "Exercise Termination Event" means the earliest to occur of
the following: (a) the Effective Date of the Merger; (b) termination of the
Merger Agreement in accordance with its terms (with certain limited
exceptions, before the occurrence of an Initial Triggering Event); (iii) 12
months after the termination of the Merger Agreement, if the termination
follows the occurrence of an Initial Triggering Event (or a termination by WCB
under certain circumstances); (iv) the second anniversary of the date of the
Stock Option Agreement (that is, February 15, 1998); or (v) the exercise by WCB
of its right to terminate the Merger Agreement under a certain provision of the
Merger Agreement.
Anti-Dilution Provisions. In addition to typical antidilution
provisions which protect against the effects of stock dividends, stock splits
and other similar transactions, the Option provides that if the additional
shares are issued, the number of shares which may be purchased under the Option
will increase to maintain WCB's purchase percentage at 19.9, and, unless those
shares are issued pursuant to a pre-existing agreement (such as the outstanding
stock options), the exercise price will be adjusted so that the
- 30 -
<PAGE> 42
aggregate price paid by WCB will be the same. This is the case even if the new
shares are issued for market value consideration.
Registration Rights. If the right to exercise the Option is triggered,
WCB has the right to request registration of the shares to be issued to it
under the Securities Act. Should registration be required, it would result in
a significant expense, both in connection with the initial registration and
because VB would then be subject to ongoing reporting under the Exchange Act.
Repurchase of Option or Option Shares. In the event the right to
exercise the Option is triggered, WCB or the owner of the shares received in
exercise of the Option will have the right to require VB to repurchase the
Option or the shares. The repurchase price is to be based upon the highest of
the following during the preceding six months: (a) the price at which a tender
or exchange offer has been made; (b) the price paid, or agreed to be paid, by a
third party for VB shares; (c) the highest closing market price; and (d) in the
event of an asset sale, a price based upon the price paid for the assets sold
plus the value of the remaining assets as determined by a nationally recognized
investment banking firm selected by WCB or the owner of the shares (the
"Market/Offer Price").
Substitute Option. In the event of a merger in which VB is not the
surviving entity, a merger in which VB is the surviving entity but increases
the number of its shares outstanding by more than 50 percent, or a sale of all
or substantially all of the assets of VB, WCB is entitled to a Substitute
Option in VB (if it is the surviving entity), the acquiring company or a person
in control of the acquiring company, selected at WCB's option. The number of
shares is to be based upon the product of the number of shares then covered by
the Option multiplied by the Market/Offer Price (computed as described in the
preceding paragraph) divided by a computed average price for the entity in
which the Substitute Option is granted. This could result in a number of
shares different from those received by other shareholders. The exercise price
for the Substitute Option will be adjusted based on the difference in the
number of shares for which the initial Option is exercisable as compared to the
number of shares for which the Substitute Option is exercisable. If the effect
of this computation would be to give a Substitute Option for more than 19.9
percent of the surviving entity, the Substitute Option will only be for 19.9
percent, but WCB would be entitled to a cash payment for the value of the
reduction. The Substitute Option would be subject to standard antidilution
provisions, but not the additional price adjustments for the original Option.
The Stock Option Agreement and the Option are intended to compensate
WCB in the event that that the Merger is not consummated according to the terms
set forth in the Merger Agreement, and may have the effect of discouraging
competing offers to acquire VB from potential third party acquirors because the
Option could increase the cost of such an acquisition. A copy of the Stock
Option Agreement is set forth as Appendix B to this Prospectus/Proxy Statement,
and reference is made thereto for the complete terms of the Stock Option
Agreement and the Option. The foregoing discussion is qualified in its
entirety by reference to the Stock Option Agreement.
- 31 -
<PAGE> 43
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited condensed pro forma combined financial
statements give effect to the Merger of WCB and VB on a pooling of interests
basis. The unaudited pro forma combined balance sheet is presented on the
basis that the Merger took place on December 31, 1995. The unaudited condensed
pro forma combined statements of income are presented on the basis that the
Merger was consummated as of the beginning of the first period presented.
These unaudited condensed pro forma combined financial statements
should be read in conjunction with the historical financial statements and the
related notes thereto for WCB and VB included or incorporated into this
Prospectus/Proxy Statement by reference. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
The unaudited condensed pro forma statements of income are not
necessarily indicative of operating results which would have been achieved had
the Merger been consummated as of the beginning of the first period presented
and should not be construed as representative of future results.
- 32 -
<PAGE> 44
WEST COAST BANCORP
AND
VANCOUVER BANCORP
CONDENSED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
West Coast Pro Forma
West Coast Bancorp Vancouver Adjustments Combined
Bancorp Consolidated Bancorp (Note 2) (Note 3)
------- ------------ ------- -------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks . . . . . . . . . . . . $ 3,685,803 $ 30,621,724 $ 3,368,876 -- $ 33,990,600
Interest-bearing deposits in other banks . . . -- 2,286,848 109,233 -- 2,396,081
Federal funds sold . . . . . . . . . . . . . . -- 7,648,678 -- -- 7,648,678
----------- ------------ ----------- --------- ------------
Total cash and cash equivalents . . . . . . . 3,685,803 40,557,250 3,478,109 -- 44,035,359
Investment securities:
Investments available for sale . . . . . . . . -- 116,176,809 5,204,229 -- 121,381,038
Investments held to maturity . . . . . . . . . -- -- 7,783,038 -- 7,783,038
----------- ------------ ----------- --------- ------------
Total investment securities . . . . . . . . . -- 116,176,809 12,987,267 -- 129,164,076
Loans held for sale . . . . . . . . . . . . . . . -- 836,399 -- -- 836,399
Loans . . . . . . . . . . . . . . . . . . . . . . -- 339,912,341 60,976,109 -- 400,888,450
Allowance for loan loss . . . . . . . . . . . . . -- (4,721,213) (848,207) -- (5,569,420)
----------- ------------ ----------- --------- ------------
Loans, net . . . . . . . . . . . . . . . . . -- 335,191,128 60,127,902 -- 395,319,030
Premises and equipment, net . . . . . . . . . . . 112,736 15,608,855 921,782 -- 16,530,637
Investment in subsidiaries . . . . . . . . . . . 48,843,840 -- -- -- --
Intangible assets . . . . . . . . . . . . . . . . 73,638 283,290 -- -- 283,290
Other assets . . . . . . . . . . . . . . . . . . 1,141,713 7,993,495 1,412,386 -- 9,405,881
----------- ------------ ----------- --------- ------------
Total assets . . . . . . . . . . . . . . . . $53,857,730 $516,647,226 $78,927,446 $ -- $595,574,672
=========== ============ =========== ========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . -- $ 83,278,388 $11,083,838 -- 94,362,226
Savings and interest-bearing demand . . . . . . -- 229,074,600 41,057,515 -- 270,132,115
Certificates of deposits . . . . . . . . . . . -- 129,747,628 18,531,756 -- 148,279,384
----------- ------------ ----------- --------- ------------
Total deposits . . . . . . . . . . . . . . . -- 442,100,616 70,673,109 -- 512,773,725
Short-term borrowings:
Federal funds purchased . . . . . . . . . . . . -- -- -- -- --
Other short-term borrowings . . . . . . . . . . -- 7,927,000 600,000 -- 8,527,000
----------- ------------ ----------- --------- ------------
Total short-term borrowings . . . . . . . . . -- 7,927,000 600,000 -- 8,527,000
Other liabilities . . . . . . . . . . . . . . . . 660,019 4,584,136 521,781 -- 5,105,917
Long-term borrowings . . . . . . . . . . . . . . -- 8,837,763 1,350,000 -- 10,187,763
----------- ------------ ----------- --------- ------------
Total liabilities . . . . . . . . . . . . . . 660,019 463,449,515 73,144,890 -- 536,594,405
STOCKHOLDERS' EQUITY
Common Stock . . . . . . . . . . . . . . . . . . 6,005,551 6,005,551 140,205 549,971 6,695,727
Additional paid-in capital . . . . . . . . . . . 32,614,692 32,614,692 4,408,064 (549,971) 36,472,785
Retained earnings . . . . . . . . . . . . . . . . 12,856,449 12,856,449 1,180,061 -- 14,036,510
Net unrealized gains (losses) on investments
available for sale . . . . . . . . . . . . . . 1,721,019 1,721,019 54,226 -- 1,775,245
----------- ------------ ----------- --------- ------------
Total stockholders' equity . . . . . . . . . 53,197,711 53,197,711 5,782,556 -- 58,980,267
----------- ------------ ----------- --------- ------------
Total liabilities and stockholders' equity . $53,857,730 $516,647,226 $78,927,446 -- $595,574,672
=========== ============ =========== ========= ============
</TABLE>
- 33 -
<PAGE> 45
PRO-FORMA COMBINED STATEMENTS OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
West Coast Vancouver Pro Forma
---------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . $33,055,409 $5,783,254 $38,838,663
Interest on taxable investment securities . . . . . . . 4,201,931 647,128 4,849,059
Interest on nontaxable investment securities . . . . . 2,662,802 149,697 2,812,499
Interest from other banks . . . . . . . . . . . . . . . 151,914 504 152,418
Interest on federal funds sold . . . . . . . . . . . . 555,843 84,844 640,687
----------- ---------- -----------
Total interest income . . . . . . . . . . . . . . . . 40,627,899 6,665,427 47,293,326
INTEREST EXPENSE
Savings and interest-bearing demand . . . . . . . . . . 6,642,960 1,991,177 8,634,137
Certificates of deposit . . . . . . . . . . . . . . . . 6,865,768 971,136 7,836,904
Short-term borrowings . . . . . . . . . . . . . . . . . 343,789 35,035 378,824
Long-term borrowings . . . . . . . . . . . . . . . . . 451,128 128,305 579,433
----------- ---------- -----------
Total interest expense . . . . . . . . . . . . . . . 14,303,645 3,125,653 17,429,298
----------- ---------- -----------
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . 26,324,254 3,539,774 29,864,028
PROVISION FOR POSSIBLE LOAN LOSS . . . . . . . . . . . 670,460 273,000 943,460
----------- ---------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSS . . . . . . . . . . . . . . . . . . . . . . 25,653,794 3,266,774 28,920,568
NONINTEREST INCOME
Service charges on deposit accounts . . . . . . . . . . 2,385,938 152,252 2,538,190
Other service charges, commissions and fees . . . . . . 2,214,167 78,660 2,292,827
Trust revenue . . . . . . . . . . . . . . . . . . . . . 1,268,587 -- 1,268,587
Gains on sales of loans . . . . . . . . . . . . . . . . 852,954 -- 852,954
Loan servicing fees . . . . . . . . . . . . . . . . . . 491,855 -- 491,855
Other . . . . . . . . . . . . . . . . . . . . . . . . . 620,453 20,055 640,508
Net gains on sales of securities . . . . . . . . . . . 7,879 1,959 9,838
----------- ---------- -----------
Total noninterest income . . . . . . . . . . . . . . 7,841,833 252,926 8,094,759
NONINTEREST EXPENSE
Salaries and employee benefits . . . . . . . . . . . . 13,093,850 1,037,302 14,131,152
Equipment . . . . . . . . . . . . . . . . . . . . . . . 1,890,516 251,469 2,141,985
Occupancy . . . . . . . . . . . . . . . . . . . . . . . 1,759,799 212,763 1,972,562
Professional fees . . . . . . . . . . . . . . . . . . . 1,302,609 176,965 1,479,574
ATM and bankcard . . . . . . . . . . . . . . . . . . . 784,287 15,697 799,984
Marketing . . . . . . . . . . . . . . . . . . . . . . . 671,790 70,187 741,977
Printing and office supplies . . . . . . . . . . . . . 649,307 79,648 728,955
FDIC insurance . . . . . . . . . . . . . . . . . . . . 451,062 66,785 517,847
Communications . . . . . . . . . . . . . . . . . . . . 560,245 16,099 576,344
Other noninterest expense . . . . . . . . . . . . . . . 2,120,048 310,028 2,430,076
----------- ---------- -----------
Total noninterest expense . . . . . . . . . . . . . . 23,283,513 2,236,943 25,520,456
----------- ---------- -----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . 10,212,114 1,282,757 11,494,871
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . 2,853,519 392,201 3,245,720
----------- ---------- -----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . $ 7,358,595 $ 890,556 $ 8,249,151
=========== ========== ===========
</TABLE>
- 34 -
<PAGE> 46
PRO-FORMA COMBINED STATEMENTS OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
West Coast Vancouver Pro Forma
---------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . $27,197,077 $3,651,769 $30,848,846
Interest on taxable investment securities . . . . . . . 4,165,272 497,244 4,662,516
Interest on nontaxable investment securities . . . . . 2,614,335 106,890 2,721,225
Interest from other banks . . . . . . . . . . . . . . . 165,377 512 165,889
Interest on federal funds sold . . . . . . . . . . . . 345,043 174,630 519,673
----------- ---------- -----------
Total interest income . . . . . . . . . . . . . . . . 34,487,104 4,431,045 38,918,149
INTEREST EXPENSE
Savings and interest-bearing demand . . . . . . . . . . 5,683,451 1,226,900 6,910,351
Certificates of deposit . . . . . . . . . . . . . . . . 3,493,743 497,638 3,991,381
Short-term borrowings . . . . . . . . . . . . . . . . . 151,334 -- 151,334
Long-term borrowings . . . . . . . . . . . . . . . . . 447,268 5,600 452,868
----------- ---------- -----------
Total interest expense . . . . . . . . . . . . . . . 9,775,796 1,730,138 11,505,934
----------- ---------- -----------
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . 24,711,308 2,700,907 27,412,215
PROVISION FOR POSSIBLE LOAN LOSS . . . . . . . . . . . 547,500 230,000 777,500
----------- ---------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSS . . . . . . . . . . . . . . . . . . . . . . 24,163,808 2,470,907 26,634,715
NONINTEREST INCOME
Service charges on deposit accounts . . . . . . . . . . 2,271,084 149,897 2,420,981
Other service charges, commissions and fees . . . . . . 1,842,062 45,776 1,887,838
Trust revenue . . . . . . . . . . . . . . . . . . . . . 1,205,973 -- 1,205,973
Gains on sales of loans . . . . . . . . . . . . . . . . 1,010,267 -- 1,010,267
Loan servicing fees . . . . . . . . . . . . . . . . . . 449,795 -- 449,795
Other . . . . . . . . . . . . . . . . . . . . . . . . . 279,092 3,040 282,132
Net loss on sales of securities . . . . . . . . . . . . (170,464) -- (170,464)
----------- ---------- -----------
Total noninterest income . . . . . . . . . . . . . . 6,887,809 198,713 7,086,522
NONINTEREST EXPENSE
Salaries and employee benefits . . . . . . . . . . . . 12,110,658 799,366 12,910,024
Equipment . . . . . . . . . . . . . . . . . . . . . . . 1,669,916 208,739 1,878,655
Occupancy . . . . . . . . . . . . . . . . . . . . . . . 1,563,080 83,779 1,646,859
Professional fees . . . . . . . . . . . . . . . . . . . 1,949,768 141,697 2,091,465
ATM and bankcard . . . . . . . . . . . . . . . . . . . 643,313 15,092 658,405
Marketing . . . . . . . . . . . . . . . . . . . . . . . 648,275 66,007 714,282
Printing and office supplies . . . . . . . . . . . . . 524,279 48,760 573,039
FDIC insurance . . . . . . . . . . . . . . . . . . . . 820,704 102,883 923,587
Communications . . . . . . . . . . . . . . . . . . . . 404,227 10,459 414,686
Other noninterest expense . . . . . . . . . . . . . . . 2,608,099 235,254 2,843,353
----------- ---------- -----------
Total noninterest expense . . . . . . . . . . . . . . 22,942,319 1,712,036 24,654,355
----------- ---------- -----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . 8,109,298 957,584 9,066,882
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . 2,457,549 293,700 2,751,249
----------- ---------- -----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . $ 5,651,749 $ 663,884 $ 6,315,633
=========== ========== ===========
</TABLE>
- 35 -
<PAGE> 47
PRO-FORMA COMBINED STATEMENTS OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
West Coast Vancouver Pro Forma
---------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . $24,209,348 $ 2,836,090 $27,045,438
Interest on taxable investment securities . . . . . . . 5,049,532 416,645 5,466,177
Interest on nontaxable investment securities . . . . . 2,499,654 48,998 2,548,652
Interest from other banks . . . . . . . . . . . . . . . 29,881 855 30,736
Interest on federal funds sold . . . . . . . . . . . . 372,685 121,429 494,114
----------- ----------- -----------
Total interest income . . . . . . . . . . . . . . . . 32,161,100 3,424,017 35,585,117
INTEREST EXPENSE
Savings and interest-bearing demand . . . . . . . . . . 4,934,563 699,730 5,634,293
Certificates of deposit . . . . . . . . . . . . . . . . 4,084,475 482,128 4,566,603
Short-term borrowings . . . . . . . . . . . . . . . . . 102,416 -- 102,416
Long-term borrowings . . . . . . . . . . . . . . . . . 343,807 -- 343,807
----------- ----------- -----------
Total interest expense . . . . . . . . . . . . . . . 9,465,261 1,181,858 10,647,119
----------- ----------- -----------
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . 22,695,839 2,242,159 24,937,998
PROVISION FOR POSSIBLE LOAN LOSS . . . . . . . . . . . 798,000 285,000 1,083,000
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSS . . . . . . . . . . . . . . . . . . . . . . 21,897,839 1,957,159 23,854,998
NONINTEREST INCOME
Service charges on deposit accounts . . . . . . . . . . 2,311,469 132,393 2,443,862
Other service charges, commissions and fees . . . . . . 1,154,947 26,687 1,181,634
Trust revenue . . . . . . . . . . . . . . . . . . . . . 1,078,367 -- 1,078,367
Gains on sales of loans . . . . . . . . . . . . . . . . 688,932 -- 688,932
Loan servicing fees . . . . . . . . . . . . . . . . . . 322,487 -- 322,487
Other . . . . . . . . . . . . . . . . . . . . . . . . . 782,949 2,685 785,634
Net gains on sales of securities . . . . . . . . . . . 142,720 -- 142,720
----------- ----------- -----------
Total noninterest income . . . . . . . . . . . . . . 6,481,871 161,765 6,643,636
NONINTEREST EXPENSE
Salaries and employee benefits . . . . . . . . . . . . 11,000,849 647,749 11,648,598
Equipment . . . . . . . . . . . . . . . . . . . . . . . 1,534,834 177,466 1,712,300
Occupancy . . . . . . . . . . . . . . . . . . . . . . . 1,338,486 71,088 1,409,574
Professional fees . . . . . . . . . . . . . . . . . . . 1,281,172 102,983 1,384,155
ATM and bankcard . . . . . . . . . . . . . . . . . . . 781,742 14,813 796,555
Marketing . . . . . . . . . . . . . . . . . . . . . . . 562,192 30,161 592,353
Printing and office supplies . . . . . . . . . . . . . 528,188 47,722 575,910
FDIC insurance . . . . . . . . . . . . . . . . . . . . 757,913 87,596 845,509
Communications . . . . . . . . . . . . . . . . . . . . 350,420 8,372 358,792
Other noninterest expense . . . . . . . . . . . . . . . 1,941,101 269,754 2,210,855
----------- ----------- -----------
Total noninterest expense . . . . . . . . . . . . . . 20,076,897 1,457,704 21,534,601
----------- ----------- -----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . 8,302,813 661,220 8,964,033
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . 2,268,060 157,079 2,425,139
----------- ----------- -----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . $ 6,034,753 $ 504,141 $ 6,538,894
=========== =========== ===========
</TABLE>
- 36 -
<PAGE> 48
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
1. Intangibles
Core deposit intangibles of $283,290 at WCB are being amortized over
seven and ten year lives with approximately six years remaining.
2. Adjustments
The unaudited pro forma combined balance sheet reflects the issuance of
WCB Common Stock, no par value, as the issuance of 552,141 shares to VB
shareholders using the exchange ratio of 3.9381, in addition to the
4,804,441 shares already outstanding to WCB's shareholders. These
shares were derived by using the respective company's outstanding
shares at December 31, 1995. An adjustment of $549,971 to common stock
and capital surplus is necessary to reflect the difference between
issuance of 552,141 shares of WCB Common Stock, no par value, with an
aggregate par value of $690,176 and the value of VB Common Stock that
will be canceled which is $141,461. The pro forma adjustments were
based on the midpoint of the proposed exchange ratio collar generating
the issuance of 552,141 shares. The estimated maximum number of shares
to be issued would be 613,495 (except under certain circumstances) and
the estimated minimum number of shares to be issued would be 501,947,
based on December 31, 1995 financial information. There were no other
significant adjustments made to the historical balance sheets or
statements of income of WCB and VB to arrive at the unaudited pro forma
combined balance sheets.
3. Transaction Costs
Total costs to be incurred by WCB and VB in connection with the Merger
are estimated to be $300,000. These costs, relating to legal,
accounting, printing and other related expenses, will be charged
against net income of the combined organization in the period incurred.
The effect of the costs has not been reflected in the Pro Forma
Combined Financial Statements.
- 37 -
<PAGE> 49
INFORMATION CONCERNING WCB
WCB is a bank holding company headquartered in Lake Oswego, Oregon,
eight miles south of downtown Portland. The community banking organization
currently comprises three member banks, The Bank of Newport, The Commercial
Bank, and Valley Commercial Bank, and has long-standing roots in Oregon dating
back to 1925. A broad range of community banking services are offered
throughout the 28-office network stretching from Portland south along I-5 to
the greater Salem area and west to the central Oregon Coast.
WCB's expansion plans include internally-generated growth from
strategically-located existing branches, some selected new branch expansion and
expansion into southwest Washington. In addition to limited de novo branching,
WCB's management strategy has also been to pursue attractive alliance
opportunities with other well-run community banks such as the proposed
transaction with VB, as well as other financial service related companies. In
June 1994, WCB concluded a successful offering of the WCB Common Stock, which
contributed over $5 million in additional capital to help finance WCB's
expansion plans. During the interim period, WCB has continued to invest
significantly in management, technology, and other resources (such as a new
data center) to support its expansion.
Financial and other information regarding WCB, including information
relating to WCB's directors and executive officers, are set forth in the WCB
1995 10-K and the WCB 1996 Proxy incorporated by reference herein. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "AVAILABLE INFORMATION."
INFORMATION CONCERNING VB
BUSINESS
VB was organized under Washington law in 1994 for the purpose of
becoming a holding company of the Bank, under an agreement and plan of exchange
pursuant to which shareholders of the Bank became shareholders of VB. VB is
registered with the Board of Governors of the Federal Reserve System as a bank
holding company under the BHCA, and has no significant operations separate from
the Bank. The principal offices of VB are located at the main office of the
Bank at 801 Main Street, Vancouver, Washington.
The Bank is a state-chartered bank organized under Washington law in
June 1989. It engages in commercial banking activities from its sole office
located at 801 Main St., Vancouver, Washington. The Bank was organized to meet
a perceived need for the services of a local community bank with a commitment
to service to the businesses and residents of Clark County, Washington. The
Bank offers commercial banking services, primarily to small- and medium-size
businesses, professionals and retail customers, including commercial loans,
accounts receivable and inventory financing, consumer installment loans,
acceptance of deposits, and personal savings and checking accounts. The Bank
offers residential mortgage loans in association with PHW Mortgage Co.
The Bank's accounts are insured by the FDIC. As of December 31, 1995,
the Bank had deposits of approximately $70.7 million and assets of
approximately $78.9 million.
COMPETITION
Competition in the banking industry is significant and has intensified
with interest rate deregulation. Furthermore, competition from outside the
traditional banking system from investment banking firms, insurance companies
and related industries offering bank-like products has widened the competition
for deposits and loans.
- 38 -
<PAGE> 50
The banking industry in the Bank's primary market area is characterized
by well-established branches of large banks with headquarters located generally
outside the primary market area.
The Bank's traditional competition for deposits comes from commercial
banks, savings and loan associations, credit unions, and money market funds,
many of which have more locations or offer higher rates of interest than the
Bank. Competition for funds also comes from issuers of corporate and
governmental securities, insurance companies, mutual funds, and other financial
intermediaries. Other than with respect to large certificates of deposit, the
Bank competes for deposits by offering a variety of deposit accounts at rates
generally competitive with similar financial institutions in the area. The
Bank's principal competitive advantage with respect to the larger state-wide
financial institutions is its status as a local community bank, offering
products and services tailored to the needs of the community. In addition, as
a result of the absence of costs associated with operating a branch system, the
Bank, operating from just one office, can and sometimes does pay a higher rate
on deposits.
In competing for deposits, the Bank is subject to certain limitations
not applicable to non-bank competitors. Legislation enacted in the 1980s
authorized banks to offer deposit instruments with rates competitive with money
market funds, but subject to restrictions not applicable to those funds.
Legislation has also made non-bank financial institutions more effective
competitors. Savings and loan associations and credit unions are now permitted
to offer checking accounts and to make commercial loans with certain
limitations.
The Bank's competition for loans comes primarily from the same
financial institutions with which the Bank competes for deposits. The Bank
competes for loan originations primarily through the level of interest rates
and loan fees charged, the variety of commercial and mortgage loan products
offered, and the efficiency and quality of services provided to borrowers.
Factors which affect loan competition include the availability of lendable
funds, local and national economic conditions, current interest rate levels,
and loan demand. The Bank does not engage in mortgage banking activities, and
loan origination for mortgage loans is limited by the Bank's regulatory lending
limits.
The offices of the major banks and savings and loan associations have
competitive advantages over the Bank in that they have high public visibility
and are able to maintain advertising and marketing activity on a much larger
scale than the Bank can economically maintain. Because single borrower lending
limits imposed by law are dependent on the capital of the institution, the
branches of larger institutions with substantial capital bases are also at an
advantage with respect to loan applications which are in excess of the Bank's
legal lending limits.
At present, there are five commercial banks, five thrifts and 19 credit
unions operating in the Bank's market area which offer some of the services
offered by the Bank, and which may be in direct competition for the customers
which the Bank seeks to attract. Because of the extensive experience of
management of the Bank in its trade area and the business contacts of
management and the directors, management believes that the Bank is able to
compete effectively for business.
FACILITIES
The principal offices of VB are located at the main office of the Bank
at 801 Main Street, Vancouver, Washington. Approximately 14,400 square feet of
space, constituting the Bank's premises, are leased by the Bank pursuant to
three leases, for an aggregate monthly rate of $13,975.50. The leases expire
on January 31, 2001.
- 39 -
<PAGE> 51
The Bank owns the building in which its former office was located at
109 E. 13th St., Vancouver, Washington, subject to a ground lease which expires
in the year 2015 and carries a monthly rent of $750. The building is leased to
Washington Mutual, Inc. at a monthly rent of $6,250.00.
EMPLOYEES
As of March 31, 1996, the Bank had 34 full-time equivalent employees.
VB has no employees separate from those of the Bank. The employees are not
represented by a union organization or other collective bargaining group, and
management considers its relations with the employees to be very good.
LEGAL PROCEEDINGS
The Bank is from time to time a party to various legal proceedings
arising in the ordinary course of the Bank's business. Management believes
that there is no threatened or pending proceedings against VB or the Bank
which, if determined adversely would have a material effect on the business or
financial position of either, respectively.
VB MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of VB's consolidated financial condition and
results of operations is intended to be read in conjunction with, and is
qualified in its entirety by reference to, the selected consolidated financial
and other data, the consolidated financial statements and relates notes
included elsewhere in this Prospectus/Proxy.
General. The Bank's business consists primarily of attracting deposits
from the public and originating commercial and real estate loans. The Bank's
net income is derived principally from net interest income. The Bank exceeded
all of its regulatory capital requirements at December 31, 1995.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Years ended December 31, 1995 and 1994
Overview. Total assets of $78.9 million as of December 31, 1995,
represents a 23.4% increase over total assets of $64.0 million as of December
31, 1994. Most of the growth is a result of the increases within the loan
portfolio.
Net Income. For the years ended December 31, 1995 and 1994, VB's net
income was $891,000 and $664,000, respectively. Income increased $227,000, or
34.2% from 1995 to 1994. Earnings per share for the two years ended 1995 were
$6.10 and $4.71, respectively.
Net Interest Income. During the years ended December 31, 1995 and
1994, average interest earning assets grew to $66.6 million, from $50.9
million. For the same periods, average interest bearing liabilities were $55.1
million and $41.2 million, respectively. During the same periods, net interest
margins decreased to 4.34% from 4.50%, due mainly to a rising interest rate
environment and an increase of high yield savings accounts. Net interest
income increased $839,000 or 31.1% to $3.5 million in 1995 from $2.7 million in
1994. The increased net interest income was caused by the offsetting factors
of increased asset growth and a declining net interest spread. This represents
an increase of 30.8% in 1995 from 1994. The average yield earned on interest
earning assets increased to 10.01% in 1995 from 8.70% in 1994. For the same
periods, average rates paid for interest-bearing liabilities increased from
4.20% to 5.67% in 1995.
- 40 -
<PAGE> 52
Average Balances and Average Rates Earned and Paid. The following
table sets forth, for the periods indicated, information with regard to average
balances of assets and liabilities, the total dollar amounts in interest income
on interest earning assets and interest expense on interest bearing
liabilities, resulting yields or costs, net interest income, and net interest
margin. Loan fees are recognized as income using the interest method over the
life of the loan.
- 41 -
<PAGE> 53
<TABLE>
<CAPTION>
============================================================================================================================
Vancouver Bancorp
Analysis of Net Interest Margin 12/31/95 12/31/94
------------------------------- --------------------------------
Ave. Inc/Exp Rate Ave. Inc/Exp Rate
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning Assets
- ----------------------------------------------------------------------------------------------------------------------------
Loans $52,565 $5,783 11.00% $36,522 $3,652 10.00%
- ----------------------------------------------------------------------------------------------------------------------------
Investment Securities
- ----------------------------------------------------------------------------------------------------------------------------
Taxable Securities 9,780 647 6.62% 8,200 497 6.06%
- ----------------------------------------------------------------------------------------------------------------------------
Non-Taxable Securities 2,750 150 5.44% 2,022 107 5.29%
- ----------------------------------------------------------------------------------------------------------------------------
Federal Funds Sold 1,482 85 5.76% 4,184 175 4.19%
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest Earning Assets $68,577 $6,665 10.01% $50,928 $4,431 8.70%
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Due from Banks 2,548 2,385
- ----------------------------------------------------------------------------------------------------------------------------
Fixed Assets 858 673
- ----------------------------------------------------------------------------------------------------------------------------
Loan Loss Allowance (670) (477)
- ----------------------------------------------------------------------------------------------------------------------------
Other Assets 1,271 676
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $70,584 $54,385
- ----------------------------------------------------------------------------------------------------------------------------
Interest-Bearing Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Interest-bearing Checking and Savings Account $37,573 $1,991 5.30% $29,925 $1,227 4.10%
- ----------------------------------------------------------------------------------------------------------------------------
Time Deposits 15,607 971 6.22% 11,187 498 4.45%
- ----------------------------------------------------------------------------------------------------------------------------
Borrowed Funds 1,946 163 8.39% 67 6 8.36%
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities $55,126 $3,126 5.67% $41,179 $1,730 4.20%
- ----------------------------------------------------------------------------------------------------------------------------
Noninterest-Bearing Deposits $ 9,719 $ 8,557
- ----------------------------------------------------------------------------------------------------------------------------
Other Liabilities 539 294
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities $65,384 $50,030
- ----------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity 5,200 4,355
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $70,584 $54,385
- ----------------------------------------------------------------------------------------------------------------------------
Net Interest Income $3,540 $2,701
- ----------------------------------------------------------------------------------------------------------------------------
Net Interest Margin 4.34% 4.50%
- ----------------------------------------------------------------------------------------------------------------------------
Average Yield on Earning Assets 10.01% 8.70%
- ----------------------------------------------------------------------------------------------------------------------------
Interest Expense to Earning Assets 4.69% 3.40%
- ----------------------------------------------------------------------------------------------------------------------------
Net Interest Income to Earning Assets 5.32% 5.30%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 42 -
<PAGE> 54
Non-Interest Expenses. Non-interest expenses for the year ended
December 31, 1995, increased $525,000, or 30.66%, from 1994. The 1995 increase
is due primarily to increased personnel and occupancy costs associated with the
Bank's move to a new facility as well as continued growth in loans and
deposits. Loans increased $19.3 million, or 45.77%, to $61.4 million in 1995
from $42.1 million in 1994.
Provision for Loan Losses. The allowance for loan losses represents
management's current estimate of amounts required to absorb losses on existing
loans. The $848,207 allowance at December 31, 1995, is an increase of
$297,110, or 53.9%, from the 1994 allowance of $551,097. The allowance
represents 1.39% of total loans at December 31, 1995, as compared to 1.31% at
December 31, 1994. Determination of the appropriate allowance level is based
on, among other things, an analysis of various factors including historical
loss experience based on volumes and types of loans, volumes and trends in
delinquencies and non- accrual loans, trends in portfolio volume, results of
internal and independent external credit reviews, and anticipated economic
conditions in the Bank's market area. Based on this analysis, management
considers the allowance for possible loan losses to be adequate.
Liquidity and Sources of Funds. The Bank's primary sources of funds
are customer deposits, maturities of investment securities, sales of "available
for sale" securities, loan repayments, net income, and advances from the
Federal Home Loan Bank of Seattle (FHLB). Scheduled loan repayments are
relatively stable sources of funds while deposit inflows and unscheduled loan
prepayments are not. Deposit inflows and unscheduled loan prepayments are
influenced by general interest rate levels, interest rates available on other
investments, competition, economic conditions, and other factors.
Total deposits were $70.7 million at December 31, 1995, up from $57.6
million at December 31, 1994. The Bank does not generally accept brokered
deposits. A concerted effort has been made to attract deposits in the market
area it serves through competitive pricing and delivery of quality products.
Management anticipates that the Bank will continue relying on customer
deposits, maturity of investment securities, sales of "available for sale"
securities, loan repayments, net income and FHLB borrowings to provide
liquidity. Although deposit balances have shown historical growth, such
balances may be influenced by changes in the banking industry, interest rates
available on other investments, general economic conditions, competition and
other factors. Borrowings may be used on a short-term basis to compensate for
reductions in other sources of funds. Borrowings may also be used on a
long-term basis to support expanded lending activities and to match maturities
or repricing intervals of assets. The sources of such funds will most likely
be borrowings from the FHLB.
Capital. The primary capital-to-asset leverage ratio for the Bank was
8.95% at December 31, 1995, as compared to 9.59% at December 31, 1994. In
1989, the banking regulators adopted risk based capital guidelines under which
one of four risk weights is applied to balance sheet assets, each with
different capital requirements based on the credit risk of the asset.
Risk-adjusted capital-to-asset ratios were 11.45% and 13.90% at December 31,
1995 and 1994, respectively. As of December 31, 1995, the Bank was considered
"Well Capitalized" per regulatory risk based capital guidelines.
As the following table indicates, the Bank currently exceeds the
regulatory minimum capital ratio requirements.
- 43 -
<PAGE> 55
<TABLE>
<CAPTION>
December 31, 1995
-------------------
(Dollars in thousands) Amount Ratio
------ -----
<S> <C> <C>
Tier 1 capital $7,008 11.45%
Tier 1 capital minimum requirement $2,451 4.00%
------ ------
Excess Tier 1 capital $4,557 7.45%
Total capital $7,774 12.70%
Total capital minimum requirement $4,902 8.00%
------ ------
Excess total capital $2,872 4.70%
</TABLE>
- 44 -
<PAGE> 56
LENDING
The Bank's principal lending activity is the origination of commercial
real estate and real estate construction loans. The Bank's policy is to
originate loans primarily in its local market area.
The Bank's loan underwriting policies focus on assessment of each
borrower's ability to service and repay the debt, and the availability of
collateral that can be used to secure the loan. Depending on the nature of the
borrower and the purpose and amount of the loan, the Bank's loans may be
secured by a variety of collateral, including business assets, real estate and
personal assets. Many business loans may also be dependent upon the personal
guarantees of owners of the business. The Bank's loans are generally
classified by the ability of the borrower to repay and the principal asset
pledged as collateral to secure the loan.
The Bank's commercial and industrial loans consist primarily of secured
revolving operating lines of credit and business term loans. Commercial real
estate loans include loans for various purposes where the primary collateral is
commercial real estate. Real estate construction loans include loans made in
connection with custom and "spec" (build to sell) construction of residential
and commercial buildings and loans made to borrowers who build residential and
commercial buildings for resale. The majority of loans within the Bank's
portfolio have terms of five years or less or have adjustable interest rates.
Such rates are principally tied to the prime rate, or to a similar extent, a
treasury-base index.
Consumer installment loans and other loans, while representing a small
percentage of total outstanding loans, include home equity loans, auto loans
and Visa cards.
In addition to interest earned on loans, the Bank receives fees for
originating loans and for providing loan commitments. These fees, net of costs
to originate the loans, are deferred and amortized into interest income over
the life of the loan. Loans are originated principally as a result of contact
with and referrals from existing customers and through the efforts of Bank
staff.
Types of Loans. The following table sets forth the composition of the
Bank's loan portfolio by type of loan as of the date indicated. The
composition of loans at December 31 was as follows:
<TABLE>
<CAPTION>
1995 1994
-----------------------------------------------------------
Amount % of Total Amount % of Total
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $10,081,130 16.42% $ 8,965,980 21.28%
Commercial-real estate 20,536,874 33.44% 15,225,084 36.14%
Real estate-construction 19,293,548 31.42% 9,253,365 21.97%
Real estate-mortgage 9,893,050 16.11% 7,317,732 17.37%
Installment 723,559 1.18% 674,605 1.60%
Personal lines of credit,
credit cards, and overdrafts 882,355 1.44% 690,261 1.64%
--------------------------------------------------------
$61,410,516 100.00% $42,127,027 100.00%
========================================================
</TABLE>
- 45 -
<PAGE> 57
Loan Maturities and Sensitivities to Changes in Interest Rates. The
following table shows the maturity analysis of loans outstanding by type as of
December 31, 1995. In addition, the table shows the amount of all loans due
within and after one year classified according to the sensitivity to change in
interest rates.
<TABLE>
<CAPTION>
After One,
Within But Within After
Loans One Year Five Years Five Years Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $ 7,280,645 $ 2,464,102 $ 336,383 $ 10,081,130
Commercial-real estate 754,343 3,180,296 16,602,235 20,536,874
Real estate-construction 16,670,362 2,463,748 159,438 19,293,548
Real estate-mortgage 2,302,548 3,408,980 4,181,523 9,893,051
Lines of credit, installments, credit
cards 465,715 342,442 797,756 1,605,913
-----------------------------------------------------------------
Total $ 27,473,613 $ 11,859,568 $ 22,077,335 $ 61,410,516
=================================================================
Total loans maturing after one year
with:
Predetermined interest rates (fixed) $ 2,968,924 $ 6,231,924 $ 2,335,346 $ 11,536,194
Floating or adjusted interest rates
(variable) 24,504,689 5,627,644 19,741,989 49,874,322
-----------------------------------------------------------------
Total $ 27,473,613 $ 11,859,568 $ 22,077,335 $ 61,410,516
=================================================================
</TABLE>
Risk Elements. The following table states as of the end of December
31, 1995 and 1994 non-accrual and past due loans:
<TABLE>
<CAPTION>
1995 1994
----------------------------
<S> <C> <C>
Non-accrual loans $ 213,238 $ --
Accruing loans past due 90 days or
more $ 5,709 $ 16,403
</TABLE>
Interest income on non-accrual loans that would have been recorded in the
period ended December 31, 1995, was $18,657. Interest income collected on such
loans and included in income was $20,285. Past due loans continue to be
minimal.
Loan Administration. With the Bank's primary lending focus on
commercial, commercial real estate and real estate construction, risk is
generally correlated with the health of the business community. The risk is
mitigated by monitoring the financial condition of the Bank's customers, and by
maintaining adequate collateral margins. The Bank has adopted comprehensive
lending policies that provide detailed underwriting guidelines, as well as
procedures for the identification and monitoring of potential problem loans.
The loan committee meets regularly and reviews various reports pertaining to
the performance, quality and composition of the loan portfolio, as well as
detailed credit information regarding new loans extended during the period.
The VB Board, as a whole, serves as the loan committee.
- 46 -
<PAGE> 58
Non-Performing Loans. Accrual of interest on loans is discontinued
when reasonable doubt exists as to the collectibility of the loan or the unpaid
interest, or when payment of principal or interest is contractually 90 days
past due, unless the loan is well secured and in the process of collection.
Upon such discontinuance, the loan is placed on non-accrual status and any
accrued but unpaid interest is charged against income in that period. Accrual
of interest is resumed only when the borrower demonstrates an ability to make
scheduled payments of both principal and interest.
At December 31, 1995, there were no commitments to lend additional
funds to borrowers whose loans were classified as non-accrual. The Bank is not
aware of any loans that continue to accrue interest at December 31, 1995, that
management reasonably expects will have a materially negative impact on future
operating results. The Bank's management is not aware of any information
concerning any material loans, other than those discussed as risk elements
above, that causes them to have doubts as to the ability of the borrowers to
comply with the terms of the loans.
SUMMARY OF LOAN LOSS EXPERIENCE
Analysis of Allowance for Loan Losses. The Bank maintains the
allowance for loan losses at a level sufficient to provide for estimated loan
losses based on evaluating known and inherent risks in the loan portfolio.
Management determines the adequacy of the allowance based on reviews of
individual credits, recent loss experience, current economic conditions, the
risk characteristics of classified loans, and other pertinent factors. Credits
deemed uncollectible are charged to the allowance. Provisions for credit
losses and recoveries on loans previously charged off loans are added to the
allowance. The following is an analysis of the activity in the allowance for
loan losses for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------
1995 1994
------------- ------------
<S> <C> <C>
Balance at beginning of period $ 551,097 $ 420,421
Charge-offs:
Commercial (95,098)
Consumer (4,525) (5,499)
------------- ------------
(4,783) (100,597)
------------- ------------
Recoveries:
Commercial 28,094 6
Consumer 799 1,267
------------- ------------
28,893 1,273
------------- ------------
Net (charge-offs) Recoveries 24,110 (99,324)
Provision charged to operations 273,000 230,000
------------- ------------
Balance at end of period $ 848,207 $ 551,097
============ ============
Ratio of net (charge-offs) recoveries to
average outstanding during period (.05%) 0.27%
============ ============
Average loans outstanding
during the period $ 52,528,186 $ 36,522,000
============ ============
</TABLE>
- 47 -
<PAGE> 59
Asset and Liability Management. The Bank's results of operations
depend substantially on net interest income. Interest income and interest
expense are affected by general economic conditions, competition in the market
place, market interest rates and repricing and maturity characteristics of the
Bank's assets and liabilities.
Exposure to interest rate risk is primarily a function of differences
between the maturity and repricing schedules of assets (principally loans and
investment portfolio securities) and liabilities (principally deposits).
Assets and liabilities are described as interest sensitive for a given period
of time when they mature or can reprice within that period. The difference
between the amount of interest sensitive assets and interest sensitive
liabilities is referred to as the interest sensitivity "GAP" for any given
period of time.
As a general rule, in periods of falling interest rates, banks with
positive interest sensitivity GAPs are more susceptible to a decline in net
interest income. In periods of rising interest rates, banks with negative
interest sensitivity GAPs are more likely to experience declines in net
interest income. The actual effect that rising and falling interest rates have
on the Bank's net interest income depends, however, not only on the interest
sensitivity GAP, but also the relative changes in interest rates that occur
when assets and liabilities are repriced, unscheduled repayments of loans,
early withdrawals of deposits and other factors.
As of December 31, 1995, the Bank had a negative interest sensitivity
GAP and thus is most vulnerable to rising interest rates. Bank management
attempts to limit exposure to interest rate risk by maintaining a balance sheet
posture such that net interest income is not significantly affected by market
fluctuations in interest rates. The Bank utilizes interest sensitivity GAP
reports in conjunction with simulation modeling to measure the effect of
varying interest rate scenarios and balance sheet strategies on net interest
income.
Certain shortcomings are inherent in the interest sensitivity GAP
method of analysis presented in the following table. For example, although
certain assets and liabilities may have similar repricing characteristics, they
may react in different degrees to changes in market interest rates. Also, the
interest rates on certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates, while interest rates on other
types may lag behind changes in market rates.
The following table sets forth the dollar amount of interest sensitive
assets and interest sensitive liabilities at December 31, 1995, and the
difference between them for the maturity or repricing periods indicated.
- 48 -
<PAGE> 60
ASSET AND LIABILITY MATURITY REPRICING SCHEDULE
DECEMBER 31, 1995
<TABLE>
<CAPTION>
After One,
Within But Within After
One Year Five Years Five Years Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans $ 36,091,773 $ 22,684,230 $ 2,634,513 $ 61,410,516
Investment Securities:
Available for sale 508,360 1,573,285 2,644,284 4,725,929
Held to Maturity - 1,489,855 6,293,183 7,783,038
Interest bearing deposits
with banks 109,233 109,233
Federal Home Loan Bank stock 478,300 478,300
---------------------------------------------------------------------
Total Earning Assets 37,187,666 25,747,370 11,571,980 74,507,016
---------------------------------------------------------------------
Deposits:
Interest bearing demand 8,779,317 8,779,317
Savings 32,278,198 32,278,198
Time certificates of deposit 12,204,445 3,837,185 2,490,126 18,531,756
---------------------------------------------------------------------
Total Interest Bearing Liabilities 53,261,960 3,837,185 2,490,126 59,589,271
---------------------------------------------------------------------
Net Interest Rate Sensitivity Gap $(16,074,294) $ 21,910,185 $ 9,081,854 $ 14,917,745
=====================================================================
</TABLE>
Investment Activities. The Bank has adopted, as required, Statement of
Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." This Statement requires investment
securities to be segregated as trading securities, held-to-maturity or
available-for-sale based upon management's intent as to the ultimate
disposition of each security acquired. Investments classified as
held-to-maturity are accounted for at amortized cost, but an institution must
have both the positive intent and the ability to hold those securities to
maturity. There are very limited circumstances under which securities in the
held-to-maturity category can be sold without jeopardizing the cost basis of
accounting for the remainder of the securities in this category. Unrealized
gains and losses on available-for-sale securities are excluded from earnings
and reported, net of federal income taxes, as a separate component of
stockholders' equity.
The Bank's investment policy is approved by its Board. It has been the
policy of the Bank to maintain relatively high levels of liquidity to meet loan
funding and deposit outflow requirements. The following table sets forth the
investment securities portfolio of the Bank.
- 49 -
<PAGE> 61
Analysis of Investment Securities. The amortized cost and estimated
market values of investments in debt securities are as follows as of December
31, 1995:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $2,036,370 $ 45,434 $ (159) $2,081,645
State and municipal securities 397,470 7,463 -- 404,933
Mortgage-backed securities
and collateralized mortgage
obligations 2,209,965 50,905 (21,519) 2,239,351
----------------------------------------------------------
$4,643,805 $103,802 $(21,678) $4,725,929
==========================================================
HELD-TO-MATURITY SECURITIES:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 408,351 $ 33,971 $ -- $ 442,322
State and municipal securities 2,591,733 44,187 (20,807) 2,615,113
Mortgage-backed securities
and collateralized mortgage
obligations 4,782,954 19,428 (61,292) 4,741,090
----------------------------------------------------------
$7,783,038 $ 97,586 $(82,099) $7,798,525
==========================================================
</TABLE>
- 50 -
<PAGE> 62
Maturity Distributions of Investment Securities. The scheduled
maturities of investment securities and their weighted average yield as of
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES HELD-TO-MATU0RITY SECURITIES
--------------------------------------------------------------------------------------
Estimated Weighted Estimated Weighted
Amortized Market Average Amortized Market Average
Cost Value Yield Cost Value Yield
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Due in one $ 508,519 $ 508,360 5.31% $ - $ - --%
year or less
Due after one
year through 1,527,851 1,573,285 6.84% 1,489,855 1,524,103 5.75%
five years
Due after
five years 397,470 404,933 5.41% 1,235,470 1,225,281 5.22%
through ten
years
Due after ten - - 274,759 308,051 6.85%
years
Mortgaged-
backed
securities 2,209,965 2,239,351 6.93% 4,782,954 4,741,090 5.68%
and
collateralized
mortgage
obligations
-----------------------------------------------------------------------------------
$4,643,805 $4,725,929 6.59% $7,783,838 $7,798,525 5.66%
===================================================================================
</TABLE>
RECENT EVENTS
There were no material changes in the statement of income for the three
months ended March 31, 1996. Net income for the first three months in 1996 was
$300,675 or $2.13 per share. The loan portfolio increased to $65,351,518 from
$61,410,516 at December 31, 1995. Total deposits were $77,178,590 at March 31,
1996, compared to $70,673,109 at year-end. Total assets were $86,696,720
compared to $78,927,446 at December 31, 1995. This growth during the first
quarter of 1996 represents the normal cycle of increased loan demand for real
estate construction purposes.
- 51 -
<PAGE> 63
MANAGEMENT OF VB
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning all of the directors
and executive officers of VB and the Bank, including the background, business
experience, and principal occupations, of each VB director and executive
officer. Except as otherwise noted, the positions indicated are at both VB and
the Bank.
DEAN N. ALTERMAN, age 36, is an attorney in the law firm of Kell, Alterman &
Runstein. He received a B.A. from Harvard College and a J.D. from Northwestern
School of Law at Lewis and Clark College. Mr. Alterman has served as a
director since 1992.
STUART A. BENDER, age 60, is a self-employed dentist, and has served as a
director since 1992.
DIANNE E. FRICHTL, age 60, is the owner of Luepke Florists and Gifts. She
served as the Chair of the VB and Bank Boards in 1994, and has served as a
director since the Bank's inception in 1989.
ROBERT V. HYDE, age 67, is a self-employed land developer and has been a
director since the Bank's inception in 1989. He has previously served as
Chairman of the Board.
TIMOTHY P. MOYER, age 39, is a real estate developer and investor. He served
as a director of the Bank from 1989 to 1992, and has served as a director of VB
and the Bank since 1995.
JAMES J. POMAJEVICH, age 53, is the owner and President of Pomajevich
Properties, Inc. ("PPI"), a commercial real estate development and management
company. Mr. Pomajevich has been a director since the Bank's inception in
1989, and served as Chairman of the Board in 1993 and again from 1995 to the
present. He received a B.Th. from Northwest Christian College, a B.A. from
the University of Illinois, and a J.D. from Willamette University School of
Law.
ANNE M. RYAN, age 47, has over 26 years of banking experience and currently
serves as Vice President and Secretary of VB, and Cashier of the Bank. Prior
to joining the Bank in 1989, Ms. Ryan served as a branch manager for U.S.
National Bank of Oregon.
LEE S. STENSETH, age 59, is the President and Chief Executive Officer of VB and
the Bank, and has over 37 years of banking experience. Prior to joining the
Bank, Mr. Stenseth served as Executive Vice President of Northwest National
Bank. He has served as a director since the Bank's inception in 1989.
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the Bank
during the fiscal year ended December 31, 1995, to its President, the only
executive officer whose compensation exceeded $100,000.
<TABLE>
<CAPTION>
===============================================================================
Named Executive Officer Position Held Salaries and Fees(1)
<S> <C> <C>
- -------------------------------------------------------------------------------
Lee S. Stenseth President $155,846
===============================================================================
</TABLE>
- -------------------
(1) Includes salary, bonus, personal benefits of automobiles and annual fees
paid to directors for participation in Board meetings.
- 52 -
<PAGE> 64
Executive Supplemental Income Plan. The Bank has a nonqualified
Executive Supplemental Income Plan covering 6 officers. The plan provides
benefits payable upon death, disability or retirement. Such benefits are
payable monthly over a fifteen year term.
Employee Stock Ownership Plan. VB has an Employee Stock Ownership Plan
with 401(k) features ("KSOP") which covers substantially all employees. The
Plan is a deferred compensation plan in which Bank contributions are used to
provide participating employees with stock in VB. Employees may choose to
contribute a percentage of their monthly salary on a pre-tax basis to the Plan,
subject to certain limitations. The Bank currently makes discretionary
matching contributions, subject to a vesting schedule based on length of
service. In 1995, the Bank contributed $36,502 to the Employee Stock Ownership
Plan. As of March 31, 1996, the KSOP held 4,602 shares of VB common stock.
1989 Stock Option Plan. VB also has a 1989 Stock Option Plan for
certain key employees. Options granted under the plan may be incentive stock
options as defined by Section 422A of the Internal Revenue Code, as amended.
Incentive stock options are exercisable at not less than 100% of the fair
market value of the stock at the time of the grant. The plan also provides for
grants of non-qualified options at the discretion of the administrators of the
plan. There are 18,522 shares of Company stock reserved for possible issuance
under the plan. As of March 31, 1996, there were options covering 18,384
shares outstanding under the plan.
1992 Stock Option Plan. VB also has a 1992 combined incentive and
nonstatutory Stock Option Plan which permits the grant of options to executive
officers and non-employee directors. The plan reserves 30,000 shares of VB
stock for possible issuance upon exercise of options granted under the plan.
As of March 31, 1996, there were options covering 13,139 shares outstanding
under the plan.
Following consummation of the Merger, outstanding options under the
1989 Stock Option Plan and the 1992 Stock Option Plan will be converted into
and exchanged for options to purchase shares of WCB stock on substantially
identical terms as were in effect at the time of grant.
Options Granted in Last Fiscal Year. No officer received or exercised
any options in the 1995 fiscal year. One director received an option for
shares and one director exercised options for 1,877 shares in the 1995 fiscal
year.
Aggregate Option Exercises and Fiscal Year-End Option Value Table. The
following table includes the number of shares covered by both exercisable and
unexercisable stock options as of December 31, 1995, to the executive officer
named in the Summary Compensation Table. Also reported are the values for
"in-the-money" options, which represent the positive spread between the
exercise price of any such existing stock options and the year and price of VB
Common Stock.
<TABLE>
<CAPTION>
==============================================================================================================
Number of Unexercised Value of Unexercised
Shares Options at Year End Options at Year End
Acquired Value --------------------------- ---------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lee S. Stenseth -0- -0- 12,128 -0- $811,970 -0-
==============================================================================================================
</TABLE>
(1) Value is based on $66.95 per share price
DIRECTOR COMPENSATION
Directors receive a fee, based on meetings attended during the year,
for serving on the Board of VB or the Bank. Currently, directors receive
$500.00 per month and $125.00 per special committee meeting. Directors also
receive incentive compensation based on the return on assets of the Bank.
- 53 -
<PAGE> 65
During 1995, incentive pay was $2,250 per director. During 1992, each director
then serving was awarded an option to purchase 1,877 shares at an exercise
price of $30.51 per share for 10 years. The newest member of the VB Board
received an option for 1,877 shares at $40.76 per share after he was elected to
the VB Board in 1995.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
None of the directors or executive officers of the Bank have or have
had any material interest in any transactions to which the Bank was or is a
party, outside of the ordinary course of the Bank's business, except as set
forth below.
Certain directors and officers of the Bank, and the companies with
which they are associated, have had and are expected to continue to have
banking transactions with the Bank from time to time in the ordinary course of
business. Any loans and commitments to lend included in such transactions have
been and will continue to be made in accordance with all applicable laws and
regulations and on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons of similar credit worthiness.
From time to time the Bank enters into loan participation agreements
with other institutions and individuals in order to facilitate loans which
otherwise would exceed the Bank's legal lending limits. Pursuant to such an
agreement, the Bank is currently participating in a commercial loan with a
current balance of $1,055,035 to PPI, owned by Mr. Pomajevich, the Chairman of
the Board of the Bank. The Bank's portion of the outstanding balance is
$196,197. Robert V. Hyde, a director of the Bank, is participating as a
co-lender of this loan. Mr. Hyde's portion of the outstanding balance is
$260,475. Mr. Hyde is also participating as a co-lender of a loan to VB by
Security State Bank of Central Washington. The loan amount is $1,350,000, of
which Mr. Hyde's portion is $225,000. This loan will be paid off by WCB on the
Effective Date. Amounts paid to Mr. Hyde are not considered compensation for
services to the Bank. In addition, Mr. Hyde is a participating co-lender in
two loans to nonaffiliates of the Bank with an aggregate outstanding balance of
approximately $303,000.
The Bank does not consider such a loan participation to constitute a
sale of assets for regulatory purposes, and believes the terms of the loan, and
of the agreement, are substantially the same as those prevailing in other
similar loans and participation agreements at the time this loan was made, and
at the time the participation agreement was executed. The Bank believes that
the loan and the participation agreement are in all respects fair to the Bank.
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of April 18, 1996, with
respect to (i) each director and executive officer of VB and the Bank, and (ii)
the shares owned by all directors and executive officers as a group.
- 54 -
<PAGE> 66
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Number of Shares Percent of
Name Beneficially Owned(1) Outstanding
- ---- --------------------- -----------
<S> <C> <C>
James J. Pomajevich 8,714 (2)(3)(4) 6.08%
Lee S. Stenseth 21,167 (3)(5)(6) 13.78%
Robert V. Hyde 16,849 (2)(4) 11.75%
Timothy Moyer 12,686 (7) 8.85%
Dianne E. Frichtl 6,778 (3)(4) 4.73%
Dean N. Alterman 2,346 (4) 1.64%
Stuart A. Bender 8,231 (4) 5.74%
Anne M. Ryan 2,130 (6)(8) 1.49%
------ ----- ------
All Directors and Officers as a Group 78,901 (2-8) 47.41%
====== ==== ======
</TABLE>
- ------------------------------
(1) Beneficial ownership includes sole voting and investment power as to the
shares, unless otherwise indicated.
(2) Includes shares held as a custodian for a minor child or other member of
the named individual's household.
(3) Includes shares held by or jointly with spouse.
(4) Includes 1,877 shares covered by options exercisable at $30.51 per
share.
(5) Includes 12,128 shares covered by options exercisable at prices ranging
between $22.00 and $30.51 per share.
(6) Includes shares held by the Bank of Vancouver Employee Stock Ownership
Plan.
(7) Includes shares held by Mr. Moyer's children. Also includes 1,877
shares covered by options exercisable at $40.76 per share.
(8) Includes 1,564 shares covered by options exercisable at $30.51 per
share.
OTHER PRINCIPAL SHAREHOLDERS
The following sets forth information as of April 18, 1996, with respect
to each person other than Messrs. Bender, Hyde, Moyer, Pomajevich and Stenseth
(included in the previous table) known by VB and the Bank to have beneficial
ownership of more than five percent of the outstanding VB Common Stock.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address Beneficially Owned(1) Outstanding
---------------- --------------------- -----------
<S> <C> <C>
Franz and Anne Boschwitz 9,837 6.95%
5604 D Lakeview Dr.
Kirkland, WA 98033
</TABLE>
- ---------------
(1) Beneficial ownership includes sole voting and investment power as to the
shares.
- 55 -
<PAGE> 67
COMMITTEES OF THE BOARD OF DIRECTORS
VB has no separate audit or compensation committees. The entire VB
Board (with the exception of Mr. Stenseth) handles those responsibilities.
SUPERVISION AND REGULATION
The following generally refers to certain statutes and regulations
affecting the banking industry. These references provide brief summaries only
and are not intended to be complete. These references are qualified in their
entirety by the referenced statutes and regulations. In addition, some
statutes and regulations which apply to and regulate the operation of the
banking industry might exist which are not referenced below. Changes in
applicable statutes and regulations may have a material effect on the business
of WCB, VB and their respective subsidiaries.
WCB AND VB
GENERAL
As bank holding companies, WCB and VB are subject to the Bank Holding
Company Act of 1956 ("BHCA"), as amended, which places them under the
supervision of the Board of Governors of the Federal Reserve System ("FRB").
In general, the BHCA limits the business of bank holding companies to owning or
controlling banks and engaging in other activities related to banking. Certain
recent legislation designed to expand interstate branching and relax federal
restrictions on interstate banking will continue to be phased in over the next
two years and may expand opportunities for bank holding companies (for
additional information see below under the heading "WCB's Subsidiary Banks --
Interstate Banking and Branching"). However, the full impact of this
legislation on WCB and VB is unclear at this time.
HOLDING COMPANY STRUCTURE
FRB Regulation. A bank holding company must obtain the approval of the
FRB: (1) before acquiring direct or indirect ownership or control of any voting
shares of any bank if, after such acquisition, it would own or control,
directly or indirectly, more than 5% of the voting shares of such bank; (2)
before merging or consolidating with another bank holding company; and (3)
before acquiring substantially all of the assets of any additional banks.
WCB and VB file annual and certain interim reports as may be required
from time to time by the FRB. In addition, the FRB performs periodic
examinations of WCB and VB.
Holding Company Control of Nonbanks. With certain exceptions, the BHCA
prohibits bank holding companies from acquiring direct or indirect ownership or
control of voting shares in any company which is not a bank or a bank holding
company unless the FRB determines that the activities of such company are so
closely related to banking or managing or controlling banks as to be a proper
incident thereto. In making such determinations, the FRB considers whether the
performance of such activities by a bank holding company would offer advantages
to the public that would outweigh possible adverse effects. For example, the
FRB has by regulation determined activities such as, among others, operating an
industrial loan company, industrial bank, savings association, mortgage
company, finance company, trust company, credit card company or factoring
company, performing certain data processing operations, leasing personal or
real property, subject to certain exceptions, and providing investment and
financial advice, are so closely related to banking as to be a proper incident
thereto within the meaning of the BHCA. On the other hand, activities such as
real estate brokerage and syndication, land development,
- 56 -
<PAGE> 68
property management, underwriting of life insurance not related to credit
transactions, and with certain exceptions, securities underwriting and equity
funding, are not so closely related to banking as to be a proper incident
thereto within the meaning of the BHCA. In the future, the FRB may from time
to time add to or delete from the list of activities permissible for bank
holding companies.
Transactions With Affiliates. WCB and its subsidiary banks, and
likewise VB and the Bank, are deemed affiliates within the meaning of the
Federal Reserve Act and transactions between affiliates are subject to certain
restrictions. Covered transactions include, subject to specific exceptions,
loans by bank subsidiaries to affiliates, investments by bank subsidiaries in
securities issued by an affiliate, the taking of such securities as collateral,
and the purchase of assets by a bank subsidiary from an affiliate. When the
Merger is consummated, WCB and its subsidiary banks will be deemed affiliates
within the meaning of the Federal Reserve Act.
Support of Bank Subsidiaries. Under FRB policy, a bank holding company
is expected to act as a source of financial and managerial strength to, and
commit resources to support, each of its subsidiary banks. Any capital loans a
bank holding company makes to its subsidiary banks are subordinate to deposits
and to certain other indebtedness of those subsidiary banks. The Crime Control
Act of 1990 provides that, in the event of a bank holding company's bankruptcy,
the bankruptcy trustee will assume any commitment the bank holding company has
made to a federal bank regulatory agency to maintain the capital of a
subsidiary bank and this obligation will be entitled to a priority of payment.
Tie-In Arrangements. WCB, VB and the bank subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any extension
of credit, sale or lease of property or furnishing of services. For example,
with certain exceptions, neither WCB, VB nor the bank subsidiaries may
condition an extension of credit to a customer on either (1) a requirement that
the customer obtain additional services provided by it or (2) an agreement by
the customer to refrain from obtaining other services from a competitor.
State Law Restrictions. As an Oregon corporation, WCB is subject to
certain limitations and restrictions under applicable Oregon corporate law.
Similarly, as a Washington corporation, VB is subject to certain limitations
and restrictions under applicable Washington corporate law. For example, state
law restrictions in both Oregon and Washington include limitations and
restrictions relating to: indemnification of directors, distributions to
shareholders, transactions involving directors, officers or interested
shareholders, maintenance of books, records, and minutes, and observance of
certain corporate formalities.
Securities Registration and Reporting. The common stock of WCB is
registered as a class with the SEC under the Exchange Act and thus is subject
to the periodic reporting and proxy solicitation requirements and the
insider-trading restrictions of that Act. The periodic reports, proxy
statements, and other information filed by WCB under that Act can be inspected
and copied at or obtained from the Washington, D.C., office of the SEC. In
addition, the securities issued by WCB are subject to the registration
requirements of the Securities Act of 1933 and applicable state securities laws
unless exemptions are available.
CONTROL TRANSACTIONS
The Change in Bank Control Act of 1978, as amended, prohibits a person
or group of persons from acquiring "control" of a bank holding company unless
the FRB has been given 60 days' prior written notice of the proposed
acquisition, and within that time period, the FRB has not issued a notice
disapproving the proposed acquisition or extending for up to another 30 days
the period during which such a disapproval may be issued. An acquisition may
be made before the expiration of the disapproval
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period if the FRB issues written notice of its intent not to disapprove the
action. Under a rebuttable presumption established by the FRB, the acquisition
of 10% or more of a class of voting stock of a bank holding company with a
class of securities registered under Section 12 of the Exchange Act would,
under the circumstances set forth in the presumption, constitute the
acquisition of control.
In addition, any company would be required to obtain the approval of
the FRB under the BHCA before acquiring 25% (5% if the company is a bank
holding company) or more of the outstanding shares of WCB or VB, or to
otherwise obtain control over the WCB or VB.
THE BANK SUBSIDIARIES
GENERAL
Despite some recent legislative initiatives to reduce regulatory
burdens, banking remains a highly regulated industry. Legislation enacted from
time to time may increase the cost of doing business, limit or expand
permissible activities, or affect the competitive balance between banks and
other financial and nonfinancial institutions. Proposals to change the laws
and regulations governing the operations and taxation of banks and other
financial institutions are frequently made in Congress, in state legislatures,
and before various bank regulatory agencies. In addition, there continue to be
proposals in Congress to restructure the banking system.
Some of the significant areas of bank regulation, including significant
federal legislation affecting state-chartered banks, are generally discussed
below.
REGULATION OF STATE BANKS
Oregon state banks, such as WCB's bank subsidiaries, are subject to
primary regulation and examination by the Oregon Department of Consumer and
Business Services ("Oregon Department"). As a Washington State bank, the Bank
is subject to primary regulation and examination by the Washington Director.
WCB's bank subsidiaries are also subject to supervision, examination, and
regulation by certain federal banking agencies, including, in the case of
Valley Commercial Bank (which is a Federal Reserve member bank), the FRB. The
deposits of each of WCB's bank subsidiaries are insured (to applicable limits)
by, and therefore are subject to regulation by, the FDIC.
Applicable federal and state statutes and regulations governing a
bank's operations relate, among other matters, to capital requirements,
required reserves against deposits, investments, loans, legal lending limits,
certain interest rates payable, mergers and consolidations, borrowings,
issuance of securities, payment of dividends (see below), establishment of
branches, and dealings with affiliated persons. The FDIC has authority to
prohibit banks under their supervision from engaging in what they consider to
be an unsafe and unsound practice in conducting their business. Depository
institutions, such as the bank subsidiaries, are affected significantly by the
actions of the FRB as it attempts to control the money supply and credit
availability in order to influence the economy.
Washington state banking law provides that the amount of funds which a
bank may lend to a single borrower is generally limited to 20% of capital and
surplus. For this purpose, capital includes (i) the amount of common stock
outstanding and unimpaired, (ii) the amount of preferred stock outstanding and
unimpaired, and (iii) capital notes or debentures issued pursuant to RCW 30.36.
Surplus includes capital surplus, reflecting the amounts paid in excess of the
par or stated value of capital stock, or amounts contributed to the bank other
than for capital stock, and undivided profits.
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DIVIDENDS
Dividends paid to WCB by its bank subsidiaries are a material source of
WCB's cash flow. Likewise, dividends paid to VB by the Bank are a material
source of VB's cash flow. Various federal and state statutory provisions limit
the amount of dividends the bank subsidiaries are permitted to pay to WCB and
VB, respectively, without regulatory approval. FRB policy further limits the
circumstances under which bank holding companies may declare dividends. For
example, a bank holding company should not continue its existing rate of cash
dividends on its common stock unless its net income is sufficient to fully fund
each dividend and its prospective rate of earnings retention appears consistent
with its capital needs, asset quality, and overall financial condition.
If, in the opinion of the applicable federal banking agency, a
depository institution under its jurisdiction is engaged in or is about to
engage in an unsafe or unsound practice (which, depending on the financial
condition of the institution, could include the payment of dividends), the
agency may require, after notice and hearing, that such institution cease and
desist from such practice. In addition, the FRB and the FDIC have issued
policy statements which provide that insured banks and bank holding companies
should generally pay dividends only out of current operating earnings.
Oregon law imposes the following limitations on the payment of
dividends by Oregon state banks: (1) no dividends may be paid that would impair
capital; (2) until the surplus fund of a bank is equal to 50% of its paid-in
capital, no dividends may be declared unless at least 20% of the bank's net
profits for the dividend period have been carried to the surplus account; (3)
dividends cannot be greater than net undivided profits then on hand minus
losses, certain bad debts, certain charged-off assets or depreciation and
accrued expenses, interest, and taxes; and (4) if the surplus fund does not
exceed 50% of paid-in capital at the time of a reduction in the surplus due to
losses, dividends cannot be declared or paid in excess of 50% of net earnings
until the surplus fund is restored to at least the amount from which the
surplus was originally reduced.
Under these restrictions, as of December 31, 1995, WCB's bank
subsidiaries could have declared dividends of approximately $10.7 million in
the aggregate, without obtaining prior regulatory approval. The payment of
dividends by banks may also be affected by other factors, such as capital
maintenance requirements.
Washington statutes prohibit a bank from paying any dividends in an
amount greater than the bank's retained earnings, without approval of the
Washington Director. The Washington Director has authority to require a bank
to suspend payment of all dividends until the bank has complied with any
requirements made by the Washington Director.
REGULATION OF MANAGEMENT
Federal law: (1) sets forth circumstances under which officers or
directors of a bank may be removed by the institution's federal supervisory
agency; (2) places restraints on lending by a bank to its executive officers,
directors, principal shareholders, and their related interests; and (3)
prohibits management personnel of a bank from serving as a director or in other
management positions of another financial institution whose assets exceed a
specified amount or which has an office within a specified geographic area.
CONTROL OF FINANCIAL INSTITUTIONS
No person may acquire "control" of a bank unless the appropriate
federal agency has been given 60 days prior written notice and within that time
the agency has not disapproved the acquisition.
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Substantial monetary penalties may be imposed for violation of the change in
control or other provisions of banking laws. Washington banking laws further
require that 30 days before the acquisition of control, defined as direct or
indirect ownership, control or power to vote 25% or more of the outstanding
stock of a bank, the acquiring party must file with the Washington Director an
application containing certain specified information. Acquisitions of control
in violation of the statute are deemed void.
FIRREA
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") became effective on August 9, 1989. Among other things, this
far-reaching legislation (1) phased in significant increases in the FDIC
insurance premiums paid by commercial banks; (2) created two deposit insurance
pools within the FDIC, one to insure commercial bank and savings bank deposits
and the other to insure savings association deposits; (3) for the first time,
permitted bank holding companies to acquire healthy savings associations; (4)
permitted commercial banks that meet certain housing-related asset requirements
to secure advances and other federal services from their local Federal Home
Loan Banks; and (5) greatly enhanced the regulators' enforcement powers by
removing procedural barriers and sharply increasing the civil and criminal
penalties for violating statutes and regulations.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") was enacted into law in late 1991. As required by FDICIA, numerous
regulations have been adopted by federal bank regulatory agencies, including
the following: (1) federal bank regulatory authorities have established five
different capital levels for banks and, as a general matter, enable banks with
higher capital levels to engage in a broader range of activities; (2) the FRB
has issued regulations requiring standardized disclosures with respect to
interest paid on deposits; (3) the FDIC has imposed restrictions on the
acceptance of brokered deposits by weaker banks; (4) the FDIC has implemented
risk-based deposit insurance premiums; and (5) the FDIC has issued regulations
requiring state-chartered banks to comply with certain restrictions with
respect to equity investments and activities in which the banks act as a
principal.
FDICIA recapitalized the Bank Insurance Fund ("BIF") and required the
FDIC to maintain the BIF and Savings Association Insurance Fund ("SAIF") at
1.25% of insured deposits by increasing deposit insurance premiums as necessary
to maintain such ratio. FDICIA also required federal bank regulatory
authorities to prescribe, by December 1, 1993, (1) non-capital standards of
safety and soundness; (2) operational and managerial standards for banks; (3)
asset and earnings standards for banks and bank holding companies addressing
such areas as classified assets, capital, and stock price; and (4) standards
for compensation of executive officers and directors of banks. However, this
provision was modified by recent legislation to allow federal regulatory
agencies to implement these standards through either guidelines or regulations.
INTERSTATE BANKING AND BRANCHING
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Act") will, over the next two years, permit nationwide
interstate banking and branching under certain circumstances. This legislation
generally authorizes interstate branching and relaxes federal law restrictions
on interstate banking. Individual states have the authority to "opt out" of
certain of these provisions. The Interstate Act currently allows states to
enact "opting-in" legislation that (i) permits interstate mergers within their
own borders before June 1, 1997, and (ii) permits out-of-state banks to
establish de novo branches within the state. As of September 29, 1995, bank
holding companies may purchase banks in any state, and states may not prohibit
such purchases. Additionally, beginning June
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1, 1997, banks will be permitted to merge with banks in other states as long as
the home state of neither merging bank has opted out. The Interstate Act
requires regulators to consult with community organizations before permitting
an interstate institution to close a branch in a low-income area.
Oregon, effective as of February 27, 1995, and Washington, effective
June 6, 1996, have each enacted "opting in" legislation generally permitting
interstate mergers, subject to certain restrictions. Given that Oregon and
Washington have permitted interstate banking for a number of years, this
legislation is not expected to have a profound impact on banking in Oregon or
Washington or on WCB, VB or the bank subsidiaries' operations in particular.
Nevertheless, the impact that the Interstate Act might have on WCB, VB and the
bank subsidiaries is impossible to predict with accuracy.
CAPITAL ADEQUACY REQUIREMENTS
The FRB, the FDIC, and the OCC (collectively, the "Federal Banking
Agencies") have established uniform capital requirements for all commercial
banks. Bank holding companies are also subject to certain minimum capital
requirements. A bank that does not achieve and maintain required capital
levels may be subject to supervisory action through the issuance of a capital
directive to ensure the maintenance of adequate capital levels. In addition,
banks are required to meet certain guidelines concerning the maintenance of an
adequate allowance for loan and lease losses.
The Federal Banking Agencies' "risk-based" capital guidelines establish
a systematic, analytical framework that makes regulatory capital requirements
more sensitive to differences in risk profiles among banking organizations,
takes off-balance sheet exposures into explicit account in assessing capital
adequacy, and minimizes disincentives to holding liquid, low-risk assets. The
risk-based ratio is determined by allocating assets and specified off-balance
sheet commitments into several categories, with high levels of capital being
required for the categories perceived as representing greater risk. The risk
weights assigned to assets and credit equivalent amounts of off-balance sheet
items are based primarily on credit risk. Other types of exposure, such as
interest rate, liquidity and funding risks, as well as asset quality problems,
are not factored into the risk-based ratio. Such risks, however, will be taken
into account in determining a final assessment of an organization's capital
adequacy. Under these new regulations, banks were required to achieve a
minimum total risk-based capital ratio of 8% and a minimum Tier 1 risk-based
capital ratio of 4%.
The Federal Banking Agencies also have adopted leverage ratio standards
that require commercial banks to maintain a minimum ratio of core capital to
total assets (the "Leverage Ratio") of 3%. Any institution operating at or
near this level is expected to have well-diversified risk, including no undue
interest rate risk exposure, excellent asset quality, high liquidity and good
earnings, and in general, to be a strong banking organization without any
supervisory, financial or operational weaknesses or deficiencies. Any
institutions experiencing or anticipating significant growth would be expected
to maintain capital ratios, including tangible capital positions, well above
the minimum levels (e.g., an additional cushion of at least 100 to 200 basis
points, depending upon the particular circumstances and risk profile).
Regulations adopted by the Federal Banking Agencies as required by
FDICIA impose even more stringent capital requirements. The regulators require
the OCC and other Federal Banking Agencies to take certain "prompt corrective
action" when a bank fails to meet certain capital requirements. The
regulations establish and define five capital levels at which an institution is
deemed to be "well-capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." In order to
be "well-capitalized," an institution must maintain, at least 10% total
risk-based capital, 6% Tier 1 risk-based capital, and a 5% Leverage Ratio.
Increasingly severe restrictions are imposed on the payment of dividends and
management fees, asset growth and other aspects of the
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operations of institutions that fall below the category of "adequately
capitalized" (which requires at least 8% total risk-based capital, 4% Tier 1
risk-based capital, and a 4% Leverage Ratio). Undercapitalized institutions
are required to develop and implement capital plans acceptable to the
appropriate federal regulatory agency. Such plans must require that any
company that controls the undercapitalized institution must provide certain
guarantees that the institution will comply with the plan until it is
adequately capitalized. As of December 31, 1995, the bank subsidiaries were
not subject to any regulatory order, agreement, or directive to meet and
maintain a specific capital level for any capital measure.
The Oregon Department has authority under Oregon law to require
shareholders of an Oregon state bank to contribute additional capital to the
bank if its capital becomes impaired. The capital of a bank is deemed to be
impaired under Oregon law if the value of the bank's assets is insufficient to
pay its liabilities (excluding any liability on outstanding capital debentures)
plus the amount of its paid-in capital.
The minimum ratio of total capital to risk-adjusted assets (including
certain off-balance sheet items, such as stand-by letters of credit) required
by the FRB for bank holding companies is 8%. At least one-half of the total
capital must be Tier 1 capital; the remainder may consist of Tier 2 capital.
Bank holding companies are also subject to minimum Leverage Ratio guidelines.
These guidelines provide for a minimum Leverage Ratio of 3% for bank holding
companies meeting certain specified criteria, including achievement of the
highest supervisory rating. All other bank holding companies are required to
maintain a Leverage Ratio which is at least 100 to 200 basis points higher (4%
to 5%). These guidelines provide that banking organizations experiencing
internal growth or making acquisitions are expected to maintain strong capital
positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets.
In August of 1995, the Federal Banking Agencies adopted a final rule
implementing the portion of Section 305 of FDICIA that requires the banking
agencies to revise their risk-based capital standards to ensure that those
standards take adequate account of interest rate risk. Effective September 1,
1995, when evaluating the capital adequacy of a bank, the Federal Banking
Agencies' examiners will consider exposure to declines in the economic value of
the bank's capital due to changes in interest rates. A bank may be required to
hold additional capital for interest rate risk if it has a significant exposure
or a weak interest rate risk management process. Concurrent with the
publication of this final rule, the Federal Banking Agencies proposed for
comment a joint policy statement describing the process the Federal Banking
Agencies will use to measure and assess a bank's interest rate risk. As
indicated by both the final rule and the joint policy statement, the Federal
Banking Agencies intend, through a future proposed rule, to incorporate
explicit minimum requirements for interest rate risk into their risk- based
capital standards. Although the Federal Banking Agencies have indicated that
they anticipate any proposed capital requirement would be based on the
measurement framework described in the joint policy statement, neither the
likelihood that the Federal Banking Agencies will in fact propose such a rule,
the actual requirements or standards established by any such rule nor the
impact the Federal Banking Agency activities discussed above may have on the
bank subsidiaries can be predicted with accuracy at this time.
FDIC INSURANCE
Generally, customer deposit accounts in banks are insured by the FDIC
for up to a maximum amount of $100,000. The FDIC has adopted a risk-based
insurance assessment system. Under this system, depository institutions, such
as the bank subsidiaries, with BIF-insured deposits, are required to pay an
assessment to the BIF ranging from $.0 to $.27 per $100 of deposits based on
the institution's risk classification. This assessment range is significantly
higher for depository institutions with SAIF-insured
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deposits. Banks at the zero assessment rate will pay the statutory minimum of
$2,000 for deposit insurance.
The risk classification is based on an assignment of the institution by
the FDIC to one of three capital groups and to one of three supervisory
subgroups. The capital groups are "well capitalized," "adequately
capitalized," and "undercapitalized." The three supervisory subgroups are
Group "A" (for financially sound institutions with only a few minor
weaknesses), Group "B" (for those institutions with weaknesses which, if
uncorrected, could cause substantial deterioration of the institution and
increase risk to the deposit insurance fund), and Group "C" (for those
institutions with a substantial probability of loss to the fund absent
effective corrective action). All the bank subsidiaries are currently deemed
well capitalized and all in Group "A", qualifying for the lowest assessment
classification, presently set at zero.
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
VB AND WCB COMMON STOCK
The Oregon Business Corporations Act ("OBCA"), as amended, and WCB's
Articles of Incorporation and Bylaws, both as amended, govern the rights of WCB
shareholders and will govern the rights of VB shareholders who become
shareholders of WCB through the Merger. The rights of VB shareholders are
currently governed by the Washington Business Corporations Act ("WBCA"), as
amended, and by VB's Articles of Incorporation and Bylaws. The following is a
brief summary of certain differences between the rights of VB shareholders and
WCB shareholders' rights. This summary does not purport to be complete and is
qualified by the documents and statutes referenced and by other applicable law.
GENERAL
Under its Articles of Incorporation, WCB's authorized capital stock
consists of 15,000,000 common stock shares, no par value, and 10,000,000
preferred stock shares, no par value.
VB's authorized capital stock consists of 10,000,000 common stock
shares with a $1 per share par value and 1,000,000 preferred stock shares with
a $1 per share par value.
The following is a more detailed description of WCB's and VB's capital
stock.
PREFERRED STOCK
As of April 18, 1996, neither WCB nor VB had any shares of preferred
stock issued. The WCB Board is authorized, without further shareholder action,
to issue preferred stock shares with such designations, preferences and rights
as the WCB Board may determine. Likewise, the VB Board is authorized, without
further shareholder action, to issue preferred stock shares with such
designations, preferences and rights as the VB Board may determine.
COMMON STOCK
As of April 18, 1996, there were 4,807,679 shares of WCB Common Stock
issued and outstanding, in addition to options for the purchase of 343,431
shares of WCB Common Stock under WCB's employee and director stock option
plans.
As of April 18, 1996, there were 141,461 shares of VB Common Stock
issued and outstanding, in addition to options for the purchase of 31,523
shares of VB Common Stock under VB's employee and director stock option plans.
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DIVIDEND RIGHTS
Dividends may be paid on WCB Common Stock as and when declared by the
WCB Board out of funds legally available for the payment of dividends. The WCB
Board may issue preferred stock that is entitled to such dividend rights as the
WCB Board may determine, including priority over the common stock in the
payment of dividends. The ability of WCB to pay dividends basically depends on
the amount of dividends paid to it by its subsidiaries. Accordingly, the
dividend restrictions imposed on the subsidiaries by statute or regulation
effectively may limit the amount of dividends WCB can pay (See "SUPERVISION AND
REGULATION -- The Bank Subsidiaries; Dividend Restrictions"). Under the OBCA,
the WCB Board is barred from making any dividend payment if, after giving
effect to such payment, WCB is either unable to pay its debts as they become
due in the usual course of business or WCB's total assets would be less than
the sum of its total liabilities, as more fully provided in ORS 60.181.
Dividends may be paid on VB Common Stock as and when declared by the VB
Board out of funds legally available for the payment of dividends. The VB
Board may issue preferred stock that is entitled to such dividend rights as the
VB Board may determine, including priority over the common stock in the payment
of dividends. The ability of VB to pay dividends basically depends on the
amount of dividends paid to it by its subsidiary. Accordingly, the dividend
restrictions imposed on its subsidiary by statute or regulation effectively may
limit the amount of dividends VB can pay (See "SUPERVISION AND REGULATION --
The Bank Subsidiaries; Dividend Restrictions"). Under the WBCA, the VB Board
is barred from making any dividend payment if, after giving effect to such
payment, VB is either unable to pay its debts as they become due in the usual
course of business or WCB's total assets would be less than the sum of its
total liabilities, as more fully provided in RCW 23B.06.400.
VOTING RIGHTS
All voting rights are currently vested in the holders of WCB Common
Stock and VB Common Stock, respectively, each share being entitled to one vote.
Both WCB's and VB's Articles of Incorporation provide that shareholders
do not have cumulative voting rights in the election of directors. The WCB
Board and the VB Board are each authorized to determine the voting rights of
any preferred stock that may be issued.
PREEMPTIVE RIGHTS
Neither the holders of WCB Common Stock nor the holders of VB Common
Stock have preemptive rights to subscribe to any additional securities that may
be issued.
LIQUIDATION RIGHTS
If WCB is liquidated, the holders of WCB Common Stock are entitled to
share, on a pro rata basis, WCB's remaining assets after provision for
liabilities. The WCB Board is authorized to determine the liquidation rights
of any preferred stock that may be issued, including priority over the
liquidation rights of holders of WCB Common Stock.
Similarly, VB Common Stock holders are entitled to share, pro rata,
VB's remaining assets after provision for liabilities, if VB is liquidated.
The VB Board is authorized to determine the liquidation rights of any preferred
stock that may be issued, including priority over the liquidation rights of
holders of VB Common Stock.
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ASSESSMENTS
All outstanding shares of VB Common Stock and of WCB Common Stock are
fully paid and nonassessable.
BOARD OF DIRECTORS
WCB's Articles of Incorporation provide for division of its Board into
three classes, as nearly equal in number as possible. Each director serves for
a three-year term, and the classes are staggered so that one class is elected
each year. The WCB Board must consist of at least eight (8), but no more than
twenty (20) directors; the WCB Board sets the exact number by resolution.
Currently, the WCB Board has thirteen (13) directors. A WCB director may not
be removed without cause before his or her term expires, unless two-thirds of
the shareholders entitled to vote on the matter, vote in favor of removal.
VB's Bylaws provide that each member of its Board serves for a one-year
term (or until the next annual shareholders' meeting and until the director's
successor is elected and qualified). The VB Board must consist of at least
five (5), but no more than fifteen (15) directors; the VB Board sets the exact
number by resolution. Currently, the VB Board has seven (7) directors. VB's
shareholders, by an affirmative majority vote, may remove any director from
office, with or without cause, before his or her term expires.
INDEMNIFICATION AND LIMITATION OF LIABILITY
WCB's Articles of Incorporation provide for indemnification, to the
fullest extent permissible under the OBCA, of its directors against all
expense, liability, and loss (including attorneys' fees) incurred by him or her
by reason of or arising from the fact that he or she is or was a director of
WCB or is or was serving at WCB's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
and these indemnification rights continue as to a person who has ceased to be a
director, officer , partner, trustee, employee, or agent and inure to the
benefit of his or her heirs, executors, and administrators. WCB's Articles of
Incorporation authorize WCB, through its Bylaws, and the WCB Board to provide
indemnification to WCB's officers, employees, and agents, to the extent
permitted by law. WCB's Bylaws provide that WCB will indemnify its directors
and officers to the full extent permitted by the OBCA. However, WCB will not
provide indemnification when (a) a director or officer commits intentional
misconduct or knowingly violates the law; (b) a director or officer is adjudged
liable to WCB in a proceeding by or in the right of WCB; or (c) a director or
officer is adjudged liable in any proceeding charging improper personal benefit
on the basis that the director or officer improperly received a personal
benefit. Indemnification rights and procedures, including entitlements to
advanced expenses, are set forth in more detail in WCB's Bylaws.
VB's Articles of Incorporation provide that a director is not
personally liable to VB or VB's shareholders for monetary damages for conduct
as a director, except for (a) intentional misconduct or knowing violations of
law; (b) conduct violating RCW 23B.08.310 (unlawful distributions); or (c)
transactions from which the director will personally receive a benefit in
money, property or services to which the director is not legally entitled.
VB's Articles of Incorporation provide for indemnification of directors and
officers under certain circumstances. The VB Board may authorize
indemnification of VB's other employees and agents in accordance with VB's
Articles of Incorporation. Indemnification rights and procedures, including
entitlements to advanced expenses, are set forth in more detail in VB's
Articles of Incorporation.
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AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
Under Oregon law, WCB's shareholders may amend WCB's Articles of
Incorporation by an affirmative majority vote of the shares entitled to vote on
the matter. The WCB Board may make the amendments listed in ORS 60.434 to the
Articles of Incorporation without shareholder approval. Either the
shareholders or, subject to certain restrictions, the WCB Board may amend WCB's
Bylaws.
Unless the corporation's Articles of Incorporation provide otherwise,
the WBCA requires approval of two-thirds of the shareholders entitled to vote
on the matter in order to amend the corporation's articles. VB's Articles
allow VB's shareholders to amend VB's Articles by an affirmative majority vote
of the shares entitled to vote on the matter. The VB Board may make the
amendments listed in RCW 23B.10.020 to the Articles of Incorporation without
shareholder approval. Either the shareholders or the VB Board may amend VB's
Bylaws.
REPURCHASE OF SHARES
Under Oregon and Washington law, a corporation may acquire shares of
its own stock. Therefore, both WCB and VB may, under applicable state law,
repurchase shares of their own capital stock.
DISSENTERS' RIGHTS
Under the WBCA, a shareholder is entitled to dissent from, and, upon
perfection of the shareholder's appraisal right, to obtain the fair value of
his or her shares in the event of certain corporate actions, including certain
mergers, share exchanges, sales of substantially all assets of the corporation,
and certain amendments to the corporation's articles of incorporation that
materially and adversely affect shareholder rights.
Similar dissenters' rights are generally provided to shareholders under
the OBCA. However, under the OBCA, dissenters' rights are not available to
shareholders of any class or series if the shares of that class or series were
registered on a national securities exchange or quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System as a
National Market System issue on the record date for the shareholders' meeting
at which the corporate action ordinarily entitling the shareholders to
dissenters' rights was taken or on the date a copy or summary of the plan of
merger is mailed to shareholders under ORS 60.491.
SALES OF ASSETS, MERGERS AND DISSOLUTIONS - VOTING
Under the WBCA, unless the articles of incorporation provide for a
lesser vote (but not less than a majority), approval by at least two-thirds of
the outstanding shares entitled to vote or two-thirds of each voting group is
required for mergers, assets sales, and dissolutions. Separate voting by
voting groups is required (i) on a plan of share exchange and (ii) on a plan of
merger if it contains provisions that would require separate voting if
contained in an amendment to articles of incorporation. VB's Articles of
Incorporation reduce the VB shareholder vote otherwise required under the WBCA
for mergers, asset sales, and dissolutions to a simple majority of all votes
entitled to be cast by each voting group. The OBCA requires approval by the
holders of a majority of the shareholders entitled to vote on the matter for
assets sales, mergers and dissolutions. Both the OBCA and the WBCA contain
provisions setting forth certain circumstances under which no vote by the
shareholders of a corporation surviving a merger is required.
- 66 -
<PAGE> 78
POTENTIAL "ANTI-TAKEOVER" PROVISIONS
WCB's Articles of Incorporation and Oregon and Washington statutes
contain certain provisions which may limit or prevent certain acquisitions.
These provisions are briefly summarized below.
1. WCB's Articles of Incorporation.
WCB's Articles of Incorporation include certain provisions that could
make more difficult the acquisition of WCB by means of a tender offer, a proxy
contest, merger or otherwise. These provisions include (1) restrictions on
removal of directors which could limit changes in the composition of the WCB
Board (See "Board of Directors," above); (2) certain nonmonetary factors that
the WCB Board may consider when evaluating a takeover offer (discussed in more
detail below); and (3) a requirement that at least two-thirds of the
shareholders approve a Change in Control of WCB or a sale of substantially all
of WCB's assets, unless the transaction is approved by 75% of the WCB Board.
In addition, the authorization of preferred stock, which is intended
primarily as a financing tool and not as a defense against takeovers, may
potentially be used by management to make more difficult uninvited attempts to
acquire control of WCB (e.g., by diluting the ownership interest of a
substantial shareholder, increasing the amount of consideration necessary for a
shareholder to obtain control, or selling authorized but unissued shares to
friendly third parties).
WCB's Articles of Incorporation allow the WCB Board to consider
nonmonetary factors in evaluating another party's offer to (a) make a tender or
exchange for any equity security of WCB, (b) merge or consolidate WCB with
another corporation or association, or (c) purchase or otherwise acquire all or
substantially all of WCB's assets. Specifically, the Articles allow the WCB
Board, in determining what is in the best interests of WCB and its
shareholders, to consider all relevant factors, including the effects on its
employees, customers, suppliers, and other constituents of WCB and its
subsidiaries and on the communities in which WCB and its subsidiaries are
located.
The staggered terms for WCB's directors, provisions in WCB's Articles
of Incorporation permitting the removal of directors only for cause except by a
super-majority shareholder vote, requirement of a super-majority vote of
shareholders to approve change-in-control transactions unless such transactions
receive a super-majority approval of the WCB Board, permitting the
consideration of nonmonetary factors in evaluating takeover proposals, the
availability of WCB's preferred stock for issuance without shareholder
approval, and the WCB Board's ability to expand the Board size and fill
resulting vacancies, may have the effect of lengthening the time required for a
person to acquire control of WCB through a tender offer, proxy contest, the
election of a majority of the WCB Board, or otherwise, and may deter any
potential unfriendly offers or other efforts to obtain control of WCB. This
could deprive WCB's shareholders of opportunities to realize a premium for
their WCB Common Stock and could make removal of incumbent directors more
difficult, even in circumstances where such action was favored by a majority of
WCB's shareholders.
2. Oregon Law.
Oregon's significant anti-takeover provisions are generally described
below.
ORS 60.357(5), a statutory provision similar to the provision described
above in WCB's Articles of Incorporation, allows directors to consider
nonmonetary factors when evaluating a takeover offer.
ORS 60.157 allows a corporation's board of directors to impose certain
restrictions or conditions on rights, options or warrants issued by the
corporation for the purchase of shares, without violating the
- 67 -
<PAGE> 79
general rule (see ORS 60.131) that all shares within the same class must have
identical preferences, limitations, and relative rights. With respect to any
person (or such person's transferee) owning or offering to acquire a specified
number or percentage of the outstanding stock or other securities of the
corporation, this statute allows the board to (a) preclude or limit such
person's exercise, transfer, or receipt of rights, options or warrants and (b)
invalidate or void the rights, options or warrants held by such person. This
permits the adoption of a Shareholder Rights Plan or a so called "Poison Pill."
The Oregon Control Share Act (ORS 60.801, et.seq.) ("OCSA") operates to
deny voting rights to potential acquirors of a corporation who trigger the OCSA
by purchasing enough shares to cross certain thresholds designated in the
statute. Under the OCSA, the shares of an "acquiring person" obtained in a
"control share acquisition" are denied voting rights unless (a) the target's
board or shareholders approve the acquisition in advance; (b) a majority of the
disinterested shareholders approve restoration of the acquiring person's voting
rights; (c) the acquiring person sells the shares to an unaffiliated person; or
(d) the corporation, in its Articles of Incorporation or Bylaws, "opts out" of
the control share provisions. At this time, WCB has not opted-out of the OCSA.
Transactions in which the corporation acquires its own shares and mergers
involving an agreement and plan of merger to which the corporation is a party
are excluded from the definition of "control share acquisition."
ORS 60.835 prohibits business combinations with interested shareholders
for a period of three years following the date the shareholder becomes
interested, unless an exception applies. A shareholder becomes interested when
the shareholder acquires 15% or more of the outstanding voting stock of the
corporation. Business combinations with an interested shareholder are not
prohibited if (a) the board of directors approves in advance either the
business combination or the transaction in which the shareholder becomes an
interested shareholder; (b) the shareholder acquires 85% or more of the
outstanding voting stock in the same transaction in which the shareholder
becomes interested; or (c) the board of directors approves the business
combination and at least two-thirds of the outstanding voting stock (excluding
the interested shares) approve the transaction (by affirmative vote and not by
written consent). ORS 60.835 does not apply if a shareholder inadvertently
becomes interested and divests as soon as practicable.
3. Washington Law.
Washington's significant anti-takeover provisions are generally
described below.
RCW 23B.17.020 provides that all shareholders of Washington business
corporations, like VB, are entitled to receive equal consideration for their
shares in certain business combinations. This statute generally provides that
an interested person exercising control cannot exercise such control in
connection with certain corporate transactions unless the transaction is
approved by the affirmative vote of the holders of two-thirds of the shares
entitled to vote. Shares owned by interested persons are not entitled to vote
in connection with such business combinations, but are counted for the proposes
of quorum requirements. An "interested shareholder" is a person, including
affiliates of such person, who beneficially owns 20% or more of the outstanding
shares of a corporation. The two-thirds vote requirement is not applicable if
(i) a majority of the company's board of directors approves the transaction,
(ii) a majority of the company's board of directors determines that the fair
market value of the consideration to be received by noninterested shareholders
is not less than the highest price paid by any interested shareholder within
two years before the transaction, or (iii) a company's initial or amended
Articles specifically exclude the provision's applicability.
RCW 23B.17.020 is designed to discourage the two-step, front-end loaded
tender offer. Typically, that occurs when a person makes a cash tender offer
to a premium above the current market price for a majority of the company's
voting stock, and then follows that purchase with a later business
- 68 -
<PAGE> 80
combination, such as a merger, that "freezes out" the remaining minority
shareholders at a lower price than that paid in the cash tender offer.
Washington law also requires prior approval by a majority of the board
of directors of the target company in certain acquisition transactions. RCW
23B.19.040 prohibits corporations that have a class of voting stock registered
with the SEC pursuant to Section 12 of the Securities Exchange Act of 1934 from
engaging in any Significant Business Transactions (including, mergers or
consolidations; certain sales, leases, exchanges, mortgages, pledges,
transfers, or other dispositions or encumbrances of assets; termination of 5%
or more of the corporation's employees; issuances or redemptions of stock;
sales of assets, liquidation, or dissolution of the corporation;
reclassifications of the corporation's securities; and allowing the acquiring
person or an affiliate or associate to receive any disproportionate benefit as
a shareholder) for a period of five years after a person or group acquires 10%
or more of the corporation's outstanding voting stock, unless the acquisition
is approved in advance by majority vote of the board of directors. The statute
will not apply to a person who "inadvertently" acquires 10% of the shares, if
such person divests itself as soon as practicable of sufficient shares to fall
below the 10% threshold. Any acquisition that violates this statute is deemed
to be void and the proposed acquiror's certificate of authority to transact
business in Washington is revoked. As the Common Stock is not currently
registered under Section 12 of the Securities Act, these state law provisions
do not apply.
CERTAIN LEGAL MATTERS
The validity of the WCB Common Stock to be issued in the Merger will be
passed upon for WCB by its counsel, Graham & Dunn, a professional corporation,
Seattle/Tacoma, Washington. Graham & Dunn, P.C. also will give an opinion
concerning certain tax matters related to the Merger.
EXPERTS
The consolidated financial statements of WCB as of December 31, 1995,
1994 and 1993, and for each of the three years in the period ended December 31,
1995, incorporated by reference into this Prospectus/Proxy Statement, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included therein in reliance upon
the authority of such firm as experts in giving said reports.
The financial statements of VB included in this Prospectus/Proxy
Statement and in the Registration Statement have been audited by Moss Adams
LLP, independent certified public accountants, to the extent and for the
periods set forth in their report appearing elsewhere herein, and are included
in reliance upon such report given upon the authority of said firm as experts
in auditing and accounting.
OTHER MATTERS
The VB Board is not aware of any business to come before the Meeting
other than those matters described above in this Prospectus/Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that proxies in the accompanying form will be voted in respect thereof
in accordance with the judgment of the persons voting the proxies.
- 69 -
<PAGE> 81
VANCOUVER BANCORP
INDEPENDENT AUDITOR'S REPORT
AND
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
<PAGE> 82
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT F-3
CONSOLIDATED FINANCIAL STATEMENTS
Balance sheet F-4
Income statement F-5 to F-6
Statement of changes in stockholders' equity F-7 to F-8
Statement of cash flows F-9
Notes to consolidated financial statements F-10 to F-25
</TABLE>
Note: These financial statements have not been reviewed, or confirmed for
accuracy or relevance by the Federal Deposit Insurance Corporation.
F-2
<PAGE> 83
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Vancouver Bancorp
We have audited the accompanying consolidated balance sheets of Vancouver
Bancorp as of December 31, 1995 and 1994, and the related consolidated
statements of income, retained earnings, and cash flows for the years then
ended. These financial statements are the responsibility of Vancouver Bancorp's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vancouver Bancorp as of
December 31, 1995 and 1994, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
Portland, Oregon
January 17, 1996
F-3
<PAGE> 84
VANCOUVER BANCORP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and noninterest-bearing deposits due from depository
institutions $ 3,368,876 $ 2,518,381
Interest-bearing deposits due from depository institutions 109,233 5,907,974
Investment securities:
Available-for-sale investment securities 4,725,929 3,295,958
Held-to-maturity investment securities 7,783,038 8,857,650
Federal Home Loan Bank stock 478,300 191,100
------------ ------------
12,987,267 12,344,708
Loans 61,410,516 42,127,027
Allowance for loan losses (848,207) (551,097)
Unearned loan fees (434,407) (344,543)
------------ ------------
60,127,902 41,231,387
Property and equipment, net of depreciation 921,782 841,824
Accrued interest receivable 468,962 343,897
Other assets 943,424 789,609
------------ ------------
$ 78,927,446 $ 63,977,780
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS
Demand deposits $ 11,083,838 $ 10,777,681
NOW and money market accounts 8,779,317 7,433,193
Savings and time certificate accounts 46,118,578 34,889,824
Time certificate accounts of $100,000 and more 4,691,376 4,454,138
------------ ------------
70,673,109 57,554,836
Accrued interest payable and other liabilities 521,781 270,807
Liabilities for securities sold under repurchase agreements 600,000 --
Note payable 1,350,000 1,500,000
------------ ------------
73,144,890 59,325,643
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value, 1,000,000 shares authorized,
no shares issued and outstanding -- --
Common stock, $1 par value, 10,000,000 shares authorized,
140,205 (137,047 in 1994) issued and outstanding 140,205 137,047
Surplus 4,408,064 4,301,748
Undivided profits 1,180,061 289,505
Net unrealized gain (loss) on available-for-sale securities 54,226 (76,163)
------------ ------------
5,782,556 4,652,137
------------ ------------
$ 78,927,446 $ 63,977,780
============ ============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-4
<PAGE> 85
VANCOUVER BANCORP
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $5,783,254 $3,651,769
Interest on investment securities:
Taxable investments 647,128 497,244
Nontaxable investments 149,697 106,890
Interest on deposits due from depository institutions 85,348 175,142
---------- ----------
6,665,427 4,431,045
INTEREST EXPENSE
Interest on NOW, money market, and savings accounts 1,991,177 1,226,900
Interest on time deposits 971,136 497,638
Interest on borrowings 163,340 5,600
---------- ----------
3,125,653 1,730,138
---------- ----------
Net interest income before provision
for loan losses 3,539,774 2,700,907
PROVISION FOR LOAN LOSSES 273,000 230,000
---------- ----------
Net interest income after provision for
loan losses 3,266,774 2,470,907
---------- ----------
NONINTEREST INCOME
Service fees 152,252 149,897
Other fee and noninterest income 100,674 48,816
---------- ----------
252,926 198,713
---------- ----------
NONINTEREST EXPENSES
Salaries and employee benefits 1,037,302 799,366
Furniture and fixture expenses 189,307 151,182
Insurance and assessments 92,583 136,306
Professional fees 104,563 88,100
Occupancy 235,283 83,779
Data processing 86,233 81,012
Advertising and promotional 46,321 49,111
Supplies 73,718 48,760
Other 371,633 274,420
---------- ----------
2,236,943 1,712,036
---------- ----------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-5
<PAGE> 86
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1995 1994
---------- --------
<S> <C> <C>
INCOME BEFORE PROVISION FOR INCOME TAXES $1,282,757 $957,584
PROVISION FOR INCOME TAXES 392,201 293,700
---------- --------
NET INCOME $ 890,556 $663,884
========== ========
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE $ 6.10 $ 4.71
========== ========
</TABLE>
F-6
<PAGE> 87
VANCOUVER BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------- ------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1993 -- $-- 136,082 $136,082
PURCHASES OF COMMON STOCK -- -- 965 965
NET INCOME -- -- -- --
ADJUSTMENT RELATING TO
REORGANIZATION -- -- -- --
NET UNREALIZED LOSS ON AVAILABLE-
FOR-SALE SECURITIES -- -- -- --
-- --- -------- --------
BALANCE, December 31, 1994 -- -- 137,047 137,047
PURCHASE OF COMMON STOCK
Exercise of options -- -- 1,877 1,877
Purchase of shares by the employee -- -- 1,281 1,281
stock ownership plan
NET INCOME -- -- -- --
CHANGE IN NET UNREALIZED GAIN
(LOSS) ON AVAILABLE-FOR-SALE
SECURITIES -- -- -- --
-- --- -------- --------
BALANCE, December 31, 1995 -- $-- 140,205 $140,205
== === ======== ========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-7
<PAGE> 88
<TABLE>
<CAPTION>
NET UNREALIZED GAIN TOTAL
UNDIVIDED (LOSS) ON AVAILABLE- STOCKHOLDERS'
SURPLUS PROFITS FOR-SALE SECURITIES EQUITY
------- --------- -------------------- -------------
<S> <C> <C> <C>
$2,907,917 $ 986,546 $ - $4,030,545
32,906 - - 33,871
- 663,884 - 663,884
1,360,925 (1,360,925) - -
- - (76,163) (76,163)
- ---------- ---------- -------- ----------
4,301,748 289,505 (76,163) 4,652,137
55,384 - - 57,261
50,932 - - 52,213
- 890,556 - 890,556
- - 130,389 130,389
- ---------- ---------- -------- ----------
$4,408,064 $1,180,061 $ 54,226 $5,782,556
- ---------- ---------- -------- ----------
</TABLE>
F-8
<PAGE> 89
VANCOUVER BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS RELATED TO OPERATING ACTIVITIES
Net income $ 890,556 $ 663,884
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 173,200 177,412
Provision for loan losses 273,000 230,000
Gain on sale of fixed assets (775) (8,773)
Realized gain on sale of available-for-sale securities (1,959) --
Deferred taxes (18,250) 9,030
Federal Home Loan Bank stock dividend (19,700) (16,100)
Increase (decrease) in cash due to changes in certain assets and liabilities:
Accrued interest receivable (125,063) (134,032)
Other assets (231,202) (282,110)
Accrued interest payable and other liabilities 270,029 83,356
------------ ------------
Net cash provided by operating activities 1,209,836 722,667
------------ ------------
CASH FLOWS RELATED TO INVESTING ACTIVITIES
Net change in loans made to customers (19,169,515) (10,032,854)
Net change in interest bearing deposits 5,798,741 146,266
Purchase of property and equipment (465,714) (331,363)
Proceeds from disposition of property and equipment 164,822 17,788
Purchases of available-for-sale securities (705,125) (1,728,558)
Proceeds from maturity and principal reduction of available-for-sale securities 466,856 613,189
Proceeds from sale of available-for-sale securities 562,482 --
Purchases of held-to-maturity investments (1,202,183) (4,453,516)
Proceeds from maturity and principal reduction of held-to-maturity investments 512,548 1,385,238
Sale of repurchase agreements 600,000 --
------------ ------------
Net cash used in investing activities (13,437,088) (14,383,810)
------------ ------------
CASH FLOWS RELATED TO FINANCING ACTIVITIES
Net change in demand deposits, NOW, and money market accounts 1,652,281 2,474,350
Net change in savings and time certificates 11,465,992 10,087,854
Exercise of stock options and sale of common stock 109,474 33,871
Proceeds from note payable -- 1,500,000
Repayments of note payable (150,000) --
------------ ------------
Net cash provided by financing activities 13,077,747 14,096,075
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 850,495 434,932
CASH AND CASH EQUIVALENTS, beginning of period 2,518,381 2,083,449
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 3,368,876 $ 2,518,381
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash $ 2,910,856 $ 1,693,621
============ ============
Taxes paid in cash $ 306,626 $ 279,322
============ ============
SCHEDULE OF NONCASH ACTIVITIES
Change in unrealized gain (loss) on available-for-sale securities, net of tax $ 130,389 $ (76,163)
============ ============
Transfer of securities from held-to-maturity to the available-for-sale category $ 1,526,194 $ --
============ ============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-9
<PAGE> 90
VANCOUVER BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization - In March 1994, Vancouver Bancorp (Bancorp) was
established for the purpose of becoming a holding company of Bank of Vancouver
(the Bank) by acquiring 100% of its outstanding common stock. This
reorganization was accomplished by each share of common stock of Bank of
Vancouver being converted and exchanged for a share of Bancorp's common stock.
All intercompany activity has been eliminated in the preparation of these
consolidated financial statements.
(b) Nature of operations - The Bank is a state chartered institution
authorized to provide banking services by the State of Washington. Bank of
Vancouver began operations on June 27, 1989. The Bank offers commercial banking
services primarily to small and medium-sized businesses, professionals, and
retail customers in Clark County, Washington.
(c) Management's estimates and assumptions - In preparing the
consolidated financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period. Significant
estimations made by management primarily involve the calculation of the
allowance for loan losses. Actual results could differ significantly from those
estimates.
(d) Investment securities - Vancouver Bancorp adopted the Financial
Accounting Standards Board's Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," as of January 1, 1994. The
pronouncement requires the Bank to specifically identify its investment
securities as "held-to-maturity," "available-for-sale," or "trading accounts."
Accordingly, management has determined that all investment securities held at
December 31, 1995 and 1994, as either "held-to-maturity" or "available-for-sale"
and conform to the following accounting policies:
Securities held-to-maturity - Bonds, notes, and debentures for
which the Bank has the intent and ability to hold to maturity are reported at
cost, adjusted for premiums and discounts that are recognized in interest income
using the interest method over the period to maturity.
Securities available-for-sale - Available-for-sale securities
consist of bonds, notes, debentures, and certain equity securities not
classified as held-to-maturity securities. Unrealized gains and losses, net of
tax, on available-for-sale securities are reported as a net amount in a separate
component of equity until realized. Fair values for investment securities are
based on quoted market prices. Gains and losses on the sale of
available-for-sale securities are determined using the specific-identification
method.
F-10
<PAGE> 91
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
(Continued)
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than temporary,
result in write-downs to their fair value. The write-downs would be included in
earnings as realized losses. Premiums and discounts are recognized in interest
income using the effective interest method over the period to maturity.
(e) Loans net of allowance for loan losses and unearned income - Loans
are stated at the amount of unpaid principal, reduced by an allowance for
estimated losses on loans and unearned income. Interest on loans is calculated
by using the simple-interest method on daily balances of the principal amount
outstanding. The allowance for loan losses is established through a provision
for loan losses charged to expenses. Loans are charged against the allowance for
loan losses when management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes is adequate to
absorb possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the borrower's
ability to pay. Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions, collection efforts
and collateral position, that the borrower's financial condition is such that
collection of interest is doubtful. Loan origination fees and certain direct
origination costs are capitalized and recognized by the effective interest
method as an adjustment to the yield of the related loan.
The Bank adopted the Financial Accounting Standards Board's
Statements No. 114 "Accounting by Creditors for Impairment of a Loan" and No.
118 "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures" as of January 1, 1995. These pronouncements require that impaired
loans be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or at the loan's market price
or the fair value of the collateral if the loan is collateral dependent. The
adoption of these statements did not have a material effect on the consolidated
financial statements.
(f) Property and equipment - Property and equipment are stated at cost,
less accumulated depreciation, computed principally by the straight-line method
over the estimated useful lives of the assets which range from three to five
years for furniture and equipment and 31-1/2 years for building premises.
(g) Income taxes - Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
F-11
<PAGE> 92
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
(Continued)
(h) Net income per share - Earnings per share were computed by dividing
net income by the weighted average number of shares of common stock and common
stock equivalents outstanding for the years ending December 31, 1995 and 1994.
Common stock equivalents include the number of shares that would have been
purchased with the proceeds from the exercise of the options based on the
average price of common stock during the year.
(i) Off-balance-sheet financial instruments - In the ordinary course of
business, the Bank has entered into off-balance-sheet financial instruments
consisting of commitments to extend credit as well as commercial letters of
credit and standby letters of credit. Such financial instruments are recorded in
the financial statements when they are funded or related fees are incurred or
received.
The Financial Accounting Standards Board issued Statement No. 119
"Disclosures about Derivative Financial Instruments and Fair Value of Financial
Instruments" which became effective for the Bank for the year ending December
31, 1995. This pronouncement requires that banks holding derivative financial
instruments, disclose quantitative and qualitative information about the
instruments. As of December 31, 1995, and for the year then ended, the Bank held
no derivative financial instruments.
(j) Fair value of financial instruments - The following methods and
assumptions were used by the Bank in estimating fair values of financial
instruments as disclosed herein:
Cash and cash equivalents - The carrying amounts of cash and
short-term instruments approximate their fair value.
Held-to-maturity and available-for-sale securities - Fair values
for investment securities, excluding restricted equity securities, are based on
quoted market prices. The carrying values of restricted equity securities
approximate fair values.
Loans receivable - For variable-rate loans that reprice frequently
and have no significant change in credit risk, fair values are based on carrying
values. Fair values for certain mortgage loans (for example, one-to-four family
residential), credit card loans, and other consumer loans are based on quoted
market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. Fair values for
commercial real estate and commercial loans are estimated using discounted cash
flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. Fair values for impaired
loans are estimated using discounted cash flow analyses or underlying collateral
values, where applicable.
F-12
<PAGE> 93
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
(Continued)
Deposit liabilities - The fair values disclosed for demand deposits
are, by definition, equal to the amount payable on demand at the reporting date
(that is, their carrying amounts). The carrying amounts of variable-rate,
fixed-term money market accounts and certificates of deposit (CDs) approximate
their fair values at the reporting date. Fair values for fixed-rate CDs are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.
Short-term borrowings - The carrying amounts of federal funds
purchased, borrowings under repurchase agreements, and other short-term
borrowings maturing within 90 days approximate their fair values. Fair values of
other short-term borrowings are estimated using discounted cash flow analyses
based on the Bank's current borrowing rates for similar types of borrowing
arrangements.
Long-term debt - The fair values of the Bank's long-term debt are
estimated using discounted cash flow analyses based on the Bank's current
borrowing rates for similar types of borrowing arrangements.
Accrued interest - The carrying amounts of accrued interest
approximate their fair values.
Off-balance-sheet instruments - The Bank's off-balance-sheet
instruments include unfunded commitments to extend credit and standby letters of
credit. The fair value of these instruments is not considered practicable to
estimate because of the lack of quoted market prices and the inability to
estimate fair value without incurring excessive costs.
(k) Statement of cash flows - Cash equivalents are generally short-term
investments with a maturity of three months or less. Cash and cash equivalents
normally include cash on hand and amounts due from banks.
(l) Reclassifications - Certain reclassifications have been made to the
1994 financial statements to conform with current year presentations.
F-13
<PAGE> 94
NOTE 2 - INVESTMENT SECURITIES
The amortized cost and estimated market values of investments in debt
securities are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
December 31, 1995
- -----------------
Available-for-sale securities:
U.S. Treasury securities and obliga-
tions of U.S. government corpora-
tions and agencies $2,036,370 $ 45,434 $ (159) $2,081,645
State and municipal securities 397,470 7,463 -- 404,933
Mortgage-backed securities and
collateralized mortgage obligations 2,209,965 50,905 (21,519) 2,239,351
---------- --------- ----------- ----------
$4,643,805 $ 103,802 $ (21,678) $4,725,929
========== ========= =========== ==========
Held-to-maturity securities:
U.S. Treasury securities and obliga-
tions of U.S. government corpora-
tions and agencies $ 408,351 $ 33,971 $ -- $ 442,322
State and municipal securities 2,591,733 44,187 (20,807) 2,615,113
Mortgage-backed securities and
collateralized mortgage obligations 4,782,954 19,428 (61,292) 4,741,090
---------- --------- ----------- ----------
$7,783,038 $ 97,586 $ (82,099) $7,798,525
========== ========= =========== ==========
December 31, 1994
- -----------------
Available-for-sale securities:
State and municipal securities $ 203,720 $ -- $ (15,471) $ 188,249
Mortgage-backed securities and
collateralized mortgage obligations 3,207,673 5,942 (105,906) 3,107,709
---------- --------- ----------- ----------
$3,411,393 $ 5,942 $ (121,377) $3,295,958
========== ========= =========== ==========
Held-to-maturity securities:
U.S. Treasury securities and obliga-
tions of U.S. government corpora-
tions and agencies $1,964,375 $ -- $ (86,527) $1,877,848
State and municipal securities 2,057,532 -- (175,304) 1,882,228
Mortgage-backed securities and
collateralized mortgage obligations 4,835,743 1,102 (324,423) 4,512,422
---------- --------- ----------- ----------
$8,857,650 $ 1,102 $ (586,254) $8,272,498
========== ========= =========== ==========
</TABLE>
The amortized cost and estimated market value of debt securities at
December 31, 1995, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers have the right to call
or prepay obligations with or without call or prepayment penalties.
F-14
<PAGE> 95
NOTE 2 - INVESTMENT SECURITIES - (Continued)
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
SECURITIES SECURITIES
------------------ ----------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 508,519 $ 508,360 $ -- $ --
Due after one year through five
years 1,527,851 1,573,285 1,489,855 1,524,103
Due after five years through ten
years 397,470 404,933 1,235,470 1,225,281
Due after ten years -- -- 274,759 308,051
Mortgage-backed securities and
collateralized mortgage obliga-
tions 2,209,965 2,239,351 4,782,954 4,741,090
---------- ---------- ---------- ----------
$4,643,805 $4,725,929 $7,783,038 $7,798,525
========== ========== ========== ==========
</TABLE>
During 1995, pursuant to implementation guidance on accounting for
certain investments in debt and equity securities issued in a Special Report by
the Financial Accounting Standards Board, the Bank reassessed the
appropriateness of its classifications for investment securities. Accordingly,
securities with an amortized cost of $1,526,194 were transferred from the
held-to-maturity category to the available-for-sale category. This resulted in
the recognition of an unrealized gain on available-for-sale securities, net of
tax, of approximately $34,300 at the time of transfer.
As of December 31, 1995 and 1994, investment securities with a book
value of $1,832,443 and $1,450,802, respectively, have been pledged to secure
public deposits and for other purposes required or permitted by law.
NOTE 3 - LOANS
The composition of loan balances are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Commercial $ 10,081,130 $ 8,965,980
Commercial - real estate 20,536,874 15,225,084
Real estate - construction 19,293,548 9,253,365
Real estate - mortgage 9,893,050 7,317,732
Installment 723,559 674,605
Personal lines of credit, credit
cards, and overdraft accounts 882,355 690,261
------------ ------------
61,410,516 42,127,027
Allowance for loan losses (848,207) (551,097)
Unearned loan fees (434,407) (344,543)
------------ ------------
$ 60,127,902 $ 41,231,387
============ ============
</TABLE>
F-15
<PAGE> 96
NOTE 3 - LOANS - (Continued)
Impaired loans of $268,129 at December 31, 1995, have been
recognized in conformity with FASB Statement No. 114 as amended by FASB
Statement No. 118. The investment in impaired loans at December 31, 1995, was
$218,684. The total allowance for loan losses related to these loans was $49,445
on December 31, 1995. Interest income on impaired loans of $20,285 was
recognized for cash payments received in 1995. Had the impaired loans performed
according to their original terms, additional interest income of $18,657 would
have been recognized during 1995.
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
--------- ---------
<S> <C> <C>
Balance at beginning of period $ 551,097 $ 420,421
Provision for loan losses 273,000 230,000
Loans charged off (4,783) (100,597)
Recoveries 28,893 1,273
--------- ---------
$ 848,207 $ 551,097
========= =========
</TABLE>
NOTE 5 - PROPERTY AND EQUIPMENT
The major classifications of property and equipment are summarized
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Land $ -- $ 75,900
Building and improvements 662,875 649,600
Furniture and equipment 697,058 464,250
Computer software 136,752 112,114
Bank-owned vehicles 70,488 61,691
----------- -----------
1,567,173 1,363,555
Less accumulated depreciation (645,391) (521,731)
----------- -----------
$ 921,782 $ 841,824
=========== ===========
</TABLE>
F-16
<PAGE> 97
NOTE 6 - TIME DEPOSITS
The maturity range for time certificates of deposit of $100,000 or
more and all other time deposits as of December 31, 1995, is as follows:
<TABLE>
<CAPTION>
TIME
CERTIFICATES ALL OTHER
OF $100,000 TIME
OR MORE DEPOSITS
------------ -----------
<S> <C> <C>
Due in three months or less $ 2,672,827 $ 1,469,903
Due after three months through one year 1,243,018 6,679,176
Due after one year through five years 423,392 3,553,315
Due after five years 352,139 2,137,986
----------- -----------
$ 4,691,376 $13,840,380
=========== ===========
</TABLE>
NOTE 7 - REPURCHASE AGREEMENTS
As of December 31, 1995, the Bank had sold $600,000 of U.S.
government securities under agreements to repurchase. The repurchase agreements
provide for interest from 4.90% to 5.50%; the securities sold yield interest
from 5.25% to 7.25%. Securities sold and the corresponding liabilities were as
follows:
<TABLE>
<CAPTION>
MATURITY CARRYING MARKET REPURCHASE
SECURITIES SOLD TERM VALUE VALUE LIABILITY
- --------------- -------- -------- ------ ----------
<S> <C> <C> <C> <C>
U.S. Treasury notes Up to six months $704,963 $707,798 $600,000
======== ======== =======
</TABLE>
NOTE 8 - INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------
1995 1994
--------- --------
<S> <C> <C>
Currently payable federal taxes $ 410,451 $284,670
Deferred tax (benefit) liability (18,250) 9,030
--------- --------
Provision for income taxes $ 392,201 $293,700
========= ========
</TABLE>
The components of the deferred tax benefit (liability) consisted of
the following:
F-17
<PAGE> 98
NOTE 8 - INCOME TAXES - (Continued)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1995 1994
-------- --------
<S> <C> <C>
Excess loan loss provision not
deductible for tax purposes $ 81,900 $ 51,850
Deferred loan fees recognized for tax
reporting (49,595) (34,000)
Amortization of organization costs (1,040) (8,400)
Difference between book and tax
depreciation methods 1,347 (2,000)
Difference between accrual and cash
basis for tax reporting (11,394) (22,050)
Other (2,968) 5,570
-------- --------
Deferred tax benefit (liability) $ 18,250 $ (9,030)
======== ========
</TABLE>
The net deferred tax asset at December 31, 1995, includes the
following components:
<TABLE>
<S> <C>
Deferred tax asset $ 317,110
Deferred tax liability (123,922)
---------
$ 193,188
=========
</TABLE>
NOTE 9 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following table shows the estimated fair value and the related
carrying values of the Bank's financial instruments at December 31, 1995:
<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
----------- -----------
<S> <C> <C>
Cash and due from financial
institutions $ 3,368,876 $ 3,368,876
Interest earning deposits due from
depositing institutions $ 109,233 $ 109,233
Securities available-for-sale $ 4,643,805 $ 4,725,929
Securities held-to-maturity $ 7,783,038 $ 7,798,526
Loans, net of allowance for loan
losses $60,127,902 $60,286,954
Accrued interest receivable $ 468,962 $ 468,962
Demand deposits $11,083,838 $11,083,838
NOW and money market accounts $ 8,779,317 $ 8,779,317
Savings and time certificate accounts $46,118,578 $46,287,838
Time certificate accounts of $100,000
or more $ 4,691,376 $ 4,747,424
Accrued interest payable $ 186,323 $ 186,323
Repurchase agreements $ 600,000 $ 600,000
Note payable $ 1,350,000 $ 1,350,000
</TABLE>
F-18
<PAGE> 99
NOTE 9 - FAIR VALUES OF FINANCIAL INSTRUMENTS - (Continued)
While these estimates of fair value are based on management's
judgment of the most appropriate factors, there is no assurance that were the
Bank or Bancorp to have disposed of such items at December 31, 1995, the
estimated fair values would necessarily have been achieved at that date, since
market values may differ depending on various circumstances. The estimated fair
values at December 31, 1995, should not necessarily be considered to apply at
subsequent dates.
In addition, other assets and liabilities of the Bank and Bancorp
that are not defined as financial instruments are not included in the above
disclosures, such as property and equipment. Also, nonfinancial instruments
typically not recognized in the financial statements nevertheless may have value
but are not included in the above disclosures. These include among other items,
the estimated earnings power of core deposit accounts, the earnings potential of
loan servicing rights, customer goodwill, and similar items.
NOTE 10 - TRANSACTIONS WITH RELATED PARTIES
Certain directors, executive officers, and principal stockholders
are customers of and have had banking transactions with the Bank, and the Bank
expects to have such transactions in the future. All loans and commitments
included in such transactions were made in compliance with applicable laws on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with other persons and do not
involve more than the normal risk of collectibility or present any other
unfavorable features. The amount of loans outstanding to directors, executive
officers, principal stockholders, and companies with which they are associated
was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
--------- ---------
<S> <C> <C>
Beginning balance $ 798,879 $ 333,885
Loans made 250,000 502,027
Loans paid (403,729) (37,418)
Net change in Visa borrowing (1,065) 385
--------- ---------
$ 644,085 $ 798,879
========= =========
</TABLE>
NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business to meet the financing needs of its
customers, the Bank is a party to financial instruments with off-balance-sheet
risk. These financial instruments include commitments to extend credit and the
issuance of letters of credit. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the statement of financial position. The contract amounts of those instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments.
F-19
<PAGE> 100
NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - (Continued)
The Bank's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend credit
and letters of credit written is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. Unless
noted otherwise, the Bank does not require collateral or other security to
support financial instruments with credit risk.
<TABLE>
<CAPTION>
CONTRACTUAL AMOUNT
AS OF DECEMBER 31,
---------------------------
1995 1994
----------- ----------
<S> <C> <C>
Financial instruments whose contract amounts represent credit
risk:
Commitments to extend credit:
Commercial real estate and construction
loan commitments $ 7,003,846 $2,879,374
Revolving lines secured by residential
properties 237,447 180,552
Credit card lines of credit 922,573 836,540
Other unused commitments 3,049,428 2,562,748
Letters of credit 209,306 191,100
----------- ----------
$11,422,600 $6,650,314
=========== ==========
</TABLE>
Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's credit
evaluation of the counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, and income-producing
properties.
Letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third-party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
F-20
<PAGE> 101
NOTE 12 - CONCENTRATIONS OF CREDIT RISK
All of the Bank's loans, commitments, commercial letters of credit,
and standby letters of credit have been granted to customers in the Bank's
market area. The majority of such customers are also depositors of the Bank.
Investments in state and municipal securities involve governmental entities
within the Bank's geographical region. The concentrations of credit by type of
loan are set forth in Note 3. The distribution of commitments to extend credit
approximates the distribution of loans outstanding. Commercial and standby
letters of credit were granted primarily to commercial borrowers as of December
31, 1995. The Bank's loan policy does not allow the extension of credit to any
single borrower or group of related borrowers in excess of $300,000 without
approval from the Board of Director's loan committee.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
(a) Operating lease commitments - The approximate annual commitment for
rentals under noncancellable operating leases is summarized as follows:
<TABLE>
<CAPTION>
LEASE SUB-LEASE NET
YEARS ENDING DECEMBER 31, COMMITMENT INCOME COMMITMENT
------------------------- ---------- --------- ----------
<S> <C> <C> <C>
1996 $169,515 $ 75,000 $ 94,515
1997 147,924 78,125 69,799
1998 147,924 81,250 66,674
1999 147,924 87,500 60,424
Thereafter 228,024 87,500 140,524
-------- -------- --------
$841,311 $409,375 $431,936
======== ======== ========
</TABLE>
Rental expense for all operating leases was $106,109 and $10,250
for the periods ended December 31, 1995 and 1994, respectively.
(b) Legal contingencies - In the ordinary course of business, the Bank
may become involved in litigation arising from normal bank activities. In the
opinion of management and legal counsel, the ultimate disposition of these
actions will not have a material adverse effect on the Bank's financial position
or results of operations.
NOTE 14 - CREDIT ARRANGEMENTS AND NOTE PAYABLE
The Bank is a member of the Federal Home Loan Bank (FHLB) of
Seattle. As a member, the Bank has a committed line of credit up to 10% of total
assets. During 1994, the collateral arrangement was changed from physical
possession to a blanket pledge agreement. Borrowings generally provide for
interest at the then current published rates. The Bank had no borrowings
outstanding from the FHLB at December 31, 1995 or 1994.
F-21
<PAGE> 102
NOTE 14 - CREDIT ARRANGEMENTS AND NOTE PAYABLE - (Continued)
In December 1994, the Bancorp obtained a $1,500,000 note from
Security State Bank. The note bears interest at prime (8.5% at December 31,
1994) and the final principal payment is due on December 15, 1999. Interest is
paid quarterly, beginning on March 15, 1995, and principal is paid semi-annually
beginning on June 15, 1995. The loan is secured by Bank of Vancouver stock.
The scheduled repayment of long-term debt is as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31, AMOUNT
------------------------- ------
<S> <C>
1996 $ 225,000
1997 375,000
1998 375,000
1999 375,000
----------
$1,350,000
==========
</TABLE>
NOTE 15 - STOCK OPTION PLANS
The Board of Directors and Stockholders adopted an Employee Stock
Option Plan (the "Plan") in June 1989 for the benefit of the Bank's and
Bancorp's key employees. Under the Plan, which offers both incentive and
nonqualified stock options, the maximum number of shares which may be optioned
and sold is 18,552 shares of Bancorp's outstanding common stock, subject to
adjustment for changes in the Bank's capitalization. Options granted under the
Plan are exercisable at any time by the grantee up to the 10th anniversary of
the date of the grant. The option price for the shares of common stock to be
issued under the Plan is established by the Board of Directors or its committee,
but, in the case of incentive stock options, will be no less than the fair
market value of the stock on the date of grant.
In October 1989, the Bank entered into incentive and nonqualified
stock option agreements with its President, pursuant to the Plan. Under the
incentive stock option agreement, the President was given options to purchase
4,000 shares of the Bank's common stock at $25 per share for a 10-year period
from the date of grant. Under the nonqualified stock option agreement, the
President was given options to purchase up to 5,914 shares of common stock for
$22 per share also for a 10-year period. As of December 31, 1995, the President
had exercised no options to acquire Bank or Bancorp stock.
In December 1992, an Incentive Stock Option and Nonstatutory Stock
Option Plan was approved and adopted. This Plan provides nonstatutory stock
options for both directors and employees as well as incentive stock options for
employees of Bancorp. The maximum number of shares optioned and sold under this
Plan is 30,000, subject to adjustment for changes in Bancorp's capitalization.
Options granted under the Plan will be evidenced by Stock Option Agreements
stipulating terms and conditions under which the options have been granted. All
options under the Plan are exercisable by the grantees up to the 10th
anniversary of the date of grant. However, incentive stock options do not become
exercisable for a period of one year after the date of grant. In no event will
the shares granted under either the nonstatutory or incentive.
F-22
<PAGE> 103
NOTE 15 - STOCK OPTION PLANS - (Continued)
options, be exercisable at prices less than 100% of the fair market value of the
stock at the time of grant.
In February 1993, the President and certain officers were granted
incentive stock options to acquire 5,342 shares of common stock at a price of
$30.51 per share. Simultaneously, nonstatutory stock options for 11,262 shares
of common stock at $30.51 per share were granted to directors of the Bank. In
December 1993, other officers were granted incentive options to acquire 3,128
shares of common stock at a price of $35.10. In June 1995, nonstatutory options
to acquire 1,877 shares of common stock at a price of $40.76 were granted to a
Director.
In 1995, nonstatutory stock options for 1,877 shares were exercised
by a Bank director and resulted in the recognition of $57,261 of additional
capital.
The following table summarizes options granted and exercisable as
of December 31, 1995:
<TABLE>
<CAPTION>
NUMBER AMOUNT
OF SHARES PRICE EXERCISABLE
--------- ----- -----------
<S> <C> <C> <C>
Incentive stock options:
October 1989 4,000 $25.00 $100,000
February 1993 5,342 $30.51 162,984
December 1993 3,128 $35.10 109,793
Nonqualified/nonstatutory
stock options:
October 1989 5,914 $22.00 130,108
February 1993 11,262 $30.51 343,604
June 1995 1,877 $40.76 76,506
--------
$922,995
========
</TABLE>
NOTE 16 - EMPLOYEE BENEFIT PLANS
Effective January 1, 1992, the Bank adopted a Salary Savings Plan
which allowed employees to defer certain amounts of compensation for income tax
purposes under Section 401(k) of the Internal Revenue Code. The Plan was amended
and incorporated into an Employee Stock Ownership Plan (KSOP) on November 18,
1992. The KSOP is a deferred compensation plan in which Bank contributions are
used to provide participating employees with stock in the Bank and in which
employee contributions are made on a before-tax basis pursuant to provisions
under Internal Revenue Code Section 401(k). Essentially all full-time employees
over the age of 21 and meeting length of service requirements are eligible to
participate in the Plan.
Employees may elect to contribute and defer, within statutory limits, up to 15%
of their annual compensation into the Plan. Their contributions and those of the
Bank will be invested by Plan Trustees into either an equity or general
investment fund. The equity fund will focus on the
F-23
<PAGE> 104
NOTE 16 - EMPLOYEE BENEFIT PLANS - (Continued)
acquisition of the Bancorp's common stock. The general investment fund will be a
diversified portfolio.
Employer contributions to the Plan are all discretionary and
consist of basic, optional, and matching allocations. Employee contributions are
fully vested at all times. Basic and optional contributions are primarily
invested in Bancorp stock and fully vested when participating employees have six
or more years of service. Matching contributions relate to employee salary
reduction elections and contributions to the Plan. Matching contributions also
vest when participating employees have six or more years of service. For the
years ended December 31, 1995 and 1994, the Bank contributed cash of $36,502 and
$24,571, respectively, into the KSOP.
During 1992, the Bank also adopted and implemented an Executive
Supplemental Income (ESI) Plan. The Plan was established to provide retirement
benefits for officers key to the Bank's growth and profitability. The Plan,
which covers certain executive officers, is being indirectly funded through the
purchase of corporate owned life insurance. The accumulated asset value of
acquired insurance policies will serve to pay future retirement benefits of
covered executives. However, these future retirement benefits are earned through
the working lifetime of covered executives and, once fully vested, are only
equal to the excess of the cash value of the corporate life insurance policy
over premiums paid by the Bank. As of December 31, 1995, the cash value of the
policies approximated the total premiums paid and, therefore, no employee
benefit obligation has been accrued.
As of December 31, 1995 and 1994, the cash surrender value of the
corporate owned life insurance policies was $616,192 and $448,740, respectively.
NOTE 17 - OTHER OPERATING EXPENSES
Other operating expenses consist of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------
1995 1994
-------- --------
<S> <C> <C>
Taxes and fees $ 97,593 $ 62,811
Directors' fees 72,402 55,375
Correspondent bank service charges 32,451 32,443
Postage 27,343 21,641
Armored car and courier 14,130 17,172
Dues, membership, and subscriptions 17,997 15,819
Conventions and meetings 9,417 14,009
Telephone 16,099 10,459
Contributions 12,690 9,890
Education and staff development 11,940 9,114
Other miscellaneous expenses 59,571 25,687
-------- --------
$371,633 $274,420
======== ========
</TABLE>
NOTE 18 - REGULATORY MATTERS
The Bank is required to maintain minimum amounts of capital to
total "risk weighted" assets, as defined by banking regulators. At December 31,
1995, the Bank is required to have
F-24
<PAGE> 105
minimum Tier 1 and total capital ratios of 4.00% and 8.00%, respectively. The
Bank's actual ratios at that date were 11.45% and 12.70%, respectively.
NOTE 19 - SUBSEQUENT EVENT
On February 15, 1996, Bancorp entered into a definitive agreement
to merge with West Coast Bancorp (WCB). The agreement provides that, upon
consummation of the merger, stockholders of Bancorp will receive WCB stock worth
$11.6 million. Based upon the terms of the merger agreement, the exchange ratio
is subject to the average price of WCB stock over a ten-day period prior to the
closing of the merger. While it is anticipated that the merger will be completed
in mid-1996, the acquisition is subject to certain conditions, including the
approval of Bancorp's shareholders. If completed, it is expected the merger will
be accounted for using the pooling of interests method. Transactions accounted
for as a pooling of interests reflect the assets, liabilities, stockholders'
equities, and results of operations of the separate entities as though the
entities had been combined as of the earliest date reported.
F-25
<PAGE> 106
GLOSSARY OF KEY TERMS
BHCA................................. Bank Holding Company Act of 1956, as
amended.
BANK................................. Bank of Vancouver.
CFA.................................. Columbia Financial Advisors, Inc., VB's
financial advisors.
CLOSING.............................. Closing of the Merger contemplated in
the Merger Agreement.
CODE................................. Internal Revenue Code of 1986, as
amended.
DISSENTING SHARES.................... Those shares of VB Common Stock as to
which shareholders have perfected their
dissenters' rights pursuant to RCW
23B.13.
EFFECTIVE DATE....................... The date Closing of the Merger will
occur.
EXCHANGE ACT......................... Securities Exchange Act of 1934, as
amended, and related rules and
regulations.
EXCHANGE AGENT....................... Individual designated by WCB and VB to
handle the exchange of VB Common Stock
for WCB Common Stock or cash (in the
case of holders that would otherwise be
entitled to a fractional share of WCB
Common Stock).
FDIC................................. Federal Deposit Insurance Corporation.
GAAP................................. Generally accepted accounting
principles, consistently applied.
HB................................... HB Acquisition Corporation, a Washington
bank holding company and wholly owned
subsidiary of WCB.
MERGER............................... The merger of VB with and into HB in
accordance with the Merger Agreement.
MERGER AGREEMENT..................... The Plan and Agreement of Reorganization
and Merger, dated as of February 15,
1996 among WCB, HB and VB.
OBCA................................. The Oregon Business Corporations Act.
OREGON DEPARTMENT.................... The Oregon Department of Consumer and
Business Services.
ORS.................................. Oregon Revised Statutes.
PRICING PERIOD....................... The ten consecutive trading days ending
on and including the fifth trading day
preceding the Effective Date.
G - 1
<PAGE> 107
PROSPECTUS/PROXY STATEMENT........... Prospectus/Proxy Statement which is to
be mailed to VB's shareholders, together
with any amendments and supplemental and
supplementals to such prospectus/proxy
statement.
PURCHASE PRICE....................... The aggregate consideration payable by
WCB to VB's shareholders in connection
with the Merger, with an aggregate value
equal to $11,581,000.
REGISTRATION STATEMENT............... Registration Statement on Form S-4, of
which this Prospectus/Proxy Statement
forms a part, filed by WCB with the SEC
for the purpose of registering shares of
WCB Common Stock to be issued in the
Merger.
REGULATORY APPROVALS................. The required regulatory approvals of the
transaction by the FRB and the
Washington Director.
SEC.................................. Securities and Exchange Commission.
SECURITIES ACT....................... Securities Act of 1933, as amended, and
related rules and regulations.
STOCK OPTION AGREEMENT............... Stock Option Agreement between WCB and
VB, dated as of February 15, 1996.
TERMINATION DATE..................... A date after October 31, 1996 in which
Closing has not occurred.
RCW.................................. Revised Code of Washington.
VB................................... Vancouver Bancorp, a Washington bank
holding company.
VB COMMON STOCK...................... VB's Common Stock, $1.00 par value per
share.
VB FINANCIAL SATEMENTS............... VB's audited consolidated statements of
financial condition as of December 31,
1995 and 1994, and the related audited
statements of income, changes in cash
flows and stockholders' equity for each
of the years ended December 31, 1995 and
1994.
WBCA................................. The Washington Business Corporations
Act.
WCB.................................. West Coast Bancorp, an Oregon bank
holding company.
WCB COMMON STOCK..................... WCB's Common Stock, no par value.
WCB FINANCIAL STATEMENTS............. WCB's audited consolidated statements of
financial condition as of December 31,
1995 and 1994, and the related audited
statements of income, changes in cash
flows and shareholders' equity for each
of the years ended December 31, 1995 and
1994.
WASHINGTON DIRECTOR.................. The Director of the Washington State
Department of Financial Institutions.
G - 2
<PAGE> 108
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
WCB's Articles of Incorporation provide for indemnification, to the
fullest extent permissible under the OBCA, of its directors against all expense,
liability, and loss (including attorneys' fees incurred by him or her by reason
of or arising from the fact that he or she is or was a director of WCB or is or
was serving at WCB's request as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, employee benefit plan, or other enterprise, and these indemnification
rights continue as to a person who has ceased to be a director, officer ,
partner, trustee, employee, or agent and inure to the benefit of his or her
heirs, executors, and administrators. WCB's Articles of Incorporation authorize
WCB, through its Bylaws, and the WCB Board to provide indemnification to WCB's
officers, employees, and agents, to the extent permitted by law. WCB's Bylaws
provide that WCB will indemnify its directors and officers to the full extent
permitted by the OBCA. However, WCB will not provide indemnification when (a) a
director or officer commits intentional misconduct or knowingly violates the
law; (b) a director or officer is adjudged liable to WCB in a proceeding by or
in the right of WCB; or (c) a director or officer is adjudged liable in any
proceeding charging improper personal benefit on the basis that the director or
officer improperly received a personal benefit. Indemnification rights and
procedures, including entitlements to advanced expenses, are set forth in more
detail in WCB's Bylaws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The exhibits are listed on the accompanying "Exhibit Index".
(b) Financial Statement Schedules.
(c) The opinion of the financial advisor is set forth as Appendix C to
this Prospectus/Proxy Statement
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to;
(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and
(iii) Include any additional or changed information on the plan
of distribution;
II-1
<PAGE> 109
(2) For determining liability under the Securities Act, to treat
each such post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(b) To advise all directors and officers that insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
(c) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE> 110
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lake Oswego, State of
Oregon on April 19, 1996.
WEST COAST BANCORP
By: /s/ Rodney B. Tibbatts
-------------------------------------------
Rodney B. Tibbatts
Co-President and Co-Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
and appoints Victor L. Bartruff, Rodney B. Tibbatts, Donald A. Kalkofen and Cora
A. Hallauer, and each of them, with full power of substitution and full power to
act without the other, as his true and lawful attorney-in-fact and agent to act
in his name, place and stead and to execute in the name and on behalf of each
person, individually and in each capacity stated below, and to file any and all
amendments to this Registration Statement, including any and all post-effective
amendments.
Pursuant to the requirements of the Securities Act, this Power of
Attorney has been signed by the following persons in the capacities indicated,
on the 19th day of April, 1996.
Signature Title
/s/ Victor L. Bartruff Co-President and Co-Chief Executive Officer
- ---------------------------- and Director (Co-Principal Executive Officer)
Victor L. Bartruff
/s/ Rodney B. Tibbatts Co-President and Co-Chief Executive Officer
- ---------------------------- and Director (Co-Principal Executive Officer)
Rodney B. Tibbatts
/s/ Donald A. Kalkofen Treasurer and Chief Financial Officer
- ---------------------------- (Principal Financial and Accounting Officer)
Donald A. Kalkofen
/s/ Lester D. Green Chairman of the Board
- ----------------------------
Lester D. Green
/s/ Gary D. Putnam Vice Chairman of the Board
- ----------------------------
Gary D. Putnam
II-3
<PAGE> 111
/s/ Lloyd D. Ankeny Director
- ----------------------------
Lloyd D. Ankeny
/s/ Phillip G. Bateman Director
- ----------------------------
Phillip G. Bateman
Director
- ----------------------------
Chester C. Clark
Director
- ----------------------------
Stanley M. Green
/s/ William B. Loch Director
- ----------------------------
William B. Loch
/s/ Jack E. Long Director
- ----------------------------
Jack E. Long
/s/ C. Douglas McGregor Director
- ----------------------------
C. Douglas McGregor
/s/ Robert D. Morrison Director
- ----------------------------
Robert D. Morrison
/s/ J. F. Ouderkirk Director
- ----------------------------
J. F. Ouderkirk
II-4
<PAGE> 112
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
2.1 Plan and Agreement of Reorganization and Merger among WCB, HB and
VB dated as of February 15, 1996, as amended (included in this
Registration Statement as Appendix A to the Prospectus/Proxy
Statement, which is incorporated herein by reference).
5.1 Opinion of Graham & Dunn, P.C. as to the legality of securities.
8.1 Opinion of Graham & Dunn, P.C. as to federal income tax
consequences.
10.1 Stock Option Agreement between WCB and VB dated as of February
15, 1996 (included in this Registration Statement as Appendix B
to the Prospectus/Proxy Statement).
10.2 Employment Agreement between VB and Lee S. Stenseth, ratified by
WCB, dated as of February 15, 1996.
10.3 Form of Noncompetition Agreement among WCB, VB and each director
of VB, respectively, dated as of February 15, 1996.
23.1 Consent of Graham & Dunn, P.C. (contained in its opinion filed as
Exhibit 5.1).
23.2 Consent of Graham & Dunn, P.C. as to its tax opinion.
23.3 Consent of Arthur Andersen LLP, WCB's independent auditors.
23.4 Consent of Moss Adams LLP, VB's independent auditors.
23.5 Consent of Columbia Financial Advisors, Inc. (contained in its
opinion included in this Registration Statement as Appendix D to
the Prospectus/Proxy Statement).
24.1 Power of Attorney (included in signature page to Registration
Statement) and certified resolutions of the WCB Board.
99.1 Opinion of Columbia Financial Advisors, Inc. (included in this
Registration Statement as Appendix D to the Prospectus/Proxy
Statement).
99.2 Form of proxy to be mailed to the shareholders of VB.
99.3 Rule 438 Consent of James J. Pomajevich.
- -------------------------
II-5
<PAGE> 113
APPENDIX A
================================================================================
PLAN AND AGREEMENT OF REORGANIZATION AND MERGER
BETWEEN
WEST COAST BANCORP,
HB ACQUISITION CORPORATION,
AND
VANCOUVER BANCORP
================================================================================
DATED AS OF FEBRUARY 15, 1996
<PAGE> 114
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. TERMS OF TRANSACTION........................... 2
1.1. Transaction...................................................... 2
1.2. Merger........................................................... 2
1.2.1. Closing of the Merger.......................... 3
1.2.2. The Bank....................................... 3
1.3. Consideration.................................................... 3
1.3.1. Amount of Consideration........................ 3
1.3.2. Form of Consideration.......................... 4
1.3.3. Average Closing Price.......................... 4
1.3.4. Daily Sales Price.............................. 4
1.3.5. No Fractional Shares........................... 4
1.3.6. Effect on HB Shares............................ 4
1.3.7. Options........................................ 5
1.3.8. Certificates................................... 5
1.4. Payment to Dissenting Shareholders............................... 6
1.5. Alternative Structures........................................... 6
1.6. Letter of Transmittal............................................ 7
1.7. Undelivered Certificates......................................... 7
1.8. Stock Option Agreement........................................... 7
SECTION 2. CLOSING OF THE TRANSACTION..................... 7
2.1. Closing.......................................................... 7
2.2. Events of Closing................................................ 8
2.3. Place of Closing................................................. 8
SECTION 3. REPRESENTATIONS AND WARRANTIES................. 8
3.1. Representations and Warranties of WCB, HB, and VB................ 8
3.1.1. Corporate Organization and Qualification....... 8
</TABLE>
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<PAGE> 115
<TABLE>
<S> <C>
3.1.2. Subsidiaries..................................... 9
3.1.3. Capital Stock.................................... 9
3.1.4. Corporate Authority.............................. 12
3.1.5. Reports and Financial Statements................. 12
3.1.6. Absence of Certain Events and Changes............ 15
3.1.7. Material Agreements.............................. 15
3.1.8. Knowledge as to Conditions....................... 16
3.1.9. Brokers and Finders.............................. 16
3.2. Additional Representations and Warranties of VB.................... 16
3.2.1. Governmental Filings; No Violations.............. 16
3.2.2. Asset Classification............................. 17
3.2.3. Properties....................................... 17
3.2.4. Compliance with Laws............................. 18
3.2.5. Litigation....................................... 19
3.2.6. Taxes............................................ 19
3.2.7. Insurance........................................ 21
3.2.8. Labor Matters.................................... 21
3.2.9. Employee Benefits................................ 21
3.2.10. Environmental Matters............................ 25
3.3. Exceptions to Representations and Warranties....................... 27
3.3.1. Disclosure of Exceptions......................... 27
3.3.2. Nature of Exceptions............................. 27
SECTION 4. CONDUCT AND TRANSACTIONS BEFORE CLOSING.......... 28
4.1. Conduct of VB's Business Before Closing............................ 28
4.1.1. Availability of VB's Books, Records and
Properties....................................... 28
4.1.2. Ordinary and Usual Course........................ 28
4.1.3. Conduct Regarding Representations and
Warranties....................................... 29
</TABLE>
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<PAGE> 116
<TABLE>
<S> <C>
4.1.4. Maintenance of Properties........................ 29
4.1.5. Preservation of Business Organization............ 30
4.1.6. Senior Management................................ 30
4.1.7. Compensation..................................... 30
4.1.8. Update of Financial Statements................... 30
4.1.9. No Solicitation.................................. 31
4.1.10. Status of Title/Leasehold Interests.............. 31
4.1.11. Review of Loans.................................. 31
4.2. Registration Statement or Fairness Hearing......................... 31
4.2.1. Registration Statement........................... 32
4.2.2. Fairness Hearing................................. 33
4.3. Submission to Regulatory Authorities............................... 34
4.4. Announcements...................................................... 34
4.5. Consents........................................................... 34
4.6. Further Actions.................................................... 35
4.7. Notice............................................................. 35
4.8. Confidentiality.................................................... 35
4.9. Affiliate Letters.................................................. 35
4.10. Update of Financial Statements........................................ 35
4.11. Availability of WCB's Books, Records and Properties.................. 36
4.12. VB Debt Outstanding.................................................. 36
SECTION 5. APPROVALS AND CONDITIONS......................... 36
5.1. Required Approvals................................................. 36
5.2. Conditions to Obligations of WCB and HB............................ 36
5.2.1. Representations and Warranties................... 36
5.2.2. Compliance....................................... 37
5.2.3. No Material Adverse Effect....................... 37
5.2.4. Financial Condition.............................. 37
</TABLE>
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<TABLE>
<S> <C>
5.2.5. Release of Pledge................................ 38
5.2.6. No Change in Loan Review......................... 38
5.2.7. No Governmental Proceedings...................... 38
5.2.8. Approval by Counsel.............................. 38
5.2.9. Receipt of Title Policy.......................... 38
5.2.10. Corporate and Shareholder Action................. 38
5.2.11. Tax Opinion...................................... 38
5.2.12. Opinion of Counsel............................... 39
5.2.13. Cash Paid........................................ 39
5.2.14. Affiliate Letters................................ 39
5.2.15. Registration Statement/Fairness Hearing.......... 40
5.2.16. Consents......................................... 40
5.2.17. Fairness Opinion................................. 40
5.2.18. VB Director to Serve on WCB Board................ 40
5.2.19. Accounting Treatment............................. 40
5.2.20. Solicitation of Employees........................ 40
5.2.21. Other Matters.................................... 40
5.3. Conditions to VB's Obligations..................................... 41
5.3.1. Representations and Warranties................... 41
5.3.2. Compliance....................................... 41
5.3.3. No Material Adverse Effect....................... 41
5.3.4. No Governmental Proceedings...................... 41
5.3.5. Corporate and Shareholder Action................. 41
5.3.6. Tax Opinion...................................... 41
5.3.7. Opinion of Counsel............................... 41
5.3.8. Cash Paid........................................ 42
5.3.9. Registration Statement........................... 42
5.3.10. VB Director to Serve on WCB Board................ 43
</TABLE>
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<TABLE>
<S> <C>
5.3.11. Approval by Counsel.............................. 43
5.3.12. Other Matters.................................... 43
SECTION 6. DIRECTORS, OFFICERS AND EMPLOYEES................ 43
6.1. Directors.......................................................... 43
6.2. Employment Agreement............................................... 43
6.3. Director and Ex-officio Member Appointed........................... 43
6.4. Employees.......................................................... 44
6.5. Employee Benefit Issues............................................ 44
6.5.1. Comparability of Benefits........................ 44
6.5.2. Transfer or Merger of Group Plan................. 44
6.5.3. No Contract Created.............................. 44
SECTION 7. TERMINATION OF AGREEMENT AND ABANDONMENT
OF TRANSACTION................................... 44
7.1. Termination by Reason of Lapse of Time............................. 44
7.2. Other Grounds for Termination...................................... 45
7.2.1. Mutual Consent................................... 45
7.2.2. Conditions of VB Not Met......................... 45
7.2.3. VB Fails to Recommend Stockholder Approval or
Triggering Event Occurs.......................... 45
7.2.4. Conditions of WCB or HB Not Met.................. 45
7.2.5. Decline in Value of WCB Stock.................... 45
7.2.6. Impracticability................................. 47
7.3. Cost Allocation Upon Termination................................... 48
SECTION 8. MISCELLANEOUS.................................... 48
8.1. Notices............................................................ 48
8.2. Waivers and Extensions............................................. 48
8.3. General Interpretation............................................. 49
8.4. Construction and Execution in Counterparts......................... 49
8.5. Survival of Representations, Warranties, and Covenants............. 49
</TABLE>
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<PAGE> 119
<TABLE>
<S> <C>
8.6. Attorneys' Fees and Costs.......................................... 49
8.7. Arbitration........................................................ 50
8.8. Governing Law...................................................... 50
8.9. Severability....................................................... 50
SECTION 9. AMENDMENTS....................................... 50
9.1. Board Action....................................................... 50
</TABLE>
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<PAGE> 120
SCHEDULES:
SCHEDULE 1 Exceptions to Representations and Warranties
SCHEDULE 2 Offices
SCHEDULE 3 Subsidiaries
SCHEDULE 4 WCB and VB Stock Plans
SCHEDULE 5 Material Contracts
SCHEDULE 6 VB's Required Third Party Consents
SCHEDULE 7 Asset Classification List
SCHEDULE 8 VB's Property Encumbrances
SCHEDULE 9 VB's and the Bank's Offices and Branches
SCHEDULE 10 VB's Compliance with Laws
SCHEDULE 11 VB's Litigation Disclosure
SCHEDULE 12 VB's and The Bank's Insurance Policies
SCHEDULE 13 VB's Employee Benefit Plans
SCHEDULE 14 Index Group
[SCHEDULES NOT INCLUDED BUT ARE AVAILABLE UPON REQUEST]
-vii-
<PAGE> 121
INDEX OF
DEFINITIONS
================================================================================
TERMS SECTION
- --------------------------------------------------------------------------------
Acquisition Proposal 7.2.5
- --------------------------------------------------------------------------------
Agreement Intro. Paragraph
- --------------------------------------------------------------------------------
Asset Classification 3.2.2
- --------------------------------------------------------------------------------
Average Closing Price 1.3.3
- --------------------------------------------------------------------------------
Bank Recital A
- --------------------------------------------------------------------------------
BHCA Recital A
- --------------------------------------------------------------------------------
Closing 1.2.1
- --------------------------------------------------------------------------------
Combined Corporation Recital B.1
- --------------------------------------------------------------------------------
Compensation Plans 3.2.9.(b)
- --------------------------------------------------------------------------------
Continuing Employees 6.4
- --------------------------------------------------------------------------------
Contracts 3.2.1.(b)
- --------------------------------------------------------------------------------
Core Deposits 5.2.4.(b)
- --------------------------------------------------------------------------------
Daily Sales Price 1.3.4
- --------------------------------------------------------------------------------
Determination Date 7.2.5.(a)
- --------------------------------------------------------------------------------
Dissenting Shares 1.4
- --------------------------------------------------------------------------------
Effective Date 2.1
- --------------------------------------------------------------------------------
Employees 3.2.9.(b)
- --------------------------------------------------------------------------------
Environmental Laws 3.2.10.(a)(2)
- --------------------------------------------------------------------------------
ERISA 3.2.9
- --------------------------------------------------------------------------------
ERISA Affiliate 3.2.9.(d)
- --------------------------------------------------------------------------------
ESI Plan 3.2.9.(j)
- --------------------------------------------------------------------------------
Exchange Act 3.1.5.(b)
- --------------------------------------------------------------------------------
Exchange Agent 1.3.8.(a)
- --------------------------------------------------------------------------------
Executive Officer 3.1.5.(e)
- --------------------------------------------------------------------------------
FAS 5.2.4.(a)
- --------------------------------------------------------------------------------
FDIA 3.1.2.(b)
- --------------------------------------------------------------------------------
FDIC 3.1.2.(b)
- --------------------------------------------------------------------------------
Federal Reserve Board Recital D
- --------------------------------------------------------------------------------
-viii-
<PAGE> 122
================================================================================
TERMS SECTION
- --------------------------------------------------------------------------------
Financial Statements 3.1.5.(d)(1)
- --------------------------------------------------------------------------------
GAAP 3.1.5.(d)
- --------------------------------------------------------------------------------
Governmental Entity 3.2.1.(a)
- --------------------------------------------------------------------------------
Hazardous Substances 3.2.10.(a)(3)
- --------------------------------------------------------------------------------
Hearing 4.2.2.(a)(1)
- --------------------------------------------------------------------------------
HB Intro. Paragraph
- --------------------------------------------------------------------------------
Index Differential 7.2.5.(d)(2)
- --------------------------------------------------------------------------------
Index Group 7.2.5.(d)(3)
- --------------------------------------------------------------------------------
Index Price 7.2.5.(d)(1)
- --------------------------------------------------------------------------------
IRC Recital H
- --------------------------------------------------------------------------------
Liens 3.1.3.(a)(5)
- --------------------------------------------------------------------------------
Material Adverse Effect 3.1.6
- --------------------------------------------------------------------------------
Merger Recital B
- --------------------------------------------------------------------------------
Modified Average Closing Price 7.2.5.(a)(1)
- --------------------------------------------------------------------------------
Oregon Director 4.2.2.(a)(1)
- --------------------------------------------------------------------------------
Pension Plan 3.2.9.(c)
- --------------------------------------------------------------------------------
Plan of Exchange 4.2.2.(a)(2)
- --------------------------------------------------------------------------------
Plan or Plans 3.2.9.(a)
- --------------------------------------------------------------------------------
Postponed Effective Date 7.2.5.(b)
- --------------------------------------------------------------------------------
Property 4.1.10
- --------------------------------------------------------------------------------
Prospectus/Proxy Statement 4.2.1.(a)(1)
- --------------------------------------------------------------------------------
Proxy/Disclosure Statement 4.2.2.(a)(3)
- --------------------------------------------------------------------------------
Purchase Price 1.3.1
- --------------------------------------------------------------------------------
Registration Statement 4.2.1.(a)(1)
- --------------------------------------------------------------------------------
Regulatory Approvals Recital D
- --------------------------------------------------------------------------------
Reports 3.1.5.(b)
- --------------------------------------------------------------------------------
SEC 3.1.5.(a)
- --------------------------------------------------------------------------------
Securities Act 3.1.5.(b)
- --------------------------------------------------------------------------------
Securities Laws 3.1.5.(b)
- --------------------------------------------------------------------------------
Stock Option Agreement Recital G
- --------------------------------------------------------------------------------
Subject Property 3.2.10.(a)(1)
- --------------------------------------------------------------------------------
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<PAGE> 123
================================================================================
TERMS SECTION
- --------------------------------------------------------------------------------
Subsequent VB/Bank Financial Statements 3.1.5.(d)(5)
- --------------------------------------------------------------------------------
Subsequent WCB Financial Statements 3.1.5.(d)(3)
- --------------------------------------------------------------------------------
Tax 3.2.6
- --------------------------------------------------------------------------------
Termination Date 2.1
- --------------------------------------------------------------------------------
Transaction 1.1
- --------------------------------------------------------------------------------
VB Intro. Paragraph
- --------------------------------------------------------------------------------
VB/Bank Financial Statements 3.1.5.(d)(4)
- --------------------------------------------------------------------------------
VB Options 1.3.7
- --------------------------------------------------------------------------------
VB Stock Plans 3.1.3.(b)(2)
- --------------------------------------------------------------------------------
WCB Intro. Paragraph
- --------------------------------------------------------------------------------
WCB Common Stock 3.1.3.(a)(1)
- --------------------------------------------------------------------------------
WCB Financial Statements 3.1.5.(d)(2)
- --------------------------------------------------------------------------------
WCB Preferred Stock 3.1.3.(a)(1)
- --------------------------------------------------------------------------------
WCB Shares 1.3.2
- --------------------------------------------------------------------------------
WCB Stock Plans 3.1.3.(a)(2)
================================================================================
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<PAGE> 124
PLAN AND AGREEMENT OF REORGANIZATION AND MERGER
BETWEEN
WEST COAST BANCORP, HB ACQUISITION CORPORATION,
AND
VANCOUVER BANCORP
This Plan and Agreement of Reorganization and Merger ("Agreement"),
dated as of February 15, 1996, is between WEST COAST BANCORP ("WCB"), an Oregon
corporation, HB ACQUISITION CORPORATION ("HB"), a Washington corporation, and
VANCOUVER BANCORP ("VB"), a Washington corporation.
PREAMBLE
The management of WCB and VB believe that the merger of VB with and
into HB, on the terms and conditions set forth in this Agreement, is in the best
interests of the stockholders of WCB and VB.
RECITALS
A. THE PARTIES. WCB is a corporation duly organized and validly existing
under Oregon law and is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended ("BHCA"). WCB's principal
offices are located in Lake Oswego, Oregon. WCB owns all of the
outstanding shares of common stock of HB, The Bank of Newport, The
Commercial Bank, Valley Commercial Bank and West Coast Mortgage, Inc.
HB is a corporation duly organized and validly existing under
Washington law. HB's principal offices are located in Seattle,
Washington. VB is a corporation duly organized and validly existing
under Washington law and is a registered bank holding company under the
BHCA. VB's principal offices are located in Vancouver, Washington. VB
owns all of the outstanding shares of common stock of the Bank of
Vancouver ("Bank").
B. THE MERGER. At the Effective Date, the following will occur:
1. VB will merge with and into HB ("Merger") and HB will be the
surviving corporation under the name HB ("Combined
Corporation").
2. Except as otherwise provided in this Agreement, the
outstanding shares of VB Common Stock will be converted into
the right to receive shares of WCB Common Stock.
C. BOARD APPROVALS. The respective boards of directors of WCB, HB, and VB
have approved this Agreement and authorized its execution and delivery.
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D. OTHER APPROVALS. The Merger is subject to:
1. satisfaction of the conditions described in this Agreement;
2. approval by the shareholders of VB;
3. approval by WCB as the sole shareholder of HB; and
4. approval or acquiescence, as appropriate, by (i) the Board of
Governors of the Federal Reserve System ("Federal Reserve
Board") and (ii) the Director of the Washington Department of
Financial Institutions (collectively, "Regulatory Approvals").
E. EMPLOYMENT AGREEMENT. WCB has entered into an employment agreement
with Lee S. Stenseth, President and Chief Executive Officer of the
Bank, which will take effect on the Effective Date.
F. DIRECTOR NONCOMPETITION AGREEMENT. Each Director of VB and the Bank's
board of directors has signed a Director Noncompetition Agreement.
These noncompetition agreements will take effect on the Effective Date.
G. STOCK OPTION AGREEMENT. As an inducement to and condition of WCB's
execution of this Agreement, VB has approved the grant of an option to
WCB under the Stock Option Agreement, as provided in Subsection 1.8.
H. INTENTION OF THE PARTIES. The parties intend the Merger to qualify, for
accounting purposes, as a "pooling of interests." The parties intend
the Merger to qualify, for federal income tax purposes, as a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended ("IRC").
AGREEMENT
In consideration of the mutual promises set forth in this Agreement,
WCB, HB, and VB agree as follows:
SECTION 1.
TERMS OF TRANSACTION
1.1. TRANSACTION. Subject to the terms and conditions set forth in this
Agreement and in the other documents referred to in this Agreement, VB
will merge with and into HB in the Merger. The term "Transaction" means
the Merger transaction contemplated by this Agreement, subject to any
modifications WCB elects in accordance with Subsection 1.5.
1.2. MERGER. On the Effective Date, VB will merge with and into HB,
with HB being the surviving corporation ("Combined Corporation"), in
accordance with the provisions of, and with
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the effect provided in RCW Title 23B. On the Effective Date, the
articles of incorporation and bylaws of the Combined Corporation will
be the articles of incorporation and bylaws of HB in effect immediately
before the Effective Date. On the Effective Date, the directors and
officers of HB will become the directors and officers of the Combined
Corporation. On the Effective Date, HB's shares then issued and
outstanding will become issued and outstanding shares of the Combined
Corporation. The Combined Corporation's name will be HB, and VB's
principal office before the Merger will be the Combined Corporation's
principal office.
1.2.1. CLOSING OF THE MERGER. Closing of the Transaction will
take place in accordance with Section 2 ("Closing"). Except
for Dissenting Shares, all shares of VB Common Stock issued
and outstanding immediately before Closing will be converted
into the right to receive the consideration described in
Subsection 1.3 at Closing, by virtue of the Merger and under
RCW 23B, without any action on the holder's part.
1.2.2. THE BANK. By virtue of the Merger, the Bank will become
the Combined Corporation's wholly owned subsidiary. On the
Effective Date, the Bank's board of directors will be all
directors who are the Bank's directors immediately before the
Merger plus one additional WCB director designated by WCB.
These directors will serve on the Bank's board of directors
until the next annual meeting of the Bank's shareholders or
until their successors have been elected and qualified. At the
1997 annual meeting of the Bank's shareholders, the directors
then serving on the Bank's board of directors may propose a
slate of directors for election to the Bank's board. WCB, as
the Bank's sole shareholder, will elect these proposed
directors to serve on the Bank's board of directors until the
1998 annual meeting of the Bank's shareholders, but WCB may
refuse to elect any of these proposed directors if WCB has
good cause to do so. Nothing in this Subsection 1.2.2 or this
Agreement restricts in any way any rights of the Bank's
shareholders and directors at any time after the Effective
Date to nominate, elect, select, or remove the Bank's
directors.
1.3. CONSIDERATION.
1.3.1. AMOUNT OF CONSIDERATION. Except as otherwise provided
in Subsection 1.4, the aggregate consideration ("Purchase
Price") VB's stockholders will be entitled to receive from WCB
in connection with the Transaction will be WCB Common Stock
with an aggregate value equal to $11,581,000, as calculated in
accordance with Subsection 1.3.2.
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1.3.2. FORM OF CONSIDERATION. Subject to the terms, conditions
and limitations set forth in this Agreement, holders of VB
Common Stock will be entitled to exchange their VB Common
Stock shares for WCB Common Stock shares, upon surrender of
the holder's certificate or certificates in accordance with
Subsection 1.3.8. Each holder, in exchange for each share of
VB Common Stock the stockholder holds of record on the
Effective Date, will be entitled to receive that number of
shares of WCB Stock calculated by dividing the Purchase Price
by the Average Closing Price (or the Modified Average Closing
Price in the circumstances specified in Subsection 7.2.5), and
by further dividing the number so reached by the aggregate
number of shares of VB Common Stock that on the Effective Date
are either (i) issued and outstanding or (ii) subject to
unexercised options. The shares of WCB Common Stock to be
issued to VB Shareholders under this Agreement in connection
with the Transaction are referred to as the "WCB Shares."
1.3.3. AVERAGE CLOSING PRICE. For the purpose of this
Agreement, the "Average Closing Price" means the average
(rounded to the nearest penny) of each Daily Sales Price of
WCB stock for the ten consecutive trading days ending on and
including the fifth trading day preceding the Effective Date.
But, if this average is less than $15.30, the Average Closing
Price will be $15.30, and if this average is more than $18.70,
the Average Closing Price will be $18.70. All prices per share
under this Subsection 1.3.3 will be appropriately adjusted to
account for stock dividends, split-ups, mergers, combinations,
conversions, share exchanges or the like.
1.3.4. DAILY SALES PRICE. For the purposes of this Agreement,
"Daily Sales Price" means for any trading day, the arithmetic
average (unrounded) of the closing bid and asked prices of WCB
stock in the over-the-counter market as such prices are
reported by the automated quotation system of the National
Association of Securities Dealers, Inc., or in the absence of
this source, by any other source that WCB and VB mutually
agree on.
1.3.5. NO FRACTIONAL SHARES. WCB will not issue fractional
shares of WCB Common Stock. In lieu of fractional shares of
WCB Common Stock, if any, each shareholder of VB who is
otherwise entitled to receive a fractional share of WCB Common
Stock will receive an amount of cash equal to the product of
such fraction times the Average Closing Price. Such fractional
share interest will not include the right to vote or receive
dividends or any interest on dividends.
1.3.6. EFFECT ON HB SHARES. HB's Common Stock shares issued
and outstanding immediately before the Effective Date will
remain outstanding and unchanged after the
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Transaction. After the Transaction, these shares will
constitute all of the issued and outstanding shares of the
capital stock of the Combined Corporation.
1.3.7. OPTIONS. For purposes of this Agreement, the term "VB
Options" means options issued by VB or the Bank in accordance
with its employee and director stock option plans. Each holder
of these VB Options will be entitled to receive, in exchange
for all of his VB Options, options to purchase that number of
WCB Common Stock shares to which such holder would have been
entitled under Subsection 1.3.2 if such holder had exercised
such VB Options immediately before Closing. All such options
will be subject to the same terms as the VB Options exchanged
in accordance with this Subsection 1.3.7.
1.3.8. CERTIFICATES.
(a) Surrender of Certificates. Each certificate
evidencing VB Common Stock (other than
Dissenting Shares) will, on and after the
Effective Date, be deemed for all corporate
purposes to represent and evidence only the
right to receive WCB Common Stock or cash in
accordance with the provisions of this
Subsection 1.3, until the VB stockholder
surrenders the certificate to an agent
designated by WCB and VB to effect the
exchange of VB Common Stock for WCB Common
Stock or cash ("Exchange Agent"), together
with a properly completed and executed form
of transmittal letter. Until any such
certificate evidencing VB Common Stock is so
surrendered, the holder of such VB Common
Stock will not have any right to receive any
certificates evidencing WCB Common Stock or
cash in lieu of fractional shares.
(b) Issuance of Certificates in Other Names. If
any certificate evidencing WCB Common Stock
is to be issued in a name other than that in
which the certificate(s) for VB Common Stock
surrendered in exchange is registered, the
person requesting this exchange must first:
(1) establish the right to receive the
certificate evidencing WCB Common Stock and
(2) either pay to the Exchange Agent any
transfer or other taxes required by reason
of the issuance of such certificate in a
name other than the registered holder of the
certificate surrendered or establish to the
satisfaction of the Exchange Agent that such
tax has been paid or is not applicable.
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(c) Lost, Stolen, and Destroyed Certificates.
If the Exchange Agent receives: (1)
satisfactory evidence of VB Common Stock
ownership represented by a missing
certificate and (2) any indemnification
assurances that the Exchange Agent may
require from persons claiming such
ownership, the Exchange Agent will be
authorized to issue WCB Common Stock for any
VB Common Stock certificate that has been
lost, stolen or destroyed.
(d) Rights to Dividends and Distributions.
After the Effective Date, no holder of a
certificate evidencing shares of VB Common
Stock will be entitled to receive any
dividends or other distributions otherwise
payable to holders of record of WCB Common
Stock on any date after the Effective Date
unless the holder (1) is entitled to receive
WCB Common Stock and (2) has surrendered his
or her certificates evidencing shares of VB
Common Stock in exchange for WCB Common
Stock. This surrender of certificates will
not deprive the holder of any dividends or
distributions that the holder is entitled to
receive for a date before this surrender as
a record holder of VB Common Stock. When
the holder surrenders his or her
certificates, the holder will receive the
amount, without interest, of any cash
dividends and any other distributions
distributed after the Effective Date on the
whole number of shares of WCB Common Stock
the holder's VB Common Stock was converted
into at the Effective Date.
(e) Checks in Other Names. If any check for cash
in lieu of fractional shares is to be issued
in a name other than the name that the VB
Common Stock certificate surrendered in
exchange for cash is registered in, the
person requesting the exchange must
establish the right to receive this cash.
1.4. PAYMENT TO DISSENTING SHAREHOLDERS. For purposes of this
Agreement, "Dissenting Shares" means those shares of VB Common Stock as
to which shareholders have perfected their dissenters' rights under RCW
23B.11.070(2)(b) and RCW 23B.13. Each outstanding dissenting share of
VB Common Stock will be converted at Closing into the rights provided
under RCW 23B.11.070(2)(b) and RCW 23B.13.
1.5. ALTERNATIVE STRUCTURES. Subject to the conditions set forth below,
WCB may, within 60 days of the execution of this Agreement and in its
sole discretion, elect to consummate the Transaction by means other
than those specified in this
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Section 1. If WCB so elects, any means, procedures or amendments
necessary or desirable to consummate the Transaction, in the opinion of
WCB's counsel, will supersede any conflicting, undesirable or
unnecessary provisions of this Agreement; but, unless this Agreement is
amended in accordance with Section 9, the following conditions will
apply: (1) the type and amount of consideration set forth in Subsection
1.3 will not be modified and (2) the tax consequences to VB and its
shareholders will not be adversely affected. If WCB elects an
alternative structure under this Subsection 1.5, VB will cooperate with
and assist WCB with the following: (1) any amendments to this Agreement
necessary or desirable in the opinion of WCB's counsel and (2) the
preparation and filing of any applications, documents, instruments and
notices necessary or desirable, in the opinion of WCB's counsel, to
obtain the necessary shareholder approvals and approvals of any
regulatory agency, administrative body or other governmental entity.
1.6. LETTER OF TRANSMITTAL. WCB will prepare a transmittal letter form
reasonably acceptable to VB for use by shareholders holding VB Common
Stock. Certificates representing shares of VB Common Stock must be
delivered for payment in the manner provided in the transmittal letter
form. On or about the Effective Date, WCB will mail the transmittal
letter form to VB shareholders.
1.7. UNDELIVERED CERTIFICATES. If outstanding certificates for VB
Common stock are not surrendered or the payment for them is not claimed
before such payments would escheat or become the property of any
governmental unit or agency, the unclaimed items will, to the extent
permitted by abandoned property or any other applicable law, become the
property of WCB (and to the extent not in its possession will be paid
over to WCB), free and clear of all claims or interests of any person
previously entitled to such items. Notwithstanding the foregoing,
neither WCB nor any other party to this Agreement will be liable to any
holder of VB Common Stock for any amount paid to any governmental unit
or agency having jurisdiction over any such unclaimed items under the
abandoned property or other applicable law of the jurisdiction, and WCB
will pay no interest on amounts owed to shareholders for shares of VB
Common Stock.
1.8. STOCK OPTION AGREEMENT. As a condition to the execution of this
Agreement, WCB and VB will sign a Stock Option Agreement of even date
with this Agreement.
SECTION 2.
CLOSING OF THE TRANSACTION
2.1. CLOSING. Closing will occur on the Effective Date (or the
Postponed Effective Date if Subsection 7.2.5.(b) applies). If Closing
does not occur on or before October 31, 1996 ("Termination Date"),
either WCB or VB may terminate this
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Agreement in accordance with Section 7. Unless WCB and VB agree upon
another date, the Effective Date will be a date selected by WCB and
within five (5) business days after the following:
(a) each condition precedent set forth in Section 5 has
been either fulfilled or waived; and
(b) each approval required by Section 5 has been granted,
and all applicable waiting periods have expired.
2.2. EVENTS OF CLOSING. On the Effective Date, all properly executed
documents required by this Agreement will be delivered to the proper
party, in form consistent with this Agreement. If any party fails to
deliver a required document on the Effective Date or otherwise defaults
under this Agreement on or before the Effective Date, then the
Transaction will not occur unless the adversely affected party waives
the default.
2.3. PLACE OF CLOSING. Unless WCB and VB agree otherwise, the Closing
will occur at the corporate office of WCB, Lake Oswego, Oregon at 10:00
a.m. on the Effective Date, or any other time during normal business
hours WCB and VB may agree on.
SECTION 3.
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF WCB, HB, AND VB. Subject to
Subsection 3.3 and except as expressly set forth in Schedule 1, WCB and
HB each represent and warrant to VB, and VB represents and warrants to
WCB and HB, the following:
3.1.1. CORPORATE ORGANIZATION AND QUALIFICATION.
(a) It is a corporation duly organized and
validly existing under the State laws of
either Washington or Oregon, and its
activities do not require it to be qualified
in any foreign jurisdiction.
(b) It has the requisite corporate power and
authority to own or lease its properties and
assets and to carry on its businesses as
they are now being conducted.
(c) The location of each of its offices is
listed in Schedule 2.
(d) It has made available to the other parties
to this Agreement a complete and correct
copy of its articles of incorporation and
bylaws, each
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as amended to date and currently in full
force and effect.
3.1.2. SUBSIDIARIES.
(a) Schedule 3 lists all of its subsidiaries and
the percent of its stock-ownership of these
subsidiaries, as of the date of this
Agreement.
(b) Each of its depository institution
subsidiaries is an "insured depository
institution," as defined in the Federal
Deposit Insurance Act ("FDIA") and
applicable regulations under the FDIA,
having deposits insured by the Federal
Deposit Insurance Corporation ("FDIC"),
subject to applicable FDIC coverage
limitations.
(c) Each of its subsidiaries is: (1) either a
commercial bank or a corporation; (2) duly
organized and validly existing under the
State laws of either Washington or Oregon;
and (3) qualified to do business and in good
standing in each jurisdiction where the
property owned, leased, or operated, or the
business conducted by the subsidiary,
requires this qualification.
(d) Each of its subsidiaries has the requisite
corporate power and authority to own or
lease its properties and assets and to carry
on its business as it is now being
conducted.
3.1.3. CAPITAL STOCK.
(a) WCB. WCB represents and warrants:
(1) the authorized capital stock of WCB
consists of 25 million shares
divided into two classes: (i) 15
million shares of common stock, no
par value ("WCB Common Stock"),
4,805,689 shares of which are issued
and outstanding and (ii) ten million
shares of blank-check preferred
stock, no par value, none of which
is outstanding ("WCB Preferred
Stock");
(2) options or rights to acquire not
more than an aggregate of 344,420
WCB Common Stock shares (subject to
adjustment on the terms set forth in
the WCB Stock Plans) are outstanding
under the stock option plans
identified in Schedule 4 ("WCB Stock
Plans");
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(3) WCB has no WCB Common Stock shares
reserved for issuance, other than
the shares reserved for issuance
under the WCB Stock Plans, and WCB
has no shares of WCB Preferred Stock
reserved for issuance;
(4) all outstanding shares of WCB Common
Stock have been duly authorized and
validly issued and are fully paid
and nonassessable;
(5) all outstanding shares of capital
stock of each of WCB's subsidiaries
owned by WCB or a subsidiary of WCB
have been duly authorized and
validly issued and are fully paid
and nonassessable, except to the
extent of any assessment required by
ORS 707, and are owned by WCB or a
subsidiary of WCB free and clear of
all liens, pledges, security
interests, claims, proxies,
preemptive or subscriptive rights or
other encumbrances or restrictions
of any kind (collectively, "Liens");
and
(6) except as set forth in this
Agreement or in the WCB Stock Plans,
no shares of capital stock of WCB
are authorized, issued or
outstanding, and there are no
preemptive rights or any outstanding
subscriptions, options, warrants,
rights, convertible securities or
other agreements or commitments of
WCB or any of its subsidiaries of
any character relating to the issued
or unissued capital stock or other
equity securities of WCB or any of
its subsidiaries (including those
relating to the issuance, sale,
purchase, redemption, conversion,
exchange, redemption, voting or
transfer of such stock or
securities).
(b) VB. VB represents and warrants:
(1) the authorized capital stock of VB
consists of (i) ten million shares
of common stock, par value $1 per
share ("VB Common Stock"), 141,428
shares of which are issued and
outstanding and (ii) one million
shares of blank-check preferred
stock, par value $1 per share, none
of which are issued or outstanding;
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(2) options or rights to acquire not
more than an aggregate of 31,523 VB
Common Stock shares (subject to
adjustment on the terms set forth in
the VB Stock Plans) were outstanding
under the stock option and other
plans listed in Schedule 4 ("VB
Stock Plans");
(3) VB has no VB Common Stock shares
reserved for issuance other than the
shares reserved for issuance under
the VB Stock Plans;
(4) all outstanding VB Common Stock
shares have been duly authorized and
validly issued and are fully paid
and nonassessable.
(5) all outstanding shares of capital
stock of each of VB's subsidiaries
owned by VB or a subsidiary of VB
have been duly authorized and
validly issued and are fully paid
and nonassessable except to the
extent provided by RCW 30.12.180,
and are owned by VB or a subsidiary
of VB free and clear of all Liens;
and
(6) except as set forth in this
Agreement or in the VB Stock Plans,
no shares of capital stock of VB are
authorized, issued or outstanding,
and there are no preemptive rights
or any outstanding subscriptions,
options, warrants, rights,
convertible securities or other
agreements or commitments of VB or
any of its subsidiaries of any
character relating to the issued or
unissued capital stock or other
equity securities of VB or any of
its subsidiaries (including those
relating to the issuance, sale,
purchase, redemption, conversion,
exchange, registration, voting or
transfer of such stock or
securities).
3.1.4. CORPORATE AUTHORITY.
(a) It has the requisite corporate power and
authority and has taken all corporate action
necessary in order to execute and deliver
this Agreement, subject, in the case of HB
and VB, only to the approval by its
shareholders of the plan of Merger contained
in this Agreement to the extent required by
RCW 23B.11.030, to
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consummate the transactions contemplated by
this Agreement.
(b) This Agreement is a valid and legally
binding agreement of it, enforceable in
accordance with the terms of this Agreement.
3.1.5. REPORTS AND FINANCIAL STATEMENTS.
(a) Filing of Reports. Since January 1, 1992,
it and each of its subsidiaries has filed
all reports and statements, together with
any required amendments to these reports and
statements, that it was required to file
with (1) the Securities and Exchange
Commission ("SEC"), (2) the Federal Reserve
Board, (3) the FDIC, (4) the Washington
Department of Financial Institutions or the
Division of Finance and Corporate Securities
of the Oregon Department of Insurance and
Finance, and (5) any other applicable
federal or state banking, insurance,
securities, or other regulatory authorities.
Each of these reports and statements,
including the related financial statements
and exhibits, complied (or will comply, in
the case of reports or statements filed
after the date of this Agreement) as to form
in all material respects with all applicable
statutes, rules and regulations as of their
respective dates (and, in the case of
reports or statements filed before the date
of this Agreement, without giving effect to
any amendments or modifications filed after
the date of this Agreement).
(b) Delivery to Other Parties of Reports. It
has delivered to the other parties, a copy
of each registration statement, offering
circular, report, definitive proxy statement
or information statement under the
Securities Act of 1933, as amended,
("Securities Act"), the Securities Exchange
Act of 1934, as amended, ("Exchange Act"),
and state securities and "Blue Sky" laws
(collectively, the "Securities Laws") filed,
used or circulated by it with respect to
periods since January 1, 1992, through the
date of this Agreement. It will promptly
deliver to the other parties each such
registration statement, offering circular,
report, definitive proxy statement or
information statement filed, used or
circulated after the date of this Agreement
(collectively, its "Reports"), each in the
form (including related exhibits and
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amendments) filed with the SEC (or if not so
filed, in the form used or circulated).
(c) Compliance with Securities Laws. As of
their respective dates (and without giving
effect to any amendments or modifications
filed after the date of this Agreement),
each of the Reports, including the related
financial statements, exhibits and
schedules, filed, used or circulated before
the date of this Agreement complied (and
each of the Reports filed after the date of
this Agreement, will comply) in all material
respects with applicable Securities Laws,
and did not (or in the case of reports,
statements, or circulars filed after the
date of this Agreement, will not) contain
any untrue statement of a material fact or
omit to state a material fact required to be
stated therein or necessary to make the
statements made therein, in light of the
circumstances under which they were made,
not misleading.
(d) Financial Statements. Each of its balance
sheets included in the Financial Statements
fairly presents (or, in the case of
Financial Statements for periods ending on a
date following the date of this Agreement,
will fairly present) the consolidated
financial position of it and its
subsidiaries as of the date of the balance
sheet. Each of the consolidated statements
of income, cash flows and stockholders'
equity included in the Financial Statements
fairly presents (or, in the case of
Financial Statements for periods ending on a
date following the date of this Agreement,
will fairly present) the consolidated
results of operations, retained earnings and
cash flows, as the case may be, of it and
its subsidiaries for the periods set forth
in these statements (subject, in the case of
unaudited statements, to normal year- end
audit adjustments), in each case in
accordance with generally accepted
accounting principals, consistently applied
("GAAP"), except as may be noted in these
statements. For purposes of this Agreement:
(1) "Financial Statements" means: (i) in
WCB's case, the WCB Financial
Statements (or for periods following
December 31, 1994, the Subsequent
WCB Financial Statements); and (ii)
in VB's case, the VB/Bank Financial
Statements (or for
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periods following December 31, 1994,
the Subsequent VB/Bank Financial
Statements).
(2) "WCB Financial Statements" means:
(i) the pre-merger audited
consolidated statements of financial
condition as of December 31, 1994,
of West Coast Bancorp and Commercial
Bancorp, and the related audited
statements of income, changes in
cashflows and stockholders' equity
for the year ended December 31,
1994, and (ii) the unaudited pro
forma combined statements of
financial condition for WCB for
December 31, 1994.
(3) "Subsequent WCB Financial
Statements" means: (i) balance
sheets and related statements of
income and stockholders' equity for
each of WCB's fiscal quarters ending
after December 31, 1994, and before
Closing and (ii) the audited
consolidated statements of financial
condition of WCB as of December 31,
1995, and the related audited
statements of income, changes in
cashflows and stockholders' equity
for the year ended December 31,
1995.
(4) "VB/Bank Financial Statements" means
the audited consolidated statements
of financial condition as of
December 31, 1994 (of VB and the
Bank), the audited statements of
financial condition as of December
31, 1993 and 1992 (of the Bank), and
the related audited statements of
income, changes in cashflows and
stockholders' equity for each of the
years ended December 31, 1994 and
1993.
(5) "Subsequent VB/Bank Financial
Statements" means: (i) a balance
sheet and related statements of
income and stockholders' equity for
each of VB's and the Bank's fiscal
quarters ending after December 31,
1994, and before Closing and (ii)
the audited consolidated statements
of financial condition of VB as of
December 31, 1995, and the related
audited statements of income,
changes in cashflows and
stockholders' equity for the year
ended December 31, 1995.
(e) Loan and Lease Losses. Its Co-Presidents
and Chief Executive Officers, and Chief
Financial Officer (for WCB) or President and
Chief
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Operations Officer (for VB) (collectively,
"Executive Officers") know of no reason why
the provision for loan and lease losses
shown in the consolidated balance sheet
included in the Financial Statements for the
period ended December 31, 1995, was not
adequate as of that date to provide for
estimable and probable losses, net of
recoveries relating to loans previously
charged off, inherent in its loan portfolio.
3.1.6. ABSENCE OF CERTAIN EVENTS AND CHANGES. Except as
disclosed in its Financial Statements, since December 31,
1994: (1) it and its subsidiaries have conducted their
respective businesses only in the ordinary and usual course of
the businesses and (2) no change or development or combination
of changes or developments has occurred that, individually or
in the aggregate, is reasonably likely to result in a Material
Adverse Effect with respect to it or its subsidiaries. For
purposes of this Agreement, "Material Adverse Effect" with
respect to any corporation means an effect that: (1) is
materially adverse to the business, financial condition,
results of operations or prospects of the corporation and its
subsidiaries taken as a whole; (2) significantly and adversely
affects the ability of the corporation to consummate the
transactions contemplated by this Agreement by the Termination
Date or to perform its material obligations under this
Agreement; or (3) enables any persons to prevent the
consummation by the Termination Date of the transactions
contemplated by this Agreement. No Material Adverse Effect
will be deemed to have occurred on the basis of any effect
resulting from actions or omissions of the corporation taken
with the prior consent of the other parties to this Agreement.
3.1.7. MATERIAL AGREEMENTS.
(a) Except for the Stock Plans and arrangements
made after the date and in accordance with
the terms of this Agreement, it and its
subsidiaries are not bound by any material
contract (as defined in Item 601(b)(10) of
Regulation S-K under the Securities Act)
that: (1) is to be performed after the date
of this Agreement and (2) has not been filed
with or incorporated by reference in its
Reports or set forth in Schedule 5.
(b) Neither it nor any of its subsidiaries is in
default under any contract, agreement,
commitment, arrangement, lease, insurance
policy or other instrument.
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3.1.8. KNOWLEDGE AS TO CONDITIONS. Its Executive Officers know
of no reason why the Regulatory Approvals and, to the extent
necessary, any other approvals, authorizations, filings,
registrations, and notices should not be obtained without the
imposition of any condition or restriction that is reasonably
likely to have a Material Adverse Effect with respect to it,
its subsidiaries, or the Combined Corporation, or the opinion
of the tax experts referred to in Subsection 5.2.11.
3.1.9. BROKERS AND FINDERS. Neither it, its subsidiaries, nor
any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for
any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated in this Agreement.
3.2. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF VB. Subject to
Subsection 3.3 and except as expressly set forth in Schedule 1, VB
represents and warrants to WCB and HB, the following:
3.2.1. GOVERNMENTAL FILINGS; NO VIOLATIONS.
(a) Filings. Other than the Regulatory
Approvals, and other than as required under
the Hart- Scott-Rodino Antitrust
Improvements Act of 1976, as amended, the
Securities Act, the Exchange Act, state
securities and "Blue Sky" laws, no notices,
reports or other filings are required to be
made by it with, nor are any consents,
registrations, approvals, permits or
authorizations required to be obtained by it
from, any governmental or regulatory
authority, agency, court, commission or
other entity, domestic or foreign
("Governmental Entity"), in connection with
the execution, delivery or performance of
this Agreement by it and the consummation by
it of the Transaction.
(b) Violations. The execution, delivery and
performance of this Agreement does not and
will not, and the consummation by it of the
Transaction will not, constitute or result
in: (1) a material breach or violation of,
or a default under, its articles of
incorporation or bylaws, or the comparable
governing instruments of any of its
subsidiaries; or (2) a material breach or
violation of, or a default under, or the
acceleration of or the creation of a Lien
(with or without the giving of notice, the
lapse of time or both) under, any provision
of any agreement, lease, contract, note,
mortgage, indenture,
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arrangement or other obligation
("Contracts") of it or any of its
subsidiaries or any law, rule, ordinance or
regulation or judgment, decree, order, award
or governmental or non-governmental permit
or license to which it or any of its
subsidiaries is subject, or any change in
the rights or obligations of any party under
any of the Contracts. Schedule 6 contains a
list of all consents it or its subsidiaries
must obtain from third parties under any
Contracts before consummation of the
Transaction.
3.2.2. ASSET CLASSIFICATION.
(a) Schedule 7 sets forth a list, accurate and
complete in all material respects as of
December 31, 1995, except as otherwise
expressly noted in Schedule 7, and separated
by category of classification or criticism
("Asset Classification"), of the aggregate
amounts of loans, extensions of credit and
other assets of it and its subsidiaries that
have been criticized or classified.
(b) Except as shown on Schedule 7, no amounts of
loans, extensions of credit or other assets
that have been classified or criticized by
any representative of any Governmental
Entity as "Other Assets Especially
Mentioned," "Substandard," "Doubtful,"
"Loss" or words of similar effect are
excluded from the amounts disclosed in the
Asset Classification, other than amounts of
loans, extensions of credit or other assets
that were paid off or charged off by it or
its subsidiaries before the date of this
Agreement.
3.2.3. PROPERTIES.
(a) Except as disclosed or reserved against in
its Financial Statements or in Schedule 8,
it and its subsidiaries have good and
marketable title, free and clear of all
Liens (other than Liens for current taxes
not yet delinquent or pledges to secure
deposits) to all of the material properties
and assets, tangible or intangible,
reflected in its Reports as being owned by
it or its subsidiaries as of the date of
this Agreement.
(b) To the knowledge of its Executive Officers,
all buildings and all fixtures, equipment
and other property and assets that are
material to its business on a consolidated
basis and are
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held under leases or subleases by it or its
subsidiaries are held under valid leases or
subleases, enforceable in accordance with
their respective terms (except as may be
limited by applicable bankruptcy,
insolvency, reorganization, moratorium or
other laws affecting creditors' rights
generally or by general equity principles).
(c) Schedule 9 lists all its and its
subsidiaries' existing branches and offices
and all new branches or offices it or any of
its subsidiaries' has applied for.
(d) VB has provided to WCB copies of existing
title policies held in its or the Bank's
files, and no exceptions, reservations, or
encumbrances have arisen or been created
since the date of issuance of those
policies.
3.2.4. COMPLIANCE WITH LAWS. Except as disclosed in Schedule
10, it and each of its subsidiaries:
(a) is in compliance, in the conduct of its
business, with all applicable federal,
state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments,
orders or decrees, including the Truth in
Lending Act, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair
lending laws or other laws relating to
discrimination;
(b) has all permits, licenses, certificates of
authority, orders, and approvals of, and has
made all filings, applications, and
registrations with, federal, state, local,
and foreign governmental or regulatory
bodies (including the Federal Reserve) that
are required in order to permit it or such
subsidiary to carry on its business as it is
presently conducted;
(c) has received since January 1, 1992, no
notification or communication from any
Governmental Entity (including any bank,
insurance and securities regulatory
authorities) or its staff (1) asserting that
it or any of its subsidiaries is not in
compliance with any of the statutes,
regulations or ordinances that such
Governmental Entity enforces, (2)
threatening to revoke any license,
franchise, permit or governmental
authorization, or (3) threatening or
contemplating revocation or limitation of,
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or that would have the effect of revoking or
limiting, FDIC deposit insurance (nor, to
the knowledge of its Executive Officers, do
any grounds for any of the foregoing exist);
and
(d) is not required to notify any federal
banking agency before adding directors to
its board of directors or the employing
senior executives.
3.2.5. LITIGATION. Except as disclosed in its Financial
Statements or in Schedule 11 before the date of this
Agreement:
(a) no criminal or administrative investigations
or hearings, before or by any Governmental
Entity, or civil, criminal or administrative
actions, suits, claims or proceedings,
before or by any person (including any
Governmental Entity) are pending or, to the
knowledge of its Executive Officers,
threatened, against it or any of its
subsidiaries (including under the Truth in
Lending Act, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage
Disclosure Act or any other fair lending law
or other law relating to discrimination);
and
(b) neither it nor any of its subsidiaries (nor
any officer, director, controlling person or
property of it or any of its subsidiaries)
is a party to or is subject to any order,
decree, agreement, memorandum of
understanding or similar arrangement with,
or a commitment letter or similar submission
to, any Governmental Entity charged with the
supervision or regulation of depository
institutions or engaged in the insurance of
deposits (including the FDIC) or the
supervision or regulation of it or of its
subsidiaries, and neither it nor any of its
subsidiaries has been advised by any such
Governmental Entity that such Governmental
Entity is contemplating issuing or
requesting (or is considering the
appropriateness of issuing or requesting)
any such order, decree, agreement,
memorandum of understanding, commitment
letter or similar submission.
3.2.6. TAXES. For purposes of this Subsection 3.2.6, "Tax"
includes any tax or similar governmental charge, impost or
levy (including income taxes, franchise taxes, transfer taxes
or fees, stamp taxes, sales taxes, use taxes, excise taxes, ad
valorem taxes, withholding taxes, worker's compensation,
payroll taxes, unemployment insurance, social security,
minimum taxes or windfall
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profits taxes), together with any related liabilities,
penalties, fines, additions to tax or interest, imposed by the
United States or any state, county, provincial, local or
foreign government or subdivision or agency of the United
States.
(a) All federal, state and local Tax returns,
including all information returns, it and
its subsidiaries are required to file have
been timely filed or requests for extensions
have been timely filed. If any extensions
were filed, they have been or will be
granted by Closing and will not have
expired. All filed returns are complete and
accurate in all material respects.
(b) Except as disclosed in its Financial
Statements:
(1) all taxes attributable to it or any
of its subsidiaries that are or were
due or payable (without regard to
whether such taxes have been
assessed) have been paid in full or
have been adequately provided for in
its Financial Statements in
accordance with GAAP;
(2) adequate provision in accordance
with GAAP has been made in its
Financial Statements relating to all
Taxes for the periods covered by
such Financial Statements that were
not yet due and payable as of the
date of this Agreement, regardless
of whether the liability for such
Taxes is disputed;
(3) as of the date of this Agreement and
except as disclosed in its Financial
Statements, there is no outstanding
audit examination, deficiency,
refund litigation or outstanding
waiver or agreement extending the
applicable statute of limitations
for the assessment or collection of
any Taxes for any period with
respect to any Taxes of it or its
subsidiaries;
(4) all Taxes with respect to completed
and settled examinations or
concluded litigation relating to it
or any of its subsidiaries have been
paid in full or have been recorded
on its Financial Statements (in
accordance with GAAP);
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(5) neither it nor any of its
subsidiaries is a party to a Tax
sharing or similar agreement or any
agreement under which it or any of
its subsidiaries has indemnified any
party (other than it or one of its
subsidiaries) with respect to Taxes;
and
(6) the proper and accurate amounts have
been withheld from all employees
(and timely paid to the appropriate
Governmental Entity or set aside in
an account for these purposes) for
all periods through the Effective
Date in compliance with all Tax
withholding provisions of applicable
federal, state, local and foreign
laws (including income, social
security and employment tax
withholding for all types of
compensation).
3.2.7. INSURANCE. It and each of its subsidiaries has taken
all requisite action (including the making of claims and the
giving of notices) under its directors' and officers'
liability insurance policy or policies in order to preserve
all rights under such policies with respect to all matters
known to it (other than matters arising in connection with,
and the transactions contemplated by, this Agreement).
Schedule 12 lists all directors' and officers' liability
insurance policies and other material insurance policies
maintained by it or its subsidiaries.
3.2.8. LABOR MATTERS. Neither it nor any of its subsidiaries
is a party to, or is bound by, any collective bargaining
agreement, contract or other agreement or understanding with
any labor union or labor organization. Neither it nor any of
its subsidiaries is the subject of any material proceeding:
(1) asserting that it or any of its subsidiaries has committed
an unfair labor practice or (2) seeking to compel it or any of
its subsidiaries to bargain with any labor organization as to
wages or conditions of employment. No strike involving it or
any of its subsidiaries is pending or, to the knowledge of its
Executive Officers, threatened. Its Executive Officers are not
aware of any activity involving its or any of its
subsidiaries' employees seeking to certify a collective
bargaining unit or engaging in any other organizational
activity.
3.2.9. EMPLOYEE BENEFITS.
(a) For purposes of this Agreement "Plan" or
"Plans", individually or collectively, means
any "employee benefit plan," as defined in
Section 3(3) of the Employee Retirement
Income
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Security Act of 1974, ("ERISA"), as amended,
maintained by VB or the Bank, as the case
may be.
(b) Schedule 13 sets forth a list, as of the
date of this Agreement, of (1) all bonus,
deferred compensation, pension, retirement,
profit- sharing, thrift, savings, employee
stock ownership, stock bonus, stock
purchase, restricted stock and stock option
plans, (2) all material employment or
severance contracts and (3) all other
material employee benefit plans that cover
employees or former employees of it and its
subsidiaries (its "Compensation Plans").
True and complete copies of the Compensation
Plans (and, as applicable, copies of summary
plan descriptions, governmental filings (on
Form 5500 series or otherwise), actuarial
reports and reports under Financial
Accounting Standards Board Statement No. 106
relating to such Compensation Plans)
covering current or former employees or
directors of it or its subsidiaries (its
"Employees"), including Plans and related
amendments, have been made available to the
other parties to this Agreement.
(c) All of its Plans covering Employees (other
than "multi-employer plans" within the
meaning of ERISA Sections 3(37) or
4001(a)(3)), to the extent subject to ERISA,
are in substantial compliance with ERISA.
Each of its Plans, that is an "employee
pension benefit plan" within the meaning of
ERISA Section 3(2) ("Pension Plan") and that
is intended to be qualified under IRC
Section 401(a), has received a favorable
determination letter from the Internal
Revenue Service, and it is not aware of any
circumstances likely to result in revocation
of any such favorable determination letter.
No litigation relating to its Plans is
pending or, to the knowledge of its
Executive Officers, threatened. Neither it
nor any of its subsidiaries has engaged in a
transaction with respect to any Plan that,
assuming the taxable period of such
transaction expired as of the date of this
Agreement, could subject it or any of its
subsidiaries to a Tax or penalty imposed by
either IRC Section 4975 or ERISA Section
502(i).
(d) No liability under Subtitle C or D of Title
IV or ERISA (other than payment of
applicable
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premiums) has been or is expected to be
incurred by it or any of its subsidiaries
with respect to any ongoing, frozen or
terminated "single-employer plan," within
the meaning of ERISA Section 4001(a)(15),
currently or formerly maintained by any of
them, or the single-employer plan of any
entity that is considered one employer with
it under ERISA Section 4001 or IRC Section
414 (an "ERISA Affiliate"). It and its
subsidiaries and ERISA Affiliates have not
incurred and do not expect to incur any
material withdrawal liability with respect
to a multiemployer plan under Subtitle I of
Title IV of ERISA (regardless of whether
based on contributions of ERISA Affiliates).
Neither it, its subsidiaries nor any of its
ERISA Affiliates has been notified by any
multiemployer plan to which it or any of its
subsidiaries or ERISA Affiliates is
contributing, or may be obligated to
contribute, that such multiemployer plan is
currently in reorganization or insolvency
under and within the meaning of ERISA
Sections 4241 or 4245 or that such
multiemployer plan intends to terminate or
has been terminated under ERISA Section
4041A. No notice of a "reportable event"
within the meaning of ERISA Section 4043,
for which the 30-day reporting requirement
has not been waived, has been required to be
filed for any of its Pension Plans or by any
of its ERISA Affiliates within the 12-month
period ending on the date of this Agreement.
Neither it, its subsidiaries nor any of
their respective ERISA Affiliates has
incurred or is aware of any facts that are
reasonably likely to result in any liability
under ERISA Sections 4069 or 4204.
(e) All material contributions it or any of its
subsidiaries are or were required to make
under the terms of any of its Plans have
been timely made or have been reflected in
its Financial Statements. Neither any of
its Pension Plans nor any single-employer
plan of any of its ERISA Affiliates has an
"accumulated funding deficiency" (whether or
not waived) within the meaning of IRC
Section 412 or ERISA Section 302. Neither
it nor any of its subsidiaries or its ERISA
Affiliates has provided, or is required to
provide, security to any Pension Plan or to
any single- employer plan of an ERISA
Affiliate under IRC Section 401(a)(29), IRC
Section 412(f)(3), or ERISA Sections 306,
307 or 4204.
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(f) Under each of its and its ERISA Affiliates'
Pension Plans that is a single-employer
plan, as of the last day of the most recent
plan year ended before the date of this
Agreement, the actuarially determined
present value of all "benefit liabilities"
within the meaning of ERISA Section
4001(a)(16) (as determined on the basis of
the actuarial assumptions contained in the
Pension Plan's most recent actuarial
valuation), did not exceed the then- current
value of the assets of such Pension Plan,
and to the knowledge of its Executive
Officers, there has been no change in the
financial condition of such Pension Plan
since the last day of the most recent plan
year that reasonably could be expected to
change such conclusion. There would be no
withdrawal liability of it and its
subsidiaries under each Plan that is a
multi-employer plan to which it, its
subsidiaries or its ERISA Affiliates has
contributed during the preceding 12 months,
if such withdrawal liability were determined
as if a "complete withdrawal," within the
meaning of ERISA Section 4203, had occurred
as of the date of this Agreement.
(g) Except as disclosed in its Financial
Statements, neither it nor its subsidiaries
have any obligations for retiree health and
life benefits.
(h) No restrictions exist on the rights of it or
its subsidiaries to amend or terminate any
Plan without incurring liability under the
Plan in addition to normal liabilities for
benefits.
(i) Except as disclosed in its Financial
Statements or as provided in a schedule to
this Agreement, the transactions
contemplated by this Agreement and the Stock
Plans will not result in: (1) vesting,
acceleration, or increase of any amounts
payable under any Compensation Plan, (2) any
material increase in benefits under any
Compensation Plan or (3) payment of any
severance or similar compensation under any
Compensation Plan.
(j) The Bank's obligations under the Executive
Supplemental Income ("ESI") Plan will not at
any time exceed the value, as reflected on
the Bank's books (reported consistent with
GAAP), of insurance policies owned by the
Bank on the lives of the officers covered by
the ESI Plan.
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3.2.10. ENVIRONMENTAL MATTERS.
(a) For purposes of this Subsection 3.2.10, the
following definitions apply:
(1) "Subject Property" with respect to a
party means (i) all real property at
which the Businesses of it or its
subsidiaries have been conducted,
all property in which it or its
subsidiaries holds a security or
other interest (including a
fiduciary interest), and any
property where under any
Environmental Law it or any of its
subsidiaries is deemed to be the
owner or operator of the property;
(ii) any facility in which it or its
subsidiaries participates in the
management, including participating
in the management of the owner or
operator of the property; and (iii)
all other real property that, for
purposes of any Environmental Law,
it or any of its subsidiaries
otherwise could be deemed to be an
owner or operator of or as otherwise
having control over.
(2) "Environmental Laws" means any
federal, state, local or foreign
law, regulation, agency policy,
order, decree, judgment, judicial
opinion, or any agreement with any
Governmental Entity, presently in
effect or subsequently adopted
relating to: (i) the manufacture,
generation, transport, use,
treatment, storage, recycling,
disposal, release, threatened
release or presence of Hazardous
Substances, or (ii) the
preservation, restoration or
protection of the environment,
natural resources or human health.
(3) "Hazardous Substances" means any
hazardous or toxic substance,
material or waste that is regulated
by any local governmental authority,
any state government or the United
States Government, including any
material or substance that is (a)
defined as a "hazardous substance"
in 42 USC Section 9601(14), (b)
defined as a "pollutant or
contaminant" in 42 USC Section
9604(a)(2), or (c) defined as a
"hazardous waste" in 42 USC Section
6903(5).
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(b) To the knowledge of its Executive Officers,
it and each of its subsidiaries and the
Subject Property are, and have been, in
compliance with all Environmental Laws, and
no circumstances exist that with the passage
of time or the giving of notice would be
reasonably likely to result in noncompliance
with such Environmental Laws.
(c) To the knowledge of its Executive Officers,
none of the following, and no reasonable
basis for any of the following, exists:
pending or threatened claims, actions,
investigations, notices of non-compliance,
information requests or notices of potential
responsibility or proceedings involving it
or any of its subsidiaries or any Subject
Property, relating to:
(1) an asserted liability of it or any
of its subsidiaries or any prior
owner, occupier or user of Subject
Property under any Environmental Law
or the terms and conditions of any
permit, license, authority,
settlement, agreement, decree or
other obligation arising under any
Environmental Law;
(2) the handling, storage, use,
transportation, removal or disposal
of Hazardous Substances;
(3) the actual or threatened discharge,
release or emission of Hazardous
Substances from, on or under or
within Subject Property into the
air, water, surface water, ground
water, land surface or subsurface
strata; or
(4) personal injuries or damage to
property related to or arising out
of exposure to Hazardous Substances.
(d) To the knowledge of its Executive Officers:
no storage tanks underground or otherwise
are present on the Subject Property or, if
present, none of such tanks are leaking and
each of them is in full compliance with all
Environmental Laws. With respect to any
Subject Property, it and its subsidiaries do
not own, possess or control any PCBs, PCB-
contaminated fluids, wastes or equipment, or
any asbestos or asbestos-containing
material. No Hazardous Substances have been
used, handled, stored, discharged, released
or
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emitted, or are threatened to be discharged,
released or emitted, at or on any Subject
Property, except for those types and
quantities of Hazardous Substances typically
used in an office environment and that have
not created conditions requiring remediation
under any Environmental Law.
(e) To the knowledge of its Executive Officers
and except for the investigation or
monitoring by the Environmental Protection
Agency or similar state agencies in the
ordinary course, no part of the Subject
Property has been or is scheduled for
investigation or monitoring under any
Environmental Law.
3.3. EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES.
3.3.1. DISCLOSURE OF EXCEPTIONS. Each exception set forth in
a Schedule is disclosed only for purposes of the
representations and warranties referenced in that exception;
but the following conditions apply:
(a) no exception is required to be set forth in
a Schedule if its absence would not result
in the related representation or warranty
being found untrue or incorrect under the
standard established by this Subsection 3.3;
and
(b) the mere inclusion of an exception in a
Schedule is not an admission by a party that
such exception represents a material fact,
event or circumstance or would result in a
Material Adverse Effect with respect to that
party.
3.3.2. NATURE OF EXCEPTIONS. No representation or warranty
contained in Subsection 3.1 or 3.2 will be found untrue or
incorrect and no party to this Agreement will have breached a
representation or warranty due to the following: the existence
of any fact, circumstance or event if that fact, circumstance
or event, individually or taken together with all similar
facts, circumstances or events, would not, or, in the case of
Subsection 3.2.5, is not reasonably likely to, have a Material
Adverse Effect with respect to such party.
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SECTION 4.
CONDUCT AND TRANSACTIONS
BEFORE CLOSING
4.1. CONDUCT OF VB'S BUSINESS BEFORE CLOSING. Before Closing, VB
promises as follows:
4.1.1. AVAILABILITY OF VB'S BOOKS, RECORDS AND
PROPERTIES.
(a) VB will make VB's, and cause its
subsidiaries to make their, books, records,
properties, contracts and documents
available at all reasonable times to WCB and
its counsel, accountants and other
representatives. These items will be open
for inspection, audit and direct
verification of: (1) loan or deposit
balances, (2) collateral receipts and (3)
any other transactions or documentation WCB
may find reasonably relevant to the
Transaction. VB will, and will cause its
subsidiaries to, cooperate fully in any such
inspection, audit, or direct verification
procedures, and VB will, and will cause its
subsidiaries to, make available all
information reasonably required by or on
behalf of WCB.
(b) At WCB's request, VB will request any third
parties involved in the preparation or
review of the VB/Bank Financial Statements
or Subsequent VB/Bank Financial Statements
to disclose to WCB the work papers or any
similar materials related to these financial
statements.
4.1.2. ORDINARY AND USUAL COURSE. Without the
prior written consent of WCB, VB will, and will cause the Bank
to, conduct its business only in the ordinary and usual course
and will not, and will not allow the Bank to, do any of the
following:
(a) effect any stock split or other
recapitalization with respect to VB Common
Stock or the Bank's capital stock; issue,
pledge or encumber in any way any shares of
VB's or the Bank's capital stock; or grant
any option or other right to shares of VB's
or the Bank's capital stock (except
issuances of common stock upon exercise of
options granted before the date of this
Agreement);
(b) declare or pay any dividend, or make any
other distribution, either directly or
indirectly,
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with respect to VB Common Stock or the
Bank's capital stock;
(c) dispose of assets or make any commitment
other than in the ordinary and usual course
of business;
(d) solicit or accept deposit accounts of a
different type from accounts previously
accepted by it or at rates materially in
excess of rates previously paid by it,
except to reflect changes in prevailing
interest rates, or incur any indebtedness
greater than $5,000;
(e) acquire an ownership interest or a leasehold
interest in any Property or any other real
property, whether by foreclosure or
otherwise, without: (1) making an
appropriate environmental evaluation in
advance of obtaining the interest and
providing the evaluation to WCB and (2)
providing WCB with at least 30 days' advance
written notice before it acquires the
interest;
(f) except as otherwise required by law
(including in particular the VB's board of
directors' fiduciary duty to shareholders),
enter into or recommend the adoption by VB's
shareholders of any agreement involving a
possible merger or other business
combination or asset sale by VB not
involving the Transaction; or
(g) enter into any other transaction or make any
expenditure other than in the ordinary and
usual course of its business or as required
by this Agreement, except for expenses
reasonably related to completion of the
Transaction, which expenses are estimated
not to exceed $120,000.
4.1.3. CONDUCT REGARDING REPRESENTATIONS AND WARRANTIES. VB
will not do or cause to be done anything that would cause any
representation or warranty in Subsection 3.1 or 3.2 to be
untrue or inaccurate if made at Closing, except as otherwise
contemplated or required by this Agreement or consented to in
writing by WCB.
4.1.4. MAINTENANCE OF PROPERTIES. VB will, and will cause the
Bank to, maintain its properties and equipment (and related
insurance or its equivalent) in accordance with good business
practice.
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4.1.5. PRESERVATION OF BUSINESS ORGANIZATION. VB will, and
will cause the Bank to, use all reasonable efforts to:
(a) preserve its business organization;
(b) retain the services of present management;
and
(c) preserve the goodwill of suppliers,
customers and others with whom it has
business relationships.
4.1.6. SENIOR MANAGEMENT. VB will, and will require the Bank
to, consult with WCB before making any change with respect to
present management personnel having the rank of vice-president
or higher.
4.1.7. COMPENSATION. VB will not, and will not allow the Bank
to, permit any increase in the current or deferred
compensation payable or to become payable by VB to any of its
directors, officers, employees, agents or consultants other
than normal increments in compensation in accordance with VB's
past practices with respect to the timing and amounts of such
increments. Without the prior written approval of WCB, VB will
not, and will not allow the Bank to, commit to, execute or
deliver any employment agreement with any party not terminable
upon two weeks' notice and without expense.
4.1.8. UPDATE OF FINANCIAL STATEMENTS. VB will deliver
Subsequent VB/Bank Financial Statements to WCB by the earlier
of: (1) 5 days after VB or the Bank has prepared and issued
them or (2) 60 days from year-end for year-end statements and
30 days from the end of the quarter for quarterly statements.
The Subsequent VB/Bank Financial Statements:
(a) will be prepared from the books and records
of VB and the Bank;
(b) will present fairly the financial position
and operating results of VB and the Bank at
the times indicated and for the periods
covered;
(c) will be prepared in accordance with GAAP
(except for the absence of notes) and with
the regulations promulgated by applicable
regulatory authorities, to the extent then
applicable, subject to normal year-end
adjustments; and
(d) will reflect all VB's and the Bank's
liabilities, contingent or otherwise, on the
respective dates and for the respective
periods covered, except for liabilities:
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(1) not required to be so reflected in
accordance with GAAP or (2) not significant
in amount.
4.1.9. NO SOLICITATION. Neither VB nor any of its officers or
directors, directly or indirectly, will solicit, encourage,
entertain, or facilitate any other proposals or inquiries for
an acquisition of the shares or assets of VB or its
subsidiaries or enter into discussions concerning any such
acquisition, except as otherwise required by law. No such
party will make available to any person not affiliated with VB
or WCB any information about its business or organization that
is not either routinely made available to the public generally
or required by law.
4.1.10. TITLE POLICIES. At WCB's request, VB will provide WCB
with title reports issued by a title insurance company
reasonably satisfactory to WCB, showing unencumbered fee
simple title or vendee's interest to all real Property owned
by VB or the Bank, other than other real estate owned, and
unencumbered leasehold interests in all real Property leased
by VB or the Bank, and containing only such exceptions,
reservations and encumbrances as may be consented to in
writing by WCB or may be consistent with Subsection 3.2.3. For
purposes of this Agreement, "Property" includes any property
that VB or the Bank has owned or leased, or in which VB or the
Bank holds any security interest, mortgage, other lien or
interest.
4.1.11. REVIEW OF LOANS. VB will, and will cause the Bank to,
permit WCB to conduct an examination of the Bank's loans to
determine credit quality and the adequacy of the Bank's
allowance for loan losses. WCB will have continued access to
the Bank's loans through Closing to update the examination. At
WCB's reasonable request, VB and the Bank will provide WCB
with current reports updating the information set forth in
Schedule 7.
4.2. REGISTRATION STATEMENT OR FAIRNESS HEARING. At WCB's sole
discretion, the parties will follow either: (1) the procedures
listed in Subsection 4.2.1 or (2) the procedures listed in
Subsection 4.2.2. WCB will make this election within 60 days
after this Agreement is signed. If WCB chooses Subsection
4.2.2, WCB may subsequently cancel this choice at any time and
elect Subsection 4.2.1 if WCB reasonably and in good faith
determines that proceeding under Subsection 4.2.2 and relying
on the exemption in Section 3(a)(10) of the Securities Act
from registration of the WCB Shares would be materially
disadvantageous to WCB, HB or their shareholders or might give
rise to legal or regulatory penalties.
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4.2.1. REGISTRATION STATEMENT. If WCB elects to proceed under
this Subsection 4.2.1, the following will apply:
(a) PREPARATION OF REGISTRATION STATEMENT.
(1) A Registration Statement on Form S-4
("Registration Statement") will be
filed by WCB with the SEC under the
Securities Act for registration of
the WCB Shares, and the parties will
prepare a related prospectus/proxy
statement ("Prospectus/Proxy
Statement") to be mailed to the
shareholders of VB (together with
any amendments and supplements to
such Prospectus/Proxy Statement).
(2) The parties will cooperate with each
other in preparing the Registration
Statement and Prospectus/Proxy
Statement, and will use their best
efforts to: (1) file the
Registration Statement with the SEC
within 45 days following the date on
which this Agreement is executed,
and (2) obtain the clearance of the
SEC, any appropriate state
securities regulators and any other
required regulatory approvals, to
issue such Prospectus/Proxy
Statement.
(3) Nothing will be included in the
Registration Statement or the
Prospectus/Proxy Statement or any
proxy solicitation materials with
respect to any party to this
Agreement unless approved by that
party, which approval will not be
unreasonably withheld.
(b) SUBMISSION TO SHAREHOLDERS.
(1) VB will submit the Prospectus/Proxy
Statement to, and will use its best
efforts in good faith to obtain the
prompt approval of the
Prospectus/Proxy Statement by, all
applicable regulatory authorities.
VB will provide copies of such
submissions for review by WCB.
(2) VB will promptly take the action
necessary in accordance with
applicable law and its articles of
incorporation and bylaws to convene
a shareholders meeting to consider
the approval of this Agreement and
to authorize the
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transactions contemplated by this
Agreement. The shareholders meeting
will be held on the earliest
practical date after the date the
Proxy Statement/Prospectus may first
be sent to VB shareholders without
objection by applicable governmental
authorities; but VB will have at
least 30 days to solicit proxies.
Except as otherwise required by law,
VB's board of directors and VB's
officers will recommend to VB's
shareholders that the shareholders
approve the Transaction.
4.2.2. FAIRNESS HEARING. If WCB elects to proceed under this
Subsection 4.2.2, the following will apply:
(a) PREPARATION OF APPLICATIONS AND FILINGS.
(1) The parties will cooperate to
prepare all necessary applications
and filings to register the WCB
Shares with and conduct a hearing
("Hearing") before the Oregon
Director of the Department of
Consumer and Business Services
("Oregon Director") under Section
59.095 of the Oregon Revised
Statutes.
(2) The parties will use all reasonable
efforts to obtain from the Oregon
Director (i) registration of the WCB
Shares, (ii) approval of a plan of
exchange provided by this Agreement
("Plan of Exchange"), and (iii) a
finding that the Plan of Exchange is
fair, just and equitable.
(3) The parties will cooperate with each
other in preparing the
Proxy/Disclosure Statement, and will
use their best efforts to obtain (i)
approval of the Plan of Exchange by
the Oregon Director and (ii) any
other regulatory approvals required
to issue the Proxy/Disclosure
Statement.
(4) Nothing will be included in the
Proxy/Disclosure Statement or any
proxy solicitation materials with
respect to any party to this
Agreement unless approved by that
party, which approval will not be
unreasonably withheld.
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(b) SUBMISSION TO SHAREHOLDERS.
(1) VB will submit the Proxy/Disclosure
Statement to, and will use its best
efforts in good faith to obtain the
prompt approval of the
Proxy/Disclosure Statement by, all
applicable regulatory authorities.
VB will provide copies of such
submissions for review by WCB.
(2) VB will promptly take the action
necessary in accordance with
applicable law and its articles of
incorporation and bylaws to convene
a shareholders meeting to consider
the approval of this Agreement and
to authorize the transactions
contemplated by this Agreement. The
shareholders meeting will be held on
the earliest practical date after
the date the Proxy/Disclosure
Statement may first be sent to VB
shareholders without objection by
applicable governmental authorities;
but VB will have at least 30 days to
solicit proxies. Except as otherwise
required by law, VB's board of
directors and VB's officers will
recommend to VB's shareholders that
the shareholders approve the
Transaction.
4.3. SUBMISSION TO REGULATORY AUTHORITIES. Representatives of WCB
and HB will prepare and file with applicable regulatory agencies,
applications for approvals, waivers or other actions their counsel
finds necessary or desirable in order to consummate the Transaction.
WCB will provide copies of these applications for VB's review. These
applications are expected to include:
(a) An application to the Federal Reserve; and
(b) A change of control notice with the Director of the
Washington Department of Financial Institutions and
related filings regarding the Transaction.
4.4. ANNOUNCEMENTS. The parties will cooperate and consult with
each other in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement or
the Transaction, unless otherwise required by law.
4.5. CONSENTS. WCB, HB, and VB each will use their best efforts to
obtain the consent or approval of any person, organization or other
entity whose consent or approval is required in order to permit WCB,
HB, and VB to consummate the Transaction.
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4.6. FURTHER ACTIONS. The proper officers of WCB, HB, and VB, in
the name and on behalf of those respective parties, will use their best
efforts in good faith to make all such arrangements, do or cause to be
done all such acts and things, and execute and deliver all such
certificates and other instruments and documents as may be reasonably
necessary or appropriate in order to consummate the Transaction
promptly.
4.7. NOTICE. VB will provide WCB and HB with prompt written notice
of the following:
(a) any events, individually or in the aggregate, that
could have a Material Adverse Effect with respect to
VB or the Bank;
(b) the commencement of any proceeding against VB by or
before any court or governmental agency, individually
or in the aggregate, that might have a Material
Adverse Effect with respect to VB or the Bank; or
(c) any acquisition of an ownership or leasehold
interest in Property.
4.8. CONFIDENTIALITY. WCB, HB, and VB each will, and VB will cause
the Bank to, hold in confidence all nonpublic information obtained from
the other in connection with the Transaction, other than information
that: (1) is required by law to be disclosed; (2) is otherwise
available on a nonconfidential basis; (3) has become public without
fault of the receiving party; or (4) is necessary to the defense of one
of the parties in a legal or administrative action brought against that
party by another party. If the Transaction is not completed, WCB, HB
and VB will, and VB will cause the Bank to: (1) each return to the
others all confidential documents obtained from them and (2) not use
any nonpublic information obtained under this Agreement or in
connection with the Transaction.
4.9. AFFILIATE LETTERS. Within thirty days following the date this
Agreement is signed, VB will deliver to WCB, after consultation with
legal counsel, a list of names and addresses of VB's "affiliates" with
respect to the Transaction within the meaning of SEC Rule 145. By the
Effective Date, VB will deliver, or cause to be delivered, to WCB a
letter from each of these "affiliates," dated as of the date of its
delivery and in a form satisfactory to WCB.
4.10. UPDATE OF FINANCIAL STATEMENTS. WCB will deliver Subsequent
WCB Financial Statements to VB by the earlier of: (1) 5 days after WCB
prepares and issues them or (2) 60 days from year-end for year-end
statements and 30 days from the end of the quarter for quarterly
statements. The Subsequent WCB Financial Statements will:
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(a) be prepared from the books and records of WCB;
(b) present fairly the financial position and operating results
of WCB at the times indicated and for the periods covered;
(c) be prepared in accordance with GAAP (except for the absence
of notes) and with the regulations promulgated by applicable
regulatory authorities, to the extent then applicable,
subject to normal year-end adjustments; and
(d) reflect all liabilities, contingent or otherwise, of WCB on
the respective dates and for the respective periods covered,
except for liabilities not required to be so reflected in
accordance with GAAP or not significant in amount.
4.11. AVAILABILITY OF WCB'S BOOKS, RECORDS AND PROPERTIES. WCB will
make available to VB true and correct copies of: (1) its articles of
incorporation and bylaws and (2) minutes of the meetings of its
shareholders and its board of directors. At VB's reasonable request,
WCB will also provide VB with copies of: (1) reports filed with the SEC
or banking regulators and (2) WCB's stock option plans.
4.12. VB DEBT OUTSTANDING. On the Effective Date, WCB will either
assume or satisfy VB's note payable to Security State Bank, Centralia,
Washington, in a principal amount not greater than $1,350,000.
SECTION 5.
APPROVALS AND CONDITIONS
5.1. REQUIRED APPROVALS. The obligations of the parties to this
Agreement are subject to the approval of the Agreement and Transaction
by all appropriate regulatory agencies having jurisdiction with respect
to the Transaction.
5.2. CONDITIONS TO OBLIGATIONS OF WCB AND HB. All obligations of WCB
and HB under this Agreement are subject to satisfaction of the
following conditions at or before Closing:
5.2.1. REPRESENTATIONS AND WARRANTIES. VB's representations and
warranties in this Agreement and in any certificate or other
instrument delivered in connection with this Agreement will be
true and correct in all material respects at Closing (except to
the extent that they expressly relate to an earlier date, in
which case they will be true in all material respects as of that
earlier date). These representations and warranties will have the
same force and effect as if they had been made at Closing. VB
will have delivered to WCB and HB its certificate, executed by a
duly authorized officer of VB and dated as of Closing, stating
that these
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representations and warranties comply with this Subsection 5.2.1.
5.2.2. COMPLIANCE. VB will have performed and complied with all
material terms, covenants and conditions of this Agreement. VB
will have delivered to WCB and HB its certificate, executed by a
duly authorized officer of VB and dated as of Closing, stating
that VB is in compliance with this Subsection 5.2.2.
5.2.3. NO MATERIAL ADVERSE EFFECT. No material damage,
destruction or loss (whether or not covered by insurance) has
occurred, and no other event, individually or in the aggregate,
having or potentially having a Material Adverse Effect with
respect to VB or the Bank has occurred. VB's certificate referred
to in Subsection 5.2.2 will state that the conditions identified
in this Subsection 5.2.3 are satisfied.
5.2.4. FINANCIAL CONDITION. The following will be true, and
VB's certificate referred to in Subsection 5.2.2 will so state:
(a) as of Closing the consolidated net worth of VB was not
less than $6,100,000 and the net worth of the Bank was
not less than $7,325,000, each as determined in
accordance with GAAP (before any adjustments not
reflected in VB's Financial Statements as of December
31, 1995, required by Federal Accounting Standards
("FAS") 115);
(b) all of the Bank's deposits, other than: (1) brokered
deposits, (2) public funds, and (3) certificates of
deposits (or equivalents) equal to or in excess of
$100,000 (collectively, "Core Deposits"), will not be
less than 95% of the daily average Core Deposits of the
Bank for the 90-day period ending two days before
Closing;
(c) the Bank's allowance for possible loan and lease losses
(1) at December 31, 1995, and at Closing will be
adequate to absorb the Bank's anticipated loan and lease
losses (taking into account any recommendations made by
VB's certified public accountants) and (2) at Closing
will be not less than 1.5% of the Bank's aggregate loans
and leases; and
(d) the reserves set aside for the contingent liabilities
reflected in the Subsequent VB/Bank Financial Statements
will be adequate to absorb all reasonably anticipated
losses.
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5.2.5. RELEASE OF PLEDGE. WCB will have assumed or satisfied
VB's note as provided in Subsection 4.12 and will have secured a
release from Security State Bank, Centralia, Washington, of VB's
stock pledged to Security State Bank as security for this note.
5.2.6. NO CHANGE IN LOAN REVIEW. VB will have provided to WCB
the reports reasonably requested by WCB under Subsection 4.1.11,
and neither these reports nor any examinations conducted by WCB
under Subsection 4.1.11 reveal a material adverse change in
either: (1) the information set forth in Schedule 7 or (2)
information revealed during WCB's previous examinations of the
Bank's loans.
5.2.7. NO GOVERNMENTAL PROCEEDINGS. No action or proceeding
will have been commenced or threatened by any governmental agency
to restrain or prohibit or invalidate the Transaction.
5.2.8. APPROVAL BY COUNSEL. All actions, proceedings,
instruments and documents required in connection with this
Agreement, the Transaction, and all other related legal matters
will have been approved by counsel for WCB and HB.
5.2.9. RECEIPT OF TITLE POLICY. WCB will have received the
title insurance policy or policies required by Subsection 4.1.10.
5.2.10. CORPORATE AND SHAREHOLDER ACTION. VB's board of
directors and VB's shareholders will each have approved the
Transaction.
5.2.11. TAX OPINION. WCB and HB will obtain from Graham & Dunn,
and deliver to VB, an opinion addressed to VB and in form and
substance reasonably satisfactory to VB and its counsel, to the
effect that consummation of the Transaction will not result in a
taxable event for VB or WCB, and otherwise will have each of the
effects specified below:
(a) The Transaction will qualify as a reorganization within
the meaning of IRC Section 368(a)(1)(A).
(b) Under IRC Section 354(a)(i), VB's stockholders who, in
accordance with Section 1, exchange their VB Common
Stock shares solely for WCB Common Stock shares will
not recognize gain or loss on the exchange.
(c) Cash payments to VB's shareholders in lieu of a
fractional share of WCB Common Stock will be treated as
distributions in redemption of the fractional share
interest, subject to the
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limitations of IRC Section 302.
5.2.12. OPINION OF COUNSEL. VB will obtain from Foster Pepper &
Shefelman and deliver to WCB an opinion of counsel, addressed to
WCB, to the effect that:
(a) VB is a corporation validly existing and in good
standing under Washington State law;
(b) the Bank is a Washington State chartered banking
corporation validly existing and in good standing under
Washington State law;
(c) VB has the corporate power and authority to execute,
deliver, and perform this Agreement;
(d) the execution, delivery, and performance of this
Agreement have been duly authorized by all necessary
corporate action on the part of VB, and this Agreement
constitutes the legal, binding, and valid obligation of
VB, enforceable in accordance with its terms, except to
the extent that enforcement (but not validity) may be
limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws generally affecting the
enforcement of the rights of creditors and by generally
applicable principles of equity;
(e) all issued and outstanding shares of VB's and the
Bank's capital stock have been duly authorized and are
validly issued, fully paid, non-assessable, free of
preemptive or similar rights arising by operation of
law or otherwise, and have been issued in compliance
with all applicable federal and applicable state
securities laws; and
(f) all VB Options have been duly authorized and validly
granted.
5.2.13. CASH PAID. The aggregate of the cash paid to holders of
VB Common Stock under this Agreement and applicable law will not
exceed 10% of the value of the WCB Common Stock issued upon
Closing.
5.2.14. AFFILIATE LETTERS. WCB and HB will have received the
affiliate list and letters specified in Subsection 4.9.
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5.2.15. REGISTRATION STATEMENT/FAIRNESS HEARING.
(a) If the parties proceed under Subsection 4.2.1, the
Registration Statement, as it may have been amended,
required in connection with the shares of WCB Common
Stock to be issued to Shareholders under Subsection 1.3
and as described in Subsection 4.2 will have become
effective, and no stop order suspending the
effectiveness of such Registration Statement will have
been issued or will remain in effect, and no
proceedings for that purpose will have been initiated
or threatened by the SEC the basis for which remains in
effect.
(b) If the parties proceed under Subsection 4.2.2, the
Oregon Director will have issued an order of
registration and a finding that the Plan of Exchange is
fair, just, and equitable and free from fraud and the
WCB Shares will be exempt from registration under the
Securities Act.
5.2.16. CONSENTS. VB will have obtained the consents as
indicated in Schedule 6.
5.2.17. FAIRNESS OPINION. VB will have received from an
investment advisor reasonably acceptable to WCB, an opinion,
dated immediately before VB mails the Prospectus/Proxy Statement
or Proxy/Disclosure Statement to its shareholders, to the effect
that the financial terms of the Transaction are financially fair
to VB's shareholders. WCB will provide VB's investment advisor
with such information as it may reasonably request in order to
render its opinion.
5.2.18. VB DIRECTOR TO SERVE ON WCB BOARD. VB will have
identified one VB director who is satisfactory to WCB and willing
to serve on WCB's board of directors.
5.2.19. ACCOUNTING TREATMENT. It will have been determined to
the satisfaction of WCB that the Transaction will be treated for
accounting purposes as a "pooling of interests" in accordance
with APB Opinion No. 16, and WCB will have received a letter to
such effect from Arthur Andersen, LLP, certified public
accountants.
5.2.20. SOLICITATION OF EMPLOYEES. Neither any member of VB's
board of directors nor any entity with which any such director is
affiliated will have solicited any employee of VB, WCB or HB with
the intention of causing such employee to terminate his or her
employment with VB, WCB or HB, as the case may be.
5.2.21. OTHER MATTERS. WCB will have received such other
opinions, certificates, and documents as WCB may
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reasonably request in connection with this Agreement and the
Transaction.
5.3. CONDITIONS TO VB'S OBLIGATIONS. All VB's obligations under this
Agreement are subject to satisfaction of the following conditions at or
before Closing:
5.3.1. REPRESENTATIONS AND WARRANTIES. WCB's and HB's
representations and warranties in this Agreement and in any
certificate or other instrument delivered in connection with this
Agreement will be true and correct in all material respects at
Closing (except to the extent that they expressly relate to an
earlier date, in which case they will be true in all material
respects as of that earlier date). These representations and
warranties will have the same force and effect as if they had
been made at Closing. WCB and HB will have delivered to VB their
respective certificates, executed by duly authorized officers of
WCB and HB and dated as of Closing, stating that these
representations and warranties comply with this Subsection 5.3.1.
5.3.2. COMPLIANCE. WCB and HB each will have performed and
complied with all terms, covenants and conditions of this
Agreement. WCB and HB will have delivered to VB their respective
certificates, executed by duly authorized officers of WCB and HB
and dated as of Closing, stating that WCB and HB are in
compliance with this Subsection 5.3.2.
5.3.3. NO MATERIAL ADVERSE EFFECT. No material damage,
destruction or loss (whether or not covered by insurance) has
occurred, and no other event, individually or in the aggregate,
having or potentially having a Material Adverse Effect with
respect to WCB has occurred. WCB's certificate referred to in
Subsection 5.3.2 will state that the conditions identified in
this Subsection 5.3.3 are satisfied.
5.3.4. NO GOVERNMENTAL PROCEEDINGS. No action or proceeding will
have been commenced or threatened by any governmental agency to
restrain or prohibit or invalidate the Transaction.
5.3.5. CORPORATE AND SHAREHOLDER ACTION. The boards of directors
of WCB and HB, and VB's and HB's shareholders, will each have
approved the Transaction.
5.3.6. TAX OPINION. The tax opinion specified in Subsection
5.2.11 will have been delivered to VB.
5.3.7. OPINION OF COUNSEL. WCB will obtain from Graham & Dunn,
P.C. and deliver to VB an opinion, addressed to VB, to the effect
that:
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(a) WCB is a corporation validly existing and in good
standing under Oregon State law and HB is a corporation
validly existing and in good standing under Washington
State law;
(b) WCB and HB have the corporate power and authority to
execute, deliver, and perform this Agreement;
(c) the execution, delivery, and performance of this
Agreement have been duly authorized by all necessary
corporate action on the part of WCB and HB, and this
Agreement constitutes the legal, binding, and valid
obligation of WCB and HB, enforceable in accordance with
its terms, except to the extent that enforcement (but
not validity) may be limited by bankruptcy, insolvency,
reorganization, moratorium, or similar laws generally
affecting the enforcement of the rights of creditors and
by generally applicable principles of equity;
(d) the WCB Shares have been duly authorized and, when
issued as contemplated by this Agreement, will be
validly issued, fully paid and nonassessable; and
(e) (1) The Registration Statement became effective under
the Securities Act on ____________, 1996, and, to the
best of counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been
instituted or threatened by the Securities and Exchange
Commission (if the parties proceed under Subsection
4.2.1) or (2) WCB has received from the Oregon Director
an order of registration and a finding by the Oregon
Director that the Plan of Exchange is fair, just, and
equitable and free from fraud (if the parties proceed
under Subsection 4.2.2).
5.3.8. CASH PAID. The aggregate of the cash paid to holders of
VB Common Stock under this Agreement and applicable law will not
exceed 10% of the value of the WCB Common Stock issued upon
Closing.
5.3.9. REGISTRATION STATEMENT.
(a) If the parties proceed under Subsection 4.2.1, the
Registration Statement, as it may have been amended,
required in connection with the shares of WCB Common
Stock to be issued to
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Shareholders under Subsection 1.3 and as described in
Subsection 4.2 will have become effective, and no stop
order suspending the effectiveness of such Registration
Statement will have been issued or will remain in
effect, and no proceedings for that purpose will have
been initiated or threatened by the SEC the basis for
which remains in effect.
(b) If the parties proceed under Subsection 4.2.2, the
Oregon Director will have issued an order of
registration and a finding that the Plan of Exchange is
fair, just, and equitable and free from fraud and the
WCB Shares will be exempt from registration under the
Securities Act.
5.3.10. VB DIRECTOR TO SERVE ON WCB BOARD. WCB has appointed,
effective as of Closing, a VB director satisfactory to VB to
serve on WCB's board of directors.
5.3.11. APPROVAL BY COUNSEL. All actions, proceedings,
instruments and documents required in connection with this
Agreement, the Transaction, and all other related legal matters
will have been approved by counsel for VB and the Bank.
5.3.12. OTHER MATTERS. VB will have received such other
opinions, certificates, and documents as VB may reasonably
request in connection with this Agreement and the Transaction.
SECTION 6.
DIRECTORS, OFFICERS AND EMPLOYEES
6.1. DIRECTORS. As a condition to the execution of this Agreement, VB
will cause each member of VB's and the Bank's board of directors to
enter into a written noncompetition agreement on or before the date
this Agreement is signed. These noncompetition agreements will take
effect on the Effective Date.
6.2. EMPLOYMENT AGREEMENT. As a condition to the execution of this
Agreement, Lee S. Stenseth will make himself available to continue as
President of the Bank, in accordance with the terms and conditions set
forth in an employment agreement of even date with this Agreement,
which will take effect on the Effective Date.
6.3. DIRECTOR AND EX-OFFICIO MEMBER APPOINTED. On the Effective Date,
WCB will cause one director, acceptable to WCB, who is a director of VB
immediately before the Effective Date, to be elected or appointed to
WCB's board of directors to serve until his successor is elected and
qualified. As of the Effective Date and until the end of his term as
President of the Bank, WCB will allow Lee S. Stenseth to attend the
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meetings of WCB's board of directors as an ex-officio member of WCB's
board of directors. Nothing in this Subsection 6.3 or this Agreement
restricts in any way any rights of the WCB's shareholders and directors
at any time after the Effective Date to nominate, elect, select, or
remove WCB's directors.
6.4. EMPLOYEES. WCB presently intends to allow the Bank's employees who
are employed with the Combined Corporation following the Transaction
("Continuing Employees") to participate in certain employee benefit
plans in which employees of WCB and HB currently participate. WCB
intends to grant Continuing Employees credit for prior service with the
Bank for purposes of determining eligibility and vesting, but
Continuing Employees will not receive this credit for purposes of
determining benefit accruals. This expression of intent is not a
contract with the Bank's employees and will not be construed to create
a contract or employment right with the Bank's employees.
6.5. EMPLOYEE BENEFIT ISSUES.
6.5.1. COMPARABILITY OF BENEFITS. WCB confirms to VB its present
intention to provide Continuing Employees with employee benefit
programs which, in the aggregate, are generally not less favorable
than those being provided to WCB employees.
6.5.2. TRANSFER OR MERGER OF GROUP PLAN. As soon as practicable
after Closing, VB's employee benefit plans will be terminated and
the interests of VB's employees in those plans will be transferred
or merged into WCB's employee benefit plans.
6.5.3. NO CONTRACT CREATED. Except as provided in Subsection 6.2,
Nothing in this Agreement gives any VB employee a right to
continuing employment.
SECTION 7.
TERMINATION OF AGREEMENT AND
ABANDONMENT OF TRANSACTION
7.1. TERMINATION BY REASON OF LAPSE OF TIME. If Closing does not occur
before the Termination Date, either WCB or VB may terminate this
Agreement and the Transaction if all of the following conditions are
present:
(a) the terminating party's board of directors decides to
terminate by a majority vote of its members;
(b) the terminating party delivers to the other party written
notice that its board of directors has voted in favor of
termination; and
(c) the failure to consummate the Merger by the Termination Date
is not due to a breach by the
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party seeking termination of any of its obligations,
representations or warranties under this Agreement.
7.2. OTHER GROUNDS FOR TERMINATION. This Agreement and the Transaction
may be terminated at any time before Closing (whether before or after
applicable approval of this Agreement by VB's shareholders, unless
otherwise provided) as follows:
7.2.1. MUTUAL CONSENT. By mutual consent of the parties to this
Agreement, if the boards of directors of each party agrees to
terminate by a majority vote of its members.
7.2.2. CONDITIONS OF VB NOT MET. By WCB's board of directors if,
by October 31, 1996, any condition set forth in Subsections 5.1 or
5.2 has not been satisfied.
7.2.3. VB FAILS TO RECOMMEND STOCKHOLDER APPROVAL OR TRIGGERING
EVENT OCCURS. By WCB's board of directors (a) before VB's
shareholders approve the Transaction, if VB's board of directors:
(1) fails to recommend to its stockholders the approval of the
Transaction or (2) modifies, withdraws or changes in a manner
adverse to WCB its recommendation to shareholders to approve the
Transaction; or (b) an Initial Triggering Event (as defined in the
Stock Option Agreement), and a Subsequent Triggering Event (as
defined in the Stock Option Agreement) occur, unless WCB exercises
the Stock Option Agreement.
7.2.4. CONDITIONS OF WCB OR HB NOT MET. By VB's board of directors
if, by October 31, 1996, any condition set forth in Subsections
5.1 or 5.3 has not been satisfied.
7.2.5. DECLINE IN VALUE OF WCB STOCK. By VB's board of directors,
in accordance with the following provisions:
(a) Subject to Subsection 7.2.5.(b), at any time during the
three-business-day period commencing on the fifth
calendar day preceding the Effective Date (the
"Determination Date"), if both of the following
conditions are satisfied:
(1) The Modified Average Closing Price (determined for
purposes of this Subsection 7.2.5.(a)(1) as the
Average Closing Price without the limitations set
forth in the second sentence of Subsection 1.3.3) is
less than $15.30; and
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(2) The number, expressed as a percentage, obtained by
dividing the Modified Average Closing Price by
$17.00 is more than five percentage points less than
the Index Differential.
(b) If VB exercises its termination right under Subsection
7.2.5.(a), it will give immediate written notice to WCB.
If VB gives this notice, the Effective Date will
automatically be postponed to a date ("Postponed
Effective Date") 10 business days from the date of this
notice, unless the parties agree on another date, and
all references to the Effective Date in this Agreement,
except in Subsections 1.3.3, 2.1, 7.2.5.(a) and
7.2.5.(b), will mean the Postponed Effective Date.
Unless Subsection 7.2.5.(c) applies, during the five-
business-day period beginning on the day WCB receives
VB's termination notice, WCB has the option to increase
the consideration to be received by VB shareholders by
using the Modified Average Closing Price in place of the
Average Closing Price. If WCB so elects within the
five-business-day period, it will give immediate written
notice to VB, and no termination will have occurred
under this Subsection 7.2.5, and this Agreement will
remain in effect in accordance with its terms (except
for the substitution of the Modified Average Closing
Price for the Average Closing Price and Postponed
Effective Date for Effective Date).
(c) At any time during the three-business-day period
commencing on the Determination Date, if the Modified
Average Closing Price is less than $13.60. If VB
exercises this right, it will give immediate written
notice to WCB.
(d) For purposes of this Subsection 7.2.5, the terms listed
below have the following meanings:
(1) Index Price. For any member of the Index Group, the
Modified Average Closing Price calculated using,
instead of WCB stock, the common stock of that
member of the Index Group.
(2) Index Differential. The sum of the respective
numbers (expressed as percentages), for each of the
members of the Index Group, obtained by multiplying
the weighting (as set forth in Schedule 14) of that
member of the Index Group times the quotient of the
Index Price for that member of the Index Group
divided by the Base Price (as set forth in
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Schedule 14) for that member of the Index Group.
(3) Index Group. The companies set forth in chart form
in Schedule 14, the common stock of all of which
will be publicly traded and as to which no publicly
announced Acquisition Proposal for the company will
have been made between the day before the date this
Agreement is signed and the Determination Date.
(4) Acquisition Proposal. A company within the Index
Group has received an Acquisition Proposal if it
receives a proposal for a transaction, which if
consummated as proposed would immediately thereafter
result in its equity holders' controlling 50% or
less of the equity of the entity resulting from the
combination.
(e) If the common stock of any of the companies listed in
Schedule 14 ceases to be publicly traded or an
Acquisition Proposal is announced with respect to that
company between the day before the date this Agreement
is signed and the Determination Date, that company will
be removed from the Index Group, and the weights
attributed to the remaining companies will be adjusted
proportionately for purposes of determining the Index
Price.
(f) All prices per share under this Subsection 7.2.5 will be
appropriately adjusted to account for stock dividends,
split-ups, mergers, combinations, conversions, exchanges
of shares or the like.
7.2.6. IMPRACTICABILITY. By either WCB, HB, or VB upon written
notice given to the other parties if the party seeking
termination under this Subsection 7.2.6's board of directors has
determined in its sole judgment, made in good faith and after due
consideration and consultation with counsel, that the Transaction
has become inadvisable or impracticable by reason of the
institution of litigation by the federal government or the
government of either the State of Washington or the State of
Oregon to restrain or invalidate the transactions contemplated by
this Agreement.
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7.3. COST ALLOCATION UPON TERMINATION. In connection with the
termination of this Agreement under this Section 7, VB, WCB and HB each
will pay their own out-of-pocket costs incurred in connection with this
Agreement, and will have no other liability to any other party.
SECTION 8.
MISCELLANEOUS
8.1. NOTICES. Any notice, request, instruction or other document given
under this Agreement must be in writing and must either be delivered
personally or be sent by registered or certified mail, postage prepaid,
and addressed as follows (or to any other address or person
representing any party as designated by that party through written
notice to the other parties):
VB Vancouver Bancorp
801 Main Street
P.O. Box 1087
Vancouver, WA 98666-1087
Attn: Lee S. Stenseth
with a copy to: Kenneth A. Roberts
Foster Pepper & Shefelman
One Main Place
101 SW Main St., 15th Floor
Portland, OR 97204
WCB and HB West Coast Bancorp
5335 SW Meadows Rd., Suite 201
Lake Oswego, OR 97035
Attn: Rodney B. Tibbatts
with a copy to: Stephen M. Klein
Graham & Dunn, P.C.
1420 Fifth Avenue, 33rd Floor
Seattle, WA 98101-2390
8.2. WAIVERS AND EXTENSIONS. Subject to Section 9, WCB, HB or VB may
grant waivers or extensions to the other parties to this Agreement, but
only through a written instrument executed by the Chief Executive
Officer of the party granting the waiver or extension. Waivers or
extensions which do not comply with the preceding sentence are not
effective. In accordance with this Section 8.2, a party may extend the
time for the performance of any of the obligations or other acts of any
other party, and may waive:
(a) any inaccuracies of any other party in the representations
and warranties contained in this Agreement or in any
document delivered in connection with this Agreement;
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(b) compliance with any of the covenants of any other party; and
(c) any other party's performance of any obligations under this
Agreement and any other condition precedent set out in
Section 5.
8.3. GENERAL INTERPRETATION. Except as otherwise expressly provided in
this Agreement or unless the context clearly requires otherwise: (1)
the defined terms defined in this Agreement include the plural as well
as the singular and (2) references in this Agreement to Sections,
Subsections, Schedules, and Exhibits refer to Sections and Subsections
of and Schedules and Exhibits to this Agreement. Whenever the words
"include", "includes", or "including" are used in this Agreement, the
parties intend them to be interpreted as if they are followed by the
words "without limitation." All pronouns used in this Agreement include
the masculine, feminine and neuter gender, as the context requires. All
accounting terms used in this Agreement that are not expressly defined
in this Agreement have the respective meanings given to them in
accordance with GAAP.
8.4. CONSTRUCTION AND EXECUTION IN COUNTERPARTS. Except as otherwise
expressly provided in this Agreement, this Agreement: (1) contains the
parties' entire understanding, and no modification or amendment of its
terms or conditions will be effective unless in writing and signed by
the parties, or their respective duly authorized agents; (2) will not
be interpreted by reference to any of the titles or headings to the
Sections or Subsections, which have been inserted for convenience only
and are not deemed a substantive part of this Agreement; (3) includes
all amendments to this Agreement, each of which is made a part of this
Agreement by this reference; and (4) may be executed in one or more
counterparts, each of which will be deemed an original, but all of
which taken together will constitute one and the same document.
8.5. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS. Except for
Subsection 4.8 (confidentiality) and Subsection 7.3 (expense
allocation), the representations, warranties and covenants in this
Agreement will not survive Closing or termination of this Agreement.
8.6. ATTORNEYS' FEES AND COSTS. In the event of any dispute or
litigation with respect to the terms and conditions or enforcement of
rights or obligations arising by reason of this Agreement or the
Transaction, the prevailing party in any such litigation will be
entitled to reimbursement from the other party for its costs and
expenses, including reasonable judicial and extra-judicial attorneys'
fees, expenses and disbursements, and fees, costs and expenses relating
to any mediation or appeal.
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<PAGE> 173
8.7. ARBITRATION. At either party's request, the parties must submit
any dispute, controversy or claim arising out of or in connection with,
or relating to, this Agreement or any breach or alleged breach of this
Agreement, to arbitration under the American Arbitration Association's
rules then in effect (or under any other form of arbitration mutually
acceptable to the parties). A single arbitrator agreed on by the
parties will conduct the arbitration. If the parties cannot agree on a
single arbitrator, each party must select one arbitrator and those two
arbitrators will select a third arbitrator. This third arbitrator will
hear the dispute. The arbitrator's decision is final (except as
otherwise specifically provided by law) and binds the parties, and
either party may request any court having jurisdiction to enter a
judgment and to enforce the arbitrator's decision. The arbitrator will
provide the parties with a written decision naming the substantially
prevailing party in the action. This prevailing party is entitled to
reimbursement from the other party for its costs and expenses,
including reasonable attorneys' fees.
8.8. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Washington, except to the
extent that certain matters may be governed by federal law.
8.9. SEVERABILITY. If a court determines that any term of this
Agreement is invalid or unenforceable under applicable law, the
remainder of this Agreement is not affected, and each remaining term is
valid and enforceable to the fullest extent permitted by law.
SECTION 9.
AMENDMENTS
9.1. BOARD ACTION. At any time before the Effective Date, whether
before or after the parties have obtained any applicable shareholder approvals
of the Transaction, the boards of directors of WCB,HB, and VB may: (1) amend or
modify this Agreement or any attached Exhibit or Schedule and (2) grant waivers
or time extensions in accordance with Subsection 8.2; but after the VB
shareholders have approved this Agreement, the parties' boards of directors may
not without VB shareholder approval amend or waive any provision of this
Agreement if the amendment or waiver would reduce the amount or change the form
of consideration VB shareholders will receive in the Transaction. All
amendments, modifications, extensions and waivers must be in writing and signed
by the party agreeing to the amendment, modification, extension or waiver.
Failure by any party to insist on strict compliance with any obligation,
agreement or condition of the other parties under this Agreement, does not
without a writing operate as a waiver or estoppel with respect to that or any
other obligation, agreement or condition.
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<PAGE> 174
Signed as of February 15, 1996:
WEST COAST BANCORP
By /s/ Rodney B. Tibbatts
----------------------------------
Name: Rodney B. Tibbatts
Title: Co-President and CEO
HB ACQUISITION CORPORATION
By /s/ Victor L. Bartruff
----------------------------------
Name: Victor L. Bartruff
Title: Co-President and CEO
VANCOUVER BANCORP
By /s/ Lee S. Stenseth
----------------------------------
Name: Lee S. Stenseth
Title: President
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<PAGE> 175
STATE OF OREGON )
) ss.
COUNTY OF CLACKAMAS )
On this 15th day of February, 1996, before me personally appeared
Rodney B. Tibbatts, to me known to be the Co-President and Chief Executive
Officer of WEST COAST BANCORP, the corporation that executed the foregoing
instrument, who acknowledged said instrument to be the free and voluntary act
and deed of said corporation, for the uses and purposes mentioned there, and who
stated on oath that he or she was authorized to execute said instrument, and
that the seal affixed (if any) was the official seal of said corporation.
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to
this document as of the day and year first written above.
/s/ Renita McNaughton
-------------------------------------
NOTARY PUBLIC in and for the State
of Oregon, residing at
771 25th St. SE, Salem, OR 97301
Title: Executive Assistant
My commission expires 9/29/97
STATE OF OREGON )
) ss.
COUNTY OF CLACKAMAS )
On this 15th day of February, 1996, before me personally appeared
Victor L. Bartruff to me known to be the Co-President and Chief Executive
Officer of HB ACQUISITION CORPORATION, the corporation that executed the
foregoing instrument, who acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes mentioned
there, and who stated on oath that he or she was authorized to execute said
instrument, and that the seal affixed (if any) was the official seal of said
corporation.
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to
this document as of the day and year first written above.
/s/ Renita McNaughton
-------------------------------------
NOTARY PUBLIC in and for the State
of Oregon, residing at
771 25th St. SE, Salem, OR 97301
Title: Executive Assistant
My commission expires 9/29/97
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<PAGE> 176
STATE OF WASHINGTON )
) ss.
COUNTY OF CLARK )
On this 15th day of February, 1996, before me personally appeared Lee
S. Stenseth, to me known to be the President of VANCOUVER BANCORP, the
corporation that executed the foregoing instrument, who acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes mentioned there, and who stated on oath that he or she was
authorized to execute said instrument, and that the seal affixed (if any) was
the official seal of said corporation.
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to
this document as of the day and year first written above.
/s/ Gaynel Moody
-------------------------------------
NOTARY PUBLIC in and for the State
of Washington, residing at
Vancouver
Title: Notary
My commission expires 7/24/99
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<PAGE> 177
The undersigned, being all of the Board of Directors of Vancouver
Bancorp ("VB"), hereby consent to the Plan and Agreement of Reorganization and
Merger, dated as of February 15, 1996, between West Coast Bancorp, HB
Acquisition Corporation, and VB ("Agreement"), and individually and as a group
agree to vote in favor of the Agreement the shares of capital stock each
beneficially owns, and subject to the good faith exercise of their fiduciary
duties in accordance with the advise of counsel, to support and recommend the
Agreement's adoption by the other shareholders of VB.
Except as otherwise required by law, the undersigned hereby,
individually and as a group, further agree to refrain from (a) negotiating or
accepting any offer of merger, consolidation, or acquisition of any of the
shares or all or substantially all of the assets of VB from the date of the
Agreement through the meeting of the shareholders of VB at which the
transactions contemplated by the Agreement will be considered, and (b) any other
actions or omissions inconsistent with the transactions contemplated by the
Agreement.
/s/ Stuart A. Bender /s/ Timothy P. Moyer
- --------------------------- ---------------------------
/s/ Robert V. Hyde /s/ Dean N. Alterman
- --------------------------- ---------------------------
/s/ Dianne A. Frichtl /s/ Lee S. Stenseth
- --------------------------- ---------------------------
/s/ James J. Pomajevich
- ---------------------------
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<PAGE> 178
AMENDMENT NO. 1 TO
MERGER AGREEMENT
This Amendment No. 1, dated April 8, 1996, amends the Plan and
Agreement of Reorganization and Merger ("Merger Agreement") between West Coast
Bancorp ("WCB"), HB Acquisition Corporation ("HB") and Vancouver Bancorp ("VB"),
signed by the parties on February 15, 1996.
RECITALS
A. After the Merger Agreement was signed, it was determined that the
numbers representing VB's and WCB's issued and outstanding shares of
capital stock were inadvertently understated in the Merger Agreement.
Also, due to options in the process of exercise under a WCB Stock Plan
at the time the Merger Agreement was signed, the number representing
the WCB Common Stock shares outstanding under the WCB Stock Plans was
overstated in the Merger Agreement. Each party was unaware when the
Merger Agreement was signed of these technical discrepancies in the
other party's disclosures.
B. The parties wish to correct their respective disclosures in the Merger
Agreement to reflect the actual numbers of each of their issued and
outstanding shares as of February 15, 1996, and the actual number of
the WCB Common Stock shares outstanding under the WCB Stock Plans as of
February 15, 1996.
Therefore, in consideration of the mutual promises set forth below and
in the Merger Agreement, the parties amend the Merger Agreement as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms not expressly defined in this Amendment
No. 1 have the meaning assigned to those terms in the Merger Agreement.
2. AMENDMENT TO WCB'S REPRESENTATIONS AND WARRANTIES. WCB's representation
and warranty in Subsection 3.1.3(a)(1) is amended by inserting
4,807,679 in place of 4,805,689 as the number of WCB Common Stock
shares which are issued and outstanding. WCB's representation and
warranty in Subsection 3.1.3(a)(2) is amended by inserting 343,431 in
place of 344,420 as the number of WCB Common Stock shares outstanding
under the WCB Stock Plans.
3. AMENDMENT TO VB'S REPRESENTATIONS AND WARRANTIES. VB's representation
and warranty in Subsection 3.1.3(b)(1) is amended by inserting 141,461
in place of 141,428 as the number of VB Common Stock shares which are
issued and outstanding.
4. FULL FORCE AND EFFECT. The Merger Agreement remains in full force and
effect, except as specifically amended by this Amendment No. 1.
<PAGE> 179
5. GOVERNING LAW. This Amendment No. 1 is governed by Washington State
law.
6. COUNTERPARTS. The parties may execute this Amendment No. 1 in one or
more counterparts. All counterparts will be construed together and
constitute one originally executed document.
Signed as of April 8, 1996:
WEST COAST BANCORP
By /s/Rodney B. Tibbatts
-------------------------
Name: Rodney B. Tibbatts
Title: Co-President and CEO
HB ACQUISITION CORPORATION
By /s/Victor L. Bartruff
-------------------------
Name: Victor L. Bartruff
Title: Co-President and CEO
VANCOUVER BANCORP
By /s/ Lee S. Stenseth
-------------------------
Name: Lee S. Stenseth
Title: President
<PAGE> 180
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Agreement"), dated as of February 15, 1996,
between WEST COAST BANCORP ("WCB"), an Oregon corporation, and VANCOUVER BANCORP
("VB"), a Washington corporation.
RECITALS
A. WCB, VB, and HB Corporation ("HB") are signing and delivering a Plan
and Agreement of Reorganization and Merger ("Merger Agreement") dated
as of February 15, 1996, concurrently with this Agreement.
B. As a condition to and in consideration of WCB's signing of the Merger
Agreement, VB has agreed to grant WCB the Option described in this
Agreement.
AGREEMENT
In consideration of the mutual promises set forth in this Agreement and
in the Merger Agreement, the parties agree as follows:
1. GRANT OF OPTION. VB grants to WCB an irrevocable option ("Option") to
purchase, subject to the terms of this Agreement, up to 28,144 fully
paid and nonassessable shares of VB Common Stock, no par value ("Common
Stock") (which represents 19.9% of VB's total stock issued and
outstanding), at a price of $64 per share; but if VB issues or agrees
to issue any shares of Common Stock (other than as permitted under the
Merger Agreement or in accordance with existing stock options) at a
price less than $64 per share (as adjusted in accordance with
Subsection 6.3), such price shall be equal to such lesser price (such
price, as adjusted if applicable, the "Option Price"). The number of
shares of Common Stock that may be received upon the exercise of the
Option and the Option Price are subject to adjustment as set forth in
this Agreement.
2. EXERCISE OF OPTION.
2.1 Exercise of Option. The Holder (defined below) may exercise
the Option, in whole or part, if, but only if, both an Initial
Triggering Event (defined below) and a Subsequent Triggering
Event (defined below) shall have occurred before the
occurrence of an Exercise Termination Event (defined below);
provided that the Holder shall have sent the written notice of
such exercise (as provided in Subsection 2.2) within 30 days
following such Subsequent Triggering Event (or such longer
period as provided in Section 10). This Option shall not be
exercisable: (a) during any period in which WCB is
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failing in any material respect to perform its obligations or
observe its covenants under the Merger Agreement, unless the
reason for such failure is that VB is failing in any material
respect to perform its obligations or observe its covenants
under the Merger Agreement; (b) if any governmental approvals
required for the issuance of the shares of Common Stock to be
purchased shall not have been obtained or if such issuance
would violate applicable laws or regulations.
2.2 Notice. In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to VB a written notice (the
date of which is referred to in this Agreement as the "Notice
Date") specifying (a) the total number of shares it will
purchase pursuant to such exercise and (b) a place and a date
not earlier than three business days nor later than 30
business days from the Notice Date, for the closing of such
purchase (the "Closing Date"); provided that if the closing of
the purchase and sale pursuant to the Option cannot be
consummated by reason of any applicable judgment, decree,
order, law or regulation, the period of time that otherwise
would run pursuant to this sentence shall run instead from the
date on which such restriction on consummation has expired or
been terminated; and provided further that if prior
notification to or approval of the Board of Governors of the
Federal Reserve System ("Federal Reserve Board") or any other
regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice
or application for approval and shall expeditiously process
the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on
which any required notification periods have expired or been
terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
2.3 Payment. At the closing referred to in Subsection 2.2, the
Holder shall pay to VB the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of
the Option in immediately available funds by wire transfer to
a bank account designated by VB, provided that failure or
refusal of VB to designate such an account shall not preclude
the Holder from exercising the Option. At such closing,
simultaneously with the delivery of immediately available
funds as provided in this Subsection 2.3, VB shall deliver to
the Holder a certificate or certificates representing the
number of shares of Common Stock purchased by the Holder and,
if the Option is exercised in part only, a new Option
evidencing the rights of the Holder thereof to purchase the
balance of the shares purchasable under this
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<PAGE> 182
Agreement and the Holder shall deliver to VB a copy of this
Agreement and a letter agreeing that the Holder will not offer
to sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
2.4 Legend. Certificates for Common Stock delivered at a closing
under this Agreement may be endorsed with a restrictive legend
that shall read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and VB
and to resale restrictions arising under the Securities
Act of 1933, as amended, and applicable state securities
laws. A copy of such agreement is on file at the
principal office of VB and will be provided to the
holder hereof without charge upon receipt by VB of a
written request therefor."
It is understood and agreed that: (a) the reference to the
resale restrictions of the Securities Act of 1933, as amended
("1933 Act"), in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the
Holder shall have delivered to VB a copy of a letter from the
staff of the Securities and Exchange Commission ("SEC"), or an
opinion of counsel, in form and substance satisfactory to VB,
to the effect that such legend is not required for purposes of
the 1933 Act; and (b) the reference to the provisions to this
Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do
not require the retention of such reference. In addition, such
certificates shall bear any other legend as may be required by
law.
2.5 Delivery. Upon the giving by the Holder to VB of the written
notice of exercise of the Option provided for under Subsection
and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of VB
shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to
the Holder. VB shall pay all expenses, and any and all United
States federal, state and local taxes and other charges that
may be payable in connection with the preparation, issue and
delivery of stock certificates
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<PAGE> 183
under this Subsection in the name of the Holder or its
assignee or transferee.
3. CERTAIN DEFINITIONS.
3.1 Exercise Termination Event. An "Exercise Termination Event" is
the earliest to occur of the following: (a) the Effective Date
of the Merger; (b) termination of the Merger Agreement in
accordance with the provisions thereof if such termination
occurs before the occurrence of an Initial Triggering Event,
except a termination by WCB pursuant to Subsection 7.2.2 of
the Merger Agreement; (c) the passage of 12 months after
termination of the Merger Agreement if such termination
follows either the occurrence of an Initial Triggering Event
or a termination by WCB pursuant to Subsection 7.2.2 of the
Merger Agreement; provided that if an Initial Triggering Event
continues or occurs beyond such termination, the Exercise
Termination Event shall be 12 months from the expiration of
the Last Triggering Event but in no event more than 18 months
after such termination; (d) the second anniversary of the date
of this Agreement; or (e) the exercise by WCB of its right to
terminate the Merger Agreement pursuant to Subsection 7.2.3
thereof. The "Last Triggering Event" means the last Initial
Triggering Event to occur.
3.2 Holder. The term "Holder" means the person or persons holding
the Option in accordance with the terms of Section 12.
3.3 Initial Triggering Event. The term "Initial Triggering Event"
means any of the following events or transactions occurring
after the date of this Agreement:
a. VB or any of its Subsidiaries (each a "VB Subsidiary"),
without having received WCB's prior written consent,
shall have engaged in or entered into an agreement to
engage in an Acquisition Transaction (defined below)
with any person (the term "person" for purposes of this
Agreement having the meaning assigned in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended ("1934 Act"), and the rules and
regulations thereunder) other than VB, any VB
Subsidiary, WCB or any of its subsidiaries (each a "WCB
Subsidiary") or VB's board of directors shall have
recommended that the shareholders of VB approve or
accept any Acquisition Transaction other than as
contemplated by the Merger Agreement. For purposes of
this Agreement, "Acquisition Transaction" shall mean (1)
a merger, consolidation or any similar transaction
involving VB or any Significant Subsidiary (as defined
in Rule 1-02 of Regulation
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S-X promulgated by the SEC) of VB, (2) a purchase, lease
or other acquisition of all or substantially all of the
assets of VB or any Significant Subsidiary of VB, (3) a
purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of
securities representing 15% or more of the voting power
of VB or any Significant Subsidiary of VB, or (4) any
substantially similar transaction;
b. (1) Any person other than WCB, any WCB Subsidiary, any
VB Subsidiary acting in a fiduciary capacity in the
ordinary course of such VB Subsidiary's business, any
employee benefit plan or employee stock ownership plan
of VB or any VB Subsidiary, or any person organized,
appointed or established by VB or any VB Subsidiary for
or pursuant to the provisions of any such plan, alone or
together with such person's affiliates and associates
(as the terms "affiliate" and "associate" are defined in
Rule 12b-2 under the 1934 Act), shall have acquired
beneficial ownership or the right to acquire beneficial
ownership of 15% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned
in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder), or (2) any group (as the term
"group" is defined in Section 13(d)(3) of the 1934 Act),
other than a group of which WCB, any WCB Subsidiary, any
VB Subsidiary acting in a fiduciary capacity in the
ordinary course of such VB Subsidiary's business, any
employee benefit plan or employee stock ownership plan
of VB or any VB Subsidiary, or any person organized,
appointed or established by VB or any VB Subsidiary for
or pursuant to the terms of any such plan is a member,
shall have been formed that beneficially owns 15% or
more of the Common Stock then outstanding; provided,
however, that notwithstanding this Subsection 3.3.b,
(i) any purchase or purchases of less than 1% in the
aggregate of the VB outstanding shares or (ii) any
exercise of existing VB stock options, will not be a
"Triggering Event."
c. Any person other than WCB or any WCB Subsidiary shall
have made a bona fide proposal to VB or its shareholders
by public announcement or written communication that
becomes the subject of public disclosure to engage in an
Acquisition Transaction;
d. After a proposal is made by a third party to VB or its
shareholders to engage in an Acquisition Transaction, VB
shall have breached any covenant or
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obligation contained in the Merger Agreement and such
breach: (1) would entitle WCB to terminate the Merger
Agreement (without regard for any cure periods, if any,
provided therein unless such cure is promptly effected
without jeopardizing consummation of the merger pursuant
to the terms of the Merger Agreement) and (2) shall not
have been cured prior to the Notice Date; or
e. Any person other than WCB or any WCB Subsidiary, other
than in connection with a transaction to which WCB has
given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board, or
other federal or state bank regulatory authority, which
application or notice has been accepted for processing,
for approval to engage in an Acquisition Transaction.
3.4 Subsequent Triggering Event. The term "Subsequent Triggering
Event" means either of the following events or transactions
occurring after the date of this Agreement (it being
understood that the occurrence of either such event would also
constitute an Initial Triggering Event):
a. The acquisition by any person, alone or together with
such person's affiliates and associates, or any group,
subject to the same exceptions as those set forth in
Subsections 3.3.b(1) and 3.3.b(2), of beneficial
ownership of 25% or more of the then outstanding Common
Stock; or
b. The occurrence of an Initial Triggering Event described
in Subsection 3.3.a, except that the percentage
referred to in clause (3) shall be 25%.
3.5 Triggering Event and Notice. VB shall notify WCB promptly in
writing of the occurrence of any Initial Triggering Event or
Subsequent Triggering Event (collectively, a "Triggering
Event"), it being understood that the giving of such notice by
VB shall not be a condition to the right of the Holder to
exercise the Option.
4. COVENANTS OF VB. VB agrees that: (a) it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised
without additional authorization of Common Stock after giving effect to
all other options, warrants, convertible securities and other rights to
purchase Common Stock; (b) it shall not by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed by VB
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<PAGE> 186
under this Agreement; (c) it shall promptly take all action as may from
time to time be required (including (1) complying with all premerger
notification, reporting and waiting period requirements specified in 15
U.S.C. Section 18a and regulations promulgated thereunder and (2) if,
under the Bank Holding Company Act of 1956, as amended, or the Change
in Bank Control Act of 1978, as amended, or any state banking law,
prior approval of or notice to the Federal Reserve Board or to any
state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal
Reserve Board or such state regulatory authority as they may require)
in order to permit the Holder to exercise the Option and VB duly and
effectively to issue shares of Common Stock in accordance with this
Agreement; and (d) it shall promptly take all action provided in this
Agreement to protect the rights of the Holder against dilution.
5. EXCHANGE OF OPTION. This Agreement (and the Option granted by this
Agreement) are exchangeable, without expense, at the option of the
Holder, upon presentation and surrender of this Agreement at VB's
principal office, for other Agreements providing for Options of
different denominations entitling the Holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth in
this Agreement, in the aggregate, the same number of shares of Common
Stock purchasable under this Agreement. The terms "Agreement" and
"Option" as used in this Agreement include any Stock Option Agreements
and related Options for which this Agreement (and the Option granted by
this Agreement) may be exchanged. Upon receipt by VB of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or
destruction) of, reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, VB will
execute and deliver a new Agreement of like tenor and date. Any such
new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of VB, whether or not the Agreement
so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
6. ANTI-DILUTION ADJUSTMENTS. The number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall
be subject to adjustment from time to time as follows:
6.1 In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock
purchasable upon exercise hereof shall be appropriately
adjusted, and proper provision shall be made in the agreements
governing such transaction so that WCB shall receive upon
exercise of the Option the number
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and class of shares, other securities, property or cash that
WCB would have received in respect of the Common Stock subject
to the Option if the Option had been exercised and the Common
Stock subject to the Option had been issued to WCB immediately
prior to such event or the record date therefor, as
applicable.
6.2 In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this
Agreement (other than as described in Section 6.1 or pursuant
to this Agreement), including, without limitation, pursuant to
stock option plans and in connection with acquisitions and
other transactions permitted by the Merger Agreement, the
number of shares of Common Stock subject to the Option shall
be increased so that, after such issuance, it equals 19.9% of
the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this
Agreement shall be deemed to authorize VB or WCB to breach any
provision of the Merger Agreement.
6.3 Subject to the following sentence, whenever the number of
shares of Common Stock purchasable upon exercise hereof is
adjusted as provided in this Section 6, the Option Price shall
be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of
Common Stock purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of
Common Stock purchasable after the adjustment. The foregoing
adjustment to the Option Price shall not apply to adjustments
in the number of shares of Common Stock issuable under this
Option caused by an issuance of additional shares of Common
Stock for consideration pursuant to an agreement entered into
before the date of this Agreement.
6.4 In no event shall the aggregate number of shares for which
this Option is exercisable (including pursuant to all
adjustments as provided for in this Agreement) exceed 19.9% of
VB's outstanding Common Stock prior to exercise.
7. REGISTRATION RIGHTS. Upon the occurrence of a Subsequent Triggering
Event that occurs before an Exercise Termination Event, VB shall, at
the request of WCB delivered within 30 days of such Subsequent
Triggering Event (whether on its own behalf or on behalf of any
subsequent Holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant to this Agreement), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act
covering the Option and any shares issued and issuable pursuant to this
Option and shall use its best efforts to cause such registration
statement to become effective and remain current in order to permit the
sale or other
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<PAGE> 188
disposition of any shares of Common Stock issued upon total or partial
exercise of this Option ("Option Shares") in accordance with any plan
of disposition requested by WCB. VB will use its best efforts to cause
such registration statement first to become effective and then to
remain effective for such period not in excess of 180 days from later
of (i) the date of the closing under this Agreement or (ii) the date
such registration statement first becomes effective, or such shorter
time as may be reasonably necessary to effect such sales or other
dispositions. WCB shall have the right to demand two such
registrations. The obligations of VB under this Agreement to file a
registration statement and to maintain its effectiveness may be
suspended for one or more periods of time that do not exceed 60 days in
the aggregate if VB's board of directors shall have determined that the
filing of such registration statement or the maintenance of its
effectiveness would require disclosure of nonpublic information that
would materially and adversely affect VB. The foregoing
notwithstanding, if at the time of any request by WCB for registration
of the Option and/or the Option Shares as provided above, VB is in
registration with respect to an underwritten public offering of shares
of Common Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter
or underwriters, of such offering the inclusion of the Option and/or
Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by VB, the number of Option Shares which
in either case are to be covered in the registration statement
contemplated by this Agreement may be reduced; provided, however, that
after any such required reduction the number of Option Shares to be
included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the
Holder and VB in the aggregate; and provided further, however, that if
such reduction occurs, then VB shall file a registration statement for
the balance as promptly as practical and no reduction shall thereafter
occur. Each Holder whose Option and/or Option Shares are registered
under this Agreement shall provide all information reasonably requested
by VB for inclusion in any registration statement to be filed under
this Agreement. If requested by any such Holder in connection with such
registration, VB shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such
underwriting agreements for the VB. Upon receiving any request under
this Section 7 from any Holder, VB agrees to send a copy thereof to any
other person known to VB to be entitled to registration rights under
this Section 7, in each case by promptly mailing the said postage
prepaid, to the address of record of the persons entitled to receive
such copies.
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<PAGE> 189
8. REPURCHASE OF OPTION OR OPTION SHARES.
8.1 Repurchase of Option or Option Shares. Upon the occurrence of
a Subsequent Triggering Event that occurs prior to an Exercise
Termination Event, (a) at the request of the Holder, delivered
within 30 days of such occurrence (or such longer period as
provided in Section 10), VB shall repurchase the Option from
the Holder at a price (the "Option Repurchase Price") equal to
the product of the excess of (i) the Market/Offer Price (as
defined below) over (ii) the Option Price, multiplied by the
number of shares for which this Option may then be exercised,
and (b) at the request of the owner of Option Shares from time
to time (the "Owner"), delivered within 30 days of such
occurrence (or such later period as provided in Section 10),
VB shall repurchase such number of the Option Shares from the
Owner as the Owner shall designate at a price (the "Option
Share Repurchase Price") equal to the product of the
Market/Offer Price multiplied by the number of Option Shares
so designated. The term "Market/Offer Price" means the highest
of the following amounts with respect to the six-month period
immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice
of the required repurchase of Option Shares, as the case may
be (a) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made; (b) the price
per share of Common Stock paid by any third party or to be
paid pursuant to an agreement with VB entered into during the
period; (c) the highest closing price for shares of Common
Stock reported in the principal market for such shares within
the period; or (d) in the event of a sale of all or
substantially all of VB's assets, the sum of the price paid in
such sale for such assets and the current market value of the
remaining assets of VB as determined by a nationally
recognized investment banking firm selected by the Holder or
the Owner, as the case may be, and VB divided by the number of
shares of Common Stock of VB outstanding at the time of such
sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be, and VB. Notwithstanding
the foregoing, if the same person who has participated in a
Triggering Event has entered, or after such Triggering Event
has occurred enters, into any agreement or understanding with
WCB relating to WCB's rights under this Option or with respect
to the Option Shares or directly or indirectly relating to VB,
WCB shall, notwithstanding the terms of such agreement or
understanding, at any time upon the occurrence of a Subsequent
Triggering Event of the type set forth in Subsection without
VB's approval, recommendation or consent, promptly request
that VB
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repurchase the Option and any Option Shares held by WCB as
provided in this Section 8 and VB shall do so.
8.2 Holder Election. The Holder and/or the Owner, as the case may
be, may exercise its right to require VB to repurchase the
Option and any Option Shares pursuant to this Section 8 by
surrendering for such purpose to VB, at its principal office,
a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to
require VB to repurchase this option and/or the Option Shares
in accordance with the provisions of this Section 8. As
promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or
notices relating thereto, VB shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to
the Owner the Option Share Repurchase Price therefor or the
portion thereof that VB is not then prohibited under
applicable law and regulation from so delivering.
8.3 Prohibitions of Law. To the extent that VB is prohibited under
applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Option and/or the
Option Shares in full, VB shall immediately so notify the
Holder and/or the owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner,
as appropriate, the portion of the Option Repurchase Price and
the Option Share Repurchase Price, respectively, that it is no
longer prohibited from delivering, within five business days
after the date on which VB is no longer so prohibited;
provided, however, that if VB at any time after delivery of a
notice of repurchase pursuant to Subsection 8.2 is prohibited
under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and VB
hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to
accomplish such repurchase), the Holder and/or Owner may
revoke its notice of repurchase of the Option or the Option
Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, VB shall promptly (a) deliver
to the Holder and/or the Owner, as appropriate, that portion
of the Option Purchase Price or the Option Share Repurchase
Price that VB is not prohibited from delivering; and (b)
deliver as appropriate, (1) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that
number of shares of Common
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<PAGE> 191
Stock obtained by multiplying the number of shares of Common
Stock for which the surrendered Stock Option Agreement was
exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option
Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the
Option Repurchase Price, and/or (2) to the Owner, a
certificate for the Option Shares it is then so prohibited
from repurchasing, and VB shall have no further obligation to
purchase such Option or Option Shares.
9. ISSUANCE OF SUBSTITUTE OPTION UPON CERTAIN MERGERS, ETC.
9.1 Issuance of Substitute Option. In the event that before an
Exercise Termination Event, VB shall enter into an agreement
(a) to consolidate with or merge into any person, other than
WCB or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or
merger; (b) to permit any person, other than WCB or one of its
Subsidiaries, to merge into VB and VB shall be the continuing
or surviving corporation, but, in connection with such merger,
the then outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other
person or cash or any other property or the then outstanding
shares of Common Stock shall after such merger represent less
than 50% of the outstanding shares and share equivalents of
the merged company; or (c) to sell or otherwise transfer all
or substantially all of its assets to any person, other than
WCB or one of its Subsidiaries then, and in each such case,
the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of
any such transaction and upon the terms and conditions set
forth in this Agreement, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the
Holder, of either (1) the Acquiring Corporation (as defined
below), (2) any person that controls the Acquiring
Corporation, or (3) in the case of a merger described in
clause (b) of this Subsection 9.1, VB.
9.2 Definitions. The following terms have the meanings indicated:
a. "Acquiring Corporation" means (1) the continuing or
surviving corporation of a consolidation or merger with
VB (if other than VB); (2) VB in a merger in which VB is
the continuing or surviving person; and (3) the
transferee of all or substantially all of VB's assets.
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<PAGE> 192
b. "Substitute Common Stock" means the common stock of the
issuer of the Substitute Option upon exercise of the
Substitute Option.
c. "Assigned Value" means the Market/Offer Price, as
defined in Section 8; provided, however, that in the
event a sale of all or substantially all of VB's assets,
the Assigned Value shall be the sum of the price paid in
such sale for such assets and the current market value
of the remaining assets of VB as determined by a
nationally recognized investment banking firm selected
by Holder, divided by the number of shares of Common
Stock of VB outstanding at the time of such sale.
d. "Average Price" means the average closing price of a
share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale
in question, but in no event higher than the closing
price of the shares of Substitute Common Stock on the
day preceding such consolidation, merger or sale;
provided that if VB is the issuer of the Substitute
Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging
into VB or by any company which controls or is
controlled by such person, as the Holder may elect.
9.3 Exercise of Substitute Option. The Substitute Option shall be
exercisable for such number of shares of Substitute Common
Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price
of the Substitute Option per share of Substitute Common Stock
shall then be equal to the Option Price multiplied by a
fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and
the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is
exercisable.
9.4 Terms of Substitute Option. The Substitute Option shall have
the same terms as the Option, provided, that if the terms of
the Substitute Option cannot, for legal reasons, be the same
as the Option, such terms (including, without limitation,
those relating to repurchase of the Option and the Option
Shares) shall be as similar as possible and in no event less
advantageous to the Holder. The issuer of the Substitute
Option shall also enter into an agreement with the then Holder
of the Substitute Option in substantially the same form as
this Agreement, which shall be applicable to the Substitute
Option. The number of shares issuable and the exercise price
under the
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<PAGE> 193
Substitute Option shall be subject to adjustment in the manner
provided in Sections 6.1 and 6.3 of this Agreement, but,
notwithstanding the foregoing, adjustments to the number of
shares issuable and the exercise price per share resulting
from the application of Section 6.2, and the price adjustment
provided for in the first sentence of Section 1, shall not
apply to such Substitute Option.
9.5 Limitation on Exercise of Substitute Option. In no event,
pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to
exercise of the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 19.9% of
the shares of Substitute Common Stock outstanding before
exercise but for this Subsection 9.5, the issuer of the
Substitute Option (the "Substitute Option VB") shall make a
cash payment to the Holder equal to the excess of (a) the
value of the Substitute Option without giving effect to the
limitation in this clause 9.5 over (b) the value of the
Substitute Option after giving effect to the limitation in
this Subsection 9.5. This difference in value shall be
determined by a nationally recognized investment banking firm
selected by the Holder.
9.6 Assumption of Agreement. VB shall not enter into any
transaction described in Subsection 9.1 unless the Acquiring
Corporation and any person that controls the Acquiring
Corporation assumes in writing all the obligations of VB under
this Agreement.
10. EXTENSION OF TIME PERIOD. The 30-day periods for exercise of certain
rights under Sections 2, 7, 8, and 12 shall be extended so that each
such period expires 30 days after all regulatory approvals required for
the exercise of such rights have been obtained and all statutory
waiting periods have expired; and shall be further extended to the
extent necessary to avoid liability under Section 16(b) of the 1934 Act
by reason of such exercise. No such extensions shall extend the period
for the Holder to exercise the Option to a date more than 2 years after
the date of this Agreement.
11. VB'S REPRESENTATIONS AND WARRANTIES. VB represents and warrants to WCB
as follows:
11.1 Authority. VB has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly and
validly authorized by VB's board of directors and no other
corporate proceedings on
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<PAGE> 194
the part of VB are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by VB. This
Agreement is the valid and legally binding obligation of VB.
11.2 Corporate Action. VB has taken all necessary corporate action
to authorize and reserve and to permit it to issue, and at all
times from the date of this Agreement through the termination
of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that
number of shares of Common Stock equal to the maximum number
of shares of Common Stock at any time and from time to time
issuable under this Agreement, and all such shares, upon
issuance pursuant to this Agreement will be duly authorized,
validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrances
and security interests and not subject to any preemptive
rights.
12. ASSIGNMENT. Neither of the parties may assign any of its rights or
obligations under this Agreement or the Option created under this
Agreement to any other person, without the express written consent of
the other party, except that in the event a Subsequent Triggering Event
shall have occurred before an Exercise Termination Event, WCB, subject
to the express provisions of this Agreement, may assign in whole or in
part its rights and obligations under this Agreement within 30 days
following such Subsequent Triggering Event (or such longer period as
provided in Section 10); provided, however, that until the date 30 days
following the date on which the Federal Reserve Board approves an
application by WCB under the Bank Holding Company Act to acquire the
shares of Common Stock subject to the Option, WCB may not assign its
rights under the Option except in (a) a widely dispersed public
distribution; (b) a private placement in which no one party acquires
the right to purchase in excess of 2% of the voting shares of VB; (c)
an assignment to a single party (e.g., a broker or investment banker)
for the purpose of conducting a widely dispersed public distribution on
WCB's behalf; or (d) any other manner approved by the Federal Reserve
Board. Any assignment by WCB shall be made only in compliance with
federal and applicable state securities laws.
13. BEST EFFORTS. Each of WCB and VB will use its best efforts to make all
filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including without
limitation making application to list the shares of Common Stock
issuable under this Agreement on any securities exchange on which the
Common Stock is then traded and applying to the Federal Reserve Board
under the Bank Holding Company Act for approval to acquire the shares
issuable under this Agreement, but WCB shall not be obligated to apply
to state banking authorities for approval to acquire
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the shares of Common Stock issuable under this Agreement until such
time, if ever, as it deems appropriate to do so.
14. TERMINATION OF OPTION. Notwithstanding anything to the contrary in this
Agreement, in the event that the Holder or Owner or any Related Person
(as defined below) thereof is a person making an offer or proposal to
engage in an Acquisition Transaction (other than the transaction
contemplated by the Merger Agreement), then (a) in the case of a Holder
or any Related Person thereof, the Option held by it shall immediately
terminate and be of no further force or effect, and (b) in the case of
an Owner or any Related Person thereof, the Option Shares held by it
shall be immediately repurchasable by VB at the Option Price. A
"Related Person" of a Holder or Owner means any "affiliate" (as defined
in Rule 12b-2 of the rules and regulations under the 1934 Act) of the
Holder or Owner and any person that is the beneficial owner of 25% or
more of the voting power of the Holder or Owner, as the case may be.
15. EQUITABLE RELIEF. The parties to this Agreement acknowledge that
damages would be an inadequate remedy for a breach of this Agreement by
either party and that the obligations of the parties shall be
enforceable by either party through injunctive or other equitable
relief.
16. ENFORCEABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated. If
for any reason such court or regulatory agency determines that the
Holder is not permitted to acquire, or VB is not permitted to
repurchase pursuant to Section 8, the full number of shares of Common
Stock provided in Section 1 (as adjusted pursuant to Section 6), it is
the express intention of VB to allow the Holder to acquire or to
require VB to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be deemed to have been duly
given when delivered in person, by cable, telegram, telecopy or telex,
or by registered or certified mail (postage prepaid, return receipt
requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Washington, regardless of the
laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
- 16 -
<PAGE> 196
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
20. EXPENSES. Except as otherwise expressly provided in this Agreement,
each of the parties shall bear and pay all costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
under this Agreement, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
21. ENTIRE AGREEMENT. Except as otherwise expressly provided in this
Agreement or in the Merger Agreement, this Agreement contains the
entire agreement between the parties with respect to the transactions
contemplated under this Agreement and supersedes all prior arrangements
or understandings with respect thereof, written or oral. The terms and
conditions of this Agreement shall inure to the benefit of and be
binding upon the parties and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended
to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except
as expressly provided in this Agreement.
22. MISCELLANEOUS. Capitalized terms used in this Agreement and not defined
in this Agreement shall have the meanings assigned to them in the
Merger Agreement. Section and Subsection headings are for convenience
and reference only and shall not affect the meaning or construction of
this Agreement. Except as otherwise provided in this Agreement,
Sections and Subsections refer to Sections and Subsections of this
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
WEST COAST BANCORP
By: /s/ Rodney B. Tibbatts
-----------------------
Co-President and Chief
Executive Officer
VANCOUVER BANCORP
By: /s/ Lee S. Stenseth
-----------------------
President
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<PAGE> 197
TITLE 23B. WASHINGTON BUSINESS CORPORATION ACT
CHAPTER 23B.13. DISSENTERS' RIGHTS
SECTION 23B.13.010 DEFINITIONS. As used in this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RCW 23B.13.020 and who exercises that right when and in
the manner required by RCW 23B.13.200 through 23B.13.280.
(3) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SECTION 23B.13.020 RIGHT TO DISSENT.
(1) A shareholder is entitled to dissent from, and obtain payment of
the fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation
is a party (i) if shareholder approval is required for the merger by RCW
23B.11.030, 23B.11.080, or the articles of incorporation and the shareholder is
entitled to vote on the merger, or (ii) if the corporation is a subsidiary that
is merged with its parent under RCW 23B.11.040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
<PAGE> 198
(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than in the usual
and regular course of business, if the shareholder is entitled to vote on the
sale or exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
(d) An amendment of the articles of incorporation that
materially reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for cash under
RCW 23B.06.040; or
(e) Any corporate action taken pursuant to a shareholder vote
to the extent the articles of incorporation, bylaws, or a resolution of the
board of directors provides that voting or nonvoting shareholders are entitled
to dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action fails to comply with
the procedural requirements imposed by this title, RCW 25.10.900 through
25.10.955, the articles of incorporation, or the bylaws, or is fraudulent with
respect to the shareholder or the corporation.
(3) The right of a dissenting shareholder to obtain payment of the fair
value of the shareholder's shares shall terminate upon the occurrence of any one
of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets aside
the corporate action; or
(c) The shareholder's demand for payment is withdrawn with the
written consent of the corporation. 1991 c 269 Section 37; 1989 c 165 Section
141.
SECTION 23B.13.030 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in the shareholder's name only if the shareholder
dissents with respect to all shares beneficially owned by any one person and
notifies the corporation in writing of the name and address of each person on
whose behalf the shareholder asserts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the shares as to which the
dissenter dissents and the dissenter's other shares were registered in the names
of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
<PAGE> 199
(a) The beneficial shareholder submits to the corporation the
record shareholder's written consentt to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares
of which such shareholder is the beneficial shareholder or over which such
shareholder has power to direct the vote. 1989 c 165 Section 142.
SECTION 23B.13.200 NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this chapter and be accompanied by a copy of this chapter.
(2) If corporate action creating dissenters' rights under RCW
23B.13.020 it taken without a vote of shareholders, the corporation, within ten
days after [the] effective date of such corporate action, shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in RCW 23B.13.220. 1989
c 165 Section 143.
SECTION 23B.13.210 NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights must (a) deliver to the corporation before
the vote is taken written notice of the shareholder's intent to demand payment
for the shareholder's shares if the proposed action is effected, and (b) not
vote such shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection
(1) of this section is not entitled to payment for the shareholder's shares
under this chapter. 1989 c 165 Section 144.
SECTION 23B.13.220 DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days after the
effective date of the corporate action, and must:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received;
<PAGE> 200
(c) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not the person acquired beneficial ownership of the
shares before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days after
the date the notice in subsection (1) of this section is delivered; and
(e) Be accompanied by a copy of this chapter.
SECTION 23B.13.260 FAILURE TO TAKE ACTION.
(1) If the corporation does not effect the proposed action within sixty
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release any transfer
restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation wishes to undertake the proposed action, it must
send a new dissenters' notice under RCW 23B.13.220 and repeat the payment demand
procedure.
SECTION 23B.13.270 AFTER-ACQUIRED SHARES.
(1) A corporation may elect to withhold payment required by RCW
23B.13.250 from a dissenter unless the dissenter was the beneficial owner of the
shares before the date set forth in the dissenters' notice as the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of the dissenter's demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares, an explanation of
how the interest was calculated, and a statement of the dissenter's right to
demand payment under RCW 23B.13.280.
SECTION 23B.13.280 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.
(1) A dissenter may notify the corporation in writing of the
dissenter's own estimate of the fair value of the dissenter's shares and amount
of interest due, and demand payment of the dissenter's estimate, less any
payment under RCW 23B.13.250, or reject the corporation's offer under RCW
23B.13.270 and demand payment of the dissenter's estimate of the fair value of
the dissenter's shares and interest due, if:
<PAGE> 201
(a) The dissenter believes that the amount paid under RCW
23B.13.250 or offered under RCW 23B.13.270 is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under RCW 23B.13.250
within sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed action and does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(2) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (1) of this section within thirty days after the
corporation made or offered payment for the dissenter's shares.
SECTION 23B.13.300 COURT ACTION.
(1) If a demand for payment under RCW 23B.13.280 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(2) The corporation shall commence the proceeding in the superior court
of the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unsettled, parties to the proceeding as in
an action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The corporation may join as a party to the proceeding any
shareholder who claims to be a dissenter but who has not, in the opinion of the
corporation, complied with the provisions of this chapter. If the court
determines that such shareholder has not complied with the provisions of this
chapter, the shareholder shall be dismissed as a party.
(5) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair
<PAGE> 202
value. The appraisers have the powers described in the order appointing them, or
in any amendment to it. The dissenters are entitled to the same discovery rights
as parties in other civil proceedings.
(6) Each dissenter made a party to the proceeding is entitled to
judgment (a) for the amount, if any, by which the court finds the fair value of
the dissenter's shares, plus interest, exceeds the amount paid by the
corporation, or (b) for the fair value, plus accrued interest, of the
dissenter's after-acquired shares for which the corporation elected to withhold
payment under RCW 23B.13.270.
SECTION 23B.13.310 COURT COSTS AND COUNSEL FEES.
(1) The court in a proceeding commenced under RCW 23B.13.300 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess the costs against all
or some of the dissenters, in amounts the court finds equitable, to the extent
the court finds the dissenters acted arbitrarily, vexatiously, or not in good
faith in demanding payment under RCW 23B.13.280.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters
if the court finds the corporation did not substantially comply with the
requirements of RCW 23B.13.200 through 23B.13.280; or
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by chapter 23B.13 RCW.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
<PAGE> 203
April 10, 1996
Board of Directors
Vancouver Bancorp
801 Main Street
Vancouver, Washington 98666
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of Vancouver Bancorp and its wholly-owned
subsidiary, Bank of Vancouver ("VB" or the Company"), of the consideration to be
received by such shareholders pursuant to the terms of the Merger Agreement and
Plan of Merger, dated February 15, 1996, (the "Agreement") between VB and West
Coast Bancorp, Inc. ("WCBO").
In connection with the proposed merger transaction (the "Merger")
whereby VB will be merged into HB Corporation, a wholly-owned subsidiary of
WCBO, each issued and outstanding share and option of the Company common stock
(along with its associated rights) at the effective time of the Merger (other
than (i) shares of holders of which are exercising appraisal rights pursuant to
applicable law and (ii) shares held directly by or indirectly by VB, its parent
company or any subsidiary thereof other than shares held in a fiduciary capacity
or in satisfaction of a debt previously contracted) shall be converted into the
right to receive the amount determined by the division of $11,581,000 (the
Merger "Consideration") by the five-day average of the bid and ask prices of
WCBO common stock two days prior to the closing date, except for fractional
shares which will receive a proportional amount of cash.
Columbia Financial Advisors, Inc. ("CFAI") as a part of its investment
banking services, is periodically engaged in the valuation of banks and advises
the directors, officers and shareholders of both public and private banks and
thrift institutions with respect to the fairness, from a financial point of
view, of the consideration to be received in transactions such as that proposed
by the Agreement. With particular regard to our
<PAGE> 204
Board of Directors
April 10, 1996
Page 2
qualifications for rendering an opinion as to the fairness, from a financial
point of view, of the Consideration to be received by holders of the shares from
WCBO pursuant to the Merger, CFAI has advised Washington and Oregon community
banks regarding fairness of capital transactions. VB has agreed to pay CFAI a
fee for this opinion letter.
In connection with rendering this opinion, we have, among other things:
(i) reviewed the Agreement; (ii) reviewed VB's financial and related audited
financial information for the twelve months ended December 31, 1994 and for the
interim nine month period ending September 30, 1995; (iii) reviewed certain
internal financial analyses and certain other forecasts for the Company prepared
by and reviewed with the management of the Company; (iv) conducted interviews
with senior management of the Company regarding the past and current business
operations, results thereof, financial condition and future prospects of the
Company; (v) reviewed the current market environment generally and the banking
and thrift environment in particular; (vi) reviewed the prices paid in certain
recent mergers and acquisitions in the banking and thrift industries on a
regional basis; (vii) reviewed WCBO's audited financial information for the
fiscal year ended December 31, 1995 and financial information for the 9 months
ended September 30, 1995 including the Form 10- KSB filed with the U.S.
Securities and Exchange Commission; (viii) reviewed the price ranges and
dividend history for WCBO common stock; (ix) and reviewed such other
information, studies and analyses and performed such other investigations and
took into account such other matters as we deemed appropriate.
In conducting our review and arriving at our opinion we have relied on
the accuracy and completeness of all information supplied or otherwise made
available to us, and we have not independently verified such information nor
have we undertaken an independent appraisal of the assets or liabilities of the
Company or WCBO. With respect to the financial forecasts referred to above, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgment of the senior management of the
Company. This opinion is necessarily based upon circumstances and conditions as
they exist and can be evaluated as of the date of this letter. We have not been
authorized to solicit and did not solicit other entities for purposes of a
business combination with VB.
This opinion is based upon the information available to us and facts
and circumstances as they exist and are subject to evaluation on the date
hereof. We are not expressing any opinion
<PAGE> 205
Board of Directors
April 10, 1996
Page 3
herein as to the prices at which shares of WCBO Common Stock have traded or may
trade at any future date.
This opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote with
respect to the merger.
In reliance upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Merger Consideration to be received by the
shareholders of VB pursuant to the Agreement is fair, from a financial point of
view, to the shareholders of VB.
We hereby consent to the reference to our firm in the proxy statement
or prospectus related to the merger transactions and to the inclusion of our
opinion as an exhibit to the proxy statement or prospectus related to the merger
transaction.
Very truly yours,
COLUMBIA FINANCIAL ADVISORS, INC.
By: /s/ Robert J. Rogowski
------------------------
Robert J. Rogowski
Principal
<PAGE> 1
April 20, 1996
Board of Directors
West Coast Bancorp
5335 S.W. Meadows Road
Suite 201
Lake Oswego, Oregon 97035
RE: ISSUANCE OF SECURITIES BY WEST COAST BANCORP IN
CONNECTION WITH THE ACQUISITION OF SHARES OF
VANCOUVER BANCORP
Gentlemen:
We are acting as counsel for West Coast Bancorp, an Oregon bank holding
company ("WCB"), in connection with the registration under the Securities Act of
1933, as amended (the "Act"), of a maximum of 757,000 shares of common stock of
WCB, no par value per share (the "Shares"). A Registration Statement on Form S-4
(the "Registration Statement") is being filed under the Act with respect to the
offering of the Shares pursuant to the proposed acquisition of Vancouver
Bancorp, a Washington bank holding company ("VB").
In connection with the offering of the Shares, we have examined: (a)
the Plan and Agreement of Reorganization and Merger between WCB, HB Acquisition
Corporation and VB dated as of February 15, 1996 (the "Agreement"), attached as
Appendix A to the Prospectus/Proxy Statement, included in the Registration
Statement; (b) the Registration Statement; and (c) such other documents as we
have deemed necessary to form the opinion expressed below. As to various
questions of fact material to such opinion, where relevant facts were not
independently established, we have relied upon statements of officers of WCB.
Based and relying solely upon the foregoing, we advise you that in our
opinion, the Shares, or any portion thereof, when issued pursuant to the
Agreement after the Registration Statement has become effective under the Act,
will be legally issued under the laws of the State of Oregon and will be fully
paid and nonassessable.
<PAGE> 2
Board of Directors
April 20, 1996
Page 2
Consent is hereby given to the filing of this opinion as an exhibit to
the Registration Statement and to the legal reference to this firm under the
caption "Certain Legal Matters" as having passed upon the validity of the
Shares. In giving this consent, we do not admit that we are experts within the
meaning of the Act.
This opinion has been prepared solely for your use in connection with
the Registration Statement and, in that regard, may also be relied upon by the
shareholders of VB.
Very truly yours,
GRAHAM & DUNN
/s/ Graham & Dunn
<PAGE> 1
[GRAHAM & DUNN LETTERHEAD]
April 19, 1996
West Coast Bancorp
HB Acquisition Corporation
5335 S.W. Meadows Road
Suite 201
Lake Oswego, Oregon 97035
Re: Holding Company Merger--Tax Consequences
Ladies and Gentlemen:
This letter responds to your request for our opinion as to certain of
the federal income tax consequences of the proposed merger (the "Merger") of
Vancouver Bancorp ("VB") into HB Acquisition Corporation ("HB"), a wholly-owned
subsidiary of West Coast Bancorp ("WCB").
We have acted as legal counsel to HB and WCB in connection with the
Merger. For the purpose of rendering this opinion, we have examined and relied
upon originals, certified copies, or copies otherwise identified to our
satisfaction as being true copies of the originals of the following documents,
including all exhibits and schedules attached to them:
a. The Plan and Agreement of Reorganization and Merger, dated as
of February 15, 1996, between VB and WCB (the "Merger
Agreement");
b. Form S-4 Registration Statement of WCB filed with the
Securities and Exchange Commission on April 22, 1996;
c. The Proxy Statement of VB (included as part of the
Registration Statement);
d. The factual representations set forth in a letter from WCB, VB
and HB, dated April 5, 1996; and
e. Such other documents, instruments, records and information
pertaining to the Merger as we have deemed necessary for
rendering our opinion.
We have assumed, without independent investigation or review, the
accuracy and completeness of the facts and representations and warranties
contained in those documents or otherwise made known to us, and that the Merger
will be effected in accordance with the terms of the Merger Agreement.
<PAGE> 2
GRAHAM & DUNN
West Coast Bancorp
HB Acquisition Corporation
04/19/96
Page 2
In connection with the Merger and pursuant to the Merger Agreement,
each share of VB voting common stock will be exchanged for that number of shares
of WCB voting common stock based on the exchange rate established in the Merger
Agreement. WCB will remain the sole shareholder of HB. No fractional shares will
be involved. VB shareholders who perfect their dissenters rights under state law
will be paid the cash value for their VB shares. Such payments will be made by
VB without reimbursement by WCB. Upon the consummation of the Merger, HB will
continue the historic business of VB.
Based upon our review of the facts described above and our analysis of
the law, and subject to the qualifications and limitations set forth herein, and
the completion of the transactions described in the matter contemplated, it is
our opinion that:
1. The merger of VB into HB solely for WCB voting common stock, as
described above, will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code, as
amended (the "Code"). VB, HB and WCB will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by VB shareholders upon the receipt
of WCB voting common stock solely in exchange for their shares of VB
stock, pursuant to Section 354(a)(1) of the Code.
3. The basis of the shares of WCB voting common stock received by VB
shareholders will be the same as the basis of the VB stock surrendered
in exchange therefor, pursuant to Section 358(a)(1) of the Code.
4. The holding period of the shares of WCB voting common stock received by
VB shareholders will include the holding period during which the VB
stock surrendered in exchange therefor was held, provided that the
shares of VB stock were held as a capital asset in the hands of the
exchanging shareholders on the date of the exchange, pursuant to
Section 1223(1) of the Code.
5. Where cash is received by any dissenting shareholder of VB in exchange
for the surrender of all of such shareholder's VB stock, the cash will
be treated as received by the shareholder as a distribution in
redemption of his or her VB stock, subject to the provisions and
limitation of Section 302 of the Code.
6. No gain or loss will be recognized by VB upon the transfer of its
assets to HB, pursuant to Sections 361 and 357(a) of the Code.
7. The basis of the assets of VB acquired by HB will be the same as the
basis of VB in the assets immediately before the Merger, pursuant to
Section 362(b) of the Code.
<PAGE> 3
GRAHAM & DUNN
West Coast Bancorp
HB Acquisition Corporation
04/19/96
Page 3
8. The holding period of the assets acquired by HB will include the period
such assets were held by VB, pursuant to Section 1223(2) of the Code.
9. No gain or loss will be recognized by WCB or HB upon the receipt by HB
of the assets of VB, as described above.
Our opinion represents only our best legal judgment as to the probable
federal income tax consequences of the transaction described, based upon
existing law. Our opinion is not intended to be a conclusive statement as to all
of the tax consequences of the transaction and is expressly limited to the
matters addressed. Further, our opinion is not binding upon the Internal Revenue
Service (the "IRS") or any court and has no official status of any kind, and no
private ruling regarding the matters discussed has been or will be requested
from the IRS. The IRS has ruled in a number of private rulings that transactions
substantially identical to the Merger result in tax consequences consistent with
those described in this opinion. Although such rulings do not constitute
authority on which we can rely in expressing our opinion, such rulings generally
do reflect the position of the IRS. Each shareholder, however, is urged to
consult with his or her own tax advisor with respect to their individual tax
situation. Our opinion is intended solely for the benefit of WCB, HB and the
shareholders of WCB, and may not be relied upon for any other purpose or by any
other person or entity or made available to any other person or entity without
our prior written consent.
Very truly yours,
GRAHAM & DUNN
/s/ Graham & Dunn
<PAGE> 1
THE BANK OF VANCOUVER
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made effective as of the
15th day of February, 1996 (the "Effective Date") between the BANK OF VANCOUVER,
a Washington corporation (the "Bank of Vancouver") and LEE S. STENSETH, a
resident of Washington ("Stenseth"), and ratified by WEST COAST BANCORP, an
Oregon corporation ("West Coast").
RECITALS
A. West Coast has entered into a Plan and Agreement of Reorganization
and Merger with Vancouver Bancorp ("VB") pursuant to which VB will merge (the
"Merger") into a subsidiary of West Coast. VB presently owns all the outstanding
shares of common stock of the Bank of Vancouver. Immediately following the
Merger, the Bank of Vancouver will be a wholly-owned subsidiary of West Coast.
B. Effective as of the date of the Merger, Stenseth desires to manage
and supervise the operations of the Bank of Vancouver, and West Coast and the
Bank of Vancouver desire to continue the employment of Stenseth in such
capacity.
NOW, THEREFORE, Stenseth and the Bank of Vancouver, in consideration of
the covenants and agreements hereinafter contained, agree as follows with
respect to Stenseth's employment by the Bank of Vancouver and his future
business activities.
AGREEMENT
1. Employment. The Bank of Vancouver agrees to employ Stenseth and
Stenseth accepts employment by the Bank of Vancouver upon the terms and
conditions set forth below. Stenseth shall have the title of President and Chief
Executive Officer of the Bank of Vancouver.
2. Effective Date and Term.
(a) Effective Date. As of its Effective Date, this Agreement shall
be a binding obligation of the parties, not subject to revocation or amendment
except by mutual consent, except, however, performance of its terms shall be
suspended until such time as the Merger shall become effective.
(b) Term. Notwithstanding the Effective Date of this Agreement, the
term of this Agreement ("Term") shall commence as of the date the Merger becomes
effective, and shall terminate May 31,1998.
(c) Abandonment of Merger. This Agreement shall be void as of its
Effective Date and of no force and effect if the Merger does not occur by
December 31, 1996, or is earlier abandoned by VB and West Coast Bancorp.
- 1 -
<PAGE> 2
3. Duties. The Bank of Vancouver shall, initially, employ Stenseth as
its President and Chief Executive Officer, and in such capacity, Stenseth shall
be responsible for all aspects of the Bank of Vancouver's performance, including
without limitation, assuring that daily operational and managerial matters are
performed in a manner consistent with the West Coast Code of Employer/Employee
Relations, and the development and retention of banking relationships and other
business development efforts (including appropriate civic and community
activities) in Clark County, Washington. Stenseth shall report directly to the
Board of Directors of the Bank of Vancouver and to the Chief Banking Officer of
West Coast. With Stenseth's consent, the Board of Directors of the Bank of
Vancouver may modify, from time to time, Stenseth's title and performance
responsibilities to accommodate management succession, as well as any other
management objectives of the Bank of Vancouver or of West Coast. Stenseth shall
faithfully and diligently perform his assigned duties. Stenseth shall assume
such additional positions, duties, and responsibilities as may properly be
requested of him without additional compensation.
4. Extent of Services. Stenseth shall devote all of his working time,
attention and skill to the duties and responsibilities set forth in Section 3
above. To the extent that such activities do not interfere with his duties under
Section 3, Stenseth may continue to actively manage his real estate investments.
Stenseth may participate in other businesses as a passive investor, provided
that (a) Stenseth shall not actively participate in the operation or management
of such businesses, and (b) Stenseth shall not, without the prior written
approval of the Bank of Vancouver, make or maintain any investment in a business
with which the Bank of Vancouver and/or West Coast has an existing competitive
or commercial relationship.
5. Salary. Initially, Stenseth shall receive a salary of Eighty-Five
Thousand Dollars ($85,000) per year, which shall be paid monthly in accordance
with the Bank of Vancouver's regular payroll schedule. Stenseth's compensation
shall be reviewed annually by the Bank of Vancouver in concert with the advice
and recommendations of the Chief Banking Officer of West Coast.
6. Incentive Compensation. During the term of this Agreement, Stenseth
shall receive as incentive compensation an amount equal to five percent (5%) of
the first one million dollars ($1,000,000) of pre-tax earnings for the Bank of
Vancouver and two and one half percent (2.5%) of pretax earnings for the Bank of
Vancouver in excess of one million dollars ($1,000,000), to be paid quarterly on
or before the last day of January, April, July, and October of each year. For
purposes of this Section 6, the "pretax earnings of the Bank of Vancouver" shall
refer to the gross revenues of the Bank of Vancouver for the calendar year ended
immediately prior to the anniversary date of this Agreement reduced by all
expenses of the Bank of Vancouver for such period other than accrued federal
income taxes arising from such earnings, as determined for financial statement
purposes by the auditors of the Bank of Vancouver utilizing generally accepted
accounting principles applied on a consistent basis.
7. Deferral of Income. Stenseth shall be eligible to participate in any
program available to senior management of Bank of Vancouver for the deferral of
income, for the purpose of deferring receipt of any or all of the compensation
to which he may become entitled pursuant to this Agreement.
- 2 -
<PAGE> 3
8. Vacation and Benefits.
(a) Vacation and Holidays. Stenseth will accrue eight (8) weeks of
paid vacation each year, in addition to all holidays observed by the Bank of
Vancouver. Unused vacation time shall not accumulate or carry over from one
calendar year to the next.
(b) Benefits. Stenseth shall be entitled to participate in such
group life insurance, health and accident insurance plans, profit sharing and
pension plans and in such other employee fringe benefit programs as the Bank of
Vancouver may have in effect from time to time for its employees, in accordance
with any policies adopted by the Board of Directors of the Bank of Vancouver
with regard thereto. It is understood that the Bank of Vancouver, by reason of
this Agreement, has not obligated itself to make any particular benefits
available to its employees.
(c) Business Expenses. The Bank of Vancouver shall reimburse
Stenseth for ordinary and necessary expenses (including, without limitation,
travel, entertainment, and similar expenses) incurred in performing and
promoting the business of the Bank of Vancouver. Stenseth shall present from
time to time itemized accounts of any such expenses, subject to any limits of
the Bank of Vancouver policy and the rules and regulations of the Internal
Revenue Service.
(d) ESI-Agreement. This Agreement is not intended to modify any
benefits to which Stenseth is entitled pursuant to the Executive Supplemental
Income Agreement between Stenseth and the Bank of Vancouver.
(e) As additional consideration for Stenseth's employment by Bank of
Vancouver, Stenseth shall be eligible to participate in West Coast's Officer's
Stock Option Plan.
9. Termination of Employment.
(a) Termination By Bank of Vancouver for Cause. In the event that
the Bank of Vancouver terminates Stenseth's employment prior to the termination
of this Agreement for Cause, as defined in Section 9(e), the Bank of Vancouver
shall pay Stenseth such salary earned and expenses reimbursable under this
Agreement incurred through such termination date. In such case, Stenseth will
have no right to receive compensation or other benefits for any period after
termination under this Section 9(a).
(b) Other Termination By Bank of Vancouver. In the event that the
Bank of Vancouver terminates Stenseth's employment prior to the termination of
this Agreement without Cause, or Stenseth terminates for Good Reason (as defined
in Section 9(f), the Bank of Vancouver shall pay Stenseth the salary and other
benefits to which Stenseth would be entitled but for such termination.
(c) Death or Disability. This Agreement shall terminate in the event
that Stenseth dies or is unable to perform his duties and obligations under this
Agreement for a period of ninety (90) days as a result of a physical or mental
disability arising at any time during
- 3 -
<PAGE> 4
the term hereof, unless with reasonable accommodation Stenseth could continue to
perform his duties under this Agreement, which accommodations shall not require
the Bank of Vancouver to expend any funds. In the event of any termination under
this Section 9(c), Stenseth or his estate shall be entitled to receive all
compensation and benefits earned through the date of termination, and such
additional compensation as would be payable to Stenseth upon termination under
Section 9(a).
(d) Return of Bank Property. At the time Stenseth ceases, for any
reason, to be employed by the Bank of Vancouver, Stenseth agrees that he will
return to the Bank of Vancouver all keys, pass cards, identification cards and
any other property of the Bank of Vancouver and/or West Coast. At the same time,
he also will return to the Bank of Vancouver all originals and copies (whether
in hard copy, electronic or other form) of any documents, drawings, notes,
memoranda, designs, devices, diskettes, tapes, manuals, and specifications which
constitute proprietary information or material of the Bank of Vancouver and/or
West Coast. The obligations in this paragraph include the return of documents
and other materials which may be in his desk at work, in his car, in place of
residence, or in any other location under his control.
(e) Cause. "Cause" shall mean only any one or more of the following:
(i) Willful misfeasance or gross negligence in the performance
of Stenseth's duties,
(ii) Conviction of a crime in connection with such duties; or
(iii) Conduct demonstrably and significantly harmful to the
Bank of Vancouver as determined in the reasonable discretion of the
Board of Directors of the Bank of Vancouver.
(iv) Permanent disability, which shall mean a physical or
mental impairment which renders Stenseth incapable of substantially
performing the duties required under this Agreement, and which is
expected to continue rendering Stenseth so incapable for the reasonably
foreseeable future.
(f) Good Reason. "Good Reason" shall mean only any one or more of
the following:
(i) Any reduction of Stenseth's salary or any reduction or
elimination of any compensation or benefit plan benefitting Stenseth,
which reduction or elimination is not of general application to
substantially all employees of the Bank of Vancouver or such employees
of any successor entity or of any entity in control of the Bank of
Vancouver;
(ii) The assignment to Stenseth of any authority or duties
materially inconsistent with Stenseth's position as of the date of this
Agreement; or
- 4 -
<PAGE> 5
(iii) A relocation or transfer of Stenseth's place of
employment that would require Stenseth to commute more than twenty-five
(25) miles each way from Stenseth's principal residence.
10. Confidentiality. Stenseth shall not, during the term of this
Agreement or thereafter, use for his own purposes or disclose to any other
person or entity any confidential business information concerning the Bank of
Vancouver and/or West Coast or its business operations, except as may be
consistent with his duties hereunder. Confidential business information shall be
interpreted to have the same meaning as a trade secret under the Uniform Trade
Secrets Act as adopted in Washington (RCW 19.108), and shall include, without
limitation, various confidential information concerning all aspects of current
and future operations, nonpublic information on investment management practices,
marketing plans, pricing structure and technology of either the Bank of
Vancouver and/or West Coast. Stenseth further agrees to treat the terms of this
Agreement as confidential, except as may be required to implement its terms or
to the extent disclosure is required by law or order of a court of competent
jurisdiction.
11. Noncompetition. During the term of this Agreement and the term of
any extensions or renewals hereof and for a period equal to the lesser of (i)
two (2) years after Stenseth's employment with the Bank of Vancouver and/or West
Coast has terminated or (ii) three years from Closing of the Merger, Stenseth
agrees that Stenseth shall not, directly or indirectly, as a shareholder,
director, officer, employee, partner, agent, consultant, lessor, creditor or
otherwise:
(a) provide management, supervisory or other similar services to
any person or entity engaged in any business in Washington or Oregon which is
competitive with the business of the Bank of Vancouver and/or West Coast as
conducted during the term of this Agreement or as conducted as of the date of
termination of employment; or
(b) persuade or entice, or attempt to persuade or entice, any
employee of the Bank of Vancouver and/or West Coast to terminate his or her
employment with the Bank of Vancouver and/or West Coast, or persuade or entice
or attempt to persuade or entice, any person or entity to terminate, cancel,
rescind or revoke its business or contractual relationships with the Bank of
Vancouver and/or West Coast.
12. Enforcement.
(a) The Bank of Vancouver and Stenseth stipulate and agree that, in
light of all of the facts and circumstances of the relationship between Stenseth
and the Bank of Vancouver, the agreements referred to in Sections 10 and 11
(including but not limited to the scope of the restricted activities and the
duration and geographic extent of such restrictions) are fair and reasonably
necessary for the protection of the Bank of Vancouver's and/or West Coast's
confidential information, goodwill and other protectable interests. In the event
a court of competent jurisdiction should decline to enforce any of those
covenants and agreements, Stenseth and the Bank of Vancouver agree that such
provisions shall be deemed to be reformed to restrict Stenseth's use of
confidential information and Stenseth's ability to compete
- 5 -
<PAGE> 6
with the Bank of Vancouver and/or West Coast to the maximum extent, in time,
scope of activities, and geography, that the court shall find enforceable.
(b) Stenseth acknowledges that the Bank of Vancouver and/or West
Coast will suffer immediate and irreparable harm that will not be compensable by
damages alone in the event Stenseth repudiates or breaches any of the provisions
of Sections 10 or 11 or threatens or attempts to do so. In the event of any such
breach or any threatened or attempted breach, Stenseth agrees that the Bank of
Vancouver, in addition to and not in limitation of any other rights, remedies or
damages available to it at law or in equity, shall be entitled to obtain
temporary, preliminary and permanent injunctions in order to prevent or restrain
any such breach, and the Bank of Vancouver shall not be required to post a bond
as a condition for the granting of such relief.
13. Indemnification by Stenseth. Stenseth agrees to indemnify the Bank
of Vancouver and hold it harmless from and against any loss, claim or liability,
including attorney's fees or other legal expenses incurred in the defense
thereof, incurred by the Bank of Vancouver as a result of any breach by Stenseth
of Sections 10 or 11 of this Agreement.
14. Covenants. Stenseth specifically acknowledges the receipt of
adequate consideration for the covenants contained in Sections 10 and 11 of this
Agreement and that the Bank of Vancouver is entitled to require compliance with
them. These covenants shall survive termination of this Agreement. Stenseth
represents and agrees that in the event of termination of employment, whether
voluntarily or involuntarily, Stenseth has experience and capabilities which
enable Stenseth to obtain employment in areas which do not violate this
Agreement, and that the enforcement of a remedy by way of injunction will not
prevent Stenseth from earning a livelihood.
15. Arbitration and Governing Law. Any controversy or claim arising out
of or relating to this Agreement or the breach thereof shall be settled by
arbitration in accordance with the rules of Judicial Arbitration and Mediation
Services, Inc. ("JAMS") or, if JAMS is unable or unwilling to act for any
reason, the commercial arbitration rules of the American Arbitration
Association. Such controversy or claim shall be resolved as soon as practicable
by a single arbitrator to be agreed upon by the parties or, in the absence of
agreement within ten days following the date on which a single arbitrator is
proposed, by a panel of three arbitrators selected in accordance with such
rules. Selection of the arbitrator(s) and all procedural aspects of the
arbitration shall be pursuant to said rules, and judgments upon the award
rendered in such arbitration may be entered in any court having jurisdiction
thereof. All proceedings shall be held at a place designated by the
arbitrator(s) in Seattle, Washington, and the arbitrator(s), in rendering a
decision as to any state law claims, shall apply the laws of the State of
Washington. All expenses of arbitration, including without limitation
arbitration fees, costs and reasonable attorneys' fees, shall be awarded by the
arbitrator(s) in favor of such party as the arbitrator(s) shall determine to be
the prevailing party in such arbitration. Notwithstanding the foregoing, in the
event of any violation by Stenseth of Section 10 and/or 11 of this Agreement,
the Bank of Vancouver shall have the right to initiate the court proceeding
described in Section 12, in lieu of an arbitration proceeding under this
subparagraph.
- 6 -
<PAGE> 7
16. Miscellaneous Provisions.
(a) This Agreement and the exhibit attached hereto, constitute the
entire understanding and agreement between the parties concerning the subject
matter hereof and supersede all prior agreements, correspondence,
representations or understandings between the parties relating to the subject
matter hereof, whether written or oral.
(b) This Agreement will bind and inure to the benefit of the heirs,
legal representatives, successors and assigns of the Bank of Vancouver and
Stenseth.
(c) If either party shall successfully seek to enforce any
provision of this Agreement or to collect any amount claimed to be due
hereunder, such successful party shall be entitled to be reimbursed by the other
party for any and all of its out-of-pocket expenses and costs including, without
limitation, reasonable attorneys' fees and costs incurred in connection with
such enforcement and/or collection.
(d) The waiver by a party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
(e) Stenseth acknowledges that the services to be rendered by him
are unique and personal. Accordingly, Stenseth may not assign any of his rights
or delegate any of his duties under this Agreement. The rights and obligations
of the Bank of Vancouver under this Agreement shall inure to the benefit of and
be binding upon the successors and assigns of the Bank of Vancouver.
(f) This Agreement may not modified except by written instrument
signed by both parties.
(g) The provisions of this Agreement are severable. The invalidity
of any provision shall not affect the validity of other provisions of this
Agreement.
(h) This Agreement will be governed by and interpreted under the
laws of the State of Washington.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement
effective the date first above written.
THE BANK OF VANCOUVER:
The Bank of Vancouver
By: /s/ Jim J. Pamajevich
-------------------------------
Its: Chairman
------------------------------
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<PAGE> 8
STENSETH:
/s/ Lee S. Stenseth
----------------------------------
LEE S. STENSETH
This Employment Agreement is ratified by West Coast Bancorp as of this 15th day
of February, 1996.
WEST COAST:
West Coast Bancorp
By: /s/ Rodney B. Tibbatts
-------------------------------
Its: Co-President and Co-CEO
----------------------------
- 8 -
<PAGE> 1
DIRECTOR NONCOMPETITION AGREEMENT
This Agreement, dated as of February 15, 1996, is between WEST COAST
BANCORP ("WCB"), HB ACQUISITION CORPORATION ("HB"), VANCOUVER BANCORP ("VB"),
and the undersigned, each of whom is a Director ("Director") of VB and the Bank
of Vancouver ("Bank").
RECITALS
A. WCB, HB and VB have entered into a Plan and Agreement of Reorganization
and Merger ("Merger Agreement"), dated as of February 15, 1996, under
which VB will merge with and into HB.
B. The obligations of WCB and HB to consummate the transactions
contemplated by the Merger Agreement are conditioned on their receipt
of noncompetition agreements from all directors of VB and the Bank.
C. WCB, HB, VB and Director believe that the future success and
profitability of the Bank require that existing directors of VB and the
Bank be available to continue to serve as directors of the Bank and not
be affiliated in any substantial way with a Competing Business for a
reasonable period of time after Closing.
AGREEMENT
In consideration of WCB's and HB's performance under the Merger
Agreement, Director agrees as follows:
1. DEFINITIONS. Defined terms used but not expressly defined in this
Director Noncompetition Agreement ("Director Agreement"), have the
meaning assigned to those terms in the Merger Agreement. For purposes
of this "Director Agreement" the following definitions also apply:
(a) Competing Business. "Competing Business" means any financial
institution or trust company that competes within the Covered
Area with WCB, HB, VB, the Bank or their subsidiaries or
affiliates.
(b) Covered Area. Clackamas, Lincoln, Marion, Multnomah, and
Washington Counties in Oregon State and Clark County in
Washington State.
(c) Term. The Term of this Director Agreement is the lesser of:
(1) two years after the Director's service as a director of
VB, the Bank, WCB, or any affiliate of WCB is terminated or
(2) three years from Closing.
2. AVAILABILITY. Director will be available to serve, at WCB's request, as
a director of the Bank for a period of at least one year after Closing.
-1-
<PAGE> 2
3. PARTICIPATION IN COMPETING BUSINESS. Except as provided in Section 6,
during the Term of this Director Agreement, Director will not become
involved, directly or indirectly, as a shareholder, member, partner,
director, officer, manager, consultant, agent or representative of a
Competing Business.
4. CONFIDENTIAL INFORMATION. During and after the Term of this Director
Agreement, Director will not disclose any confidential information of
WCB, HB, VB, the Bank or their subsidiaries or affiliates obtained by
the Director while serving as a director the Bank.
5. EMPLOYMENT OUTSIDE COVERED AREA. Nothing in this Director
Noncompetition Agreement prevents the Director from accepting
employment outside the Covered Area from a Competing Business, if,
during the Term, the Director: (a) will not act as an employee or other
representative or agent of the Competing Business within the Covered
Area and (b) will have no responsibilities for the Competing Business'
operations within the Covered Area.
6. PASSIVE INTEREST. Nothing in this Director Agreement prevents the
Director from owning 2% or less of any class of security of a Competing
Business.
7. REMEDIES. Any breach of this Agreement by Director entitles WCB, HB,
and VB, together with their successors and assigns, to injunctive
relief and/or specific performance, as well as to any other legal or
equitable remedies they may be entitled to.
8. GOVERNING LAW AND ENFORCEABILITY. This Director Agreement is governed
by Washington State law. If any court determines that the restrictions
set forth in this Director Agreement are unenforceable, the maximum
restrictions, term, scope or geographical area that is enforceable will
be substituted in place of the unenforceable provisions.
9. COUNTERPARTS. The parties may execute this Agreement in one or more
counterparts. All the counterparts will be construed together and will
constitute one Agreement.
SIGNATURES ON NEXT PAGE.
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<PAGE> 3
SIGNED as of February 15, 1996:
Director:
/s/ Stuart A. Bender
- --------------------------------
/s/ Robert V. Hyde
- --------------------------------
/s/ Dianne A. Frichtl
- --------------------------------
/s/ James J. Pomajevich
- --------------------------------
/s Timothy P. Moyer
- --------------------------------
/s/ Dean N. Alterman
- --------------------------------
WESTCOAST BANCORP
By /s/ Rodney B. Tibbatts
-----------------------------
Name: Rodney B. Tibbatts
---------------------------
Title: Co-President and Co-CEO
--------------------------
HB ACQUISITION CORPORATION
By /s/ Donald K. Kalkofen
-----------------------------
Name: Donald K. Kalkofen
---------------------------
Title: Treasurer
-------------------------
VANCOUVER BANCORP
By /s/ Lee S. Stenseth
----------------------------
Name: Lee S. Stenseth
---------------------------
Title: President
--------------------------
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<PAGE> 1
CONSENT
We hereby consent to the filing of our federal tax opinion as an
exhibit to the Registration Statement and to the reference to us in the
Prospectus/Proxy Statement included therein under the headings "THE MERGER --
Certain Federal Income Tax Consequences" and "CERTAIN LEGAL MATTERS."
/s/ Graham & Dunn, P.C.
Seattle, Washington
April 19, 1996
<PAGE> 1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated January 30, 1996
included in West Coast Bancorp's Form 10-K for the year ended December 31, 1995
and to all references to our firm included in this registration statement.
/s/ Arthur Andersen LLP
- -----------------------
Portland, Oregon
April 19, 1996
<PAGE> 1
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of West Coast Bancorp, of our report dated
January 17, 1996, relating to the financial statements of Vancouver Bancorp
which appears in such Prospectus. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
/s/ Moss Adams LLP
- ------------------
Portland, Oregon
April 18, 1996
<PAGE> 1
SECRETARY'S CERTIFICATE
1. I hereby certify that I am the Secretary of West Coast Bancorp, an
Oregon corporation ("Bancorp"), and that I have been duly appointed and am
presently serving in that capacity in accordance with the Bylaws of said
Bancorp.
2. I further certify that attached as Exhibit A is a full, true and
correct copy of resolutions adopted by the Board of Directors of Bancorp on the
28th day of March, 1996.
I further certify that said resolutions are still in full force and
effect and have not been revoked or rescinded as of the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary of
the Corporation, this 18th day of April, 1996.
/s/ Cora A. Hallauer
---------------------------------
Cora A. Hallauer
Secretary, West Coast Bancorp
<PAGE> 2
RESOLUTIONS
OF THE BOARD OF DIRECTORS OF
WEST COAST BANCORP
(FOR MEETING OF MARCH 28, 1996)
1. At its meeting of February 15, 1996, the Board of Directors
("Board") of West Coast Bancorp ("WCB"), among other things (i) approved the
Plan and Agreement of Reorganization and Merger dated February 15, 1996 ("Merger
Agreement") in connection with the acquisition of Vancouver Bancorp ("VB"); and
approved the preparation and filing of a Registration Statement on Form S-4
("Registration Statement") for filing with the Securities and Exchange
Commission ("SEC").
2. An Amendment No. 1 to the Merger Agreement has been prepared to
correct certain technical errors relating to the number of shares of WCB and VB
outstanding and WCB options.
3. In connection with the filing of the Registration Statement with the
SEC, the Board desires to take the action necessary to authorize certain
officers to execute a power of attorney appointing an attorney-in-fact to sign
any amendments to the Registration Statement on behalf of the signing officers.
RESOLUTIONS
NOW, THEREFORE, BE IT
[APPROVAL OF AMENDMENT NO. 1 TO MERGER AGREEMENT]
RESOLVED, that Amendment No. 1 to the Merger Agreement, is approved,
and both Co-Presidents and Co-Chief Executive Officers are authorized (with full
power to act alone) to execute and deliver Amendment No. 1, substantially in the
form presented to and discussed at this meeting, with such non-material
amendments, deletions or additions as are acceptable to such officers with the
advice of legal counsel; and be it further
[POWER OF ATTORNEY]
RESOLVED, that each officer of Bancorp who may be required to sign and
execute the Registration Statement or any amendment thereto or related
documents, is authorized to execute a Power of Attorney, appointing Victor L.
Bartruff, Rodney B. Tibbatts, Cora A. Hallauer and Donald A. Kalkofen or either
of them individually, to act as his/her true and lawful attorney or attorneys,
to sign in his/her name, place and stead, in any such capacity, the Registration
Statement and all amendments and other related documents, and to file the same
with the SEC; and be it further
1
<PAGE> 3
[MISCELLANEOUS]
RESOLVED, that for purposes of these Resolutions, the proper officers
of WCB are: Victor L. Bartruff and Rodney B. Tibbatts, Co- Presidents and
Co-Chief Executive Officers, Donald A. Kalkofen, Senior Vice President and Chief
Financial Officer, and Cora A. Hallauer, Senior Vice President and Secretary;
and be it further
RESOLVED, that the proper officers of WCB are authorized and directed
to take such other steps as may be necessary, advisable, convenient, or proper
to carry out the intent of the foregoing Resolutions, to fully perform the
provisions of the Agreement (including the execution of any necessary or
appropriate consents), and to comply with all applicable laws, rules and
regulations.
2
<PAGE> 1
REVOCABLE PROXY OF VANCOUVER BANCORP
- --------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 28, 1996
- --------------------------------------------------------------------------------
The undersigned hereby appoints DIANNE E. FRICHTL and STUART A. BENDER,
and each of them (with full power to act alone) as proxies, with full power of
substitution, and hereby authorizes them to represent and to vote, as designated
below, all the shares of common stock, $1.00 par value, of Vancouver Bancorp
held of record by the undersigned on April 18, 1996, at the Annual Meeting of
Shareholders to be held at Royal Oaks Country Club, 8716 N.E. Fourth Plain
Boulevard, Vancouver, Washington on Tuesday May 28, 1996, at 5:00 p.m., local
time, and at any and all adjournments of such Meeting, as follows:
1. A proposal to approve the merger FOR AGAINST ABSTAIN
among West Coast Bancorp, Acquisi-
tion Bancorp and Vancouver Bancorp [ ] [ ] [ ]
pursuant to the Agreement and Plan
of Reorganization and Merger dated
as of February 15, 1996.
2. The election as director of the FOR WITHHELD
nominees listed below (except as [ ] [ ]
marked below):
James J. Pomajevich
Lee S. Stenseth
Robert V. Hyde
Timothy Moyer
Dianne E. Frichtl
Dean N. Alterman
Stuart A. Bender
INSTRUCTIONS: TO WITHHOLD YOUR
VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THE NOMINEE'S NAME BELOW.
----------------------------
----------------------------
3. Whatever other business may
properly be brought before the
Annual Meeting or any adjournment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE PROPOSALS.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING. HOWEVER, IF ANY OTHER MATTERS ARE
PROPERLY PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
THE RECOMMENDATIONS OF MANAGEMENT.
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<PAGE> 2
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual
Meeting or at any adjournment thereof and after notification to the Secretary of
Vancouver Bancorp at the Annual Meeting of the shareholder's decision to
terminate this proxy, then the power of said attorneys and proxies shall be
deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from Vancouver Bancorp prior to
the execution of this proxy of notice of the Meeting, the Prospectus/Proxy
Statement dated _____________________, 1996.
Dated: , 1996
----------------------
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PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
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SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on this proxy card. When
signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each holder
must sign.
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.
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<PAGE> 1
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as
amended, the undersigned hereby consents to being named as a prospective
director of West Coast Bancorp ("West Coast") in the Registration Statement on
Form S-4 filed by West Coast with the Securities and Exchange Commission on
April 18, 1996.
/s/ James J. Pomajevich
------------------------------------
James J. Pomajevich
