<PAGE> 1
As filed with the Securities and Exchange Commission on December 23, 1997
Registration No. 333-
================================================================================
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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<S> <C> <C>
OREGON 6711 93-810577
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer identification no.)
incorporation or organization) classification code number)
</TABLE>
5335 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
President and Chief Executive Officer
5335 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. DANIEL B. RITTER, ESQ.
SHAUNA L. VERNAL, ESQ. ERIC A. DEJONG, ESQ.
Graham & Dunn P.C. Davis Wright Tremaine LLP
1420 Fifth Avenue, 33rd Floor 1501 Fourth Avenue, Suite 2600
Seattle, Washington 98101-2390 Seattle, Washington 98101-1688
-----------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
The date of mailing of the enclosed Prospectus/Joint Proxy
Statement to shareholders of West Coast Bancorp and
Centennial Holdings, Ltd.
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. [ ]
CALCULATION OF REGISTRATION FEE
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======================================================================================================
Title of Each Proposed Maximum Proposed Maximum Amount of
Class of Securities Amount Being Offering Price Aggregate Registration
Being Registered Registered(1) Per Share(3) Offering Price(2)(3) Fee(3)
======================================================================================================
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Common Stock 2,550,000 $8.952 $22,827,542.80 $6,917.44
======================================================================================================
</TABLE>
(1) Represents the number of shares of West Coast Bancorp's common stock ("WCB
Common Stock") to be issued in exchange for the total shares of Centennial
Holdings, Ltd.'s common stock ("Centennial Common Stock") that are either
outstanding or subject to exercisable options on the merger's effective
date, under the terms of the Plan and Agreement of Merger described in
this Registration Statement.
(2) Represents the maximum price per share of West Coast Common Stock issuable
in exchange for Centennial Common Stock, based on the merger exchange
ratio. On December 16, 1997, there were 1,576,944 shares of Centennial
Common Stock outstanding, and 89,300 shares subject to granted but
unexercised options. The book value of Centennial Common Stock on December
16, 1997 was $13.70 per share.
(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
("1933 Act"), on the basis of the per-share book value of the Centennial
Common Stock as of December 17, 1997.
---------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT FILES
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE 1933
ACT, OR UNTIL THIS REGISTRATION STATEMENT BECOMES EFFECTIVE ON SUCH DATE AS THE
SECURITIES AND EXCHANGE COMMISSION, ACTING UNDER SECTION 8(a), MAY DETERMINE.
<PAGE> 2
[Centennial Holdings, Ltd. Letterhead]
January __, 1998
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting ("Special
Meeting") of Shareholders of Centennial Holdings, Ltd. ("Centennial"), a
Washington corporation and the bank holding company for Centennial Bank
("Bank"). The Special Meeting will be held on February 18, 1998, at 2:00 p.m.
local time, at The Olympia Country & Golf Club, 3636 Country Club Drive N.W.,
Olympia, Washington.
The attached Notice of Special Meeting and Prospectus/Joint Proxy
Statement describe the formal business to be transacted at the Special Meeting.
At the Special Meeting, you will be asked to consider and vote upon a proposal
to approve the Plan and Agreement of Merger ("Merger Agreement"), dated as of
October 30, 1997, between West Coast Bancorp ("WCB"), an Oregon corporation and
bank holding company and Centennial. The complete text of the Merger Agreement
appears as Appendix A to the Prospectus/Joint Proxy Statement. The Merger
Agreement provides for the merger ("Merger") of Centennial with and into WCB,
with WCB as the surviving corporation. Consequently, Centennial's shareholders
will become shareholders of WCB, and the Bank will become a separate subsidiary
of WCB.
The Merger is subject to various conditions described in the Merger
Agreement and summarized in the attached Joint Proxy Statement, which also
serves as WCB's Prospectus for its common stock ("WCB Common Stock") to be
issued in the Merger. If the Merger is completed, Centennial shareholders will
receive shares of WCB Common Stock in exchange for their shares of Centennial
Common Stock ("Centennial Common Stock") owned, based on an exchange formula
detailed in the Prospectus/Joint Proxy Statement. The complete text of the
Merger Agreement appears as Appendix A to the Prospectus/Joint Proxy Statement..
Your Board of Directors has received an opinion from Alex Sheshunoff &
Co., Investment Banking, an investment banking firm, to the effect that, as of
the date of this Prospectus/Joint Proxy Statement and based on the factors and
assumptions described in the opinion, the consideration to be received by
Centennial and its shareholders in the Merger is fair from a financial point of
view. THE BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS
OF CENTENNIAL AND ITS SHAREHOLDERS, AND HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
MERGER.
Approval of the Merger requires the affirmative vote of the holders of
two-thirds of the outstanding shares of Centennial Common Stock. We urge you to
review the attached Prospectus/Joint Proxy Statement and to consider your vote
carefully. If you have any questions regarding this material in advance of the
Special Meeting, please call Jill Faughender, Centennial's Corporate Secretary,
at (360) 456-7775.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING, REGARDLESS OF THE SIZE OF YOUR HOLDINGS, AND WHETHER OR NOT YOU PLAN TO
ATTEND THE SPECIAL MEETING IN PERSON. A FAILURE TO VOTE, EITHER BY NOT RETURNING
THE ENCLOSED PROXY OR BY CHECKING THE "ABSTAIN" BOX ON THE PROXY, WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT. TO ASSURE THAT
YOUR SHARES ARE REPRESENTED IN VOTING ON THIS VERY IMPORTANT MATTER, PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY FORM IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU DO ATTEND, YOU
MAY (IF YOU WISH), REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON AT THE
SPECIAL MEETING.
On behalf of your Board of Directors, we recommend that you vote FOR
approval of the Merger Agreement.
Very truly yours,
Daniel D. Yerrington Thomas W. Healy
President Chairman of the Board
PLEASE COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY FORM
<PAGE> 3
CENTENNIAL HOLDINGS, LTD.
2850 HARRISON AVENUE N.W.
OLYMPIA, WASHINGTON 98502
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 18, 1998
TO THE SHAREHOLDERS OF CENTENNIAL HOLDINGS, LTD.:
NOTICE IS HEREBY GIVEN that a Special Meeting ("Special Meeting") of
Shareholders of Centennial Holdings, Ltd. ("Centennial"), a Washington
corporation and bank holding company, will be held on February 18, 1998, at 2:00
p.m. local time, at The Olympia Country & Golf Club, 3636 Country Club Drive
N.W., Olympia, Washington. The Special Meeting is for the following purposes:
1. MERGER AGREEMENT. To consider and vote upon a proposal to approve the
Plan and Agreement of Merger ("Merger Agreement"), dated as of October
30, 1997, between Centennial and West Coast Bancorp ("WCB"), an Oregon
corporation and bank holding company, under the terms of which
Centennial will merge with and into WCB, as more fully described in the
accompanying Prospectus/Joint Proxy Statement. The Merger Agreement is
attached as Appendix A to the Prospectus/Joint Proxy Statement.
2. OTHER MATTERS. To act upon any other matters as may properly come before
the Special Meeting (or any postponement or adjournment of it).
Only holders of record of Centennial Common Stock, at 5:00 p.m. on
December 31, 1997 (the record date for the Special Meeting), are entitled to
notice of, and to vote at, the Special Meeting (or at any adjournments or
postponements of it). The affirmative vote of the holders of two-thirds or more
of the outstanding shares of Centennial Common Stock is required for approval of
the Merger Agreement. As of December 31, 1997, there were ______ shares of
Centennial Common Stock outstanding.
Centennial shareholders desiring to do so may dissent from the Merger
and obtain payment for their shares in accordance with the provisions of the
Washington Business Corporation Act ("WBCA"), Chapter 23B.13, a copy of which is
included in this Prospectus/Joint Proxy Statement. See "THE MERGER --
Dissenters' Rights of Appraisal" and Appendix C.
All shareholders are cordially invited to attend the Special 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 Centennial Common Stock.
Shareholders may revoke proxies previously submitted by completing a later-dated
proxy, by written revocation delivered to Centennial's Secretary at or before
the Special Meeting, or by appearing and voting at the Special Meeting in
person. Attendance at the Special Meeting will not of itself revoke a previously
submitted proxy.
By Order of the Board of Directors,
Jill Faughender, Secretary
Olympia, Washington
January __, 1998
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN, AND WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. APPROVAL OF THE MERGER REQUIRES
THE AFFIRMATIVE VOTE OF HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF
CENTENNIAL COMMON STOCK. IN ORDER TO ENSURE THAT THE REQUISITE VOTES ARE
OBTAINED AND A QUORUM IS ATTAINED, WE URGE YOU TO SIGN, DATE, AND RETURN THE
ENCLOSED PROXY FORM.
<PAGE> 4
[West Coast Bancorp Letterhead]
January __, 1998
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting ("Special
Meeting") of Shareholders of West Coast Bancorp ("WCB"), an Oregon corporation
and bank holding company, which will be held on February 20, 1998, at 2:00 p.m.
local time, at The Crowne Plaza Hotel, 14811 Kruse Oaks Drive, Lake Oswego,
Oregon.
At the Special Meeting, you will be asked to consider and approve a Plan
and Agreement of Merger ("Merger Agreement"), dated as of October 30, 1997,
between WCB and Centennial Holdings, Ltd. ("Centennial"), a Washington
corporation and the parent bank holding company of Centennial Bank ("Bank"). The
Merger Agreement provides for the merger ("Merger") of Centennial with and into
WCB, with WCB as the surviving entity. Consequently, Centennial's shareholders
will become shareholders of WCB through the Merger. If the Merger is completed,
each Centennial shareholder will receive shares of WCB Common Stock for each
share of Centennial common stock ("Centennial Common Stock") owned, based on an
Exchange Ratio detailed in the Prospectus/Joint Proxy Statement. The Merger is
subject to various conditions described in the Merger Agreement and summarized
in the attached Joint Proxy Statement, which also serves as WCB's Prospectus for
its common stock ("WCB Common Stock") to be issued in the Merger. The complete
text of the Merger Agreement appears as Appendix A to the Prospectus/Joint Proxy
Statement.
Your Board of Directors has received an opinion from Dain Bosworth
Incorporated ("Dain Bosworth"), an investment banking firm, to the effect that,
as of the date of this Prospectus/Joint Proxy Statement and based on the factors
and assumptions described in the opinion, the consideration to be paid to
Centennial's shareholders in the Merger is fair from a financial point of view.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF WCB
AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT. YOUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER.
Approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of WCB Common Stock. We urge you
to read the attached Prospectus/Joint Proxy Statement and to consider your vote
carefully. If you have any questions regarding this material in advance of the
Special Meeting, please call Rodney B. Tibbatts, WCB's Executive Vice President
and Corporate Development Officer, at (503) 598-3242. Regardless of the size of
your holdings, it is important that your shares be voted at the Special Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL 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 SPECIAL 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 SPECIAL MEETING.
On behalf of your Board of Directors, I recommend that you vote FOR
approval of the Merger Agreement.
Sincerely,
Victor L. Bartruff
President and Chief Executive Officer
PLEASE COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY FORM
<PAGE> 5
WEST COAST BANCORP
5335 Southwest Meadows Road, Suite 201
Lake Oswego, Oregon 97035
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 20, 1998
TO THE SHAREHOLDERS OF WEST COAST BANCORP:
NOTICE IS HEREBY GIVEN that a Special Meeting ("Special Meeting") of
Shareholders of West Coast Bancorp ("WCB"), an Oregon corporation and bank
holding company, will be held on February 20, 1998, at 2:00 p.m. local time, at
The Crowne Plaza Hotel, 14811 Kruse Oaks Drive, Lake Oswego, Oregon. The Special
Meeting is for the following purposes:
1. MERGER AGREEMENT. To consider and vote upon a proposal to approve the
Plan and Agreement of Merger ("Merger Agreement"), dated as of October
30, 1997, between WCB and Centennial Holdings, Ltd. ("Centennial"), a
Washington corporation and bank holding company, under the terms of
which Centennial will merge with and into WCB, as more fully described
in the accompanying Prospectus/Joint Proxy Statement. The Merger
Agreement is attached as Appendix A to the Prospectus/Joint Proxy
Statement.
2. OTHER MATTERS. To act upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
Only holders of record of WCB common stock ("WCB Common Stock"), at the
close of business on December 31, 1997 (the record date for the Special
Meeting), are entitled to notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof. The affirmative vote of the holders of a
majority of the outstanding shares of WCB Common Stock is required for approval
of the Merger Agreement. As of December 31, 1997, there were _________ shares of
WCB Common Stock outstanding.
All shareholders are cordially invited to attend the Special 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 WCB Common Stock.
Shareholders may revoke proxies previously submitted by completing a later-dated
proxy, by written revocation delivered to WCB's secretary at or before the
Special Meeting, or by appearing and voting at the Special Meeting in person.
Attendance at the Special Meeting will not of itself revoke a previously
submitted proxy.
By Order of the Board of Directors,
Carol Williams, Secretary
Lake Oswego, Oregon
January __, 1998
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN, AND WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. APPROVAL OF THE MERGER REQUIRES
THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF WCB
COMMON STOCK. IN ORDER TO ENSURE THAT THE REQUISITE VOTES ARE OBTAINED AND THAT
A QUORUM IS ATTAINED, WE URGE YOU TO SIGN, DATE, AND RETURN THE ENCLOSED PROXY
FORM.
<PAGE> 6
JOINT PROXY STATEMENT
CENTENNIAL HOLDINGS, LTD. AND WEST COAST BANCORP
PROSPECTUS
WEST COAST BANCORP COMMON STOCK
This Prospectus/Joint Proxy Statement is being furnished to holders of
shares of Centennial Common Stock, in connection with the solicitation of
proxies by Centennial's Board of Directors ("Centennial Board") for use at the
Special Meeting ("Centennial Meeting") of Shareholders to be held on February
18, 1998, and at any adjournments or postponements of the Centennial Meeting.
This Prospectus/Joint Proxy Statement and the accompanying proxy forms are first
being mailed to Centennial's shareholders on or about January __, 1998.
This Prospectus/Joint Proxy Statement is also being furnished to the
holders of WCB Common Stock, in connection with the solicitation of proxies by
WCB's Board of Directors ("WCB Board") for use at the Special Meeting ("WCB
Meeting") of WCB Shareholders to be held on February 20, 1998, and at any
adjournments or postponements of the WCB Meeting. This Prospectus/Joint Proxy
Statement and the accompanying proxy forms are first being mailed to WCB's
shareholders on January __, 1998.
At the Meetings, the respective shareholders of Centennial and WCB will
vote upon a proposal to approve the Merger of Centennial with and into WCB,
under the terms of the Merger Agreement. The Merger Agreement is incorporated
into this Prospectus/Joint Proxy Statement by reference. The Merger Agreement is
attached to this Prospectus/Joint Proxy Statement at Appendix A.
Subject to certain qualifications, the aggregate consideration
Centennial's shareholders and option holders will be entitled to receive in the
Merger is 2,550,000 shares of WCB Common Stock. The number of shares of WCB
Common Stock each holder will receive for each share (other than Dissenting
Shares) of Centennial Common Stock will be determined by dividing 2,550,000 by
the number of shares of Centennial Common Stock that are outstanding or subject
to unexercised options on the Effective Date. See "THE MERGER - Basic Terms of
the Merger."
This Prospectus/Joint Proxy Statement also constitutes WCB's Prospectus,
filed as part of a Registration Statement on Form S-4 ("Registration Statement")
with the Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended ("1933 Act"), relating to the shares of WCB Common Stock to be
issued in the Merger. When the Merger becomes effective, all outstanding shares
of Centennial Common Stock will be converted into the right to receive shares of
WCB Common Stock. No fractional shares will be issued in the Merger; cash will
be paid in lieu of fractional shares. Centennial shareholders desiring to do so
may dissent from the Merger ("Dissenting Shares") and obtain payment for their
shares in accordance with the provisions of Chapter 23B.13 of the Washington
Business Corporations Act ("WBCA"). WCB shareholders are not entitled to any
dissenters' rights under the Oregon Business Corporation Act ("OBCA"). For a
more detailed discussion of the foregoing provisions, and a description of
certain other significant considerations in connection with the Merger, see "THE
MERGER -- Basic Terms of Merger; -- Dissenters' Rights of Appraisal; --
Conditions to the Merger; -- Interests of Certain Persons in the Merger"; and
Appendix B.
THIS PROSPECTUS/JOINT PROXY STATEMENT DOES NOT COVER ANY RESALE OF THE
SECURITIES TO BE RECEIVED BY SHAREHOLDERS OF CENTENNIAL UPON CONSUMMATION OF THE
MERGER, AND NO PERSON IS AUTHORIZED TO MAKE ANY USE OF THIS PROSPECTUS/JOINT
PROXY IN CONNECTION WITH ANY SUCH RESALE.
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 OR INSTRUMENTALITY.
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
OR ADEQUACY OF THIS PROSPECTUS/JOINT PROXY STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus/Joint Proxy Statement is January __, 1998.
<PAGE> 7
AVAILABLE INFORMATION
WCB is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended ("1934 Act"). In accordance with the
1934 Act, WCB files reports, proxy statements, and other information with the
SEC. Centennial is currently not subject to the information and reporting
requirements of the 1934 Act.
Under the rules and regulations of the SEC, the solicitation of
shareholders to approve the Merger constitutes an offering of the WCB Common
Stock to be issued in connection with the Merger. WCB has filed the Registration
Statement with the SEC under the 1933 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 1934 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. Copies of materials
filed by WCB with the SEC may also be obtained through the Commission's Internet
address at http://www.sec.gov. 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.
This Prospectus/Joint Proxy Statement constitutes part of the
Registration Statement (File No. 333) filed by WCB with the SEC under the 1933
Act. This Prospectus/Joint Proxy Statement omits certain information contained
in the Registration Statement in accordance with the rules and regulations of
the SEC. Please refer to the Registration Statement and related exhibits for
further information with respect to WCB and the WCB Common Stock. Statements
contained in this or any other document incorporated into this document by
reference as to the contents of any contract or other document are not
necessarily complete, and these statements are entirely qualified in each
instance by references to a copy of the contract or other document either filed
as an exhibit to the Registration Statement or contained in another document
incorporated into this document by reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by WCB with the SEC under the 1934 Act, a
copy of each of which accompany this Prospectus/Joint Proxy Statement, are
incorporated herein by reference:
1. WCB's Annual Report on Form 10-K for the year ended December 31,
1996 ("WCB 1996 10-K");
2. WCB's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1997 ("WCB 1997 10-Qs");
3. WCB's Proxy Statement for its 1997 Annual Meeting of
Shareholders ("WCB 1997 Proxy");
4. WCB's 1996 Annual Report to Shareholders filed as an exhibit to
the WCB 1996 10-K ("WCB 1996 Annual Report"); and
5. WCB's Current Reports on Form 8-K dated February 13, 1997 and
October 31, 1997 ("WCB 1997 8-K's").
All documents filed by WCB under Sections 13(a), 13(c), 14 and 15(d) of
the 1934 Act after the date of this document and before the Centennial Meeting
and the WCB Meeting are incorporated into this document by reference and are a
part of this document from each document's filing date. Any statement contained
in a document incorporated into this document by reference is modified or
superseded for purposes of this document to the extent that a statement
contained in this document, or in any other document filed after the document
containing the statement that is incorporated by reference into this document,
modifies or supersedes that statement. Any statement so modified or superseded
will not constitute a part of this document, except as modified or superseded.
-------------------
All information contained in this Prospectus/Joint Proxy Statement
relating to WCB has been furnished by WCB, and Centennial is relying upon the
accuracy of that information. All information contained in this Prospectus/Joint
Proxy Statement relating to Centennial has been furnished by Centennial, 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/JOINT PROXY STATEMENT. IF SUCH A
REPRESENTATION IS GIVEN OR MADE BY ANY PERSON, THAT REPRESENTATION SHOULD NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER WCB OR CENTENNIAL. THIS
PROSPECTUS/JOINT PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO PURCHASE THE SECURITIES OFFERED BY THIS
PROSPECTUS/JOINT PROXY STATEMENT OR THE SOLICITATION OF A PROXY IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS/JOINT PROXY STATEMENT NOR ANY
DISTRIBUTION OF THE SECURITIES OFFERED UNDER THE TERMS OF THIS PROSPECTUS/JOINT
PROXY STATEMENT CREATES, UNDER ANY CIRCUMSTANCES, ANY IMPLICATION THAT (1) THERE
HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF
CENTENNIAL OR WCB, OR ANY OF THEIR SUBSIDIARIES, SINCE THE DATE OF THIS
PROSPECTUS/JOINT PROXY STATEMENT OR (2) THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS/JOINT PROXY STATEMENT.
<PAGE> 8
TABLE OF CONTENTS
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GLOSSARY OF CERTAIN KEY TERMS.....................................................1
SUMMARY 1
Introduction..............................................................1
Parties to the Merger.....................................................1
Trading Market............................................................1
The Special Stockholder Meetings..........................................2
The Merger; Exchange Ratio................................................2
Effective Date............................................................3
Reasons for the Merger; Recommendation of the Centennial Board............3
Reasons for the Merger; Recommendation of the WCB Board...................3
Opinion of Centennial Financial Advisor...................................4
Opinion of WCB Financial Advisor..........................................4
Directors and Executive Officers..........................................4
Conditions; Regulatory Approvals..........................................4
Amendment; Termination....................................................5
Tax Treatment of the Merger...............................................5
Accounting Treatment of the Merger........................................5
Anticipated Increase in Provision for Bank Loan Losses....................5
Dissenters' Rights of Appraisal...........................................5
Interests of Certain Persons in the Merger................................6
Comparison of Shareholders' Rights........................................6
STOCK PRICE AND DIVIDEND INFORMATION..............................................6
WCB.......................................................................6
Centennial................................................................7
Recent Stock Price Data...................................................7
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA........................7
West Coast Bancorp........................................................9
Centennial Holdings, Ltd.................................................10
Pro Forma West Coast Bancorp and Centennial Holdings, Ltd.
Consolidated (Unaudited)...............................................11
SPECIAL MEETING OF CENTENNIAL STOCKHOLDERS.......................................13
Date, Time, Place, and Purpose...........................................13
Shares Outstanding and Entitled to Vote; Record Date.....................13
Vote Required............................................................13
Voting, Solicitation, and Revocation of Proxies..........................13
SPECIAL MEETING OF WCB STOCKHOLDERS..............................................14
Date, Time, Place and Purpose............................................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
Background of the Merger.................................................15
Reasons For The Merger - General.........................................16
Reasons For The Merger - Centennial......................................17
Opinion of Centennial Financial Advisor..................................17
Recommendation of the Centennial Board...................................21
Reasons For The Merger - WCB.............................................21
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i
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Opinion of WCB Financial Advisor.........................................22
Recommendation of the WCB Board..........................................25
THE MERGER.......................................................................25
General..................................................................25
Basic Terms of the Merger................................................25
Cash for Fractional Shares...............................................26
Exchange of Stock Certificates...........................................26
Directors and Executive Officers after the Merger........................26
Employee Benefit Plans...................................................26
Mechanics of the Merger..................................................27
Conduct Pending Consummation of the Merger...............................27
Conditions to the Merger.................................................27
Amendment or Termination of the Merger Agreement.........................28
Interests of Certain Persons in the Merger...............................28
Certain Federal Income Tax Consequences..................................29
Accounting Treatment of Merger...........................................30
Dissenters' Rights of Appraisal..........................................30
Resales of Stock Received in the Merger..................................30
No Solicitation..........................................................31
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS......................31
INFORMATION CONCERNING WCB.......................................................39
INFORMATION CONCERNING CENTENNIAL................................................39
Business.................................................................39
Competition..............................................................39
Facilities...............................................................40
Employees................................................................40
Legal Proceedings........................................................40
CENTENNIAL MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS....................................................40
Overview.................................................................40
Results of Operations....................................................41
Liquidity and Capital Resources..........................................44
Lending..................................................................45
MANAGEMENT OF CENTENNIAL.........................................................51
Directors and Executive Officers.........................................51
Executive Compensation...................................................52
Director Compensation....................................................52
Board Committees.........................................................53
Certain Transactions and Relationships...................................53
Securities Ownership of Management and Certain Beneficial Owners.........53
Other Principal Shareholders.............................................54
SUPERVISION AND REGULATION.......................................................55
Introduction.............................................................55
WCB AND CENTENNIAL...............................................................55
General..................................................................55
Holding Company Structure................................................55
Control Transactions.....................................................56
</TABLE>
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<TABLE>
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THE BANK SUBSIDIARIES AND THE BANK...............................................56
General..................................................................56
Regulation of State Banks................................................57
Dividends................................................................57
Regulation of Management.................................................58
Control of Financial Institutions........................................58
FIRREA...................................................................58
FDICIA...................................................................58
Interstate Banking and Branching.........................................58
Capital Adequacy Requirements............................................59
FDIC Insurance...........................................................60
Community Reinvestment Act ("CRA").......................................61
DESCRIPTION OF WCB'S CAPITAL STOCK AND COMPARISON OF CERTAIN RIGHTS OF HOLDERS
OF CENTENNIAL COMMON STOCK AND WCB COMMON STOCK...........................61
General...................................................................61
Preferred Stock...........................................................61
Common Stock..............................................................61
Dividend Rights...........................................................61
Voting Rights.............................................................62
Preemptive Rights.........................................................62
Liquidation Rights........................................................62
Assessments...............................................................62
Board of Directors........................................................62
Indemnification and Limitation of Liability...............................62
Amendment of Articles of Incorporation and Bylaws.........................63
Repurchase of Shares......................................................63
Dissenters' Rights........................................................63
Sales of Assets, Mergers and Dissolutions - Voting........................63
Potential "Anti-Takeover" Provisions......................................64
CERTAIN LEGAL MATTERS.............................................................65
EXPERTS ..........................................................................65
OTHER MATTERS.....................................................................66
CENTENNIAL HOLDINGS, LTD. FINANCIAL STATEMENTS...................................F-1
</TABLE>
APPENDIX A - Plan and Agreement of Merger
APPENDIX B - Chapter 23B.13 of the WBCA (Dissenters' Rights of
Appraisal under Washington Law)
APPENDIX C - Opinion of Alex Sheshunoff & Co., Investment Banking
APPENDIX D - Opinion of Dain Bosworth Incorporated
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GLOSSARY OF CERTAIN KEY TERMS
1933 Act.................. The Securities Act of 1933, as amended, and the
related SEC rules and regulations.
1934 Act.................. The Securities Exchange Act of 1934, as amended,
and related SEC rules and regulations.
Arthur Andersen........... Arthur Andersen LLP, independent certified
public accountants.
Bank...................... Centennial Bank, Centennial's sole commercial
bank subsidiary.
Bank Subsidiaries......... The Bank of Newport, The Commercial Bank, and
the Bank of Vancouver, WCB's commercial bank
subsidiaries.
BHCA...................... The Bank Holding Company Act of 1956, as
amended.
Board..................... Board of Directors.
Centennial................ Centennial Holdings, Ltd., a Washington
corporation and a bank holding company.
Centennial Common Stock... Centennial's common stock, par value $0.01 per
share.
Centennial Financial
Statements................ Centennial's (i) audited consolidated
statements of financial condition as of December
31, 1996 and 1995 and the related audited
consolidated statements of operations, cash
flows, and changes in stockholders' equity for
each of the years ended December 31, 1996 and
1995, and (ii) Centennial's unaudited
consolidated statements of financial condition
as of the end of the most recent fiscal quarter
preceding December 31, 1997, and the related
unaudited statements of operations, cash flows,
and changes in stockholders' equity for that
period.
Centennial Meeting........ Special meeting of Centennial shareholders to be
held on February 18, 1998.
Centennial Record Date.... December 31, 1997.
Closing................... Closing of the Merger, which will occur on the
Effective Date.
Code...................... The Internal Revenue Code of 1986, as amended.
Dain Bosworth............. Dain Bosworth Incorporated, WCB's financial
advisor.
Dissenting Shares......... Centennial Common Stock shares held by holders
who have properly exercised dissenters' rights
in accordance with Chapter 23B.13 of the WBCA.
Effective Date............ The date Closing of the Merger will occur.
Exchange Agent............ The company designated by WCB and Centennial to
handle the exchange of Centennial Common Stock
certificates for WCB Common Stock certificates
or cash (in the case of holders that would
otherwise be entitled to a fractional share of
WCB Common Stock).
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Exchange Ratio............ The ratio that will determine the number of WCB
Common Stock shares each holder of Centennial
Common Stock shares will receive in exchange for
each share he or she holds of records on the
Effective Date. The Exchange Ratio will be
computed as follows: In exchange for each
Centennial Common Stock share held of record on
the Effective Date, the holder will receive that
number (rounded to 2 decimals) of WCB Common
Stock Shares calculated by dividing the Purchase
Price by the aggregate number of Centennial
Common Stock shares that immediately before
Closing are either (a) issued and outstanding or
(b) subject to granted but unexercised options.
FDIC...................... The Federal Deposit Insurance Corporation.
FRB....................... The Board of Governors of the Federal Reserve
System.
GAAP...................... Generally accepted accounting principles,
consistently applied.
Merger.................... The merger of Centennial with and into WCB in
accordance with the Merger Agreement.
Merger Agreement.......... The Plan and Agreement of Merger, dated as of
October 30, 1997, between WCB and Centennial.
OBCA...................... The Oregon Business Corporations Act, as
amended.
Prospectus/Joint Proxy
Statement................. This Prospectus/Joint Proxy Statement, filed
with the SEC by WCB and to be mailed to
Centennial's and WCB's shareholders, together
with any amendments and supplements.
Purchase Price............ 2,550,000 shares of WCB Common Stock
Registration Statement.... The Registration Statement on Form S-4, of which
this Prospectus/Joint Proxy Statement forms a
part, filed with the SEC by WCB under the 1933
Act, for the purpose of registering the 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 State
Department of Financial Institutions.
SEC....................... The Securities and Exchange Commission.
Sheshunoff................ Alex Sheshunoff & Co., Investment Banking,
Centennial's financial advisors.
Tangible Equity Capital... The tangible equity capital (i.e., common stock,
paid-in capital and retained earnings, plus (or
minus) net unrealized gain (or loss) on
available-for-sale securities and minus goodwill
and any other intangible assets) of Centennial
and the Bank on a consolidated basis as of the
Effective Date, determined in accordance with
GAAP.
Termination Date.......... August 31, 1998, the date after which each party
has the right to terminate the Merger Agreement,
if the Closing has not occurred by that date.
Washington Director....... The Director of the Washington State Department
of Financial Institutions.
WBCA...................... The Washington Business Corporations Act, as
amended.
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WCB....................... West Coast Bancorp, an Oregon corporation and
bank holding company.
WCB Common Stock.......... WCB's common stock, no par value per share.
WCB Financial
Statements................ WCB's (i) audited consolidated statements of
financial condition as of December 31, 1996 and
1995, and the related audited consolidated
statements of operations, cash flows, and
changes in stockholders' equity for each of the
years in the three-year period ended December
31, 1996, and (ii) unaudited consolidated
statements of financial condition as of the end
of the most recent fiscal quarter preceding
December 31, 1997, and the related unaudited
statements of operations, cash flows, and
changes in stockholders' equity for that period.
WCB Meeting............... Special meeting of WCB shareholders to be held
on February 20, 1998.
WCB Record Date........... December 31, 1997.
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SUMMARY
The following material summarizes certain information contained
elsewhere in this Prospectus/Joint Proxy Statement. This summary is not intended
to be complete and is entirely qualified by reference to the more detailed
information contained elsewhere in this Prospectus/Joint Proxy Statement
(including its appendices). Unless the context otherwise requires, capitalized
terms used but not otherwise defined elsewhere in this Prospectus/Joint Proxy
Statement have the meanings assigned to them in the Glossary of Certain Key
Terms inside the front cover.
INTRODUCTION
WCB and Centennial propose to merge under the terms of the Merger
Agreement. The respective Boards of WCB and Centennial have unanimously adopted
the Merger Agreement and recommend, respectively, that the shareholders of WCB
and Centennial vote to approve the Merger Agreement. Subject to approval of the
Merger Agreement by these shareholders, receipt of required Regulatory
Approvals, and satisfaction of certain other conditions, Centennial will merge
with and into WCB. Centennial's shareholders, other than holders of Dissenting
Shares, will receive shares of WCB Common Stock or cash in lieu of fractional
shares in exchange for their shares of Centennial Common Stock in accordance
with the Exchange Ratio set forth in the Merger Agreement. See "THE MERGER Basic
Terms of the Merger; -- Cash for Fractional Shares; -- Dissenters' Rights of
Appraisal." If the Merger is completed, the Bank, and Centennial's other wholly
owned subsidiaries, will become wholly owned subsidiaries of WCB. Centennial
shareholders will no longer own any stock in Centennial, and Centennial will
cease to exist. Holders of Centennial Common Stock, other than holders of
Dissenting Shares, will become shareholders of WCB.
PARTIES TO THE MERGER
Centennial. Centennial is a Washington corporation and a registered bank
holding company under the BHCA. Centennial was originally incorporated in 1987
under the name "First Olympic Bancorporation" but remained inactive until 1994
and conducted no operations before 1995, when it was reorganized in 1995 to
become the Bank's parent bank holding company. Centennial's business and
activities are conducted primarily through the Bank. Centennial owns all of the
stock of the Bank, a state-chartered commercial bank organized under Washington
law in 1974. Centennial also has other direct and indirect subsidiaries,
including Centennial Funding Corporation, a mortgage broker that originates
single family residential and construction loans.
As of September 30, 1997, the Bank had deposits of approximately $237
million and assets of approximately $260.8 million. Centennial is headquartered
in Olympia, Washington, its executive offices are located at 2850 Harrison
Avenue N.W., and its telephone number is (360) 754-2400. For additional
information about Centennial and its business, see "INFORMATION CONCERNING
CENTENNIAL."
WCB. WCB is an Oregon corporation and a registered bank holding company
under the BHCA. WCB was organized in August of 1981 under the name Commercial
Bancorp ("Commercial"). Commercial merged with the former one-bank holding
company West Coast Bancorp, located in Newport, Oregon, on February 28, 1995,
and the name "West Coast Bancorp" was retained as part of that merger. WCB is
headquartered in Lake Oswego, Oregon, and its principal business activities are
conducted through its three commercial bank subsidiaries: (1) The Commercial
Bank, (2) The Bank of Newport, and (3) the Bank of Vancouver. The Bank of
Newport operates three branches under the business name "Valley Commercial
Bank." At September 30, 1997, WCB's Bank Subsidiaries had facilities in a total
of 23 cities and towns in Oregon and one city in Washington, operating a total
of 29 full-service branches and three limited service branches. As of September
30, 1997, WCB and its Bank Subsidiaries had total assets of approximately $809
million and total deposits of approximately $708.5 million.
WCB's executive offices are located at 5335 Meadows Road, Suite 201,
Lake Oswego, Oregon 97035, and its telephone number is (503) 684-0884. See
"INFORMATION CONCERNING WCB." Additional information concerning WCB and its
business is included in the documents incorporated into this Prospectus/Joint
Proxy Statement by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
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<PAGE> 15
TRADING MARKET
WCB Common Stock is quoted on The Nasdaq National Market System Stock
Market under the symbol "WCBO" and is registered as a class with the SEC under
the 1934 Act. Accordingly, WCB is required to file certain periodic and annual
reports with the SEC and to make information about WCB available to its
shareholders and the public. Centennial is not subject to the information and
reporting requirements of the 1934 Act and Centennial Common Stock is not
actively traded, or listed on, any exchange or market system.
THE SPECIAL STOCKHOLDER MEETINGS
Centennial. The Centennial Meeting will be held on February 18, 1998, at
2:00 p.m. local time, at The Olympia Country & Golf Club, 3636 Country Club
Drive N.W., Olympia, Washington. The purpose of the Centennial Meeting is to
vote on (1) approval of the Merger Agreement, and (2) any other matters that may
properly come before the Centennial Meeting.
Only shares of Centennial Common Stock held of record on December 31,
1997 at 5:00 p.m. ("Centennial Record Date") are entitled to notice of, and to
vote at, the Centennial Meeting. The affirmative vote of at least two-thirds of
the shares of Centennial Common Stock outstanding on the Centennial Record Date
is required to approve the Merger Agreement. On the Centennial Record Date,
there were ______ shares of Centennial Common Stock outstanding. Each director
of Centennial and the Bank has agreed to vote all shares of Centennial Common
Stock held or controlled by him or her (as of the Centennial Record Date, a
total of __________ shares, or approximately _____% of the shares outstanding),
in favor of approval of the Merger. For additional information about the
Centennial Meeting, see "SPECIAL MEETING OF CENTENNIAL STOCKHOLDERS."
WCB. The WCB Meeting will be held on February 20, 1998, at 2:00 p.m.
local time, at The Crowne Plaza Hotel, 14811 Kruse Oaks Drive, Lake Oswego,
Oregon. The purpose of the WCB Meeting is to consider and vote on (1) approval
of the Merger Agreement, and (2) any other matters that may properly come before
the WCB Meeting.
Only shares of WCB Common Stock held of record as of December 31, 1997
("WCB Record Date") are entitled to notice of, and to vote at, the WCB Meeting.
On the WCB Record Date, there were _________ shares of WCB Common Stock
outstanding. The affirmative vote of at least a majority of the shares of WCB
Common Stock outstanding on the WCB Record Date is required to approve the
Merger Agreement. As of the WCB Record Date, WCB's executive officers and
directors were entitled to vote an aggregate of _________ shares, which
represents approximately _____% of the total number of outstanding shares of WCB
Common Stock on the WCB Record Date. For additional information about the WCB
Meeting, see "SPECIAL MEETING OF WCB STOCKHOLDERS."
THE MERGER; EXCHANGE RATIO
In accordance with the Merger Agreement, on the Effective Date,
Centennial will merge with and into WCB, with WCB as the surviving corporation.
As long as Centennial does not exceed its transaction expense limitation of
$175,000, Centennial's shareholders and option holders will be entitled to
receive from WCB the aggregate consideration of 2,550,000 shares ("Purchase
Price") of WCB Common Stock if the Merger is completed. Each holder of
Centennial Common Stock shares, other than Dissenting Shares, will receive, in
exchange for each share of Centennial Common Stock held of record on the
Effective Date, the number of shares of WCB Common Stock resulting from a
division of the Purchase Price by the aggregate number of shares of Centennial
Common Stock that, on the Effective Date, are issued and outstanding or subject
to granted but unexercised stock options. At December 31, 1997, __________
shares of Centennial Common Stock were outstanding and __________ shares were
subject to unexercised options. Accordingly, if the Merger had Closed on that
date, each holder of Centennial Common Stock shares would have received 1.53 WCB
Common Stock shares for each share of Centennial Common Stock held. Holders of
granted but unexercised options for Centennial Common Stock will not receive WCB
Common Stock at Closing. Unexercised options for Centennial Common Stock will be
converted into options for WCB Common Stock at Closing in accordance with the
Exchange Ratio. In other words, holders of granted but unexercised Centennial
Common Stock options will receive, in exchange for those options, options to
purchase the number of WCB Common Stock shares that they would have received in
the Merger if they would have exercised their Centennial Common Stock options
immediately before Closing. All WCB Common Stock options will be subject to the
same terms as the Centennial Common Stock options exchanged for them, and the
aggregate option exercise price of such WCB Common Stock
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<PAGE> 16
options will be equal to the aggregate option price of the Centennial Common
Stock options converted into such WCB Common Stock options.
The aggregate market value of the WCB Common Stock Centennial
shareholders will receive in the Merger will depend on the market value of WCB
Common Stock shares on the Effective Date. Cash will be paid in lieu of issuing
fractional shares of WCB Common Stock. Upon completion of the Merger,
shareholders of Centennial will no longer own any stock in Centennial. For more
detailed information concerning the Merger, the Exchange Ratio, and how
Centennial Shareholders may exchange certificates representing shares of
Centennial Common Stock, see "THE MERGER -- Basic Terms of the Merger; -- Cash
for Fractional Shares; -- Exchange of Stock Certificates."
EFFECTIVE DATE
The parties presently expect the Merger to Close on February 28, 1998 or
during the first quarter of 1998, although the timing is subject to the
satisfaction of certain conditions (discussed below). The Merger Agreement
provides that if the Merger is not completed by August 31, 1998, then at any
time after that date, the Board of either WCB or Centennial may vote to abandon
the Merger. See "THE MERGER -- Basic Terms of the Merger; -- Termination of the
Merger Agreement."
REASONS FOR THE MERGER; RECOMMENDATION OF THE CENTENNIAL BOARD
The Centennial Board has unanimously determined that the Merger
Agreement is fair to and in the best interests of Centennial and its
shareholders, and recommends that Centennial's shareholders approve the Merger
Agreement. In making this determination, the Centennial Board considered a
variety of factors, including the value of the WCB Common Stock that the
shareholders of Centennial will receive in exchange for their shares of
Centennial Common Stock, the continued ability of the Bank to provide
competitive and comprehensive services in the markets in which it operates, and
the parties' shared belief in personalized community banking, which emphasizes
responsiveness to local markets and delivery of personalized services to
customers.
The Centennial Board believes that the Merger will allow the Bank to
provide a wider array of products and services, while continuing to offer the
advantages of personalized community banking to Centennial's current customers,
and will also enhance shareholder value by providing Centennial's shareholders a
premium on their Centennial Common Stock. The Centennial Board further
anticipates that the Merger will provide both Centennial and the Bank with
substantially greater financial and technological resources, which will enable
the Bank to compete more effectively in its markets and better serve its
customers and communities. Additionally, Centennial's shareholders will be able
to obtain a premium over book value for their shares of Centennial Common Stock
on a tax-deferred basis, while at the same time enjoying the benefits of a more
active trading market in the WCB Common Stock.
THE CENTENNIAL BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AS
ADVISABLE AND IN THE BEST INTERESTS OF CENTENNIAL AND ITS SHAREHOLDERS, AND
RECOMMENDS THAT CENTENNIAL SHAREHOLDERS APPROVE THE MERGER AGREEMENT. For a more
detailed discussion of the factors considered by the Centennial Board in
reaching its determination to approve the Merger Agreement, see "BACKGROUND OF
AND REASONS FOR THE MERGER."
REASONS FOR THE MERGER; RECOMMENDATION OF THE WCB BOARD
The WCB Board has unanimously determined that the Merger is fair to and
in the best interests of WCB's shareholders. In making this determination, the
WCB Board considered a variety of factors, including:
(1) The WCB Board's and management's knowledge and review of the
financial condition, results of operations, and business
operations and prospects of the Bank;
(2) The WCB Board's belief that the acquisition of Centennial will
expand WCB's franchise in Washington and along the Interstate 5
corridor (the WCB Board noted that the Olympia economy, which has
seen substantial growth in recent years, presents an attractive
and logical market for expansion); and
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<PAGE> 17
(3) The WCB Board's evaluation of the financial terms of the Merger
and its effect on the shareholders of WCB, and the WCB Board's
belief that the terms are fair to WCB and its shareholders.
THE WCB BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AS ADVISABLE AND IN
THE BEST INTERESTS OF WCB AND ITS SHAREHOLDERS, AND RECOMMENDS THAT THE
SHAREHOLDERS OF WCB APPROVE THE MERGER AGREEMENT. For a more detailed discussion
of the factors considered by the WCB Board in reaching its determination to
approve the Merger Agreement, see "BACKGROUND OF AND REASONS FOR THE MERGER."
OPINION OF CENTENNIAL FINANCIAL ADVISOR
Sheshunoff, Centennial's financial advisor, has delivered a written
opinion to the Centennial Board, dated as of October 30, 1997, and updated as of
the date of this Prospectus/Joint Proxy Statement, to the effect that the Merger
is fair, from a financial perspective, to Centennial and its shareholders. A
copy of Sheshunoff's opinion setting forth the limits of its review, assumptions
made, matters considered and procedures followed is attached to this
Prospectus/Joint Proxy Statement as Appendix C and should be read in its
entirety by Centennial's shareholders. See "BACKGROUND OF AND REASONS FOR THE
MERGER -- Opinion of Centennial Financial Advisor."
OPINION OF WCB FINANCIAL ADVISOR
Dain Bosworth, WCB's financial advisor, has delivered a written opinion
to the WCB Board, dated October 30, 1997, and updated as of the date of this
Prospectus/Joint Proxy Statement, to the effect that the consideration to be
paid to Centennial in the Merger is fair, from a financial perspective, to WCB
and its shareholders. A copy of Dain Bosworth's opinion, updated as of the date
of this Prospectus/Joint Proxy Statement and setting forth the limits of its
review, assumptions made, other matters considered and procedures followed, is
attached to this Prospectus/Joint Proxy Statement as Appendix D and should be
read in its entirety by WCB's shareholders. See "BACKGROUND OF AND REASONS FOR
THE MERGER -- Opinion of WCB Financial Advisor."
DIRECTORS AND EXECUTIVE OFFICERS
When the Merger is completed, the WCB Board will consist of WCB's
current directors, and in addition Thomas W. Healy and Joe L. Snyder, who are
presently members of the Centennial Board. WCB has also agreed to appoint Mr.
Healy to WCB's executive committee, as of the Effective Date.
The respective executive officers of WCB and the Bank in office
immediately before the Effective Date are expected to remain unchanged, at least
initially, following the Merger. On the Effective Date, the Bank Board will
consist of all persons who were directors of the Bank immediately before the
Merger, plus one or two additional WCB directors to be designated by WCB to
serve on the Bank Board. For more information on the anticipated composition of
the respective Boards and managements of WCB and the Bank after the Merger, see
"THE MERGER -- Directors and Executive Officers; -- Interests of Certain Persons
in the Merger."
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is conditioned on (1) approval of the Merger
Agreement by the holders of at least a majority of the outstanding shares of WCB
Common Stock and by the holders of at least two-thirds of the outstanding shares
of Centennial Common Stock; (2) receipt of all necessary approvals of the Merger
by governmental regulatory agencies, including the FRB; (3) receipt by each
party of a favorable tax opinion from Graham & Dunn P.C. ("Graham & Dunn"); (4)
receipt of a letter from Arthur Andersen to the effect that it concurs with the
respective management conclusions that the Merger qualifies for
pooling-of-interests accounting treatment; (5) the continuing accuracy of the
representations and warranties of each party; (6) the performance of specified
obligations by each party; and (7) certain other conditions. See "THE MERGER --
Conditions to the Merger" and "SUPERVISION AND REGULATION."
WCB has filed the appropriate applications or notices required for
approval of the Merger by the FRB and the Washington Department of Financial
Institutions.
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<PAGE> 18
AMENDMENT; TERMINATION
The Merger Agreement may be amended at any time before the Effective
Date upon approval of both the WCB and Centennial Boards. However, after
Centennial's shareholders have approved the Merger Agreement, no amendment
reducing the amount or changing the form of any consideration to be received by
Centennial's shareholders may be effected without the approval of Centennial's
shareholders. Further, at any time before the Effective Date, the Merger
Agreement may be terminated, and the Merger abandoned, whether before or after
the adoption of the Merger Agreement by the respective shareholders of WCB and
Centennial: (1) by the majority vote of each of the WCB and Centennial Boards,
or (2) unilaterally, by either of the Boards under certain specified
circumstances (including a failure to consummate the Merger by August 31, 1998).
See "THE MERGER -- Amendment or Termination of the Merger Agreement."
TAX TREATMENT OF THE MERGER
Consummation of the Merger is conditioned upon receipt by WCB, and
delivery to Centennial, of an opinion from Graham & Dunn to the effect that (1)
the Merger will constitute a tax-free reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended ("Code");
(2) no gain or loss will be recognized, under the provisions of Section
354(a)(i) of the Code, by any shareholder who exchanges his or her shares of
Centennial Common Stock solely for shares of WCB Common Stock; and (3) the
payment of cash to a Centennial shareholder 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 Consequences."
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 and Centennial's obligations to
complete the Merger, WCB must receive a letter from Arthur Andersen, WCB's
independent auditors, to the effect that it concurs with the respective
managements' conclusions that the Merger will qualify for pooling of interests
accounting treatment. See "THE MERGER -- Accounting Treatment of the Merger."
ANTICIPATED INCREASE IN PROVISION FOR BANK LOAN LOSSES.
In connection with the Merger, WCB and Centennial have undertaken an
extensive review and evaluation of the credit risk inherent in the Bank's loan
portfolio. This review and evaluation is still underway, but both parties expect
that an increase to the Bank's allowance for loan losses will be made in
accordance with WCB's historic reserve methodology. Presently, it is anticipated
that the Bank's allowance for loan losses will be adjusted upward to 1.5% to
1.75% of the outstanding loan portfolio of the Bank. If this level of allowance
had been provided for the Bank's loan portfolio as of September 30, 1997, an
additional provision of $1.3 million to $1.8 million would have been required.
See "CENTENNIAL'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Results of Operations - Nine months ended September
30, 1997 and 1996 - Provision for Loan Losses; - Net Income."
DISSENTERS' RIGHTS OF APPRAISAL
Holders of Centennial Common Stock have the right to dissent from the
Merger and, if they follow certain procedures and the Merger is completed, to
obtain payment of the fair value of their shares in cash, in accordance with
applicable provisions of Washington law. A dissenting shareholder's failure to
follow exactly the procedures specified in the applicable provisions of
Washington law will result in loss of the shareholder's dissenters' rights.
Accordingly, the shareholders of Centennial wishing to dissent from the Merger
are urged to carefully read "THE MERGER -- Dissenters' Rights of Appraisal," and
the copy of Chapter 23B.13 of the WBCA set forth in Appendix B.
Holders of shares of WCB Common Stock may vote against the Merger, but
votes against the Merger will not entitle WCB shareholders to receive the fair
value of their shares in cash. Because WCB Common Stock is traded on the Nasdaq
Stock Market, the OBCA does not provide WCB's shareholders with dissenters'
rights.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of WCB's management and the WCB Board may be deemed to
have interests in the Merger in addition to their interests as shareholders of
WCB generally, as a result of provisions in the Merger Agreement relating to the
appointment of one or two current directors of WCB to the Bank Board.
Certain members of Centennial's management and the Centennial Board may
be deemed to have interests in the Merger in addition to their interests as
shareholders of Centennial generally, as a result of provisions in the Merger
Agreement relating to indemnification, a salary continuation agreement, and
appointments to the WCB Board and executive committee. These provisions are
summarized below and discussed in more detail in "THE MERGER -- Interests of
Certain Persons in the Merger."
The Merger Agreement provides that for the three-year period following
the Effective Date, WCB will indemnify the directors of Centennial and the Bank
against certain liabilities to the extent that such persons were entitled to
indemnification from Centennial or the Bank.
WCB has entered into a salary continuation agreement with Thomas W.
Healy, effective on the Merger's Effective Date. This Agreement provides that
certain payments will be made to Mr. Healy if there is a "change in control" of
WCB after the Effective Date. WCB and Mr. Healy have also entered into a letter
agreement providing for continuation of certain employee benefits, including
continued accrual of deferred compensation until Mr. Healy reaches age 65.
Additionally, WCB has agreed to appoint Mr. Healy and Joe L. Snyder to the WCB
Board and Mr. Healy to WCB's executive committee, effective upon Closing.
COMPARISON OF SHAREHOLDERS' RIGHTS
Shareholders of Centennial who receive WCB Common Stock in the Merger in
exchange for their Centennial Common Stock will be governed with respect to
their rights as shareholders by WCB's Articles of Incorporation and Bylaws and
by Oregon law. Presently, the rights of Centennial's shareholders are determined
under Centennial's Articles of Incorporation and Bylaws and by Washington law.
For a discussion of certain material differences in the rights of shareholders
of WCB and Centennial, see "COMPARISON OF RIGHTS OF HOLDERS OF WCB AND
CENTENNIAL COMMON STOCK."
STOCK PRICE AND DIVIDEND INFORMATION
WCB
The WCB Common Stock trades on The Nasdaq Stock Market under the symbol
"WCBO," and its primary market makers are (1) Piper Jaffray Companies, Inc.; (2)
Herzog, Heine, Geduld, Inc.; (3) Black and Company, Inc.; (4) Hoefer & Arnett,
Inc.; (5) Keefe Bruyettee Woods, Inc.; (6) Pacific Crest Securities; and (7)
Dain Bosworth. The respective high and low sale prices of the WCB Common Stock
for the periods indicated are shown below. The prices below 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 1997, there were
approximately [3,800] holders of record of WCB Common Stock.
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------
Cash Cash Cash
Dividends Dividends Dividends
Period Market Price Declared Market Price Declared Market Price Declared
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $15.17 $11.67 $0.04 $10.40 $ 8.53 $0.03 $7.39 $6.55 $0.05
- ------------------------------------------------------------------------------------------------------
2nd Quarter $21.33 $13.92 $0.04 $10.40 $ 9.47 $0.03 $7.39 $6.79 $0.03
- ------------------------------------------------------------------------------------------------------
3rd Quarter $20.67 $16.92 $0.05 $10.67 $ 9.33 $0.04 $8.85 $6.91 $0.03
- ------------------------------------------------------------------------------------------------------
4th -- -- $0.05 $12.50 $ 10.67 $0.04 $9.33 $8.53 $0.03
Quarter(1)
- ------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Through December __, 1997.
6
<PAGE> 20
CENTENNIAL
No broker makes a market in the Centennial Common Stock, and the trades
that have occurred cannot be characterized as amounting to an established public
trading market. The Centennial Common Stock is traded by individuals on a
personal basis in private transactions 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. The data below include trades between
individual investors, as reported to Centennial as its own transfer agent. Due
to the limited information available, the following data may not accurately
reflect the actual market value of the Centennial Common Stock.
<TABLE>
<CAPTION>
Stock Prices CASH DIVIDENDS NUMBER OF
PERIOD HIGH LOW DECLARED SHARES TRADED
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1st Quarter 1995 $14.75 $14.75 .075 700
- ------------------------------------------------------------------------------------------------------
2nd Quarter 1995 $14.75 $14.75 .075 8,100
- ------------------------------------------------------------------------------------------------------
3rd Quarter 1995 $14.75 $14.75 .075 21,850
- ------------------------------------------------------------------------------------------------------
4th Quarter 1995 $14.75 $14.75 .075 1,302
- ------------------------------------------------------------------------------------------------------
1st Quarter 1996 $14.75 $14.75 .075 1,000
- ------------------------------------------------------------------------------------------------------
2nd Quarter 1996 $16.00 $16.00 .08 500
- ------------------------------------------------------------------------------------------------------
3rd Quarter 1996 $18.54 $16.50 .08 25,894
- ------------------------------------------------------------------------------------------------------
4th Quarter 1996 $18.54 $14.05 .08 1,542
- ------------------------------------------------------------------------------------------------------
1st Quarter 1997 $19.34 $16.00 .08 2,643
- ------------------------------------------------------------------------------------------------------
2nd Quarter 1997 $20.50 $19.70 .08 4,895
- ------------------------------------------------------------------------------------------------------
3rd Quarter 1997 $20.50 $19.70 .08 31,032
- ------------------------------------------------------------------------------------------------------
4th Quarter 1997(1) $20.00 $19.70 .08 7,468
- ------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Through December 15, 1997.
RECENT STOCK PRICE DATA
The following table sets forth the closing price per share of WCB Common
Stock, as reported on The Nasdaq Stock Market, and of Centennial Common Stock,
in addition to the equivalent per share price for Centennial Common Stock, on
October 29, 1997 (the last full trading day before the Merger Agreement's
execution was announced to the public) and on January __, 1998, the most recent
date for which it is practicable to obtain market price data before the printing
of this Prospectus/Joint Proxy Statement. Holders of Centennial Common Stock are
urged to obtain current market quotations for shares of WCB Common Stock.
<TABLE>
<CAPTION>
CLOSING PRICE PER SHARE: October 29, 1997 January __, 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
WCB Common Stock $18.50
- ----------------------------------------------------------------------------------------------
Centennial Common Stock(1) $20.50
- ----------------------------------------------------------------------------------------------
Centennial Equivalent Pro Forma(2) $28.31
- ----------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) There are no publicly available quotations of Centennial Common Stock, and
the market prices per share as of October 29, 1997 and January __, 1998,
respectively (quoted above), represent the purchase prices known to
Centennial's management to have been paid for the Centennial Common Stock in
the last resale transaction before those dates.
(2) Giving effect for the Merger and computed by multiplying the closing price
per share of WCB Common Stock on the date indicated by an Exchange Ratio
based on an aggregate of 1,666,244 shares of Centennial Common Stock
outstanding or subject to unexercised options and assuming Centennial does
not exceed its transaction expense limitation.
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The tables on the following pages set forth, for the respective periods
specified, selected historical consolidated financial data for each of WCB and
Centennial, and selected unaudited pro forma combined financial data giving
effect to the Merger on a pooling of interests basis. The pro forma combined
financial data are presented as though the Merger had been completed at the
beginning of the period set forth; however, the data is not necessarily
indicative of actual or future operating results or the financial position that
would have occurred or will occur upon the Merger's completion. The data has
been derived in part from, and should be read in conjunction with, the
consolidated financial statements and notes thereto and other
7
<PAGE> 21
financial information with respect to WCB and Centennial set forth elsewhere in
this Prospectus/Joint 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 Centennial
believe to be necessary for a fair presentation of the data have been included.
The September 30, 1997 ratios have been annualized where necessary. Dollar
amounts are in thousands, except per share data.
8
<PAGE> 22
WEST COAST BANCORP
The following table presents unaudited information concerning certain financial
information and ratios for WCB. The information is qualified in its entirety by
reference to more detailed financial information and financial statements
presented elsewhere in the Prospectus/Joint Proxy Statement. The September 30
ratios have been annualized where necessary.
<TABLE>
<CAPTION>
(Dollars in thousands, except (unaudited)
per share data) Nine Months Ended Years Ended December 31,
- ------------------------------- -------------------------------- -------------------------------------------------
9/97 9/96 1996 1995 1994
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Interest income ............... $ 48,905 $ 41,375 $ 56,624 $ 47,293 $ 38,918
Interest expense............... 17,530 14,495 19,834 17,429 11,506
-------------- -------------- -------------- -------------- -------------
Net interest income ......... 31,375 26,880 36,790 29,864 27,412
Provision for loan loss........ 1,731 1,555 2,175 944 777
-------------- -------------- -------------- -------------- -------------
Net interest income after
provision for loan losses...... 29,644 25,325 34,615 28,920 26,635
Noninterest income ............ 7,847 6,630 8,879 8,095 7,087
Noninterest expense............ 24,605 21,493 28,851 25,520 24,654
-------------- -------------- -------------- -------------- -------------
Income before income taxes .... 12,886 10,462 14,643 11,495 9,068
Provision for income taxes..... 4,183 3,384 4,841 3,246 2,752
-------------- -------------- -------------- -------------- -------------
Net income .................... $ 8,703 $ 7,078 $ 9,802 $ 8,249 $ 6,316
============== ============== ============== ============== =============
Per share data:
Primary earnings per share .. $ 0.84 $ 0.69 $ 0.96 $ 0.81 $ 0.66
Fully diluted earnings per .. 0.84 0.69 0.95 0.81 0.65
share
Cash dividends .............. 0.13 0.10 0.14 0.14 0.12
Period end book value ....... 7.44 6.42 6.68 5.93 4.92
Average common equivalent
shares outstanding ........ 10,360,030 10,259,334 10,320,123 10,181,255 9,642,546
Total assets .................. $ 808,923 $ 683,757 $ 712,343 $ 595,574 $ 515,750
Total deposits ................ 708,545 594,988 604,902 512,774 437,175
Total long-term borrowings .... 18,731 11,190 28,583 10,188 10,046
Net loans ..................... 565,341 491,346 528,755 395,319 319,698
Stockholders' equity .......... 75,266 64,188 67,145 58,981 48,884
Financial ratios:
Return on average assets .... 1.55% 1.49% 1.51% 1.49% 1.28%
Return on average equity .... 16.62% 15.55% 15.86% 15.66% 14.17%
Average equity to assets .... 9.33% 9.60% 9.51% 9.54% 9.04%
Dividend payout ratio ....... 15.02% 14.92% 14.80% 16.83% 18.13%
Efficiency ratio ............ 62.66% 64.10% 63.20% 67.25% 71.11%
Net loans to total assets ... 69.89% 71.86% 74.23% 66.38% 61.99%
Yield on earnings assets (1) 9.52% 9.73% 9.70% 9.71% 8.97%
Average rates paid .......... 4.15% 4.09% 4.09% 4.25% 3.16%
Net interest spread (1) ..... 5.37% 5.64% 5.61% 5.46% 5.81%
Interest rate margin (1) .... 6.17% 6.40% 6.38% 6.24% 6.41%
Nonperforming assets to
total assets ............. 0.41% 0.37% 0.28% 0.14% 0.11%
Allowance for loan loss to
total loans .............. 1.46% 1.29% 1.31% 1.39% 1.56%
Allowance for loan loss
to nonperforming assets .. 250.15% 255.71% 356.17% 679.15% 927.95%
<CAPTION>
Years Ended December 31,
------------------------------
1993 1992
------------- -------------
<S> <C> <C>
Interest income ............... $ 35,585 $ 34,469
Interest expense............... 10,647 12,242
------------- -------------
Net interest income ......... 24,938 22,227
Provision for loan loss........ 1,083 1,338
------------- -------------
Net interest income after
provision for loan losses...... 23,855 20,889
Noninterest income ............ 6,644 5,360
Noninterest expense............ 21,535 19,585
------------- -------------
Income before income taxes .... 8,964 6,664
Provision for income taxes..... 2,425 1,878
------------- -------------
Net income .................... $ 6,539 $ 4,786
============= =============
Per share data:
Primary earnings per share .. $ 0.71 $ 0.52
Fully diluted earnings per .. 0.71 0.52
share
Cash dividends .............. 0.12 0.09
Period end book value ....... 4.41 3.83
Average common equivalent
shares outstanding ........ 9,191,423 9,179,744
Total assets .................. $ 480,153 $ 424,370
Total deposits ................ 413,935 380,690
Total long-term borrowings .... 9,095 0
Net loans ..................... 284,184 249,143
Stockholders' equity .......... 40,342 34,962
Financial ratios:
Return on average assets .... 1.50% 1.19%
Return on average equity .... 18.02% 14.69%
Average equity to assets .... 8.31% 8.09%
Dividend payout ratio ....... 16.77% 17.78%
Efficiency ratio ............ 68.50% 71.01%
Net loans to total assets ... 59.19% 58.71%
Yield on earnings assets (1) 9.19% 9.69%
Average rates paid .......... 3.20% 3.96%
Net interest spread (1) ..... 5.99% 5.73%
Interest rate margin (1) .... 6.54% 6.35%
Nonperforming assets to
total assets ............. 0.44% 0.64%
Allowance for loan loss to
total loans .............. 1.53% 1.47%
Allowance for loan loss
to nonperforming assets .. 210.64% 137.67%
</TABLE>
(1) Interest earned on untaxable securities has been computed on a 34% tax
equivalent basis.
9
<PAGE> 23
CENTENNIAL HOLDINGS, LTD.
The following table presents unaudited information concerning certain financial
information and ratios for Centennial. Certain amounts presented in the table
below have been reclassified from Centennial's financial statements presented
elsewhere in this Prospectus/Joint Proxy Statement to conform with WCB's
financial statement presentation. The reclassifications had no effect on net
income or retained earnings as presented in Centennial's financial statements.
The information is qualified in its entirety by reference to more detailed
financial information and financial statements presented elsewhere in the
Prospectus/Proxy Statement. The September 30 ratios have been annualized where
necessary.
<TABLE>
<CAPTION>
(Dollars in thousands, except (unaudited)
per share data) Nine Months Ended Years Ended December 31,
- ------------------------------- ------------------------------ -----------------------------------------------
9/97 9/96 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Interest income ............... $ 16,237 $ 13,722 $ 18,962 $ 15,675 $ 10,934
Interest expense .............. 6,021 4,861 6,762 5,530 2,699
------------- ------------- ------------- ------------- -------------
Net interest income ......... 10,216 8,861 12,200 10,145 8,235
Provision for loan loss(1)
1,212 280 396 256 114
------------- ------------- ------------- ------------- -------------
Net interest income after
provision
for loan losses ............. 9,004 8,581 11,804 9,889 8,121
Noninterest income ............ 3,466 1,563 2,059 2,335 2,391
Noninterest expense
9,171 7,974 11,026 8,957 7,956
------------- ------------- ------------- ------------- -------------
Income before income taxes .... 3,299 2,170 2,837 3,267 2,556
Provision for income taxes
1,206 654 963 908 757
------------- ------------- ------------- ------------- -------------
Net income(1) ................. $ 2,093 $ 1,516 $ 1,874 $ 2,359 $ 1,799
============= ============= ============= ============= =============
Per share data:
Primary earnings per share .. $ 1.40 $ 1.09 $ 1.33 $ 1.81 $ 1.43
Fully diluted earnings per .. 1.26 0.96 1.18 1.59 1.26
share
Cash dividends .............. 0.22 0.21 0.28 0.26 0.26
Period end book value ....... 13.48 12.13 12.32 10.52 8.68
Average common equivalent
shares outstanding ........ 1,659,640 1,586,703 1,589,005 1,482,255 1,431,300
Total assets .................. $ 260,833 $ 212,725 $ 228,015 $ 171,083 $ 129,852
Total deposits ................ 237,408 183,056 199,305 151,611 116,544
Total long-term borrowings .... 290 6,846 6,234 3,287 0
Net loans ..................... 189,432 167,110 182,618 117,280 95,707
Stockholders' equity .......... 21,237 18,085 18,380 13,825 11,246
Financial ratios:
Return on average assets .... 1.20% 1.10% 0.98% 1.54% 1.52%
Return on average equity .... 14.35% 12.92% 11.43% 19.16% 17.06%
Average equity to assets .... 8.37% 8.54% 8.56% 8.06% 8.93%
Dividend payout ratio ....... 15.44% 19.04% 21.33% 14.55% 18.46%
Efficiency ratio ............ 66.97% 76.54% 77.37% 71.78% 74.84%
Net loans to total assets ... 72.63% 78.56% 80.09% 68.55% 73.70%
Yield on earnings assets (2) 10.38% 11.15% 11.00% 11.36% 10.50%
Average rates paid .......... 4.63% 4.72% 4.65% 4.98% 3.59%
Net interest spread (2) ..... 5.75% 6.43% 6.35% 6.38% 6.91%
Interest rate margin (2) .... 6.54% 7.21% 7.09% 7.36% 7.92%
Nonperforming assets to
total assets ............. 0.51% 0.33% 0.30% 0.14% 0.25%
Allowance for loan loss to
total loans .............. 0.83% 0.73% 0.79% 0.84% 0.81%
Allowance for loan loss
to nonperforming assets .. 117.88% 177.17% 215.58% 127.91% 240.25%
<CAPTION>
Years Ended December 31,
------------------------------
1993 1992
------------- -------------
<S> <C> <C>
Interest income ............... $ 10,063 $ 9,083
Interest expense .............. 2,247 2,280
------------- -------------
Net interest income ......... 7,816 6,803
Provision for loan loss(1)
113 208
------------- -------------
Net interest income after
provision
for loan losses ............. 7,703 6,595
Noninterest income ............ 2,174 1,069
Noninterest expense
6,906 5,380
------------- -------------
Income before income taxes .... 2,971 2,284
Provision for income taxes
1,007 639
------------- -------------
Net income(1) ................. $ 1,964 $ 1,645
============= =============
Per share data:
Primary earnings per share .. $ 1.63 $ 1.55
Fully diluted earnings per .. 1.51 1.40
share
Cash dividends .............. 0.17 0.16
Period end book value ....... 7.60 6.10
Average common equivalent
shares outstanding ........ 1,299,703 1,176,027
Total assets .................. $ 111,466 $ 88,323
Total deposits ................ 97,939 76,820
Total long-term borrowings .... 3,000 3,000
Net loans ..................... 71,975 53,951
Stockholders' equity .......... 9,228 7,347
Financial ratios:
Return on average assets .... 1.83% 2.05%
Return on average equity .... 24.20% 37.64%
Average equity to assets .... 7.56% 5.45%
Dividend payout ratio ....... 10.22% 10.53%
Efficiency ratio ............ 69.48% 68.21%
Net loans to total assets ... 64.57% 61.08%
Yield on earnings assets (2) 10.67% 12.77%
Average rates paid .......... 3.50% 4.34%
Net interest spread (2) ..... 7.17% 8.44%
Interest rate margin (2) .... 8.29% 9.58%
Nonperforming assets to
total assets ............. 0.00% 0.33%
Allowance for loan loss to
total loans .............. 1.02% 1.15%
Allowance for loan loss
to nonperforming assets .. 18523.40% 215.88%
</TABLE>
(1) See "CENTENNIAL'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Results of Operations - Nine months ended
September 30, 1997 and 1996 - Provision for Loan Losses; - Net Income."
(2) Interest earned on untaxable securities has been computed on a 34% tax
equivalent basis.
10
<PAGE> 24
PRO FORMA WEST COAST BANCORP AND CENTENNIAL HOLDINGS, LTD. CONSOLIDATED
(UNAUDITED)
The following table presents unaudited information concerning certain financial
information and ratios on a pro forma basis giving effect to the proposed Merger
on a pooling of interest accounting basis. The pro forma combined consolidated
information is presented as if the Merger had been consummated at the beginning
of each period presented. Any adjustments necessary to prepare this information
have been of a normal recurring nature. The information is qualified in its
entirety by reference to the more detailed financial information and financial
statements presented elsewhere in this Prospectus/Joint Proxy Statement. The
September 30 ratios have been annualized where necessary.
<TABLE>
<CAPTION>
(Dollars in thousands, except (unaudited)
per share data) Nine Months Ended Years Ended December 31,
- ------------------------------- -------------------------------- --------------------------------------------------
9/97 9/96 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Interest income ............... $ 65,142 $ 55,097 $ 75,586 $ 62,968 $ 49,852
Interest expense .............. 23,551 19,356 26,596 22,959 14,205
-------------- -------------- -------------- -------------- --------------
Net interest income ......... 41,591 35,741 48,990 40,009 35,647
Provision for loan loss(1)..... 2,943 1,835 2,571 1,200 891
-------------- -------------- -------------- -------------- --------------
Net interest income after
provision
for loan losses ............. 38,648 33,906 46,419 38,809 34,756
Noninterest income ............ 11,313 8,193 10,938 10,430 9,478
Noninterest expense
33,776 29,467 39,877 34,477 32,610
-------------- -------------- -------------- -------------- --------------
Income before income taxes .... 16,185 12,632 17,480 14,762 11,624
Provision for income taxes
5,389 4,038 5,804 4,154 3,509
-------------- -------------- -------------- -------------- --------------
Net income(1) ................. $ 10,796 $ 8,594 $ 11,676 $ 10,608 $ 8,115
============== ============== ============== ============== ==============
Per share data:
Primary earnings per share .. $ 0.86 $ 0.70 $ 0.94 $ 0.87 $ 0.70
Fully diluted earnings per
share ..................... 0.84 0.68 0.92 0.85 0.69
Cash dividends .............. 0.13 0.11 0.15 0.14 0.13
Period end book value ....... 7.71 6.70 6.93 6.08 5.05
Average common equivalent
shares outstanding ........ 12,899,279 12,686,990 12,751,301 12,449,105 11,832,435
Total assets .................. $ 1,069,752 $ 896,482 $ 940,358 $ 766,657 $ 645,602
Total deposits ................ 945,953 778,044 804,207 664,385 553,719
Total long-term borrowings .... 19,021 18,036 34,817 13,475 10,046
Net loans ..................... 754,773 658,456 711,373 512,599 415,405
Stockholders' equity .......... 96,499 82,273 85,525 72,806 60,130
Financial ratios:
Return on average assets .... 1.47% 1.41% 1.39% 1.51% 1.33%
Return on average equity .... 16.13% 15.02% 14.93% 16.32% 14.72%
Average equity to assets .... 9.10% 9.36% 9.29% 9.22% 9.02%
Dividend payout ratio ....... 15.13% 15.73% 15.92% 16.40% 18.34%
Efficiency ratio ............ 63.78% 67.05% 66.57% 68.37% 71.99%
Net loans to total assets ... 70.56% 73.45% 75.65% 66.86% 64.34%
Yield on earnings assets (2) 9.72% 10.04% 9.99% 10.07% 9.26%
Average rates paid .......... 4.26% 4.23% 4.22% 4.40% 3.24%
Net interest spread (2) ..... 5.46% 5.81% 5.77% 5.66% 6.02%
Interest rate margin (2) .... 6.25% 6.58% 6.54% 6.48% 6.70%
Nonperforming assets to
total assets ............. 0.44% 0.36% 0.28% 0.14% 0.13%
Allowance for loan loss to
total loans .............. 1.30% 1.15% 1.18% 1.26% 1.40%
Allowance for loan loss
to nonperforming assets .. 212.38% 238.66% 320.40% 397.32% 671.93%
<CAPTION>
Years Ended December 31,
--------------------------------
1993 1992
-------------- --------------
<S> <C> <C>
Interest income ............... $ 45,648 $ 43,552
Interest expense .............. 12,894 14,522
-------------- --------------
Net interest income ......... 32,754 29,030
Provision for loan loss(1)..... 1,196 1,546
-------------- --------------
Net interest income after
provision
for loan losses ............. 31,558 27,484
Noninterest income ............ 8,818 6,429
Noninterest expense
28,441 24,965
-------------- --------------
Income before income taxes .... 11,935 8,948
Provision for income taxes
3,432 2,517
-------------- --------------
Net income(1) ................. $ 8,503 $ 6,431
============== ==============
Per share data:
Primary earnings per share .. $ 0.77 $ 0.60
Fully diluted earnings per
share ..................... 0.76 0.59
Cash dividends .............. 0.12 0.09
Period end book value ....... 4.50 3.85
Average common equivalent
shares outstanding ........ 11,179,969 10,979,065
Total assets .................. $ 591,619 $ 512,693
Total deposits ................ 511,874 457,510
Total long-term borrowings .... 12,095 3,000
Net loans ..................... 356,159 303,094
Stockholders' equity .......... 49,570 42,309
Financial ratios:
Return on average assets .... 1.56% 1.33%
Return on average equity .... 19.15% 17.40%
Average equity to assets .... 8.16% 7.65%
Dividend payout ratio ....... 15.24% 15.96%
Efficiency ratio ............ 68.73% 70.39%
Net loans to total assets ... 60.20% 59.12%
Yield on earnings assets (2) 9.48% 10.26%
Average rates paid .......... 3.25% 4.02%
Net interest spread (2) ..... 6.22% 6.24%
Interest rate margin (2) .... 6.88% 6.94%
Nonperforming assets to
total assets ............. 0.35% 0.58%
Allowance for loan loss to
total loans .............. 1.42% 1.41%
Allowance for loan loss
to nonperforming assets .. 245.61% 145.29%
</TABLE>
(1) See "CENTENNIAL'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Results of Operations - Nine months ended
September 30, 1997 and 1996 - Provision for Loan Losses; - Net Income."
(2) Interest earned on untaxable securities has been computed on a 34% tax
equivalent basis.
11
<PAGE> 25
EQUIVALENT PER COMMON SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
WCB CENTENNIAL
-----------------------------------------------------
Pro Forma
Combined Pro Forma
Historical Corporation Historical Equivalent(4)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Book Value Per Share (1) (3)
With exchange ratio at 1.53:
September 30, 1997 $7.44 $7.71 $13.48 $11.80
December 31, 1996 $6.68 $6.93 $12.32 $10.60
December 31, 1995 $5.93 $6.08 $10.52 $9.30
December 31, 1994 $4.92 $5.05 $8.68 $7.73
------------------------------------------------------------------------------------------------
Fully diluted earnings per share (2)(3)
for the periods ending
With exchange ratio at 1.53:
September 30, 1997 $0.84 $0.84 $1.26 $1.29
December 31, 1996 $0.95 $0.92 $1.18 $1.41
December 31, 1995 $0.81 $0.85 $1.59 $1.30
December 31, 1994 $0.65 $0.69 $1.26 $1.06
------------------------------------------------------------------------------------------------
Cash dividends declared per share (3)
for the periods ended
With exchange ratio at 1.53:
September 30, 1997 $0.13 $0.13 $0.22 $0.20
December 31, 1996 $0.14 $0.15 $0.28 $0.23
December 31, 1995 $0.14 $0.14 $0.26 $0.21
December 31, 1994 $0.12 $0.13 $0.26 $0.20
------------------------------------------------------------------------------------------------
</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) Fully diluted earnings per share is calculated by dividing total actual
historical and pro forma net income for the periods ended by the actual
historical and pro forma weighted average number of common equivalent
shares outstanding for the period indicated.
(3) All per share amounts have been restated to retroactively reflect stock
dividends and stock splits previously reported.
(4) Calculated by multiplying the pro forma combined corporation by the exchange
ratio.
12
<PAGE> 26
SPECIAL MEETING OF CENTENNIAL STOCKHOLDERS
DATE, TIME, PLACE, AND PURPOSE
The Centennial Meeting will be held on February 18, 1998, at 2:00 p.m.
local time, at The Olympia Country & Golf Club, 3636 Country Club Drive N.W.,
Olympia, Washington. The purposes of the Centennial Meeting are as follows: (1)
to consider and vote upon approval of the Merger Agreement, and (2) to act upon
other matters, if any, that may properly come before the Centennial Meeting.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The Centennial Board has fixed 5:00 p.m. on December 31, 1997 as the
Centennial Record Date for determining the holders of shares of Centennial
Common Stock entitled to notice of and to vote at the Centennial Meeting. At the
close of business on the Centennial Record Date, there were ______ shares of
Centennial Common Stock issued and outstanding held by approximately ___ holders
of record. Holders of record of Centennial Common Stock on the Centennial Record
Date are entitled to one vote per share, and are also entitled to exercise
dissenters' rights if certain procedures are followed. See "THE MERGER --
Dissenters' Rights of Appraisal" and Appendix C.
VOTE REQUIRED
The affirmative vote of two-thirds of all shares of Centennial Common
Stock outstanding on the Centennial Record Date is required to approve the
Merger Agreement. Centennial's shareholders are entitled to one vote for each
share of Centennial Common Stock held. The presence of a majority of the
outstanding shares of Centennial Common Stock in person or by proxy is necessary
to constitute a quorum of shareholders for the Centennial 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 Centennial 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 Centennial Record Date, directors and executive officers of
Centennial and the Bank, and their affiliates, owned and were entitled to vote
______ shares at the Centennial Meeting, representing approximately _____% of
the outstanding shares of Centennial Common Stock. See "INFORMATION CONCERNING
CENTENNIAL -- Security Ownership of Certain Beneficial Owners and Management."
Each director of Centennial and the Bank has agreed to vote all shares of
Centennial Common Stock held or controlled by him or her (as of the Centennial
Record Date, a total of [__________] shares, or approximately [_____] of the
shares outstanding), 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
Centennial 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 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 Centennial, 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. Shareholders are entitled to one vote for each share of Centennial
Common Stock held on the Centennial Record Date.
The proxy for the Centennial Meeting is being solicited on behalf of the
Centennial Board. Centennial 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 Centennial may solicit
proxies personally. Centennial is not expected to pay any compensation for the
13
<PAGE> 27
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.
SPECIAL MEETING OF WCB STOCKHOLDERS
DATE, TIME, PLACE AND PURPOSE
The WCB Meeting will be held on February 20, 1998, at 2:00 p.m. local
time, at The Crowne Plaza Hotel, 14811 Kruse Oaks Drive, Lake Oswego, Oregon.
The purposes of the WCB Meeting are as follows: (1) to consider and vote upon
approval of the Merger Agreement, and (2) to act upon other matters, if any,
which properly come before the WCB Meeting.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The WCB Board has fixed the close of business on December 31, 1997 as
the WCB Record Date for determining the holders of shares of WCB Common Stock
entitled to notice of and to vote at the WCB Meeting. At the close of business
on the WCB Record Date, there were ________ shares of WCB Common Stock issued
and outstanding held by approximately ___ holders of record. Holders of record
of WCB Common Stock on the Record Date are entitled to one vote per share.
VOTE REQUIRED
The affirmative vote of holders of a majority of all shares of WCB
Common Stock outstanding on the WCB Record Date is required to approve the
Merger Agreement. WCB's shareholders are entitled to one vote for each share of
WCB Common Stock held. The presence of a majority of the outstanding shares of
WCB Common Stock in person or by proxy is necessary to constitute a quorum of
shareholders for the WCB 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) will be counted in determining the shares
present at the WCB 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 WCB
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 WCB Record Date, WCB's directors and executive officers and
their affiliates owned and were entitled to vote ________ shares at the WCB
Meeting, representing approximately ___% of the outstanding shares of WCB Common
Stock on the WCB Record Date. See WCB 1997 Proxy, under "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
VOTING, SOLICITATION, AND REVOCATION OF PROXIES
If the enclosed proxy is duly executed and received in time for the WCB
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 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 WCB, 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. Shareholders are entitled to one vote for each share of WCB Common Stock
held on the WCB Record Date.
The proxy for the WCB Meeting is being solicited on behalf of the WCB
Board. WCB 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 WCB may solicit proxies personally. WCB 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.
14
<PAGE> 28
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER
Since its formation in 1974, and in particular since Chairman and CEO
Thomas Healy, assumed control in 1985, the Bank has recorded earnings gains and
strong asset growth in its Thurston, Pierce, Mason and Lewis Counties markets.
Prior to commencement of negotiations with WCB regarding a proposed acquisition
of Centennial, Centennial's Board and management had not actively pursued a
possible sale or merger of Centennial, but rather concentrated on realizing
Centennial's potential growth. During the past four years, Centennial received
several unsolicited general inquiries from other financial institutions
concerning a possible merger or acquisition of Centennial. Although no formal
proposals were made, these inquiries gave the Centennial Board and management an
opportunity to reassess Centennial and its success to date, and to consider the
circumstances under which the Centennial Board might be interested and/or
required to consider a merger possibility. The Centennial Board considered the
potential increase in profitability that could be realized by sharing operating
costs such as personnel, administration, training, regulatory compliance, data
processing, and loan review with a larger organization. Moreover, where the Bank
had been successful in participating out loans exceeding the Bank's lending
limits, additional revenue for a combined organization could be realized through
participation with one or more sister banks and retaining the interest income
within the combined organization. The Centennial Board believed the potential
cost savings and enhanced revenue could result in an enhancement of shareholder
value. In addition, the Centennial Board believed that a merger with a larger
company could potentially provide Centennial shareholders an immediate premium
and increased liquidity for their stock.
In October 1995, Rodney B. Tibbatts, WCB's Executive Vice President and
Corporate Development Officer, contacted Mr. Healy, Chairman and CEO of both
Centennial and the Bank, to arrange a meeting in Portland. The purpose of the
meeting was to gain insight into Centennial and the Bank's strategic plans for
the future, along with informing Mr. Healy of WCB's mission and strategic
intent. Mr. Tibbatts indicated that WCB desired to have a presence in the
southern Puget Sound area of Washington and believed Centennial could be a
favorable partner to aid WCB in achieving this goal. Mr. Healy expressed
interest in WCB's multi-bank structure and philosophy of operation. Several
times over the next few months Mr. Tibbatts and Mr. Healy further discussed the
possibility of joining forces at a future date. The Centennial Board believed
that WCB's indication of interest presented an opportunity to potentially
achieve a mutually beneficial business combination. The Centennial Board
decided, therefore, to pursue further discussions with WCB. Accordingly, in
August of 1996, Messrs. Healy, Yerrington, Snyder, and Bayley (all Centennial
directors), met with Mr. Tibbatts, and Victor L. Bartruff, WCB President & CEO,
and with Lester Green and Gary Putnam, then Chairman and Vice Chairman,
respectively, of the WCB Board. These parties met in order to share the
philosophies of the two organizations in an effort to determine if further
discussions would be productive. Although both parties, from these preliminary
discussions, indicated interest in continuing discussions, it was mutually
agreed other more urgent business matters required their immediate attention.
Each of WCB and Centennial had acquired a bank in mid-1996 and the subsequent
integration of the newly acquired banks necessitated delaying any substantive
discussions regarding a potential combination of WCB and Centennial until later.
In November and December of 1996, Mr. Tibbatts met with Mr. Healy and
Mr. Yerrington periodically to update each other on their respective companies,
and Mr. Healy expressed a desire to re-establish merger discussions. Mr. Healy
indicated Centennial should have its operating budget for 1997 and its audited
financial statements for 1996 by late January. During February and March,
additional discussions between the parties were held and reported on at their
respective Board meetings.
Feeling that a combination of the two institutions would be consistent
with the objectives of both parties, on April 10, 1997, WCB and Centennial
signed a Confidentiality Agreement. The Centennial Board had authorized Mr.
Healy to proceed with negotiations of a mutually acceptable term sheet and
authorized the retention of Sheshunoff as an investment advisor in the matter.
A preliminary Term Sheet was subsequently prepared and negotiated, and
was approved by the WCB Board on April 24, 1997. WCB and Centennial commenced
their respective due diligence examinations in May of 1997. Subsequent
discussions and negotiations did not result in mutually acceptable terms, so
negotiations were suspended for several months.
On September 8, 1997, a meeting was held in Kelso, Washington involving
Mr. Healy, representing the Centennial Board, Messrs. Bartruff and Mr. Putnam of
WCB's Board and 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 Centennial. WCB and
Centennial then updated their detailed due diligence reviews of each other's
assets,
15
<PAGE> 29
business and financial conditions, consulting on the proposed transaction with
their respective independent public accountants, legal counsel, investment
advisors, in the case of Centennial, and Board members. Also, the WCB
negotiating team of Messrs. Bartruff, Putnam, and Kalkofen met on several
occasions with Mr. Healy and, on occasion, with other Centennial directors.
After reaching a consensus on a number of basic issues involving a combination
of the companies, the Centennial Board met on September 24, 1997 and the WCB
Board met on September 25, 1997 to consider approval of the basic terms of the
proposed Merger. Both Boards approved proceeding with formal negotiations toward
a definitive merger agreement.
At a special meeting of the Centennial Board held on October 29, 1997,
and at the regular meeting of the WCB Board held on October 30, 1997, the
proposed combination and the Merger Agreement were considered by each Board in
detail. The WCB Board, along with its counsel, Graham & Dunn, reviewed the
Merger Agreement and its exhibits. Also, the WCB Board reviewed a report by its
investment advisor, Dain Bosworth, regarding the fairness of the transaction
from a financial point of view. 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 Merger Agreement and its submission to WCB's
shareholders for approval. The Centennial Board, with advice from its legal
counsel, Davis Wright Tremaine LLP, reviewed the Merger Agreement and considered
the potential benefit of the proposed Merger to Centennial 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 Centennial's financial
advisor, Sheshunoff. At this meeting, the Centennial Board unanimously
determined that the proposed Merger was fair to and in the best interest of
Centennial and its shareholders, and therefore, approved the Merger Agreement
and its submission to Centennial's shareholders for approval. At each meeting,
the Merger, the Exchange Ratio, and related transactions were unanimously
approved by all members of the respective Boards present, subject to (1)
approval of the Centennial and WCB shareholders, (2) receipt of all necessary
Regulatory Approvals, and (3) the conditions set forth in the Merger Agreement.
When the Purchase Price was negotiated, in mid-September 1997, WCB
Common Stock was trading at $17-19 per share, adjusted for the subsequent
3-for-2 stock split of WCB Common Stock.
REASONS FOR THE MERGER - GENERAL
WCB and Centennial 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 pursue
this strategy after the Merger and intends to operate the Bank, along with the
Bank Subsidiaries and West Coast Trust Company, Inc., as separate subsidiaries
with local management and directors that are involved in, and knowledgeable
about, the respective markets of such subsidiaries.
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
headquartered in Olympia, Washington, and its primary market areas are Thurston,
Pierce, Lewis, and Mason Counties in Washington. This market area extends from
the southern Puget Sound (southern Pierce County) area south along Interstate 5
to include the communities of Centralia and Chehalis. The Bank's primary lending
focus is on small to medium-sized businesses, residential developers, and
consumer households, which is similar to the lending practices of WCB's existing
bank subsidiaries.
WCB offers a range of non-traditional products, such as annuities,
mutual funds, and brokerage services. Centennial offers similar products to its
customers. In addition, WCB through its trust subsidiary, West Coast Trust,
offers trust and employee benefit plans which are not presently offered by
Centennial. It is 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.
The Merger is also expected to provide some benefits to the parties
through increased efficiencies and other savings, particularly in areas of
strategic planning, data processing, loan participation, and marketing.
Moreover, having banking offices in the southern Puget Sound area is expected to
enable the parties to more effectively pursue their strategy of
16
<PAGE> 30
providing community-style banking services to small and medium-sized businesses
throughout the twelve counties that will be served by WCB.
REASONS FOR THE MERGER - CENTENNIAL
The Centennial Board believes that the terms of the Merger Agreement,
which are the product of arms-length negotiations between representatives of
Centennial and WCB, are fair and in the best interests of Centennial and its
shareholders. In the course of reaching its determination, the Centennial Board
consulted with legal counsel regarding the legal duties of the Centennial Board,
as they relate to the Merger, the terms of the Merger Agreement and the issues
related thereto. The Centennial Board also consulted with its accountants
regarding certain financial, tax and accounting aspects of the transaction and
with its financial advisor regarding the financial aspects and fairness of the
transaction. Finally, the Centennial Board consulted with senior management
regarding, among other things, operational and other due diligence matters.
At a meeting of the Centennial Board held on October 29, 1997, the
Centennial Board unanimously determined that the Merger and Merger Agreement are
fair to, and in the best interests of, Centennial and its shareholders, and
recommended the Merger Agreement be submitted to the shareholders of Centennial
for approval. In addition to the overall objectives of enhancing shareholder
value and providing high quality community banking services in its market area,
the Centennial Board considered the fairness opinion of Sheshunoff, the report
of its accountants and other consultants, including legal counsel, and a number
of additional factors, including the following:
- The value of WCB's Common Stock being issued in the Merger
represented significant enhancement of shareholder value to
Centennial's shareholders;
- WCB's stock is relatively actively traded, thus creating a more
marketable and liquid security for Centennial's shareholders;
- The Merger is structured as a tax-free exchange of stock,
permitting Centennial shareholders the opportunity to continue
to invest in a regional community banking organization without
immediate adverse tax consequences;
- WCB's financial condition, businesses and prospects, and the
economic prospects of the markets served by both parties, appear
to be attractive;
- The combined organizations would enable the Bank to offer trust
services to its customers and larger and more diverse loans due
to higher lending limits and improved balance sheet liquidity;
- The combined organization is expected to provide increased
opportunities to the Bank's employees; and
- The structure of the Merger would allow the Bank to retain its
name and local identity, as well as to keep its Board and
management team substantially intact, thus allowing the Bank to
continue to provide responsive, quality, personalized community
banking services to its customers.
The Centennial Board did not ascribe relative or specific weights to any factor
in its evaluation of the Merger, but instead took all of these factors into
consideration.
OPINION OF CENTENNIAL FINANCIAL ADVISOR
Sheshunoff has delivered a written opinion ("Sheshunoff Opinion") to the
Centennial Board to the effect that, as of the date of this Prospectus/Joint
Proxy Statement, the consideration to be received by Centennial shareholders
under the terms of the Merger Agreement is fair to such shareholders from a
financial standpoint. The Purchase Price and Exchange Ratio have been determined
by Centennial and WCB through negotiations. The Sheshunoff 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 Centennial shareholder
as to how such shareholder should vote at the Centennial Meeting.
Centennial retained Sheshunoff as its exclusive financial advisor in
connection with the Merger under the terms of an engagement letter dated April
9, 1997 ("Engagement Letter"). Sheshunoff is a regionally recognized investment
banking firm
17
<PAGE> 31
that is regularly engaged in the valuation of businesses and securities in
connection with mergers and acquisitions. Centennial retained Sheshunoff based
upon its qualifications, expertise and reputation to provide its opinion of
fairness of the Merger Consideration to be received by Centennial's shareholders
in connection with the Merger and related matters. As part of its investment
banking business, Sheshunoff is regularly engaged in the valuation of securities
in connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. The Centennial Board decided to retain Sheshunoff based on
its experience as a financial advisor in mergers and acquisitions of financial
institutions, and its knowledge of financial institutions. On October 30, 1997,
Sheshunoff rendered its written opinion that, as of such date, the consideration
to be received in the Merger Agreement was fair, from a financial point of view,
to the holders of Centennial's Common Stock.
The full text of the Sheshunoff Opinion, which sets forth, among other
things, assumptions made, procedures followed, matters considered, and
limitations on the review undertaken, is attached at Appendix C. Centennial's
shareholders are urged to read the Sheshunoff Opinion carefully and in its
entirety. The Sheshunoff Opinion is addressed to Centennial's Board and does not
constitute a recommendation to any shareholder of Centennial as to how such
shareholder should vote at the Centennial Meeting.
In connection with its opinion, Sheshunoff: (1) analyzed certain
internal financial statements and other financial and operating data concerning
Centennial prepared by the management of Centennial; (2) analyzed certain
financial information, both audited and unaudited, of Centennial including those
included in their audited financial statements for the two years ended December
31, 1995 and December 31, 1996 and quarterly call reports for the periods ended
March 31, 1997 and June 30, 1997; (3) analyzed certain publicly available
financial statements, both audited and unaudited, of WCB, including those
included in WCB's Annual Reports on Form 10-K for the two years ended December
31, 1995 and December 31, 1996, the annual report to shareholders for the year
ended December 31, 1996 and WCB's quarterly Reports on Form 10-Q for the six
months ended June 30, 1997; (4) analyzed certain internal confidential financial
projections of Centennial and WCB prepared by the respective management of
Centennial and WCB; (5) discussed certain aspects of the past and current
business operations, financial condition and future prospects of Centennial and
WCB with certain members of their respective management; (6) reviewed reported
market prices and historical trading activity of WCB's Common Stock; (7)
compared the financial performance of WCB and the prices and trading activity of
WCB's Common Stock with that of certain other comparable publicly traded
companies and their securities; (8) reviewed certain security analysis reports
of WCB's Common Stock prepared by various investment banking firms; (9) reviewed
the financial terms, to the extent publicly available, of certain comparable
precedent transactions; (10) reviewed the Merger Agreement; (11) reviewed and
discussed with WCB senior management certain internal analyses and forecasts of
certain cost savings, operating efficiencies, revenue effects and financial
synergies expected by WCB to be achieved as a result of the Merger; and (12)
performed such other analyses as it has deemed appropriate.
In connection with its review, Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available, and Sheshunoff did not assume any responsibility for
independent verification of such information. With respect to the internal
confidential financial projections, Sheshunoff assumed that such projections
were reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the future financial performance of Centennial and
did not independently verify the validity of such assumptions. However, the
assumptions used to make projections of future performance are not certain to
become reality. If the projections do not become reality, actual performance may
vary substantially from the projected results. Sheshunoff did not make any
independent evaluation or appraisal of the assets or liabilities of Centennial,
nor was Sheshunoff furnished with any such appraisals. Sheshunoff did not
examine any individual loan files of Centennial. Sheshunoff is not an expert in
the evaluation of loan portfolios for the purposes of assessing the adequacy of
the allowance for losses with respect thereto and has assumed that such
allowances for each of the companies are in the aggregate, adequate to cover
such losses.
With respect to WCB, Sheshunoff relied solely upon publicly available
data regarding WCB's financial condition and performance. Sheshunoff discussed
this publicly available information with the management of WCB. Sheshunoff did
not conduct any independent evaluation or appraisal of the assets, liabilities
or business prospects of WCB, was not furnished with any evaluations or
appraisals, and did not review any individual credit files of WCB. Sheshunoff is
not an expert in the evaluation of loan portfolios for the purposes of assessing
the adequacy of the allowance for losses with respect thereto and has assumed
that such allowances for each of the companies are in the aggregate, adequate to
cover such losses.
The Sheshunoff Opinion is necessarily based on economic, market and
other conditions as in effect on, and the information made available to
Sheshunoff as of October 29, 1997.
18
<PAGE> 32
In connection with rendering its opinion, Sheshunoff performed a variety
of financial analyses. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to partial analysis
of summary description. Moreover, the evaluation of the fairness, from a
financial point of view, of the consideration to be received by the shareholders
of Centennial is to some extent a subjective one based on the experience and
judgment of Sheshunoff and not merely the result of mathematical analysis of
financial data. Accordingly, notwithstanding the separate factors summarized
below, Sheshunoff believes that its analyses must be considered as a whole and
that selecting portions of its analyses and of the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinion. The ranges of valuations
resulting from any particular analysis described below should not be taken to be
Sheshunoff's view of the actual value of Centennial.
In performing its analyses, Sheshunoff made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of Centennial. The analyses
performed by Sheshunoff are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. The analyses do not purport to be appraisals or to reflect the
prices at which a company might actually be sold. In addition, Sheshunoff's
analyses should not be viewed as determinative of the Centennial Board's opinion
with respect to the value of Centennial.
The following is a summary of the analyses performed by Sheshunoff in
connection with its opinion dated as of October 30, 1997:
Analysis of Selected Transactions. Sheshunoff performed an analysis of
premiums paid in selected pending or recently completed acquisitions of banking
organizations nationwide and in the western United States, with comparable
characteristics to the Centennial and WCB transaction. Two sets of comparable
transactions were analyzed to ensure a thorough comparison.
The first set of comparable transactions (the "regional transactions")
was comprised to reflect the profitability, asset size and regional location of
Centennial. The regional transactions specifically consisted of five mergers and
acquisitions of banks located in the western United States with total assets
between $150 million and $400 million and a return on average equity between
9.0% and 15.0% which sold between October 29, 1996 and October 29, 1997. The
analysis yielded multiples of the regional transactions' purchase price relative
to: (1) book value ranging from 1.76 times to 2.35 times with an average of 2.01
times and a median of 1.96 times (compared with the multiple implied in the
Merger, based on the closing price of the WCB Common Stock at October 29, 1997,
of 2.44 times June 30, 1997 book value); (2) last 12 months earnings ranging
from 16.2 times to 22.9 times with an average of 19.3 times and a median of 19.0
times (compared with the multiple implied in the Merger, based on the closing
price of the WCB Common Stock at October 29, of 22.2 times last 12 months
earnings as of June 30, 1997); (3) total assets ranging between 16.1% and 23.4%
with an average of 17.9% and a median of 16.5% (compared with the multiple
implied in the Merger, based on the closing price of the WCB Common Stock at
October 29, 1997, of 20.2% of June 30, 1997 total assets); and (4) total
deposits ranging from 18.0% to 27.1% with an average of 20.0% and a median of
18.0% (compared with the multiple implied in the Merger, based on the closing
price of the WCB Common Stock at October 29, 1997, of 22.4% of deposits as of
June 30, 1997).
The second set of comparable transactions (the "national transactions")
was comprised to reflect a more narrowly defined group of comparable
transactions based on the profitability, asset size and type of consideration
received (i.e. stock, cash or mixture). The national transactions specifically
consisted of nine mergers and acquisitions of banks in the United States with
total assets between $200 million and $300 million with a return on average
equity between 10% and 15% which sold for common stock between October 29, 1996
and October 29, 1997. The analysis yielded multiples of the transactions'
purchase price relative to: (1) book value ranging from 1.74 times to 3.45 times
with an average of 2.33 times and a median of 2.19 times (compared with the
multiple implied in the Merger, based on the closing price of the WCB Common
Stock at October 29, 1997, of 2.44 times June 30, 1997 book value); (2) last 12
months earnings ranging from 14.0 times to 29.1 times with an average of 18.9
times and a median of 17.1 times (compared with the multiple implied in the
Merger, based on the closing price of the WCB Common Stock at October 29, 1997,
of 22.2 times last 12 months earnings as of June 30, 1997); (3) total assets
ranging between 15.3% and 32.5% with an average of 20.9% and a median of 21.3%
(compared with the multiple implied in the Merger, based on the closing price of
the WCB Common Stock at October 29, 1997, of 20.2% of June 30, 1997 total
assets); and (4) total deposits ranging from 16.8% to 39.2% with an average of
24.9% and a median of 24.2% (compared with the multiple implied in the Merger of
22.4% of deposits as of June 30, 1997).
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<PAGE> 33
Discounted Cash Flow Analysis. Using discounted cash flow analysis,
Sheshunoff estimated the present value of the future stream of after-tax cash
flow that Centennial could produce through the year 2001, under various
circumstances, assuming that Centennial performed in accordance with the
earnings/return projections of management. Sheshunoff estimated the terminal
value for Centennial at the end of the period by applying multiples of earnings
ranging from 14 times to 22 times and then discounting the cash flow streams,
dividends paid to the shareholders (assuming all earnings in excess of that
required to maintain a tangible equity to tangible asset percentage of 7.0% are
paid out in dividends) and terminal value using discount rates ranging from 12%
to 20% chosen to reflect different assumptions regarding the required rates of
return of Centennial and the inherent risk surrounding the underlying
projections. This discounted cash flow analysis indicated a range of $20.50 per
share to $42.15 per share based on 1,593,344 fully diluted shares outstanding as
of October 29, 1997. This compares favorably to the value of the Merger
consideration for Centennial of approximately $27.19 per share, based on the
closing price of WCB Common Stock at October 29, 1997.
Sheshunoff also performed a cash flow analysis using an estimated
terminal value for Centennial at the end of the period by applying multiples of
book value ranging from 1.75 times to 2.75 times and then discounting the cash
flow streams, dividends paid to the shareholders (assuming all earnings in
excess of that required to maintain a tangible equity to tangible asset
percentage of 7.0% are paid out in dividends) and terminal value using discount
rates ranging from 12% to 20% chosen to reflect different assumptions regarding
the required rates of return of Centennial and the inherent risk surrounding the
underlying projections. This discounted cash flow analysis indicated a range of
$17.19 per share to $34.79 per share. This compares favorably to the value of
the Merger Consideration for Centennial of approximately $27.19 per share, based
on the closing price of WCB Common Stock at October 29, 1997.
Comparable Company Analysis. Sheshunoff compared selected balance sheet
data, asset quality, capitalization and profitability measures and market
statistics using financial data at or for the twelve months ended June 30, 1997
and market data as of October 28, 1997 for WCB to a group of selected western
bank holding companies which Sheshunoff deemed to be relevant.
The group of selected western bank holding companies ("Comparable
Composite") included Columbia Banking System, Inc., California State Bank,
Greater Bay Bancorp, Pacific Capital Bancorp, Pacific Bank N.A., Sierra West
Bancorp, TriCo Bancshares and Western Bancorp. This comparison, among other
things, showed that: (1) WCB's equity to asset percentage was 9.5%, compared to
an average of 9.6% and a median of 9.5% for the Comparable Composite; (2) for
the last twelve months ended June 30, 1997, WCB's return on average equity was
16.4%, compared to an average of 10.5% and a median of 10.5% for the Comparable
Composite; (3) for the last twelve months ended June 30, 1997, WCB's return on
average assets was 1.53%, compared to an average of 1.01% and a median of 1.07%
for the Comparable Composite; (4) as of June 30, 1997, WCB's nonperforming
assets to total assets ratio was 0.32%, compared to an average of 0.82% and a
median of 0.49% for the Comparable Composite; (5) as of October 28, 1997, WCB's
price per share to June 30, 1997 book value per share was 2.71 times, compared
to an average of 2.26 times and median of 2.20 times for the Comparable
Composite; and (6) as of October 28, 1997, WCB's price per share to last twelve
months earnings per share as of June 30, 1997 was 18.4 times, compared to an
average of 29.7 times and median of 20.7 times for the Comparable Composite.
Sheshunoff also compared selected stock market results of WCB to the
publicly available corresponding data of other composites which Sheshunoff
deemed to be relevant, including SNL Securities, L.P.'s ("SNL") index of all
publicly traded banks, SNL's index of all publicly traded banks with total
assets between $500 million and $1 billion and the S&P 500. Results from
indexing the S&P 500, SNL's index of all publicly traded banks, SNL's index of
all publicly traded banks with total assets between $500 million and $1 billion,
the Comparable Composite and WCB's Common Stock from March 31, 1997 to September
30, 1997 revealed similar relationships in price movements of WCB's Common Stock
to the price movements of the Comparable Composite SNL's index of all publicly
traded banks. The analysis revealed that percentage price movements of WCB's
stock were greater than the price movements of each of the other indices.
Sheshunoff discussed certain aspects of the past and current business
operations, financial condition and future prospects of WCB with certain members
of the management of WCB. Sheshunoff also reviewed certain security analysis
reports of WCB prepared by an investment banking firm. Sheshunoff expresses no
opinion as to the future market price of WCB common stock.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to Centennial or the Merger. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of Centennial and other factors that could affect the public
trading value of the companies to which they are being compared. Mathematical
analysis (such as
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<PAGE> 34
determining the average or median) is not in itself a meaningful method of using
comparable transaction data or comparable company data.
Centennial has agreed to pay Sheshunoff $25,000 for merger and
acquisition advisory services in addition to a $50,000 fee upon issuance of a
fairness opinion. Centennial has also agreed to indemnify and hold harmless
Sheshunoff and its officers and employees against certain liabilities in
connection with its services under the engagement letter, except for liabilities
resulting from the negligence of Sheshunoff.
On October 29, 1997, Sheshunoff attended the special meeting of the
Centennial Board and issued its opinion to the Board that the terms of the
Merger as provided in the Merger Agreement are fair, from a financial view
point, to Centennial and its shareholders. THE FULL TEXT OF THE SHESHUNOFF
OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITS
ON ITS REVIEW, IS ATTACHED AS APPENDIX C. THE SUMMARY OF THE SHESHUNOFF OPINION
IN THIS PROSPECTUS/JOINT PROXY STATEMENT IS ENTIRELY QUALIFIED BY REFERENCE TO
THE FULL TEXT OF THE OPINION. CENTENNIAL SHAREHOLDERS ARE URGED TO READ THE
ENTIRE SHESHUNOFF OPINION.
RECOMMENDATION OF THE CENTENNIAL BOARD
THE CENTENNIAL BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF
CENTENNIAL VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
REASONS FOR THE MERGER - WCB
At its meeting on October 30, 1997, 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.
WCB determined that the Merger would advance WCB's strategic plan
because of its belief that the Merger will combine two institutions with
complementary businesses and strategies, thereby creating a stronger combined
organization with greater size, flexibility, efficiency, and profitability. The
WCB Board believes that (1) each institution is currently well managed, (2) the
companies have compatible management philosophies and strategic focuses, (3)
each institution will contribute complementary business strengths resulting in a
well meshed diversified institution, and (4) 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 to adopt the Merger Agreement and
recommend its approval by the WCB shareholders, the WCB Board considered a
variety of factors, although it did not assign any relative or specific weights
to the factors considered. The factors considered included the following:
- The WCB Board's knowledge and review of the financial condition,
results of operation, and business operations and prospects of
Centennial;
- The WCB Board's analysis of the banking industry environment,
including the rapid consolidation and increasing regional
competition in the banking and financial services industries and
the need to respond proactively to industry trends;
- The WCB Board review based in part on a presentation by WCB
management regarding (1) its due diligence review of Centennial,
including the business, operations, earnings, asset quality,
financial condition and corporate culture of Centennial on a
historical, prospective and pro forma basis, (2) product mix,
the compatibility of corporate roles and the respective
contributions the parties would bring to a combined
organization, and (3) the expanded opportunities for revenue
enhancement and cost savings from synergies that are expected to
result from the Merger;
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<PAGE> 35
- WCB's primary long-term strategy of seeking to expand and
further diversify its operations along the Interstate 5
corridor, including in the Puget Sound area in Washington;
- The terms of the Merger Agreement and other documents executed
in connection with the Merger;
- The current and prospective economic environment facing
financial institutions generally and WCB in particular;
- The WCB Board's evaluation of the financial terms of the Merger
and their effect on the shareholders of WCB and the WCB Board's
belief that such terms are fair to WCB and its shareholders,
based in part on Dain Bosworth's opinion as to the fairness to
WCB shareholders of the consideration to be paid by WCB in the
Merger (see "BACKGROUND OF AND REASONS FOR THE MERGER - Opinion
of WCB Financial Advisor");
- The expectation that the merger will be a tax-free transaction
to WCB and will qualify for pooling-of-interests accounting
treatment (see "THE MERGER -- Federal Income Tax Consequences of
the Merger; Accounting Treating of the Merger"); and
- The WCB Board's belief, after consultation with its legal
counsel, that the required regulatory approvals could be
obtained to consummate the Merger.
The foregoing discussion of the information and factors considered by
the WCB Board is not intended to be exhaustive but is believed to encompass all
material factors considered by the WCB Board. On the basis of the foregoing
factors, the WCB Board concluded that the terms of the Merger are fair to and in
the best interests of WCB and its shareholders.
OPINION OF WCB FINANCIAL ADVISOR
WCB has retained the investment firm of Dain Bosworth to act as its
financial advisor in connection with the Merger. Dain Bosworth attended the
meeting of the WCB Board held on October 30, 1997, at which the WCB Board
approved the Merger Agreement.
Dain Bosworth has delivered to the WCB Board its written opinion, dated
October 30, 1997 ("Dain Bosworth Opinion"), to the effect that, as of the date
of its opinion, the consideration to be paid by WCB in connection with the
Merger is fair from a financial point of view. A copy of the Dain Bosworth
Opinion which sets forth the assumptions made, matters considered and
limitations of the review undertaken, is attached to this Prospectus/Joint Proxy
Statement as Appendix E, and should be read in its entirety.
WCB retained Dain Bosworth on October 10, 1997 to provide an opinion to
the Board of Directors of WCB as to the fairness, from a financial point of
view, of the consideration to be paid by WCB in connection with the Merger.
While Dain Bosworth provided such fairness opinion to the WCB Board, Dain
Bosworth was not requested to and did not make any recommendation to the Board
of Directors as to the form or amount of consideration to be paid in connection
with the Merger.
Dain Bosworth rendered a written opinion to the WCB Board that, as of
October 30, 1997, the consideration to be paid in the Merger by WCB is fair from
a financial point of view. Shareholders of WCB are urged to read the Dain
Bosworth Opinion carefully in its entirety. The Dain Bosworth Opinion is
directed to the WCB Board, is related to the fairness of the consideration from
a financial point of view, does not address any other aspect of the proposed
Merger or any related transaction and does not constitute a recommendation to
any shareholder as to how such shareholder should vote at the WCB Meeting. The
summary of the Dain Bosworth Opinion set forth in this Prospectus/Joint Proxy
Statement is qualified in its entirety by reference to the full text of such
opinion.
There were no limitations imposed by WCB on the scope of Dain Bosworth's
investigation. Dain Bosworth's opinion did not address WCB's underlying business
decision to proceed with the Merger. As set forth in its opinion, Dain Bosworth
relied on, and did not independently verify, the accuracy and completeness of
the financial and other information furnished to it by WCB and Centennial. Dain
Bosworth did not make an independent evaluation or appraisal of the assets and
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<PAGE> 36
liabilities of either WCB or Centennial, and did not express any opinion
regarding the liquidation value or regulatory compliance of either entity. WCB
stockholders are urged to read the Dain Bosworth Opinion in its entirety for a
summary description of the procedures followed, the factors considered and the
assumptions made by Dain Bosworth in rendering its opinion.
In connection with its opinion, Dain Bosworth, among other things: (1)
reviewed drafts of the Merger Agreement and related documents; (2) visited the
headquarters of WCB and Centennial; (3) held discussions with certain members of
the management of WCB and Centennial regarding the business, operations and
prospects of the respective companies and the reasons for completing the Merger;
(4) reviewed certain business and financial information on WCB and Centennial;
(5) reviewed certain summary financial projections relating to both the WCB and
Centennial; (6) reviewed certain publicly available documents filed by WCB with
the SEC pursuant to the Exchange Act of 1934; (7) compared certain financial
statistics of WCB with statistics for other publicly traded companies deemed
comparable; (8) reviewed price and trading data of the common stock of WCB; and
(9) to the extent publicly available, compared the financial terms of the Merger
with those of other transactions deemed comparable. Dain Bosworth used the
foregoing information to further its understanding of Centennial, WCB and the
market for WCB's Common Stock.
In conducting the review and in performing the analyses described below,
Dain Bosworth did not attribute any particular weight to any information or
analysis considered by it, but rather made qualitative judgments as to the
significance and relevance of each factor and analysis. Accordingly, Dain
Bosworth believes that the information reviewed and the analyses conducted must
be considered as a whole and that considering any portion of such information or
analyses, without considering all of such information and analyses, could create
a misleading or incomplete view of the process underlying its opinion.
In delivering its opinion to the WCB Board on October 30, 1997, Dain
Bosworth prepared and delivered to the WCB Board and its counsel certain written
materials containing a summary of various analyses and information that Dain
Bosworth considered to be material to its opinion. The following is a summary of
certain of these materials:
Analysis of Selected Publicly Traded Companies. Dain Bosworth compared
WCB's financial information and recent prices of WCB Common Stock to similar
information for selected publicly traded financial institutions in the western
United States including: Cascade Bancorp, Centennial Bancorp, Columbia Banking
System, First State Bancorp, Glacier Bancorp, United Security Bancorp and Union
Bankshares ("Comparable Companies"). The Comparable Companies were selected on
the basis of a variety of factors including size, geographic location, and
capitalization levels.
Dain Bosworth calculated valuation ratios based on published stock
prices for each of the Comparable Companies. The valuation ratios were based
upon several variables, including earnings for the latest twelve months ("LTM"),
earnings per share ("EPS") estimated for the 1997 and 1998 calendar years, total
assets, book value and tangible book value. The estimates of EPS for the
Comparable Companies and WCB were based upon consensus earnings estimates
obtained from an independent reporting system that monitors estimates prepared
by research analysts from various investment firms.
Dain Bosworth compared the historical performance and expectations for
the Comparable Companies with the performance and management's expectations for
future profitability of WCB. Based upon this comparison, Dain Bosworth
determined that the median valuation ratios for the Comparable Companies were
the appropriate benchmarks against which the value of WCB Common Stock should be
measured; accordingly, Dain Bosworth computed the same valuation ratios for WCB
Common Stock based on the closing sale price for WCB Common Stock on October 29,
1997 and compared such ratios to the median valuation ratios for the Comparable
Companies. The following table lists the results of this analysis:
<TABLE>
<CAPTION>
MEDIAN FOR MULTIPLE
COMPARABLE
COMPANIES WCB
-----------------------------------
<S> <C> <C>
Valuation Variable:
Price/Book value............................. 2.31x 2.49x
Price/Tangible book value.................... 2.40 2.50
Price/Assets................................. 0.26 0.23
Price/LTM EPS................................ 16.6 16.4
Price/Calendar 1997 EPS estimate............. 15.9 16.1
Price/Calendar 1998 EPS estimate............. 14.0 13.9
</TABLE>
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<PAGE> 37
Analysis of Selected Merger and Acquisition Transactions. Dain Bosworth
reviewed and summarized the terms of relevant merger and acquisition
transactions, including (1) 64 acquisitions of U.S. banks with $100 million or
more in assets announced after July 1, 1997 (the "U.S. Bank Mergers") and (2)
nine acquisitions banks located in the Pacific Northwest announced since January
1, 1997 (the "Pacific Northwest Bank Mergers"). In each case, Dain Bosworth's
analysis was limited to transactions for which relevant financial data was
available.
For purposes of evaluating the Merger, valuation multiples were
calculated for each of the acquisitions based upon several variables, including
book value, tangible book value, LTM earnings per share and the ratio of the
premium paid to tangible equity over core deposits. These valuation multiples
were then compared to the valuation multiples implied in the Merger. The
following table lists the results of Dain Bosworth's analysis of selected merger
and acquisition transactions:
<TABLE>
<CAPTION>
VALUATION RATIOS
-------------------------------------------------
PRICE TO PRICE TO PREMIUM
PRICE TO TANGIBLE LTM TO CORE
BOOK VALUE BOOK EPS DEPOSITS
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
U.S. Bank Mergers (median)....................... 2.26x 2.25x 20.1x 13.7%
Pacific Northwest Bank Mergers (median).......... 2.40 2.40 18.0 17.4
Implied in the Merger............................ 2.10 2.41 19.2 11.7
</TABLE>
Contribution Analysis. Dain Bosworth analyzed the relative contributions
of WCB and Centennial to the pro forma combined company, before giving effect to
certain cost savings which the management of WCB estimated could be achieved in
the Merger. Based on balance sheets as of September 30, 1997, this analysis
indicated that WCB would contribute between 74.6% and 84.1% of various balance
sheet items to the pro forma combined company. Similarly, WCB would contribute
between 63.9% and 82.3% of various income statement items to the pro forma
combined company, based on results of each company for the last twelve months
ending September 30, 1997. Under the terms of the Merger, WCB shareholders would
own approximately 79.9% of the combined company upon consummation of the Merger.
Dilution Analysis. Dain Bosworth analyzed the potential pro forma effect
of the Merger on WCB's EPS for calendar years 1998 and 1999 relative to WCB on a
stand-alone basis. This analysis indicated that the Merger could be accretive to
WCB's EPS in both years, assuming certain cost savings anticipated by the
management of WCB to result from the Merger are achieved. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
Dain Bosworth did not assign any particular weight to the individual
analyses described above, which represent a summary of the material analyses
performed by Dain Bosworth. Dain Bosworth's determination regarding the fairness
of the Merger is not based on a mathematical model but rather upon the body of
information obtained from such analyses and qualitative factors.
For rendering its opinion to the WCB Board in connection with the
transaction contemplated by the Merger Agreement, WCB has paid Dain Bosworth
$87,500. In addition, WCB has agreed to reimburse Dain Bosworth for its
reasonable out-of-pocket expenses and to indemnify Dain Bosworth against certain
expenses and liabilities arising in connection with its engagement, including
liabilities under the Securities Act and the Exchange Act.
Dain Bosworth was selected by WCB on the basis of its experience in
valuing securities in connection with mergers and acquisitions, knowledge of
WCB, and expertise in transactions involving financial institutions. Dain
Bosworth is a nationally recognized investment banking firm and is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. In the past, Dain Bosworth has provided investment
banking services to WCB and has received customary fees for the rendering of
such services. Dain Bosworth has from time to time issued research reports and
recommendations on WCB Common Stock. In the course of its trading activities,
Dain Bosworth may, from time to time, have a long or short position in, and buy
and sell securities of, WCB. Dain Bosworth also periodically publishes research
reports regarding other financial institutions, including other financial
institutions based in the Pacific Northwest.
THE FULL TEXT OF DAIN BOSWORTH'S WRITTEN OPINION IS ATTACHED AS APPENDIX
D TO THE PROSPECTUS/JOINT PROXY STATEMENT AND IS INCORPORATED HEREIN BY
REFERENCE. THE DESCRIPTION OF THE DAIN BOSWORTH OPINION SET FORTH HEREIN IS
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<PAGE> 38
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX D. WCB SHAREHOLDERS ARE URGED
TO READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY DAIN BOSWORTH IN CONNECTION THEREWITH.
RECOMMENDATION OF THE WCB BOARD
THE WCB BOARD UNANIMOUSLY RECOMMENDS THAT THE WCB SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
THE MERGER
GENERAL
Although the following description summarizes the material terms of the
Merger, it does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement. WCB and Centennial shareholders are being
asked to approve the Merger in accordance with the terms of the Merger
Agreement, and are urged to read the Merger Agreement, which is attached at
Appendix A, carefully.
BASIC TERMS OF THE MERGER
The Merger Agreement provides for the merger of Centennial with and into
WCB. As a result, Centennial shareholders will become shareholders of WCB, and
the Bank and Centennial's subsidiaries will become subsidiaries of WCB.
Centennial will cease to exist after the Merger. The Merger is subject to
certain Regulatory Approvals. While WCB and Centennial believe that they will
receive the requisite Regulatory Approvals for the Merger, there can be no
assurance that these approvals will be received or, if received, as to the
timing of these approvals or as to the ability to obtain these approvals on
satisfactory terms. See "-- Conditions to the Merger."
The number of shares of WCB Common Stock that WCB will issue in exchange
for each share of Centennial Common Stock will be determined by the Exchange
Ratio.
The negotiated Purchase Price WCB will pay for Centennial is an
aggregate of 2,550,000 shares of WCB Common Stock. However, the Merger Agreement
provides that if the costs and expenses incurred by Centennial in connection
with the Merger transaction exceed $175,000, the Purchase Price will be reduced
by the number of shares of WCB Common Stock equal in value to the excess. For
purposes of any reduction in the Purchase Price under this provision, WCB Common
Stock will be valued at $17.83 per share.
Exchange Ratio. The number of shares of WCB Common Stock each Centennial
shareholder (other than holders of Dissenting Shares) will receive in exchange
for his or her shares of Centennial Common Stock will be determined in
accordance with an Exchange Ratio. This Exchange Ratio will be computed by
dividing the Purchase Price by the aggregate number of shares of Centennial
Common Stock outstanding or subject to granted but unexercised options at
Closing. For example, at December 31, 1997, [1,576,944] shares of Centennial
Common Stock were issued and outstanding and [89,300] shares were subject to
unexercised options. Accordingly, if the Merger had Closed on that date, each
holder of Centennial Common Stock shares would have received 1.53 WCB Common
Stock shares for each share of Centennial Common Stock held.
Holders of unexercised options for Centennial Common Stock will not
receive WCB Common Stock at Closing. Unexercised options for Centennial Common
Stock will be converted at Closing into options for WCB Common Stock in
accordance with the Exchange Ratio. In other words, holders of Centennial Common
Stock options will receive, in exchange for those options, options to purchase
the number of WCB Common Stock shares that they would have received in the
Merger if they would have exercised their Centennial Common Stock options
immediately before Closing. All WCB Common Stock options will be subject to the
same terms as the Centennial Common Stock options exchanged for them, and the
option exercise price of those WCB Common Stock options will be equal to the
option exercise price of the Centennial Common Stock options converted into
those WCB Common Stock options.
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<PAGE> 39
CASH FOR FRACTIONAL SHARES
WCB will not issue certificates for fractional shares of WCB Common
Stock. Each Centennial 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 $17.83. Centennial shareholders will have
no other rights with respect to fractional shares or other shares.
EXCHANGE OF STOCK CERTIFICATES
On and after the Effective Date, certificates representing Centennial
Common Stock will be deemed to represent only the right to receive WCB Common
Stock certificates or cash, as provided in the Merger Agreement. Upon surrender
to the Exchange Agent designated by WCB and Centennial, of certificates that,
before the Effective Date, represented shares of Centennial 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. Centennial
shareholders will receive written instructions and the required letter of
transmittal after the Merger is effective.
All WCB Common Stock issued under the Merger Agreement will be deemed
issued as of the Effective Date. No distributions or dividends paid upon shares
of WCB Common Stock after Closing of the Merger will be paid to any holder of
Centennial Common Stock until the holder has surrendered his or her certificates
formerly representing shares of Centennial Common Stock, at which time any
accumulated dividends and distributions since the Effective Date, without
interest, will be paid to the holder.
DIRECTORS AND EXECUTIVE OFFICERS AFTER THE MERGER
In connection with the Merger, WCB will appoint Messrs. Healy and Snyder
to the WCB Board, and Mr. Healy to the Executive Committee. Mr. Healy is
currently the Bank's Chairman of the Board and Chief Executive Officer and Mr.
Snyder is currently the Bank's Vice Chairman. These appointments will be
effective on the Effective Date. It is anticipated that the Bank's current
executive officers will remain in place, at least initially, after the Merger is
completed.
The Bank Board immediately before the Merger will initially remain the
same after the Merger, except that one or two additional directors (persons
currently serving on the WCB Board) will be appointed by WCB to the Bank 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 one
or two WCB directors designated by WCB. The Bank's directors will serve until
the 1998 annual meeting of the Bank's shareholders or until their successors
have been elected and qualified.
As a condition to the execution of the Merger Agreement, each member of
the respective Boards of Centennial and the Bank are required to enter into a
Director Noncompetition Agreement with WCB and Centennial. Except under certain
limited circumstances, the Director Noncompetition Agreement prohibits these
directors from competing with WCB and its subsidiaries within their market area.
The market areas covered by the Director Noncompetition Agreement are the
counties of Clackamas, Lincoln, Marion, Multnomah, Polk, Washington, and Yamhill
counties in Oregon and the counties of Clark, Cowlitz, Lewis, Mason, Pierce, and
Thurston in Washington. The Term of the Director Noncompetition begins for each
Director at Closing. With respect to those directors who remain directors of the
Bank for at least one year following Closing, the term ends one year after the
director's service as a director of WCB, Centennial, the Bank, or any WCB
affiliate terminates. Otherwise the term ends two years after Closing. Each of
the members of the respective Boards has entered into a Director Noncompetition
Agreement as described above except Mr. Daniel Yerrington, whose existing
employment and non-competition arrangements with the Bank will be continued
after the Merger.
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, including WCB's stock option plans.
Centennial'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.
26
<PAGE> 40
MECHANICS OF THE MERGER
On the Effective Date, Centennial will be merged with and into WCB. At
that time, all business, assets, and liabilities formerly carried on or owned by
Centennial will be transferred to and vested in WCB. Centennial will cease to
have a corporate existence separate from WCB, the Bank will be a wholly owned
subsidiary of WCB, and Centennial's other direct and indirect subsidiaries will
be direct and indirect subsidiaries of WCB.
CONDUCT PENDING CONSUMMATION OF THE MERGER
The Merger Agreement provides that, until the Merger is effective,
Centennial 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,
Centennial and the Bank will refrain from engaging in various activities such
as: (1) effecting any stock split or other recapitalization, (2) except under
certain limited circumstances, declaring or paying dividends or other
distributions in excess of regular quarterly cash dividends of up to $.08 per
share, (3) disposing of assets or making with respect to assets material
commitments outside the ordinary course of business, (4) with certain
exceptions, incurring new indebtedness greater than $25,000, (5) acquiring real
property without conducting an environmental evaluation, (6) with certain
exceptions, entering into or terminating any contracts with a term of more than
one year or that require a payment by the Bank of more than $25,000 per contract
or $100,000 in the aggregate, (7) selling securities if the aggregate gain
realized would exceed $50,000 or transferring securities between portfolios, (8)
amending its articles of incorporation or bylaws or materially changing its
policies, (9) increasing its full-time employees above 149, (10) with certain
exceptions, making capital expenditures in excess of $25,000 per project or
$175,000 in the aggregate; and (11) 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. If conditions to the Merger remain unsatisfied and the
Merger has not been effected on or before August 31, 1998, 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 Centennial
Common Stock and the holders of the shares of WCB Common Stock approve the
transaction. In accordance with applicable Oregon and Washington corporate laws,
approval of the Merger requires the affirmative vote of (1) a majority of the
holders of all shares outstanding of WCB Common Stock, and (2) two-thirds of the
holders of all shares outstanding of Centennial Common Stock. In addition,
approval of the Merger is required from the FRB and the Washington Director. An
application is currently pending with the FRB, and notice has been filed with
the Washington Director. Although no assurance of approval can be given, the
parties expect to receive the approval in due course.
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 shareholders have approved the Merger; (d) WCB has
appointed, effective as of Closing, Mr. Healy and Mr. Snyder to serve on WCB's
Board; (e) the parties have provided one another with the counsel, tax,
accounting treatment, and fairness opinions required by the Merger Agreement;
(f) Centennial has paid in full its $4 million credit line with National Bank of
Alaska and secured a release of all collateral 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) Centennial 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 Centennial 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;
(k) Centennial has met a Tangible Equity Capital requirement of at least $18.2
million and has deposits of at least $193 million, excluding brokered deposits
and jumbo certificates of deposit; and (l) all appropriate regulatory approvals
have been received.
27
<PAGE> 41
Either WCB or Centennial 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 Centennial may also grant extended time to
the other party to complete an obligation or condition.
AMENDMENT OR TERMINATION 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 mutually agree to make
any amendment or supplement without further approval of Centennial's
shareholders, except amendments which would reduce the amount or change the form
of consideration Centennial shareholders will receive in the Merger transaction.
The Merger Agreement contains several provisions entitling either
Centennial or WCB to terminate the Merger Agreement under certain circumstances.
The following briefly describes these provisions:
Lapse of Time. If the Merger has not closed by August 31, 1998, then at
any time after that date, either WCB or Centennial may terminate the Merger
Agreement, as long as the party terminating has not caused the delay in closing
by breaching its obligations under the Merger Agreement.
Mutual Consent. The parties by mutual consent may terminate the Merger
Agreement at any time before Closing, whether before or after the Merger
Agreement has been approved by the parties' shareholders.
Failure of Centennial to Recommend Approval. WCB may terminate the
Merger Agreement before Centennial shareholders approve it, if the Centennial
Board fails to recommend (or adversely modifies, withdraws or changes its
recommendation) approval of the Merger to its shareholders.
Failure of WCB to Recommend Approval. Centennial may terminate the
Merger Agreement before WCB's shareholders approve it, if the WCB Board fails to
recommend (or adversely modifies, withdraws, or changes its recommendation)
approval of the Merger to its shareholders.
Impracticability. Either WCB or Centennial 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.
Termination Fees. If Centennial terminates the Merger Agreement under
certain circumstances, it will pay WCB in liquidated damages the greater of (1)
$1.2 million or (2) the amount equal to 2.5% of the value of the Purchase Price.
For purpose of determining the value of the Purchase Price, WCB Common Stock
will be priced based on an average calculated over the ten-trading-day period
preceding termination. If WCB terminates the Merger Agreement under certain
circumstances, it will pay Centennial $200,000 in liquidated damages.
Allocation of Costs Upon Termination. If the Merger Agreement is
terminated, WCB and Centennial will each pay their own out-of-pocket costs
incurred in connection with the transaction and, except for applicable
termination fees, will have no other liability to the other party.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Centennial Board and management may be deemed to
have interests in the Merger, in addition to their interests as shareholders of
Centennial. The Centennial Board was aware of these factors and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
Agreement with Mr. Healy. WCB and the Bank have entered into a Salary
Continuation Agreement with Thomas W. Healy, that will be effective upon the
closing of the Merger. The term of the agreement is one year, with automatic
one-year extensions unless the parties provide prior written notice of
non-renewal. If a definitive agreement providing for a change of control (as
defined in the agreement) is entered into prior to the expiration of the term of
the agreement, the agreement will be extended for an additional 18 months
following the change in control. If, following a change in control, Mr. Healy
terminates the agreement for Good Reason or WCB terminates the agreement for
other than for Cause (as such terms are defined in the agreement), Mr. Healy
will be entitled to severance benefits. The benefits consist of
28
<PAGE> 42
(i) a salary continuation payment equal to Mr. Healy's monthly salary at the
date of termination, payable from the date of termination to the date 18 months
following the change in control, and (ii) a bonus continuation payment based
upon the most recent bonus paid to Mr. Healy prior to the date of termination,
prorated for any period as to which Mr. Healy was employed but as to which no
annual bonus was paid.
WCB has also entered into a letter agreement with Mr. Healy,
supplementing the terms of the Salary Continuation Agreement. The letter
agreement provides, among other things, that Mr. Healy will serve as Chief
Executive Officer of the bank at an initial annual salary of $180,000, which is
the amount of Mr. Healy's current annual salary at the Bank, plus an annual
incentive bonus on the same basis as other WCB employees of equivalent position.
The letter agreement also provides that regardless of whether Mr. Healy
continues his employment with the Bank following the Merger, WCB will, after
closing of the Merger, contribute $8,333 per month on his behalf to WCB's
deferred compensation plan, until he reaches age 65, which represents a
continuation of his current retirement benefits.
Appointments to the WCB Board. WCB has agreed to appoint Mr. Healy,
currently the Bank's Chairman and Chief Executive Officer, and Joe L. Snyder,
currently the Bank's Vice Chairman, to the WCB Board effective as of the
Effective Date. Also, the current directors of the Bank will continue to serve
as directors of the Bank, at least initially, following the Merger. In addition,
WCB has agreed to appoint Mr. Healy to WCB's executive committee, effective as
of the Effective Date.
Directors' and Officers' Liability. The Merger Agreement provides that
during the three-year period following the Effective Date, WCB will indemnify
the present and former directors of Centennial and the Bank against liabilities
arising out of their actions taken within the scope of their service during the
six year period prior to the Effective Date, to the extent such persons were
entitled to indemnification from Centennial or the Bank. The Merger Agreement
also provides that prior to the Effective Date Centennial will obtain "tail"
liability insurance coverage on existing Centennial and Bank officers' and
directors' insurance policies for the six year period following the Effective
Date. WCB will indemnify the present and former officers and directors of
Centennial, and cause the Bank to indemnify the present and former officers and
directors of the Bank, against any claims covered by such insurance to the
extent that such persons were entitled to indemnification from Centennial or the
Bank, as the case may be.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a tax-free reorganization under
Section 368(a) of the Code for federal income tax purposes. Centennial and WCB
will receive at Closing an opinion from Graham & Dunn that the Merger will
constitute a tax-free reorganization for federal tax purposes. This 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 Centennial and WCB. THE
FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW MAY NOT APPLY TO PARTICULAR
CATEGORIES OF HOLDERS OF CENTENNIAL 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.
The Graham & Dunn opinion will state that:
1. The Transaction will qualify as a reorganization with in the
meaning of IRC Section 368(a)(1)(A).
2. Under IRC Section 354(a)(i), Centennial's shareholders who, in
accordance with Section 1, exchange their shares of Centennial
Common Stock solely for shares of WCB Common Stock will not
recognize gain or loss on the exchange.
3. Cash payments to Centennial's shareholders in lieu of a
fractional share of Continuing Corporation Common Stock will be
treated as distributions in redemption of the fractional share
interest, subject to the limitations of IRC Section 302.
29
<PAGE> 43
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 Centennial and WCB are carried forward at their previously
recorded amounts, and operating results of WCB and Centennial 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, WCB's receipt of a letter from Arthur Andersen that they
concur with the respective management's conclusions that the Merger will qualify
for the pooling of interests treatment is a condition to the obligations of WCB
and Centennial to consummate the Merger.
The unaudited condensed pro forma combined financial information
contained in this Prospectus/Joint 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.
DISSENTERS' RIGHTS OF APPRAISAL
Under Washington State law (Revised Code of Washington 23B.13), a
shareholder of Centennial 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 Centennial shareholder must (1) deliver to Centennial,
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 Centennial shareholder who has properly perfected his
or her dissenters' rights. A dissenting shareholder must follow the procedures
set forth in the Dissenters' Notice. This Notice will include instructions for
completing the exercise of dissenters' rights. 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 Centennial 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
Centennial 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. This value may be higher
or lower than the value of WCB Common Stock issuable under the Merger Agreement.
A Centennial shareholder's dissenters' rights to obtain payment of the
fair value of his or her shares will terminate if (1) the Merger is abandoned or
rescinded, (2) a court with jurisdiction permanently enjoins or sets aside the
merger, or (3) the shareholder withdraws demand for payment with Centennial's
written consent.
A VOTE AGAINST THE MERGER WILL NOT IN AND OF ITSELF SATISFY THE
REQUIREMENTS OF THE WASHINGTON STATUTE; A SHAREHOLDER WHO DOES NOT DELIVER TO
CENTENNIAL PRIOR TO THE MEETING A WRITTEN NOTICE OF THE SHAREHOLDER'S INTENT TO
DEMAND PAYMENT FOR THE FAIR VALUE OF THE SHARES OF CENTENNIAL COMMON STOCK HELD
WILL LOSE THE RIGHT TO EXERCISE DISSENTERS' RIGHTS. THE FAILURE OF A CENTENNIAL
SHAREHOLDER TO COMPLY STRICTLY WITH THE WASHINGTON STATUTORY REQUIREMENTS WILL
RESULT IN A LOSS OF HIS OR HER DISSENTERS' RIGHTS. A COPY OF THE RELEVANT
STATUTORY PROVISIONS IS ATTACHED AS APPENDIX B. CENTENNIAL SHAREHOLDERS SHOULD
REFER TO THIS APPENDIX FOR A COMPLETE STATEMENT CONCERNING DISSENTERS' RIGHTS.
THE ABOVE SUMMARY IS ENTIRELY QUALIFIED BY REFERENCE TO APPENDIX B.
RESALES OF STOCK RECEIVED IN THE MERGER
The WCB Common Stock to be issued in the Merger will be transferable
free of restrictions under the 1933 Act, except for shares received by persons,
including directors and executive officers of Centennial, who may be deemed to
be "affiliates" of Centennial, as that term is used in (1) paragraphs (c) and
(d) of Rule 145 under the 1933 Act and/or (2) Accounting Series Releases 130 and
135, as amended, of the SEC. Affiliates may not sell their shares of WCB Common
Stock acquired in the Merger, except (a) pursuant to an effective registration
statement under the 1933 Act covering those shares, (b) in compliance with Rule
145, or (c) in accordance with an opinion of counsel reasonably satisfactory to
WCB, under other applicable exemptions from the registration requirements of the
1933 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
30
<PAGE> 44
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 Effective Date and ending when financial results covering at least 30
days of post-merger operations of the combined organization have been published.
WCB will obtain customary agreements with all Centennial directors, officers,
and affiliates of Centennial 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 Centennial or WCB held by them before the Merger,
except (1) in compliance with the 1933 Act and the rules and regulations
promulgated thereunder, and (2) 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/Joint Proxy Statement does not cover any
resales of the WCB Common Stock received by affiliates of Centennial.
NO SOLICITATION
Centennial has agreed in the Merger Agreement that, except as required
by fiduciary duties under applicable law, neither Centennial nor any of its
officers or directors will (1) solicit, encourage, entertain or facilitate any
other proposals or inquiries for an acquisition of the shares or assets of
Centennial or its subsidiaries, (2) enter into discussions concerning any
acquisition, or (3) furnish any nonpublic information relating to WCB's business
or organization to any person that is not affiliated with Centennial or WCB.
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited condensed pro forma combined financial
statements give effect to the Merger of WCB and Centennial on a pooling of
interests basis. The unaudited pro forma combined balance sheet is presented on
the basis that the Merger took place on September 30, 1997. 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 Centennial included or incorporated into this
Prospectus/Joint Proxy Statement by reference. See the Centennial Financial
Statements. For the WCB Financial Statements, 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.
31
<PAGE> 45
WEST COAST BANCORP
AND
CENTENNIAL HOLDINGS, LTD.
Condensed Pro Forma Combined Balance Sheet
September 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
WCB Adjustments Combined
WCB Consolidated Centennial (Note 2) (Note 3)
<S> <C> <C> <C> <C> <C>
ASSETS Cash and cash equivalents:
Cash and due from banks .......... $ 613,064 29,160,877 $ 15,128,030 $ -- $ 44,288,907
Interest-bearing deposits in
other banks ...................... 1,845,448 14,743,365 25,949,269 -- 40,692,634
Federal funds sold ............... -- 6,988,000 -- -- 6,988,000
------------------------------------------------------------------------------------------
Total cash and cash equivalents 2,458,512 50,892,242 41,077,299 -- 91,969,541
Investment securities:
Investments available for sale ... -- 153,694,405 11,448,677 (3,865) 165,139,217
Investments held to maturity ..... -- 2,596,143 720,000 -- 3,316,143
------------------------------------------------------------------------------------------
Total investment securities .... -- 156,290,548 12,168,677 (3,865) 168,455,360
Loans held for sale ................ -- 3,420,198 4,332,750 -- 7,752,948
Loans .............................. -- 573,736,247 191,013,590 -- 764,749,837
Allowance for loan loss ............ -- (8,395,415) (1,581,590) -- (9,977,005)
------------------------------------------------------------------------------------------
Loans, net ....................... -- 565,340,832 189,432,000 -- 754,772,832
Premises and equipment, net ........ 2,028,109 18,356,687 8,075,853 -- 26,432,540
Intangible assets .................. 16,413 549,260 2,723,298 -- 3,272,558
Other assets ....................... 70,762,960 14,073,194 3,023,094 -- 17,096,288
------------------------------------------------------------------------------------------
Total assets ................... $ 75,265,994 $ 808,922,961 $ 260,832,971 ($3,865) $ 1,069,752,067
==========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand ........................... $ -- $ 124,773,637 $ 56,693,571 $ -- $ 181,467,208
Savings and interest-bearing
demand ......................... -- 368,263,553 110,236,181 -- 478,499,734
Certificates of deposits ......... -- 215,507,951 70,478,069 -- 285,986,020
------------------------------------------------------------------------------------------
Total deposits ................. -- 708,545,141 237,407,821 -- 945,952,962
Short-term borrowings:
Federal funds purchased .......... -- -- -- -- --
Other short-term borrowings ...... -- 81,308 -- -- 81,308
------------------------------------------------------------------------------------------
Total short-term borrowings .... -- 81,308 -- -- 81,308
Other liabilities .................. -- 6,299,130 1,898,571 (659) 8,197,042
Long-term borrowings ............... -- 18,731,388 290,000 -- 19,021,388
------------------------------------------------------------------------------------------
Total liabilities .............. -- 733,656,967 239,596,392 (659) 973,252,700
------------------------------------------------------------------------------------------
Commitments and contingent
liabilities
STOCKHOLDERS' EQUITY
Common stock ....................... 12,640,633 12,640,633 15,755 2,997,317 15,653,705
Additional paid-in capital ......... 31,597,765 31,597,765 13,321,774 (2,999,245) 41,920,294
Retained earnings .................. 29,754,752 29,754,752 7,993,307 -- 37,748,059
Net unrealized gains (losses) on
investments available for sale ..... 1,272,844 1,272,844 (94,257) (1,278) 1,177,309
------------------------------------------------------------------------------------------
Stockholders' equity ............. 75,265,994 75,265,994 21,236,579 (3,206) 96,499,367
------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity .......... $ 75,265,994 $ 808,922,961 $ 260,832,971 ($3,865) $ 1,069,752,067
==========================================================================================
</TABLE>
32
<PAGE> 46
WEST COAST BANCORP
AND
CENTENNIAL HOLDINGS, LTD.
Pro Forma Combined Statements of Income
Nine Months Ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
WCB Centennial Pro Forma
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................ $ 42,255,066 $ 15,476,779 $ 57,731,845
Interest on taxable investment securities . 4,149,858 467,014 4,616,872
Interest on nontaxable investment ......... 1,669,737 50,495 1,720,232
securities
Interest from other banks ................. 785,341 242,910 1,028,251
Interest on federal funds sold ............ 44,833 -- 44,833
--------------------------------------------
Total interest income ................... 48,904,835 16,237,198 65,142,033
INTEREST EXPENSE
Savings and interest-bearing demand ....... 8,364,719 3,596,845 11,961,564
Certificates of deposit ................... 8,111,718 2,065,983 10,177,701
Short-term borrowings ..................... 88,968 210,498 299,466
Long-term borrowings ...................... 964,990 148,115 1,113,105
--------------------------------------------
Total interest expense .................. 17,530,395 6,021,441 23,551,836
--------------------------------------------
NET INTEREST INCOME ....................... 31,374,440 10,215,757 41,590,197
PROVISION FOR LOAN LOSS ................... 1,731,000 1,211,500 2,942,500
--------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS ................. 29,643,440 9,004,257 38,647,697
------------ ------------ ------------
NONINTEREST INCOME
Other service charges, commissions and fees 2,951,779 209,476 3,161,255
Service charges on deposit accounts ....... 2,162,934 788,224 2,951,158
Trust revenue ............................. 1,215,226 -- 1,215,226
Gains on sales of loans ................... 959,551 486,929 1,446,480
Gains on sales of serviced loans .......... -- 1,659,420 1,659,420
Loan servicing fees ....................... 369,547 288,207 657,754
Other ..................................... 232,256 46,108 278,364
Net (losses) on sales of securities ....... (43,963) (12,792) (56,755)
--------------------------------------------
Total noninterest income ................ 7,847,330 3,465,572 11,312,902
NONINTEREST EXPENSE
Salaries and employee benefits ............ 13,892,388 4,869,134 18,761,522
Equipment ................................. 2,095,731 792,266 2,887,997
Occupancy ................................. 1,859,032 490,177 2,349,209
ATM & Bancard ............................. 1,026,833 13,116 1,039,949
Professional Fees ......................... 973,520 272,785 1,246,305
Marketing ................................. 711,655 213,192 924,847
Communications ............................ 664,061 202,658 866,719
Printing and office supplies .............. 613,605 320,161 933,766
FDIC insurance ............................ 57,259 17,569 74,828
Other noninterest expense ................. 2,710,531 1,979,643 4,690,174
--------------------------------------------
Total noninterest expense ............... 24,604,615 9,170,701 33,775,316
INCOME BEFORE INCOME TAXES ................ 12,886,155 3,299,128 16,185,283
PROVISION FOR INCOME TAXES ................ 4,183,475 1,206,225 5,389,700
--------------------------------------------
NET INCOME ................................ $ 8,702,680 $ 2,092,903 $ 10,795,583
============================================
AVERAGE NUMBER OF COMMON
EQUIVALENT SHARES OUTSTANDING ........... 10,360,030 1,659,640 12,899,279
EARNINGS PER SHARE
Primary ................................. $ .84 $ 1.40 $ .86
Fully Diluted ........................... $ .84 $ 1.26 $ .84
</TABLE>
33
<PAGE> 47
WEST COAST BANCORP
AND
CENTENNIAL HOLDINGS, LTD.
Pro Forma Combined Statements of Income
Nine Months Ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
WCB Centennial Pro Forma
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................ $ 35,216,066 $ 12,997,610 $ 48,213,676
Interest on taxable investment securities . 3,675,887 437,458 4,113,345
Interest on nontaxable investment ......... 1,962,302 59,465 2,021,767
securities
Interest from other banks ................. 147,078 215,416 362,494
Interest on federal funds sold ............ 373,844 11,802 385,646
-------------------------------------------
Total interest income ................... 41,375,177 13,721,751 55,096,928
INTEREST EXPENSE
Savings and interest-bearing demand ....... 7,224,106 2,339,552 9,563,658
Certificates of deposit ................... 6,346,643 2,242,495 8,589,138
Short-term borrowings ..................... 411,532 142,434 553,966
Long-term borrowings ...................... 512,652 136,554 649,206
-------------------------------------------
Total interest expense .................. 14,494,933 4,861,035 19,355,968
-------------------------------------------
NET INTEREST INCOME ....................... 26,880,244 8,860,716 35,740,960
PROVISION FOR LOAN LOSS ................... 1,554,987 280,000 1,834,987
-------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS ................. 25,325,257 8,580,716 33,905,973
-------------------------------------------
NONINTEREST INCOME
Other service charges, commissions and fees 2,098,639 217,841 2,316,480
Service charges on deposit accounts ....... 1,952,139 615,031 2,567,170
Trust revenue ............................. 1,006,991 0 1,006,991
Gains on sales of loans ................... 922,211 40,740 962,951
Gains on sales of serviced loans .......... -- 203,542 203,542
Loan servicing fees ....................... 364,085 399,623 763,708
Other ..................................... 305,020 80,626 385,646
Net gains (losses) on sales of securities . (19,496) 6,240 (13,256)
-------------------------------------------
Total noninterest income ................ 6,629,589 1,563,643 8,193,232
NONINTEREST EXPENSE
Salaries and employee benefits ............ 12,003,958 4,162,179 16,166,137
Equipment ................................. 1,759,308 629,180 2,388,488
Occupancy ................................. 1,658,597 473,234 2,131,831
Professional Fees ......................... 1,466,424 402,978 1,869,402
ATM & Bancard ............................. 767,501 17,489 784,990
Printing and office supplies .............. 582,568 332,226 914,794
Marketing ................................. 528,979 218,208 747,187
Communications ............................ 443,506 152,181 595,687
FDIC insurance ............................ 7,772 2,183 9,955
Other noninterest expense ................. 2,274,507 1,584,563 3,859,070
-------------------------------------------
Total noninterest expense ............... 21,493,120 7,974,421 29,467,541
INCOME BEFORE INCOME TAXES ................ 10,461,726 2,169,938 12,631,664
PROVISION FOR INCOME TAXES ................ 3,384,223 653,447 4,037,670
-------------------------------------------
NET INCOME ................................ $ 7,077,503 $ 1,516,491 $ 8,593,994
===========================================
AVERAGE NUMBER OF COMMON
EQUIVALENT SHARES OUTSTANDING ........... 10,259,334 1,586,703 12,686,990
EARNINGS PER SHARE
Primary ................................. $ .69 $ 1.09 $ .70
Fully Diluted ........................... $ .69 $ .96 $ .68
</TABLE>
34
<PAGE> 48
WEST COAST BANCORP
AND
CENTENNIAL HOLDINGS, LTD.
Pro Forma Combined Statements of Income
Twelve Months Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
WCB Centennial Pro Forma
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................ $48,516,001 $18,043,293 $66,559,294
Interest on taxable investment securities . 4,861,108 592,416 5,453,524
Interest on nontaxable investment ......... 2,545,479 77,584 2,623,063
securities
Interest from other banks ................. 305,248 237,152 542,400
Interest on federal funds sold ............ 396,020 11,802 407,822
---------------------------------------
Total interest income ................... 56,623,856 18,962,247 75,586,103
INTEREST EXPENSE
Savings and interest-bearing demand ....... 9,912,025 3,352,413 13,264,438
Certificates of deposit ................... 8,680,066 2,962,244 11,642,310
Short-term borrowings ..................... 552,338 246,080 798,418
Long-term borrowings ...................... 689,160 201,131 890,291
---------------------------------------
Total interest expense .................. 19,833,589 6,761,868 26,595,457
---------------------------------------
NET INTEREST INCOME ....................... 36,790,267 12,200,379 48,990,646
PROVISION FOR LOAN LOSS ................... 2,174,987 396,000 2,570,987
---------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS ................. 34,615,280 11,804,379 46,419,659
---------------------------------------
NONINTEREST INCOME
Other service charges, commissions and fees 2,747,856 226,710 2,974,566
Service charges on deposit accounts ....... 2,632,192 863,226 3,495,418
Trust revenue ............................. 1,360,430 -- 1,360,430
Gains on sales of loans ................... 1,178,052 42,717 1,220,769
Gains on sales of serviced loans .......... -- 269,107 269,107
Loan servicing fees ....................... 499,744 547,663 1,047,407
Other ..................................... 443,281 100,666 543,947
Net gains on sales of securities .......... 17,030 8,475 25,505
---------------------------------------
Total noninterest income ................ 8,878,585 2,058,564 10,937,149
NONINTEREST EXPENSE
Salaries and employee benefits ............ 15,969,770 5,974,930 21,944,700
Equipment ................................. 2,454,551 833,117 3,287,668
Occupancy ................................. 2,324,133 736,351 3,060,484
Professional Fees ......................... 1,822,824 426,162 2,248,986
ATM & Bancard ............................. 1,022,998 22,725 1,045,723
Marketing ................................. 783,067 291,968 1,075,035
Printing and office supplies .............. 750,813 470,605 1,221,418
Communications ............................ 643,107 226,206 869,313
FDIC insurance ............................ 10,432 2,183 12,615
Other noninterest expense ................. 3,069,645 2,041,350 5,110,995
---------------------------------------
Total noninterest expense ............... 28,851,340 11,025,597 39,876,937
INCOME BEFORE INCOME TAXES ................ 14,642,525 2,837,346 17,479,871
PROVISION FOR INCOME TAXES ................ 4,840,510 962,897 5,803,407
---------------------------------------
NET INCOME ................................ $ 9,802,015 $ 1,874,449 $11,676,464
=======================================
AVERAGE NUMBER OF COMMON
EQUIVALENT SHARES OUTSTANDING ........... 10,320,123 1,589,005 12,751,301
EARNINGS PER SHARE
Primary ................................. $ .96 $ 1.33 $ .94
Fully Diluted ........................... $ .95 $ 1.18 $ .92
</TABLE>
35
<PAGE> 49
WEST COAST BANCORP
AND
CENTENNIAL HOLDINGS, LTD.
Pro Forma Combined Statements of Income
Twelve Months Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
WCB Centennial Pro Forma
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................ $ 38,838,663 $ 14,537,787 $ 53,376,450
Interest on taxable investment securities . 4,849,059 594,407 5,443,466
Interest on nontaxable investment ......... 2,812,499 89,363 2,901,862
securities
Interest from other banks ................. 152,418 450,309 602,727
Interest on federal funds sold ............ 640,687 2,613 643,300
-------------------------------------------
Total interest income ................... 47,293,326 15,674,479 62,967,805
INTEREST EXPENSE
Savings and interest-bearing demand ....... 8,634,137 2,901,317 11,535,454
Certificates of deposit ................... 7,836,904 1,905,160 9,742,064
Short-term borrowings ..................... 378,824 304,898 683,722
Long-term borrowings ...................... 579,433 418,598 998,031
-------------------------------------------
Total interest expense .................. 17,429,298 5,529,973 22,959,271
-------------------------------------------
NET INTEREST INCOME ....................... 29,864,028 10,144,506 40,008,534
PROVISION FOR LOAN LOSS ................... 943,460 256,000 1,199,460
-------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS ................. 28,920,568 9,888,506 38,809,074
-------------------------------------------
NONINTEREST INCOME
Other service charges, commissions and fees 2,292,827 181,628 2,474,455
Service charges on deposit accounts ....... 2,538,190 698,815 3,237,005
Trust revenue ............................. 1,268,587 -- 1,268,587
Gains on sales of loans ................... 852,954 278,576 1,131,530
Gains on sales of serviced loans .......... -- 619,237 619,237
Loan servicing fees ....................... 491,855 470,058 961,913
Other ..................................... 640,508 87,770 728,278
Net gains (losses) on sales of securities . 9,838 (860) 8,978
-------------------------------------------
Total noninterest income ................ 8,094,759 2,335,224 10,429,983
NONINTEREST EXPENSE
Salaries and employee benefits ............ 14,131,152 4,875,790 19,006,942
Equipment ................................. 2,141,985 674,545 2,816,530
Occupancy ................................. 1,972,562 515,218 2,487,780
Professional Fees ......................... 1,479,574 284,889 1,764,463
ATM & Bancard ............................. 799,984 23,878 823,862
Marketing ................................. 741,977 276,944 1,018,921
Printing and office supplies .............. 728,955 343,105 1,072,060
FDIC insurance ............................ 517,847 130,988 648,835
Communications ............................ 576,344 186,399 762,743
Other noninterest expense ................. 2,430,076 1,645,490 4,075,566
-------------------------------------------
Total noninterest expense ............... 25,520,456 8,957,246 34,477,702
INCOME BEFORE INCOME TAXES ................ 11,494,871 3,266,484 14,761,355
PROVISION FOR INCOME TAXES ................ 3,245,720 907,922 4,153,642
-------------------------------------------
NET INCOME ................................ $ 8,249,151 $ 2,358,562 $ 10,607,713
===========================================
AVERAGE NUMBER OF COMMON
EQUIVALENT SHARES OUTSTANDING ........... 10,181,255 1,482,255 12,449,105
EARNINGS PER SHARE
Primary ................................. $ .81 $ 1.81 $ .87
Fully Diluted ........................... $ .81 $ 1.59 $ .85
</TABLE>
36
<PAGE> 50
WEST COAST BANCORP
AND
CENTENNIAL HOLDINGS, LTD.
Pro Forma Combined Statements of Income
Twelve Months Ended December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
WCB Centennial Pro Forma
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................ $ 30,848,846 $ 9,823,401 $ 40,672,247
Interest on taxable investment securities . 4,662,516 781,843 5,444,359
Interest on nontaxable investment ......... 2,721,225 88,999 2,810,224
securities
Interest from other banks ................. 165,889 240,222 406,111
Interest on federal funds sold ............ 519,673 -- 519,673
--------------------------------------------
Total interest income ................... 38,918,149 10,934,465 49,852,614
INTEREST EXPENSE
Savings and interest-bearing demand ....... 6,910,351 1,885,751 8,796,102
Certificates of deposit ................... 3,991,381 763,979 4,755,360
Short-term borrowings ..................... 151,334 49,286 200,620
Long-term borrowings ...................... 452,868 -- 452,868
--------------------------------------------
Total interest expense .................. 11,505,934 2,699,016 14,204,950
--------------------------------------------
NET INTEREST INCOME ....................... 27,412,215 8,235,449 35,647,664
PROVISION FOR LOAN LOSS ................... 777,500 114,000 891,500
--------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS ................. 26,634,715 8,121,449 34,756,164
--------------------------------------------
NONINTEREST INCOME
Other service charges, commissions and fees 1,887,838 242,535 2,130,373
Service charges on deposit accounts ....... 2,420,981 635,072 3,056,053
Trust revenue ............................. 1,205,973 -- 1,205,973
Gains on sales of loans ................... 1,010,267 378,770 1,389,037
Gains on sales of serviced loans .......... -- 595,804 595,804
Loan servicing fees ....................... 449,795 506,221 956,016
Other ..................................... 282,132 38,128 320,260
Net (losses) on sales of securities ....... (170,464) (4,878) (175,342)
--------------------------------------------
Total noninterest income ................ 7,086,522 2,391,652 9,478,174
NONINTEREST EXPENSE
Salaries and employee benefits ............ 12,910,024 4,033,372 16,943,396
Equipment ................................. 1,878,655 496,093 2,374,748
Occupancy ................................. 1,646,859 390,366 2,037,225
Professional Fees ......................... 2,091,465 261,660 2,353,125
ATM & Bancard ............................. 658,405 19,411 677,816
Marketing ................................. 714,282 286,207 1,000,489
Printing and office supplies .............. 573,039 343,927 916,966
FDIC insurance ............................ 923,587 222,094 1,145,681
Communications ............................ 414,686 148,579 563,265
Other noninterest expense ................. 2,843,353 1,754,204 4,597,557
--------------------------------------------
Total noninterest expense ............... 24,654,355 7,955,913 32,610,268
INCOME BEFORE INCOME TAXES ................ 9,066,882 2,557,188 11,624,070
PROVISION FOR INCOME TAXES ................ 2,751,249 757,380 3,508,629
--------------------------------------------
NET INCOME ................................ $ 6,315,633 $ 1,799,808 $ 8,115,441
============================================
AVERAGE NUMBER OF COMMON
EQUIVALENT SHARES OUTSTANDING ........... 9,642,546 1,431,300 11,832,435
EARNINGS PER SHARE
Primary ................................. $ .66 $ 1.43 $ .70
Fully Diluted ........................... $ .65 $ 1.26 $ .69
</TABLE>
37
<PAGE> 51
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
1. Intangibles. Core deposit intangibles of $549,260 at WCB are being
amortized over seven and ten year lives with approximately ten years remaining.
Core deposit intangibles and goodwill at Centennial are being amortized over ten
years with approximately eight and one-half 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 2,410,582
shares to Centennial shareholders using the exchange ratio of 1.53, in addition
to the 10,112,506 shares already outstanding to WCB's shareholders. No shares of
WCB Common Stock will be issued in exchange for unexercised Centennial stock
options at the closing of the Merger; such options will be converted into
equivalent WCB Common Stock options. These shares were derived by using the
respective companies' outstanding shares at September 30, 1997. An adjustment of
$2,997,317 to common stock and $2,999,245 to capital surplus is necessary to
reflect the difference between issuance of 2,410,582 shares of WCB Common Stock,
with an aggregate par value of $3,013,228 and the value of Centennial Common
Stock that will be canceled which is $15,755. Included in the adjustments and
reflected in the Investments available for sale and Other liabilities are 125
shares of WCB stock owned by Centennial at September 30, 1997. These shares have
also been eliminated in the pro forma Common Stock and Capital Surplus. The pro
forma adjustments were based on the exchange ratio generating the issuance of
2,410,582 shares. There were no other significant adjustments made to the
historical balance sheets or statements of income of WCB and Centennial to
arrive at the unaudited pro forma combined balance sheets and statements of
income.
3. Transaction Costs. Total transaction costs incurred by WCB and
Centennial in connection with the Merger are estimated at $495,000. Included in
these costs are expenses relating to legal, accounting, printing and other
professional fees incurred to complete the Merger. In addition, WCB and
Centennial anticipate costs to transition Centennial into WCB of approximately
$700,000. Transition costs would include items such as system conversion costs,
equipment costs, and professional fees, and the like incurred in the process of
converting Centennial to WCB systems and procedures.
4. Earnings per share. Earnings per share computations are based on the
weighted average common equivalent shares outstanding during the years
indicated. The shares used in calculating earnings per share have been restated
to reflect all stock dividends paid. Pro forma weighted average shares
outstanding reflect the issuance of 1.53 shares of Combined Corporation Common
Stock for each share of Centennial Common Stock. See "EQUIVALENT PER COMMON
SHARE DATA."
5. West Coast Bancorp. The assets and stockholders' equity of WCB
(parent company only) of $75,265,994, as disclosed, are included in the assets
and liabilities of WCB Consolidated.
6. Allowance for Loan Losses. In connection with the Merger, WCB and
Centennial have undertaken an extensive review and evaluation of the credit risk
inherent in the Bank's loan portfolio. This review and evaluation is still
underway, but both parties expect that an increase to the Bank's allowance for
loan losses will be made in accordance with WCB's historic reserve methodology.
Presently, it is anticipated that the Bank's allowance for loan losses will be
adjusted upward to 1.5% to 1.75% of the outstanding loan portfolio of the Bank.
If this level of allowance had been provided for the Bank's loan portfolio as of
September 30, 1997, an additional provision of $1.3 million to $1.8 million
would have been required. See "CENTENNIAL'S MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Results of Operations Nine
months ended September 30, 1997 and 1996 - Provision for Loan Losses; - Net
Income."
38
<PAGE> 52
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 the Bank of Vancouver, and has long-standing roots in Oregon dating
back to 1925. A broad range of community banking services are offered throughout
the 32-office network stretching from Portland, north to Vancouver, Washington,
south along I-5 to the greater Salem area and west to the central Oregon Coast.
The Bank of Newport operates three branches under the business name "Valley
Commercial Bank."
WCB's expansion plans include internally-generated growth from
strategically-located existing branches, some selected new branch expansion and
expansion in Washington. In addition to 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 Centennial, 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 an enhanced 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
1996 10-K, WCB's 1997 10-Qs and the WCB 1997 Proxy incorporated by reference
into this Prospectus/Joint Proxy Statement. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE," "AVAILABLE INFORMATION," the WCB 1996 10-K, the 1997
WCB 10-Q's, and the WCB 1997 Proxy.
INFORMATION CONCERNING CENTENNIAL
BUSINESS
Centennial was originally organized in 1987 under the name " First
Olympic Bancorporation" but remained inactive until 1994 and conducted no
operations before 1995, when it was reorganized to become the Bank's parent
holding company. At that time the Bank was reorganized as a wholly-owned
subsidiary of Centennial. As a result, Centennial became a bank holding company
registered under the Bank Holding Company Act of 1956. In September 1995,
Centennial acquired all of the outstanding stock of Centennial Funding
Corporation, an FHA-approved mortgage lender which makes home loans and
residential development loans. In June 1996, the Bank acquired First American
State Bank ("First American"), a two branch bank in Lewis County, Washington.
The banks were merged, with the Bank continuing as the resulting entity.
Centennial has other subsidiaries, all of which are, or before consummation of
the Merger will be, wholly owned. At September 30, 1997, Centennial had assets
of approximately $260.8 million on a consolidated basis.
The Bank is a Washington state commercial banking corporation
incorporated on May 8, 1974. The Bank's deposits are insured by the FDIC. The
Bank is not a member of the Federal Reserve System. The Bank serves customers in
southwestern Washington through eight branches and two real estate offices, with
locations in Olympia, Lacey, Shelton, Hoodsport, Centralia, Chehalis, Fife and
Puyallup. The Bank offers a broad range of financial services to commercial and
individual customers throughout its service areas. Commercial banking services
include real estate loans, commercial loans, accounts receivable and inventory
financing, letters of credit and commercial deposits. Individual banking
services include savings and checking accounts, real estate loans, consumer
installment loans, safe deposit boxes and discount brokerage services.
The Bank has experienced strong growth in the last ten years. The Bank
targets high quality small businesses as its core customers and strives to offer
exceptional service. Centennial's mortgage departments offer a full range of
mortgage products to consumers, building contractors, and commercial investors.
By hiring its management and loan officers from the local community, the Bank
believes it has a local knowledge base that enables it to compete more
effectively against the larger banks operating in its market areas.
COMPETITION
Centennial faces strong competition, both in attracting deposits and in
originating loans, from other commercial banks, savings and loan associations,
mutual savings banks and credit unions, all of which exist in Centennial's
service areas. Many of these competitors have greater financial resources than
Centennial.
39
<PAGE> 53
Centennial competes for deposits and banking business in southwestern
Washington from eight locations in Olympia, Lacey, Shelton, Hoodsport, Centralia
and Chehalis. Centennial's market area encompasses Thurston, Mason, Pierce and
Lewis counties. Centennial competes against approximately ten commercial banks,
five savings banks and ten credit unions in its market area.
Centennial competes for consumer and commercial mortgage business
through the Bank's banking branches and also through loan production offices in
Puyallup and Fife. There are innumerable competing mortgage lenders, both in the
traditional financial institution arena and independent mortgage companies.
Rates and service are the competitive factors.
FACILITIES
The main office of Centennial and the Bank are located at 2850 Harrison
Ave, Olympia, Washington. The Bank owns seven other locations and leases four
other locations in Southwest Washington, and has an option to purchase its
Chehalis and Shelton Olde Towne leased premises.
EMPLOYEES
As of September 30, 1997, the Bank had 148.9 full time equivalent
employees. None of the Bank's employees is represented by a union or other
bargaining group. The Bank believes its relationship with its employees to be
good. Centennial does not have paid employees of its own. Certain officers of
the Bank serve as unpaid officers of Centennial and Centennial reimburses the
Bank for their services.
LEGAL PROCEEDINGS
Periodically and in the ordinary course of business, various claims and
lawsuits may be brought against Centennial or the Bank. In the opinion of
management, the ultimate liability, if any, resulting from such claims or
lawsuits will not have a material adverse effect on the financial position or
results of operations of Centennial or the Bank.
CENTENNIAL MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of Centennial'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 related
notes included elsewhere in this Prospectus/Proxy.
OVERVIEW
Centennial's business consists primarily of attracting deposits from the
public and originating commercial and real estate loans through the Bank.
Centennial's net income is derived primarily from net interest income of the
Bank, which is primarily the difference between interest earned on the Bank's
loan and investment portfolio and the cost of funds, consisting of interest paid
on deposits and borrowings. The volume of and yields earned on loans and
investments and the volume of and rates paid on deposits and borrowings
determine net interest income.
The Bank's net income is also affected by noninterest income (primarily
service charges on deposits, securities gains or losses and other operating
income), provision for loan losses and other noninterest expenses (primarily
salaries and benefits, occupancy expenses, data processing costs, and state and
local taxes).
The Bank depends primarily upon customer deposits for funds with which
to conduct its business. Total deposits increased to $235.1 million at September
30, 1997 from $199.3 million at December 31, 1996. Since 1987, the Bank has
experienced strong, consistent deposit growth, with some seasonal fluctuations.
Centennial's net income is also dependent to some extent on the
financial results of its other direct and indirect subsidiaries, including
Centennial Funding Corporation ("Centennial Funding"), a mortgage brokerage
company. Effective September 30, 1995, the Bank transferred its 50% ownership
interest in Centennial Funding to Centennial as a non-cash dividend, and
Centennial acquired the remaining 50% ownership interest from the other
shareholder of Centennial Funding in
40
<PAGE> 54
exchange for Centennial Common Stock. To date, the financial results of
Centennial Funding and Centennial's other subsidiaries (other than the Bank)
have not materially affected Centennial's net income.
In June 1996, Centennial acquired First American State Bank ("First
American") through a merger of First American into the Bank. The acquisition was
accounted for using the purchase method of accounting. The results of operations
for First American are included in Centennial's results of operations since the
date of the acquisition. The cost of the acquisition ($5.4 million) exceeded the
fair value of the net assets of First American by $1.8 million. The excess is
being amortized on the straight-line basis over the estimated remaining lives on
the underlying assets. See Note 1 to Consolidated Financial Statements of
Centennial.
RESULTS OF OPERATIONS
Nine months ended September 30, 1997 and 1996
Overview. As of September 30, 1997, total assets of Centennial were
$260.8 million, representing a 23% increase over Centennial's total assets of
$212.7 million as of September 30, 1996. The growth in Centennial's total assets
resulted primarily from increases in cash and cash equivalents balances, as
deposits grew faster than loan originations.
Net Interest Income. Net interest income for the nine months ended
September 30, 1997 increased 15% to $10.2 million from $8.9 million on September
30, 1996. This increase in net interest income reflects primarily an increase in
the volume of interest-earning assets partially offset by a decreases in net
interest margin and net interest spread from period to period. Average
interest-earning assets for the nine months ended September 30, 1997 grew 27% to
$209.5 million from $164.7 million at September 30, 1996. Average
interest-bearing liabilities for the nine months ended September 30, 1997 grew
26% to $174.0 million from $137.6 million at September 30, 1996. Net interest
margin, which is determined by dividing net interest income by average
interest-earning assets, declined to 6.54% for the nine months ended September
30, 1997, from 7.21% for the nine months ended September 30, 1996, due mainly to
declining rates on interest earning assets. The average yield on interest
earning assets decreased to 10.38% for the nine months ended September 30, 1997
from 11.15% for the nine months ended September 30, 1996. Average rates paid for
interest-bearing liabilities decreased to 4.63% for the nine months ended
September 30, 1997 from 4.72% for the nine months ended September 30, 1996. As a
result, net interest spread, which is the difference between the yield on
interest-earning assets and the rate paid on interest-bearing liabilities,
declined to 5.75% for the nine months ended September 30, 1997 from 6.43% for
the nine months ended September 30, 1996.
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 amount of interest income
on 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 using the interest method over the life of the loan.
41
<PAGE> 55
CENTENNIAL HOLDINGS, LTD.
AVERAGE BALANCES AND AVERAGE RATES EARNED AND PAID 9/30/97 AND 9/30/96
<TABLE>
<CAPTION>
09/30/97 09/30/96
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate (1) Balance Paid Rate (1)
----------- ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning balances
due from banks 5,757,825 242,910 5.64% 5,108,508 215,416 5.63%
Federal funds sold 306,569 11,802 5.14%
Taxable securities 10,340,757 467,014 6.04% 10,270,066 437,458 5.69%
Nontaxable securities (2) 1,206,996 76,508 8.47% 1,480,146 90,098 8.13%
Loans, including fees (3) 192,169,943 15,476,779 10.77% 147,551,860 12,997,610 11.77%
----------------------- ------------------------
Total interest earning
assets 209,475,521 16,263,211 10.38% 164,717,149 13,752,384 11.15%
------------ ----------
Allowance for loan loss (1,537,119) (1,142,278)
Premises and equipment 8,216,862 7,403,604
Other assets 16,886,104 12,424,476
----------- ------------
Total assets 233,041,368 183,402,951
=========== ============
LIABILITIES:
Savings and interest
bearing demand deposits 99,072,229 3,596,845 4.85% 71,110,886 2,339,552 4.39%
Certificates of deposit 67,875,432 2,065,983 4.07% 60,819,287 2,242,495 4.93%
Short-term borrowings 4,836,374 210,498 5.82% 3,409,307 142,434 5.58%
Long-term borrowings 2,174,051 148,115 9.11% 2,214,484 136,554 8.24%
----------- ------------ ------------ ------------
Total interest bearing
liabilities 173,958,086 6,021,441 4.63% 137,553,964 4,861,035 4.72%
------------ ------------
Demand deposits 37,728,931 29,512,038
Other liabilities 1,852,291 669,330
----------- ------------
Total liabilities 213,539,308 167,735,332
Shareholders' equity 19,502,060 15,667,619
----------- ------------
233,041,368 183,402,951
=========== ============
Net interest income 10,241,770 8,891,349
============ ============
Net interest spread 5.75% 6.43%
=========== ===========
</TABLE>
(1) Yield rate calculations have been based on more detailed information
than presented and therefore may not recompute exactly due to rounding.
(2) Interest earned on nontaxable securities has been computed on a 34
percent tax equivalent basis.
(3) Includes balances for loans held for sale.
Provision for Loan Losses. The provision for loan losses for the nine
months ended September 30, 1997 increased 300% to $1.2 million from $.3 million
for the nine months ended September 30, 1996, primarily as a result of
unexpected loan losses from First American. Centennial believes the loan loss
provision represents appropriate additions to the allowance for loan losses.
In connection with the Merger, WCB and Centennial have undertaken an
extensive review and evaluation of the credit risk inherent in the Bank's loan
portfolio. This review and evaluation is still underway, but both parties expect
that an increase to the Bank's allowance for loan losses will be made in
accordance with WCB's historic reserve methodology. Presently, it is anticipated
that the Bank's allowance for loan losses will be adjusted upward to 1.5% to
1.75% of the outstanding loan portfolio of the Bank. If this level of allowance
had been provided for the Bank's loan portfolio as of September 30, 1997, an
additional provision of $1.3 million to $1.8 million would have been required.
42
<PAGE> 56
Other Income. Other income for the nine months ended September 30, 1997
increased 122% to $3.5 million from $1.5 million for the nine months ended
September 30, 1996. This increase was due primarily to income from the sale of
mortgage loan servicing rights and to a lesser extent to income from the sale of
loans.
Other Expense. Other expense for the nine months ended September 30,
1997 increased 15% to $9.2 million from $8.0 million for the nine months ended
September 30, 1996. The increase was due primarily to increased operating costs
associated with Centennial's growth in assets.
Net Income. Centennial's net income increased 38% to $2.1 million for
the nine months ended September 30, 1997 from $1.5 million for the nine months
ended September 30, 1996. This increase was due primarily to the significant
increase in other income described above. Fully-diluted earnings per share for
the nine months ended September 30, 1997 increased 31% to $1.26 from $.96 for
the nine months ended September 30, 1997. In connection with the Merger, an
adjustment to the Bank's loan loss allowance is likely to be made. See " -
Provision for Loan Losses." Any such adjustment will increase the provision for
loan losses and represent a charge to the Bank's future earnings. Presently, it
is anticipated that the Bank's allowance for loan losses will be adjusted upward
to 1.5% to 1.75% of the outstanding loan portfolio of the Bank. If this level of
allowance had been provided for the Bank's loan portfolio as of September 30,
1997, an additional provision of $1.3 million to $1.8 million would have been
required, reducing Centennial's net income for the nine months then ended to an
amount ranging between $1.2 million to $900,000.
Years ended December 31, 1996 and 1995
Overview. As of December 31, 1996, total assets of Centennial were
$228.0 million, representing a 33% increase over total assets of $171.1 million
as of December 31, 1995. The growth in Centennial's total assets resulted
primarily from increases in the Bank's loan portfolio (including increases
resulting from the acquisition of First American).
Net Interest Income. Net interest income for 1996 increased 20% to $12.2
million in 1996 from $10.1 million in 1995. This increase in net income reflects
primarily an increase in the volume of interest-earning assets partially offset
by decreases in net interest margin. Average interest-earning assets in 1996
grew 25% to $172.7 million from $138.4 million in 1995. Average interest bearing
liabilities in 1996 grew 31% to $145.4 million from $111.1 million in 1995.
During the same periods, net interest margin declined to 7.09% for 1996 from
7.36% for 1995, due mainly to the development of a dealer loan portfolio, which
was priced competitively at a lower rate than offered directly in the Bank. The
average yield on interest earning assets decreased to 11.0% in 1996 from 11.35%
in 1995. Average rates paid for interest-bearing liabilities decreased to 4.65%
for 1996 from 4.98% for 1995. As a result, net interest spread decreased only
marginally from year to year.
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 amount of interest income
on 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 using the interest method over the life of the loan.
AVERAGE BALANCES AND AVERAGE RATES EARNED AND PAID
<TABLE>
<CAPTION>
12/31/96 12/31/95
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate (1) Balance Paid Rate (1)
----------- ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning balances
due from banks 4,424,736 237,152 5.36% 7,567,377 450,309 5.95%
Federal funds sold 229,508 11,802 5.14% 49,315 2,613 5.30%
Taxable securities 10,319,360 592,416 5.74% 9,822,675 594,407 6.05%
Nontaxable securities (2) 1,445,219 117,552 8.13% 1,742,342 135,398 7.77%
Loans, including fees (3) 156,325,725 18,043,293 11.54% 119,266,136 14,537,787 12.19%
------------------------ -------------------------
Total interest earning
assets 172,744,548 19,002,215 11.00% 138,447,845 15,720,514 11.35%
---------- ----------
Allowance for loan loss (1,158,610) (904,815)
Premises and equipment 7,641,999 5,250,513
Other assets 12,342,073 9,911,095
---------- ----------
</TABLE>
43
<PAGE> 57
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
----------- ------------
Total assets 191,570,010 152,704,638
=========== ============
LIABILITIES:
Savings and interest
bearing demand deposits 75,552,574 3,352,413 4.44% 58,549,639 2,901,317 4.96%
Certificates of deposit 63,009,874 2,962,244 4.70% 43,535,753 1,905,160 4.38%
Short-term borrowings 4,380,328 246,080 5.62% 4,871,438 304,898 6.26%
Long-term borrowings 2,435,083 201,131 8.26% 4,130,771 418,598 10.13%
----------------------- ------------------------
Total interest bearing
liabilities 145,377,859 6,761,868 4.65% 111,087,601 5,529,973 4.98%
------------ ------------
Demand deposits 28,814,435 28,978,453
Other liabilities 983,390 324,282
----------- ------------
Total liabilities 175,175,684 140,390,336
Shareholders' equity 16,394,326 12,314,302
=========== ============
191,570,010 152,704,638
=========== ============
Net interest income 12,240,347 10,190,541
============ ============
Net interest spread 6.35% 6.38%
=========== ===========
</TABLE>
(1) Yield rate calculations have been based on more detailed information
than presented and therefore may not recompute exactly due to rounding.
(2) Interest earned on nontaxable securities has been computed on a 34
percent tax equivalent basis.
(3) Includes balances for loans held for sale.
Other Income. Other income for 1996 decreased 12% to $2.1 million from
$2.3 million for 1995. This decrease was due primarily to lower income from the
sale of loans.
Other Expense. Other expense for 1996 increased 23% to $11.0 million
from $9.0 million for 1995. The increase is due primarily to increases in
operating expenses associated with the acquisition of First American (including
salary and benefit expense, the cost of cancelling First American's data
processing contract, staff training, supplies and signage expenses and other
business consolidation expenses) and to a lesser extent to increased salary
expense associated with Centennial Funding.
Provision for Loan Losses. The provision for 1996 increased 55% to
$396,00 from $256,000 for 1995 as a result of increases in the Bank's loan
portfolio.
Net Income. Centennial's net income decreased 21% to $1.9 million for
1996 from $2.4 million for 1995. This decrease resulted from increased other
expenses, described above. Fully-diluted earnings per share for 1996 declined
26% to $1.18 from $1.59 for 1995.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Sources of Funds. Centennial'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 payments are relatively stable
sources of funds while deposit inflows and unscheduled loan repayments 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 $235.1 million at September 30, 1997, up from $183.1
million at September 30, 1996. 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.
Deposit growth in 1995, 1996 and the first three quarters of 1997 has largely
been a function of the opening of a new Olympia branch in 1995, the acquisition
of First American, which had deposits of $29.0 million at closing, in June 1996,
the acquisition of the Olde Towne Branch in Shelton in 1997, and a general
increase in lending customers who move their deposit accounts to the Bank.
Centennial anticipates that it 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
44
<PAGE> 58
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
source of such funds will most likely be borrowings from the FHLB.
Capital. The tier 1 capital-to-asset leverage ratio for the Bank was
7.85% at September 30, 1997, as compared to 8.43 % at September 30, 1996. The
tier 1 capital-to-asset leverage ratio for the Bank was 8.25 % at December 31,
1996, as compared to 8.14% at December 31, 1995. 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
10.11% and 10.73% at September 30, 1997 and 1996 respectively. Risk-adjusted
capital-to-asset ratios were 10.33% and 11.44% at December 31, 1996 and 1995
respectively. As of September 30, 1997, the Bank was considered "Well
Capitalized" per regulatory risk based capital guidelines.
As the following table indicates, Centennial (on a consolidated basis)
currently exceeds the regulatory minimum capital ratio requirements.
<TABLE>
<CAPTION>
(Dollars in thousands) September 30, 1997 December 31, 1996
---------------------------------------------------------------------
Amount Ratio Amount Ratio
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 capital $19,463 9.56% $16,722 9.57%
Tier 1 capital minimum
requirement 8,147 4.00% 6,986 4.00%
----------------- ---------------- ----------------- ----------------
$11,316 5.56% $9,736 5.57%
Total capital $21,045 10.33% $17,952 10.28%
Total capital minimum
requirement 16,294 8.00% 13,972 8.00%
----------------- ---------------- ----------------- ----------------
Excess total capital $4,751 2.33% $3,980 2.28%
</TABLE>
LENDING
Centennial's principal lending activities are the origination of
commercial, commercial real estate, real estate mortgage and real estate
construction loans through the Bank. Centennial's policy is to originate loans
primarily in its local market area. The Bank is a Preferred Lender with the SBA
and utilizes the SBA programs to offer loans to small businesses that may
otherwise not meet the Bank's underwriting criteria. Being a community bank, the
Bank is able to attract a large volume of commercial business due to its
flexibility, service and understanding of the market. Real estate values and
construction starts remain stable and no major change is anticipated. Strong
markets in King and Pierce County support and contribute to the stability of the
real estate values and construction starts in Thurston County. The influence of
Ft. Lewis and the state government also contribute to the stability of the local
market. In general, loan-to-value ratios are maintained in the 75% - 80% range
for portfolio loans. Real estate mortgages are written to the secondary market
standards and are available for sale to the secondary market.
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. Most business loans are also dependent on the personal guarantees of the
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 SBA
loans, business term loans and secured revolving lines of credit. 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 buildings. The majority of the 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.
The Bank's consumer installment loans and other loans include home
equity loans, auto loans, personal lines of credit and Visa cards.
45
<PAGE> 59
In addition to interest earned on loans, Centennial receives fees for
originating loans and for providing loan commitments. These fees, net of costs
to originate 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 staff.
Types of Loans. The following table sets forth the composition of
Centennial's loan portfolio by type of loan as of the date indicated, not
including non accrual loans or deferred fees. The composition of loans at
September 30, 1997 and for the years ended December 31, 1996 and 1995 was as
follows:
<TABLE>
<CAPTION>
December 31
-----------------------------
September 30, 1997 1996 1995
--------------------------------------------------------------------------
Amount % of Total Amount % of Total Amount % of Total
<S> <C> <C> <C> <C> <C> <C>
Commercial $ 53,450,759 27.48% $ 49,117,142 26.87% $34,330,319 28.82%
Commercial-real estate 33,277,863 17.11% 38,112,518 20.85% 27,300,658 22.92%
Real estate-construction 33,691,818 17.32% 17,339,723 9.49% 12,268,654 10.30%
Real estate-mortgage 30,923,673 15.90% 32,170,157 17.60% 20,892,032 17.54%
Lines of credit,
installment, credit
cards, and overdrafts 43,182,541 22.20% 46,068,933 25.20% 24,319,607 20.42%
--------------------------------------------------------------------------
TOTAL $194,526,654 100.00% $182,808,473 100.00% $119,111,270 100.00%
==========================================================================
</TABLE>
Loan Maturities and Sensitivities to Changes in Interest Rates. The
following table shows the maturity analysis of loans outstanding by type as of
September 30, 1997. 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, but does not include non accrual loans or deferred fees.
<TABLE>
<CAPTION>
After One
Within But Within After
One Year Five Years Five Years Total
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $39,457,438 $10,418,135 $3,575,186 $53,450,759
Commercial-real estate 13,331,848 12,131,440 7,814,575 33,277,863
Real estate-construction 31,490,088 2,130,362 71,368 33,691,818
Real estate-mortgage 12,181,107 12,021,753 6,720,813 30,923,673
Lines of credit, installment,
credit cards, and overdrafts 4,490,896 32,526,244 6,165,401 43,182,541
---------------------------------------------------------------
TOTAL $100,951,377 $69,227,934 $24,347,343 $194,526,654
===============================================================
Total loans maturing after one year with:
Predetermined interest rates (fixed): $7,432,720 $59,182,198 $24,347,343 $90,962,261
Floating or adjusted interest rates
(variable): 93,518,657 10,045,736 103,564,393
---------------------------------------------------------------
$100,951,377 $69,227,934 $24,347,343 $194,526,654
===============================================================
</TABLE>
Risk Elements. The following table states as of September 30, 1997 and
for the years ended December 31, 1996 and 1995 non-accrual and past due loans:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996 December 31, 1995
------------------ ----------------- -----------------
<S> <C> <C> <C>
Non accrual loans $1,093,000 $344,000 $191,000
Accruing loans past due 90 days or more $2,000 $5,000 $280,000
</TABLE>
Interest income on non accrual loans that would have been recorded in
the three periods ending September 30, 1997 was $52,400. Non accrual loans have
increased greatly in 1997. This is due to unexpected loan problems from the loan
portfolio acquired with First American, the balances of these loans were
$630,000 at September 30, 1997. Without those
46
<PAGE> 60
loans, the non accrual balance would be $463,000, well in line with historical
non accruals for Centennial. The anticipated loss for these First American loans
is $60,000.
Loan Administration. Centennial has experienced significant growth of
its loan portfolio with consistent growth in all areas of lending. The growth is
largely attributable to the economic climate in Thurston County, the ancillary
effects of large regional businesses such as Boeing, Intel and State Farm, which
are located in King and Pierce counties and the quality of service and products
available from Centennial. The increase in loan losses and delinquencies can be
directly attributable to the quality of the loan portfolio acquired with First
American. As these problems are resolved, historical rates of loan losses and
delinquencies are expected to return. Centennial strives to minimize the risks
associated with loans to developers by funding borrowers with significant assets
and other sources of income beyond their development companies. Typically, many
of the developers have rental income from commercial or residential properties
and management considers these loans to customers to be of the same or better
quality as loans to long standing Centennial customers and represent no
additional risk. With Centennial's primary lending focus on commercial and real
estate loans, risk is generally correlated with the health of the business
community. The risk is mitigated by monitoring the financial condition of
Centennial's customers and by maintaining adequate collateral margins.
Centennial has adopted comprehensive lending policies that provide detailed
underwriting guidelines, as well as procedures for identification and monitoring
of potential problem loans. The loan committees meet regularly and review
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 commercial loan committee consists of the CEO,
COO and CCO of the Bank along with the SBA officer and area managers. The real
estate loan committee consists of the CEO, COO and CCO of the Bank, along with
the SVP Mortgage, VP Mortgage, VP Construction and the Credit Administration
Manager. The full board of the Bank reviews summary reports from these
committees monthly.
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. 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 September 30, 1997, 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 continued to accrue interest at September 30, 1997 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.
At September 30, 1997, the Bank had $1,093,000 in non-accrual loans,
$2,000 in past due loans 90 days plus, and $246,737 in OREO, for a total of
$1,341,737 in non-performing assets. The allowance for loan loss represents
117.88% of non-performing assets at September 30, 1997, compared to 177.17% at
December 30, 1996 and 215.58% at December 31, 1995. One borrower with two loans
and combined balances of $570,000 was upgraded to performing loans status in
November, 1997, and one loan for $60,000 was charged off, bringing the above
figures and ratios into historical performance ranges for Centennial. Centennial
anticipates no significant losses on the remainder of the non-performing assets.
Analysis of Allowance for Loan Losses. Centennial 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
risks 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 are added to the allowance. The
following is an analysis of the activity in the allowance for loan losses for
the period ended September 30, 1997 and the years ended December 31, 1996 and
1995:
47
<PAGE> 61
<TABLE>
<CAPTION>
Nine Months Ended Year Ended December 31
September 30, 1997 1996 1995
-------------------------------------------------
<S> <C> <C> <C>
Balance at the beginning of the period $ 1,452,946 $ 992,098 $ 800,060
Charge-offs:
Commercial (815,664) (250,337) (3,240)
Consumer (297,926) (298,400) (67,163)
-------------------------------------------------
(1,113,590) (548,737) (70,403)
-------------------------------------------------
Recoveries:
Commercial 18,479 26,516 4,850
Consumer 12,255 35,441 1,591
-------------------------------------------------
30,734 61,957 6,441
-------------------------------------------------
Net (charge-offs) recoveries (1,082,856) (486,780) (63,962)
Reserves added through acquisition of
First American State Bank 551,628
Provision charged to operations 1,211,500 396,000 256,000
-------------------------------------------------
Balance at end of period $ 1,581,590 $ 1,452,946 $ 992,097
=================================================
Ratio of net (charge-offs) recoveries to
average loans outstanding during period 0.75% 0.31% 0.05%
Average loans outstanding during the period $ 192,169,943 $ 156,325,725 $ 118,473,976
</TABLE>
In connection with the Merger, WCB and Centennial have undertaken an
extensive review and evaluation of the credit risk inherent in the Bank's loan
portfolio. This review and evaluation is still underway, but both parties expect
that an increase to the Bank's allowance for loan losses will be made in
accordance with WCB's historic methodology. Presently, it is anticipated that
the Bank's allowance for loan losses will be adjusted upward to 1.5% to 1.75% of
the outstanding loan portfolio. If this level of allowance had been provided for
the Bank's loan portfolio as of September 30, 1997, an additional provision of
$1.3 million to $1.8 million would have been required.
Asset and Liability Management. Centennial's results of operations
depend 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 Centennial'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 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 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 September 30, 1997, Centennial had a negative interest sensitivity
GAP and thus is most vulnerable to rising interest rates. 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. Centennial utilizes interest sensitivity GAP reports to measure
the effect of varying interest rate scenarios and balance sheet strategies on
net interest income.
48
<PAGE> 62
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, 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 September 30, 1997, and the
difference between them for the maturity or repricing periods indicated.
ASSET AND LIABILITY MATURITY REPRICING SCHEDULE
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
After One
Within One But Within After Five
Year Five Years Years Total
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans $ 100,951,377 $ 69,227,934 $ 24,347,343 $ 194,526,654
Investment Securities:
Available for sale 4,713,608 6,019,369 715,700 11,448,677
Held for Maturity 240,000 480,000 720,000
Interest bearing deposits with
other banks 25,949,269 25,949,269
--------------------------------------------------------------
Total Earning Assets $ 131,854,254 $ 75,727,303 $ 25,063,043 $ 232,644,600
==============================================================
Deposits:
Interest bearing demand $ 41,033,461 $ 41,033,461
Savings 69,202,720 69,202,720
Time certificates of deposit 53,557,279 15,758,046 1,162,744 70,478,069
--------------------------------------------------------------
Total deposits 163,793,460 15,758,046 1,162,744 180,714,250
==============================================================
Long term borrowings 290,000 290,000
--------------------------------------------------------------
Total Interest Bearing Liabilities 164,083,460 15,758,046 1,162,744 181,004,250
--------------------------------------------------------------
Net Interest Rate Sensitivity Gap $( 32,229,206) $ 59,969,257 $ 23,900,299 $ 51,640,350
==============================================================
</TABLE>
Investment Activities. Centennial has adopted, as required, Statement of
Financial Accounting Standards (SAFS) 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 stockholder's equity.
Other than securities issued by the U.S. government or a federal agency,
Centennial has no securities exceeding 10% of stockholders' equity. Municipal
securities owned by Centennial are primarily issued by Thurston County or local
municipalities with which Centennial is familiar.
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 Centennial.
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<PAGE> 63
Analysis of Investment Securities. The amortized cost and estimated
market values of investments in debt securities are as follows as of September
30, 1997:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury securities $6,734,407 $12,681 ($1,544) $6,745,544
U.S. Government agencies 917,667 (201,967) 715,700
Municipal Bonds 500,000 25,100 525,100
Mortgage-backed securities 907,111 7,618 (12,475) 902,254
Marketable equity securities 52,905 27,774 80,679
Federal Home Loan Bank stock 2,479,400 2,479,400
-------------------------------------------------------------------
TOTAL AVAILABLE FOR SALE 11,591,490 73,173 (215,986) 11,448,677
Held to maturity:
Municipal bonds 720,000 4,545 (1,791) 722,656
-------------------------------------------------------------------
TOTAL $12,311,490 $77,718 ($217,777) $12,171,333
===================================================================
</TABLE>
Maturity Distributions of Investment Securities. The scheduled
maturities of investment securities and their weighted average yield as of
September 30, 1997 were as follows:
<TABLE>
<CAPTION>
Available-for-Sale Securities Held-to-Maturity 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
year or less 1,248,595 1,251,275 5.96% $240,000 $240,127 6.23%
Due after one year
through five years 5,985,812 6,019,369 6.23% 480,000 482,529 7.95%
Due after five
years through
ten years
Due after ten years 917,667 715,700 3.30%
-----------------------------------------------------------------------------------
8,152,074 7,986,344 5.86% 720,000 722,656 7.38%
============= =============
Mortgaged-backed
securities 907,111 902,254
Marketable Equity
Securities 52,905 80,679
Federal Home Loan
Bank Stock 2,479,400 2,479,400
--------------------------- ---------------------------
11,591,490 11,448,677 720,000 722,656
=========================== ===========================
</TABLE>
50
<PAGE> 64
MANAGEMENT OF CENTENNIAL
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning all of the directors
and executive officers of Centennial and the Bank, including the background,
business experience, and principal occupations, of each Centennial director and
executive officer. Except as otherwise noted, the positions indicated are at
both Centennial and the Bank.
DIRECTORS:
DAVID BAYLEY, age 48, is Vice President and majority owner of Mason County Title
Co. and practices law as a self-employed attorney in areas of real estate &
corporate law Mr. Bayley serves as Chairman of the Bank's Audit Committee, and
is also a member of the Funds Management and Executive Committees. He has served
as a director of the Bank since 1985, and of Centennial since 1994.
LOWELL DEGUISE, age 40, is owner of Deguise Bookkeeping Service and Controller
for Gene Weaver & Associates, and a former director of First American. Mr.
Deguise is a member of the Bank's Funds Management and Audit Committees and has
been a director of the Bank since 1996.
RUSSELL D. DUNCAN, age 56, is the owner/manager of Duncan & Assoc. Insurance
Agency. Mr. Duncan is Chairman of the Bank Human Resource & Marketing Committee,
is a member of the Bank's Executive Committee, and has served as a director of
the Bank since 1986.
THOMAS W. HEALY, age 58, has been the Chief Executive Officer of Centennial
since its formation and of the Bank since 1986, and serves as Chairman of the
Board of Centennial and the Bank and Chairman of the Bank's Executive Committee.
Mr. Healy has been a director of the Bank since 1986.
RICHARD T. HOSS, age 44, is an attorney with Hoss & Wilson Hoss, Attorneys at
Law in Shelton. Mr. Hoss is a member of the Executive and Funds Management
Committees of the Board and has been a director of the Bank since 1986.
G. LOWELL JARVIS, age 68, is semi-retired and works part-time as a real estate
agent for Reid Realty. Mr. Jarvis has been a director of the Bank since its
inception and is a member of the Executive Committee and Vice Chairman of the
Audit Committee.
JENS W. JORGENSEN, age 37, previously Chairman of First American's Board, is
General Manager of Tri-Mountain Resources, a division of Jorgensen Timber. Mr.
Jorgensen holds a BA in Business Finance and International Finance. Mr.
Jorgensen is a member of the Bank's Funds Management and Audit Committees. Mr.
Jorgensen has been a director of Centennial and the Bank since 1996.
GREGG REICHERT, age 50, is the owner operator of an AM/PM mini mart and Reichert
Choice Meats and was previously a member of First American's Board. He is a
member of the Bank's Funds Management and Human Resources and Marketing
Committees has served as a director of the Bank since 1996.
RICHARD SCOTT, age 63, is President and General Manager of Desco Electronics.
Mr. Scott is a member of the Bank's Funds Management and Human Resources and
Marketing Committees of the Board and has been a director of the Bank since
1990.
JOE L. SNYDER, age 51, is an attorney. Mr. Snyder currently serves as
Vice-Chairman of the Board of the Bank, and member of the Human Resource and
Marketing and Audit Committees of the Board. Mr. Snyder has been a director of
Centennial since 1994, and a director of the Bank since 1983.
NORMA A. TAYLOR, age 64, is Vice President of Taylor United, Inc., a
family-owned shellfish operation. Ms. Taylor is a member of the Bank's Human
Resource and Marketing and Audit Committees, has been a director of Centennial
since 1994, and a director of the Bank since 1988.
DANIEL D. YERRINGTON, age 52, has been the President of Centennial since 1994
and of the Bank since 1987. Mr. Yerrington is Chairman of the Bank's Funds
Management Committee, and serves as Vice-Chairman of the Executive Committee and
as a
51
<PAGE> 65
member of the Bank's Human Resource and Marketing Committee. Mr. Yerrington is
also a member of the Centennial Board. Mr. Yerrington holds a BA, has 23 years
banking experience and five years experience as an FDIC Examiner.
EXECUTIVE OFFICERS:
STEVE HANSON, age 40, Senior Vice President and Chief Financial Officer. Mr.
Hanson has 15 years bank experience and approximately 2 years as a State of
Washington bank examiner. He has worked for the Bank since 1987 and is the Chief
Financial Officer for Centennial and the Bank.
JILL FAUGHENDER, age 38, Vice President, Human Resources. Ms. Faughender has 18
years banking experience and holds designation as Professional in Human Resource
(PHR) Management. She has worked for the Bank since 1985 and is the Personnel
Officer of the Bank and Corporate Secretary for both Centennial and the Bank.
CAROL HANSON, age 63, Senior Vice President, Chief Credit Officer. Ms. Hanson
has 34 years mortgage and commercial lending experience. She has worked for the
Bank since 1992 and is the Senior Credit Administrator.
TERRY SNYDER, age 52, Senior Vice President, Mortgage Area Manager. Mr. Snyder
has 25 years banking and mortgage lending experience. He has worked for the Bank
since 1987 and currently oversees the entire mortgage operation.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table summarizes all
compensation earned by Thomas W. Healy, Chief Executive Officer of Centennial
and the Bank and the only named executive officer who will continue as an
executive officer or director of WCB after consummation of the Merger, for
services rendered in all capacities during the fiscal year ended December 31,
1996.
<TABLE>
<CAPTION>
Annual Compensation
Name and ------------------------------- All Other
Principal Position Year Salary Compensation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thomas W. Healy 1996 $180,000 $192,811(1)
=========================================================================================================
</TABLE>
- ----------
(1) Includes car allowance benefits of $1,405, board fees of $6,000, $35,406
relating to premiums on a $1.5 million policy on Mr. Healy's life, the
proceeds of which Centennial is obligated to apply in redemption of
shares of Centennial Common Stock from Mr. Healy's estate, and $150,000
representing the actuarially projected current dollar value of deferred
compensation benefits which accrued during 1996 under the terms of Mr.
Healy's employment contract with Centennial.
Options Granted in Last Fiscal Year. There were no options granted to Mr. Healy
during the fiscal year ended December 31, 1996.
Aggregate Option Exercises and Fiscal Year-End Option Value Table. The
following table includes the number of shares covered by exercisable stock
options held by Mr. Healy as of December 31, 1996. Mr. Healy holds no
unexercisable options. 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 end fair market value of the Centennial
Common Stock.
<TABLE>
<CAPTION>
Shares
Acquired Value Number of Unexercised Value of Unexercised
Name on Exercise Realized Options at Year End Options at Year End
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas W. Healy 20,000 $103,600 80,000 $507,200
====================================================================================================
</TABLE>
DIRECTOR COMPENSATION
Directors receive a fee of $550.00 per month for each meeting of the
Centennial or Bank Board, as well as $550.00 for each committee meeting
attended. Centennial maintains a director stock option plan (the "Plan") as a
means of providing directors of Centennial and its
52
<PAGE> 66
subsidiaries with greater incentive in connection with their services to
Centennial and its subsidiaries, thereby promoting the interests of Centennial
and its stockholders. The Plan was effective April 1, 1996 and terminates April
1, 1999. The Plan is administered by the Centennial Board of Directors, which
has exclusive authority in its absolute discretion to determine the terms and
conditions of options granted thereunder, other than those terms and conditions
fixed in the Plan. The aggregate number of shares of Centennial Common Stock
that may be issued under the Plan may not exceed 25,000 shares.
BOARD COMMITTEES
There are no committees of the Centennial Board. Any committee work is
done through the Bank Board and its committees. The Bank has an Executive/Loan
Committee, a Funds Management Committee, a Human Resource & Marketing Committee
and an Audit Committee.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Except as set forth herein, none of the directors or executive officers
of Centennial or 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 Centennial's and the Bank's business.
Certain directors and officers of Centennial and 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.
Thomas W. Healy is employed under an employment agreement with
Centennial. The term of employment is 8.5 years commencing January 1, 1996. The
employment agreement provides an annual salary of $180,000, subject to annual
increases and bonuses in the discretion of Centennial's Board of Directors, as
well as stock options, benefits, automobile allowance and indemnification. Mr.
Healy is also entitled under the agreement to a retirement allowance of $150,000
per year, beginning at age 65. The retirement allowance vests on a pro rata
basis over the term of the agreement. Pursuant to the agreement, Centennial is
required to maintain a life insurance policy in the amount of $1.5 million, the
proceeds of which must be used to redeem shares of Centennial stock from Mr.
Healy's estate.
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of September 30, 1997,
with respect to (1) each director and executive officer of Centennial and the
Bank, and (2) the shares owned by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
Number of Shares Percentage
Name Beneficially Owned(1) Outstanding
- ---- --------------------- -----------
<S> <C> <C>
Thomas W. Healy(2) 673,243 42.43%
Daniel D. Yerrington(3) 31,384 1.98%
David C. Bayley(4) 60,300 3.80%
Lowell Deguise 1,722 *
Russell D. Duncan(5) 12,487 *
Richard T. Hoss(6) 4,300 *
G. Lowell Jarvis(7) 4,400 *
Jens W. Jorgensen 23,814 1.50%
Gregg Reichert 9,066 *
Richard A. Scott(8) 7,600 *
Joe L. Snyder(9) 51,700 3.26%
Norma A. Taylor(10) 21,900 1.38%
Terry Snyder(11) 16,561 1.04%
Steve Hanson(12) 9,759 *
Carol Hanson(13) 4,295 *
Jill Faughender(14) 3,603 *
All Directors and Officers as a Group 59.18%
</TABLE>
53
<PAGE> 67
- -------------------
* Less than 1%.
(1) Beneficial ownership includes sole voting and investment power as to the
shares, unless otherwise indicated.
(2) Includes 10,343 shares owned through Centennial Employee Stock Ownership
Plan, and 45,900 shares owned by Centennial Capital Corporations, a
wholly owned company of Healy.
(3) Includes 1,500 shares of issuable on exercise of vested options and
7,528 shares owned through the Centennial Employee Stock Ownership Plan.
(4) Includes 400 shares of issuable on exercise vested options.
(5) Includes 400 shares of issuable on exercise vested options.
(6) Includes 400 shares of issuable on exercise vested options.
(7) Includes 400 shares of issuable on exercise vested options.
(8) Includes 400 shares of issuable on exercise vested options.
(9) Includes 400 shares of issuable on exercise vested options.
(10) Includes 400 shares of issuable on exercise vested options.
(11) Includes 5,561 shares owned through the Centennial Employee Stock
Ownership Plan.
(12) Includes 3,000 shares of issuable on exercise vested options and 4,609
shares owned through the Centennial Employee Stock Ownership Plan.
(13) Includes 3,000 shares of issuable on exercise vested options and 295
shares owned through the Centennial Employee Stock Ownership Plan.
(14) Includes 1,000 shares of issuable on exercise vested options and 2,553
shares owned through the Centennial Employee Stock Ownership Plan.
OTHER PRINCIPAL SHAREHOLDERS
There are no persons other than those included in the table entitled
"Securities Ownership of Management and Certain Beneficial Owners" known by
Centennial and the Bank to have beneficial ownership of more than 5% of the
outstanding Centennial Common Stock.
54
<PAGE> 68
SUPERVISION AND REGULATION
INTRODUCTION
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,
Centennial, and their respective subsidiaries.
WCB AND CENTENNIAL
GENERAL
As bank holding companies, WCB and Centennial 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 has expanded interstate branching and relaxed federal
restrictions on interstate banking and may expand opportunities for bank holding
companies (for additional information see below under the heading "WCB's Bank
Subsidiaries -- Interstate Banking and Branching"). However, the full impact of
this legislation on WCB and Centennial 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 Centennial must file annual and certain interim reports required
from time to time by the FRB. In addition, the FRB performs periodic
examinations of WCB and Centennial.
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. The Economic Growth
and Regulatory Paperwork Reduction Act of 1996 ("Economic Growth Act") amended
the BHCA to eliminate the requirement that bank holding companies seek FRB
approval before engaging de novo in permissible nonbanking activities if the
holding company is well-capitalized and meets certain other specified criteria.
A bank holding company meeting those specifications need only notify the FRB
within 10 business days after beginning the activity.
The Economic Growth Act also established an expedited procedure for
well-capitalized bank holding companies meeting certain criteria to obtain FRB
approval to acquire smaller companies that engage in permissible non-banking
activities pre-approved by FRB order.
Transactions With Affiliates. WCB and its Bank Subsidiaries, and
likewise Centennial 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 Bank Subsidiaries will be
deemed affiliates within the meaning of the Federal Reserve Act.
Support of Subsidiary Banks. 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
55
<PAGE> 69
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, Centennial, the Bank, 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, Centennial, the
Bank, 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. Effective April 21, 1997, the FRB
has also adopted significant amendments to its anti-tying rules that: (1) remove
FRB-imposed anti-tying restrictions on bank holding companies and their non-bank
subsidiaries; (2) allow banks greater flexibility to package products with their
affiliates; and (3) establish a safe harbor from the tying restrictions for
certain foreign transactions. These amendments are designed to enhance
competition in banking and nonbanking products and allow banks and their
affiliates to provide more efficient, lower cost service to their customers.
However, the impact of the amendments on WCB, Centennial and their respective
subsidiaries is unclear at this time.
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, Centennial 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 1934 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 office of the SEC in Washington, D.C. In addition, the
securities issued by WCB are subject to the registration requirements of the
1933 Act 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 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 Centennial, or to otherwise
obtain control over the WCB or Centennial.
THE BANK SUBSIDIARIES AND THE BANK
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.
56
<PAGE> 70
REGULATION OF STATE BANKS
Oregon state banks, such as The Bank of Newport and The Commercial Bank
are subject to primary regulation and examination by the Oregon Department of
Consumer and Business Services ("Oregon Department"). As Washington State banks,
the Bank and the Bank of Vancouver are 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.
The deposits of the Bank and the 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 (1) the amount of common stock
outstanding and unimpaired, (2) the amount of preferred stock outstanding and
unimpaired, and (3) 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.
DIVIDENDS
Dividends paid to WCB by its Bank Subsidiaries are a material source of
WCB's cash flow. Likewise, dividends paid to Centennial by the Bank are a
material source of Centennial's cash flow. Various federal and state statutory
provisions limit the amount of dividends the Bank Subsidiaries and the Bank are
permitted to pay to WCB and Centennial, 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, 1996, WCB's Bank
Subsidiaries could have declared dividends of approximately $17.3 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.
57
<PAGE> 71
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. 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 later 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") permits nationwide interstate banking and branching under
certain circumstances. This legislation generally authorizes interstate
branching and relaxes federal law restrictions on interstate banking. As of
September 29, 1995, bank holding companies may purchase banks in any state, and
states may not prohibit such purchases. Additionally, as of June 1, 1997, banks
are 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.
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Under recent FDIC regulations, banks are prohibited from using their
interstate branches primarily for deposit production. The FDIC has accordingly
implemented a loan-to-deposit ratio screen to ensure compliance with this
prohibition.
Oregon, effective as of February 27, 1995, and Washington, effective
June 6, 1996, each enacted "opting in" legislation in accordance with the
Interstate Act provisions allowing banks to opt-in early to the interstate
merger provisions. Accordingly, both states generally permit 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's,
Centennial's, the Bank's or the Bank Subsidiaries' operations in particular.
Nevertheless, the impact that the Interstate Act might have on WCB, Centennial,
the Bank, and the Bank Subsidiaries is impossible to predict at this time.
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 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, 1996, neither the Bank nor the
Bank Subsidiaries were 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.
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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. This joint policy statement was
superseded by an updated Joint Policy Statement in June of 1996.
In addition, the Federal Banking Agencies published a joint final rule
on September 6, 1996, amending their respective risk-based capital standards to
incorporate a measure for market risk to cover all positions located in an
institution's trading account and foreign exchange and commodity positions
wherever located. This final rule, effective January 1, 1997, implements an
amendment to the Basle Capital Accord that sets forth a supervisory framework
for measuring market risk. The final rule effectively requires banks and bank
holding companies with significant exposure to market risk to measure that risk
using its own internal value-at-risk model, subject to the parameters of the
final rule, and to hold a sufficient amount of capital to support the
institution's risk exposure.
Institutions subject to this final rule must be in compliance with it by
January 1, 1998. This final rule applies to any bank or bank holding company,
regardless of size, whose trading activity equals 10% or more of its total
assets or amounts to $1 billion or more. The Federal Banking Agencies may
require an institution not otherwise subject to the final rule to comply with it
for safety and soundness reasons and, under certain circumstances, also may
exempt an institution otherwise subject to the final rule from compliance.
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. On September 30, 1996, the Deposit Insurance
Funds Act of 1996 ("Funds Act") was enacted. The Funds Act provides, among other
things, for the recapitalization of the SAIF through a special assessment on all
depository institutions that hold SAIF-insured deposits. The one-time assessment
is designed to place the SAIF at its 1.25 reserve ratio goal.
The Funds Act, for the three-year period beginning in 1997, subjects
BIF-insured deposits to a Financing Corporation ("FICO") premium assessment on
domestic deposits at one-fifth the premium rate (roughly 1.3 basis points)
imposed on SAIF-insured deposits (roughly 6.5 basis points). In addition,
service debt funding on FICO bonds for the first half of 1997 is expected to
result in BIF-insured institutions paying .64 cents for each $100 of assessed
deposits, and SAIF-insured institutions paying 3.2 cents on each $100 of
deposits. Beginning in the year 2000, BIF-insured institutions will be required
to pay the FICO obligations on a pro-rata basis with all thrift institutions;
annual assessments are expected to equal approximately 2.4 basis points until
2017, to be phased out completely by 2019.
Banking regulators are empowered under the Funds Act to prohibit insured
institutions and their holding companies from facilitating or encouraging the
shifting of deposits from the SAIF to the BIF in order to avoid higher
assessment rates. The Funds Act also provides for the merger of the BIF and SAIF
on January 1, 1999, only if no thrift institutions exist on that date.
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
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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).
COMMUNITY REINVESTMENT ACT ("CRA")
The Federal Banking Agencies have each adopted regulations and
examination procedures to ensure that a bank is helping to meet the credit needs
of all segments of its communities, including low-and-moderate-income
neighborhoods.
DESCRIPTION OF WCB'S CAPITAL STOCK AND
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
CENTENNIAL COMMON STOCK AND WCB COMMON STOCK
The 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 Centennial's shareholders who become shareholders of WCB through the
Merger. The rights of Centennial shareholders are currently governed by the
WBCA, as amended, and by Centennial's Articles of Incorporation and Bylaws. The
following is a brief summary of the material differences between the rights,
respectively, of Centennial and WCB shareholders. 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.
Centennial's authorized capital stock consists of 9,000,000 common stock
shares, and 1,000,000 preferred stock shares. All shares have a par value of
$.01 per share.
PREFERRED STOCK
As of December 31, 1997, neither WCB nor Centennial had issued any
shares of preferred stock. 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 Centennial
Board is authorized, without further shareholder action, to issue preferred
stock shares with such designations, preferences and rights as the Centennial
Board may determine.
COMMON STOCK
As of December 31, 1997, there were ________ shares of WCB Common Stock
issued and outstanding, in addition to options for the purchase of ________
shares of WCB Common Stock under WCB's employee and director stock option plans.
As of December 31, 1997, there were ________ shares of Centennial Common
Stock issued and outstanding, in addition to options for the purchase of
________ shares of Centennial Common Stock under Centennial's employee and
director stock option plans.
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.
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Dividends may be paid on Centennial Common Stock as and when declared by
the Centennial Board out of funds legally available for the payment of
dividends. The Centennial Board may issue preferred stock that is entitled to
such dividend rights as the Centennial Board may determine, including priority
over the common stock in the payment of dividends. The ability of Centennial 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 Centennial
can pay (See "SUPERVISION AND REGULATION -- The Bank Subsidiaries; Dividend
Restrictions"). Under the WBCA, the Centennial Board is barred from making any
dividend payment if, after giving effect to such payment, Centennial 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 Centennial Common Stock, respectively, each share being entitled to
one vote.
Both WCB's and Centennial's Articles of Incorporation provide that
shareholders do not have cumulative voting rights in the election of directors.
The WCB Board and the Centennial 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 Centennial
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, Centennial Common Stock holders are entitled to share, pro
rata, Centennial's remaining assets after provision for liabilities, if
Centennial is liquidated. The Centennial 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 Centennial Common Stock.
ASSESSMENTS
All outstanding shares of Centennial 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 8, but no more than 20 directors;
the WCB Board sets the exact number by resolution. Currently, the WCB Board has
11 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.
Centennial'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 Centennial Board must
consist of at least five directors; the Centennial Board sets the exact number
by resolution. Currently, the Centennial Board has six directors. Centennial'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,
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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
(1) a director or officer commits intentional misconduct or knowingly violates
the law; (2) a director or officer is adjudged liable to WCB in a proceeding by
or in the right of WCB; or (3) 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.
Centennial's Articles of Incorporation provide that a director is not
personally liable to Centennial or Centennial's shareholders for monetary
damages for conduct as a director, except for (1) intentional misconduct or
knowing violations of law; (2) conduct violating RCW 23B.08.310 (unlawful
distributions); or (3) transactions from which the director will personally
receive a benefit in money, property or services to which the director is not
legally entitled. Centennial's Articles of Incorporation provide for
indemnification of directors and officers under certain circumstances. The
Centennial Board may authorize indemnification of Centennial's other employees
and agents in accordance with Centennial's Articles of Incorporation.
Indemnification rights and procedures, including entitlements to advanced
expenses, are set forth in more detail in Centennial's Articles of
Incorporation.
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.
The WBCA requires approval of two-thirds of the shareholders entitled to
vote on the matter in order to amend the corporation's articles. The Centennial
Board may make the amendments listed in RCW 23B.10.020 to the Articles of
Incorporation without shareholder approval. Either the shareholders or the
Centennial Board may amend Centennial's Bylaws.
REPURCHASE OF SHARES
Under Oregon and Washington law, a corporation may acquire shares of its
own stock. Therefore, both WCB and Centennial 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 rights, 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, unless the articles of incorporation provide
otherwise, 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.
Thus the shareholders of WCB are not entitled to dissenter's rights with regard
to the Merger.
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. Centennial's articles of
incorporation do not provide for a lesser vote. Separate voting by voting groups
is required (1) on a plan of share exchange and (2) on a plan of merger if it
contains provisions that would require separate voting
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if contained in an amendment to articles of incorporation. 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.
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 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."
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The Oregon Control Share Act (ORS 60.801, et seq.) ("OCSA") operates to
deny voting rights to potential acquirers 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.
As a Washington corporation, Centennial is subject to the provisions of
the WCBA. Section 23B.19 of the WCBA may be considered to have an anti-takeover
effect and may delay, deter, or prevent a tender offer, proxy contest or other
takeover attempt that a shareholder might consider to be in such shareholder's
best interest, including such an attempt as might result in payment of a premium
over the market price for shares held by shareholders. However, Section 23B.19
does not apply to a corporation that does not have a class of voting securities
registered under Section 12 of the Securities Exchange Act of 1934. Thus, it
does not apply to Centennial.
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, Seattle/Tacoma, Washington.
Graham & Dunn also will give an opinion concerning certain tax matters related
to the Merger.
EXPERTS
The consolidated financial statements of WCB as of December 31, 1996 and
1995, and for each of the years in the three-year period ended December 31,
1996, incorporated by reference into this Prospectus/Joint Proxy Statement and
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance of said firm as experts in
accounting and auditing in giving said report.
The consolidated financial statements of Centennial as of December 31,
1996 and 1995 and for the years then ended are included in this Prospectus/Joint
Proxy Statement and in the Registration Statement in reliance on the report of
Dwyer Pemberton & Coulson, P.C., independent certified public accountants, as
indicated in their reports with respect thereto, and on the authority of such as
experts in accounting and auditing. Dwyer Pemberton & Coulson's report refers to
the adoption of Statement of Financial Accounting Standards No. 123 - Accounting
for Stock-Based Compensation.
The consolidated balance sheets of Vancouver Bancorp (Bancorp) as of
December 31, 1995 and 1994, and the related consolidated statements of income,
stockholders' equity, and cash flows for the years then ended as existed prior
to restatement for Bancorp's pooling combination with West Coast Bancorp (and
not presented separately or incorporated separately by reference herein), have
been audited by Moss Adams LLP, independent auditors, as stated in their report,
which is incorporated herein by reference from the West Coast Bancorp Annual
Report on Form 10-K for the year ended December 31, 1996. The consolidated
financial statements of West Coast Bancorp, as restated for its pooling
combination with Bancorp have also been incorporated in this prospectus by
reference from the West Coast Bancorp Annual Report on Form 10-K for the year
ended December 31, 1996, in reliance (with respect to the pre-pooling
consolidated financial
65
<PAGE> 79
statements of Bancorp at and for the years ended December 31, 1995 and 1994)
upon the report of such firm given upon their authority as experts in accounting
and auditing.
OTHER MATTERS
Neither the Centennial Board nor the WCB Board is aware of any business
to come before the parties' respective Special Stockholder Meetings, other than
those matters described above in this Prospectus/Joint Proxy Statement. However,
if any other matters should properly come before any of the Special Meetings, 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.
66
<PAGE> 80
CONSOLIDATED FINANCIAL STATEMENTS
CENTENNIAL HOLDINGS, LTD.
For the years ended December 31, 1996 and 1995
<PAGE> 81
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Income 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
</TABLE>
<PAGE> 82
[DWYER PEMBERTON AND COULSON, P.C. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
January 24, 1997
Board of Directors
Centennial Holdings, Ltd.
We have audited the accompanying consolidated balance sheets of Centennial
Holdings, Ltd. and subsidiaries (Centennial) as of December 31, 1996 and 1995,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of Centennial's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Centennial Holdings, Ltd. and subsidiaries as of December 31, 1996 and 1995, and
the results of its operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note 15 to the financial statements, Centennial adopted
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, on January 1, 1996.
/s/ DWYER, PEMBERTON AND COULSON
--------------------------------------
Dwyer, Pemberton and Coulson
-1-
<PAGE> 83
CENTENNIAL HOLDINGS, LTD.
CONSOLIDATED BALANCE SHEETS
September 30, 1997 (Unaudited) and December 31, 1996 and 1995
ASSETS
<TABLE>
<CAPTION>
December 31
September 30 ----------------------
1997 1996 1995
------------ ---------------------------
<S> <C> <C> <C>
CASH AND DUE FROM BANKS $ 40,987,037 $ 16,093,969 $ 26,490,830
FEDERAL FUNDS SOLD -0- -0- 3,000,000
INVESTMENT SECURITIES 12,168,677 11,068,072 10,042,017
OTHER INVESTMENTS 207,132 193,602 270,510
LOANS
Commercial and industrial 129,466,755 116,892,081 76,344,417
Real estate mortgages 9,461,773 12,438,051 11,870,850
Consumer and installment 51,923,795 54,432,312 33,006,926
Other loans 4,493,615 3,627,266 1,539,563
------------------------------------------
195,345,938 187,389,710 122,761,756
Reserve for loan losses 1,581,590 1,452,946 992,098
------------------------------------------
LOANS - NET 193,764,348 185,936,764 121,769,658
PREMISES AND EQUIPMENT - NET 8,075,853 8,292,074 6,784,604
OTHER REAL ESTATE OWNED 246,737 420,957 304,593
OTHER ASSETS 5,326,806 6,009,686 2,421,207
------------------------------------------
TOTAL ASSETS $260,776,590 $228,015,124 $171,083,419
==========================================
</TABLE>
See accompanying notes.
<PAGE> 84
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31
September 30 ---------------------------
1997 1996 1995
------------ ---------------------------
<S> <C> <C> <C>
DEPOSITS
Demand $ 95,392,318 $ 65,591,738 $ 51,632,592
Savings 78,637,275 71,381,642 50,862,828
Time, $100,000 and over 20,657,819 24,835,123 11,975,634
Other time 40,392,681 37,496,478 37,140,391
-----------------------------------------------
TOTAL DEPOSITS 235,080,093 199,304,981 151,611,445
OTHER LIABILITIES 4,051,349 3,964,971 2,226,746
OPERATING LINES OF CREDIT 290,000 6,234,415 3,287,045
-----------------------------------------------
TOTAL LIABILITIES 239,421,442 209,504,367 157,125,236
-----------------------------------------------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 118,569 130,468 133,619
-----------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, 1,000,000 shares authorized;
none issued and outstanding -0- -0- -0-
Common stock:
9,000,000 shares authorized; 1,491,608 and
1,314,471 shares issued and outstanding
in 1996 and 1995 respectively 15,755 14,917 13,145
Surplus 13,321,774 12,190,599 9,121,196
Undivided profits 7,993,307 6,258,917 4,833,702
Unrealized securities losses, net of tax (94,257) (84,144) (143,479)
-----------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 21,236,579 18,380,289 13,824,564
-----------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 260,776,590 $ 228,015,124 $ 171,083,419
===============================================
</TABLE>
-2-
<PAGE> 85
CENTENNIAL HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF INCOME
For the nine months ended September 30, 1997 and 1996 (Unaudited)
and for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
September 30 December 31
--------------------------------------------------------
1997 1996 1996 1995
--------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 15,482,147 $ 13,125,780 $18,141,508 $ 14,625,477
Interest on investment securities 470,001 444,216 600,391 612,033
Interest on mortgage-backed securities 47,508 52,707 69,609 71,737
Interest on federal funds 242,910 227,218 248,954 452,922
-------------------------------------------------------
TOTAL INTEREST INCOME 16,242,566 13,849,921 19,060,462 15,762,169
-------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 5,662,828 4,582,047 6,314,657 4,806,477
Interest on Federal Home Loan Bank
advances 210,498 142,434 246,080 304,898
Interest on borrowed funds 175,836 253,063 318,925 507,530
-------------------------------------------------------
TOTAL INTEREST EXPENSE 6,049,162 4,977,544 6,879,662 5,618,905
-------------------------------------------------------
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 10,193,404 8,872,377 12,180,800 10,143,264
PROVISION FOR LOAN LOSSES 1,211,500 280,000 396,000 256,000
-------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,981,904 8,592,377 11,784,800 9,887,264
-------------------------------------------------------
OTHER INCOME
Service fees 793,079 623,451 875,638 715,522
Loan servicing income 288,207 399,623 547,663 470,058
Gain on loan sales 629,991 283,037 342,061 870,671
Gain on sale of serviced loans 1,517,186 -0- -0- -0-
Other operating income 253,437 234,199 296,648 266,853
-------------------------------------------------------
TOTAL OTHER INCOME 3,481,900 1,540,310 2,062,010 2,323,104
-------------------------------------------------------
OTHER EXPENSES
Salaries 3,910,195 3,449,182 5,031,633 4,169,622
Pensions, payroll taxes and employee
benefits 959,038 707,032 937,357 688,376
Occupancy expenses 1,107,547 960,444 1,368,069 1,218,317
Other operating expenses 3,187,370 2,846,091 3,659,705 2,833,289
-------------------------------------------------------
TOTAL OTHER EXPENSES 9,164,150 7,962,749 10,996,764 8,909,604
-------------------------------------------------------
INCOME BEFORE MINORITY
INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARY 3,299,654 2,169,938 2,850,046 3,300,764
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARY (526) -0- (12,700) (34,280)
-------------------------------------------------------
INCOME BEFORE INCOME TAXES 3,299,128 2,169,938 2,837,346 3,266,484
PROVISION FOR INCOME TAXES 1,206,225 653,447 962,897 907,922
-------------------------------------------------------
NET INCOME $ 2,092,903 $ 1,516,491 $ 1,874,449 $ 2,358,562
=======================================================
</TABLE>
See accompanying notes.
-3-
<PAGE> 86
CENTENNIAL HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the nine months ended September 30, 1997 (Unaudited)
and for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
UNREALIZED
COMMON CAPITAL UNDIVIDED SECURITIES
STOCK SURPLUS PROFITS LOSSES TOTAL
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995 $ 1,295,701 $ 7,608,727 $ 2,865,205 $ (556,981) $11,212,652
Net income 2,358,562 2,358,562
Cash dividends (390,065) (390,065)
Issuance of common stock 45,616 586,031 631,647
Redemption of common stock (264) (401,470) (401,734)
Exchange of stock (1,327,908) 1,327,908
Unrealized gain on securities,
net of tax 413,502 413,502
---------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 13,145 9,121,196 4,833,702 (143,479) 13,824,564
Net income 1,874,449 1,874,449
Cash dividends (449,234) (449,234)
Issuance of common stock 276 326,162 326,438
Acquisition of First American State
Bank, including issuance of
149,537 shares of common stock 1,496 2,743,241 (34,678) 2,710,059
Unrealized gain on securities,
net of tax 94,013 94,013
---------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 14,917 12,190,599 6,258,917 (84,144) 18,380,289
Net income 2,092,903 2,092,903
Cash dividends (358,513) (358,513)
Issuance of common stock 838 1,131,175 1,132,013
Unrealized loss on securities,
net of tax (10,113) (10,113)
---------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1997 $ 15,755 $ 13,321,774 $ 7,993,307 $ (94,257) $21,236,579
=====================================================================
</TABLE>
See accompanying notes.
-4-
<PAGE> 87
CENTENNIAL HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1997 and 1996 (Unaudited)
and for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
September 30 December 31
------------------------------------------------------
1997 1996 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 2,092,903 $ 1,516,491 $ 1,874,449 $ 2,358,562
Noncash revenues and expenses
included in income:
Depreciation and amortization 872,160 579,587 1,072,820 701,336
Provision for loan losses 1,211,500 280,000 396,000 256,000
Deferred federal income tax
expense (benefit) (64,683) 152,821 57,791 (23,445)
Federal Home Loan Bank stock
dividends (135,500) (123,700) (169,900) (121,200)
(Income) loss from unconsolidated
subsidiary (25,429) (28,140) (25,686) 1,781
(Increase) decrease in other assets 532,780 231,735 (241,393) (1,942,461)
Increase (decrease) in other liabilities 156,271 675,856 956 (341,808)
------------------------------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 4,640,002 3,284,650 2,965,037 888,765
------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of investments available
for sale (4,488,207) (2,043,015) (2,145,302) (1,387,328)
Maturities of investments available
for sale 2,333,972 4,307,073 4,524,113 3,094,713
Proceeds from sale of investments
available for sale 1,223,808 3,136,154 3,870,538 -0-
Purchase of investments held
to maturity (100,000) -0- -0- -0-
Maturities of investments held to
maturity 50,000 300,000 550,000 600,000
Net increase in loans (8,864,864) (27,297,206) (42,787,399) (19,159,885)
Acquisition of premises and equip-
ment, net (505,840) (531,801) (808,938) (1,469,976)
Decrease (increase) in federal funds
sold -0- 3,000,000 3,000,000 (1,355,000)
Net cash paid for acquisition of First
American State Bank -0- (887,473) (887,473) -0-
------------------------------------------------------
NET CASH USED BY
INVESTING ACTIVITIES (10,351,131) (20,016,268) (34,684,461) (19,677,476)
------------------------------------------------------
</TABLE>
-5-
<PAGE> 88
<TABLE>
<CAPTION>
September 30 December 31
----------------------------------------------------------
1997 1996 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Net increase in demand and savings
deposits 37,056,213 10,144,283 19,318,152 9,084,356
Net (decrease) increase in time deposits (1,281,101) (7,895,069) (820,163) 25,984,752
Payments on borrowed funds, net -0- -0- -0- (50,000)
Net increase (decrease) in lines
of credit (5,944,415) 3,558,584 2,947,370 (811,631)
Redemption of common stock -0- -0- -0- (401,734)
Issuance of common stock 1,132,013 314,398 326,438 631,647
Dividends paid (358,513) (329,985) (449,234) (390,065)
-----------------------------------------------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 30,604,197 5,792,211 21,322,563 34,047,325
-----------------------------------------------------------
NET (DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS 24,893,068 (10,939,407) (10,396,861) 15,258,614
CASH AND CASH EQUIVALENTS,
Beginning 16,093,969 26,490,830 26,490,830 11,232,216
-----------------------------------------------------------
CASH AND CASH EQUIVALENTS,
Ending $ 40,987,037 $ 15,551,423 $ 16,093,969 $ 26,490,830
===========================================================
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<S> <C> <C> <C> <C>
Interest paid $ 6,162,011 $ 4,870,428 $ 6,789,820 $ 5,474,273
Income taxes paid $ 1,518,087 $ 161,851 $ 646,139 $ 1,242,001
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING TRANSACTIONS
<TABLE>
<S> <C> <C> <C> <C>
Market value adjustment of investments
available for sale $ 15,322 $ 21,634 $ 142,443 $ 626,518
Deferred federal income taxes on market
value adjustment of investments avail-
able for sale $ 5,210 $ 7,356 $ 48,430 $ 213,016
Loans transferred to other real estate
owned $ 313,702 $ 360,177 $ 420,957 $ 304,593
</TABLE>
See accompanying notes.
-6-
<PAGE> 89
CENTENNIAL HOLDINGS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1996 and 1995
NOTE 1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Description of the Business:
Centennial Holdings, Ltd., a bank holding company, provides a full
range of financial services to individuals and businesses, primarily
through its wholly-owned subsidiaries, Centennial Bank and Centennial
Funding Corporation.
Centennial Bank is a full-service commercial bank insured by the
Federal Deposit Insurance Corporation (FDIC). The Bank has seven
full-service branches, a mortgage servicing department and two loan
production offices located in Western Washington.
Centennial Funding Corporation is a mortgage broker and originates
single-family residential and construction loans.
Basis of Presentation:
The consolidated financial statements of Centennial Holdings, Ltd.
(Centennial), as of and for the years ended December 31, 1996 and
1995, include the accounts of the Corporation and its wholly-owned
subsidiaries; Centennial Bank, Centennial Funding Corporation, ELD,
Inc., Totten, Inc., and College Building General Partnership; and its
nonwholly-owned subsidiary, Building General Partnership. All
intercompany balances and transactions between Centennial and its
subsidiaries were eliminated in consolidation.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.
Mergers and Acquisitions:
Effective January 1, 1995, in a corporate reorganization, Centennial
Bank became a wholly-owned subsidiary of Centennial Holdings, Ltd.
Stockholders of Centennial Bank received 100 shares of Centennial
Holdings, Ltd. common stock for each share of Centennial Bank stock.
The business combination was accounted for as a pooling of interests.
Effective September 30, 1995, Centennial Bank transferred its 50
percent ownership interest in Centennial Funding Corporation to
Centennial Holdings, Ltd. as a noncash dividend. No gain or loss was
recorded. Concurrent with this transfer, Centennial Holdings, Ltd.
acquired the remaining outstanding stock of Centennial Funding
Corporation by issuing 45,616 shares of Centennial Holdings, Ltd.
stock. The business combination was accounted for as a purchase and
Centennial Funding Corporation became a wholly-owned subsidiary of
Centennial Holdings, Ltd.
-7-
<PAGE> 90
NOTE 1. (CONTINUED)
Mergers and Acquisitions (Continued):
On June 6, 1996, Centennial acquired First American State Bank in a
business combination accounted for as a purchase. First American State
Bank was a full-service bank with two branches in Lewis County. At the
date of acquisition, First American State Bank had approximately
$33,200,000 of assets, $22,000,000 of loans, $29,000,000 of deposits,
and stockholders' equity of $3,400,000. The results of operations of
First American State Bank are included in the accompanying financial
statements since the date of acquisition. The cost of the acquisition
was $5,414,251, which exceeded the fair value of the net assets of
First American State Bank by $1,768,916. The excess is being amortized
on the straight-line basis over the estimated remaining lives of the
underlying assets. The excess was allocated as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
IN NET ASSETS
---------------
<S> <C>
Core deposit premium and other intangibles $ 2,680,181
Deferred taxes (911,265)
---------------
TOTAL $ 1,768,916
===============
</TABLE>
The following summarized proforma (unaudited) information assumes the
acquisition had occurred on January 1, 1995:
<TABLE>
<CAPTION>
1996 1995
--------------------------
<S> <C> <C>
Interest income $ 20,199,086 $18,566,169
Net interest income $ 12,779,369 $11,542,264
Net income $ 1,946,659 $ 2,542,562
</TABLE>
Investments and Mortgage-Backed Securities:
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting
for Certain Investments in Debt and Equity Securities, requires that
investment securities be classified at acquisition into one of three
categories: Held to Maturity, Available for Sale, or Trading
Securities.
Securities are classified as held to maturity when Centennial has the
positive intent and ability to hold them to maturity. These securities
are recorded at cost, adjusted for amortization of premiums and
accretion of discounts. Unrealized losses due to fluctuation in fair
value are recognized only when it is determined that the decline is
permanent.
Securities held principally for the purpose of sale in the near term
are classified as trading securities and are recorded at fair value.
Adjustments to fair value are included in noninterest income. At
December 31, 1996 and 1995, Centennial did not have any securities
classified as trading securities.
Investments not classified as held to maturity or trading securities
are classified as available for sale. These securities are recorded at
fair value, with unrealized gains and losses reported as a separate
component of stockholders' equity.
Gains and losses on the disposition of investments are based on the
net proceeds and the recorded amount of the securities sold, using the
specific-identification method.
-8-
<PAGE> 91
NOTE 1. (CONTINUED)
Loans:
Loans are stated at the amount of unpaid principal, reduced by
undisbursed loans in process, unearned loan fees, discounts and a
reserve for loan losses. Unearned discount on installment loans is
recognized as income over the terms of the loans by the interest
method.
Interest on loans is calculated by using the effective interest method
(Centennial Bank) and the simple interest method (Centennial Funding
Corporation) on a daily balance of the principal amount outstanding.
Accrual of interest is discontinued when management believes, after
considering economic and business conditions and collection efforts,
that the borrowers' financial condition is such that collection of
interest is doubtful. Uncollectible interest previously accrued is
charged to interest income.
The reserve for loan losses is established through a provision charged
to expense. Loans are charged against the reserve for loan losses when
management believes that the collectibility of the principal is
unlikely. The reserve is an amount that management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluation of the collectibility of loans and
prior loan-loss experience. The evaluation considers such factors as
changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific loans, and current economic
conditions that may affect the borrowers' ability to pay.
Loan Fees:
Loan fees are charged on most loans at the time of origination to
recover the cost of originating the loan. The net fee or cost is
recognized as an adjustment to interest income over the loan term
using the straight-line method for construction loans and the interest
method for other loans.
Loan fees on the origination of short-term construction or residential
real estate loans are recognized as income when the loans are
originated.
Loan Servicing Rights:
Under loan sales agreements Centennial Bank retains the servicing and
remits to the investor loan principal and interest at agreed-upon
rates. These rates generally differ from the loan's contractual
interest rate, resulting in a "yield differential." Interest income as
a result of this "yield differential" is recorded when received due to
uncertainties in the prepayment and discount assumptions used for the
calculation of a "yield differential" asset.
Effective January 1, 1995, Centennial Bank adopted Financial
Accounting Standards Board Statement of Financial Accounting Standards
(SFAS) No. 122, Accounting for Mortgage Servicing Rights. The cost of
loan servicing rights originated or purchased, and the amortization
thereon is periodically evaluated in relation to estimated future net
servicing revenues. The recorded value of the servicing portfolio is
periodically evaluated based on management's best estimate of
remaining loan lives. Prior to the adoption of SFAS No. 122, only
those loan servicing rights purchased were capitalized. Centennial
Bank recorded servicing rights on originated loans of approximately
$269,000 and $567,000 in 1996 and 1995 respectively, and amortization
of approximately $103,500 and $30,000 in 1996 and 1995 respectively.
Premises and Equipment:
Premises and equipment are recorded at cost and are depreciated using
the straight-line method over the estimated useful lives of the assets
ranging from two to forty years. Leasehold improvements are amortized
using the straight-line method over the lesser of the estimated useful
lives of the improvements or the terms of the related leases.
-9-
<PAGE> 92
NOTE 1. (CONTINUED)
Core Deposit Premiums and Other Intangibles
Net assets of organizations acquired in purchase transactions are
recorded at fair value at the date of acquisition. Core deposit
premiums attributable to depositor relationships that existed at the
date of an acquisition and other intangibles are being amortized on a
straight-line basis over ten years.
Income Taxes:
Income taxes include federal taxes currently payable or receivable and
deferred taxes arising from temporary differences between income for
financial reporting and income tax purposes. These differences result
principally from different methods used for depreciation, provision
for loan losses, recognition and amortization of the originated
mortgage servicing rights, FHLB stock dividends, and the unrealized
securities losses.
Centennial Holdings, Ltd. and its wholly-owned subsidiaries,
Centennial Bank, Centennial Funding Corporation, ELD, Inc., and
Totten, Inc., file a consolidated federal income tax return. Other
entities file separate federal income tax returns.
Off Balance Sheet Financial Instruments:
In the ordinary course of business Centennial Bank and Centennial
Funding Corporation have entered into off balance sheet financial
instruments consisting of commitments to extend credit, commitments
under credit card arrangements, commercial letters of credit and
standby letters of credit which involve elements of credit, interest
rate and liquidity risks. Such financial instruments are recorded in
the financial statements when they become payable (Note 12).
Cash and Cash Equivalents:
For the purpose of presentation in the consolidated statements of cash
flows, cash and cash equivalents are defined as cash and highly-liquid
investment securities with original maturities of three months or less
and are included in the consolidated/combined balance sheet caption
"Cash and Due from Banks."
Advertising Costs:
Advertising costs are charged to operations when incurred. Advertising
costs of $305,955 and $289,036 for the years ended December 31, 1996
and 1995, respectively, are included in other operating expenses.
Unaudited Financial Information:
Information as of September 30, 1997 and for the nine-month periods
ended September 30, 1997 and 1996 is unaudited. The unaudited
information furnished reflects all adjustments, which consist solely
of normal recurring accruals, which are, in the opinion of management,
necessary for a fair presentation of the financial position at
September 30, 1997 and the resulsts of operations and cash flows for
the nine-month periods ended September 30, 1997 and 1996. The resluts
of the nine-month periods are not necessarily indicative of the
results of Centennial which may be expected for the entire year.
Reclassification:
Certain amounts presented in the preceding year have been reclassified
to conform with the financial statement presentation in the current
year. The reclassifications had no effect on net income or undivided
profits as previously reported.
-10-
<PAGE> 93
NOTE 2. CONCENTRATION OF CREDIT RISK
Centennial maintains cash balances at several banks in excess of the
federally insured limit. Accounts at each institution are insured by
the Federal Deposit Insurance Corporation up to $100,000 per
applicable account.
NOTE 3. INVESTMENT SECURITIES
Investments at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------
<S> <C> <C>
Available for sale, at estimated market value $10,398,072 $ 9,122,017
Held to maturity, at amortized cost 670,000 920,000
-------------------------
TOTAL $11,068,072 $ 10,042,017
=========================
</TABLE>
The amortized cost and estimated market values of investments at
December 31 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
1996 COST GAINS LOSSES VALUE
- ---- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury securities $ 2,945,413 $ 3,587 $ (840) $ 2,948,160
U.S. Government agencies
and corporations 3,692,392 2,174 (152,952) 3,541,614
Municipal bonds 500,000 27,250 -0- 527,250
Mortgage-backed securities 1,001,530 6,065 (17,867) 989,728
Marketable equity securities 42,330 6,318 (1,228) 47,420
Federal Home Loan Bank stock 2,343,900 -0- -0- 2,343,900
----------------------------------------------------------
TOTAL AVAILABLE FOR SALE 10,525,565 45,394 (172,887) 10,398,072
Held to maturity:
Municipal bonds 670,000 6,095 (2,935) 673,160
----------------------------------------------------------
TOTAL $ 11,195,565 $ 51,489 $ (175,822) $ 11,071,232
==========================================================
</TABLE>
Proceeds from the sales of the securities in the available for sale
portfolio during 1996 were $3,870,538, resulting in a net loss of
$8,475.
The amortized cost and estimated market value of investment securities
at December 31, 1996, by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities due to call
provisions or the prepayment of principal.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
---------------------------
<S> <C> <C>
Due in one year or less $ 2,527,993 $ 2,528,120
Due after one year through five years 4,362,145 4,376,465
Due after ten years 917,667 785,599
---------------------------
7,807,805 7,690,184
Mortgage-backed securities 1,001,530 989,728
Marketable equity securities 42,330 47,420
Federal Home Loan Bank stock 2,343,900 2,343,900
---------------------------
TOTAL $ 11,195,565 $ 11,071,232
===========================
</TABLE>
-11-
<PAGE> 94
NOTE 3. (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
1995 COST GAINS LOSSES VALUE
- ---- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury securities $ 3,181,517 $ 3,853 $ (3,077) $ 3,182,293
U.S. Government agencies
and corporations 2,637,197 -0- (252,822) 2,384,375
Municipal bonds 500,000 35,255 -0- 535,255
Mortgage-backed securities 1,101,597 8,477 (9,080) 1,100,994
Federal Home Loan Bank stock 1,919,100 -0- -0- 1,919,100
----------------------------------------------------------
TOTAL AVAILABLE FOR SALE 9,339,411 47,585 (264,979) 9,122,017
Held to maturity:
Municipal bonds 920,000 10,389 (4,586) 925,803
----------------------------------------------------------
TOTAL $ 10,259,411 $ 57,974 $ (269,565) $ 10,047,820
==========================================================
</TABLE>
Proceeds from the sales of the securities in the available for sale
portfolio during 1995 were $2,497,500, resulting in a net loss of
$861.
At December 31, 1996, investments were pledged as follows:
<TABLE>
<CAPTION>
AMORTIZED MARKET
PLEDGED TO INVESTMENT COST VALUE
---------- ---------- ---- -----
<S> <C> <C> <C>
Bankruptcy Court U.S. Treasury Bill:
5.84% Maturity 7-31-97 $ 499,053 $ 499,375
Treasury, Tax and Loan U.S. Treasury Notes:
4.75% Maturity 2-15-97 999,424 998,800
6.06% Maturity 5-31-98 247,747 248,125
Washington Public Deposit U.S. Gov't Agency Securities:
Protection Commission 5.94% Maturity 4-03-98 999,213 1,002,100
5.72% Maturity 1-27-97 549,540 549,615
3.28% Maturity 8-27-98 729,920 720,900
Municipal Bonds:
4.70% Maturity 12-01-97 100,000 100,270
5.75% Maturity 12-01-99 105,000 108,854
3.40% Maturity 11-01-97 100,000 99,752
------------------------
TOTAL $ 4,329,897 $ 4,327,791
========================
</TABLE>
NOTE 4. OTHER INVESTMENTS
Other investments consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
----------------------
<S> <C> <C>
Certificate of deposit, interest at 5.4%, maturing
December 1997, pledged as collateral on loans sold (Note 12) $ 100,557 $ 200,000
Sequim Partnership - owned by ELD, Inc. 93,045 70,510
----------------------
TOTAL $ 193,602 $ 270,510
======================
</TABLE>
-12-
<PAGE> 95
NOTE 5. LOANS
The outstanding principal balance of loans on which the accrual of
interest has been discontinued or reduced was $344,051 and $193,854 at
December 31, 1996 and 1995 respectively. At December 31, 1996 and
1995, unamortized deferred loan fees totaled $251,933 and $124,267
respectively.
Changes in the reserve for loan losses at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
-----------------------
<S> <C> <C>
Balance, beginning of year $ 992,098 $ 800,060
Reserves added through acquisition of First
American State Bank 551,628 -0-
Provision charged to operations 396,000 256,000
Loans charged off (548,737) (70,403)
Recoveries 61,957 6,441
-----------------------
Balance, end of year $ 1,452,946 $ 992,098
=======================
</TABLE>
Loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of these
loans at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------
<S> <C> <C>
Loans serviced for:
FHLMC $134,474,074 $ 116,542,167
GNMA 39,701,268 47,686,460
FNMA 6,472,597 4,971,942
Other investors 119,970,507 100,598,664
---------------------------
TOTAL $300,618,446 $ 269,799,233
===========================
</TABLE>
Custodial escrow balances maintained in connection with the loans
serviced were $961,094 and $729,690 at December 31, 1996 and 1995
respectively.
NOTE 6. PREMISES AND EQUIPMENT
Major classifications of these assets at December 31 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
------------------------
<S> <C> <C>
Land $1,876,937 $ 1,506,937
Premises 4,459,427 3,561,184
Furniture and equipment 4,829,404 3,809,108
Leasehold improvements 1,023,948 965,529
------------------------
12,189,716 9,842,758
Less accumulated depreciation and amortization 3,897,642 3,058,154
------------------------
PREMISES AND EQUIPMENT - NET $8,292,074 $ 6,784,604
========================
</TABLE>
Depreciation and amortization expense was $849,456 and $671,336 for
the years ended December 31, 1996 and 1995 respectively.
-13-
<PAGE> 96
NOTE 7. OTHER ASSETS
Other assets consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
-------------------------
<S> <C> <C>
Accrued interest on loans $1,077,788 $ 716,491
Accrued interest on investments 109,561 91,483
Originated mortgage servicing rights 702,428 536,821
Prepaid expenses 120,816 74,714
Deferred federal income taxes -0- 96,807
Federal income taxes receivable -0- 241,678
Core deposit premiums and other intangibles 2,560,317 -0-
Cash surrender value of life insurance 641,887 -0-
Miscellaneous 796,889 663,213
-------------------------
TOTAL $6,009,686 $ 2,421,207
=========================
</TABLE>
NOTE 8. OTHER LIABILITIES
Other liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
-------------------------
<S> <C> <C>
Official checks $1,594,322 $ 1,594,717
Escrow and settlement accounts 635,116 180,260
Accrued interest 392,774 309,494
Federal income tax payable 103,106 -0-
Deferred federal income taxes 1,036,164 -0-
Miscellaneous 203,489 142,275
-------------------------
TOTAL $3,964,971 $ 2,226,746
=========================
</TABLE>
-14-
<PAGE> 97
NOTE 9. OPERATING LINES OF CREDIT/ADVANCES FROM THE FEDERAL HOME LOAN BANK
At December 31 Centennial and subsidiaries had the following lines of
credit:
<TABLE>
<CAPTION>
OUTSTANDING BALANCE
--------------------
LIMIT 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Centennial Holdings, Ltd.:
National Bank of Alaska, interest at prime,
expiring June 30, 1998. Secured by stock
in wholly-owned subsidiary, Centennial Bank. $ 4,000,000 $ 2,180,000 $ 380,000
Centennial Bank:
Federal Home Loan Bank, subject to an existing Advances, Security
and Deposit Agreement. Under the agreement virtually all of the
Bank's assets not otherwise encumbered are pledged as collateral.
The agreement continues until terminated by written notice of
either party. The limit is 15 percent of the Bank's total assets.
At December 31, 1996, the Bank had approximately $33,400,000
available to borrow under this
agreement. 33,400,000 -0- -0-
Various banks, with interest rates based on
the lending institution's federal funds borrowing
rate, expiring in April and June of 1997. 4,500,000 -0- -0-
Centennial Funding Corporation: Various banks, expiring between
April 1 and June 30, 1997, interest at prime plus 1/2 percent to
prime plus 1 percent, secured by assignments of notes and deeds
of trust on the underlying funded loans and a guarantee from the
parent company, Centennial Holdings, Ltd. of $2,200,000
for $3,507,540 of the lines of credit. 12,200,000 4,054,415 2,907,045
-------------------------------------------
TOTAL $ 54,100,000 $ 6,234,415 $ 3,287,045
===========================================
</TABLE>
At December 31, 1996 the prime rate was 8.25 percent.
NOTE 10. REGULATORY MATTERS
Banking regulations limit the amount of dividends that may be paid
without prior approval from a bank's regulatory agency. At December
31, 1996 and 1995, there were no restrictions on the amount of
dividends that could be paid from undivided profits of the subsidiary,
Centennial Bank.
-15-
<PAGE> 98
NOTE 11. LEASE COMMITMENTS
Operating leases are maintained for the Lacey and Shelton branches
with College Building General Partnership and Building General
Partnership. The leases provide for monthly payments of $14,500 and
expire July 2011 and July 2013 respectively. The leases contain
purchase options that can be exercised at certain dates.
Centennial Bank entered into an operating lease for additional office
space in Lacey. The lease provides for monthly payments of $2,250 and
expires December 1998. The lease contains an option to renew for an
additional three years.
Centennial Bank maintains an operating lease for a loan production
office in Fife that provides for monthly payments of $2,110 and
expires June 1997 at which time management intends to renew the lease.
Centennial Bank assumed an operating lease for the Chehalis branch as
a result of the acquisition of First American State Bank. The lease
provides for monthly payments of $1,500 and expires in January 1999.
Centennial Funding Corporation leases its premises from the president
of that Company. The lease is a month-to-month operating lease with
monthly payments of $3,365 plus a proration of property taxes,
insurance, common area costs, maintenance and management fees.
Effective January 1, 1997, the lease payments are $3,466 per month.
Lease expense for 1996 and 1995 was $298,095 and $258,433
respectively.
Minimum future rental payments under noncancelable operating leases
having remaining terms in excess of one year as of December 31, 1996
and for each of the next five years and in the aggregate are:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 231,708
1998 219,048
1999 174,000
2000 174,000
2001 174,000
2002 and thereafter 1,919,500
-----------
TOTAL $ 2,892,256
===========
</TABLE>
NOTE 12. COMMITMENTS AND CONTINGENCIES
The consolidated financial statements do not reflect various
commitments and contingent liabilities which arise in the normal
course of business and involve elements of credit risk, interest rate
risk and liquidity risk. A summary of commitments at December 31, 1996
is as follows:
<TABLE>
<CAPTION>
<S> <C>
Commitments to extend credit $ 43,366,000
Commitments to sell loans, including standby commitments $ 4,364,000
Credit card arrangements $ 5,357,000
Standby letters of credit $ 1,235,000
</TABLE>
Commitments to extend credit, sell loans, credit card arrangements,
commercial letters of credit and standby letters of credit all include
exposure to some credit loss in the event of nonperformance of the
customer. Credit policies and procedures for credit commitments and
financial guarantees are the same as those for extension of credit
that are recorded on the consolidated balance sheets. Because these
instruments have fixed maturity dates, and because many expire without
being drawn upon, they do not generally present any significant
liquidity risk. If the commitments are utilized, a significant portion
of such utilization is on an immediate-payment basis. The remainder
are secured by the goods acquired by the customer with the letter of
credit. Centennial has not been required to perform on any financial
guarantees and has not incurred any losses on its commitments in 1996
or 1995.
-16-
<PAGE> 99
NOTE 12. (CONTINUED)
Centennial Holdings, Ltd. and its subsidiaries are parties to
litigation and claims arising in the normal course of business.
Management, after consultation with legal counsel, believes that the
liabilities, if any, arising from such litigation and claims will not
be material to the consolidated financial position.
Automobile Loan Sales:
Approximately $949,000 and $1,805,000 of the serviced loans were sold
with recourse at December 31, 1996 and 1995 respectively.
Additionally, Centennial Bank has pledged, as security, a certificate
of deposit equal to 10 percent of the outstanding principal balance of
these loans. The balance of the certificate was $100,557 and $200,000
at December 31, 1996 and 1995 respectively.
During 1996 Centennial Bank converted approximately $13,400,000 of
automobile loans into participation certificates. Under the terms of
the participation agreements, the purchaser will receive their
principal and accrued interest prior to Centennial Bank receiving
payments on its retained interest in the loans. At December 31, 1996,
Centennial Bank has an unrecorded contingent recourse liability of
approximately $905,000 related to this transfer.
Centennial Bank has considered the recourse provisions, as noted
above, in the determination of the adequacy of the allowance for loan
losses.
NOTE 13. EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Centennial Holdings, Ltd. has entered into employment and
noncompetition contracts with several of its executive officers which
provide for the payment of compensation if the officers are terminated
without cause. The compensation is based on the officers' salary at
the time of termination and provides that the terminated officers
receive their salary for a defined period of time during which they
cannot work for a competitor. The terms of the noncompetition
contracts range from 150 days to three years. At December 31, 1996,
the total commitment was approximately $255,500.
Centennial has entered into an employment agreement with Centennial
Bank's chief executive officer. Under the terms of the agreement the
associated costs are allocated between Centennial Bank and Centennial
Holdings, Ltd. based on the time spent on business of the respective
companies.
The agreement provides for the chief executive officer's annual
salary, a covenant not to compete for three years, and a retirement
allowance. The retirement allowance provides for annual payments of
$150,000 beginning at age sixty-five, continuing until death. In the
event of retirement prior to age sixty-five, he will receive a prorata
annual retirement allowance based on the actual length of employment.
The present value of the payments based on his life expectancy are
being accrued based on a retirement age of sixty-five and are included
in other liabilities in the consolidated financial statements. As of
December 31, 1996, $150,000 has been accrued under the agreement.
Additionally, the agreement requires Centennial to maintain a
$1,500,000 life insurance policy on the chief executive officer to be
used to repurchase his stock ownership interest from his estate upon
death.
-17-
<PAGE> 100
NOTE 14. PENSION PLANS
Centennial Bank and Centennial Funding Corporation participate in a
defined contribution 401(k) pension plan and Centennial Bank
participates in a noncontributory employee stock ownership plan (ESOP)
that is sponsored by Centennial Holdings, Ltd. The plans cover all
employees meeting the eligibility requirements as stated in the plan
agreements.
Contributions to the 401(k) pension plan are based on the
contributions of the employees to a defined maximum amount. Matching
contributions during 1996 and 1995 were $87,954 and $70,291
respectively.
Contributions to the ESOP are discretionary and approved by the Board
of Directors. A summary of ESOP activity as of December 31 is as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Total number of shares of Centennial Holdings, Ltd.
stock owned by the ESOP 112,831 103,677
Contributions to the ESOP $ 50,000 $ 50,000
</TABLE>
NOTE 15. EMPLOYEE STOCK OPTIONS/STOCK PURCHASE PLANS
In October 1995 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards, (SFAS), No. 123,
Accounting for Stock-based Compensation. SFAS No. 123 requires
expanded disclosures of stock-based compensation arrangements with
employees and encourages (but does not require) application of the
fair value recognition provisions in the statement. SFAS No. 123 does
not rescind or interpret the existing accounting rules for employee
stock-based arrangements. Centennial may continue following the rules
to recognize and measure compensation as outlined in Accounting
Principles Board Opinion 25 (APB 25), but is now required to disclose
the proforma amounts of net income that would have been reported had
Centennial elected to follow the fair value recognition provisions of
SFAS No. 123. Effective January 1, 1996, Centennial adopted the
disclosure requirements of SFAS No. 123, but has determined that it
will continue to measure its stock-based compensation arrangements
under the provisions of APB 25. The adoption of the disclosure
requirements of SFAS No. 123 had no material impact on Centennial's
financial condition or results of operations.
Centennial has an Incentive Stock Option Plan, an Employee Stock
Purchase Plan, and a Director Stock Option Plan. Under the plans
Centennial may grant options for up to 325,000 shares of common stock.
At December 31, 1996, 198,600 options had been granted and 126,400
shares of stock were reserved for options under the various plans.
Incentive Stock Option Plan:
Under the Incentive Stock Option Plan, Centennial may grant options to
non-key employees. The exercise price of each option is equal to the
market price of Centennial's stock on the date of grant. The maximum
term of the options is ten years, and the options are fully vested on
the date of grant.
Following is a summary of the activity of the plan during the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
------------------------------------------------------
SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C>
Outstanding and
exercisable, Jan 1 191,000 $ 12.40 178,500 $ 12.21
Granted 10,000 18.54 12,500 16.00
Exercised (27,500) 11.81
Forfeited (16,000) 11.31
---------- ---------
Outstanding and
exercisable, December 31 157,500 $ 13.07 191,000 $ 12.46
========== =========
</TABLE>
-18-
<PAGE> 101
NOTE 15. (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
Exercise price range of options outstanding
and exercisable at December 31 $10.44 to $18.54 $4.54 to $16.00
Weighted average remaining contractual
life of options outstanding at December 31 6.95 years 7.62 years
The fair value of each option granted is estimated on the grant date
using the net present value of the expected cash flows. The following
assumptions were made in estimating fair value:
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---------------------
<S> <C> <C>
Dividend yield 2% 2%
Risk-free interest rate 6.23% 5.42%
Expected life Six years Six years
Had compensation cost been determined on the basis of fair value
pursuant to SFAS No. 123, net income would have been reduced as
follows:
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---------------------
<S> <C> <C>
Net income:
As reported $ 1,874,449 $ 2,358,562
Proforma $ 1,768,024 $ 2,235,562
</TABLE>
Employee Stock Purchase Plan:
Effective January 1, 1996, Centennial adopted an Employee Stock
Purchase Plan. Substantially all employees of Centennial who have been
continuously employed for two years are eligible to participate in the
Employee Stock Purchase Plan. Under the Plan, common stock may be
acquired annually at a price of 90 percent of the fair market value of
the stock on the purchase date. There is no charge to income as a
result of issuance of stock under this Plan. At December 31, 1996,
4,400 shares of common stock were reserved for issuance under this
Plan. The offer expires on April 1, 1997.
Director Stock Option Plan:
Centennial adopted a Director Stock Option Plan effective April 1,
1996. Under the Plan Directors may elect to receive up to 100 percent
of their director fees each year in common stock at 100 percent of the
fair market value of the stock on the purchase date. The Plan will
terminate April 1, 1999. The Director Stock Option Plan is a
noncompensatory plan; therefore, the disclosures provisions as
required under SFAS No. 123 do not apply to this Plan. At December 31,
1996, 3,200 shares of unissued common stock were reserved for issuance
under the Plan.
NOTE 16. RELATED-PARTY TRANSACTIONS
Certain directors, and companies of which directors are principal
owners, have loans and other transactions with Centennial. Such
transactions are made on substantially the same terms, including
interest rates and collateral required, as those prevailing for
similar transactions of unrelated parties. An analysis of the loan
transactions follows:
<TABLE>
<CAPTION>
<S> <C>
Balances at December 31, 1995 $1,255,160
Loans made 862,374
Repayments (367,096)
----------
Balances at December 31, 1996 $1,750,438
==========
</TABLE>
-19-
<PAGE> 102
NOTE 17. SUBSEQUENT EVENTS
In January 1997 the Board of Directors declared a cash dividend of
$.08 per share of common stock totaling $119,329.
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107,
Disclosures About Fair Value of Financial Instruments, requires the
disclosure of estimated fair values of all asset, liability and
off-balance sheet financial instruments. Fair value estimates under
SFAS No. 107 are determined as of a specific date in time utilizing
quoted market prices, where available, or various assumptions and
estimates. As the assumptions underlying these estimates change, the
fair value of the financial instruments will change. The use of
assumptions and various valuation techniques, as well as the absence
of secondary markets for certain financial instruments, will likely
reduce the comparability of fair value disclosures between financial
institutions. Additionally, highly subjective values of core deposit
intangibles or other nonfinancial instruments excluded under SFAS No.
107 have not been disclosed. Accordingly, the aggregate fair value
amounts presented do not represent and should not be construed to
represent the full underlying value of Centennial Holdings, Ltd.
The fair values of financial instruments at December 31 were as
follows (dollars in thousands):
<TABLE>
<CAPTION>
RECORDED FAIR
1996 AMOUNT VALUE VARIANCE
---- ------ ----- --------
<S> <C> <C> <C>
Financial assets:
Cash and due from banks $ 16,094 $ 16,094 $ ---
Investment securities 11,068 11,071 3
Originated mortgage servicing rights 702 1,261 559
Other investments:
Certificate of deposit 101 101 ---
Loans receivable, net 185,937 187,714 1,777
Financial liabilities:
Nonmaturity deposits 126,830 126,830 ---
Deposits with stated maturities 72,475 72,870 395
Off balance sheet assets:
Mortgage servicing rights --- 1,386 1,386
1995
----
Financial assets:
Cash and due from banks $ 26,491 $ 26,491 $ ---
Federal funds sold 3,000 3,000 ---
Investment securities 10,042 10,048 6
Originated mortgage servicing rights 537 596 59
Other investments:
Certificate of deposit 200 200 ---
Loans receivable, net 121,770 121,818 48
Financial liabilities:
Nonmaturity deposits 94,434 94,434 ---
Deposits with stated maturities 57,177 57,732 555
Off balance sheet assets:
Mortgage servicing rights --- 1,197 1,197
</TABLE>
-20-
<PAGE> 103
NOTE 18. (CONTINUED)
The methods and assumptions used to estimate the fair values of each
class of financial instruments are as flows:
Cash and Due from Banks, and Federal Funds Sold: The recorded value of
cash and cash equivalents and federal funds sold approximates fair
value due to the relatively short-term nature of these instruments.
Investment Securities: The fair value of investment securities is
based on quoted market prices. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Loans Receivable, Net: Fixed rate loans were priced using a discounted
cash flow method. The discount rate used was the rate then offered on
similar products. For adjustable rate loans, the recorded amount
approximated fair value.
Mortgage Servicing Rights: The fair value of mortgage servicing rights
is based on an independent appraisal of the servicing portfolio. The
appraised value is primarily based on the present value of expected
cash flows. Originated mortgage servicing rights are recorded in
accordance with SFAS No. 122 (Note 1). Off balance sheet mortgage
servicing rights are loan servicing rights on originated loans sold
prior to the adoption of SFAS No. 122.
Deposits: The fair value of checking accounts, savings accounts, and
money market accounts was the amount payable on demand at the
reporting date. For time deposit accounts, the fair value was
determined using the discounted cash flow method. The discount rate
was equal to the rate currently offered on similar products.
-21-
<PAGE> 104
APPENDIX A
===============================================================================
PLAN AND AGREEMENT OF MERGER
BETWEEN
WEST COAST BANCORP
AND
CENTENNIAL HOLDINGS, LTD.
===============================================================================
DATED AS OF OCTOBER 30, 1997
<PAGE> 105
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.........................................................3
1.2.2 The Bank........................................................3
1.2.3 Effect on WCB Common Stock......................................3
1.3 Consideration..........................................................3
1.3.1 Purchase Price..................................................3
1.3.2 Exchange Ratio..................................................3
1.3.3 Centennial Expense Limitation...................................3
1.3.4 Change in Equity Capital........................................4
1.3.5 No Fractional Shares............................................4
1.3.6 Options.........................................................4
1.3.7 Certificates....................................................4
1.4 Payment to Dissenting Shareholders.....................................5
1.5 Alternative Structures.................................................5
1.6 Letter of Transmittal..................................................6
1.7 Undelivered Certificates...............................................6
SECTION 2 CLOSING OF THE TRANSACTION.................................................6
2.1 Closing................................................................6
2.2 Events of Closing......................................................6
2.3 Place of Closing.......................................................6
SECTION 3 REPRESENTATIONS AND WARRANTIES.............................................7
3.1 Representations and Warranties of WCB and Centennial...................7
3.1.1 Corporate Organization and Qualification........................7
3.1.2 Subsidiaries....................................................7
3.1.3 Capital Stock...................................................8
3.1.4 Corporate Authority.............................................9
3.1.5 Reports and Financial Statements...............................10
3.1.6 Absence of Certain Events and Changes..........................11
3.1.7 Material Agreements............................................12
3.1.8 Knowledge as to Conditions.....................................12
3.1.9 Brokers and Finders............................................12
3.2 Centennial's Additional Representations and Warranties................12
3.2.1 Loan and Lease Losses..........................................12
3.2.2 No Stock Option Plans..........................................12
3.2.3 Governmental Filings; No Violations............................12
3.2.4 Asset Classification...........................................13
3.2.5 Subsidiaries...................................................13
3.2.6 Investments....................................................13
3.2.7 Properties.....................................................14
3.2.8 Anti-takeover Provisions.......................................14
3.2.9 Compliance with Laws...........................................14
3.2.10 Litigation.....................................................15
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3.2.11 Taxes..........................................................15
3.2.12 Insurance......................................................16
3.2.13 Labor Matters..................................................16
3.2.14 Employee Benefits..............................................17
3.2.15 Environmental Matters..........................................18
3.3 Exceptions to Representations and Warranties..........................19
3.3.1 Disclosure of Exceptions.......................................19
3.3.2 Nature of Exceptions...........................................19
SECTION 4 CONDUCT AND TRANSACTIONS BEFORE CLOSING...................................20
4.1 Conduct of Centennial's Business Before Closing.......................20
4.1.1 Availability of Centennial's Books, Records and Properties.....20
4.1.2 Ordinary and Usual Course......................................20
4.1.3 Conduct Regarding Representations and Warranties...............22
4.1.4 Maintenance of Properties......................................22
4.1.5 Preservation of Business Organization..........................22
4.1.6 Personnel and Employment Agreements............................22
4.1.7 Compensation...................................................23
4.1.8 Update of Financial Statements.................................23
4.1.9 No Solicitation................................................23
4.1.10 Title Reports and Update Endorsements..........................23
4.1.11 Review of Loans................................................24
4.1.12 Divestiture of Interest in Sequim Shoprite Center..............24
4.2 Registration Statement................................................24
4.2.1 Preparation of Registration Statement..........................24
4.2.2 Submission to Shareholders.....................................25
4.3 Accounting Treatment..................................................25
4.3.1 Pooling of Interests...........................................25
4.3.2 Affiliate List.................................................25
4.3.3 Restrictive Legends............................................25
4.4 Submission to Regulatory Authorities..................................26
4.5 Transition Plan.......................................................26
4.6 Announcements.........................................................26
4.7 Consents..............................................................26
4.8 Further Actions.......................................................26
4.9 Notice................................................................26
4.10 Confidentiality.......................................................27
4.11 Update of Financial Statements........................................27
4.12 Availability of WCB's Books, Records and Properties...................27
SECTION 5 APPROVALS AND CONDITIONS..................................................28
5.1 Required Approvals....................................................28
5.2 Conditions to WCB's Obligations.......................................28
5.2.1 Representations and Warranties.................................28
5.2.2 Compliance.....................................................28
5.2.3 Equity Capital Requirement.....................................28
5.2.4 Payment of Note and Release of Pledge..........................28
5.2.5 Transaction Fees Statements....................................28
5.2.6 Building Partnerships..........................................29
5.2.7 Sequim Shoprite Center Partnership.............................29
5.2.8 Audit Report...................................................29
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5.2.9 No Material Adverse Effect.....................................29
5.2.10 Financial Condition............................................29
5.2.11 No Change in Loan Review.......................................29
5.2.12 No Governmental Proceedings....................................30
5.2.13 Receipt of Title Policy........................................30
5.2.14 Corporate and Shareholder Action...............................30
5.2.15 Tax Opinion....................................................30
5.2.16 Opinion of Counsel.............................................30
5.2.17 Cash Paid......................................................31
5.2.18 Affiliate Letters..............................................31
5.2.19 Registration Statement.........................................31
5.2.20 Consents.......................................................31
5.2.21 Fairness Opinions..............................................31
5.2.22 Accounting Treatment...........................................32
5.2.23 Solicitation of Employees......................................32
5.2.24 Other Matters..................................................32
5.3 Conditions to Centennial's Obligations................................32
5.3.1 Representations and Warranties.................................32
5.3.2 Compliance.....................................................32
5.3.3 No Material Adverse Effect.....................................32
5.3.4 No Governmental Proceedings....................................32
5.3.5 Corporate and Shareholder Action...............................32
5.3.6 Tax Opinion....................................................32
5.3.7 Opinion of Counsel.............................................32
5.3.8 Fairness Opinion...............................................33
5.3.9 Accounting Treatment...........................................33
5.3.10 Cash Paid......................................................33
5.3.11 Registration Statement.........................................33
5.3.12 Director and Executive Committee Appointments..................34
5.3.13 Other Matters..................................................34
SECTION 6 DIRECTORS, OFFICERS AND EMPLOYEES.........................................34
6.1 Directors.............................................................34
6.2 Director Appointments.................................................34
6.3 Executive Committee Appointments......................................34
6.4 Salary Continuation Agreement.........................................34
6.5 Employees.............................................................34
6.6 Employee Benefit Issues...............................................34
6.6.1 Comparability of Benefits......................................34
6.6.2 Termination and Transfer/Merger of Plans.......................35
6.6.3 No Contract Created............................................35
6.7 Indemnification of Centennial Directors...............................36
6.7.1 Indemnification................................................36
6.7.2 Claims for Indemnification.....................................36
6.7.3 Defense and Advancement of Expenses............................36
6.7.4 Enforcement and Dispute Resolution.............................36
6.7.5 Assumption of Obligation.......................................36
6.7.6 Insurance Coverag..............................................37
SECTION 7 TERMINATION OF AGREEMENT AND
ABANDONMENT OF TRANSACTION..........................................36
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7.1 Termination by Reason of Lapse of Time................................36
7.2 Other Grounds for Termination.........................................36
7.2.1 Mutual Consent.................................................36
7.2.2 Centennial's Conditions Not Met................................36
7.2.3 WCB's Conditions Not Met.......................................36
7.2.4 Centennial Fails to Recommend Shareholder Approval.............36
7.2.5 WCB Fails to Recommend Shareholder Approval....................37
7.2.6 Impracticability...............................................37
7.3 Centennial Termination Fee............................................37
7.4 WCB Termination Fee...................................................37
7.5 Cost Allocation Upon Termination......................................37
SECTION 8 MISCELLANEOUS.............................................................38
8.1 Notices...............................................................38
8.2 Waivers and Extensions................................................38
8.3 General Interpretation................................................38
8.4 Construction and Execution in Counterparts............................39
8.5 Survival of Representations, Warranties, and Covenants................39
8.6 Attorneys' Fees and Costs.............................................39
8.7 Arbitration...........................................................39
8.8 Governing Law and Venue...............................................39
8.9 Severability..........................................................40
SECTION 9 AMENDMENTS................................................................40
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EXHIBITS AND SCHEDULES:
EXHIBIT A Form Affiliate Letter
SCHEDULE 1 Exceptions to Representations and Warranties
SCHEDULE 2 Offices
SCHEDULE 3 Subsidiaries
SCHEDULE 4 WCB Stock Plans and Centennial's Stock Options
SCHEDULE 5 Material Contracts
SCHEDULE 6 Centennial's Required Third Party Consents
SCHEDULE 7 Centennial's Asset Classification List
SCHEDULE 8 Centennial's Investments
SCHEDULE 9 Centennial's Property Encumbrances
SCHEDULE 10 Centennial's and the Bank's Offices and Branches
SCHEDULE 11 Centennial's Compliance with Laws
SCHEDULE 12 Centennial's Litigation Disclosure
SCHEDULE 13 Centennial's and The Bank's Insurance Policies
SCHEDULE 14 Centennial's Employee Benefit Plans
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INDEX OF DEFINITIONS
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Agreement Intro. Paragraph
Asset Classification 3.2.4
ASR 4.3.2
Bank Recital A
Bank Common Stock 3.1.3(b)(7)
BHCA Recital A
Centennial Intro. Paragraph
Centennial Financial Statements 3.1.5(d)(4)
Centennial Common Stock 3.1.3(b)(1)
Centennial Options 1.3.6
Centennial Stock Plans 3.1.3(b)(2)
Claims 6.7
Closing 1.2.1
Compensation Plans 3.2.14(b)
Continuing Corporation Recital B.1
Continuing Corporation Shares 4.2.1(a)
Continuing Corportion Common Stock Recital B.2
Continuing Employees 6.5
Contracts 3.2.3(b)
Dissenting Shares 1.4
Effective Date 2.1
Employees 3.2.14(b)
Environmental Laws 3.2.15(a)(2)
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<TABLE>
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TERMS SECTION
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ERISA 3.2.14(a)
Exchange Act 3.1.5(b)
Exchange Agent 1.3.7(a)
Exchange Ratio 1.3.2
Executive Officer 3.1.8
FDIA 3.1.2(b)
FDIC 3.1.2(b)
Federal Reserve Board Recital D
Financial Statements 3.1.5(d)(1)
GAAP 3.1.5(d)
Governmental Entity 3.2.3(a)
Hazardous Substances 3.2.15(a)(3)
Indemnification Period 6.7
Indemnified Party 6.7
IRC Recital H
Joint Prospectus/Proxy Statement 4.2.1(a)
Liens 3.1.3(a)(5)
Material Adverse Effect 3.1.6
Merger Recital B
OBCA 1.2
Oregon Division Recital D.4
Pension Plan 3.2.14(c)
Plan/Plans 3.2.14(a)
Property 4.1.10
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TERMS SECTION
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Purchase Price 1.3.1
Registration Statement 4.2.1(a)
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)
Sheshunoff Recital G
Subject Property 3.2.15(a)(1)
Subsequent Centennial Financial Statements 3.1.5(d)(5)
Subsequent WCB Financial Statements 3.1.5(d)(3)
Subsidiary/Subsidiaries 3.1.2(a)
Tangible Equity Capital 5.2.3
Tax 3.2.11
Termination Date 2.1
Transaction 1.1
Transaction Fees 1.3.3
WBCA 1.2
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 Stock Plans 3.1.3(a)(2)
WDFI Recital D.4
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PLAN AND AGREEMENT OF MERGER
BETWEEN
WEST COAST BANCORP
AND
CENTENNIAL HOLDINGS, LTD.
This Plan and Agreement of Merger ("Agreement"), dated as of October 30,
1997, is between WEST COAST BANCORP ("WCB"), an Oregon corporation and
CENTENNIAL HOLDINGS, LTD.("Centennial"), a Washington corporation.
PREAMBLE
WCB's and Centennial's management and boards of directors believe,
respectively, that the merger of Centennial with and into WCB, on the terms and
conditions set forth in this Agreement, is in the best interests of WCB's and
Centennial's shareholders.
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 owns all of the
outstanding common stock of (1) The Bank of Newport, (2) The Commercial
Bank, (3) The Bank of Vancouver, (4) West Coast Trust Company, Inc., and
(5) West Coast Mortgage, Inc. WCB's principal office is located in Lake
Oswego, Oregon. Centennial is a corporation duly organized and validly
existing under Washington law and is a registered bank holding company
under the BHCA. Centennial's principal office is located in Olympia,
Washington. Centennial owns all of the outstanding shares of common
stock of (1) Centennial Bank ("Bank"), a Washington state commercial
banking corporation, (2) Centennial Funding Corporation, and (3) Totten,
Inc.
B. THE MERGER. On the Effective Date, the following will occur:
1. Centennial will merge with and into WCB ("Merger"), and WCB will
be the surviving corporation under the name West Coast Bancorp
("Continuing Corporation"). The Bank will become a separate,
wholly-owned subsidiary of WCB.
2. Except as otherwise provided in this Agreement, the outstanding
shares of Centennial Common Stock will be converted into common
stock shares of the Continuing Corporation ("Continuing
Corporation Common Stock") in accordance with the Exchange
Ratio.
C. BOARD APPROVALS. WCB's and Centennial's respective boards of directors
have approved this Agreement and authorized its execution and delivery.
D. OTHER APPROVALS. The Merger is subject to:
1. satisfaction of the conditions described in this Agreement;
2. approval by WCB's shareholders;
3. approval by Centennial's shareholders; and
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4. approval or acquiescence, as appropriate, by (a) the Board of
Governors of the Federal Reserve System ("Federal Reserve
Board"), (b) the Washington State Department of Financial
Institutions ("WDFI") and (c) the Financial Institutions
Division of the Oregon State Department of Consumer and Business
Services ("Oregon Division") (collectively, "Regulatory
Approvals").
E. SALARY CONTINUATION AGREEMENT. WCB has entered into a salary
continuation agreement, effective as of the Effective Date, with Thomas
W. Healy, Centennial's Chairman and CEO.
F. DIRECTOR NONCOMPETITION AGREEMENT. Each Director of Centennial's and the
Bank's boards of directors, except Daniel Yerrington, has signed a
Director Noncompetition Agreement. Daniel Yerrington, President of the
Bank, will sign a separate noncompetition agreement. These
noncompetition agreements will take effect on the Effective Date.
G. FAIRNESS OPINIONS. Centennial has received from Alex Sheshunoff and Co.,
Inc. ("Sheshunoff") and delivered to WCB an opinion to the effect that
the financial terms of the Transaction are financially fair to
Centennial's shareholders. As a condition to Closing of the Transaction,
Sheshunoff will update this fairness opinion immediately before
Centennial mails the Joint Prospectus/Proxy Statement to its
shareholders and immediately before Closing. WCB may, at its discretion,
request an opinion from an investment advisor that the terms of the
Transaction are financially fair to its shareholders.
H. INTENTION OF THE PARTIES--ACCOUNTING AND TAX TREATMENT. 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
WCB and Centennial agree as follows:
SECTION 1
TERMS OF TRANSACTION
1.1 TRANSACTION. Under and subject to this Agreement and the other documents
referred to in this Agreement, Centennial will merge with and into WCB
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, Centennial will merge with and into WCB,
with WCB being the surviving corporation, in accordance with the
provisions of, and with the effect provided in Title 23B of the
Washington Business Corporation Act ("WBCA") and in Title 7, Chapter 60
of the Oregon Business Corporation Act ("OBCA"). On the Effective Date,
the articles of incorporation and bylaws of the Continuing Corporation
will be WCB's Articles of Incorporation and Bylaws in effect immediately
before the Effective Date. The Continuing Corporation's name will be
"West Coast Bancorp," and the Continuing Corporation's principal office
will be WCB's principal office. Except as otherwise provided in
Subsections 5.3.12 and 6.2, on the Effective Date, WCB's directors and
WCB's officers will become the directors and officers of the Continuing
Corporation. On the Effective Date, WCB's shares then issued and
outstanding will become issued and outstanding shares of the Continuing
Corporation. Centennial's shareholders on the Effective Date will become
shareholders of the Continuing Corporation by virtue of the Merger.
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1.2.1 CLOSING. Closing of the Transaction will take place in
accordance with Section 2 ("Closing"). Except for Dissenting
Shares, all shares of Centennial Common Stock issued and
outstanding immediately before Closing will be converted at
Closing into shares of Continuing Corporation Common Stock in
accordance with Subsection 1.3, by virtue of the Merger.
1.2.2 THE BANK. By virtue of the Merger, the Bank will become the
Continuing Corporation's 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 or two
(at WCB's discretion) additional WCB directors 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. Nothing
in this Agreement is intended to restrict 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.
1.2.3 EFFECT ON WCB COMMON STOCK. WCB Common Stock shares issued and
outstanding immediately before the Effective Date will remain
outstanding and unchanged after the Merger.
1.3 CONSIDERATION.
1.3.1 PURCHASE PRICE. Except as otherwise provided in Subsection 1.4
and subject to Subsection 1.3.3, the aggregate consideration
Centennial's shareholders and option holders will be entitled to
receive from WCB in connection with the Transaction will be
2,550,000 shares of WCB Common Stock ("Purchase Price").
1.3.2 EXCHANGE RATIO. Subject to the conditions and limitations in
this Agreement, holders of Centennial Common Stock will receive
Continuing Corporation Common Stock shares in exchange for their
Centennial Common Stock shares. The number of Continuing
Corporation Common Stock Shares each holder will receive in
exchange for each Centennial Common Stock share she holds of
record on the Effective Date will be determined according to a
ratio ("Exchange Ratio") computed as follows: In exchange for
each share of Centennial Common Stock held of record on the
Effective Date, the holder will receive that number (rounded to
2 decimals, rounding down if the third decimal is four or less
or up if it is five or more) of shares of Continuing Corporation
Common Stock calculated by dividing the Purchase Price by the
aggregate number of shares of Centennial Common Stock that
immediately before Closing are either (i) issued and outstanding
or (ii) subject to granted but unexercised options. The shares
of Continuing Corporation Common Stock to be issued to
Centennial Shareholders under this Agreement in connection with
the Transaction are referred to as the "WCB Shares."
1.3.3 CENTENNIAL EXPENSE LIMITATION. If Centennial's Transaction Fees
exceed $175,000, then before the Exchange Ratio is calculated,
the Purchase Price will be reduced by the number of WCB Common
Stock shares equal in value to the excess. For purposes of
determining this reduction in the Purchase Price, WCB Common
Stock shares will be valued at $17.83 per share. "Transaction
Fees" means all costs and expenses incurred by Centennial or
owed or paid by Centennial to third parties in connection with
the negotiation and execution of this Agreement and related
documents and the consummation of the Transaction, including
expenses incurred by Centennial in connection with obtaining
approvals for the Transaction from regulators and shareholders.
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1.3.4 CHANGE IN EQUITY CAPITAL. If, after the date of this Agreement
but before the Effective Date, WCB's or Centennial's Common
Stock issued and outstanding increases or decreases in number or
is changed into or exchanged for a different kind or number of
securities, through a recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar
change in capitalization of WCB or Centennial, as the case may
be, then, as appropriate, the parties will make the
proportionate adjustment to the Purchase Price. No adjustment to
the Purchase Price will be made in connection with WCB's 3-for-2
stock split to shareholders of record on October 6, 1997, since
the Purchase Price as stated in this Agreement already reflects
this stock split.
1.3.5 NO FRACTIONAL SHARES. The Continuing Corporation will not issue
fractional shares of Continuing Corporation Common Stock. In
lieu of fractional shares, if any, each shareholder of
Centennial who is otherwise entitled to receive a fractional
share of Continuing Corporation Common Stock will receive an
amount of cash equal to the product of such fraction times
$17.83. Such fractional share interest will not include the
right to vote or receive dividends or any interest on dividends.
1.3.6 OPTIONS. For purposes of this Agreement, the term "Centennial
Options" means options to acquire an aggregate of up to 90,300
shares of Centennial Common Stock, which options were issued and
unexercised on the date of this Agreement. Each holder of these
Centennial Options will be entitled to receive, in exchange for
his Centennial Options which remain unexercised on the Effective
Date, options to purchase that number of Continuing Corporation
Common Stock shares he would have been entitled under Subsection
1.3.2 if he had exercised the Centennial Options immediately
before Closing. All such options will be subject to the same
terms as the Centennial Options exchanged in accordance with
this Subsection 1.3.6.
1.3.7 CERTIFICATES.
(a) Surrender of Certificates. Each certificate evidencing
Centennial Common Stock (other than Dissenting Shares)
will, on and after the Effective Date, represent and
evidence the right to receive a certificate representing
the Continuing Corporation Common Stock shares (or cash
for fractional shares) to which their Centennial Common
Stock shares converted in accordance with the provisions
of this Subsection 1.3, until the holder surrenders the
certificate to an agent designated by WCB and Centennial
to effect the exchange of Centennial Common Stock
certificates for Continuing Corporation Common Stock
certificates or cash ("Exchange Agent"), together with a
properly completed and executed form of transmittal
letter. Until any such certificate evidencing Centennial
Common Stock is so surrendered, the holder of such
Centennial Common Stock will not have any right to
receive any certificates evidencing Continuing
Corporation Common Stock or cash in lieu of fractional
shares.
(b) Issuance of Certificates in Other Names. If any
certificate evidencing Continuing Corporation Common
Stock is to be issued in a name other than that in which
the certificate(s) for Centennial Common Stock
surrendered in exchange is registered, the person
requesting this exchange must first: (1) establish to
the Exchange Agent's satisfaction the right to receive
the certificate evidencing Continuing Corporation 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
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surrendered or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not
applicable.
(c) Lost, Stolen, and Destroyed Certificates. If the
Exchange Agent receives: (1) satisfactory evidence of
Centennial Common Stock ownership represented by a
missing certificate and (2) any indemnification
assurances that the Exchange Agent may require from
persons claiming such ownership, then the Exchange Agent
will be authorized to issue Continuing Corporation
Common Stock for any Centennial 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 Centennial Common Stock will be entitled to
receive any dividends or other distributions otherwise
payable to holders of record of Continuing Corporation
Common Stock on any date after the Effective Date unless
the holder has surrendered her certificates evidencing
shares of Centennial Common Stock in exchange for
Continuing Corporation Common Stock certificates. This
surrender of certificates will not deprive the holder of
any dividends or distributions that she is entitled to
receive for a date before this surrender as a record
holder of Centennial Common Stock. When the holder
surrenders 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 Continuing Corporation
Common Stock into which the holder's Centennial Common
Stock was converted 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 Centennial Common Stock certificate
surrendered in exchange for cash is registered in, the
person requesting the exchange must establish to the
Exchange Agent's satisfaction the right to receive this
cash.
1.4 PAYMENT TO DISSENTING SHAREHOLDERS. For purposes of this Agreement,
"Dissenting Shares" means those shares of Centennial Common Stock as to
which shareholders have properly taken all steps necessary to perfect
their dissenters' rights under Title 23B.13 of the WBCA. Each
outstanding Dissenting Share of Centennial Common Stock will be
converted at Closing into the rights provided under Title 23B.13.
1.5 ALTERNATIVE STRUCTURES. Subject to the conditions set forth below, WCB
may, within 90 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 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, amount, and timing of
payment of the consideration set forth in Subsection 1.3 will not be
modified, (2) the tax consequences to Centennial and its shareholders
will not be adversely affected, and (3) the Bank's status as a separate
subsidiary of WCB following the Merger will not be affected. If WCB
elects an alternative structure under this Subsection 1.5, Centennial
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 effect the alternative structure and to
obtain the necessary stockholder approvals and approvals of any
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regulatory agency, administrative body or other governmental entity. WCB
will pay any additional expenses incurred by Centennial in connection
with any such changes, if those expenses would not have been incurred by
Centennial absent WCB's election under this Subsection 1.5.
1.6 LETTER OF TRANSMITTAL. WCB will prepare a transmittal letter form
reasonably acceptable to Centennial for use by shareholders holding
Centennial Common Stock. Certificates representing shares of Centennial
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 Centennial shareholders.
1.7 UNDELIVERED CERTIFICATES. If outstanding certificates for Centennial
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 the Continuing Corporation (and to the extent not in its
possession will be paid over to the Continuing Corporation), free and
clear of all claims or interests of any person previously entitled to
such items. But, neither the Continuing Corporation nor either party to
this Agreement will be liable to any holder of Centennial 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 the Continuing
Corporation will pay no interest on amounts owed to shareholders for
shares of Centennial Common Stock.
SECTION 2
CLOSING OF THE TRANSACTION
2.1 CLOSING. Closing will occur on the Effective Date. If Closing does not
occur on or before August 31, 1998 ("Termination Date"), either WCB or
Centennial may terminate this Agreement in accordance with Section 7.
Unless WCB and Centennial agree upon another date, the Effective Date
will be a date selected by WCB within 45 calendar 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 Centennial agree otherwise, Closing
will occur on the Effective Date at WCB's main office, 5335 S.W. Meadows
Road, Suite 201, Lake Oswego, Oregon.
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SECTION 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF WCB AND CENTENNIAL. Subject to
Subsection 3.3 and except as expressly set forth in Schedule 1, WCB
represents and warrants to Centennial, and Centennial represents and
warrants to WCB, 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 (as
applicable), and its activities do not require it to be
qualified in any jurisdiction other than Oregon and
Washington.
(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 party to this
Agreement a complete and correct copy of its articles of
incorporation and bylaws, each as amended to date and
currently in full force and effect.
3.1.2 SUBSIDIARIES.
(a) Schedule 3 lists all of its Subsidiaries and its
percentage ownership of these Subsidiaries, as of the
date of this Agreement. In this Agreement, the term
"Subsidiary" with respect to a party means any
corporation, partnership, financial institution, trust
company, or other entity owned or controlled by that
party or any of its subsidiaries or affiliates (or owned
or controlled by that party together with one or more of
its subsidiaries or affiliates). A Subsidiary is
considered to be owned or controlled by a party if that
party or any of its Subsidiaries (individually or
together with the party) directly or indirectly owns,
controls, or has the ability to exercise 50% or more of
the voting power of the Subsidiary.
(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) a commercial bank, a
corporation, or a trust company; (2) duly organized and
validly existing under either Washington or Oregon law;
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.
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3.1.3 CAPITAL STOCK.
(a) WCB. WCB represents and warrants:
(1) on the date this Agreement was signed, WCB's
authorized capital stock consists of 25 million
shares divided into two classes: (i) 15 million
shares of common stock, no par value ("WCB
Common Stock"), 10,112,506 shares of which are
issued and outstanding and (ii) 10 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 1,284,569 WCB Common Stock shares
(subject to adjustment on the terms set forth in
the WCB Stock Plans) are outstanding under the
stock option plans listed in Schedule 4 ("WCB
Stock Plans");
(3) No WCB Common Stock shares are 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 have been duly authorized
and validly issued and are fully paid and
nonassessable, except to the extent any
assessment is required under Oregon Revised
CodeSection707 or Revised Code of
WashingtonSection 30.12.180, 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, 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 (including those
relating to the issuance, sale, purchase,
redemption, conversion, exchange, redemption,
voting or transfer of such stock or securities).
(b) Centennial. Centennial represents and warrants:
(1) Centennial's authorized capital stock consists
of (i) 9 million shares of common stock, par
value $.01 per share ("Centennial Common
Stock"), 1,575,544 shares of which are issued
and outstanding and (ii) 1 million shares of
preferred stock, par value $.01 per share, none
of which are issued or outstanding;
(2) options or rights to acquire not more than an
aggregate of 90,300 Centennial Common Stock
shares (subject to adjustment on the terms set
forth in the Centennial Stock Plans) are
outstanding under the stock
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option plans or other plans listed in Schedule 4
("Centennial Stock Plans");
(3) Centennial has no Centennial Common Stock shares
reserved for issuance other than the shares
reserved for issuance under the Centennial Stock
Plans;
(4) all outstanding Centennial 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 Centennial's Subsidiaries have been duly
authorized and validly issued and are fully paid
and nonassessable, except to the extent of any
assessment required under Revised Code of
Washington Section 30.12.180, and at Closing
will be owned by Centennial or a Subsidiary of
Centennial free and clear of all Liens;
(6) except as set forth in this Agreement, there are
no preemptive rights or any outstanding
subscriptions, options, warrants, rights,
convertible securities or other agreements or
commitments of Centennial or any of its
Subsidiaries of any character relating to the
issued or unissued capital stock or other equity
securities of Centennial 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);
(7) the Bank's authorized capital stock consists of
(i) 17,000 shares of common stock, par value
$100 per share ("Bank Common Stock"), 12,952
shares of which are issued and outstanding;
(8) it owns all of the Bank Common Stock and the
Bank's preferred stock outstanding, and these
shares are free and clear of all encumbrances,
except for the pledge to secure the Promissory
Note referred to in Subsection 5.2.4; and
(9) it (alone or together with any of its
Subsidiaries) owns all of the shares of capital
stock (or 100% of any other applicable form of
ownership interest if the Subsidiary is not a
corporation) of each of its Subsidiaries free
and clear of all encumbrances.
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 only to the
approval by its shareholders of the plan of Merger
contained in this Agreement to the extent required by
Revised Code of Washington Section 23B.11.030 or Oregon
Revised Code Section 60.487, to 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.
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3.1.5 REPORTS AND FINANCIAL STATEMENTS.
(a) Filing of Reports. Since January 1, 1994, 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, and (4) 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 Party of Reports. It has delivered to
the other party 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, 1994, through the
date of this Agreement. It will promptly deliver to the
other party 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 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 shareholders' 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
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with generally accepted accounting principles,
consistently applied ("GAAP"), except as may be noted in
these statements.
(1) "Financial Statements" means: (i) in WCB's case,
the WCB Financial Statements (or for periods
ending on a date following the date of this
Agreement, the Subsequent WCB Financial
Statements); and (ii) in Centennial's case, the
Centennial Financial Statements (or for periods
ending on a date following the date of this
Agreement, the Subsequent Centennial Financial
Statements).
(2) "WCB Financial Statements" means WCB's (i)
audited consolidated statements of financial
condition as of December 31, 1996, and the
related audited statements of income, cashflows
and changes in stockholders' equity for the year
ended December 31, 1996; and (ii) unaudited
consolidated statements of financial condition
as of the end of each fiscal quarter following
December 31, 1996 but preceding the date of this
Agreement, and the related unaudited statements
of income, cashflows and changes in
stockholders' equity for each such quarter.
(3) "Subsequent WCB Financial Statements" means
balance sheets and related statements of income
and stockholders' equity for each of WCB's
fiscal quarters ending after the date of this
Agreement and before Closing.
(4) "Centennial Financial Statements" means (i)
Centennial's audited consolidated statements of
financial condition as of December 31, 1996,
1995, and 1994, and the related audited
statements of income, cashflows and changes in
stockholders' equity for each of the years ended
December 31, 1996, 1995, and 1994; and (ii)
Centennial's unaudited consolidated statements
of financial condition as of the end of each
fiscal quarter following December 31, 1996 but
preceding the date of this Agreement, and the
related unaudited statements of income,
cashflows and changes in stockholders' equity
for each such quarter.
(5) "Subsequent Centennial Financial Statements" means (i)
balance sheets and related statements of income and
stockholders' equity for each of Centennial's and the
Bank's fiscal quarters ending after the date of this
Agreement and before Closing, and (ii) Centennial's
audited consolidated statements of financial condition
as of December 31, 1997, and the related audited
statements of income, cashflows and changes in
stockholders' equity for the year ended December 31,
1997.
3.1.6 ABSENCE OF CERTAIN EVENTS AND CHANGES. Except as disclosed in
its Financial Statements and Reports, since December 31, 1996:
(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
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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
explicit prior consent of the other party 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.
3.1.8 KNOWLEDGE AS TO CONDITIONS. Its President, Chief Executive
Officer, and Chief Financial Officer (collectively, "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 Continuing Corporation, or the
opinion of the tax experts referred to in Subsection 5.2.15.
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 CENTENNIAL'S ADDITIONAL REPRESENTATIONS AND WARRANTIES. Subject to
Subsection 3.3 and except as expressly set forth in Schedule 1,
Centennial represents and warrants to WCB, the following:
3.2.1 LOAN AND LEASE LOSSES. Its Executive Officers know of no reason
why the allowance for loan and lease losses shown in the
consolidated balance sheets included in the Financial Statements
for the periods ended December 31, 1996, March 31, 1997, June
30, 1997, and September 30, 1997 was not adequate as of those
dates, respectively, to provide for estimable and probable
losses, net of recoveries relating to loans not previously
charged off, inherent in its loan portfolio.
3.2.2 NO STOCK OPTION PLANS. Except as listed in Schedule 4, neither
it nor any of its Subsidiaries has adopted any stock option
plans or granted any options or rights to acquire any shares of
Bank Common Stock, Centennial Common Stock, or capital stock or
other ownership interest of any Centennial Subsidiary.
3.2.3 GOVERNMENTAL FILINGS; NO VIOLATIONS.
(a) Filings. Other than the Regulatory Approvals and other
than as required under the Securities Act, the Exchange
Act, and state securities and "Blue Sky" laws,
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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; (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, arrangement or other
obligation ("Contracts") of it or any of its
Subsidiaries; or (3) a violation of 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 (4) 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.
3.2.4 ASSET CLASSIFICATION.
(a) Schedule 7 sets forth a list, accurate and complete in
all material respects as of September 30, 1997, 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
by any Governmental Entity, by any outside auditor, or
by any internal audit.
(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.
3.2.5 SUBSIDIARIES. Schedule 3 lists all the material assets and
liabilities of each of its Subsidiaries, other than the Bank.
3.2.6 INVESTMENTS. Schedule 8 lists all investments (except
investments in securities issued by federal state or local
government or any subdivision or agency thereof and investments
in Subsidiaries) made by it or any of its Subsidiaries in an
amount greater than $25,000 or which represent an ownership
interest of more than 5% in any corporation, company,
partnership, or other entity. All investments comply with all
applicable laws and regulations.
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3.2.7 PROPERTIES.
(a) Except as disclosed or reserved against in its Financial
Statements or in Schedule 9, 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 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 10 lists all its and its Subsidiaries' existing
branches and offices and all new branches or offices it
or any of its Subsidiaries' has applied to establish or
purchase, along with the cost to establish or purchase
those branches.
(d) Centennial has provided to WCB copies of existing title
policies held in its or the Bank's files covering
Property, and no exceptions, reservations, or
encumbrances have arisen or been created since the date
of issuance of those policies.
3.2.8 ANTI-TAKEOVER PROVISIONS. It and each of its Subsidiaries have
taken all necessary action to exempt the Transaction and this
Agreement from (a) all applicable Washington state law
anti-takeover provisions, if any, and (b) any takeover-related
provisions of its or the Bank's certificates of incorporation or
bylaws.
3.2.9 COMPLIANCE WITH LAWS. Except as disclosed in Schedule 11, 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 Bank Secrecy
Act, 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, 1994, 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,
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permit or governmental authorization, or (3) threatening
or contemplating revocation or limitation of, 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
employing senior executives.
3.2.10 LITIGATION. Except as disclosed in its Financial Statements or
in Schedule 12, 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.
3.2.11 TAXES. For purposes of this Subsection 3.2.11, "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 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)
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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);
(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).
3.2.12 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 13 lists
all directors' and officers' liability insurance policies and
other material insurance policies maintained by it or its
Subsidiaries.
3.2.13 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.
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3.2.14 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 Security Act of 1974,
("ERISA"), as amended, maintained by Centennial or any
of its Subsidiaries, as the case may be. Centennial and
its Subsidiaries are not now nor have they ever been
contributing employers to or sponsors of a
multi-employer plan or a single employer plan subject to
Title IV of ERISA.
(b) Schedule 14 sets forth a list, as of the date of this
Agreement, of (1) all Plans, stock purchase plans,
restricted stock and stock option plans, and other
deferred compensation arrangements, (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, annual reports on Form 5500,
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, including Plans
and related amendments, have been made available to the
other party to this Agreement.
(c) All Plans (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 Plan, 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 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 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) All material contributions it or any of its Subsidiaries
are or were required to make under the terms of any
Plans have been timely made or have been reflected in
its Financial Statements. No Plan of it or any of its
Subsidiaries 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 has provided, or is required to
provide, security to any Pension Plan under IRC Section
401(a)(29), IRC Section 412(f)(3), or ERISA Sections
306, 307 or 4204.
(e) Except as disclosed in its Financial Statements, neither
it nor its Subsidiaries have any obligations for retiree
health and life benefits.
(f) 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.
(g) 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
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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.
3.2.15 ENVIRONMENTAL MATTERS.
(a) For purposes of this Subsection 3.2.15, 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).
(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 applicable
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 applicable
Environmental
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Law or the terms and conditions of any permit,
license, authority, settlement, agreement,
decree or other obligation arising under any
applicable 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
applicable 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 material amount of asbestos
or asbestos-containing material. No Hazardous Substances
have been used, handled, stored, discharged, released or
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 applicable
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 applicable 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 Subsection
3.3.2; 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, material set of facts, or material event
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, set of
facts, or event, if the fact or event individually or taken
together with other facts or events would
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not, or, in the case of Subsection 3.2.10, is not reasonably
likely to, have a Material Adverse Effect with respect to such
party.
SECTION 4
CONDUCT AND TRANSACTIONS
BEFORE CLOSING
4.1 CONDUCT OF CENTENNIAL'S BUSINESS BEFORE CLOSING. Before Closing,
Centennial promises as follows:
4.1.1 AVAILABILITY OF CENTENNIAL'S BOOKS, RECORDS AND PROPERTIES.
(a) Centennial will make its, 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. Centennial will, and will cause its
Subsidiaries to, cooperate fully in any such inspection,
audit, or direct verification procedures, and Centennial
will, and will cause its Subsidiaries to, make available
all information reasonably required by or on behalf of
WCB. WCB, its counsel, accountants, and other
representatives will conduct any inspections, audits,
and verifications under this Subsection 4.1.1 at
reasonable times and in a manner which is not disruptive
to the business of Centennial or the Bank.
(b) At WCB's request, Centennial will request any third
parties involved in the preparation or review of the
Centennial Financial Statements or Subsequent Centennial
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. Centennial will, and will cause its
Subsidiaries to, conduct business only in the ordinary and usual
course and, without the prior written consent of WCB, will not,
and will not allow its Subsidiaries to, do any of the following:
(a) effect any stock split or other recapitalization with
respect to Centennial Common Stock or the capital stock
of a Centennial Subsidiary, or issue, pledge, redeem, or
encumber in any way any shares of Centennial's or a
Centennial Subsidiary's capital stock; or grant any
option or other right to shares of Centennial's or a
Centennial Subsidiary's capital stock (except issuances
of Centennial Common Stock upon exercise of the
Centennial Options granted before the date of this
Agreement);
(b) declare or pay any dividend, or make any other
distribution, either directly or indirectly, with
respect to Centennial Common Stock or the capital stock
of any Centennial Subsidiary, except (1) dividends from
the Bank to Centennial to support the operations of
Centennial which are consistent with past practices, (2)
dividends which may be necessary to pay Centennial's
debt to National Bank of Alaska before Closing, as
required by Subsection 5.2.4) and (3) Centennial's
regular quarterly cash dividends to Centennial
shareholders consistent with past practices and in an
amount that does not exceed 8 cents per share (dividend
must be paid as of record and on a payment date that
will not result in
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Centennial shareholders receiving a dividend from both
Centennial and the Continuing Corporation for the same
quarter or time period);
(c) acquire, sell, transfer, assign, encumber or otherwise
dispose of assets or make any commitment with respect to
its assets 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 new indebtedness greater than $25,000
(except for borrowings from U.S. Bank, National Bank of
Alaska, and the Federal Home Loan Bank in the ordinary
course of business and consistent with past practices);
(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) enter into or recommend the adoption by Centennial's
shareholders of any agreement involving a possible
merger or other business combination or asset sale by
Centennial not involving the Transaction;
(g) enter into, renew, or terminate any contracts (including
real property leases and data or item processing
agreements) with or for a term of one-year or more,
except for (1) purchase of a six-year "tail" on existing
insurance policies for directors' and officers'
liability (including errors and omissions and trust
errors and omissions) and for employment related
practices liability and (2) the Bank's contracts of
deposit and agreements to lend money not otherwise
restricted under this Agreement and (i) entered into in
the ordinary course of business, (ii) consistent with
past practices, and (iii) providing for not less (in the
case of loans) or more (in the case of deposits) than
prevailing market rates of interest;
(h) enter into or amend any contract (other than contracts
for deposits at the Bank or agreements to lend money not
otherwise restricted by this Agreement) calling for a
payment by it of more than $25,000, unless the contract
may be terminated without cause or penalty upon 30 days
notice or less;
(i) enter into any personal services contract with any
person or firm, except (1) contracts, agreements, or
arrangements for legal, accounting, investment advisory,
or tax services entered into directly to facilitate the
Transaction and (2) contracts entered into in the
ordinary course of business with a term of no more than
6 months and which require total expenditures by
Centennial and its Subsidiaries of no more than $25,000
per contract and no more than $100,000 total for all
such contracts;
(j) (1) sell any securities, whether held for investment or
sale, other than in the ordinary course of business or
sell any securities, whether held for investment or
sale, even in the ordinary course of business, if the
aggregate gain realized from all sales after the date of
this Agreement would be more than $50,000 or (2)
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transfer any investment securities between portfolios of
securities available for sale and portfolios of
securities to be held to maturity;
(k) amend its articles of incorporation, bylaws, or other
formation agreements, or convert its charter or form of
entity;
(l) implement or adopt any material changes in its
operations policies or procedures, including loan loss
reserve policies, unless the changes are requested by
WCB or are necessary or advisable, on the advice of
legal counsel, to comply with applicable laws,
regulations or regulatory policies;
(m) implement or adopt any change in its accounting
principles, practices or methods, other than as may be
required (1) by GAAP, (2) for tax purposes, or (3) to
take advantage of any beneficial tax or accounting
methods;
(n) increase the combined number of full-time or equivalent
employees of Centennial and its Subsidiaries above 149;
(o) other than in accordance with binding commitments
existing on the date of this Agreement, make any capital
expenditures in excess of $25,000 per project or related
series of projects or $175,000 in the aggregate, except
for expenses reasonably related to (1) completion of the
Transaction or (2) satisfaction of the conditions
described in Subsection 5.2.4; or
(p) enter into any other transaction or make any expenditure
other than in the ordinary and usual course of its
business and made or entered into in a manner consistent
with its well-established practices or as required by
this Agreement.
4.1.3 CONDUCT REGARDING REPRESENTATIONS AND WARRANTIES. Centennial
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 in any material respect 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. Centennial will, and will cause the
Bank to, maintain its properties and equipment (and related
insurance or its equivalent) in accordance with good business
practice.
4.1.5 PRESERVATION OF BUSINESS ORGANIZATION. Centennial 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 PERSONNEL AND EMPLOYMENT AGREEMENTS. Centennial will, and will
require the Bank to, obtain WCB's approval before making any
change, including hiring of replacements, with respect to
present management personnel having the rank of vice-president
or higher. Except as otherwise agreed in writing by WCB and
Centennial, Centennial will
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not, and will not allow its Subsidiaries to, enter into any
employment agreement with any individual.
4.1.7 COMPENSATION. Centennial will not, and will not allow the Bank
to, permit any increase in the current or deferred compensation
payable or to become payable by Centennial to any of its
directors, officers, employees, agents or consultants other than
normal increments in compensation in accordance with
Centennial's past practices with respect to the timing and
amounts of such increments. Without the prior written approval
of WCB, Centennial 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. Centennial will promptly deliver
its Financial Statements to WCB. Centennial will deliver
Subsequent Centennial Financial Statements to WCB by the earlier
of: (1) 5 days after Centennial or the Bank has prepared and
issued them or (2) 60 days after year-end for year-end
statements and 30 days after the end of the quarter for
quarterly statements. The Subsequent Centennial Financial
Statements:
(a) will be prepared from the books and records of
Centennial and the Bank;
(b) will present fairly the financial position and operating
results of Centennial 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 Centennial's and the Bank's
liabilities, contingent or otherwise, on the respective
dates and for the respective periods covered, except for
liabilities: (1) not required to be so reflected in
accordance with GAAP or (2) not significant in amount.
4.1.9 NO SOLICITATION. Neither Centennial 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 Centennial or its
Subsidiaries or enter into discussions concerning any such
acquisition, except as otherwise required to comply with the
fiduciary responsibilities of Centennial's board of directors.
No such party will make available to any person not affiliated
with Centennial 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 REPORTS AND UPDATE ENDORSEMENTS. At WCB's request,
Centennial will provide WCB with title reports issued by a title
insurance company reasonably satisfactory to WCB. These title
reports must show unencumbered fee simple title or vendee's
interest to all real Property owned by Centennial or the Bank
and unencumbered leasehold interests in all real Property leased
by Centennial or the Bank, and these title reports may contain
only (1) general exclusions and exceptions, (2) reservations,
covenants, conditions, and restrictions of record and general to
the area, (3) easements and encroachments not affecting the
value of or interfering with WCB's reasonable use of the
property, (4) reserved oil and/or mining rights, and (5) other
exceptions consented to in writing by WCB, which consent WCB may
not unreasonably withhold. At Closing,
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Centennial will provide WCB with update endorsements, dated as
of the Effective Date, to title policies for each Property owned
by it or the Bank. For purposes of this Agreement, "Property"
includes any property that Centennial or the Bank owns or
leases, other than other real estate owned.
4.1.11 REVIEW OF LOANS. Centennial 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. WCB will
conduct these examinations at reasonable times and in a manner
which is not disruptive to the business of Centennial or the
Bank. At WCB's reasonable request, Centennial and the Bank will
provide WCB with current reports updating the information set
forth in Schedule 7.
4.1.12 DIVESTITURE OF INTEREST IN SEQUIM SHOPRITE CENTER. Centennial
will use all reasonable efforts to divest before Closing all of
its interest and all interest of any of its Subsidiaries in the
Sequim Shoprite Center Partnership and in all assets of that
Partnership, and Centennial will comply fully with all terms of
any related divestiture requests or orders made by any
governmental regulatory agency with jurisdiction over
Centennial.
4.2 REGISTRATION STATEMENT.
4.2.1 PREPARATION OF REGISTRATION STATEMENT.
(a) 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 shares of Continuing Corporation Common
Stock to be issued to Centennial Shareholders under this
Agreement in connection with the Transaction ("Continuing
Corporation Shares"), and the parties will prepare a related
joint prospectus/proxy statement ("Joint Prospectus/Proxy
Statement") to be mailed together with any amendments and
supplements to WCB's and Centennial's shareholders.
(b) The parties will cooperate with each other in preparing the
Registration Statement and Joint Prospectus/Proxy Statement, and
will use all reasonable 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 the Joint
Prospectus/Proxy Statement.
(c) Nothing will be included in the Registration Statement or the
Joint 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.
(d) WCB will pay all costs associated with the preparation by WCB's
counsel and filing of the Registration Statement. Centennial
will pay all costs associated with review by Centennial's
counsel of the Registration Statement or the Joint
Prospectus/Proxy Statement. Each party will pay the respective
costs associated with the printing and mailing of the Joint
Prospectus/Proxy Statement to its shareholders and any other
direct costs incurred by it in connection with the Joint
Prospectus/Proxy Statement.
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4.2.2 SUBMISSION TO SHAREHOLDERS.
(a) WCB and Centennial will submit the Joint
Prospectus/Proxy Statement to, and will use all
reasonable efforts in good faith to obtain the prompt
approval of the Joint Prospectus/Proxy Statement by, all
applicable regulatory authorities. The parties will
provide each other with copies of such submissions for
review.
(b) WCB and Centennial will each promptly take the action
necessary in accordance with applicable law and their
respective Certificates of Incorporation and Bylaws to
each convene a shareholders' meeting to consider the
approval of this Agreement and to authorize the
transactions contemplated by this Agreement. These
shareholders meetings will be held on the earliest
practical date after the date the Joint Prospectus/Proxy
Statement may first be sent to WCB's and Centennial's
shareholders without objection by applicable
governmental authorities; but each party will have at
least 30 days to solicit proxies. Except as otherwise
required to comply with the fiduciary responsibilities
of their respective boards of directors, each party's
board of directors and each party's officers,
respectively, will recommend approval of the Transaction
to that party's shareholders.
4.3 ACCOUNTING TREATMENT.
4.3.1 POOLING OF INTERESTS. The parties intend the Merger to be
treated as a "pooling of interests" for accounting purposes.
From the date of this Agreement through the Effective Date,
neither WCB nor Centennial nor any of their respective
Subsidiaries or other affiliates (a) will knowingly take any
action or enter into any contract, agreement, commitment or
arrangement that would jeopardize the treatment of the Merger as
a "pooling of interests;" or (b) will knowingly fail to take any
action that would preserve the treatment of the Merger as a
"pooling of interests." No action or omission by either party
will constitute a breach of this Subsection 4.3.1 if the action
is permitted or required under this Agreement, is made with the
other party's written consent, or is required by applicable laws
or regulations.
4.3.2 AFFILIATE LIST. Certain persons may be deemed "affiliates" of
Centennial under Securities Act Rule 145, the SEC's Accounting
Series Releases ("ASR") 130 and 135, or other rules and releases
related to "pooling of interests" accounting treatment. Within
thirty days following the date this Agreement is signed,
Centennial will deliver to WCB, after consultation with legal
counsel, a list of names and addresses of Centennial's
"affiliates" with respect to the Transaction within the meaning
of Rule 145 or ASR 130 and 135. By the Effective Date,
Centennial will deliver, or cause to be delivered, to WCB a
letter from each of these "affiliates," and any additional
person who becomes an "affiliate" before the Effective Date and
after the date of the list, dated as of the date of its delivery
and in the form attached as Exhibit A.
4.3.3 RESTRICTIVE LEGENDS. WCB will place a restrictive legend on all
shares of Continuing Corporation Common Stock to be received by
an "affiliate" so as to preclude their transfer or disposition
in violation of the affiliate letters, to instruct its transfer
agent not to permit the transfer of those shares, and to take
any other steps reasonably necessary to ensure compliance with
the Securities Act Rule 145 or the SEC's ASR 130 and 135 or
other rules and releases related to "pooling of interests"
accounting treatment. Centennial will collect all stock
certificates evidencing ownership of Centennial Common Stock by
"affiliates" and deliver these certificates to WCB on or before
the Effective
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Date. "Affiliates" may not transfer the shares of Continuing
Corporation Common Stock they receive in exchange for their
Centennial Common Stock until financial results covering at
least 30 days of combined operations of the Continuing
Corporation have been published.
4.4 SUBMISSION TO REGULATORY AUTHORITIES. Representatives of WCB, at WCB's
expense, 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 Centennial's review. WCB will
give Centennial the opportunity to approve information contained in
these applications to the extent such information relates to Centennial
or the Bank, but Centennial may not unreasonably withhold its approval.
These applications and filings are expected to include:
(a) an application to the Federal Reserve;
(b) a change in control notice with the WDFI Director;
(c) any filings required under the WBCA; and
(d) any filings required under the OBCA.
4.5 TRANSITION PLAN. WCB and Centennial will immediately establish a
Transition Committee consisting of six members. Victor L. Bartruff and
Thomas W. Healy, or their designees, will co-chair the Transition
Committee. Mr. Bartruff will appoint to the Transition Committee two
other members from WCB, subject to the consent of Mr. Healy, which
consent may not be unreasonably withheld. Mr. Healy will appoint to the
Transition Committee two other members from Centennial, subject to the
consent of Mr. Bartruff, which consent may not be unreasonably withheld.
Within 45 days after the date of this Agreement, the Transition
Committee will develop a Transition Plan agreeable to the Chief
Executive Officers of both WCB and Centennial.
4.6 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.
4.7 CONSENTS. WCB and Centennial will use all reasonable efforts to obtain
the consent or approval of any person, organization or other entity
whose consent or approval is required in order to consummate the
Transaction.
4.8 FURTHER ACTIONS. The proper officers of WCB and Centennial,
respectively, in the name and on behalf of those respective parties,
will use all reasonable 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 as promptly as practicable.
4.9 NOTICE. Centennial will provide WCB 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 Centennial or the Bank;
(b) the commencement of any proceeding against Centennial, the Bank,
or any of their Subsidiaries or affiliates, by or before any
court or governmental agency, individually or
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in the aggregate, that might have a Material Adverse Effect with
respect to Centennial or the Bank; or
(c) any acquisition of an ownership or leasehold interest in real
property, other than an acquisition in good faith of real
property to satisfy a debt previously contracted for.
4.10 CONFIDENTIALITY. WCB and Centennial each will, and Centennial 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
disclosing party; or (4) is necessary to the defense of one of the
parties in a legal or administrative action brought against that party
by the other party. If the Transaction is not completed, WCB and
Centennial will, and Centennial 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.
4.11 UPDATE OF FINANCIAL STATEMENTS. WCB will promptly deliver its Financial
Statements to Centennial. WCB will deliver Subsequent WCB Financial
Statements to Centennial by the earlier of: (1) 5 days after WCB
prepares and issues them or (2) 60 days after year-end for year-end
statements and 30 days after the end of the quarter for quarterly
statements. The Subsequent WCB Financial Statements will:
(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.
4.12 AVAILABILITY OF WCB'S BOOKS, RECORDS AND PROPERTIES. WCB will make
available to Centennial true and correct copies of (1) its Articles of
Incorporation and Bylaws and (2) all reports it has filed with the SEC
since January 1, 1996. At Centennial's reasonable request, WCB will also
provide Centennial with copies of: (1) other reports filed with the SEC
(2) reports filed with banking regulators, (2) WCB's stock option plans,
and (3) any other information that the parties agree upon.
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 WCB'S OBLIGATIONS. All WCB's obligations under this
Agreement are subject to satisfaction of the following conditions at or
before Closing:
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5.2.1 REPRESENTATIONS AND WARRANTIES. Centennial's representations and
warranties in this Agreement and in any certificate or other
instrument delivered in connection with this Agreement are 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 are true in all material respects as of that earlier
date). These representations and warranties have the same force
and effect as if they had been made at Closing. Centennial has
delivered to WCB its certificate, executed by a duly authorized
officer of Centennial and dated as of Closing, stating that
these representations and warranties comply with this Subsection
5.2.1.
5.2.2 COMPLIANCE. Centennial has performed and complied in all
material respects with all material terms, covenants, and
conditions of this Agreement. Centennial has delivered to WCB
its certificate, executed by a duly authorized officer of
Centennial and dated as of Closing, stating that Centennial is
in compliance with this Subsection 5.2.2.
5.2.3 EQUITY CAPITAL REQUIREMENT. The Tangible Equity Capital,
determined in accordance with GAAP of Centennial and the Bank on
a consolidated basis as of the Effective Date is at least the
amount equal to $18.2 million plus increases in capital from the
exercise of Centennial Options between the date of this
Agreement and the Effective Date. Centennial's certificate
referred to in Subsection 5.2.2 must confirm that this condition
is satisfied. Tangible Equity Capital means common stock, paid
in capital, retained earnings, plus (or minus) net unrealized
gain (or loss) on available for sale securities and minus
goodwill and any other intangible assets. Despite this
Subsection 5.2.3, Centennial's Tangible Equity Capital at
Closing may be below the amount required in this Subsection to
the extent WCB requires the Bank's loan loss reserve percentage
at Closing to be greater than 1.50% at Closing.
5.2.4 PAYMENT OF NOTE AND RELEASE OF PLEDGE. Centennial has (1)
satisfied in full its obligations under the Promissory Note and
all related documents, as amended or renewed, dated May 29,
1996, entered into between Centennial and National Bank of
Alaska establishing a credit line of $4 million, with a
remaining payoff balance of approximately $290,000 as of the
date of this Agreement; (2) obtained full release of all
collateral, including the Bank Common Stock, pledged as security
for this Promissory Note; and (3) provided WCB with evidence
satisfactory to it and its counsel that the Promissory Note has
been satisfied and the collateral released as required by this
Subsection 5.2.4.
5.2.5 TRANSACTION FEES STATEMENTS. Centennial has delivered to WCB a
statement, in a form reasonably satisfactory to WCB, from each
third party to whom Centennial has paid or owes Transaction
Fees. Each statement must set forth the total costs and expenses
paid or owing to the third party in connection with the
Transaction's consummation. Centennial has delivered to WCB its
certificate, executed by a duly authorized officer of Centennial
and dated as of Closing, stating the total Transaction Fees
incurred by Centennial and certifying that Centennial is in
compliance with Subsection 1.3.3 and this Subsection 5.2.5.
5.2.6 BUILDING PARTNERSHIPS. The College Building General Partnership
and the Building General Partnership have been dissolved, and
the assets of those partnerships have been distributed in a
manner reasonably satisfactory to WCB and consistent with
applicable law.
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5.2.7 SEQUIM SHOPRITE CENTER PARTNERSHIP. Centennial has used all
reasonable efforts to divest before Closing all of its interest
and all interest of any of its Subsidiaries in the Sequim
Shoprite Center Partnership and in all assets of that
Partnership, and Centennial is in full compliance with all terms
of any related divestiture requests or orders made by any
governmental regulatory agency with jurisdiction over
Centennial.
5.2.8 AUDIT REPORT. Centennial has delivered to WCB the completed and
certified audit report of its independent certified public
accountants with respect to Centennial's audited consolidated
statements of financial condition as of December 31, 1997, and
the related audited statements of income, cashflows and changes
in stockholders' equity for the year ended December 31, 1997.
5.2.9 NO MATERIAL ADVERSE EFFECT. No damage, destruction, or loss or
other event or sequence of events has occurred which,
individually or in the aggregate, has had or potentially may
have a Material Adverse Effect with respect to Centennial or the
Bank. Centennial's certificate referred to in Subsection 5.2.2
states that the conditions identified in this Subsection 5.2.9
are satisfied.
5.2.10 FINANCIAL CONDITION. The following are true, and Centennial's
certificate referred to in Subsection 5.2.2 confirms the truth
of the following:
(a) Centennial's consolidated allowance for possible loan
and lease losses (1) at December 31, 1996, March 31,
1997, June 30, 1997, September 30, 1997, December 31,
1997 and at Closing was and is adequate to absorb the
anticipated loan and lease losses (taking into account
any recommendations made by Centennial's certified
public accountants) and (2) at Closing is at least an
amount equal to WCB's consolidated loan loss reserve
percentage at Closing or any greater amount WCB
reasonably finds necessary;
(b) the reserves set aside for the contingent liabilities
reflected in the Subsequent Centennial Financial
Statements are adequate to absorb all reasonably
anticipated losses; and
(c) the Bank's deposits at Closing, excluding brokered
deposits and jumbo certificates of deposit, total at
least $193 million.
5.2.11 NO CHANGE IN LOAN REVIEW. Centennial has 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.
5.2.12 NO GOVERNMENTAL PROCEEDINGS. No action or proceeding has been
commenced or threatened by any governmental agency to restrain,
prohibit, or invalidate the Transaction.
5.2.13 RECEIPT OF TITLE POLICY. WCB has received all title insurance
reports requested under Subsection 4.1.10, and Centennial has
delivered to WCB the update endorsements required by Subsection
4.1.10.
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5.2.14 CORPORATE AND SHAREHOLDER ACTION. Centennial's board of
directors and WCB's and Centennial's shareholders have each
approved the Transaction.
5.2.15 TAX OPINION. WCB has, at WCB's expense, obtained from Graham &
Dunn, P.C. and delivered to Centennial, an opinion addressed to
Centennial and in form and substance reasonably satisfactory to
Centennial and its counsel, to the effect that consummation of
the Transaction will not result in a taxable event for
Centennial 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), Centennial's shareholders
who, in accordance with Section 1, exchange their
Centennial Common Stock shares solely for Continuing
Corporation Common Stock shares will not recognize gain
or loss on the exchange.
(c) Cash payments to Centennial's shareholders in lieu of a
fractional share of Continuing Corporation Common Stock
will be treated as distributions in redemption of the
fractional share interest, subject to the limitations of
IRC Section 302.
5.2.16 OPINION OF COUNSEL. Centennial has obtained from Davis Wright
Tremaine and delivered to WCB an opinion of counsel, addressed
to WCB, to the effect that:
(a) Centennial is a corporation validly existing and in good
standing under Washington law;
(b) the Bank is a Washington commercial banking corporation
validly existing and in good standing under Washington
law;
(c) Centennial 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 Centennial, and this
Agreement constitutes Centennial's legal, binding, and
valid obligation, 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 Centennial'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;
(f) all Centennial Options have been duly authorized and
validly granted;
(g) counsel has no knowledge of any pending or threatened
claims, actions, suits or legal or equitable proceedings
before any governmental agency which, in counsel's
opinion would be, individually or in the aggregate,
reasonably likely to
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result in liability in excess of $40,000 or prevent
consummation of the Transaction;
(h) execution of this Agreement and consummation of the
Transaction (i) will not violate Centennial's or the
Bank's articles of incorporation or bylaws, (ii) will
not violate the terms of any material contract listed in
Schedule 5, and (iii) to counsel's knowledge, will not
breach or result in a default under the terms of any
other material obligation that Centennial or the Bank
has entered into before the date of this opinion; and
(i) Counsel's opinion will be governed by and interpreted in
accordance with the Legal Opinion Accord of the ABA
section of Business Law (1991), together with the
related commentary, as published in The Business Lawyer,
Volume 47, No. 1, and any amendments or modifications
thereto.
5.2.17 CASH PAID. The aggregate of the cash paid for fractional shares
and Dissenting Shares to holders of Centennial Common Stock
under this Agreement and applicable law will not exceed 10% of
the Purchase Price, as it may be adjusted under this Agreement.
5.2.18 AFFILIATE LETTERS. WCB has received the affiliate list and
letters specified in Subsection 4.3.2.
5.2.19 REGISTRATION STATEMENT. The Registration Statement, as it may
have been amended, required in connection with the shares of
Continuing Corporation Common Stock to be issued to shareholders
under Subsection 1.3, and as described in Subsection 4.2, has
become effective, and no stop order suspending the effectiveness
of such Registration Statement has been issued or remains in
effect, and no proceedings for that purpose have been initiated
or threatened by the SEC the basis for which still exists.
5.2.20 CONSENTS. Centennial has obtained the consents as indicated in
Schedule 6.
5.2.21 FAIRNESS OPINIONS. WCB has received (1) from Sheshunoff, two
updated fairness opinions (to be delivered by Centennial to WCB
at Centennial's expense), one dated immediately before
Centennial mails the Joint Prospectus/Proxy Statement to its
shareholders and the other dated immediately before Closing, to
the effect that the financial terms of the Transaction are
financially fair to Centennial's shareholders and (2) from Dain
Bosworth, Inc. (if requested), a fairness opinion, dated
immediately before WCB mails the Joint Prospectus/Proxy
Statement to its shareholders, to the effect that the financial
terms of the Transaction are financially fair to WCB's
shareholders. Any opinion requested by WCB from Dain Bosworth,
Inc. will be at WCB's expense. WCB and Centennial will each
provide the other's investment advisor with such information as
it may reasonably request in order to render its opinion.
5.2.22 ACCOUNTING TREATMENT. It has been determined to WCB's
satisfaction that the Transaction will be treated for accounting
purposes as a "pooling of interests" in accordance with APB
Opinion No. 16, and WCB has received a letter to this effect
from Arthur Andersen LLP, certified public accountants.
5.2.23 SOLICITATION OF EMPLOYEES. Neither any member of Centennial's
board of directors nor any entity with which any such director
is affiliated has solicited any employee of
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Centennial or WCB with the intention of causing the employee to
terminate her employment with Centennial or WCB, as the case may
be.
5.2.24 OTHER MATTERS. WCB has received any other opinions,
certificates, and documents that WCB reasonably requests in
connection with this Agreement and the Transaction.
5.3 CONDITIONS TO CENTENNIAL'S OBLIGATIONS. All Centennial'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 representations and
warranties in this Agreement and in any certificate or other
instrument delivered in connection with this Agreement are 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 are true in all material respects as of that earlier
date). These representations and warranties have the same force
and effect as if they had been made at Closing. WCB has
delivered to Centennial its certificate, executed by a duly
authorized officer of WCB and dated as of Closing, stating that
these representations and warranties comply with this Subsection
5.3.1.
5.3.2 COMPLIANCE. WCB has performed and complied in all material
respects with all terms, covenants and conditions of this
Agreement. WCB has delivered to Centennial its certificate,
executed by a duly authorized officer of WCB and dated as of
Closing, stating that WCB is in compliance with this Subsection
5.3.2.
5.3.3 NO MATERIAL ADVERSE EFFECT. No damage, destruction, or loss or
other event or sequence of events has occurred which,
individually or in the aggregate, has had or potentially may
have a Material Adverse Effect with respect to WCB. WCB's
certificate referred to in Subsection 5.3.2 states that the
conditions identified in this Subsection 5.3.3 are satisfied.
5.3.4 NO GOVERNMENTAL PROCEEDINGS. No action or proceeding has been
commenced or threatened by any governmental agency to restrain,
prohibit, or invalidate the Transaction.
5.3.5 CORPORATE AND SHAREHOLDER ACTION. WCB's board of directors and
WCB's and Centennial's shareholders have each approved the
Transaction.
5.3.6 TAX OPINION. The tax opinion specified in Subsection 5.2.15 has
been delivered to Centennial.
5.3.7 OPINION OF COUNSEL. WCB has obtained from Graham & Dunn, P.C.
and delivered to Centennial an opinion, addressed to Centennial,
to the effect that:
(a) WCB is a corporation validly existing and in good
standing under Oregon law;
(b) WCB has 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 WCB's part, and this Agreement
constitutes WCB's legal, binding, and valid obligation,
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
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generally affecting the enforcement of the rights of
creditors and by generally applicable principles of
equity;
(d) the Continuing Corporation Shares have been duly
authorized and, when issued as contemplated by this
Agreement, will be validly issued, fully paid and
nonassessable;
(e) the Registration Statement became effective under the
Securities Act on ____________, 1997, 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;
(f) counsel has no knowledge of any pending or threatened
claims, actions, suits or legal or equitable proceedings
before any governmental agency which, in counsel's
opinion would be, individually or in the aggregate,
reasonably likely to result in liability in excess
$50,000 or prevent consummation of the Transaction;
(g) execution of this Agreement and consummation of the
Transaction will not violate WCB's articles of
incorporation or bylaws; and
(h) Counsel's opinion will be governed by and interpreted in
accordance with the Legal Opinion Accord of the ABA
section of Business Law (1991), together with the
related commentary, as published in The Business Lawyer,
Volume 47, No. 1, and any amendments or modifications
thereto.
5.3.8 FAIRNESS OPINION. Centennial has received from Sheshunoff, two
updated fairness opinions, one dated immediately before
Centennial mails the Joint Prospectus/Proxy Statement to its
shareholders and the other dated immediately before Closing, to
the effect that the financial terms of the Transaction are
financially fair to Centennial's shareholders.
5.3.9 ACCOUNTING TREATMENT. WCB has received the letter required under
Subsection 5.2.22 and has provided Centennial with a copy.
5.3.10 CASH PAID. The aggregate of the cash paid to holders of
Centennial Common Stock under this Agreement and applicable law
will not exceed 10% of the Purchase Price, as it may be adjusted
under this Agreement.
5.3.11 REGISTRATION STATEMENT. The Registration Statement, as it may
have been amended, required in connection with the shares of
Continuing Corporation Common Stock to be issued to shareholders
under Subsection 1.3, and as described in Subsection 4.2, has
become effective, and no stop order suspending the effectiveness
of such Registration Statement has been issued or remains in
effect, and no proceedings for that purpose have been initiated
or threatened by the SEC the basis for which still exists.
5.3.12 DIRECTOR AND EXECUTIVE COMMITTEE APPOINTMENTS. Effective as of
the Effective Date, WCB has elected or appointed (1) Thomas W.
Healy and Joe L. Snyder to serve on WCB's board of directors and
(2) Thomas W. Healy to serve on WCB's Executive Committee.
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5.3.13 OTHER MATTERS. Centennial has received any other opinions,
certificates, and documents that Centennial reasonably requests
in connection with this Agreement and the Transaction.
SECTION 6
DIRECTORS, OFFICERS, AND EMPLOYEES
6.1 DIRECTORS. At the time this Agreement is executed, Centennial will cause
each member of Centennial's and the Bank's boards 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 DIRECTOR APPOINTMENTS. Effective as of the Effective Date, WCB will
elect or appoint Thomas W. Healy and Joe L. Snyder to WCB's board of
directors to serve until their successors are elected and qualified.
Nothing in this Subsection 6.2 or this Agreement restricts in any way
any rights of WCB's shareholders and directors at any time after the
Effective Date to nominate, elect, select, or remove WCB's directors.
6.3 EXECUTIVE COMMITTEE APPOINTMENTS. Effective as of the Effective Date,
WCB will appoint Thomas W. Healy to serve on WCB's Executive Committee.
This appointment will remain effective for at least one year following
Closing.
6.4 SALARY CONTINUATION AGREEMENT. At the time this Agreement is executed,
WCB will enter into a salary continuation agreement with Thomas W.
Healy. This salary continuation agreement will be effective as of the
Effective Date.
6.5 EMPLOYEES. WCB presently intends to allow the Bank's employees who are
employed with the Bank following the Transaction ("Continuing
Employees") to participate in certain employee benefit plans in which
employees of WCB 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 under
WCB's plans. Benefits for Continuing Employees will begin accruing under
WCB's plans as soon as practicable after Closing. Until that time,
benefits will continue to accrue under Centennial's plans. 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.
6.6 EMPLOYEE BENEFIT ISSUES.
6.6.1 COMPARABILITY OF BENEFITS. WCB confirms to Centennial its
present intention to provide Continuing Employees with employee
benefit programs which, in the aggregate, are generally
competitive with employee benefit programs offered by financial
institutions of comparable size located in WCB's market area.
6.6.2 TERMINATION AND TRANSFER/MERGER OF PLANS. As soon as practicable
after Closing, all employee benefit plans of Centennial and its
Subsidiaries will be terminated and the interests of Continuing
Employees in those plans will be transferred or merged into
WCB's employee benefit plans. Centennial's 401(k) plan will be
merged with WCB's 401(k) plan, and the Continuing Employees
participating in Centennial's Employee Stock Ownership Plan may
transfer their interests under that plan to WCB's 401(k) plan.
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6.6.3 NO CONTRACT CREATED. Nothing in this Agreement gives any
employee of Centennial or its Subsidiaries a right to continuing
employment.
6.7 INDEMNIFICATION OF CENTENNIAL DIRECTORS.
6.7.1 INDEMNIFICATION. For three years following the Effective Date
("Indemnification Period"), WCB will indemnify and defend the
present and former directors of Centennial and the Bank (each an
"Indemnified Party") against and from all claims, losses, and
liabilities (collectively, "Claims") arising out of their
actions taken before the Effective Date within the scope of
their service as directors of Centennial or the Bank. Despite
the previous sentence, WCB is obligated under this Subsection
6.7 to indemnify and defend an Indemnified Party only to the
extent that the Indemnified Party was entitled to
indemnification from Centennial for actions taken by the
Indemnified Party during the six-year period immediately
preceding the Effective Date. In addition, insofar as the "tail"
insurance referred to in Subsection 6.7.6 covers an officer or
director only to the extent he is indemnified by Centennial or
the Bank, as the case may be, WCB will indemnify and defend the
present and former directors and officers of Centennial and will
cause the Bank to continue to indemnify and defend the present
and former directors and officers of the Bank against and from
Claims covered by such insurance to the extent they were
entitled to indemnification from Centennial or the Bank, as the
case may be, immediately preceding the Effective Date.
6.7.2 CLAIMS FOR INDEMNIFICATION. Any Indemnified Party with a claim
for indemnification must notify WCB of the claim within 10 days
from the date the Indemnified Party learns of the claim. If the
Indemnified Party does not notify WCB of the claim within this
10-day period, WCB's obligation to indemnify the Indemnified
Party will be reduced by any costs, expenses, or other losses
that are due to the untimely notice. If the Indemnified Party
does not notify WCB of the claim within 30 days from the date
the Indemnified Party learns of the claim, WCB may, at its
discretion, deny indemnification to the Indemnified Party.
6.7.3 DEFENSE AND ADVANCEMENT OF EXPENSES. WCB will advance to an
Indemnified Party upon request expenses related to an
Indemnified Party's defense against any Claims, as long as the
Indemnified Party agrees in writing to reimburse WCB for those
expenses if it is ultimately determined that the Indemnified
Party is not entitled to indemnification from WCB. WCB may, at
its discretion, assume the Indemnified Party's defense against
any Claims. In any case, WCB has the right to approve defense
counsel for any Indemnified Party, and the Indemnified Party
will cooperate in the defense. WCB will not be liable to
indemnify an Indemnified Party for any settlement amount, unless
WCB consents in advance to the settlement amount. WCB may not
unreasonably withhold its consent to any proposed settlement.
6.7.4 ENFORCEMENT AND DISPUTE RESOLUTION. All disputes arising under
this Subsection 6.7 must be submitted to arbitration in
accordance with Subsection 8.7.
6.7.5 ASSUMPTION OF OBLIGATION. If, during the Indemnification Period,
WCB consolidates with or merges into any other entity and WCB is
not the surviving entity, then WCB will use all reasonable
efforts to provide for assumption of its obligations under this
Subsection 6.7 by the surviving entity.
6.7.6 INSURANCE COVERAGE. Before the Effective Date, Centennial and
the Bank will purchase six-year "tail" insurance coverage on
existing insurance policies for directors' and
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officers' liability (including entity errors and omissions and
trust errors and omissions) and for employment related
practices. This "tail" insurance must cover all Indemnified
Parties for the six-year period following the Effective Date.
WCB is entitled to indemnification from any insurance proceeds
which are received under this or any other insurance policy to
the extent WCB has provided indemnification to an Indemnified
Party and the insurance policy covers the liability or loss.
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 Centennial 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 Transaction by the Termination
Date is not due to a breach by the 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 Centennial's shareholders,
unless otherwise provided) as follows:
7.2.1 MUTUAL CONSENT. By mutual consent of Centennial and WCB, if the
boards of directors of each party agrees to terminate by a
majority vote of its members.
7.2.2 CENTENNIAL'S CONDITIONS NOT MET. By WCB's board of directors if,
by August 31, 1998, any condition set forth in Subsections 5.1
or 5.2 has not been satisfied.
7.2.3 WCB'S CONDITIONS NOT MET. By Centennial's board of directors if,
by August 31, 1998, any condition set forth in Subsections 5.1
or 5.3 has not been satisfied.
7.2.4 CENTENNIAL FAILS TO RECOMMEND SHAREHOLDER APPROVAL. By WCB's
board of directors before Centennial's shareholders approve the
Transaction, if Centennial's board of directors: (1) fails to
recommend to its shareholders 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.
7.2.5 WCB FAILS TO RECOMMEND SHAREHOLDER APPROVAL. By Centennial's
board of directors before WCB's shareholders approve the
Transaction, if WCB's board of directors: (1) fails to recommend
to its shareholders the approval of the Transaction or (2)
modifies, withdraws or changes in a manner adverse to Centennial
its recommendation to shareholders to approve the Transaction.
7.2.6 IMPRACTICABILITY. By either WCB or Centennial, upon written
notice given to the other party, if the board of directors of
the party seeking termination under this Subsection
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7.2.6 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 governments of either the State of Oregon or
the State of Washington to restrain or invalidate the
Transaction or this Agreement.
7.3 CENTENNIAL TERMINATION FEE. Centennial acknowledges that WCB has
incurred expenses, direct and indirect, in negotiating and executing
this Agreement and in taking steps to effect Transaction. Accordingly,
Centennial will pay to WCB the termination fee set forth in this
Subsection 7.3, if (1) this Agreement terminates because Centennial does
not use all reasonable efforts to consummate the Transaction in
accordance with the terms of this Agreement; (2) Centennial terminates
this Agreement for any reason other than the grounds for termination set
forth in Subsections 7.1, 7.2.1, 7.2.3; 7.2.5, or 7.2.6 (3) WCB
terminates this Agreement under Subsections 7.1, 7.2.2 (other than for
failure of a condition in Subsections 5.1, 5.2.12, 5.2.17, 5.2.19, or
5.2.22) or 7.2.4. The termination fee will be the greater of (1) $1.2
million or (2) the amount equal to 2.5% of the value of the Purchase
Price. If this termination fee becomes payable, it will be payable on
WCB's demand and must be paid by Centennial within three business days
of the date WCB makes the demand. For purposes of this Subsection 7.3,
the value of the Purchase Price will be determined by multiplying the
Purchase Price by the average (rounded to the nearest penny) of the
closing prices for WCB Common Stock over the ten consecutive trading
days before the date this Agreement terminates. The closing prices of
WCB Common Stock for each trading day will be determined using the
arithmetic mean (unrounded) of the closing bid and ask prices of WCB
Common Stock in the over-the-counter market, as such prices are reported
by the automated quotation system of the NASD, Inc., or in the absence
of this source, by any other source that WCB and Centennial mutually
agree on.
7.4 WCB TERMINATION FEE. Due to expenses, direct and indirect, incurred by
Centennial in negotiating and executing this Agreement and in taking
steps to effect Transaction, WCB will pay to Centennial $200,000 if (1)
this Agreement terminates because WCB does not use all reasonable
efforts to consummate the Transaction in accordance with the terms of
this Agreement, (2) WCB terminates this Agreement for any reason other
than the grounds for termination set forth in Subsections 7.1, 7.2.1,
7.2.2, 7.2.4, or 7.2.6, or (3) Centennial terminates this Agreement
under Subsections 7.2.3 (other than for failure of a condition in
Subsections 5.1, 5.3.4, 5.3.6, 5.3.8, 5.3.9, 5.3.10, or 5.3.11) or
7.2.5. If this termination fee becomes payable, it will be payable on
Centennial's demand and must be paid by WCB within three business days
of the date Centennial makes the demand.
7.5 COST ALLOCATION UPON TERMINATION. In connection with the termination of
this Agreement under this Section 7, except as provided in Subsections
7.3 and 7.4, WCB and Centennial will each pay their own out-of-pocket
costs incurred in connection with this Agreement, and will have no other
liability to the 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 via facsimile transmission 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 party):
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WCB West Coast Bancorp
5335 SW Meadows Rd., Suite 201
Lake Oswego, OR 97035
Attn: Victor L. Bartruff
with a copy to: Stephen M. Klein, Esq.
Graham & Dunn, P.C.
1420 Fifth Avenue, 33rd Floor
Seattle, WA 98101-2390
Centennial Centennial Holdings, Ltd.
2850 Harrison Avenue N.W.
P.O. Box 29001
Olympia, WA 98502-9001
Attn: Thomas W. Healy
with a copy to: Daniel B. Ritter, Esq.
Davis Wright Tremaine
1501 Fourth Avenue, Suite 2600
Seattle, WA 98101
8.2 WAIVERS AND EXTENSIONS. Subject to Section 9, WCB or Centennial may
grant waivers or extensions to the other party, 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 Subsection 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;
(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
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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. The
representations, warranties and covenants in this Agreement will not
survive Closing or termination of this Agreement, except that (1)
Subsection 4.10 (confidentiality), Subsections 7.3 and 7.4 (termination
fees), and Subsection 7.5 (expense allocation) will all survive Closing
and termination, and (2) the covenants in this Agreement that impose
duties or obligations on the parties following Closing will survive
Closing.
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.
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 AND VENUE. This Agreement will be governed by and
construed in accordance with Oregon law, except to the extent that
certain matters may be governed by federal law. The parties must bring
any legal proceeding arising out of this Agreement in Clackamas County,
Oregon.
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
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 and Centennial 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 Centennial's
shareholders have approved this Agreement, the parties' boards of directors may
not without Centennial 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 Centennial shareholders will receive in the Transaction. All
amendments, modifications, extensions and waivers must be in writing and signed
by the party
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agreeing to the amendment, modification, extension or waiver. Failure by any
party to insist on strict compliance by the other party with any of its
obligations, agreements or conditions 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.
Signed as of October 30, 1997:
WEST COAST BANCORP, INC.
By /s/ Victor L. Bartruff
-------------------------------
Name: Victor L. Bartruff
Title: President and CEO
CENTENNIAL HOLDINGS, LTD.
By /s/ Thomas W. Healy
-------------------------------
Name: Thomas W. Healy
Title: Chairman and CEO
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<PAGE> 153
STATE OF OREGON )
) ss.
COUNTY OF CLACKAMAS )
On this 30th day of October, 1997, before me personally appeared Victor
L. Bartruff, to me known to be the 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 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.
---------------------------------------------
NOTARY PUBLIC in and for the State of Oregon,
residing at__________________________________
Title:_______________________________________
My commission expires:_______________________
STATE OF WASHINGTON )
) ss.
COUNTY OF THURSTON )
On this 30th day of October, 1997, before me personally appeared Thomas
W. Healy, to me known to be the Chairman and Chief Executive Officer of
CENTENNIAL HOLDINGS, LTD., 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 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.
-------------------------------------------------
NOTARY PUBLIC in and for the State of Washington,
residing at______________________________________
Title:___________________________________________
My commission expires:___________________________
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The undersigned, all being officers or members of the board of directors
of either Centennial Holdings, Ltd. ("Centennial") or Centennial Bank ("Bank"),
hereby consent to the Plan and Agreement of Merger ("Agreement"), dated as of
October 30, 1997, between West Coast Bancorp, Inc. and Centennial, 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 advice of counsel, to support
and recommend the Agreement's adoption by the other shareholders of Centennial.
The undersigned further agree that any Centennial Options held by each that
remain unexercised on the Effective Date will be exchanged as provided in
Subsection 1.3.6 of the Agreement.
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 Centennial from the date of
the Agreement through the meeting of the shareholders of Centennial 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.
<TABLE>
<S> <C>
/s/ David Bayley /s/ Lowell Deguise
- ---------------------------------- ----------------------------------
David Bayley Lowell Deguise
Director of Centennial and Bank Director of Bank
/s/ Russell D. Duncan /s/ Thomas W. Healy
- ---------------------------------- ----------------------------------
Russell D. Duncan Thomas W. Healy
Director of Bank Director and Chairman of Centennial and Bank
/s/ Richard T. Hoss /s/ G. Lowell Jarvis
- ---------------------------------- ----------------------------------
Richard T. Hoss G. Lowell Jarvis
Director of Bank Director of Bank
/s/ Jens W. Jorgensen /s/ Greg Reichert
- ---------------------------------- ----------------------------------
Jens W. Jorgensen Greg Reichert
Director of Centennial and Bank Director of Bank
/s/ Richard Scott /s/ Joe L. Snyder
- ---------------------------------- ----------------------------------
Richard Scott Joe L. Snyder
Director of Bank Director of Centennial and Vice Chairman of Bank
/s/ Norma A. Taylor /s/ Daniel D. Yerrington
- ---------------------------------- ----------------------------------
Norma A. Taylor Daniel D. Yerrington
Director of Centennial and Bank Director of Centennial and Bank
</TABLE>
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APPENDIX B
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;
(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;
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(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:
(a) The beneficial shareholder submits to the corporation the
record shareholder's written consent 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.
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(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;
(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.13.230 DUTY TO DEMAND PAYMENT.
(1) A shareholder sent a dissenters' notice described in RCW
23B.13.220 must demand payment, certify whether the shareholder acquired
beneficial ownership of the shares before the date required to be set forth in
the dissenters' notice pursuant to RCW 23B.13.220(2)(c), and deposit the
shareholder's certificates in accordance with the terms of the notice.
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(2) The shareholder who demands payment and deposits the
shareholder's share certificates under subsection (1) of this section retains
all other rights of a shareholder until the proposed corporate action is
effected.
(3) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for the shareholder's shares
under this chapter.
SECTION 23B.13.240 SHARE RESTRICTIONS.
(1) The corporation may restrict the transfer of uncertificated
shares from the date the demand for their payment is received until the proposed
corporate action is effected or the restriction is released under RCW
23B.13.260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until the
effective date of the proposed corporate action.
SECTION 23B.13.250 PAYMENT.
(1) Except as provided in RCW 23B.13.270, within thirty days of the
later of the effective date of the proposed corporate action, or the date the
payment demand is received, the corporation shall pay each dissenter who
complied with RCW 23B.13.230 the amount the corporation estimates to be the fair
value of the shareholders' shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal
year ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any;
(b) An explanation of how the corporation estimated the fair
value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
RCW 23B.13.280; and
(e) 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.
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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:
(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.
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(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 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.
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APPENDIX C
December 15, 1997
Board of Directors
Centennial Holdings, Ltd.
2850 Harrison Avenue NW
Olympia, WA 98502-9001
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock of Centennial
Holdings, Ltd., Olympia, Washington ("Centennial"), of the consideration (the
"Merger Consideration") to be received by such holders pursuant to the Plan and
Agreement of Merger dated as of October 30, 1997 (the "Merger Agreement"), which
provides for the merger (the "Merger") of Centennial with and into West Coast
Bancorp ("WCB"). Pursuant to section 1.3.2 of the Merger Agreement, in exchange
for each share of their Centennial stock (the "Centennial Common Stock"), each
of Centennial's shareholders will have a right to receive 1.6004 shares (the
"Exchange Ratio") of the common stock of WCB (the "WCB Common Stock"). In
aggregate, Centennial Common Stock holders will receive 2,550,000 shares of WCB
Common Stock.
In connection with our opinion, we have: (i) analyzed certain internal financial
statements and other financial and operating data concerning Centennial prepared
by the management of Centennial; (ii) analyzed certain publicly available
financial statements, both audited and unaudited, of Centennial including those
included in their audited financial statements for the two years ended December
31, 1995 and December 31, 1996 and quarterly call reports for the periods ended
March 31, 1997 and June 30, 1997; (iii) analyzed certain publicly available
financial statements, both audited and unaudited, of WCB including those
included in their Form 10-K reports for the two years ended December 31, 1995
and December 31, 1996, the annual report for the year ended December 31, 1996
and their quarterly 10-Q reports for the twelve months ended June 30, 1997; (iv)
analyzed certain financial projections of Centennial and WCB prepared by the
respective management of Centennial and WCB; (v) discussed certain aspects of
the past and current business
<PAGE> 162
Board of Directors
Centennial Holdings, Ltd.
December 15, 1997
Page 2
operations, financial condition and future prospects of Centennial and WCB with
certain members of their respective management; (vi) reviewed reported market
prices and historical trading activity of WCB's common stock; (vii) compared the
financial performance of WCB and the prices and trading activity of WCB's common
stock with that of certain other comparable publicly traded companies and their
securities; (viii) reviewed certain security analysis reports of WCB's common
stock prepared by various investment banking firms; (ix) reviewed the financial
terms, to the extent publicly available, of certain comparable precedent
transactions; (x) reviewed the Merger Agreement; (xi) reviewed and discussed
with WCB senior management certain internal analyses and forecasts of certain
cost savings, operating efficiencies, revenue effects and financial synergies
expected by WCB to be achieved as a result of the Merger; and (xii) performed
such other analyses as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. We have not made an independent evaluation of the assets or liabilities
of Centennial, nor have we been furnished with any such appraisals. With respect
to financial forecasts, we have assumed that they have been reasonably prepared
and reflect the best currently available estimates and judgment of management of
Centennial and WCB as to the future financial performance of Centennial and WCB.
We have assumed such forecasts and projections will be realized in the amounts
and at the times contemplated thereby. With respect to WCB, we relied solely
upon publicly available data regarding WCB's financial condition and
performance. We discussed this publicly available information with the
management of WCB. We did not conduct any independent evaluation or appraisal of
the assets, liabilities or business prospects of WCB nor were we furnished with
any evaluations or appraisals. We are not experts in the evaluation of loan
portfolios for the purposes of assessing the adequacy of the allowance for
losses with respect thereto and have assumed that such allowances for Centennial
and WCB are in the aggregate, adequate to cover such losses. In addition, we
have not reviewed any individual credit files or made independent evaluation,
appraisal or physical inspection of the assets or individual properties of
Centennial and WCB, nor have we been furnished with any such appraisals.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of the date hereof.
Events
<PAGE> 163
Board of Directors
Centennial Holdings, Ltd.
December 15, 1997
Page 3
occurring after the date hereof could materially affect the assumptions used in
preparing this opinion. We have also assumed that there are no material changes
in Centennial's or WCB's assets, financial condition, results of operations,
business or prospects since the respective dates of their financial statements
reviewed by us, and that off-balance sheet activities of Centennial and WCB will
not materially and adversely impact the future financial position and results of
operations of both Centennial and WCB. We have also assumed the Merger will be
completed as set forth in the Agreement and that no material changes will be
made or restrictions imposed by regulatory or other parties on the terms of the
Merger.
Our opinion is limited to the fairness, from a financial point of view, to the
holders of Centennial Common Stock of the Merger Consideration received as
stated in the Merger Agreement. Moreover, this letter, and the opinion expressed
herein, does not constitute a recommendation to any shareholder as to any
approval of the Merger or the Merger Agreement, nor does it express an opinion
on the future market price of WCB common stock. It is understood that this
letter is for the information of the Board of Directors of Centennial and may
not be used for any other purpose without our prior written consent, except that
this opinion may be included in its entirety in any filing, including proxy
materials to be sent to the shareholders of Centennial and WCB, filed in a
registration statement by WCB with the Securities and Exchange Commission with
respect to the Merger.
Based on the foregoing and such other matters we have deemed relevant, we are of
the opinion as of the date hereof that the Merger Consideration is fair, from a
financial point of view, to the holders of Centennial Common Stock.
Very truly yours,
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
<PAGE> 164
APPENDIX D
October 30, 1997
The Board of Directors
West Coast Bancorp
5335 S.W. Meadows Road, Suite 201
Lake Oswego, Oregon 97035
To the Board of Directors:
You have requested our opinion, as of the date hereof, as to the fairness, from
a financial point of view, to the common stockholders of West Coast Bancorp, an
Oregon corporation (the "Company"), of the consideration to be paid in
connection with a Plan and Agreement of Merger (the "Merger Agreement"), to be
dated as of October 30, 1997, by and among the Company and Centennial Holdings,
Ltd., a registered bank holding company existing under Washington law
("Centennial"). Pursuant to the Merger Agreement, (i) Centennial will be merged
with and into the Company (the "Merger"), and (ii) the outstanding shares of
Centennial common stock, including 90,300 shares of common stock reserved for
issuance pursuant to outstanding stock options, will be converted into the right
to receive an aggregate of 2,550,000 shares of the Company's common stock,
adjusted for a 50% stock dividend to be paid by the Company on November 10,
1997. The Merger is expected to be accounted for as a pooling of interests.
Dain Bosworth Incorporated ("Dain Bosworth"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements, and valuations for estate, corporate, and other
purposes. In the ordinary course of business Dain Bosworth has published
research reports and made recommendations regarding the equity securities of the
Company and other companies in the financial services industry. Also, Dain
Bosworth has acted as a market maker in the equity securities of the Company and
other publicly traded companies in the financial services industry and,
accordingly, periodically may have positions in such securities. In addition,
Dain Bosworth has previously provided investment banking services to the
Company. Dain Bosworth has been engaged by the Company solely to render this
fairness opinion and we will receive a fee for rendering such opinion. We also
will be indemnified against certain liabilities that may arise from activities
related to our engagement.
<PAGE> 165
The Board of Directors
West Coast Bancorp
Page 2
In connection with this opinion, we have, among other things, reviewed certain
publicly available information regarding the Company and Centennial and other
financial and operating information supplied to us, including certain historical
audited financial statements, certain internal unaudited financial information,
and certain summary financial projections relating to both the Company and
Centennial. We have visited the corporate offices of the Company and Centennial
and made inquiries of the management of each company regarding the past and
current business operations, financial condition, and future prospects of each
company. We have reviewed drafts of the Merger Agreement and selected other
documents related to the Merger. In addition, we have held discussions with
management of both the Company and Centennial to understand the reasons for
completing the Merger.
We have analyzed the historical reported market prices and trading activity of
the common stock of the Company. We have compared financial and stock market
information on the Company to similar information for certain publicly traded
companies deemed comparable to the Company in the financial services industry.
We have also reviewed, to the extent publicly available, the terms of selected
relevant mergers and acquisitions, analyzed the general economic outlook for
companies in the financial services industry, and performed other studies and
analyses as we considered appropriate.
In conducting our review and in rendering our opinion, we have assumed and
relied upon the accuracy, completeness and fairness of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independent verification of such information. It is
understood that we were retained by the Board of Directors of the Company, and
that the Board of Directors has not looked to us for independent verification
with respect to the financial and other information provided to us or publicly
available, including the projections provided to us relating to the Company or
Centennial. We have further relied upon the assurances of management of the
Company and Centennial that they are not aware of any facts that would make the
information supplied to us, or publicly available, inaccurate or misleading.
With respect to the financial projections for Centennial and the Company, we
have assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgment of the management
of the Company and Centennial as to the future financial performance of the
individual companies.
We did not make an independent appraisal of the assets or liabilities of the
Company or Centennial, and we do not express an opinion regarding the
liquidation value, solvency or regulatory compliance of either company
separately, or the combined companies following the Merger. Furthermore, we do
not express any opinion as to the prices at which shares of the Company's common
stock may trade following the date of this opinion, at the closing of the
Merger, or at any time in the future. Our opinion as expressed herein is limited
to the fairness to common stockholders of the Company, from a financial point of
view, of the consideration to be paid by the Company in connection with the
Merger, and does not address the Company's underlying business decision to
proceed with the Merger. Our opinion is based solely on
<PAGE> 166
The Board of Directors
West Coast Bancorp
Page 3
information available to us on or before the date hereof, and reflects general
market, economic, financial, monetary, and other conditions as of such date.
This opinion is not a recommendation to any stockholder of the Company as to how
such stockholder should vote at the stockholders' meeting to be held in
connection with the Merger. Also, this letter may not be reproduced, quoted,
published, or otherwise used or referred to in any manner, nor shall any public
reference to Dain Bosworth be made, without our prior written consent, except
that the Company may include this opinion in the Company's proxy statement
relating to the Merger to be distributed to stockholders and in related filings
with the Securities and Exchange Commission, provided that any such disclosure
shall first be submitted to Dain Bosworth for its approval.
Based upon the foregoing, and other matters that we considered relevant, it is
our opinion that, as of the date hereof, the consideration to be paid by the
Company in connection with the Merger is fair to the stockholders of the Company
from a financial point of view.
Very truly yours,
/s/
DAIN BOSWORTH INCORPORATED
<PAGE> 167
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
WCB's Articles of Incorporation provide that WCB will indemnify its
directors, to the fullest extent possible under the OBCA, against all expense,
liability, and loss (including attorneys' fees incurred by a director arising
from the director's status as a WCB director (or, 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. These indemnification rights continue as to a foreign
director who has ceased to be a director, officer, partner, trustee, employee,
or agent and inure to the benefit of the former director's 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 (1) a director or
officer commits intentional misconduct or knowingly violates the law; (2) a
director or officer is adjudged liable to WCB in a proceeding by or in the right
of WCB; or (3) 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 advisors are set forth as Appendices D
and E to this Prospectus/Joint 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 1933 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% 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;
(2) For determining liability under the 1933 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.
II-1
<PAGE> 168
(b) To advise all directors and officers that insofar as indemnification
for liabilities arising under the 1933 Act 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> 169
SIGNATURES
Pursuant to the requirements of the 1933 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 December 18, 1997.
WEST COAST BANCORP
By:/s/ Victor L. Bartruff
Victor L. Bartruff,
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
and appoints Victor L. Bartruff and Donald A. Kalkofen, 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 1933 Act, this Power of Attorney has
been signed by the following persons in the capacities indicated, on the 18th
day of December, 1997.
SIGNATURE TITLE
--------- -----
/s/ Victor L. Bartruff President and Chief Executive Officer and
Victor L. Bartruff Director
/s/ Rodney B. Tibbatts Executive Vice President,
Rodney B. Tibbatts Corporate Development Officer,
and Director
/s/ Donald A. Kalkofen Executive Vice President and
Donald A. Kalkofen Chief Financial Officer
/s/ Gary D. Putnam Chairman of the Board
Gary D. Putnam
/s/ Lloyd D. Ankeny Director
Lloyd D. Ankeny
/s/ Phillip G. Bateman Director
Phillip G. Bateman
/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
II-3
<PAGE> 170
/s/ J.F. Ouderkirk Director
J.F. Ouderkirk
/s/ James J. Pomajevich Director
James J. Pomajevich
II-4
<PAGE> 171
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
2.1 Plan and Agreement of Merger between WCB and Centennial dated as of
October 30, 1997, (included in this Registration Statement as Appendix
A to the Prospectus/Joint Proxy Statement).
5.1 Form of Opinion of Graham & Dunn as to the legality of securities.
8.1 Form of Opinion of Graham & Dunn as to federal income tax
consequences.
10.1 Form of Noncompetition Agreement among WCB, Centennial and each
respective director, except Daniel Yerrington, of Centennial and the
Bank, dated as of October 30, 1997.
10.2 Salary Continuation Agreement between WCB, the Bank and Thomas W.
Healy dated as of October 30, 1997.
10.3 Supplemental Letter from WCB to Mr. Healy regarding certain terms of
Mr. Healy's continued employment, dated October 30, 1997.
23.1 Consent of Graham & Dunn (contained in its opinion filed as Exhibit
5.1).
23.2 Consent of Graham & Dunn as to its tax opinion (contained in its
opinion filed as Exhibit 8.1).
23.3 Consent of Arthur Andersen, WCB's independent auditors.
23.4 Consent of Moss Adams, LLP, Vancouver Bancorp's independent auditors.
23.5 Consent of Dwyer Pemberton, Centennial's independent auditors.
23.6 Consent of Sheshunoff (contained in its opinion included in this
Registration Statement as Appendix C to the Prospectus/Joint Proxy
Statement).
23.7 Consent of Dain Bosworth (contained in its opinion included in this
Registration Statement as Appendix D to the Prospectus/Joint Proxy
Statement).
24.1 Power of Attorney (included in the signature page of this Registration
Statement) and certified resolutions of the WCB Board.
99.1 Opinion of Sheshunoff (included as Appendix C to the Prospectus/Joint
Proxy Statement).
99.2 Opinion of Dain Bosworth (included as Appendix D to the
Prospectus/Joint Proxy Statement).
99.3 Form of proxy to be mailed to the shareholders of Centennial.
99.4 Form of proxy to be mailed to the shareholders of WCB.
99.5 Rule 438 Consent of Thomas W. Healy.
99.6 Rule 438 Consent of Joe L. Snyder.
II-5
<PAGE> 1
EXHIBIT 5.1
December 22, 1997
Board of Directors of
West Coast Bancorp
5335 Meadows Road, Suite 201
Lake Oswego, OR 97035
Re: ISSUANCE OF SECURITIES BY WEST COAST BANCORP IN CONNECTION WITH
THE ACQUISITION OF SHARES OF CENTENNIAL HOLDINGS, LTD.
Ladies and Gentlemen:
We are acting as counsel for West Coast Bancorp, an Oregon bank holding
company ("West Coast"), in connection with the registration under the Securities
Act of 1933, as amended (the "Act"), of a maximum of 2,550,000 shares of common
stock of West Coast, 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 Centennial Holdings, Ltd., a Washington corporation and bank
holding company ("Centennial").
In connection with the offering of the Shares, we have examined: (a) the
Plan and Agreement of Merger between West Coast and Centennial dated as of
October 30, 1997 (the "Agreement"), attached as Appendix A to the
Prospectus/Joint 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 West Coast.
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.
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
<PAGE> 2
Board of Directors of West Coast Bancorp
December 22, 1997
Page 2
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 Centennial.
Very truly yours,
GRAHAM & DUNN
/s/ Graham & Dunn
<PAGE> 1
EXHIBIT 8.1
[__________, 1998]
West Coast Bancorp, Inc.
5335 Meadows Road, Suite 201
Lake Oswego, Oregon 97035
Centennial Holdings, Ltd.
2850 Harrison Avenue N.W.
Olympia, Washington 98602
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
Centennial Holdings, Ltd. ("Centennial") into West Coast Bancorp, Inc. ("West
Coast").
We have acted as legal counsel to West Coast 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 Merger, dated as of October 30, 1997,
between West Coast and Centennial (the "Merger Agreement");
b. Form S-4 Registration Statement of West Coast filed with the
Securities and Exchange Commission on December __, 1997;
c. The Joint Proxy Statement of West Coast and Centennial (included
as part of the Registration Statement);
d. The factual representations set forth in a letter from West Coast
and Centennial, dated [_________ __, 1998]; 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
<PAGE> 2
[________________, 1998]
Page 2
otherwise made known to us, and that the Merger will be effected in accordance
with the terms of the Merger Agreement.
In connection with the Merger and pursuant to the Merger Agreement, each
share of Centennial voting common stock will be exchanged for that number of
shares of West Coast voting common stock based on the exchange rate established
in the Merger Agreement. Cash will be issued in lieu of fractional shares.
Centennial shareholders who perfect their dissenters rights under state law will
be paid the cash value for their Centennial shares. Such payments will be made
by West Coast. Upon the consummation of the Merger, West Coast will continue the
historic business of Centennial.
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 Centennial into West Coast solely for West Coast voting
common stock, as described above, will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code,
as amended (the "Code"). West Coast and Centennial 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 Centennial shareholders upon the
receipt of West Coast voting common stock solely in exchange for their
shares of Centennial stock, pursuant to Section 354(a)(1) of the Code.
3. The basis of the shares of West Coast voting common stock received by
Centennial shareholders will be the same as the basis of the Centennial
stock surrendered in exchange therefor, pursuant to Section 358(a)(1) of
the Code.
4. The holding period of the shares of West Coast voting common stock
received by Centennial shareholders will include the holding period
during which the Centennial stock surrendered in exchange therefor was
held, provided that the shares of Centennial 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. No gain or loss will be recognized by Centennial upon the transfer of
its assets to West Coast, pursuant to Sections 361 and 357(a) of the
Code.
6. The basis of the assets of Centennial acquired by West Coast will be the
same as the basis of Centennial in the assets immediately before the
Merger, pursuant to Section 362(b) of the Code.
<PAGE> 3
[________________, 1998]
Page 3
7. The holding period of the assets acquired by West Coast will include the
period such assets were held by Centennial, pursuant to Section 1223(2)
of the Code.
8. No gain or loss will be recognized by West Coast upon the receipt of the
assets of Centennial, as described above.
9. Cash payments by West coast to Centennial Shareholders in lieu of
fractional shares of West Coast 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.
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 West Coast,
Centennial, the shareholders of West Coast and the shareholders of Centennial ,
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
<PAGE> 1
EX-10.1
DIRECTOR NONCOMPETITION AGREEMENT
This Director Noncompetition Agreement ("Director Agreement"), dated as
of October 30, 1997, is between WEST COAST BANCORP ("WCB"), CENTENNIAL HOLDINGS,
INC. ("Centennial"), and the undersigned, each of whom is a Director
("Director") of either Centennial or Centennial Bank ("Bank").
RECITALS
A. WCB and Centennial have entered into a Plan and Agreement of Merger
("Merger Agreement"), dated as of October 30, 1997, under which
Centennial will merge with and into WCB.
B. The obligation of WCB to consummate the transactions contemplated by the
Merger Agreement are conditioned on its receipt of noncompetition
agreements from all directors of Centennial and the Bank.
C. WCB, Centennial, and Director believe that the future success and
profitability of the Bank require that existing directors of Centennial
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 performance under the Merger Agreement,
Director agrees as follows:
1. DEFINITIONS. Capitalized terms not defined in this Director Agreement,
have the meaning assigned to those terms in the Merger Agreement. The
following definitions also apply to this Director Agreement:
(a) Competing Business. "Competing Business" means any financial
institution or trust company that competes or will compete
within the Covered Area with WCB, Centennial, the Bank or any of
their Subsidiaries. The term "Competing Business" includes,
without limitation, any start-up or other financial institution
or trust company in formation.
(b) Covered Area. Clackamas, Lincoln, Marion, Multnomah, Polk,
Washington, and Yamhill Counties in Oregon State and Clark,
Cowlitz, Lewis, Mason, Pierce, and Thurston Counties in
Washington State.
(c) Term. The Term of this Director Agreement begins at Closing. For
those directors who remain directors of the Bank for at least
one year following Closing (as required by this Director
Agreement), the Term ends one year after the Director's service
as a director of Centennial, the Bank, WCB, or any affiliate of
WCB is terminated. Otherwise, the Term ends two years after
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.
<PAGE> 2
3. PARTICIPATION IN COMPETING BUSINESS. Except as provided in Sections 6
and 7, during the Term of this Director Agreement, Director will not
become involved, directly or indirectly, as a shareholder, member,
partner, director, officer, manager, investor, organizer, "founder",
consultant, agent or representative of a Competing Business.
4. NO SOLICITATION. During the Term of this Director Agreement, Director
will not directly or indirectly solicit or attempt to solicit (1) any
employees of the Bank, WCB, or any of their Subsidiaries, to leave their
employment or (2) any customers of the Bank, WCB, or any of their
Subsidiaries to remove their business from the Bank, WCB, or any of
their Subsidiaries. Solicitation prohibited under this section includes
solicitation by any means, including, without limitation, meetings,
letters or other mailings, electronic communications of any kind, and
internet communications.
5. CONFIDENTIAL INFORMATION. During and after the Term of this Director
Agreement, Director will not disclose any confidential information of
WCB, Centennial, the Bank, or any of their Subsidiaries, obtained by the
Director while serving as a director the Bank.
6. 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.
7. PASSIVE INTEREST. Nothing in this Director Agreement prevents the
Director from owning 2% or less of any class of security of a Competing
Business.
8. REMEDIES. Any breach of this Agreement by Director entitles WCB and
Centennial, 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.
9. GOVERNING LAW AND ENFORCEABILITY. This Director Agreement is governed by
Oregon 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.
10. COUNTERPARTS. The parties may execute this Agreement in one or more
counterparts. All the counterparts will be construed together and will
constitute one Agreement.
SIGNED as of October 30, 1997:
Director:
- -------------------------------------- --------------------------------------
David Bayley Lowell Deguise
- -------------------------------------- --------------------------------------
<PAGE> 3
- -------------------------------------- --------------------------------------
Russell D. Duncan Thomas W. Healy
- -------------------------------------- --------------------------------------
Richard T. Hoss G. Lowell Jarvis
- -------------------------------------- --------------------------------------
Jens W. Jorgensen Gregg Reichert
- -------------------------------------- --------------------------------------
Richard Scott Joe L. Snyder
- -------------------------------------- --------------------------------------
Norma A. Taylor
WEST COAST BANCORP
By____________________________________
Name: Victor L. Bartruff
Title: President and CEO
CENTENNIAL HOLDINGS, LTD.
By____________________________________
Name: Thomas W. Healy
Title: Chairman and CEO
<PAGE> 1
EX-10.2
CONFIDENTIAL
SALARY CONTINUATION AGREEMENT
THIS SALARY CONTINUATION AGREEMENT ("Agreement") dated as of October 30,
1997 is effective upon closing of the Merger (as defined below) ("Effective
Date"). The parties to the Agreement ("Parties"') are WEST COAST BANCORP
("Bancorp"), an Oregon corporation, CENTENNIAL BANK ("Bank"), a Washington state
banking corporation (collectively, "Company"), and THOMAS W. HEALY
("Executive").
A. Bancorp and Centennial Holdings, Ltd. ("Centennial"), a Washington
corporation and the parent bank holding company of the Bank, have
entered into a Plan and Agreement of Merger dated as of October 30, 1997
("Merger Agreement") under which Centennial will merge with and into
Bancorp ("Merger").
B. Both the Company and Executive desire to continue Executive's services
with the Company after the Merger is consummated and particularly in the
event of a subsequent change in control of Bancorp.
C. To encourage Executive's continued services, Company desires to provide
a salary continuation benefit to Executive following closing of the
Merger.
In consideration of the mutual promises, covenants, agreements and
undertakings contained in this Agreement, the parties agree as follows:
1. EFFECTIVE DATE AND TERM. As of the Effective Date, this Agreement shall
be a binding obligation of the Parties, not subject to revocation or
amendment except by mutual consent or in accordance with its terms. The
term of this Agreement ("Term") shall commence as of the Effective Date
and shall end one year thereafter, provided however, that this Agreement
shall be automatically renewed for successive one year periods, unless
the Board of Directors of either the Bank or Bancorp do not approve such
renewal and provide written notice to the Executive of such event, or
the Executive gives written notice to Company not less than 30 days
prior to any such anniversary date of the Executive's election not to
extend the term beyond its then scheduled expiration date.
Notwithstanding the preceding, if a definitive agreement providing for a
Change in Control (as defined below) is entered into on or before the
expiration of the Term, the term of this Agreement shall be extended to
18 months after the consummation of such Change in Control. If the
Merger is not consummated in accordance with the Merger Agreement, this
Agreement will not become effective and will be void.
2. COMMITMENT OF EXECUTIVE. In the event that any person extends any
proposal or offer which is intended to or may result in a Change in
Control, as defined below (a "Change in Control Proposal"), Executive
shall, at Company's request, assist Company in evaluating such proposal
or offer. Further, Executive specifically agrees not to resign
Executive's position with Company during any period from the receipt of
a specific Change in Control Proposal until the consummation or
abandonment of the transaction contemplated by such Proposal.
- 1 -
<PAGE> 2
3. SALARY CONTINUATION PAYMENT.
(a) Amount of Payment--Termination Event After Change in Control.
Except as otherwise provided in this Section, in the case of a
Termination Event After a Change in Control, as defined in
Section 4, Executive shall receive a salary continuation payment
("Salary Continuation Payment") equal to the sum of the Regular
Salary Continuation Payment and the Bonus Continuation Payment.
The Regular Salary Continuation Payment shall equal Executive's
regular monthly salary in effect as of the date of termination
of employment (as reportable on Executive's IRS Form W-2, but
including the amount of any voluntary deferrals of salary, and
excluding any expense allowances or reimbursements, any bonuses,
any gain from exercise of stock options, or any other similar
non-recurring payments) which would be payable to Executive but
for the termination from the date of termination of Executive's
employment to the date 18 months after the Change in Control.
The Bonus Continuation Payment shall equal (i) the most recent
annual bonus paid to Executive, multiplied by (ii) -------------
(x) the number of days during which Executive was employed but
as to which no annual bonus has been paid plus the number of
days from the date of ---- termination of employment to the date
18 months after the Change in Control divided by (y) 365.
(b) Limitation on Payment. Notwithstanding anything in this
Agreement to the contrary, the Salary Continuation Payment shall
not exceed an amount equal to $1.00 less than the amount which
would cause the payment, together with any other payments
received from Company, to be a "parachute payment" as defined in
Section 280G(b)(2)(A) of the Internal Revenue Code.
4. TERMINATION EVENT AFTER CHANGE IN CONTROL. A Termination Event After a
Change in Control shall be deemed to occur upon, and only upon, one or
more of the following:
(a) Termination of Executive's employment by the Executive for Good
Reason (as defined herein) within 18 months after a Change In
Control;
(b) Termination of Executive's employment by Company other than for
Cause, Disability, or Retirement (each of which is defined
below) within 18 months after a Change In Control; or
(c) Termination of Executive's employment by Company other than for
Cause, Disability, or Retirement prior to a Change In Control if
such termination occurs either (i) on or after announcement, by
Company or any other party, of a contemplated Change In Control
or an intended Change In Control, or (ii) on or after the date a
contemplated or intended Change In Control should have been
announced in conformity with applicable securities or other
laws, but only if in either ----------- case a Change In Control
occurs within 12 months after such termination of Executive's
employment.
5. DEFINITIONS.
(a) Cause. "Cause" shall mean only any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Executive's duties;
-2-
<PAGE> 3
(ii) Conviction of a crime in connection with such duties; or
(iii) Conduct demonstrably and significantly harmful to
Company as determined in the reasonable discretion of
the Board of Directors of Bancorp.
(b) Disability. "Disability" shall mean a physical or mental
impairment which renders Executive incapable of substantially
performing the duties required under this Agreement, and which
is expected to continue rendering Executive so incapable for the
reasonably foreseeable future.
(c) Retirement. "Retirement" shall mean voluntary termination by the
Executive in accordance with Company's retirement policies,
including early retirement, if applicable to their salaried
employees.
(d) Good Reason. "Good Reason" shall mean only any one or more of
the following:
(i) Any reduction of Executive's salary or any reduction or
elimination of any compensation or benefit plan
benefiting Executive, which reduction or elimination is
not of general application to substantially all
employees of Company or such employees of any successor
entity or of any entity in control of Company, unless
such reduction or elimination is mutually agreed to
between Executive and Company or is made in connection
with a mutually agreed to reduction in Executive's
duties or involvement in the Company or in the Bank's
management;
(ii) A relocation or transfer of Executive's place of
employment which would reasonably require Executive to
commute more than 50 miles each way from Executive's
principal residence; or
(iii) The assignment to the Executive of any authority or
duties materially inconsistent with Executive's position
as of the date of this Agreement, unless such assignment
is mutually agreed to between Executive and Company.
(e) Change In Control. "Change in Control" shall mean either of the
following:
(i) A Person or Entity (as defined below) acquiring or
otherwise becoming the owner (as a result of a purchase,
merger, stock exchange, or otherwise) of more than 50%
of the outstanding common stock of Bancorp, or
(ii) The merger of Bancorp into any corporation, or the
merger of any corporation into Bancorp, where more than
50% of the stock of such corporation or Bancorp, as the
case may be, (the "Surviving Corporation") is owned by
other than the owners of the common stock of Bancorp
prior to such merger.
(f) Person or Entity. "Person or Entity" shall include any one or
more persons
-3-
<PAGE> 4
and/or entities acting in concert with respect to their
interests in the Surviving Corporation.
6. OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Agreement is not an
employment agreement. Accordingly, except with respect to the Salary
Continuation Payment, this Agreement shall have no effect on the
determination of any compensation payable by Company to the Executive,
or upon any of the other terms of Executive's employment with Company.
The specific arrangements referred to herein are not intended to exclude
any other benefits which may be available to the Executive upon a
termination of employment with Company pursuant to employee benefit
plans of Company or otherwise.
7. WITHHOLDING. All payments required to be made by Company hereunder to
the Executive shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as Company may
reasonably determine should be withheld pursuant to any applicable law
or regulation.
8. ASSIGNABILITY. Company may assign this Agreement and its rights
hereunder in whole, but not in part, to any corporation, bank or other
entity with or into which Company may hereafter merge or consolidate or
to which Company may transfer all or substantially all of its assets, if
in any such case said corporation, bank or other entity shall by
operation of law or expressly in writing assume all obligations of
Company hereunder as fully as if it had been originally made a party
hereto, but may not otherwise assign this Agreement or its rights
hereunder. The Executive may not assign or transfer this Agreement or
any rights or obligations hereunder.
9. GENERAL PROVISIONS.
(a) Choice of Law. This Agreement is made with reference to and is
intended to be construed in accordance with the laws of the
State of Oregon.
(b) Arbitration. Any dispute, controversy or claim arising out of or
in connection with, or relating to, this Agreement or any breach
or alleged breach hereof, shall, upon the request of any party
involved, be submitted to, and settled by, arbitration pursuant
to the rules then in effect of the American Arbitration
Association (or under any other form of arbitration mutually
acceptable to the parties so involved). Any award rendered shall
be final and conclusive upon the parties and a judgment thereon
may be entered in the highest court of the forum having
jurisdiction. The arbitrator shall render a written decision,
naming the substantially prevailing party in the action, and
shall award such party all costs and expenses incurred,
including reasonable attorneys' fees.
(c) Attorney Fees. In the event of any breach of or default under
this Agreement which results in either party incurring attorney
or other fees, costs or expenses (including in arbitration), the
prevailing party shall be entitled to recover from the
non-prevailing party any and all such fees, costs and expenses,
including attorney fees.
(d) Entire Agreement and Understanding. This Agreement constitutes
the entire understanding and agreement between Executive and the
Company concerning its subject
-4-
<PAGE> 5
matter and supersedes all prior agreements, correspondence,
representations, or understandings between the Parties relating
to its subject matter. Executive waives any and all rights which
may have existed under any prior agreements, correspondence,
representations or understandings between Executive and the
Bank, Centennial, or any affiliate of the Bank or Centennial,
including without limitation any rights Executive may have under
the Employment Agreement dated March 11, 1996 between Executive
and Centennial.
(e) Successors. This Agreement shall be binding upon and inure to
the benefit of the Parties and each of their respective
affiliates, legal representatives, successors and assigns.
(f) Construction. This Agreement contains the entire agreement among
the Parties with respect to its subject matter, and may be
amended or modified only in a writing executed by all of the
Parties. Its language is and will be deemed to be the language
chosen by the Parties jointly to express their mutual intent. No
rule of construction based on which party drafted the Agreement
or certain of its provisions will be applied against any party.
This Agreement may be amended only in a writing signed by the
parties.
(g) Captions. The captions of the respective sections of this
Agreement have been included for convenience of reference only.
They shall not be construed to modify or otherwise affect in any
respect any of the provisions of the Agreement.
(h) Counterparts. This Agreement may be executed in one or more
counterparts by the parties hereto. All counterparts shall be
construed together and shall constitute one Agreement.
EXECUTED by each of the parties effective as of the date first stated
above.
BANCORP: CENTENNIAL BANK:
WEST COAST BANCORP, CENTENNIAL BANK, a Washington
an Oregon corporation state banking corporation
By:____________________________ By:_____________________________
Victor L. Bartruff Daniel D. Yerrington
Its: President and CEO Its: President
EXECUTIVE:
- ----------------------------------------
THOMAS W. HEALY
-5-
<PAGE> 1
EX 10.3
October 30, 1997
Mr. Thomas W. Healy
Chairman and CEO
Centennial Holdings, Ltd.
2850 Harrison Avenue N.W.
Olympia, WA 98502
Dear Tom:
The purpose of this letter is to confirm our agreement regarding your
continuing employment with Centennial Bank ("Bank") and related benefits
following closing of the pending Merger of Centennial Holdings, Ltd.
("Centennial") into West Coast Bancorp ("WCB"). Please sign in the space
provided at the end of this letter to indicate your acceptance of and agreement
to be bound by the terms set forth below. This letter supplements the Salary
Continuation Agreement, dated October 30, 1997, between you, the Bank, and WCB.
Accordingly, the terms set forth in that Agreement are not repeated here. This
letter does not constitute a waiver by you, WCB, or the Bank of any provisions
in the Salary Continuation Agreement. Likewise, no provision in the Salary
Continuation Agreement will constitute a waiver of any provisions in this
letter. Capitalized terms used but not defined in this letter have the meanings
assigned to those terms in the Plan and Agreement of Merger ("Merger Agreement")
between Centennial and WCB, dated October 30, 1997.
Salary. We currently anticipate that you will continue as Chief Executive
Officer ("CEO") of the Bank following Closing of the Merger. After the Merger,
your initial annual salary will be $180,000, to be paid in monthly installments
in accordance with the Bank's regular payroll schedule. The Bank will review
your compensation annually in accordance with WCB policies and criteria and in
connection with the advice and recommendations of WCB's Chief Executive Officer.
Your annual salary will be adjusted in the future to reflect your performance
and the extent of your continued involvement in the management of the Bank.
Incentive Bonus. As CEO of the Bank, you will, after the Merger, be eligible for
annual incentive bonuses on the same basis as other WCB employees of equivalent
position. Your annual incentive bonus could be as high as 30% of your annual
salary, if you meet certain Bank performance targets. These performance targets
will be based on the goals set forth in the Bank's budget and strategic plan.
You will be evaluated with respect to your success in achieving these goals.
Medical, Insurance and Employee Plans. After the Merger, You will be entitled to
participate in any group life insurance, disability, health and accident
insurance plans, profit sharing plans and pension plans and in other employee
benefit programs the Bank or WCB may have in effect from time to time for its
similarly situated employees, in accordance with and subject to any policies
adopted by either the Bank's or WCB's board of directors with respect to the
plans or programs. So long as you are employed by WCB or the Bank, WCB will
provide medical coverage to you and make it available at your expense to your
dependents. Regardless of your
<PAGE> 2
Mr. Thomas W. Healy
October 30, 1997
Page 2
continued employment, WCB will make medical coverage available to you and your
dependents, at your expense, until you reach age 65. This medical coverage will
be the same as that provided or made available to senior executives of WCB and
their dependents.
Deferred Compensation. After the Effective Date, regardless of whether you
continue your employment with the Bank, WCB, or any of WCB's Subsidiaries
following the Merger, the Bank will after Closing, until you reach age 65,
contribute $8,333 per month (beginning on the month following the month in which
Closing occurs) on your behalf to WCB's deferred compensation plan, unless such
contributions cannot be so held under the terms of WCB's deferred compensation
plan as it may be amended before Closing, in which case, these contributions
will be held on your behalf in a substantially equivalent deferred compensation
plan. The amount held for your retirement by the Bank at Closing, which amount
we understand will be $262,500 plus monthly contributions from Centennial of
$8,333 for each month following the date of this letter through the month of
Closing, will be held on your behalf following Closing in WCB's deferred
compensation plan, unless such amount cannot be so held under the terms of WCB's
deferred compensation plan as it may be amended before Closing, in which case,
this amount will be held on your behalf in a substantially equivalent deferred
compensation plan. The parties will prepare and execute, effective as of
Closing, any additional documents necessary to carry out the intent of this
paragraph.
Use of Personnel and Facilities. While you are employed at the Bank (and after
your employment terminates to the extent mutually agreed upon by you and WCB),
the Bank will make available to you certain personnel and facilities for your
personal business use, as long as such use does not interfere with the business
of the Bank or WCB or with your duties as an employee of the Bank. Subject to
reasonable limits WCB may implement from time to time at its discretion, the
facilities you may use for this purpose include office space, supplies, copying,
telephone and facsimile services, and any other facilities WCB agrees to allow
you to use. You agree that you will pay WCB or the Bank (as applicable) at
reasonable rates established by WCB for your use of personnel and facilities and
that you will reimburse WCB or the Bank (as applicable) for any expenses they
incur in connection with your use of facilities or personnel.
Insurance Contract. We understand that Centennial owns an insurance policy on
your life in the amount of $1.5 million. If at any time after Closing, WCB
ceases to have an insurable interest in your life or for any other reason
decides to dispose of this policy, WCB will provide you with 30 days' advance
notice. During the 30-day notice period, you or your trust will have the option
to buy this insurance policy at fair market value for the benefit of your trust,
subject to any restrictions on the transfer of the insurance policy.
Centennial Capital Corporation. You recognize that WCB will own the name
"Centennial" following the Merger, and that WCB has an interest in protecting
and preserving that name and its use. Accordingly, before Closing of the Merger,
you agree to change the name of your independent corporation from "Centennial
Capital Corporation" to another name that does not contain the word
"Centennial." On and after the Effective Date, you agree to discontinue use of
the name "Centennial" in connection with any of your business activities that
are independent of your employment at the Bank. However, Centennial Limited
Partnership and Centennial Properties Partnership may retain their names until
June 30, 1999, as long as they remain inactive and conduct no business
whatsoever.
<PAGE> 3
Mr. Thomas W. Healy
October 30, 1997
Page 3
Benefits under Merger Agreement. WCB confirms to you its covenants set forth in
the Merger Agreement in Sections 6.2 and 6.3 (relating to WCB's appointment of
you as a director of WCB and as a member of its executive committee) and in
Section 6.7 (relating to indemnification of Centennial and Bank directors).
"At Will" Employment. You understand that your continued employment with the
Bank is "at will." Thus, signing this letter does not obligate you to continue
your employment with the Bank following Closing of the Merger, nor does it
obligate WCB or the Bank to continue your employment following Closing of the
Merger.
Waiver. By signing this letter, you agree to waive all of your rights under any
employment agreements you have entered into with Centennial or the Bank,
including, without limitation, the Employment Agreement between you and
Centennial, dated March 11, 1996, which, along with any amendments to it, will
terminate at Closing.
Sincerely,
Victor L. Bartruff
President and CEO
Accepted and Agreed:
- ----------------------------
Thomas W. Healy
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 22, 1997,
included (or incorporated by reference) in West Coast Bancorp's Form 10-K for
the year ended December 31, 1996 and to all references to our Firm included in
this registration statement.
ARTHUR ANDERSEN LLP
San Francisco, California
December 19, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 17, 1996,
included (or incorporated by reference) in West Coast Bancorp's Form 10-K for
the year ended December 31, 1996, and to all references to our firm included in
this registration statement.
MOSS ADAMS, LLP
Portland, Oregon
December 19, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
The Boards of Directors
Centennial Holdings, Ltd.
Olympia, Washington
We consent to the use in this Registration Statement on Form S-4 on behalf of
Centennial Holdings, Ltd., of our report dated January 24, 1997, relating to the
consolidated financial statements of Centennial Holdings, Ltd. and subsidiaries
contained in the Prospectus, which is part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" contained in
this Prospectus, which is a part of such Registration Statement.
DWYER PEMBERTON & COULSON, P.C.
Tacoma, Washington
December 18, 1997
<PAGE> 1
EXHIBIT 99.3
REVOCABLE PROXY OF CENTENNIAL HOLDINGS, LTD.
- --------------------------------------------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 18, 1998
- --------------------------------------------------------------------------------
The undersigned hereby appoints ___________and ____________, 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, $.01 par value, of Centennial Holdings, Ltd. held of
record by the undersigned on December 31, 1997, at the Special Meeting of
Shareholders to be held at The Olympia Country Club, 3636 Country Club Drive
N.W., Olympia, Washington on Wednesday, February 18, 1998, at 2:00 p.m., local
time, and at any and all adjournments of such Meeting, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. A proposal to approve the merger among West Coast FOR AGAINST ABSTAIN
Bancorp and Centennial Holdings, Ltd. pursuant to [ ] [ ] [ ]
the Plan and Agreement of Merger dated as of
October 30, 1997
2. Whatever other business may properly be brought
before the Special Meeting or any adjournment
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE PROPOSAL.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Special
Meeting or at any adjournment thereof, and after notifying the Secretary of
Centennial Holdings, Ltd. at the Special Meeting of your 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 Centennial Holdings, Ltd.
prior to the execution of this proxy of Notice of the Meeting and the
Prospectus/Proxy Statement dated January __1998.
Dated: _____________________, 1998
<PAGE> 2
-----------------------------------------
PRINT NAME OF SHAREHOLDER(S)
(As it appears on Stock Certificate)
- ------------------------------ -----------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
No. of Shares Owned:
* * * *
Please sign exactly as your name appears on this proxy card and complete
the number of shares owned. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder must sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED,
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99.4
REVOCABLE PROXY OF WEST COAST BANCORP
- --------------------------------------------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 20, 1998
- --------------------------------------------------------------------------------
The undersigned hereby appoints Victor L. Bartruff and Donald A.
Kalkofen, 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, no par value, of West Coast
Bancorp held of record by the undersigned on December 31, 1997, at the Special
Meeting of Shareholders to be held at The Crowne Plaza Hotel, 14811 Kruse Oaks
Drive, Lake Oswego, Oregon on Friday, February 20, 1998, at 2:00 p.m., local
time, and at any and all adjournments of such Meeting, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. A proposal to approve the merger among West Coast FOR AGAINST ABSTAIN
Bancorp and Centennial Holdings Ltd. pursuant to [ ] [ ] [ ]
the Plan and Agreement of Merger dated as of
October 30, 1997
2. Whatever other business may properly be brought before the Special
Meeting or any adjournment
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE PROPOSAL.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Special
Meeting or at any adjournment thereof, and after notifying the Secretary of West
Coast Bancorp at the Special Meeting of your 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 West Coast Bancorp prior to
the execution of this proxy of Notice of the Meeting and the Prospectus/Proxy
Statement dated January __1998.
Dated: _____________________, 1998
<PAGE> 2
------------------------------------------
PRINT NAME OF SHAREHOLDER (S)
(As it appears on Stock Certificate)
- ------------------------------ -----------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
No. of Shares Owned:
Please sign exactly as your name appears on this proxy card and complete
the number of shares owned. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder must sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED,
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE> 1
EX 99.5
RULE 438 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 ("WCB") in the Registration Statement on Form S-4
filed by WCB with the Securities and Exchange Commission on December 23, 1997.
/s/ Thomas W. Healy
-------------------------------
Thomas W. Healy
December 18, 1997
-------------------------------
Date Signed
<PAGE> 1
EX 99.6
RULE 438 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 ("WCB") in the Registration Statement on Form S-4
filed by WCB with the Securities and Exchange Commission on December 23, 1997.
/s/ Joe L. Snyder
-------------------------------
Joe L. Snyder
December 18, 1997
-------------------------------
Date Signed
