<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
Form 10-Q
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 1999
[ ] Transition report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number 0-10997
WEST COAST BANCORP
(Exact name of registrants specified in its charter)
Oregon 93-0810577
(State or other jurisdiction (IRS Employer
incorporation or organization) Identification No.)
5335 Meadows Road, Suite 201, Lake Oswego, Oregon 97035
(Address of Principal executive offices) (Zip code)
(503) 684-0884
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No. [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, no par value, outstanding on July 31, 1999: 14,014,086
<PAGE> 2
TABLE OF CONTENTS
PART I. Financial Information
<TABLE>
<CAPTION>
Item 1. Financial Statements Page
----
<S> <C>
Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998................................3
Consolidated Statements of Income -
Three months and six months ended June 30, 1999 and 1998...........4
Consolidated Statements of Cash Flows -
Six months ended June 30, 1999 and 1998............................5
Consolidated Statements of Changes in Stockholders' Equity.........6
Notes to Consolidated Financial Statements.........................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................14
Item 3. Quantitative and Qualitative Disclosures About Market Risk........29
PART II. Other Information
Item 101. Legal Proceedings.................................................30
Item 4. Submissions of Matters to a Vote of Security Holders..............31
Item 6. Exhibits and Reports on Form 8-K..................................32
Signatures........................................................33
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1.
WEST COAST BANCORP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents:
Cash and due from banks ....................... $ 62,376,425 $ 80,923,069
Interest-bearing deposits in other banks ...... 9,842 568,825
--------------- ---------------
Total cash and cash equivalents .......... 62,386,267 81,491,894
Investment securities:
Investments available for sale ................ 234,294,355 253,271,239
Investments held to maturity .................. -- 2,695,531
--------------- ---------------
Total investment securities .............. 234,294,355 255,966,770
Loans held for sale ................................. 4,333,743 15,972,711
Loans ............................................... 901,738,867 862,052,215
Allowance for loan loss ............................. (13,058,234) (12,452,694)
--------------- ---------------
Loans, net .................................... 888,680,633 849,599,521
Premises and equipment, net ......................... 30,345,095 29,689,405
Intangible assets ................................... 2,531,518 2,727,564
Other assets ........................................ 21,919,034 19,975,557
--------------- ---------------
Total assets ............................. $ 1,244,490,645 $ 1,255,423,422
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES:
Deposits:
Demand ........................................ $ 192,094,682 $ 205,408,337
Savings and interest-bearing demand ........... 538,453,462 559,211,508
Certificates of deposits ...................... 358,253,911 343,837,191
--------------- ---------------
Total deposits ........................... 1,088,802,055 1,108,457,036
Short-term borrowings ............................... 14,300,000 --
Other liabilities ................................... 6,745,641 9,481,233
Long-term borrowings ................................ 19,474,271 20,259,985
--------------- ---------------
Total liabilities ........................ 1,129,321,967 1,138,198,254
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY:
Preferred stock: no par value, none issued;
10,000,000 shares authorized
Common stock: no par value, 50,000,000 shares
Authorized; shares issued and outstanding
14,064,086 and 14,235,931 respectively ........ 17,580,108 17,794,914
Additional paid-in capital .......................... 62,048,067 66,474,468
Retained earnings ................................... 36,714,139 29,392,264
Accumulated other comprehensive income (loss) ....... (1,173,636) 3,563,522
--------------- ---------------
Total stockholders' equity .................... 115,168,678 117,225,168
--------------- ---------------
Total liabilities and stockholders' equity $ 1,244,490,645 $ 1,255,423,422
=============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE> 4
WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------ ------------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................. $20,370,422 $20,435,332 $40,448,396 $40,648,220
Interest on taxable investment securities .. 2,228,953 2,063,646 4,752,860 4,110,395
Interest on nontaxable investment securities 1,124,995 969,152 2,255,323 1,864,092
Interest from other banks .................. 77,869 399,219 149,996 945,089
Interest on federal funds sold ............. 17,668 28,794 26,283 35,146
----------- ----------- ----------- -----------
Total interest income ................ 23,819,907 23,896,143 47,632,858 47,602,942
INTEREST EXPENSE
Savings and interest-bearing demand ........ 4,048,979 4,045,863 7,995,986 8,006,396
Certificates of deposit .................... 4,489,939 4,379,463 8,983,875 8,661,893
Short-term borrowings ...................... 104,633 115,540 215,551 400,266
Long-term borrowings ....................... 241,393 462,502 497,665 918,903
----------- ----------- ----------- -----------
Total interest expense ............... 8,884,944 9,003,368 17,693,077 17,987,458
----------- ----------- ----------- -----------
NET INTEREST INCOME ........................ 14,934,963 14,892,775 29,939,781 29,615,484
PROVISION FOR LOAN LOSS .................... 450,000 495,000 960,000 1,980,415
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS ............ 14,484,963 14,397,775 28,979,781 27,635,069
NONINTEREST INCOME
Service charges on deposit accounts ........ 1,144,297 1,121,235 2,302,338 2,207,353
Gains on sales of loans .................... 1,009,900 1,880,784 2,245,666 2,975,181
Other service charges, commissions and fees 1,081,827 867,070 2,112,952 1,656,074
Trust revenue .............................. 587,832 518,067 1,115,860 1,304,544
Loans servicing fees ....................... 84,152 169,069 240,117 312,481
Other ...................................... 73,002 233,423 557,232 401,511
Net gains on sales of securities ........... 101,459 150,095 204,364 250,981
----------- ----------- ----------- -----------
Total noninterest income ............. 4,082,469 4,939,743 8,778,529 9,108,125
NONINTEREST EXPENSE
Salaries and employee benefits ............. 6,474,984 7,473,181 13,437,913 14,738,944
Equipment .................................. 1,208,981 1,363,403 2,476,573 2,576,896
Occupancy .................................. 867,005 804,993 1,742,322 1,619,131
Marketing .................................. 551,861 362,698 911,259 749,934
Communication .............................. 392,608 371,680 818,396 748,480
Professional fees .......................... 355,054 360,055 682,658 780,699
Printing and office supplies ............... 252,264 351,174 540,806 759,656
Restructuring charges ...................... 303,290 -- 707,863 --
Other noninterest expense .................. 1,678,949 1,794,971 3,513,198 4,063,477
----------- ----------- ----------- -----------
Total noninterest expense ............ 12,084,996 12,882,155 24,830,988 26,037,217
INCOME BEFORE INCOME TAXES ................. 6,482,436 6,455,363 12,927,322 10,705,977
PROVISION FOR INCOME TAXES ................. 1,987,018 2,099,503 4,051,828 3,603,510
----------- ----------- ----------- -----------
NET INCOME ................................. $ 4,495,418 $ 4,355,860 $ 8,875,494 $ 7,102,467
=========== =========== =========== ===========
Basic earnings per share ............. $ .32 $ .31 $ .63 $ .51
Diluted earnings per share ........... $ .31 $ .30 $ .61 $ .48
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 5
WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------------------
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................... $ 8,875,494 $ 7,102,467
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of premises and equipment ... 1,744,825 1,459,342
Amortization of intangibles ............................... 196,046 222,461
Net (gain) on sales of available for sale investments ..... (204,364) (250,981)
Provision for loan losses ................................. 960,000 1,980,415
Decrease (increase) in interest receivables ............... 421,338 (610,554)
(Increase) decrease in other assets ....................... (2,364,815) 94,099
Net cash provided by loans held for sale .................. 11,638,968 439,178
Increase (decrease) in interest payable ................... 954,494 (42,560)
(Decrease) in other liabilities ........................... (3,690,086) (969,060)
Tax benefit associated with stock options ................. 416,492 1,189,902
------------ ------------
Net cash provided by operating activities ............ 18,948,392 10,614,709
CASH FLOWS FOR INVESTING ACTIVITIES
Proceeds from maturities of investment securities:
Available for sale ........................................ 37,685,303 22,798,055
Held to maturity .......................................... -- 17,662
Proceeds from sales of available for sale investment securities . 11,732,703 5,512,295
Purchase of investment securities:
Available for sale ........................................ (32,278,385) (40,867,703)
Loans made to customers greater than principal collected on loans (40,041,112) (44,272,592)
Capital expenditures ............................................ (2,400,515) (3,247,273)
------------ ------------
Net cash used in investing activities ..................... (25,302,006) (60,059,556)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in demand, savings and interest
bearing transaction accounts .............................. (34,071,701) 30,857,925
Net increase in proceeds from sales of certificates of deposits
greater than payments for maturing time deposits .......... 14,416,720 23,930,764
Proceeds from long-term borrowings .............................. -- 11,000,000
Payments on long-term borrowings ................................ (785,714) (1,571,429)
Net increase (decrease) in short-term borrowings ................ 14,300,000 (27,852,000)
Redemption of common stock for stock repurchase plan ............ (5,778,001) --
Sales of common stock, net ...................................... 720,302 1,469,247
Dividends paid and cash paid for fractional shares .............. (1,553,619) (1,284,185)
------------ ------------
Net cash (used) provided by financing activities .......... (12,752,013) 36,550,322
------------ ------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS ..................... (19,105,627) (12,894,525)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................. 81,491,894 98,817,658
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................... $ 62,386,267 $ 85,923,133
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 6
WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings
---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1997 .............. 12,606,009 $ 15,757,511 $ 43,213,086 $ 40,599,130
Comprehensive income:
Net income .............................. -- -- -- 14,058,671
Other comprehensive income, net of tax:
Net unrealized investment gains ......... -- -- -- --
Reclassification adjustment for gains
included in net income ..... -- -- -- --
Other comprehensive income, net of tax .. -- -- -- --
Comprehensive income ....................
Cash dividends, $.21 per common
share ................................. -- -- -- (2,972,623)
Sale of common stock pursuant to
stock options plans ................... 412,485 515,606 2,209,761 --
Redemption of stock pursuant to
stock options plans ................... (23,422) (29,278) (440,805) --
Common stock repurchased and retired .... (50,000) (62,500) (966,530) --
10 percent stock dividend ............... 1,291,627 1,614,535 20,666,030 (22,280,565)
Cash paid for fractional shares ......... (768) (960) -- (12,349)
Tax benefit associated with stock
options ............................... -- -- 1,792,926 --
---------- ------------- ------------- -------------
BALANCE, December 31, 1998 .............. 14,235,931 $ 17,794,914 $ 66,474,468 $ 29,392,264
Comprehensive income:
Net income .............................. -- -- -- 8,875,494
Other comprehensive (loss), net of tax:
Net unrealized investment (loss) ........ -- -- -- --
Cumulative effect of change in
accounting principle .......... -- -- -- --
Reclassification adjustment for gains
included in net income ........ -- -- -- --
Other comprehensive (loss), net of tax .. -- -- -- --
Comprehensive income ....................
Cash dividends, $.11 per common
share ................................. -- -- -- (1,553,619)
Sale of common stock pursuant to
stock options plans ................... 159,845 199,806 1,112,987 --
Redemption of stock pursuant to
stock option plans .................... (31,690) (39,612) (552,879) --
Common stock repurchased and retired .... (300,000) (375,000) (5,403,001) --
Tax benefit associated with stock
options ............................... -- -- 416,492 --
---------- ------------- ------------- -------------
BALANCE, June 30, 1999 .................. 14,064,086 $ 17,580,108 $ 62,048,067 $ 36,714,139
========== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Income Total
------------- -------------
<S> <C> <C>
BALANCE, December 31, 1997 .............. $ 1,570,591 $ 101,140,318
Comprehensive income:
Net income .............................. -- 14,058,671
Other comprehensive income, net of tax:
Net unrealized investment gains ......... -- 2,207,313
Reclassification adjustment for gains
included in net income ..... -- (214,382)
-------------
Other comprehensive income, net of tax .. 1,992,931 1,992,931
-------------
Comprehensive income .................... 16,051,602
=============
Cash dividends, $.21 per common
share ................................. -- (2,972,623)
Sale of common stock pursuant to
stock options plans ................... -- 2,725,367
Redemption of stock pursuant to
stock options plans ................... -- (470,083)
Common stock repurchased and retired .... -- (1,029,030)
10 percent stock dividend ............... -- --
Cash paid for fractional shares ......... -- (13,309)
Tax benefit associated with stock
options ............................... -- 1,792,926
------------- -------------
BALANCE, December 31, 1998 .............. $ 3,563,522 $ 117,225,168
Comprehensive income:
Net income .............................. -- 8,875,494
Other comprehensive (loss), net of tax:
Net unrealized investment (loss) ........ -- (4,994,293)
Cumulative effect of change in
accounting principle .......... -- 131,369
Reclassification adjustment for gains
included in net income ........ -- 125,766
-------------
Other comprehensive (loss), net of tax .. (4,737,158) (4,737,158)
-------------
Comprehensive income .................... 4,138,336
=============
Cash dividends, $.11 per common
share ................................. -- (1,553,619)
Sale of common stock pursuant to
stock options plans ................... -- 1,312,793
Redemption of stock pursuant to
stock option plans .................... -- (592,491)
Common stock repurchased and retired .... -- (5,778,001)
Tax benefit associated with stock
options ............................... -- 416,492
------------- -------------
BALANCE, June 30, 1999 .................. $ (1,173,636) $ 115,168,678
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of West Coast Bancorp (Bancorp or the Company) which operates its wholly-owned
subsidiaries, West Coast Bank (Bank), West Coast Trust, Centennial Funding
Corporation and Totten, Inc. after elimination of intercompany transactions and
balances.
The interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments including normal recurring
accruals necessary for fair presentation of results of operations for the
interim periods included herein have been made. The results of operations for
the three and six months ended June 30, 1999 are not necessarily indicative of
results to be anticipated for the year ending December 31, 1999, or other future
periods.
2. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. BUSINESS COMBINATIONS
Effective February 28, 1998, Bancorp completed its acquisition of
Centennial Holdings, Ltd. in Olympia, Washington. Its principal business
activities were conducted through Centennial Bank, which was merged into West
Coast Bank on December 31, 1998. The acquisition of Centennial Holdings, Ltd.
was accounted for as a pooling-of-interests. The historical consolidated
financial statements have been restated and include the accounts and results of
operations of Centennial Holdings, Ltd.
4. ACCOUNTING CHANGES
In 1998, the Financial Accounting Standards Board issued SFAS NO. 133,
"Accounting for Derivative Instruments and Hedging Activities". The statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statements of financial position and measure
those instruments at fair value.
Effective January 1, 1999, Bancorp adopted SFAS NO. 133, "Accounting for
Derivative Instruments and Hedging Activities". The adoption of SFAS 133 did not
materially impact the financial position or results of operations of Bancorp.
Bancorp does not currently utilize derivative instruments in its operations, and
does not engage in hedging activities. Under the provisions of SFAS NO. 133, and
in connection with the adoption of SFAS 133, Bancorp reclassified investment
securities carried at $2,695,531 with a market value of $2,909,000 from the held
to maturity classification to the available for sale classification. As a result
of this transfer, an unrealized gain of $131,000, net of tax, was recognized in
accumulated other comprehensive income as a cumulative effect of change in
accounting principle.
7
<PAGE> 8
5. RESTRUCTURING CHARGES
As previously disclosed, the 1999 results have been impacted by one-time
costs resulting from the consolidation of the Company's affiliate banks into one
entity, called West Coast Bank. The consolidation was completed on December 31,
1998. Bancorp has expensed $4.63 million in costs for the consolidation,
including costs related to a severance plan, signage, data conversions,
marketing, regulatory and administrative items. While the Company still expects
to make further severance payouts, and has accrued for certain conversion costs,
these costs have been recognized as expenses in the results of operations since
the inception of the consolidation in the third quarter of 1998 through June 30,
1999. The Company does not anticipate incurring any additional significant
restructuring expenses in future quarters. Of the one-time expenses, $404,573
were expensed in the first quarter of 1999, and $303,290 were expensed in the
second quarter of 1999 as restructuring charges.
Total restructuring charges of $1.92 million were accrued in the fourth
quarter of 1998 to cover anticipated costs of $1.73 million for the severance
program and personnel related expenditures, with the remaining $188,000 in costs
reserved for marketing and professional fees incurred but not yet paid. As of
June 30, 1999, Bancorp has an accrual for the restructuring charges of
$1,020,000 of which $700,000 is for severance and employment costs and the
remaining amount is for unpaid professional fees and conversion costs. During
the first and second quarter of 1999, $797,000 of the severance and employee
related program costs and marketing and professional fees have been charged
against the accrual. During the second quarter of 1999 Bancorp reduced its
expected severance accrual by $248,000 and increased the accrual by $305,000 for
professional fees and conversion costs already incurred but not yet paid. The
following table summarizes the accrued restructuring charges utilized in the
first and second quarters of 1999.
<TABLE>
<CAPTION>
(Dollars in Thousands) June 30, 1999
- ---------------------- -------------
<S> <C>
Balance, accrued restructuring charges, December 31, 1998 $1,760
Provision for restructure charges first quarter 1999 .... --
Utilization first quarter 1999:
Cash ............................................... 589
Noncash ............................................ --
------
Total Utilization ....................................... 589
------
Balance, accrued restructuring charges, March 31, 1999 .. $1,171
Provision for restructure charges second quarter 1999 ... 57
Utilization second quarter 1999:
Cash ............................................... 208
Noncash ............................................ --
------
Total Utilization ....................................... 208
------
Balance, accrued restructuring charges, June 30, 1999 ... $1,020
======
</TABLE>
6. STOCKHOLDERS' EQUITY
The Board of Directors declared a quarterly cash dividend of $.055 per
share during each of the first and second quarters of 1999. A dividend of $.045
per share was declared in the first and second quarter of 1998. A 10 percent
stock dividend was also declared in the third quarter of 1998. All per share
amounts have been restated to retroactively reflect stock dividends and stock
splits previously reported.
7. SUPPLEMENTAL CASH FLOW INFORMATION
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, and federal funds sold. Generally, federal
funds are purchased and sold for one-day periods.
Bancorp paid $16,739,000 and $18,030,018 for interest in the six months
ended June 30, 1999 and 1998, respectively. Income taxes paid were $3,985,000
and $2,170,934 in the six months ended June 30, 1999 and 1998, respectively.
8
<PAGE> 9
8. CONTINGENCIES AND LITIGATION
During the normal course of business, the Company from time-to-time is
subject to routine litigation incidental to its business. The Bank and Bancorp
are defendants in a lawsuit seeking damages in excess of $4.6 million or
specific performance, based on an alleged financing commitment made by the Bank
to the plaintiffs. The Bank denies the existence of any agreement or commitment
to plaintiffs. Due to the nature and uncertainties inherent in litigation, there
are no assurances that these matters would not at some point in the future have
a material effect on the Company. However, at this time, management believes
that the probable resolution of those matters will not materially affect the
financial position of the Company.
9. COMPREHENSIVE INCOME
Bancorp adopted SFAS No. 130 "Reporting Comprehensive Income" in 1998.
This statement established standards for reporting and displaying comprehensive
income and its components. The following table displays the components of other
comprehensive income:
<TABLE>
<CAPTION>
Three Months ended Six Months ended
June 30, June 30,
----------------------- -----------------------
(Dollars in thousands) 1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Unrealized gains on securities:
Unrealized holding losses arising during the period ........... $(5,382) $ 75 $(8,074) $ (206)
Tax benefit .................................................. 2,064 (24) 3,080 89
------- ------- ------- -------
Unrealized holdings losses arising during the period, after tax (3,318) 51 (4,994) (117)
Cumulative effect of change in accounting principle ........... -- -- $ 213 --
Tax expense ................................................... -- -- (82) --
------- ------- ------- -------
Cumulative effect of change in accounting principle after tax . -- -- 131 --
Less: Reclassification adjustment for gains realized in income $ 101 $ 150 $ 204 $ 251
tax (expenses) benefit
Tax expense ................................................... (38) (57) (78) (96)
------- ------- ------- -------
Net unrealized gains .......................................... 63 93 126 155
------- ------- ------- -------
Other comprehensive income (loss) ............................. $(3,255) $ 144 $(4,737) $ 38
======= ======= ======= =======
</TABLE>
9
<PAGE> 10
10. EARNINGS PER SHARE
The following table reconciles the numerator and denominator of the
basic and diluted earnings per share computations:
<TABLE>
<CAPTION>
Weighted
Average Per-Share
Net Income Shares Amount
--------------------------------------------
Three Months ended June 30, 1999
--------------------------------------------
<S> <C> <C> <C>
Basic earnings per share . $4,495,418 14,103,731 $ 0.32
Stock options ............ 331,971
Diluted earnings per share $4,495,418 14,435,702 $ 0.31
</TABLE>
<TABLE>
<CAPTION>
Three Months ended June 30, 1998
--------------------------------------------
<S> <C> <C> <C>
Basic earnings per share . $4,355,860 14,126,938 $ 0.31
Stock options ............ 590,186
Diluted earnings per share $4,355,860 14,717,124 $ 0.30
</TABLE>
<TABLE>
<CAPTION>
Weighted
Average Per-Share
Net Income Shares Amount
--------------------------------------------
Six Months ended June 30, 1999
--------------------------------------------
<S> <C> <C> <C>
Basic earnings per share . $8,875,494 14,139,865 $ 0.63
Stock options ............ 370,174
Diluted earnings per share $8,875,494 14,510,039 $ 0.61
</TABLE>
<TABLE>
<CAPTION>
Six Months ended June 30, 1998
--------------------------------------------
<S> <C> <C> <C>
Basic earnings per share . $7,102,467 14,022,703 $ 0.51
Stock options ............ 671,773
Diluted earnings per share $7,102,467 14,694,476 $ 0.48
</TABLE>
Bancorp for the periods reported had no reconciling items between net income and
income available to common shareholders.
10
<PAGE> 11
11. SEGMENT AND RELATED INFORMATION
Bancorp adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," in 1998, which established standards for
the way enterprises report information about operating segments.
During 1998, Bancorp operated four community banks; these banks were
consolidated into one banking entity at December 31,1998. Until late in 1998,
separate management teams managed the four banks, relying on common support
services offered through the parent Company. The four banks operated in Oregon
and Washington, where the economic and regulatory factors were similar for the
banks; three of the four banks shared the Portland, Oregon market. The banks
used similar means of branch networks, marketing and technology to deliver
similar loan and deposit products and services. Following the consolidation to a
single banking entity, the Bank operates 42 branch offices, and has realigned
management resources into a single team. Through the consolidation to a one-bank
structure, Bancorp has aggregated its historical banking operations into a
single segment as shown below.
Bancorp accounts for intercompany fees and services at an estimated fair
value according to regulatory requirements for the service provided.
Intercompany items relate primarily to the use of accounting, human resources,
data processing and marketing services provided. All other accounting policies
are the same as those described in the summary of significant accounting
policies in Bancorp's 1998 annual report.
Summarized financial information concerning Bancorp's reportable
segments and the reconciliation to Bancorp's consolidated results is shown in
the following table. The "Other" column includes Bancorp's trust operations and
corporate-related items. In 1998, these items included support services such as
accounting, human resources, data processing and marketing provided at the
parent. During 1999, these support services are operating within the banking
unit. Investment in subsidiaries is netted out of the presentations below. The
"Intersegment" column identifies the intersegment activities of revenues,
expenses and other assets, between the "Banking" and "Other" segment.
<TABLE>
<CAPTION>
(Dollars in thousands) Three months ended June 30, 1999
Banking Other Intersegment Consolidated
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income ............... $ 23,783 $ 65 $ (28) $ 23,820
Interest expense .............. 8,913 -- (28) 8,885
---------- ---------- ---------- ----------
Net interest income ...... 14,870 65 -- 14,935
---------- ---------- ---------- ----------
Provision for loan loss ....... 450 -- -- 450
Noninterest income ............ 3,551 596 (65) 4,082
Restructuring charges ......... 303 -- -- 303
Noninterest expense ........... 11,241 606 (65) 11,782
---------- ---------- ---------- ----------
Income before income taxes 6,427 55 -- 6,482
Provision for income taxes .... 1,968 19 -- 1,987
---------- ---------- ---------- ----------
Net income .................... $ 4,459 $ 36 $ -- $ 4,495
========== ========== ========== ==========
Depreciation and amortization . $ 972 $ 8 $ -- $ 980
Assets ........................ $1,242,641 $ 6,928 $ (5,078) $1,244,491
Loans, net .................... $ 888,681 $ -- $ -- $ 888,681
Deposits ...................... $1,094,204 $ -- $ (5,402) $1,088,802
Equity ........................ $ 107,263 $ 7,906 $ N/A $ 115,169
</TABLE>
11
<PAGE> 12
11. SEGMENT AND RELATED INFORMATION (continued)
<TABLE>
<CAPTION>
(Dollars in thousands) Three months ended June 30, 1998
Banking Other Intersegment Consolidated
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income ............... $ 23,879 $ 32 $ (15) $ 23,896
Interest expense .............. 9,018 -- (15) 9,003
---------- ---------- ---------- ----------
Net interest income ...... 14,861 32 -- 14,893
---------- ---------- ---------- ----------
Provision for loan loss ....... 495 -- -- 495
Noninterest income ............ 4,294 2,427 (1,781) 4,940
Restructuring charges ......... -- -- -- --
Noninterest expense ........... 11,357 3,307 (1,781) 12,883
---------- ---------- ---------- ----------
Income before income taxes 7,303 (848) -- 6,455
Provision for income taxes .... 2,402 (303) -- 2,099
---------- ---------- ---------- ----------
Net income .................... $ 4,901 $ (545) $ -- $ 4,356
========== ========== ========== ==========
Depreciation and amortization . $ 757 $ 110 $ -- $ 867
Assets ........................ $1,154,350 $ 11,392 $ (3,487) $1,162,255
Loans, net .................... $ 808,783 $ -- $ -- $ 808,783
Deposits ...................... $1,016,687 $ -- $ (3,417) $1,013,270
Equity ........................ $ 97,632 $ 12,024 $N/A $ 109,656
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands) Six months ended June 30, 1999
Banking Other Intersegment Consolidated
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income ............... $ 47,580 $ 105 $ (52) $ 47,633
Interest expense .............. 17,745 -- (52) 17,693
---------- ---------- ---------- ----------
Net interest income ...... 29,835 105 -- 29,940
---------- ---------- ---------- ----------
Provision for loan loss ....... 960 -- -- 960
Noninterest income ............ 7,757 1,152 (131) 8,778
Restructuring charges ......... 708 -- -- 708
Noninterest expense ........... 22,987 1,267 (131) 24,123
---------- ---------- ---------- ----------
Income before income taxes 12,937 (10) -- 12,927
Provision for income taxes .... 4,055 (3) -- 4,052
---------- ---------- ---------- ----------
Net income .................... $ 8,882 $ (7) $ -- $ 8,875
========== ========== ========== ==========
Depreciation and amortization . $ 1,922 $ 19 $ -- $ 1,941
Assets ........................ $1,242,641 $ 6,928 $ (5,078) $1,244,491
Loans, net .................... $ 888,681 $ -- $--- $ 888,681
Deposits ...................... $1,094,204 $ -- $ (5,402) $1,088,802
Equity ........................ $ 107,263 $ 7,906 $ N/A $ 115,169
</TABLE>
12
<PAGE> 13
11. SEGMENT AND RELATED INFORMATION (continued)
<TABLE>
<CAPTION>
(Dollars in thousands) Six months ended June 30, 1998
Banking Other Intersegment Consolidated
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income ............... $ 47,557 $ 74 $ (28) $ 47,603
Interest expense .............. 18,011 4 (28) 17,987
---------- ---------- ---------- ----------
Net interest income ...... 29,546 70 -- 29,616
---------- ---------- ---------- ----------
Provision for loan loss ....... 2,008 (28) -- 1,980
Noninterest income ............ 7,633 4,950 (3,475) 9,108
Restructuring charges ......... -- -- -- --
Noninterest expense ........... 23,021 6,492 (3,475) 26,038
---------- ---------- ---------- ----------
Income before income taxes 12,150 (1,444) -- 10,706
Provision for income taxes .... 4,085 (481) -- 3,604
---------- ---------- ---------- ----------
Net income .................... $ 8,065 $ (963) $ -- $ 7,102
========== ========== ========== ==========
Depreciation and amortization . $ 1,455 $ 226 $ -- $ 1,681
Assets ........................ $1,154,350 $ 11,392 $ (3,487) $1,162,255
Loans, net .................... $ 808,783 $ -- $ -- $ 808,783
Deposits ...................... $1,016,687 $ -- $ (3,417) $1,013,270
Equity ........................ $ 97,632 $ 12,024 $ N/A $ 109,656
</TABLE>
12. RECLASSIFICATION
Certain reclassifications of prior year amounts have been made to
conform to current classifications.
13
<PAGE> 14
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENT DISCLOSURE
In addition to historical information, this report contains certain
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (PSLRA) This statement is included for the express
purpose of availing Bancorp of the protections of the safe harbor provisions of
the PSLRA. The forward looking statements contained in this report are subject
to factors, risks, and uncertainties that may cause actual results to differ
materially from those projected. Important factors that might cause such a
material difference include, but are not limited to, those discussed in this
section of the report. In addition, the following items are among the factors
that could cause actual results to differ materially from the forward looking
statements in this report: general economic conditions, including their impact
on capital expenditures; business conditions in the banking industry; the
regulatory environment; new legislation; rapidly changing technology and
evolving banking industry standards; competitive standards; competitive factors,
including increased competition with community, regional, and national financial
institutions; fluctuating interest rate environments; and similar matters.
Readers are cautioned not to place undue reliance on these forward looking
statements, which reflect Management's analysis only as of the date of the
statement. Bancorp undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events or circumstances that arise after
the date of this report. Readers should carefully review the risk factors
described in this and other documents Bancorp files from time to time with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
Three months ended June 30, 1999 and 1998
Net Income. Bancorp reported net income of $4,495,418 or $.31 per
diluted share, for the three months ended June 30, 1999, compared to $4,355,860
or $.30 per diluted share for the three months ended June 30, 1998. The 1999
second quarter results include $483,000 in non-recurring and restructuring
charges ($304,000 after income taxes), resulting from marketing costs to promote
the West Coast Bank name and restructuring expenses associated with Bancorp's
consolidation of its subsidiary banks. After adjusting for the second quarter
non-recurring events, adjusted operating net income was $4,799,000 or $.33 per
diluted share, up 10% compared to adjusted operating net income of $4,356,000 or
$.30 per diluted share, in the second quarter of 1998. Net interest income
increased slightly in the second quarter of 1999 over the comparable period in
1998, due to higher average interest earning assets offset by a declining net
interest margin. Noninterest income decreased mainly due to a decrease in gains
on sales of loans. This decrease was offset slightly by increases in other
service charges, commissions and fees, and service charges on deposit accounts
due to an increased customer base, higher transaction volumes, and increases in
fee assessments. Total noninterest expenses decreased mainly due to staff
reductions and other savings associated with Bancorp's consolidation of its
subsidiaries.
Net Interest Income. Net interest income is the difference between
interest income (principally from loan and investment securities) and interest
expense (principally on customer deposits and borrowings). Changes in net
interest income result from changes in volume, net interest spread, and net
interest margin. Volume refers to the average dollar level of interest earning
assets and interest bearing liabilities. Net interest spread refers to the
differences between the average yield on interest earning assets and the average
cost of interest bearing liabilities. Net interest margin refers to net interest
income divided by average interest earning assets and is influenced by the level
and relative mix of interest earning assets and interest bearing liabilities.
Bancorp's profitability, like that of many financial institutions, is dependent
to a large extent upon net interest income. Bancorp tends to be slightly
liability sensitive, meaning that interest bearing liabilities mature or reprice
more quickly than interest earning assets in a given period. Therefore, a
significant increase in the market rates of interest or flattening interest rate
yield curve could adversely affect net interest income. In contrast, a
decreasing interest rate environment or steepening interest rate yield curve may
slightly improve Bancorp's margin. Competition, the economy, and the status of
the interest rate environment also impact Bancorp's net interest income in any
period.
14
<PAGE> 15
Net interest income on a tax equivalent basis for the three months ended
June 30, 1999 increased $122,000 or .79%, to $15,514,000 from $15,392,000 for
the same period in 1998. The increased net interest income was caused mainly by
asset growth, offset by a declining net interest margin. Average interest
earning assets increased by $90.3 million, or 8.50%, to $1.15 billion in the
second quarter of 1999 from $1.06 billion for the same period in 1998, while
average interest bearing liabilities increased $71.8 million or 8.36%. The
average net interest spread decreased from 5.01% to 4.66%, mainly due to
decreased average earning asset yields, which declined 72 basis points from
9.21% to 8.49%. The low/flat interest rate yield curve has caused variable rate
repricing on assets over the period, which along with recent new asset
generation and increased competitive pricing, have led to the decreasing asset
yields. In addition, certain fixed rate loan customers have refinanced their
loans at the lower rates over the period. Average rates paid decreased 37 basis
points to 3.83% in the second quarter of 1999 from 4.20% for the same period in
1998. Bancorp's net interest margin for the three months ended June 30, 1999 was
5.40%, a decrease of 41 basis points from 5.81% for the comparable period of
1998. The decrease in Bancorp's net interest margin and related yields or
spreads are due mainly to a changing interest rate environment, increased
pricing competition, and a shift in some of its asset mix. Given these factors,
Bancorp could see further declines in its interest margin. Continued anticipated
refinance activity caused by the low interest rate environment, continued strong
competition in the markets it serves, and other economic factors, could further
impact the Company's net interest margin.
Analysis of Net Interest Income The following table presents information
regarding yields on interest-earning assets, expense on interest-bearing
liabilities, and net yields on interest-earning assets for the periods indicated
on a tax equivalent basis:
<TABLE>
<CAPTION>
Three Months Ended
(Dollars in thousands) June 30,
---------------------------- Increase
1999 1998 (Decrease) Change
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest and fee income(1) ............... $ 24,399 $ 24,395 $ 4 0.02%
Interest expense ......................... 8,885 9,003 (118) (1.31)%
---------- ---------- ----------
Net interest income ...................... $ 15,514 $ 15,392 $ 122 0.79%
========== ========== ==========
Average interest earning assets........... $1,152,563 $1,062,305 $ 90,258 8.50%
Average interest bearing liabilities...... $ 930,914 $ 859,098 $ 71,816 8.36%
Average interest earning assets/
interest bearing liabilities......... 123.81% 123.65% 0.16
Average yields earned(2) ................. 8.49% 9.21% (0.72)
Average rates paid(2) .................... 3.83% 4.20% (0.37)
Net interest spread(2) ................... 4.66% 5.01% (0.35)
Net interest margin(2) ................... 5.40% 5.81% (0.41)
</TABLE>
- --------------
(1) Interest earned on nontaxable securities has been computed on a 34% tax
equivalent basis.
(2) These ratios for the three months ended June 30, 1999 and 1998 have been
annualized.
Provision for Loan Loss. Bancorp recorded provisions for loan losses for
the second quarter of 1999 and 1998 of $450,000 and $495,000 respectively. Net
charge-offs for the second quarter of 1999 were $113,000, compared to net
charge-offs of $281,000 for the same period in 1998. At June 30, 1999, the
percentage of non-performing assets was 0.36% of total assets, compared to 0.31%
one year earlier. Bancorp's allowance for loan losses, as a percentage of total
loans was 1.45% at June 30, 1999, compared to 1.46% as of June 30, 1998.
Noninterest Income. Noninterest income for the second quarter of 1999
was $4,082,469, down $857,274 or 17.35% from $4,939,743 in the like period in
1998. Gains on sales of loans decreased $870,884 to $1,009,900 in 1999 from
$1,880,784 in 1998. The decrease in gains on sales of loans was due mainly to
decreased activity in the commercial brokerage and residential real estate
programs. Other service charges, commissions, and fees increased $214,757 to
$1,081,827 from $867,070 or 24.77% in 1999 over 1998. The increases in other
service charges, commissions, and fees were due to strong growth in the merchant
bankcard program, sales of investment products, and increased ATM related
service charges. Service charges on deposit accounts increased to $1,144,297, a
2.06% increase over the same period in 1998, caused mainly by increases in
volumes of customers serviced and increases in fee assessments. Trust revenue
increased during the second quarter of 1999, as compared to the same period in
1998, due in part to the activity of the equity market and increases in assets
under management. Loan servicing fees and other noninterest income decreased in
1999 over 1998. Net gains on the sales of securities were $101,459 through June
30, 1999, compared to $150,095 for the same period one year earlier.
15
<PAGE> 16
Noninterest Expense. Noninterest expenses for the second quarter ended
June 30, 1999, were $12,084,996, a decrease of $797,159 or 6.19% over the same
period in 1998. A restructuring charge of $303,290 impacted the second quarter
1999 noninterest expenses, due to the Company's consolidation of its subsidiary
banks. Bancorp's salaries and employee benefits decreased $998,197, or 13.36%,
to $6,474,984 in the second quarter ended June 30, 1999, from $7,473,181 for the
like period in 1998. Salary and employee benefit expense has declined primarily
as a result of Bancorp's restructuring efforts. At June 30, 1999, Bancorp
employed 649 staffing positions compared to 735 at June 30, 1998. Equipment and
printing and office supplies expenses and other expenses decreased in the second
quarter compared to the same period in 1998, as Bancorp realized efficiencies in
operations following its more recent acquisitions and its restructuring efforts.
Equipment expense decreased $154,422 or 11.33% in the second quarter of 1999
over 1998. Bancorp continues to invest in technological improvements and
expansion; occupancy and communications expenses are higher in the second
quarter of 1999 over the same period in 1998, due mainly to growth and expansion
including additions of new branches, products and services over the period.
Marketing expenses increased $189,163 or 52.15% in the second quarter of 1999
over the same period in 1998, as Bancorp increases its promotion of new and
current products. Professional fees incurred for services from outside
consultants, accountants, and attorneys are down slightly in the second quarter
of 1999, compared to the second quarter of 1998.
16
<PAGE> 17
Six months ended June 30, 1999 and 1998
Net Income. Bancorp reported net income of $8,875,494, or $.61 per
diluted share, for the six months ended June 30, 1999, compared to $7,102,467,
or $.48 per diluted share, for the six months ended June 30, 1998. The 1999 year
to date results include $888,000 in non-recurring and restructuring charges
($558,000 after tax) resulting from marketing costs to promote the West Coast
Bank name and restructuring expenses associated with Bancorp's consolidation of
its subsidiary banks. In addition, the 1998 year to date results were impacted
by non-recurring merger related costs of $1,607,000 ($1,060,000 after taxes).
After adjusting for these non-recurring events, adjusted operating net income
year to date was $9,434,000 or $.65 per diluted share, up 24% compared to
adjusted operating net income of $8,163,000 or $.56 per diluted share, for the
same period in 1998. Net interest income increased through June 30, 1999, over
the comparable period in 1998, due to higher average interest earning assets
offset by a declining net interest margin. Noninterest income decreased mainly
due to a decrease in gains on sales of loans, trust revenue and loan servicing
fees. These decreases were in part offset by increases in other service charges
commissions and fees and service charges on deposit accounts, due to an
increased customer base, higher transaction volumes, and increases in fee
assessments. Total noninterest expenses decreased mainly due to staff reductions
and other savings associated with Bancorp's consolidation of its subsidiaries.
Net Interest Income. Net interest income on a tax equivalent basis for
the six months ended June 30, 1999, increased $526,000 or 1.72%, to $31,102,000
from $30,576,000 for the same period in 1998. The increased net interest income
was caused mainly by asset growth, offset by a declining net interest margin.
Average interest earning assets increased by $98.4 million, or 9.38%, to $1.15
billion in the second quarter of 1999 from $1.05 billion for the same period in
1998, while average interest bearing liabilities increased $71.2 million or
8.32%. The average net interest spread decreased from 5.10% to 4.73%, mainly due
to decreased average earning asset yields, which declined 76 basis points from
9.34% to 8.58%. The low/flat interest rate yield curve has caused variable rate
repricing on assets over the period, which along with recent new asset
generation and increased competitive pricing, have lead to the decreasing asset
yields. In addition, certain fixed rate loan customers have refinanced their
loans at the lower rates over the period. Average rates paid decreased 39 basis
points to 3.85% in the first two quarters of 1999 from 4.24% for the same period
in 1998. Bancorp's net interest margin for the six months ended June 30, 1999
was 5.47%, a decrease of 41 basis points from 5.88% for the comparable period of
1998. The decrease in Bancorp's net interest margin and related yields or
spreads are due mainly to a changing interest rate environment, increased
pricing competition, and a shift in some of its asset mix. Given these factors,
Bancorp could see further declines in its interest margin. Continued anticipated
refinance activity caused by the low interest rate environment, continued strong
competition in the markets it serves, and other economic factors, could further
impact the Company's net interest margin.
Analysis of Net Interest Income The following table presents information
regarding yields on interest-earning assets, expense on interest-bearing
liabilities, and net yields on interest-earning assets for the periods indicated
on a tax equivalent basis:
<TABLE>
<CAPTION>
Six Months Ended
(Dollars in thousands) June 30,
---------------------------- Increase
1999 1998 (Decrease) Change
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest and fee income(1) ............. $ 48,795 $ 48,563 $ 232 0.48%
Interest expense ....................... 17,693 17,987 (294) (1.63)%
---------- ---------- ----------
Net interest income .................... $ 31,102 $ 30,576 $ 526 1.72%
========== ========== ==========
Average interest earning assets......... $1,147,178 $1,048,810 $ 98,368 9.38%
Average interest bearing liabilities.... $ 926,441 $ 855,276 $ 71,165 8.32%
Average interest earning assets/
interest bearing liabilities....... 123.83% 122.63% 1.20
Average yields earned(2) ............... 8.58% 9.34% (0.76)
Average rates paid(2) .................. 3.85% 4.24% (0.39)
Net interest spread(2) ................. 4.73% 5.10% (0.37)
Net interest margin(2) ................. 5.47% 5.88% (0.41)
</TABLE>
- --------------
(1) Interest earned on nontaxable securities has been computed on a 34% tax
equivalent basis.
(2) These ratios for the six months ended June 30, 1999 and 1998 have been
annualized.
Provision for Loan Loss. Bancorp recorded provisions for loan losses
through June of 1999 and 1998 of $960,000 and $1,980,415 respectively. Bancorp's
provision was impacted in the first quarter of 1998 by a one time merger-related
increase in the provision for loan losses of $1,038,000 related to the
Centennial Holdings Ltd. acquisition, to bring its allowance for loan loss
methodology in line with Bancorp practices. Net charge-offs through June 30,
1999 were $355,000, compared to net charge-offs of $427,000 for the same period
in 1998.
17
<PAGE> 18
Noninterest Income. Noninterest income for the first six months of 1999
was $8,778,529, down $329,596 or 3.62% from $9,108,125 in the like period in
1998. Gains on sales of loans decreased $729,515 to $2,245,666 in 1999 from
$2,975,181 in 1998, due to decreases in loan sale volume, impacted by the recent
interest rate environment lowering the demand for refinance activity. Trust
revenue also decreased in the first six months of 1999, as compared to the same
period in 1998, due in part to the activity of the equity market and increases
in assets under management. Other service charges, commissions, and fees
increased $456,878 or 27.59% through June 30, 1999, over the same period in
1998. The increases in other service charges, commissions, and fees were due to
strong growth in the merchant bankcard program, sales of investment products,
and increased ATM related service charges. Service charges on deposit accounts
increased to $2,302,338, a 4.30% increase over the same period in 1998, caused
mainly by increases in volumes of customers serviced and increases in fee
assessments. Loan servicing fees decreased in the first six months of 1999
compared to 1998. Net gains on the sales of securities were $204,364 through
June 30, 1999, compared to $250,981 for the same period one year earlier.
Noninterest Expense. Noninterest expenses for the six months ended June
30, 1999, were $24,830,988, a decrease of $1,206,229 or 4.63% from $26,037,217
for the same period in 1998. Non-recurring and restructuring charges of $888,000
($558,000 after tax) impacted the year to date results, due to the Company's
recent consolidation of its subsidiary banks. Noninterest expenses through June
30, 1998 include $569,000 related to an acquisition. Bancorp's salaries and
employee benefits decreased $1,301,031, or 8.83%, to $13,437,913 through June
30, 1999, from $14,738,944 for the like period in 1998. Salary and employee
benefit expense has declined as a result of Bancorp's restructuring efforts. At
June 30, 1999, Bancorp employed 649 staffing positions compared to 735 at June
30, 1998. In the three quarters since the restructuring plan was announced,
Bancorp has identified, notified or released over 73 staff positions and plans
to continue to reduce corporate cost to reach certain desired goals. Equipment
and printing and office supplies have decreased in the first six months of 1999
compared to the same period in 1998, as Bancorp realized efficiencies in
operations following its more recent acquisitions and its restructuring efforts.
Professional fees decreased $98,041 from $780,699 through June 30, 1999 to
$682,658 for the same period. Occupancy, communications, and marketing expenses
are higher in the first two quarters of 1999 over the same period in 1998, due
mainly to growth and expansion including additions of new branches, products and
services over the period. Marketing expenses increased $161,325 or 21.51% in
1999 over 1998, due to increased efforts to market Bancorp's name and products.
Bancorp opened two new branch offices during the first half of 1999, and now
operates 42 branches. Other noninterest expense decreased $555,027 in the first
six months of 1999 compared to like period in 1998, due mainly to merger related
expenses of $569,000 recognized in the first quarter of 1998.
18
<PAGE> 19
RESTRUCTURING CHARGES
For the three months ended June 30, 1999, Bancorp expensed $303,290 in
restructuring charges related to its consolidation of its four separate banking
affiliates into one entity. For the six months ended June 30, 1999, Bancorp
expensed $707,863 in restructuring charges related to its consolidation. The
consolidation was completed on December 31, 1998, and new signs on the branch
facilities were installed in the first quarter of 1999. In the three quarters
since the plan was announced, Bancorp has identified, notified, or released over
73 staff positions. The restructuring liability is being charged as severance
and conversion cost payments are made.
Bancorp has expensed a total of $4.63 million in costs for the
consolidation, including costs related to a severance plan, signage, data
conversions, marketing, regulatory and administrative items. While Bancorp still
expects to make further severance payouts, and has accrued for certain
conversion costs, these costs have been recognized as expenses in the results of
operations, since the announcement of the consolidation in the third quarter of
1998. The Company does not anticipate incurring significant additional
restructuring expenses in future quarters. The Company had originally forecast
the cost of the restructure at $5 million. Bancorp was therefore successful in
containing its costs below the original forecast.
Bancorp expects that the consolidation will save approximately $6
million annually. The cost savings will come from the reductions in staff and
related overhead, a simplified corporate structure, a reduced regulatory burden
and synergies created by unified marketing efforts and name branding. The
original plan called for two-thirds of the cost savings to be substantially
achieved by third quarter 1999, with the remaining savings to be achieved early
in the year 2000. The Company to date has identified and instituted savings and
revenue enhancements that make up approximately $5.625 million or 94% of the
original estimated income enhancements. Certain of the Company's operations
continue to be consolidated into centralized locations during 1999, and
additional staffing reductions well be realized following these changes.
Bancorp's liquidity has not been materially affected by cash outlays
related to one-time restructuring charges. Bancorp does not anticipate that
future restructuring charges will have a material effect on Bancorp's liquidity.
INCOME TAXES
During the first six months of 1999, due to an increase in net income
before taxes and changes in the mix of taxable and nontaxable income items, the
provision for income taxes increased from that of 1998. It is anticipated that
Bancorp's tax expense will increase in future periods, both due to an increase
in income before taxes and a smaller percentage of Bancorp's income being
generated from tax exempt items. Any future merger related capitalized costs may
also increase Bancorp's tax provision.
19
<PAGE> 20
LIQUIDITY AND SOURCES OF FUNDS
Bancorp's primary sources of funds are customer deposits, maturities of
investment securities, sales of "Available for Sale" securities, loan sales,
loan repayments, net income, advances from the Federal Home Loan Bank of Seattle
("FHLB"), and the use of Federal Funds markets. Scheduled loan repayments are
relatively stable sources of funds, while deposit inflows and unscheduled loan
prepayments are not. Deposit inflows and unscheduled loan prepayments are
influenced by general interest rate levels, interest rates available on other
investments, competition, economic conditions, and other factors.
Deposits are Bancorp's primary source of new funds. Total deposits were
$1.089 billion at June 30, 1999, compared to $1.108 billion at December 31,
1998. Bancorp 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 a quality product.
Management anticipates that Bancorp will continue relying on customer
deposits, maturity of investment securities, sales of "Available for Sale"
securities, loan sales, loan repayments, net income, Federal Funds markets,
FHLB, and other borrowings to provide liquidity. Although deposit balances have
shown historical growth, such balances may be influenced by changes in the
banking industry, interest rates available on other investments, general
economic conditions, competition, customer management of cash resources prior to
year 2000 and other factors. Borrowings may be used on a short-term basis to
compensate for reductions in other sources of funds. Borrowings may also be used
on a long-term basis to support expanded lending activities and to match
maturities or repricing intervals of assets. The sources of such funds will
include Federal Funds purchased, repurchase agreements, and borrowings from the
FHLB.
CAPITAL RESOURCES
The Federal Reserve Bank "FRB" and the Federal Deposit Insurance
Corporation "FDIC" have established minimum requirements for capital adequacy
for bank holding companies and member banks. The requirements address both
risk-based capital and leveraged capital. The regulatory agencies may establish
higher minimum requirements if, for example, a corporation has previously
received special attention or has a high susceptibility to interest rate risk.
The FRB and FDIC risk-based capital guidelines require banks and bank holding
companies to have a ratio of tier one capital to total risk-weighted assets of
at least 4%, and a ratio of total capital to total risk-weighted assets of 8% or
greater. In addition, the leverage ratio of tier one capital to total assets
less intangibles is required to be at least 3%. As of June 30, 1999, Bancorp and
the Bank are considered "Well Capitalized" per the regulatory risk based capital
guidelines.
Shareholders' equity decreased to $115.2 million at June 30,1999, from
$117.2 million at December 31, 1998, a decrease of $2.0 million over that period
of time. The decrease is due to a decline in the in the market value of
Bancorp's available for sale investment portfolio and Bancorp's activity in its
stock repurchase plan. At June 30, 1999, Bancorp's shareholders' equity, as a
percentage of total assets, was 9.25%, compared to 9.34% at December 31, 1998.
The decrease was primarily the result of Bancorp's equity base decreasing more
than a decrease in total assets. Equity decreased 1.75% over the period from
December 31, 1998, to June 30, 1999, while assets decreased by .87% over the
same period. As the following table indicates, Bancorp currently exceeds the
regulatory capital minimum requirements.
<TABLE>
<CAPTION>
(Dollars in thousands) June 30, 1999
-------------------------
Amount Ratio
<S> <C> <C>
Tier 1 capital ............................ $ 114,394 11.47%
Tier 1 capital minimum requirement ........ 39,859 4.00%
---------- -----
Excess over minimum Tier 1 capital....... $ 74,535 7.47%
========== =====
Total capital ............................. $ 126,864 12.72%
Total capital minimum requirement ......... 79,761 8.00%
---------- -----
Excess over minimum total capital........ $ 47,103 4.72%
========== =====
Risk-adjusted assets ...................... $ 997,013
==========
Leverage ratio ............................ 9.23%
Minimum leverage requirement .............. 3.00%
-----
Excess over minimum leverage ratio....... 6.23%
=====
Risk-adjusted total assets ................ $1,239,771
==========
</TABLE>
20
<PAGE> 21
LENDING AND CREDIT MANAGEMENT
Interest earned on the loan portfolio is the primary source of income
for Bancorp. Net loans represented 71.41% of total assets as of June 30, 1999.
Although the Bank strives to serve the credit needs of its service
areas, the primary focus is on real estate related and commercial credits. The
Bank makes substantially all its loans to customers located within its service
areas. The Bank has no loans defined as highly leveraged transactions by the
FRB.
Although a risk of nonpayment exists with respect to all loans, certain
specific types of risks are associated with different types of loans. Owing to
the nature of the Bank's customer base and the growth experienced in the market
areas served, real estate is frequently a material component of collateral for
the Bank's loans. The expected source of repayment of these loans is generally
the cash flow of the project, operations of the borrower's business or personal
income. Risks associated with real estate loans include fluctuating land values,
local economic conditions, changes in tax policies, and a concentration of loans
within any one area.
The Bank manages the general risks inherent in the loan portfolio by
following loan policies and underwriting practices designed to result in prudent
lending activities.
The following table presents the composition of the Banks' loan portfolios, at
the dates indicated.
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-----------------------------------------------------------
(Dollars in thousands)
Amount Percent Amount Percent
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Commercial .......................... $ 170,525 19.19% $ 150,206 17.68%
Real estate construction ............ 112,043 12.61 118,171 13.91
Real estate mortgage ................ 105,069 11.82 113,661 13.38
Real estate commercial .............. 452,088 50.87 414,169 48.75
Installment and other consumer....... 62,014 6.98 65,845 7.75
--------- ------ --------- ------
Total loans ......................... 901,739 101.47% 862,052 101.47%
Allowance for loan losses ........... (13,058) (1.47) (12,453) (1.47)
--------- ------ --------- ------
Total loans, net .................... $ 888,681 100.00% $ 849,599 100.00%
========= ====== ========= ======
</TABLE>
The following table presents information with respect to nonperforming assets.
<TABLE>
<CAPTION>
(Dollars in thousands) June 30, 1999 December 31, 1998
------------- ---------------
<S> <C> <C>
Loans on nonaccrual status ........................................... $3,669 $4,565
Loans past due greater than 90 days but not on nonaccrual status...... 5 42
Other real estate owned .............................................. 778 1,121
------ ------
Total nonperforming assets ........................................... $4,452 $5,728
====== ======
Percentage of nonperforming assets to total assets ................... .36% .46%
</TABLE>
See "Loan Loss Allowance and Provision"
Interest income on loans is accrued daily on the principal balance
outstanding. Generally, no interest is accrued on loans when factors indicate
collection of interest is doubtful or when the principal or interest payment
becomes 90 days past due. The nonaccrual loans consist of a number of loans in
different categories and are largely secured. For such loans, previously accrued
but uncollected interest is charged against current earnings, and income is only
recognized to the extent payments are subsequently received.
21
<PAGE> 22
As of June 30, 1999, the Bank had loans to persons serving as directors,
officers, principal shareholders and their related interests. These loans were
made substantially on the same terms, including interest rates, maturities and
collateral as those made to other customers of the Banks. At June 30, 1999,
Bancorp had $5,054,000 of bankers' acceptances. At June 30, 1999, there was no
concentration of loans exceeding 10 percent of the total loans to a multiple
number of borrowers engaged in a similar business.
LOAN LOSS ALLOWANCE AND PROVISION
Bancorp maintains a loan loss allowance to absorb losses inherent in the
loan portfolio. The allowance is based on ongoing, quarterly assessments of the
probable estimated losses inherent in the loan portfolio, and to a lesser
extent, unused commitments to provide financing. Our methodology for assessing
the appropriateness of the allowance consists of several key elements, which
include:
-- The formula allowance,
-- Specific allowances for identified problem loans and portfolio
segments and
-- The unallocated allowance.
Bancorp's allowance incorporates the results of measuring impaired loans
as provided in: Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan," and SFAS No 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures."
These accounting standards prescribe the measurement methods, income recognition
and disclosures concerning impaired loans.
The formula allowance is calculated by applying loss factors to
outstanding loans and certain unused commitments, in each case based on the
internal risk grade of those loans, pools of loans, or commitments. Changes in
risk grades of both performing and nonperforming loans affect the amount of the
formula allowance. Loss factors are based on our historical loss experience and
other such pertinent data and may be adjusted for significant factors that, in
management's judgement, affect the collectibility of the portfolio as of the
evaluation date. Loss factors are described as follows:
-- Problem graded loan loss factors are obtained from four years of
historical loss experience. Bancorp is exploring the utilization
of a migration model to track historical loss experience.
-- Pooled loan loss factors, not individually graded loans, are
based on expected net charge-offs for one year. Pooled loans are
loans and leases that are homogeneous in nature, such as
consumer installment and residential mortgage loans.
Specific allowances are established where management has identified
significant conditions or circumstances related to a credit that management
believes indicate the probability that a loss may be incurred in excess of the
amount determined by the application of the formula allowance. The unallocated
allowance uses a more subjective method and considers such factors as the
following:
-- Existing general economic and business conditions affecting our
key lending areas,
-- Credit quality trends, including trends in nonperforming loans
expected to result from existing conditions,
-- Collateral values,
-- Loan volumes and concentrations,
-- Seasoning of the loan portfolio,
-- Specific industry conditions within portfolio segments,
-- Recent loss experience in particular segments of the portfolio,
-- Duration of the current business cycle,
-- Bank regulatory examination results and
-- Findings of our internal credit examiners.
Executive credit management reviews these conditions quarterly in
discussion with our senior credit officers. If any of these conditions is
evidenced by a specifically identifiable problem credit or portfolio segment as
of the evaluation date, management's estimate of the effect of this condition
may be reflected as a specific allowance applicable to this credit or portfolio
segment. Where any of these conditions is not evidenced by a specifically
identifiable problem credit or portfolio segment as of the evaluation date,
management's evaluation of the probable loss concerning this condition is
reflected in the unallocated allowance.
22
<PAGE> 23
The allowance for credit losses is based upon estimates of probable
losses inherent in the loan portfolio. The amount actually observed for these
losses can vary significantly from the estimated amounts. Our methodology
includes several features that are intended to reduce the differences between
estimated and actual losses. By assessing the probable estimated losses inherent
in the loan portfolio on a quarterly basis, we are able to adjust specific and
inherent loss estimates based upon any more recent information that has become
available.
Recently acquired loan portfolios are reviewed and an overall assessment
is made using Bancorp's methodology as to the adequacy of the loan portfolios,
and any necessary adjustments to the allowance are made as they are identified.
A detailed review of the acquired loan portfolio follows, and Bancorp's loan
grading system is then applied to the portfolio. Any further adjustments to the
allowance are recorded in the period they are identified.
The following table summarizes the Banks' allowance for loan losses,
charge-offs and recovery activity:
<TABLE>
<CAPTION>
Six months ended Year ended
(Dollars in thousands) June 30, 1999 December 31, 1998
---------------- -----------------
<S> <C> <C>
Loans outstanding at end of period ........... $ 901,739 $ 862,052
Average loans outstanding during the period .. $ 884,189 $ 816,240
Allowance for loan losses, beginning of period $ 12,453 $ 10,451
Recoveries:
Commercial ................................. 32 298
Real Estate ................................ 42 47
Installment and consumer ................... 56 63
--------- ---------
Total recoveries ........................... 130 408
Loans charged off:
Commercial ................................. 93 853
Real Estate ................................ 154 39
Installment and consumer ................... 238 414
--------- ---------
Total loans charged off .................... 485 1,306
--------- ---------
Net loans charged off ........................ (355) (898)
Provision for loan losses .................... 960 2,900
--------- ---------
Allowance for loan losses, end of period ..... $ 13,058 $ 12,453
========= =========
Ratio of net loans charged off
to average loans outstanding(1) ............ .08% .11%
Ratio of allowance for loan losses
to loans at end of period .................. 1.45% 1.44%
</TABLE>
- --------------
(1) The ratio for the six months ended June 30, 1999 has been annualized.
At June 30, 1999, Bancorp's allowance for loan loss was $13.1 million,
or 1.45% of total loans, and 293.31% of total nonperforming assets, compared
with an allowance for loan losses at December 31, 1998 of $12.4 million, or
1.44% of total loans, and 217.41% of total nonperforming assets.
Bancorp, during its normal loan review procedures considers a loan to be
impaired when it is probable that Bancorp will be unable to collect all amounts
due according to the contractual terms of the loan agreement. A loan is not
considered to be impaired during a period of minimal delay (less than 90 days).
Bancorp measures impaired loans based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair market value of the
collateral if the loan is collateral dependent. Loans that are currently
measured at fair value or at lower of cost or fair value, leases and certain
large groups of smaller balance homogeneous loans that are collectively measured
for impairment are excluded. Impaired loans are charged to the allowance when
management believes, after considering economic and business conditions,
collection efforts and collateral position, that the borrower's financial
condition is such that collection of principal is not probable.
23
<PAGE> 24
During the second quarter of 1999, net loans charged off were $113,000,
compared to $281,000 for the same period in 1998. The percentage of net loans
charged off to average loans outstanding was 0.05% and 0.14% at June 30, 1999,
and at June 30, 1998 respectively. Charged off loans reflect the realization of
losses in the portfolio that were recognized previously through the provision
for loan losses.
At June 30, 1999, the provision for loan loss exceeded the net loans
charged off during the period, reflecting management's belief, based on the
foregoing analysis, that there are additional losses inherent in the loan
portfolio. There can be no assurance that the adverse impact to Bancorp, if any,
of these conditions will not be in excess of the range set forth above. Readers
are referred to management's "Forward Looking Statement Disclosure" in
connection with this section.
INVESTMENT PORTFOLIO
The following table shows the carrying value of the Banks' portfolio of
investments:
<TABLE>
<CAPTION>
June 30, December 31,
(Dollars in thousands) 1999 1998
-------- --------
<S> <C> <C>
Investments available for sale (At Fair Value)
U.S. Treasury securities ........................ $ 3,518 $ 6,065
U.S. Government agency securities ............... 88,039 88,856
Corporate securities ............................ 25,486 34,682
Mortgage-backed securities ...................... 5,199 6,517
Obligations of state and political subdivisions . 102,235 107,689
Other securities ................................ 9,817 9,462
-------- --------
Total .................................... $234,294 $253,271
Investments held to maturity (At Historical Cost)
Obligations of state and political subdivisions . $ -- $ 2,696
-------- --------
Total .................................... $ -- $ 2,696
Total Investment Portfolio ............... $234,294 $255,967
======== ========
</TABLE>
Under the provisions of SFAS NO. 133, and in connection with its
adoption, Bancorp reclassified investment securities carried at $2,695,531 with
a market value of $2,909,000 from the held to maturity classification to the
available for sale classification in the first quarter of 1999.
24
<PAGE> 25
YEAR 2000 ISSUES
INTRODUCTION. The year 2000 creates challenges with respect to the
automated systems used by financial institutions and other companies. Many
software programs are not able to recognize the year 2000, since most programs
and systems were designed to store calendar years in the 1900s by assuming the
"19" and storing only the last two digits of the year. For example, these
automated systems would recognize a year stored as "00" as the year "1900,"
rather than as the year 2000. If these automated systems are not appropriately
re-coded, updated, or replaced before the year 2000, they will likely confuse
data, crash, or fail in some manner. In addition, many software programs and
automated systems will fail to recognize the year 2000 as a leap year. The
problem is not limited to computer systems. Year 2000 issues will potentially
affect every system that has an embedded microchip, such as automated teller
machines, elevators, and vaults.
These challenges are especially problematic for financial institutions,
since many transactions, such as interest accruals and payments, are date
sensitive. The operations of third parties with whom Bancorp does business,
including the Company's vendors, suppliers, utility companies, and customers,
may also be affected.
THE COMPANY'S STATE OF READINESS. The Company is committed to addressing
these year 2000 challenges in a prompt and responsible manner. Management has
assessed automated systems, implemented a plan to resolve year 2000 issues, and
purchased technology as appropriate. The Company's year 2000 compliance plan
("Y2K Plan") has five phases. These phases are (1) project management, (2)
awareness, (3) assessment, (4) testing, and (5) renovation and implementation.
The Company has substantially completed phases one through four, although
appropriate follow-up activities and testing are continuing to occur. The
Company is currently focused on the fifth phase.
PROJECT MANAGEMENT. The Company's Chief Information Officer has primary
responsibility for year 2000 project management. The Company also formed a year
2000 compliance committee, consisting of appropriate representatives from its
critical operational areas, to assist in Y2K Plan implementation. The Company's
board of directors is provided with status reports at least quarterly to assist
them in overseeing this process.
AWARENESS. The Company completed several projects designed to promote
awareness of year 2000 issues throughout our organization and our customer base.
These projects include mailing information brochures to deposit and loan
customers, providing training for lending officers and other staff, assigning a
compliance officer to answer customer questions, responding to vendor, customer,
and shareholder inquiries, and providing year 2000 information and progress
updates on the Company's web site.
ASSESSMENT. Assessment is the process of identifying all
mission-critical applications, including information technology and
non-information technology systems, that could potentially be negatively
affected by dates in the year 2000 and beyond. The Company's assessment phase is
substantially complete. Systems examined during this phase included
telecommunications systems, account-processing applications, and other software
and hardware used in connection with customer accounts.
The Company's operations, like those of many other companies, are
intertwined with the operations of certain of its business partners.
Accordingly, the Company's operations could be materially affected, if the
operations of those companies who provide the Company with mission critical
applications, systems, and services are materially affected. For example, the
Company depends upon vendors who provide equipment, technology, and software to
it in connection with its business operations. Failure of these software vendors
to achieve year 2000 readiness could substantially affect the operations of the
Company. In addition, lawsuits and other financial challenges materially
affecting the financial viability of these vendors could materially affect the
Company. In response to this concern, the Company has identified and contacted
those vendors who provide our mission-critical applications. The Company is
assessing their year 2000 compliance efforts and will continue to monitor their
progress as the year 2000 approaches.
Last year, the Company's lending personnel examined its current loan
portfolios and identified our key business customers. The Company contacted
these customers and requested information regarding their preparation for the
year 2000. The Company then assessed the responses received to identify the risk
of loan defaults due to the effects of the year 2000 on the businesses of key
business customers. The Company is monitoring on a quarterly basis those
business borrowers who appear to have higher risk than others with respect to
year 2000 issues. In addition, the Company will continue to assess new loan
applicants for year 2000 risks. For more information see below, under "The Risks
of the Company's Year 2000 Issues."
25
<PAGE> 26
TESTING. Updating and testing of the Company's mission-critical
automated systems is substantially complete. During the first round of testing,
all mission-critical systems were tested to verify that dates in the year 2000
are being appropriately recognized and processed. A second round of testing,
conducted to verify first round results using an alternative methodology, is
also substantially complete. To date, testing has revealed no material year 2000
compliance issues related to mission-critical automated systems that cannot be
remedied before the year 2000. The Company plans to conduct a final round of
testing on its mission-critical automated systems during the fourth quarter of
1999.
RENOVATION AND IMPLEMENTATION. This phase involves obtaining and
implementing renovated software applications provided by our vendors. As these
applications are received and implemented, the Company tests them for year 2000
compliance. This phase also involves upgrading and replacing mission-critical
automated systems where appropriate and will continue throughout 1999. Although
the Company expects this phase to be substantially complete by early in the
fourth quarter of 1999, with a final round of testing to follow in 1999,
additional follow-up activities may take place in the year 2000 and beyond.
ESTIMATED COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES. The total
financial effect of these year 2000 challenges on the Company cannot be
predicted with certainty at this time. In fact, in spite of all efforts being
made to rectify these problems, the success of these efforts cannot be predicted
until the year 2000 actually arrives. The Company will upgrade or replace
certain automated systems before the year 2000; although some of these systems
would have been replaced without regard to year 2000 issues, due to technology
updates and Company expansion. The Company's estimated budget under its Y2K Plan
is set forth in the table below(1). The costs below represented approximately 9%
of the Company's information technology budget for 1998 and will represent about
10% of the 1999 information technology budget. The Company currently plans to
continue to use normal operating funds for payment of its year 2000 expenses.
Bancorp's estimated budget for year 2000 costs and expenses is as
follows:
<TABLE>
<CAPTION>
Item 1998 1999 Total
-------- -------- --------
<S> <C> <C> <C>
Anticipated Personnel Costs ... $100,000 $105,000 $205,000
Telephone Banking Equipment (2) 75,000 -- 75,000
Personal Computers (2) ........ 29,500 117,500 147,000
ATM Upgrades .................. -- 25,000 25,000
Third Party Consulting (3) .... 30,000 35,000 65,000
-------- -------- --------
Totals (1) .................... $234,500 $282,500 $517,000
======== ======== ========
</TABLE>
(1) The Company may incur additional costs complying with requirements of its
regulatory agencies related to year 2000 issues. Management cannot predict these
costs at this time, so they have not been included in the table above, other
than with respect to anticipated personnel costs.
(2) This represents the replacement cost of certain equipment the Company has
identified to date as requiring replacement. The majority of this equipment was
scheduled for replacement regardless of year 2000 issues, due to age,
operability, and changing Company requirements.
(3) Bancorp engaged a consulting firm to write a comprehensive testing plan for
the Company in 1998. Expenses for 1999 relate to costs associated with proxy
testing of certain systems and consulting Bancorp may seek to review and audit
the Company's year 2000 compliance progress.
Based on the estimates set forth above and the information the Company
has received to date from its critical system providers and vendors, Management
does not believe that expenses related to meeting the Company's year 2000
challenges will have a material effect on the operations or financial
performance of the Company. However, factors beyond the control of management,
such as the effects on vendors of our mission-critical software and systems, the
effects of year 2000 issues on the economy, and the development of the risks
identified below under "The Risks of the Company's Year 2000 Issues," among
other things, could have a material effect on the operations or financial
performance of the Company.
26
<PAGE> 27
THE RISKS OF THE COMPANY'S YEAR 2000 ISSUES. The year 2000 presents
certain risks to the Company and its operations. Some of these risks are present
because the Company purchases technology applications from other parties who
face year 2000 challenges. Other of these risks are inherent in the business of
banking or are risks faced by many companies with stock traded on a national
stock exchange. Although it is impossible to identify every possible risk that
the Company may face moving into the millennium, Management has to date
identified the following potential risks:
1. Commercial banks, such as the Bank, may experience a contraction in
their deposit base, if a significant amount of deposited funds are
withdrawn by customers prior to the year 2000, and interest rates may
increase in the latter part of 1999. This potential deposit contraction
could make it necessary for the Bank to change its sources of funding
and could materially impact future earnings. The Company has
incorporated a contingency plan for addressing this situation, should it
occur, into its asset and liability management strategies. This plan
includes maintaining the ability to borrow funds in an amount at least
equal to 50% of the Company's allowed borrowing from the Federal Home
Loan Bank of Seattle. Significant demand for funds by other banks could
reduce the amount of funds available for the Company to borrow. If
insufficient funds are available from a Federal Home Loan Bank or other
correspondents, the Company may also sell investment securities or other
liquid assets to meet liquidity needs. Despite these efforts, a
significant deposit contraction could materially impact the Company's
earnings or future operations, particularly if funds availability at the
Federal Home Loan Bank is impaired or higher interest rates for the
Bank's funding sources lead to a decrease in the Company's net interest
margin.
2. The Bank lends significant amounts to businesses in its market areas. If
these businesses are adversely affected by year 2000 issues, their
ability to repay loans could be impaired. This increased credit risk
could affect the Company's financial performance. Management is
currently monitoring the year 2000 compliance efforts of its significant
business loan customers as described above under the "Assessment"
segment of the "Introduction." To date, as a precaution, Management has
increased the Company's loan loss reserves by about $437,000 to provide
for potential losses from loan defaults due to year 2000 risks. As the
Company continues to monitor risk in this area, it may increase or
decrease loan loss reserves as appropriate in the future.
3. The Company's operations, like those of many other companies, can be
affected by the year-2000-triggered failures of other companies upon
whom the Company depends for the functioning of its automated systems.
Accordingly, the Company's operations could be materially affected, if
the operations of those companies who provide the Company with mission
critical applications, systems, and services are materially affected. As
described above, the Company has identified its mission-critical vendors
and is monitoring their year 2000 compliance progress. For more
information, see "The Company's Year 2000 Readiness," above.
4. All companies with stock traded on a national stock exchange, including
Bancorp, could experience a drop in stock price as investors change
their investment portfolios or sell stock prior to the millennium. At
this time, it is impossible to predict whether or not this will in fact
be the case with respect to the stock of Bancorp or any other Company.
5. Bancorp's subsidiary West Coast Trust provides investment advisory
services to certain customers, including an open-end mutual fund
administered by an investment company registered under the Investment
Advisors Act of 1940. Management has assessed the mission critical
systems used by West Coast Trust and continues to monitor the year 2000
compliance activities of the investment company administering the
open-end mutual fund. Management also continues to monitor the year 2000
compliance activities of the third party broker-dealer that sells
certain non-deposit investment products to customers of the Bank and
West Coast Trust. In addition, West Coast Trust has completed testing of
its mission critical systems, and no material issues were found that
cannot be addressed before the year 2000. Testing results were audited
by an independent third party, and no material exceptions were found.
6. The Company's ability to serve customers in the year 2000 could be
affected by factors outside its control, such as communications
abilities and access to utilities, such as electricity, water,
telephone, and others, to the extent access or service is interrupted
due to the effects of year 2000 issues on these and other utilities.
27
<PAGE> 28
THE COMPANY'S CONTINGENCY PLANS. In addition to the contingency plans
described above under "The Risks of the Company's Year 2000 Issues," the Company
has developed a Business Interruption Contingency Plan ("BIC Plan"). The BIC
Plan contains information pertinent to maintaining the successful operation of
each major business line of the Company. The Company will continue to update
this policy as appropriate throughout 1999. Certain circumstances may occur for
which there are no satisfactory contingency plans. For more information see
above under "The Risks of the Company's Year 2000 Issues."
FORWARD LOOKING STATEMENTS
The discussion above, entitled "Year 2000 Issues," including without
limitation the section entitled "Risks of the Company's Year 2000 Issues,"
includes certain "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 ("PSLRA"). This statement is included
for the express purpose of availing Bancorp of the protections of the safe
harbor provisions of the PSLRA. Management's ability to predict results or
effects of issues related to the year 2000 is inherently uncertain, and is
subject to factors that may cause actual results to differ materially from those
projected. Factors that could affect the actual results include, without
limitation, (1) the possibility that protection procedures, contingency plans,
and remediation efforts will not operate as intended, (2) the possibility that
the Company may fail to timely or completely identify all software or hardware
applications requiring remediation or other risks or issues related to the year
2000, (3) unexpected costs or events, (4) failures of communications abilities
or utility companies serving the Company, (5) fluctuating interest rates, and
(6) the uncertainty associated with the impact of year 2000 issues on the
banking industry and on the Company's customers, vendors, and others with whom
it does business. Readers are cautioned not to place undue reliance on these
forward looking statements.
28
<PAGE> 29
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
MARKET RISK
Interest rate, credit, and operations risks are the most significant
market risks impacting Bancorp's performance. Other types of market risk, such
as foreign currency exchange rate risk and commodity price risk, do not arise in
the normal course of Bancorp's business activities. Bancorp relies on loan
reviews, prudent loan underwriting standards and an adequate allowance for loan
loss to mitigate credit risk.
Bancorp uses an asset/liability management simulation model to measure
interest rate risk. The model quantifies interest rate risk through simulating
forecasted net interest income over a 12-month time period under various rate
scenarios, as well as monitoring the change in the present value of equity under
the same rate scenarios. The present value of equity is defined as the
difference between the market value of current assets less current liabilities.
By measuring the change in the present value of equity under different rate
scenarios, management is able to identify interest rate risk that may not be
evident in simulating changes in forecasted net interest income.
Bancorp is currently slightly liability sensitive, meaning that
interest-bearing liabilities mature or reprice more quickly than
interest-earning assets in a given period, therefore, a significant increase in
market rates of interest or a flattening interest rate yield curve could
adversely affect net interest income. In contrast, a decreasing rate environment
or a steepening interest rate yield curve may slightly improve Bancorp's margin.
Further, the effects of a flattening yield curve could more adversely affect
Bancorp's margin than any benefits received from a decreasing rate environment.
Bancorp attempts to continue to limit its loss exposure through managing the
repricing characteristics of its assets and liabilities. Bancorp has also placed
increased emphasis on its non-interest revenue products to additionally
stabilize earnings strength.
It should be noted that the simulation model does not take into account
future management actions that could be undertaken, if there were a change in
actual market interest rates during the year. Also, certain assumptions are
required to perform modeling simulations that may have significant impact on the
results. These include assumptions regarding the level of interest rates and
balance changes on deposit products that do not have stated maturities. These
assumptions have been developed through a combination of industry standards and
future expected pricing behavior. The model also includes assumptions about
changes in the composition or mix of the balance sheet. The results derived from
the simulation model could vary significantly by external factors such as
changes in the prepayment assumptions, early withdrawals of deposits and
competition. Any merger activity will also have an impact on Bancorp's
asset/liability position as new assets are acquired and added. Management has
assessed these risks and believes that there has been no material change since
December 31, 1998.
29
<PAGE> 30
PART II. OTHER INFORMATION
Item 101. Legal Proceedings.
On May 11, 1999, the Bank and Bancorp were served with a summons and
complaint with respect to an alleged financing commitment. The lawsuit, filed by
Edward A. Fischer and Marianne M. Fischer ("Plaintiffs"), is currently pending
in the Circuit Court of the State of Oregon for the County of Multnomah.
Plaintiffs are seeking damages in excess of $4.6 million or specific performance
of the alleged agreement. The Bank denies the existence of any agreement or
commitment to Plaintiffs.
Due to the nature and uncertainties inherent in litigation, there are no
assurances that this matter will not at some point in the future result in a
loss that could materially effect the Company. However, at this time, management
believes that the probable resolution of this matter will not materially effect
the financial position of the Company.
This section contains certain "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). This
statement is included for the express purpose of availing Bancorp of the
protections of the safe harbor provisions of the PSLRA. The forward looking
statements contained in this section are subject to factors, risks, and
uncertainties that may cause actual results to differ materially from those
projected. Important factors that might cause such a material difference
include, but are not limited to, (1) facts and events currently unknown to
management that may surface as the subject matters discussed are further
investigated, (2) common law, rights, and legal and equitable remedies that may
be uncovered when the issues raised above are further researched, and (3)
uncertainties inherent in the legal process. Readers are cautioned not to place
undue reliance on these forward looking statements, which reflect Management's
analysis only as of the date of the statement. Bancorp undertakes no obligation
to publicly revise or update these forward-looking statements to reflect events
or circumstances that arise after the date of this report. Readers should
carefully review the risk factors described in this and other documents Bancorp
files from time to time with the Securities and Exchange Commission.
30
<PAGE> 31
Item 4. Submissions of Matters to a Vote of Security Holders.
(a) West Coast Bancorp's Annual Shareholders' Meeting was held on April 23,
1999.
(b) Not Applicable
(c) A brief description of each matter voted upon at the Annual
Shareholders' Meeting held on April 23, 1999 and number of votes cast
for, against or withheld, including a separate tabulation with respect
to each nominee for office is presented below:
(1) Election of (4) Directors for terms expiring in 2001 or when
their successors have been elected and qualified.
Director:
Victor L. Bartruff-
Votes cast for: 9,983,348
Votes cast against: -
Votes abstaining: 1,105,333
Michael J. Bragg-
Votes cast for: 10,747,598
Votes cast against: -
Votes abstaining: 341,083
William B. Loch-
Votes cast for: 10,762,110
Votes cast against: -
Votes abstaining: 326,571
Mary B. Pearmine-
Votes cast for: 10,715,284
Votes cast against: -
Votes abstaining: 373,397
(2) Approve adoption of 1999 Stock Option Plan.
Votes cast for: 6,464,179
Votes cast against: 1,688,239
Votes abstaining: 87,323
(d) None
31
<PAGE> 32
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Salary Continuation Agreement between the Registrant and Victor
L. Bartruff dated April 1, 1999.
10.2 Salary Continuation Agreement between the Registrant and Ronald
T. DeLude dated April 1, 1999.
10.3 Salary Continuation Agreement between the Registrant and Donald
A. Kalkofen dated April 1, 1999.
10.4 Salary Continuation Agreement between the Registrant and Cynthia
J. Haworth dated April 1, 1999.
10.5 Salary Continuation Agreement between the Registrant and Adeline
C. Hesse dated April 1, 1999.
10.6 Salary Continuation Agreement between the Registrant and David
L. Prysock dated April 1, 1999.
10.7 Salary Continuation Agreement between the Registrant and Rodney
B. Tibbatts dated April 1, 1999.
10.8 Salary Continuation Agreement between the Registrant and Shauna
L. Vernal dated April 1, 1999.
10.9 Salary Continuation Agreement between the Registrant and Kevin
M. McClung dated April 1, 1999.
27 Financial Data Schedule for Form 10-Q.
(b) During the three months ended June 30, 1999, West Coast Bancorp filed
the following current report on Form 8-K:
None
32
<PAGE> 33
SIGNATURES
As required by the Securities Exchange Act of 1934, this report is signed on
registrant's behalf by the undersigned authorized officers.
WEST COAST BANCORP
(Registrant)
Dated: August 13, 1999 /s/ Ronald T. DeLude
-----------------------------------------
Ronald T. DeLude
Acting President and Chief Executive
Officer
Dated: August 13, 1999 /s/ Donald A. Kalkofen
-----------------------------------------
Donald A. Kalkofen
Executive Vice President and Chief
Financial Officer
33
<PAGE> 1
EXHIBIT 10.1
SALARY CONTINUATION AGREEMENT
FOR WCB POLICYMAKING EXECUTIVE OFFICERS
This SALARY CONTINUATION AGREEMENT ("Agreement") is dated as of April
1, 1999 (the "Effective Date"). The parties to the Agreement ("Parties") are
WEST COAST BANCORP ("Bancorp"), West Coast Bank ("Bank"), and Victor L. Bartruff
("Executive").
RECITALS
A. Executive is employed by Bank in a managerial capacity, presently
holding the position of President and Chief Executive Officer.
B. Bancorp and Bank (collectively, "Company") wishes to ensure the
continued availability of Executive's services in the event of a change
in control of Bancorp, in order to assist Bancorp in maximizing the
benefits obtainable from such a change.
C. To encourage Executive's continued services, Bancorp wishes to provide
an incentive for Executive's continued employment.
Therefore, the parties agree as follows:
AGREEMENT
1. EFFECTIVE DATE AND TERM. As of the Effective Date, this Agreement is a
binding obligation of the parties and is not subject to revocation or
amendment, except by mutual consent or in accordance with its terms.
The initial term of this Agreement ("Initial Term") begins on the
Effective Date and ends on March 31, 2000. Following the Initial Term,
this Agreement will automatically renew on April 1 of each year for
subsequent one-year terms (each a "Renewal Term"), unless (a) the
Board, before the next Renewal Term begins, takes action to cancel the
Agreement at the end of its current term, or (b) Executive, before the
next Renewal Term begins, gives Bancorp written notice of Executive's
election to cancel the Agreement at the end of its current term. If a
definitive agreement providing for a Change in Control (as defined
below) is entered into on or before the expiration of the Initial Term
or any Renewal Term, the term then in effect will automatically be
extended to 24 months after the consummation of the Change in Control,
and the Board will not have authority to cancel this Agreement during
that period, unless Executive consents in writing to the cancellation.
2. COMMITMENT OF EXECUTIVE. If any person extends any proposal or offer
intended to or with the potential to result in a Change in Control (a
"Change in Control Proposal"), Executive must, at Bancorp's request,
assist Bancorp in evaluating the Proposal. Further, as a condition to
receipt of the Salary Continuation Payment described below, Executive
will not resign Executive's position with the Company during the period
beginning when the Company receives a Change in Control Proposal and
ending when the transaction contemplated by the Proposal is either
consummated or abandoned.
1
<PAGE> 2
3. SALARY CONTINUATION PAYMENT.
(a) Payment Trigger and Timing. If a Termination Event After a
Change in Control (as defined in Section 4) occurs, Executive
will receive a salary continuation payment ("Salary
Continuation Payment"). Unless limited below, the Salary
Continuation Payment will equal the Regular Salary
Continuation Payment plus the Bonus Continuation Payment. The
Company will pay this Salary Continuation Payment to Executive
on the later of (i) the date Executive's employment terminates
or (ii) the date the Change in Control occurs.
(b) Payment Amount. The Regular Salary Continuation Payment will
equal Executive's regular monthly salary in effect when
Executive's employment terminates (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) that would be payable to Executive but for the
termination from the day Executive's employment terminates to
the date 24 months after the later of (i) the date the Change
in Control occurs or (ii) the date Executive's employment
terminates. The Bonus Continuation Payment will equal (i) the
most recent annual bonus paid to Executive, multiplied by (ii)
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 24
months after the later of (x) the date the Change in Control
occurs or (y) the date Executive's employment terminates,
divided by 365.
(c) Limitation on Payment. The Salary Continuation Payment will
not exceed an amount equal to $1.00 less than the amount which
would cause the payment, together with any other payments
received from the 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 will be deemed to occur when, and only when, one or
more of the following events occur:
(a) Executive terminates Executive's employment for any reason,
other than Retirement, Disability, or death within 24 months
after a Change In Control; or
(b) The Company terminates Executive's employment other than for
Cause, Disability, Retirement or death within 24 months after
a Change In Control; or
(c) The Company terminates Executive's employment other than for
Cause, Disability, Retirement, or death before a Change In
Control, if the termination occurs during the period beginning
six months before the execution of a definitive agreement
providing for the Change in Control and ending upon occurrence
of the Change in Control, but only if the Change in Control in
fact occurs.
2
<PAGE> 3
5. DEFINITIONS.
(a) Cause. "Cause" means only any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Executive's duties; or
(ii) Conviction of a crime in connection with such duties;
or
(iii) Conduct demonstrably and significantly harmful to the
financial condition of the Company.
(b) Disability. "Disability" means a physical or mental impairment
that renders Executive incapable of substantially performing
the duties required under this Agreement and that is expected
to continue rendering Executive so incapable for the
reasonably foreseeable future.
(c) Retirement. "Retirement" means voluntary termination by
Executive in accordance with the Company's applicable
retirement policies, including early retirement, if applicable
to its salaried employees.
(d) Change In Control. "Change In Control" means one of the
following:
(i) A Person or Entity acquiring or otherwise becoming
the owner (as a result of a purchase, merger, stock
exchange, or otherwise) of more than 50% of Bancorp's
outstanding common stock; or
(ii) Bancorp's merger into any corporation or other
business entity, or the merger of any corporation or
other business entity into Bancorp, where more than
50% of the stock (or other form of ownership) of the
corporation or business entity ("Surviving
Corporation") is owned by other than the owners of
the common stock of Bancorp before the merger; or
(iii) A Person or Entity acquiring more than fifty percent
of the Company's assets, measured by the total fair
market value of all of the Company's assets
immediately before the acquisition, during the
twelve-month period ending on the date of the most
recent acquisition. A Change in Control does not
include a transfer of assets by the Company if the
assets are transferred to an Entity, 50% or more of
the total value or voting power of which is owned,
directly or indirectly, by the Company.
(e) Person or Entity. "Person or Entity" includes, without
limitation, any one or more persons 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, other than providing for the Salary
Continuation Payment, this Agreement will not affect the determination
of any compensation payable by the Company to Executive, nor will it
affect the other terms of Executive's employment with the Company. The
specific arrangements referred to in this Agreement are not intended to
exclude or circumvent any other benefits that may be available to
3
<PAGE> 4
Executive under the Company's employee benefit or other applicable
plans, if his or her employment terminates.
7. WITHHOLDING. All payments made to Executive under this Agreement are
subject to the withholding of amounts for tax and other payroll
deductions that the Company reasonably determines appropriate under
applicable law or regulation.
8. ASSIGNABILITY. The Company may assign this Agreement and its rights
under it in whole, but not in part, to any corporation, financial
institution or other entity with or into which Bancorp merges or
consolidates or to which Bancorp transfers all or substantially all of
its assets. But, the corporation, financial institution, or other
entity accepting assignment (the "assignee") must by operation of law
or expressly in writing assume all obligations of the Company under
this Agreement, as fully as if the assignee had been an original party.
The Company may not otherwise assign this Agreement or any of its
rights under it. The Company may not through assignment avoid an
obligation to pay a Salary Continuation Payment once the obligation is
triggered under this Agreement, although it may assign to assignee the
obligation to pay, as long as assignee agrees to pay in accordance with
this Agreement. Executive may not assign or transfer this Agreement or
any rights or obligations under it.
9. GENERAL PROVISIONS.
(a) Choice of Law/Venue. The parties intend that Oregon law govern
this Agreement and its interpretation. Any dispute arising out
of this Agreement must be brought in either Clackamas County
or Multnohmah County in Oregon, and the parties will submit to
personal jurisdiction in either of those counties.
(b) Arbitration. Any dispute or claim arising out of or brought in
connection with this Agreement, will, if requested by any
party, be submitted to and settled by, arbitration under the
rules then in effect of the American Arbitration Association
(or under any other form of arbitration mutually acceptable to
the parties involved). Any award rendered in arbitration will
be final and will bind the parties, and a judgement on it may
be entered in the highest court of the forum having
jurisdiction. The arbitrator will render a written decision,
naming the substantially prevailing party in the action, and
will award such party all costs and expenses incurred,
including reasonable attorneys' fees.
(c) Attorney Fees. If any breach of or default under this
Agreement results in either party incurring attorney or other
fees, costs or expenses (including in arbitration), the
substantially prevailing party is entitled to recover from the
non-prevailing party any and all legal fees, costs and
expenses, including attorney fees.
(d) Waiver. This Agreement supercedes all previous agreements
between Executive and the Company and any of its affiliates
pertaining to this subject matter. By signing this Agreement,
Executive waives any and all rights Executive may have had
under any previous salary continuation, severance, or other
similar Agreements Executive may have entered into with the
Company or any of its affiliates or predecessors.
(e) Successors. This Agreement binds and inures to the benefit of
the parties and each of their respective affiliates, legal
representatives, successors and assigns.
4
<PAGE> 5
(f) Construction. This Agreement contains the entire agreement
among the parties with respect to its subject matter, and may
be amended only through a written document signed by all of
the parties. Its language is 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.
(g) Section Headings. The section headings used in this Agreement
have been included for convenience and reference only.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, and all counterparts will be construed together
as one Agreement.
Signed as of April 1, 1999:
BANCORP AND BANK:
/S/
---------------------------------------
By: Shauna L. Vernal
Its: Vice-President and General Counsel
EXECUTIVE:
/S/
---------------------------------------
Signature of Executive
5
<PAGE> 1
EXHIBIT 10.2
SALARY CONTINUATION AGREEMENT
FOR WCB POLICYMAKING EXECUTIVE OFFICERS
This SALARY CONTINUATION AGREEMENT ("Agreement") is dated as of April
1, 1999 (the "Effective Date"). The parties to the Agreement ("Parties") are
WEST COAST BANCORP ("Bancorp"), West Coast Bank ("Bank"), and Ronald T. DeLude
("Executive").
RECITALS
A. Executive is employed by Bank in a managerial capacity, presently
holding the position of Executive Vice-President and Chief Operating
Officer.
B. Bancorp and Bank (collectively, "Company") wishes to ensure the
continued availability of Executive's services in the event of a change
in control of Bancorp, in order to assist Bancorp in maximizing the
benefits obtainable from such a change.
C. To encourage Executive's continued services, Bancorp wishes to provide
an incentive for Executive's continued employment.
Therefore, the parties agree as follows:
AGREEMENT
1. EFFECTIVE DATE AND TERM. As of the Effective Date, this Agreement is a
binding obligation of the parties and is not subject to revocation or
amendment, except by mutual consent or in accordance with its terms.
The initial term of this Agreement ("Initial Term") begins on the
Effective Date and ends on March 31, 2000. Following the Initial Term,
this Agreement will automatically renew on April 1 of each year for
subsequent one-year terms (each a "Renewal Term"), unless (a) the
Board, before the next Renewal Term begins, takes action to cancel the
Agreement at the end of its current term, or (b) Executive, before the
next Renewal Term begins, gives Bancorp written notice of Executive's
election to cancel the Agreement at the end of its current term. If a
definitive agreement providing for a Change in Control (as defined
below) is entered into on or before the expiration of the Initial Term
or any Renewal Term, the term then in effect will automatically be
extended to 24 months after the consummation of the Change in Control,
and the Board will not have authority to cancel this Agreement during
that period, unless Executive consents in writing to the cancellation.
2. COMMITMENT OF EXECUTIVE. If any person extends any proposal or offer
intended to or with the potential to result in a Change in Control (a
"Change in Control Proposal"), Executive must, at Bancorp's request,
assist Bancorp in evaluating the Proposal. Further, as a condition to
receipt of the Salary Continuation Payment described below, Executive
will not resign Executive's position with the Company during the period
beginning when the Company receives a Change in Control Proposal and
ending when the transaction contemplated by the Proposal is either
consummated or abandoned.
1
<PAGE> 2
3. SALARY CONTINUATION PAYMENT.
(a) Payment Trigger and Timing. If a Termination Event After a
Change in Control (as defined in Section 4) occurs, Executive
will receive a salary continuation payment ("Salary
Continuation Payment"). Unless limited below, the Salary
Continuation Payment will equal the Regular Salary
Continuation Payment plus the Bonus Continuation Payment. The
Company will pay this Salary Continuation Payment to Executive
on the later of (i) the date Executive's employment terminates
or (ii) the date the Change in Control occurs.
(b) Payment Amount. The Regular Salary Continuation Payment will
equal Executive's regular monthly salary in effect when
Executive's employment terminates (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) that would be payable to Executive but for the
termination from the day Executive's employment terminates to
the date 24 months after the later of (i) the date the Change
in Control occurs or (ii) the date Executive's employment
terminates. The Bonus Continuation Payment will equal (i) the
most recent annual bonus paid to Executive, multiplied by (ii)
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 24
months after the later of (x) the date the Change in Control
occurs or (y) the date Executive's employment terminates,
divided by 365.
(c) Limitation on Payment. The Salary Continuation Payment will
not exceed an amount equal to $1.00 less than the amount which
would cause the payment, together with any other payments
received from the 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 will be deemed to occur when, and only when, one or
more of the following events occur:
(a) Executive terminates Executive's employment for any reason,
other than Retirement, Disability, or death within 24 months
after a Change In Control; or
(b) The Company terminates Executive's employment other than for
Cause, Disability, Retirement or death within 24 months after
a Change In Control; or
(c) The Company terminates Executive's employment other than for
Cause, Disability, Retirement, or death before a Change In
Control, if the termination occurs during the period beginning
six months before the execution of a definitive agreement
providing for the Change in Control and ending upon occurrence
of the Change in Control, but only if the Change in Control in
fact occurs.
2
<PAGE> 3
5. DEFINITIONS.
(a) Cause. "Cause" means only any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Executive's duties; or
(ii) Conviction of a crime in connection with such duties;
or
(iii) Conduct demonstrably and significantly harmful to the
financial condition of the Company.
(b) Disability. "Disability" means a physical or mental impairment
that renders Executive incapable of substantially performing
the duties required under this Agreement and that is expected
to continue rendering Executive so incapable for the
reasonably foreseeable future.
(c) Retirement. "Retirement" means voluntary termination by
Executive in accordance with the Company's applicable
retirement policies, including early retirement, if applicable
to its salaried employees.
(d) Change In Control. "Change In Control" means one of the
following:
(i) A Person or Entity acquiring or otherwise becoming
the owner (as a result of a purchase, merger, stock
exchange, or otherwise) of more than 50% of Bancorp's
outstanding common stock; or
(ii) Bancorp's merger into any corporation or other
business entity, or the merger of any corporation or
other business entity into Bancorp, where more than
50% of the stock (or other form of ownership) of the
corporation or business entity ("Surviving
Corporation") is owned by other than the owners of
the common stock of Bancorp before the merger; or
(iii) A Person or Entity acquiring more than fifty percent
of the Company's assets, measured by the total fair
market value of all of the Company's assets
immediately before the acquisition, during the
twelve-month period ending on the date of the most
recent acquisition. A Change in Control does not
include a transfer of assets by the Company if the
assets are transferred to an Entity, 50% or more of
the total value or voting power of which is owned,
directly or indirectly, by the Company.
(e) Person or Entity. "Person or Entity" includes, without
limitation, any one or more persons 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, other than providing for the Salary
Continuation Payment, this Agreement will not affect the determination
of any compensation payable by the Company to Executive, nor will it
affect the other terms of Executive's employment with the Company. The
specific arrangements referred to in this Agreement are not intended to
exclude or circumvent any other benefits that may be available to
3
<PAGE> 4
Executive under the Company's employee benefit or other applicable
plans, if his or her employment terminates.
7. WITHHOLDING. All payments made to Executive under this Agreement are
subject to the withholding of amounts for tax and other payroll
deductions that the Company reasonably determines appropriate under
applicable law or regulation.
8. ASSIGNABILITY. The Company may assign this Agreement and its rights
under it in whole, but not in part, to any corporation, financial
institution or other entity with or into which Bancorp merges or
consolidates or to which Bancorp transfers all or substantially all of
its assets. But, the corporation, financial institution, or other
entity accepting assignment (the "assignee") must by operation of law
or expressly in writing assume all obligations of the Company under
this Agreement, as fully as if the assignee had been an original party.
The Company may not otherwise assign this Agreement or any of its
rights under it. The Company may not through assignment avoid an
obligation to pay a Salary Continuation Payment once the obligation is
triggered under this Agreement, although it may assign to assignee the
obligation to pay, as long as assignee agrees to pay in accordance with
this Agreement. Executive may not assign or transfer this Agreement or
any rights or obligations under it.
9. GENERAL PROVISIONS.
(a) Choice of Law/Venue. The parties intend that Oregon law govern
this Agreement and its interpretation. Any dispute arising out
of this Agreement must be brought in either Clackamas County
or Multnohmah County in Oregon, and the parties will submit to
personal jurisdiction in either of those counties.
(b) Arbitration. Any dispute or claim arising out of or brought in
connection with this Agreement, will, if requested by any
party, be submitted to and settled by, arbitration under the
rules then in effect of the American Arbitration Association
(or under any other form of arbitration mutually acceptable to
the parties involved). Any award rendered in arbitration will
be final and will bind the parties, and a judgement on it may
be entered in the highest court of the forum having
jurisdiction. The arbitrator will render a written decision,
naming the substantially prevailing party in the action, and
will award such party all costs and expenses incurred,
including reasonable attorneys' fees.
(c) Attorney Fees. If any breach of or default under this
Agreement results in either party incurring attorney or other
fees, costs or expenses (including in arbitration), the
substantially prevailing party is entitled to recover from the
non-prevailing party any and all legal fees, costs and
expenses, including attorney fees.
(d) Waiver. This Agreement supercedes all previous agreements
between Executive and the Company and any of its affiliates
pertaining to this subject matter. By signing this Agreement,
Executive waives any and all rights Executive may have had
under any previous salary continuation, severance, or other
similar Agreements Executive may have entered into with the
Company or any of its affiliates or predecessors.
(e) Successors. This Agreement binds and inures to the benefit of
the parties and each of their respective affiliates, legal
representatives, successors and assigns.
4
<PAGE> 5
(f) Construction. This Agreement contains the entire agreement
among the parties with respect to its subject matter, and may
be amended only through a written document signed by all of
the parties. Its language is 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.
(g) Section Headings. The section headings used in this Agreement
have been included for convenience and reference only.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, and all counterparts will be construed together
as one Agreement.
Signed as of April 1, 1999:
BANCORP AND BANK:
/S/
---------------------------------------
By: Victor L. Bartruff
Its: President and CEO
EXECUTIVE:
/S/
---------------------------------------
Signature of Executive
5
<PAGE> 1
EXHIBIT 10.3
SALARY CONTINUATION AGREEMENT
FOR WCB POLICYMAKING EXECUTIVE OFFICERS
This SALARY CONTINUATION AGREEMENT ("Agreement") is dated as of April
1, 1999 (the "Effective Date"). The parties to the Agreement ("Parties") are
WEST COAST BANCORP ("Bancorp"), West Coast Bank ("Bank"), and Donald A. Kalkofen
("Executive").
RECITALS
A. Executive is employed by Bank in a managerial capacity, presently
holding the position of Executive Vice-President and Chief Financial
Officer.
B. Bancorp and Bank (collectively, "Company") wishes to ensure the
continued availability of Executive's services in the event of a change
in control of Bancorp, in order to assist Bancorp in maximizing the
benefits obtainable from such a change.
C. To encourage Executive's continued services, Bancorp wishes to provide
an incentive for Executive's continued employment.
Therefore, the parties agree as follows:
AGREEMENT
1. EFFECTIVE DATE AND TERM. As of the Effective Date, this Agreement is a
binding obligation of the parties and is not subject to revocation or
amendment, except by mutual consent or in accordance with its terms.
The initial term of this Agreement ("Initial Term") begins on the
Effective Date and ends on March 31, 2000. Following the Initial Term,
this Agreement will automatically renew on April 1 of each year for
subsequent one-year terms (each a "Renewal Term"), unless (a) the
Board, before the next Renewal Term begins, takes action to cancel the
Agreement at the end of its current term, or (b) Executive, before the
next Renewal Term begins, gives Bancorp written notice of Executive's
election to cancel the Agreement at the end of its current term. If a
definitive agreement providing for a Change in Control (as defined
below) is entered into on or before the expiration of the Initial Term
or any Renewal Term, the term then in effect will automatically be
extended to 18 months after the consummation of the Change in Control,
and the Board will not have authority to cancel this Agreement during
that period, unless Executive consents in writing to the cancellation.
2. COMMITMENT OF EXECUTIVE. If any person extends any proposal or offer
intended to or with the potential to result in a Change in Control (a
"Change in Control Proposal"), Executive must, at Bancorp's request,
assist Bancorp in evaluating the Proposal. Further, as a condition to
receipt of the Salary Continuation Payment described below, Executive
will not resign Executive's position with the Company during the period
beginning when the Company receives a Change in Control Proposal and
ending when the transaction contemplated by the Proposal is either
consummated or abandoned.
1
<PAGE> 2
3. SALARY CONTINUATION PAYMENT.
(a) Payment Trigger and Timing. If a Termination Event After a
Change in Control (as defined in Section 4) occurs, Executive
will receive a salary continuation payment ("Salary
Continuation Payment"). Unless limited below, the Salary
Continuation Payment will equal the Regular Salary
Continuation Payment plus the Bonus Continuation Payment. The
Company will pay this Salary Continuation Payment to Executive
on the later of (i) the date Executive's employment terminates
or (ii) the date the Change in Control occurs.
(b) Payment Amount. The Regular Salary Continuation Payment will
equal Executive's regular monthly salary in effect when
Executive's employment terminates (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) that would be payable to Executive but for the
termination from the day Executive's employment terminates to
the date 18 months after the later of (i) the date the Change
in Control occurs or (ii) the date Executive's employment
terminates. The Bonus Continuation Payment will equal (i) the
most recent annual bonus paid to Executive, multiplied by (ii)
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 later of (x) the date the Change in Control
occurs or (y) the date Executive's employment terminates,
divided by 365.
(c) Limitation on Payment. The Salary Continuation Payment will
not exceed an amount equal to $1.00 less than the amount which
would cause the payment, together with any other payments
received from the 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 will be deemed to occur when, and only when, one or
more of the following events occur:
(a) Executive terminates Executive's employment for any reason,
other than Retirement, Disability, or death within 18 months
after a Change In Control; or
(b) The Company terminates Executive's employment other than for
Cause, Disability, Retirement or death within 18 months after
a Change In Control; or
(c) The Company terminates Executive's employment other than for
Cause, Disability, Retirement, or death before a Change In
Control, if the termination occurs during the period beginning
six months before the execution of a definitive agreement
providing for the Change in Control and ending upon occurrence
of the Change in Control, but only if the Change in Control in
fact occurs.
2
<PAGE> 3
5. DEFINITIONS.
(a) Cause. "Cause" means only any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Executive's duties; or
(ii) Conviction of a crime in connection with such duties;
or
(iii) Conduct demonstrably and significantly harmful to the
financial condition of the Company.
(b) Disability. "Disability" means a physical or mental impairment
that renders Executive incapable of substantially performing
the duties required under this Agreement and that is expected
to continue rendering Executive so incapable for the
reasonably foreseeable future.
(c) Retirement. "Retirement" means voluntary termination by
Executive in accordance with the Company's applicable
retirement policies, including early retirement, if applicable
to its salaried employees.
(d) Change In Control. "Change In Control" means one of the
following:
(i) A Person or Entity acquiring or otherwise becoming
the owner (as a result of a purchase, merger, stock
exchange, or otherwise) of more than 50% of Bancorp's
outstanding common stock; or
(ii) Bancorp's merger into any corporation or other
business entity, or the merger of any corporation or
other business entity into Bancorp, where more than
50% of the stock (or other form of ownership) of the
corporation or business entity ("Surviving
Corporation") is owned by other than the owners of
the common stock of Bancorp before the merger; or
(iii) A Person or Entity acquiring more than fifty percent
of the Company's assets, measured by the total fair
market value of all of the Company's assets
immediately before the acquisition, during the
twelve-month period ending on the date of the most
recent acquisition. A Change in Control does not
include a transfer of assets by the Company if the
assets are transferred to an Entity, 50% or more of
the total value or voting power of which is owned,
directly or indirectly, by the Company.
(e) Person or Entity. "Person or Entity" includes, without
limitation, any one or more persons 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, other than providing for the Salary
Continuation Payment, this Agreement will not affect the determination
of any compensation payable by the Company to Executive, nor will it
affect the other terms of Executive's employment with the Company. The
specific arrangements referred to in this Agreement are not intended to
exclude or circumvent any other benefits that may be available to
3
<PAGE> 4
Executive under the Company's employee benefit or other applicable
plans, if his or her employment terminates.
7. WITHHOLDING. All payments made to Executive under this Agreement are
subject to the withholding of amounts for tax and other payroll
deductions that the Company reasonably determines appropriate under
applicable law or regulation.
8. ASSIGNABILITY. The Company may assign this Agreement and its rights
under it in whole, but not in part, to any corporation, financial
institution or other entity with or into which Bancorp merges or
consolidates or to which Bancorp transfers all or substantially all of
its assets. But, the corporation, financial institution, or other
entity accepting assignment (the "assignee") must by operation of law
or expressly in writing assume all obligations of the Company under
this Agreement, as fully as if the assignee had been an original party.
The Company may not otherwise assign this Agreement or any of its
rights under it. The Company may not through assignment avoid an
obligation to pay a Salary Continuation Payment once the obligation is
triggered under this Agreement, although it may assign to assignee the
obligation to pay, as long as assignee agrees to pay in accordance with
this Agreement. Executive may not assign or transfer this Agreement or
any rights or obligations under it.
9. GENERAL PROVISIONS.
(a) Choice of Law/Venue. The parties intend that Oregon law govern
this Agreement and its interpretation. Any dispute arising out
of this Agreement must be brought in either Clackamas County
or Multnohmah County in Oregon, and the parties will submit to
personal jurisdiction in either of those counties.
(b) Arbitration. Any dispute or claim arising out of or brought in
connection with this Agreement, will, if requested by any
party, be submitted to and settled by, arbitration under the
rules then in effect of the American Arbitration Association
(or under any other form of arbitration mutually acceptable to
the parties involved). Any award rendered in arbitration will
be final and will bind the parties, and a judgement on it may
be entered in the highest court of the forum having
jurisdiction. The arbitrator will render a written decision,
naming the substantially prevailing party in the action, and
will award such party all costs and expenses incurred,
including reasonable attorneys' fees.
(c) Attorney Fees. If any breach of or default under this
Agreement results in either party incurring attorney or other
fees, costs or expenses (including in arbitration), the
substantially prevailing party is entitled to recover from the
non-prevailing party any and all legal fees, costs and
expenses, including attorney fees.
(d) Waiver. This Agreement supercedes all previous agreements
between Executive and the Company and any of its affiliates
pertaining to this subject matter. By signing this Agreement,
Executive waives any and all rights Executive may have had
under any previous salary continuation, severance, or other
similar Agreements Executive may have entered into with the
Company or any of its affiliates or predecessors.
(e) Successors. This Agreement binds and inures to the benefit of
the parties and each of their respective affiliates, legal
representatives, successors and assigns.
4
<PAGE> 5
(f) Construction. This Agreement contains the entire agreement
among the parties with respect to its subject matter, and may
be amended only through a written document signed by all of
the parties. Its language is 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.
(g) Section Headings. The section headings used in this Agreement
have been included for convenience and reference only.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, and all counterparts will be construed together
as one Agreement.
Signed as of April 1, 1999:
BANCORP AND BANK:
/S/
---------------------------------------
By: Victor L. Bartruff
Its: President and CEO
EXECUTIVE:
/S/
---------------------------------------
Signature of Executive
5
<PAGE> 1
EXHIBIT 10.4
SALARY CONTINUATION AGREEMENT
FOR WCB POLICYMAKING EXECUTIVE OFFICERS
This SALARY CONTINUATION AGREEMENT ("Agreement") is dated as of April
1, 1999 (the "Effective Date"). The parties to the Agreement ("Parties") are
WEST COAST BANCORP ("Bancorp"), West Coast Bank ("Bank"), and Cynthia J. Haworth
("Executive").
RECITALS
A. Executive is employed by Bank in a managerial capacity, presently
holding the position of Executive Vice President.
B. Bancorp and Bank (collectively, "Company") wishes to ensure the
continued availability of Executive's services in the event of a change
in control of Bancorp, in order to assist Bancorp in maximizing the
benefits obtainable from such a change.
C. To encourage Executive's continued services, Bancorp wishes to provide
an incentive for Executive's continued employment.
Therefore, the parties agree as follows:
AGREEMENT
1. EFFECTIVE DATE AND TERM. As of the Effective Date, this Agreement is a
binding obligation of the parties and is not subject to revocation or
amendment, except by mutual consent or in accordance with its terms.
The initial term of this Agreement ("Initial Term") begins on the
Effective Date and ends on March 31, 2000. Following the Initial Term,
this Agreement will automatically renew on April 1 of each year for
subsequent one-year terms (each a "Renewal Term"), unless (a) the
Board, before the next Renewal Term begins, takes action to cancel the
Agreement at the end of its current term, or (b) Executive, before the
next Renewal Term begins, gives Bancorp written notice of Executive's
election to cancel the Agreement at the end of its current term. If a
definitive agreement providing for a Change in Control (as defined
below) is entered into on or before the expiration of the Initial Term
or any Renewal Term, the term then in effect will automatically be
extended to twelve months after the consummation of the Change in
Control, and the Board will not have authority to cancel this Agreement
during that period, unless Executive consents in writing to the
cancellation.
2. COMMITMENT OF EXECUTIVE. If any person extends any proposal or offer
intended to or with the potential to result in a Change in Control (a
"Change in Control Proposal"), Executive must, at Bancorp's request,
assist Bancorp in evaluating the Proposal. Further, as a condition to
receipt of the Salary Continuation Payment described below, Executive
will not resign Executive's position with the Company during the period
beginning when the Company receives a Change in Control Proposal and
ending when the transaction contemplated by the Proposal is either
consummated or abandoned.
1
<PAGE> 2
3. SALARY CONTINUATION PAYMENT.
(a) Payment Trigger and Timing. If a Termination Event After a
Change in Control (as defined in Section 4) occurs, Executive
will receive a salary continuation payment ("Salary
Continuation Payment"). Unless limited below, the Salary
Continuation Payment will equal the Regular Salary
Continuation Payment plus the Bonus Continuation Payment. The
Company will pay this Salary Continuation Payment to Executive
on the later of (i) the date Executive's employment terminates
or (ii) the date the Change in Control occurs.
(b) Payment Amount. The Regular Salary Continuation Payment will
equal Executive's regular monthly salary in effect when
Executive's employment terminates (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) that would be payable to Executive but for the
termination from the day Executive's employment terminates to
the date twelve months after the later of (i) the date the
Change in Control occurs or (ii) the date Executive's
employment terminates. The Bonus Continuation Payment will
equal (i) the most recent annual bonus paid to Executive,
multiplied by (ii) 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 twelve months after the later of (x)
the date the Change in Control occurs or (y) the date
Executive's employment terminates, divided by 365.
(c) Limitation on Payment. The Salary Continuation Payment will
not exceed an amount equal to $1.00 less than the amount which
would cause the payment, together with any other payments
received from the 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 will be deemed to occur when, and only when, one or
more of the following events occur:
(a) Executive terminates Executive's employment for any reason,
other than Retirement, Disability, or death within twelve
months after a Change In Control; or
(b) The Company terminates Executive's employment other than for
Cause, Disability, Retirement or death within twelve months
after a Change In Control; or
(c) The Company terminates Executive's employment other than for
Cause, Disability, Retirement, or death before a Change In
Control, if the termination occurs during the period beginning
six months before the execution of a definitive agreement
providing for the Change in Control and ending upon occurrence
of the Change in Control, but only if the Change in Control in
fact occurs.
2
<PAGE> 3
5. DEFINITIONS.
(a) Cause. "Cause" means only any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Executive's duties; or
(ii) Conviction of a crime in connection with such duties;
or
(iii) Conduct demonstrably and significantly harmful to the
financial condition of the Company.
(b) Disability. "Disability" means a physical or mental impairment
that renders Executive incapable of substantially performing
the duties required under this Agreement and that is expected
to continue rendering Executive so incapable for the
reasonably foreseeable future.
(c) Retirement. "Retirement" means voluntary termination by
Executive in accordance with the Company's applicable
retirement policies, including early retirement, if applicable
to its salaried employees.
(d) Change In Control. "Change In Control" means one of the
following:
(i) A Person or Entity acquiring or otherwise becoming
the owner (as a result of a purchase, merger, stock
exchange, or otherwise) of more than 50% of Bancorp's
outstanding common stock; or
(ii) Bancorp's merger into any corporation or other
business entity, or the merger of any corporation or
other business entity into Bancorp, where more than
50% of the stock (or other form of ownership) of the
corporation or business entity ("Surviving
Corporation") is owned by other than the owners of
the common stock of Bancorp before the merger; or
(iii) A Person or Entity acquiring more than fifty percent
of the Company's assets, measured by the total fair
market value of all of the Company's assets
immediately before the acquisition, during the
twelve-month period ending on the date of the most
recent acquisition. A Change in Control does not
include a transfer of assets by the Company if the
assets are transferred to an Entity, 50% or more of
the total value or voting power of which is owned,
directly or indirectly, by the Company.
(e) Person or Entity. "Person or Entity" includes, without
limitation, any one or more persons 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, other than providing for the Salary
Continuation Payment, this Agreement will not affect the determination
of any compensation payable by the Company to Executive, nor will it
affect the other terms of Executive's employment with the Company. The
specific arrangements referred to in this Agreement are not intended to
exclude or circumvent any other benefits that may be available to
3
<PAGE> 4
Executive under the Company's employee benefit or other applicable
plans, if his or her employment terminates.
7. WITHHOLDING. All payments made to Executive under this Agreement are
subject to the withholding of amounts for tax and other payroll
deductions that the Company reasonably determines appropriate under
applicable law or regulation.
8. ASSIGNABILITY. The Company may assign this Agreement and its rights
under it in whole, but not in part, to any corporation, financial
institution or other entity with or into which Bancorp merges or
consolidates or to which Bancorp transfers all or substantially all of
its assets. But, the corporation, financial institution, or other
entity accepting assignment (the "assignee") must by operation of law
or expressly in writing assume all obligations of the Company under
this Agreement, as fully as if the assignee had been an original party.
The Company may not otherwise assign this Agreement or any of its
rights under it. The Company may not through assignment avoid an
obligation to pay a Salary Continuation Payment once the obligation is
triggered under this Agreement, although it may assign to assignee the
obligation to pay, as long as assignee agrees to pay in accordance with
this Agreement. Executive may not assign or transfer this Agreement or
any rights or obligations under it.
9. GENERAL PROVISIONS.
(a) Choice of Law/Venue. The parties intend that Oregon law govern
this Agreement and its interpretation. Any dispute arising out
of this Agreement must be brought in either Clackamas County
or Multnohmah County in Oregon, and the parties will submit to
personal jurisdiction in either of those counties.
(b) Arbitration. Any dispute or claim arising out of or brought in
connection with this Agreement, will, if requested by any
party, be submitted to and settled by, arbitration under the
rules then in effect of the American Arbitration Association
(or under any other form of arbitration mutually acceptable to
the parties involved). Any award rendered in arbitration will
be final and will bind the parties, and a judgement on it may
be entered in the highest court of the forum having
jurisdiction. The arbitrator will render a written decision,
naming the substantially prevailing party in the action, and
will award such party all costs and expenses incurred,
including reasonable attorneys' fees.
(c) Attorney Fees. If any breach of or default under this
Agreement results in either party incurring attorney or other
fees, costs or expenses (including in arbitration), the
substantially prevailing party is entitled to recover from the
non-prevailing party any and all legal fees, costs and
expenses, including attorney fees.
(d) Waiver. This Agreement supercedes all previous agreements
between Executive and the Company and any of its affiliates
pertaining to this subject matter. By signing this Agreement,
Executive waives any and all rights Executive may have had
under any previous salary continuation, severance, or other
similar Agreements Executive may have entered into with the
Company or any of its affiliates or predecessors.
(e) Successors. This Agreement binds and inures to the benefit of
the parties and each of their respective affiliates, legal
representatives, successors and assigns.
4
<PAGE> 5
(f) Construction. This Agreement contains the entire agreement
among the parties with respect to its subject matter, and may
be amended only through a written document signed by all of
the parties. Its language is 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.
(g) Section Headings. The section headings used in this Agreement
have been included for convenience and reference only.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, and all counterparts will be construed together
as one Agreement.
Signed as of April 1, 1999:
BANCORP AND BANK:
/S/
---------------------------------------
By: Victor L. Bartruff
Its: President and CEO
EXECUTIVE:
/S/
---------------------------------------
Signature of Executive
5
<PAGE> 1
EXHIBIT 10.5
SALARY CONTINUATION AGREEMENT
FOR WCB POLICYMAKING EXECUTIVE OFFICERS
This SALARY CONTINUATION AGREEMENT ("Agreement") is dated as of April
1, 1999 (the "Effective Date"). The parties to the Agreement ("Parties") are
WEST COAST BANCORP ("Bancorp"), West Coast Bank ("Bank"), and Adeline C. Hesse
("Executive").
RECITALS
A. Executive is employed by Bank in a managerial capacity, presently
holding the position of Executive Vice President.
B. Bancorp and Bank (collectively, "Company") wishes to ensure the
continued availability of Executive's services in the event of a change
in control of Bancorp, in order to assist Bancorp in maximizing the
benefits obtainable from such a change.
C. To encourage Executive's continued services, Bancorp wishes to provide
an incentive for Executive's continued employment.
Therefore, the parties agree as follows:
AGREEMENT
1. EFFECTIVE DATE AND TERM. As of the Effective Date, this Agreement is a
binding obligation of the parties and is not subject to revocation or
amendment, except by mutual consent or in accordance with its terms.
The initial term of this Agreement ("Initial Term") begins on the
Effective Date and ends on March 31, 2000. Following the Initial Term,
this Agreement will automatically renew on April 1 of each year for
subsequent one-year terms (each a "Renewal Term"), unless (a) the
Board, before the next Renewal Term begins, takes action to cancel the
Agreement at the end of its current term, or (b) Executive, before the
next Renewal Term begins, gives Bancorp written notice of Executive's
election to cancel the Agreement at the end of its current term. If a
definitive agreement providing for a Change in Control (as defined
below) is entered into on or before the expiration of the Initial Term
or any Renewal Term, the term then in effect will automatically be
extended to twelve months after the consummation of the Change in
Control, and the Board will not have authority to cancel this Agreement
during that period, unless Executive consents in writing to the
cancellation.
2. COMMITMENT OF EXECUTIVE. If any person extends any proposal or offer
intended to or with the potential to result in a Change in Control (a
"Change in Control Proposal"), Executive must, at Bancorp's request,
assist Bancorp in evaluating the Proposal. Further, as a condition to
receipt of the Salary Continuation Payment described below, Executive
will not resign Executive's position with the Company during the period
beginning when the Company receives a Change in Control Proposal and
ending when the transaction contemplated by the Proposal is either
consummated or abandoned.
1
<PAGE> 2
3. SALARY CONTINUATION PAYMENT.
(a) Payment Trigger and Timing. If a Termination Event After a
Change in Control (as defined in Section 4) occurs, Executive
will receive a salary continuation payment ("Salary
Continuation Payment"). Unless limited below, the Salary
Continuation Payment will equal the Regular Salary
Continuation Payment plus the Bonus Continuation Payment. The
Company will pay this Salary Continuation Payment to Executive
on the later of (i) the date Executive's employment terminates
or (ii) the date the Change in Control occurs.
(b) Payment Amount. The Regular Salary Continuation Payment will
equal Executive's regular monthly salary in effect when
Executive's employment terminates (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) that would be payable to Executive but for the
termination from the day Executive's employment terminates to
the date twelve months after the later of (i) the date the
Change in Control occurs or (ii) the date Executive's
employment terminates. The Bonus Continuation Payment will
equal (i) the most recent annual bonus paid to Executive,
multiplied by (ii) 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 twelve months after the later of (x)
the date the Change in Control occurs or (y) the date
Executive's employment terminates, divided by 365.
(c) Limitation on Payment. The Salary Continuation Payment will
not exceed an amount equal to $1.00 less than the amount which
would cause the payment, together with any other payments
received from the 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 will be deemed to occur when, and only when, one or
more of the following events occur:
(a) Executive terminates Executive's employment for any reason,
other than Retirement, Disability, or death within twelve
months after a Change In Control; or
(b) The Company terminates Executive's employment other than for
Cause, Disability, Retirement or death within twelve months
after a Change In Control; or
(c) The Company terminates Executive's employment other than for
Cause, Disability, Retirement, or death before a Change In
Control, if the termination occurs during the period beginning
six months before the execution of a definitive agreement
providing for the Change in Control and ending upon occurrence
of the Change in Control, but only if the Change in Control in
fact occurs.
2
<PAGE> 3
5. DEFINITIONS.
(a) Cause. "Cause" means only any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Executive's duties; or
(ii) Conviction of a crime in connection with such duties;
or
(iii) Conduct demonstrably and significantly harmful to the
financial condition of the Company.
(b) Disability. "Disability" means a physical or mental impairment
that renders Executive incapable of substantially performing
the duties required under this Agreement and that is expected
to continue rendering Executive so incapable for the
reasonably foreseeable future.
(c) Retirement. "Retirement" means voluntary termination by
Executive in accordance with the Company's applicable
retirement policies, including early retirement, if applicable
to its salaried employees.
(d) Change In Control. "Change In Control" means one of the
following:
(i) A Person or Entity acquiring or otherwise becoming
the owner (as a result of a purchase, merger, stock
exchange, or otherwise) of more than 50% of Bancorp's
outstanding common stock; or
(ii) Bancorp's merger into any corporation or other
business entity, or the merger of any corporation or
other business entity into Bancorp, where more than
50% of the stock (or other form of ownership) of the
corporation or business entity ("Surviving
Corporation") is owned by other than the owners of
the common stock of Bancorp before the merger; or
(iii) A Person or Entity acquiring more than fifty percent
of the Company's assets, measured by the total fair
market value of all of the Company's assets
immediately before the acquisition, during the
twelve-month period ending on the date of the most
recent acquisition. A Change in Control does not
include a transfer of assets by the Company if the
assets are transferred to an Entity, 50% or more of
the total value or voting power of which is owned,
directly or indirectly, by the Company.
(e) Person or Entity. "Person or Entity" includes, without
limitation, any one or more persons 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, other than providing for the Salary
Continuation Payment, this Agreement will not affect the determination
of any compensation payable by the Company to Executive, nor will it
affect the other terms of Executive's employment with the Company. The
specific arrangements referred to in this Agreement are not intended to
exclude or circumvent any other benefits that may be available to
3
<PAGE> 4
Executive under the Company's employee benefit or other applicable
plans, if his or her employment terminates.
7. WITHHOLDING. All payments made to Executive under this Agreement are
subject to the withholding of amounts for tax and other payroll
deductions that the Company reasonably determines appropriate under
applicable law or regulation.
8. ASSIGNABILITY. The Company may assign this Agreement and its rights
under it in whole, but not in part, to any corporation, financial
institution or other entity with or into which Bancorp merges or
consolidates or to which Bancorp transfers all or substantially all of
its assets. But, the corporation, financial institution, or other
entity accepting assignment (the "assignee") must by operation of law
or expressly in writing assume all obligations of the Company under
this Agreement, as fully as if the assignee had been an original party.
The Company may not otherwise assign this Agreement or any of its
rights under it. The Company may not through assignment avoid an
obligation to pay a Salary Continuation Payment once the obligation is
triggered under this Agreement, although it may assign to assignee the
obligation to pay, as long as assignee agrees to pay in accordance with
this Agreement. Executive may not assign or transfer this Agreement or
any rights or obligations under it.
9. GENERAL PROVISIONS.
(a) Choice of Law/Venue. The parties intend that Oregon law govern
this Agreement and its interpretation. Any dispute arising out
of this Agreement must be brought in either Clackamas County
or Multnohmah County in Oregon, and the parties will submit to
personal jurisdiction in either of those counties.
(b) Arbitration. Any dispute or claim arising out of or brought in
connection with this Agreement, will, if requested by any
party, be submitted to and settled by, arbitration under the
rules then in effect of the American Arbitration Association
(or under any other form of arbitration mutually acceptable to
the parties involved). Any award rendered in arbitration will
be final and will bind the parties, and a judgement on it may
be entered in the highest court of the forum having
jurisdiction. The arbitrator will render a written decision,
naming the substantially prevailing party in the action, and
will award such party all costs and expenses incurred,
including reasonable attorneys' fees.
(c) Attorney Fees. If any breach of or default under this
Agreement results in either party incurring attorney or other
fees, costs or expenses (including in arbitration), the
substantially prevailing party is entitled to recover from the
non-prevailing party any and all legal fees, costs and
expenses, including attorney fees.
(d) Waiver. This Agreement supercedes all previous agreements
between Executive and the Company and any of its affiliates
pertaining to this subject matter. By signing this Agreement,
Executive waives any and all rights Executive may have had
under any previous salary continuation, severance, or other
similar Agreements Executive may have entered into with the
Company or any of its affiliates or predecessors.
(e) Successors. This Agreement binds and inures to the benefit of
the parties and each of their respective affiliates, legal
representatives, successors and assigns.
4
<PAGE> 5
(f) Construction. This Agreement contains the entire agreement
among the parties with respect to its subject matter, and may
be amended only through a written document signed by all of
the parties. Its language is 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.
(g) Section Headings. The section headings used in this Agreement
have been included for convenience and reference only.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, and all counterparts will be construed together
as one Agreement.
Signed as of April 1, 1999:
BANCORP AND BANK:
/S/
---------------------------------------
By: Victor L. Bartruff
Its: President and CEO
EXECUTIVE:
/S/
---------------------------------------
Signature of Executive
5
<PAGE> 1
EXHIBIT 10.6
SALARY CONTINUATION AGREEMENT
FOR WCB POLICYMAKING EXECUTIVE OFFICERS
This SALARY CONTINUATION AGREEMENT ("Agreement") is dated as of April
1, 1999 (the "Effective Date"). The parties to the Agreement ("Parties") are
WEST COAST BANCORP ("Bancorp"), West Coast Bank ("Bank"), and David L. Prysock
("Executive").
RECITALS
A. Executive is employed by Bank in a managerial capacity, presently
holding the position of Executive Vice President.
B. Bancorp and Bank (collectively, "Company") wishes to ensure the
continued availability of Executive's services in the event of a change
in control of Bancorp, in order to assist Bancorp in maximizing the
benefits obtainable from such a change.
C. To encourage Executive's continued services, Bancorp wishes to provide
an incentive for Executive's continued employment.
Therefore, the parties agree as follows:
AGREEMENT
1. EFFECTIVE DATE AND TERM. As of the Effective Date, this Agreement is a
binding obligation of the parties and is not subject to revocation or
amendment, except by mutual consent or in accordance with its terms.
The initial term of this Agreement ("Initial Term") begins on the
Effective Date and ends on March 31, 2000. Following the Initial Term,
this Agreement will automatically renew on April 1 of each year for
subsequent one-year terms (each a "Renewal Term"), unless (a) the
Board, before the next Renewal Term begins, takes action to cancel the
Agreement at the end of its current term, or (b) Executive, before the
next Renewal Term begins, gives Bancorp written notice of Executive's
election to cancel the Agreement at the end of its current term. If a
definitive agreement providing for a Change in Control (as defined
below) is entered into on or before the expiration of the Initial Term
or any Renewal Term, the term then in effect will automatically be
extended to twelve months after the consummation of the Change in
Control, and the Board will not have authority to cancel this Agreement
during that period, unless Executive consents in writing to the
cancellation.
2. COMMITMENT OF EXECUTIVE. If any person extends any proposal or offer
intended to or with the potential to result in a Change in Control (a
"Change in Control Proposal"), Executive must, at Bancorp's request,
assist Bancorp in evaluating the Proposal. Further, as a condition to
receipt of the Salary Continuation Payment described below, Executive
will not resign Executive's position with the Company during the period
beginning when the Company receives a Change in Control Proposal and
ending when the transaction contemplated by the Proposal is either
consummated or abandoned.
1
<PAGE> 2
3. SALARY CONTINUATION PAYMENT.
(a) Payment Trigger and Timing. If a Termination Event After a
Change in Control (as defined in Section 4) occurs, Executive
will receive a salary continuation payment ("Salary
Continuation Payment"). Unless limited below, the Salary
Continuation Payment will equal the Regular Salary
Continuation Payment plus the Bonus Continuation Payment. The
Company will pay this Salary Continuation Payment to Executive
on the later of (i) the date Executive's employment terminates
or (ii) the date the Change in Control occurs.
(b) Payment Amount. The Regular Salary Continuation Payment will
equal Executive's regular monthly salary in effect when
Executive's employment terminates (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) that would be payable to Executive but for the
termination from the day Executive's employment terminates to
the date twelve months after the later of (i) the date the
Change in Control occurs or (ii) the date Executive's
employment terminates. The Bonus Continuation Payment will
equal (i) the most recent annual bonus paid to Executive,
multiplied by (ii) 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 twelve months after the later of (x)
the date the Change in Control occurs or (y) the date
Executive's employment terminates, divided by 365.
(c) Limitation on Payment. The Salary Continuation Payment will
not exceed an amount equal to $1.00 less than the amount which
would cause the payment, together with any other payments
received from the 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 will be deemed to occur when, and only when, one or
more of the following events occur:
(a) Executive terminates Executive's employment for any reason,
other than Retirement, Disability, or death within twelve
months after a Change In Control; or
(b) The Company terminates Executive's employment other than for
Cause, Disability, Retirement or death within twelve months
after a Change In Control; or
(c) The Company terminates Executive's employment other than for
Cause, Disability, Retirement, or death before a Change In
Control, if the termination occurs during the period beginning
six months before the execution of a definitive agreement
providing for the Change in Control and ending upon occurrence
of the Change in Control, but only if the Change in Control in
fact occurs.
2
<PAGE> 3
5. DEFINITIONS.
(a) Cause. "Cause" means only any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Executive's duties; or
(ii) Conviction of a crime in connection with such duties;
or
(iii) Conduct demonstrably and significantly harmful to the
financial condition of the Company.
(b) Disability. "Disability" means a physical or mental impairment
that renders Executive incapable of substantially performing
the duties required under this Agreement and that is expected
to continue rendering Executive so incapable for the
reasonably foreseeable future.
(c) Retirement. "Retirement" means voluntary termination by
Executive in accordance with the Company's applicable
retirement policies, including early retirement, if applicable
to its salaried employees.
(d) Change In Control. "Change In Control" means one of the
following:
(i) A Person or Entity acquiring or otherwise becoming
the owner (as a result of a purchase, merger, stock
exchange, or otherwise) of more than 50% of Bancorp's
outstanding common stock; or
(ii) Bancorp's merger into any corporation or other
business entity, or the merger of any corporation or
other business entity into Bancorp, where more than
50% of the stock (or other form of ownership) of the
corporation or business entity ("Surviving
Corporation") is owned by other than the owners of
the common stock of Bancorp before the merger; or
(iii) A Person or Entity acquiring more than fifty percent
of the Company's assets, measured by the total fair
market value of all of the Company's assets
immediately before the acquisition, during the
twelve-month period ending on the date of the most
recent acquisition. A Change in Control does not
include a transfer of assets by the Company if the
assets are transferred to an Entity, 50% or more of
the total value or voting power of which is owned,
directly or indirectly, by the Company.
(e) Person or Entity. "Person or Entity" includes, without
limitation, any one or more persons 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, other than providing for the Salary
Continuation Payment, this Agreement will not affect the determination
of any compensation payable by the Company to Executive, nor will it
affect the other terms of Executive's employment with the Company. The
specific arrangements referred to in this Agreement are not intended to
exclude or circumvent any other benefits that may be available to
3
<PAGE> 4
Executive under the Company's employee benefit or other applicable
plans, if his or her employment terminates.
7. WITHHOLDING. All payments made to Executive under this Agreement are
subject to the withholding of amounts for tax and other payroll
deductions that the Company reasonably determines appropriate under
applicable law or regulation.
8. ASSIGNABILITY. The Company may assign this Agreement and its rights
under it in whole, but not in part, to any corporation, financial
institution or other entity with or into which Bancorp merges or
consolidates or to which Bancorp transfers all or substantially all of
its assets. But, the corporation, financial institution, or other
entity accepting assignment (the "assignee") must by operation of law
or expressly in writing assume all obligations of the Company under
this Agreement, as fully as if the assignee had been an original party.
The Company may not otherwise assign this Agreement or any of its
rights under it. The Company may not through assignment avoid an
obligation to pay a Salary Continuation Payment once the obligation is
triggered under this Agreement, although it may assign to assignee the
obligation to pay, as long as assignee agrees to pay in accordance with
this Agreement. Executive may not assign or transfer this Agreement or
any rights or obligations under it.
9. GENERAL PROVISIONS.
(a) Choice of Law/Venue. The parties intend that Oregon law govern
this Agreement and its interpretation. Any dispute arising out
of this Agreement must be brought in either Clackamas County
or Multnohmah County in Oregon, and the parties will submit to
personal jurisdiction in either of those counties.
(b) Arbitration. Any dispute or claim arising out of or brought in
connection with this Agreement, will, if requested by any
party, be submitted to and settled by, arbitration under the
rules then in effect of the American Arbitration Association
(or under any other form of arbitration mutually acceptable to
the parties involved). Any award rendered in arbitration will
be final and will bind the parties, and a judgement on it may
be entered in the highest court of the forum having
jurisdiction. The arbitrator will render a written decision,
naming the substantially prevailing party in the action, and
will award such party all costs and expenses incurred,
including reasonable attorneys' fees.
(c) Attorney Fees. If any breach of or default under this
Agreement results in either party incurring attorney or other
fees, costs or expenses (including in arbitration), the
substantially prevailing party is entitled to recover from the
non-prevailing party any and all legal fees, costs and
expenses, including attorney fees.
(d) Waiver. This Agreement supercedes all previous agreements
between Executive and the Company and any of its affiliates
pertaining to this subject matter. By signing this Agreement,
Executive waives any and all rights Executive may have had
under any previous salary continuation, severance, or other
similar Agreements Executive may have entered into with the
Company or any of its affiliates or predecessors.
(e) Successors. This Agreement binds and inures to the benefit of
the parties and each of their respective affiliates, legal
representatives, successors and assigns.
4
<PAGE> 5
(f) Construction. This Agreement contains the entire agreement
among the parties with respect to its subject matter, and may
be amended only through a written document signed by all of
the parties. Its language is 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.
(g) Section Headings. The section headings used in this Agreement
have been included for convenience and reference only.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, and all counterparts will be construed together
as one Agreement.
Signed as of April 1, 1999:
BANCORP AND BANK:
/S/
---------------------------------------
By: Victor L. Bartruff
Its: President and CEO
EXECUTIVE:
/S/
---------------------------------------
Signature of Executive
5
<PAGE> 1
EXHIBIT 10.7
SALARY CONTINUATION AGREEMENT
FOR WCB POLICYMAKING EXECUTIVE OFFICERS
This SALARY CONTINUATION AGREEMENT ("Agreement") is dated as of April
1, 1999 (the "Effective Date"). The parties to the Agreement ("Parties") are
WEST COAST BANCORP ("Bancorp"), West Coast Bank ("Bank"), and Rodney B. Tibbatts
("Executive").
RECITALS
A. Executive is employed by Bank in a managerial capacity, presently
holding the position of Executive Vice-President.
B. Bancorp and Bank (collectively, "Company") wishes to ensure the
continued availability of Executive's services in the event of a change
in control of Bancorp, in order to assist Bancorp in maximizing the
benefits obtainable from such a change.
C. To encourage Executive's continued services, Bancorp wishes to provide
an incentive for Executive's continued employment.
Therefore, the parties agree as follows:
AGREEMENT
1. EFFECTIVE DATE AND TERM. As of the Effective Date, this Agreement is a
binding obligation of the parties and is not subject to revocation or
amendment, except by mutual consent or in accordance with its terms.
The initial term of this Agreement ("Initial Term") begins on the
Effective Date and ends on March 31, 2000. Following the Initial Term,
this Agreement will automatically renew on April 1 of each year for
subsequent one-year terms (each a "Renewal Term"), unless (a) the
Board, before the next Renewal Term begins, takes action to cancel the
Agreement at the end of its current term, or (b) Executive, before the
next Renewal Term begins, gives Bancorp written notice of Executive's
election to cancel the Agreement at the end of its current term. If a
definitive agreement providing for a Change in Control (as defined
below) is entered into on or before the expiration of the Initial Term
or any Renewal Term, the term then in effect will automatically be
extended to 24 months after the consummation of the Change in Control,
and the Board will not have authority to cancel this Agreement during
that period, unless Executive consents in writing to the cancellation.
2. COMMITMENT OF EXECUTIVE. If any person extends any proposal or offer
intended to or with the potential to result in a Change in Control (a
"Change in Control Proposal"), Executive must, at Bancorp's request,
assist Bancorp in evaluating the Proposal. Further, as a condition to
receipt of the Salary Continuation Payment described below, Executive
will not resign Executive's position with the Company during the period
beginning when the Company receives a Change in Control Proposal and
ending when the transaction contemplated by the Proposal is either
consummated or abandoned.
1
<PAGE> 2
3. SALARY CONTINUATION PAYMENT.
(a) Payment Trigger and Timing. If a Termination Event After a
Change in Control (as defined in Section 4) occurs, Executive
will receive a salary continuation payment ("Salary
Continuation Payment"). Unless limited below, the Salary
Continuation Payment will equal the Regular Salary
Continuation Payment plus the Bonus Continuation Payment. The
Company will pay this Salary Continuation Payment to Executive
on the later of (i) the date Executive's employment terminates
or (ii) the date the Change in Control occurs.
(b) Payment Amount. The Regular Salary Continuation Payment will
equal Executive's regular monthly salary in effect when
Executive's employment terminates (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) that would be payable to Executive but for the
termination from the day Executive's employment terminates to
the date 24 months after the later of (i) the date the Change
in Control occurs or (ii) the date Executive's employment
terminates. The Bonus Continuation Payment will equal (i) the
most recent annual bonus paid to Executive, multiplied by (ii)
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 24
months after the later of (x) the date the Change in Control
occurs or (y) the date Executive's employment terminates,
divided by 365.
(c) Limitation on Payment. The Salary Continuation Payment will
not exceed an amount equal to $1.00 less than the amount which
would cause the payment, together with any other payments
received from the 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 will be deemed to occur when, and only when, one or
more of the following events occur:
(a) Executive terminates Executive's employment for any reason,
other than Retirement, Disability, or death within 24 months
after a Change In Control; or
(b) The Company terminates Executive's employment other than for
Cause, Disability, Retirement or death within 24 months after
a Change In Control; or
(c) The Company terminates Executive's employment other than for
Cause, Disability, Retirement, or death before a Change In
Control, if the termination occurs during the period beginning
six months before the execution of a definitive agreement
providing for the Change in Control and ending upon occurrence
of the Change in Control, but only if the Change in Control in
fact occurs.
2
<PAGE> 3
5. DEFINITIONS.
(a) Cause. "Cause" means only any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Executive's duties; or
(ii) Conviction of a crime in connection with such duties;
or
(iii) Conduct demonstrably and significantly harmful to the
financial condition of the Company.
(b) Disability. "Disability" means a physical or mental impairment
that renders Executive incapable of substantially performing
the duties required under this Agreement and that is expected
to continue rendering Executive so incapable for the
reasonably foreseeable future.
(c) Retirement. "Retirement" means voluntary termination by
Executive in accordance with the Company's applicable
retirement policies, including early retirement, if applicable
to its salaried employees.
(d) Change In Control. "Change In Control" means one of the
following:
(i) A Person or Entity acquiring or otherwise becoming
the owner (as a result of a purchase, merger, stock
exchange, or otherwise) of more than 50% of Bancorp's
outstanding common stock; or
(ii) Bancorp's merger into any corporation or other
business entity, or the merger of any corporation or
other business entity into Bancorp, where more than
50% of the stock (or other form of ownership) of the
corporation or business entity ("Surviving
Corporation") is owned by other than the owners of
the common stock of Bancorp before the merger; or
(iii) A Person or Entity acquiring more than fifty percent
of the Company's assets, measured by the total fair
market value of all of the Company's assets
immediately before the acquisition, during the
twelve-month period ending on the date of the most
recent acquisition. A Change in Control does not
include a transfer of assets by the Company if the
assets are transferred to an Entity, 50% or more of
the total value or voting power of which is owned,
directly or indirectly, by the Company.
(e) Person or Entity. "Person or Entity" includes, without
limitation, any one or more persons 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, other than providing for the Salary
Continuation Payment, this Agreement will not affect the determination
of any compensation payable by the Company to Executive, nor will it
affect the other terms of Executive's employment with the Company. The
specific arrangements referred to in this Agreement are not intended to
exclude or circumvent any other benefits that may be available to
3
<PAGE> 4
Executive under the Company's employee benefit or other applicable
plans, if his or her employment terminates.
7. WITHHOLDING. All payments made to Executive under this Agreement are
subject to the withholding of amounts for tax and other payroll
deductions that the Company reasonably determines appropriate under
applicable law or regulation.
8. ASSIGNABILITY. The Company may assign this Agreement and its rights
under it in whole, but not in part, to any corporation, financial
institution or other entity with or into which Bancorp merges or
consolidates or to which Bancorp transfers all or substantially all of
its assets. But, the corporation, financial institution, or other
entity accepting assignment (the "assignee") must by operation of law
or expressly in writing assume all obligations of the Company under
this Agreement, as fully as if the assignee had been an original party.
The Company may not otherwise assign this Agreement or any of its
rights under it. The Company may not through assignment avoid an
obligation to pay a Salary Continuation Payment once the obligation is
triggered under this Agreement, although it may assign to assignee the
obligation to pay, as long as assignee agrees to pay in accordance with
this Agreement. Executive may not assign or transfer this Agreement or
any rights or obligations under it.
9. GENERAL PROVISIONS.
(a) Choice of Law/Venue. The parties intend that Oregon law govern
this Agreement and its interpretation. Any dispute arising out
of this Agreement must be brought in either Clackamas County
or Multnohmah County in Oregon, and the parties will submit to
personal jurisdiction in either of those counties.
(b) Arbitration. Any dispute or claim arising out of or brought in
connection with this Agreement, will, if requested by any
party, be submitted to and settled by, arbitration under the
rules then in effect of the American Arbitration Association
(or under any other form of arbitration mutually acceptable to
the parties involved). Any award rendered in arbitration will
be final and will bind the parties, and a judgement on it may
be entered in the highest court of the forum having
jurisdiction. The arbitrator will render a written decision,
naming the substantially prevailing party in the action, and
will award such party all costs and expenses incurred,
including reasonable attorneys' fees.
(c) Attorney Fees. If any breach of or default under this
Agreement results in either party incurring attorney or other
fees, costs or expenses (including in arbitration), the
substantially prevailing party is entitled to recover from the
non-prevailing party any and all legal fees, costs and
expenses, including attorney fees.
(d) Waiver. This Agreement supercedes all previous agreements
between Executive and the Company and any of its affiliates
pertaining to this subject matter. By signing this Agreement,
Executive waives any and all rights Executive may have had
under any previous salary continuation, severance, or other
similar Agreements Executive may have entered into with the
Company or any of its affiliates or predecessors.
(e) Successors. This Agreement binds and inures to the benefit of
the parties and each of their respective affiliates, legal
representatives, successors and assigns.
4
<PAGE> 5
(f) Construction. This Agreement contains the entire agreement
among the parties with respect to its subject matter, and may
be amended only through a written document signed by all of
the parties. Its language is 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.
(g) Section Headings. The section headings used in this Agreement
have been included for convenience and reference only.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, and all counterparts will be construed together
as one Agreement.
Signed as of April 1, 1999:
BANCORP AND BANK:
/S/
---------------------------------------
By: Shauna L. Vernal
Its: Senior Vice President &
General Counsel
EXECUTIVE:
/S/
---------------------------------------
Rodney B. Tibbatts
5
<PAGE> 1
EXHIBIT 10.8
SALARY CONTINUATION AGREEMENT
FOR WCB POLICYMAKING EXECUTIVE OFFICERS
This SALARY CONTINUATION AGREEMENT ("Agreement") is dated as of April
1, 1999 (the "Effective Date"). The parties to the Agreement ("Parties") are
WEST COAST BANCORP ("Bancorp"), West Coast Bank ("Bank"), and Shauna L. Vernal
("Executive").
RECITALS
A. Executive is employed by Bank in a managerial capacity, presently
holding the position of Vice-President, General Counsel, and Corporate
Secretary.
B. Bancorp and Bank (collectively, "Company") wishes to ensure the
continued availability of Executive's services in the event of a change
in control of Bancorp, in order to assist Bancorp in maximizing the
benefits obtainable from such a change.
C. To encourage Executive's continued services, Bancorp wishes to provide
an incentive for Executive's continued employment.
Therefore, the parties agree as follows:
AGREEMENT
1. EFFECTIVE DATE AND TERM. As of the Effective Date, this Agreement is a
binding obligation of the parties and is not subject to revocation or
amendment, except by mutual consent or in accordance with its terms.
The initial term of this Agreement ("Initial Term") begins on the
Effective Date and ends on March 31, 2000. Following the Initial Term,
this Agreement will automatically renew on April 1 of each year for
subsequent one-year terms (each a "Renewal Term"), unless (a) the
Board, before the next Renewal Term begins, takes action to cancel the
Agreement at the end of its current term, or (b) Executive, before the
next Renewal Term begins, gives Bancorp written notice of Executive's
election to cancel the Agreement at the end of its current term. If a
definitive agreement providing for a Change in Control (as defined
below) is entered into on or before the expiration of the Initial Term
or any Renewal Term, the term then in effect will automatically be
extended to twelve months after the consummation of the Change in
Control, and the Board will not have authority to cancel this Agreement
during that period, unless Executive consents in writing to the
cancellation.
2. COMMITMENT OF EXECUTIVE. If any person extends any proposal or offer
intended to or with the potential to result in a Change in Control (a
"Change in Control Proposal"), Executive must, at Bancorp's request,
assist Bancorp in evaluating the Proposal. Further, as a condition to
receipt of the Salary Continuation Payment described below, Executive
will not resign Executive's position with the Company during the period
beginning when the Company receives a Change in Control Proposal and
ending when the transaction contemplated by the Proposal is either
consummated or abandoned.
1
<PAGE> 2
3. SALARY CONTINUATION PAYMENT.
(a) Payment Trigger and Timing. If a Termination Event After a
Change in Control (as defined in Section 4) occurs, Executive
will receive a salary continuation payment ("Salary
Continuation Payment"). Unless limited below, the Salary
Continuation Payment will equal the Regular Salary
Continuation Payment plus the Bonus Continuation Payment. The
Company will pay this Salary Continuation Payment to Executive
on the later of (i) the date Executive's employment terminates
or (ii) the date the Change in Control occurs.
(b) Payment Amount. The Regular Salary Continuation Payment will
equal Executive's regular monthly salary in effect when
Executive's employment terminates (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) that would be payable to Executive but for the
termination from the day Executive's employment terminates to
the date twelve months after the later of (i) the date the
Change in Control occurs or (ii) the date Executive's
employment terminates. The Bonus Continuation Payment will
equal (i) the most recent annual bonus paid to Executive,
multiplied by (ii) 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 twelve months after the later of (x)
the date the Change in Control occurs or (y) the date
Executive's employment terminates, divided by 365.
(c) Limitation on Payment. The Salary Continuation Payment will
not exceed an amount equal to $1.00 less than the amount which
would cause the payment, together with any other payments
received from the 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 will be deemed to occur when, and only when, one or
more of the following events occur:
(a) Executive terminates Executive's employment for any reason,
other than Retirement, Disability, or death within twelve
months after a Change In Control; or
(b) The Company terminates Executive's employment other than for
Cause, Disability, Retirement or death within twelve months
after a Change In Control; or
(c) The Company terminates Executive's employment other than for
Cause, Disability, Retirement, or death before a Change In
Control, if the termination occurs during the period beginning
six months before the execution of a definitive agreement
providing for the Change in Control and ending upon occurrence
of the Change in Control, but only if the Change in Control in
fact occurs.
2
<PAGE> 3
5. DEFINITIONS.
(a) Cause. "Cause" means only any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Executive's duties; or
(ii) Conviction of a crime in connection with such duties;
or
(iii) Conduct demonstrably and significantly harmful to the
financial condition of the Company.
(b) Disability. "Disability" means a physical or mental impairment
that renders Executive incapable of substantially performing
the duties required under this Agreement and that is expected
to continue rendering Executive so incapable for the
reasonably foreseeable future.
(c) Retirement. "Retirement" means voluntary termination by
Executive in accordance with the Company's applicable
retirement policies, including early retirement, if applicable
to its salaried employees.
(d) Change In Control. "Change In Control" means one of the
following:
(i) A Person or Entity acquiring or otherwise becoming
the owner (as a result of a purchase, merger, stock
exchange, or otherwise) of more than 50% of Bancorp's
outstanding common stock; or
(ii) Bancorp's merger into any corporation or other
business entity, or the merger of any corporation or
other business entity into Bancorp, where more than
50% of the stock (or other form of ownership) of the
corporation or business entity ("Surviving
Corporation") is owned by other than the owners of
the common stock of Bancorp before the merger; or
(iii) A Person or Entity acquiring more than fifty percent
of the Company's assets, measured by the total fair
market value of all of the Company's assets
immediately before the acquisition, during the
twelve-month period ending on the date of the most
recent acquisition. A Change in Control does not
include a transfer of assets by the Company if the
assets are transferred to an Entity, 50% or more of
the total value or voting power of which is owned,
directly or indirectly, by the Company.
(e) Person or Entity. "Person or Entity" includes, without
limitation, any one or more persons 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, other than providing for the Salary
Continuation Payment, this Agreement will not affect the determination
of any compensation payable by the Company to Executive, nor will it
affect the other terms of Executive's employment with the Company. The
specific arrangements referred to in this Agreement are not intended to
exclude or circumvent any other benefits that may be available to
3
<PAGE> 4
Executive under the Company's employee benefit or other applicable
plans, if his or her employment terminates.
7. WITHHOLDING. All payments made to Executive under this Agreement are
subject to the withholding of amounts for tax and other payroll
deductions that the Company reasonably determines appropriate under
applicable law or regulation.
8. ASSIGNABILITY. The Company may assign this Agreement and its rights
under it in whole, but not in part, to any corporation, financial
institution or other entity with or into which Bancorp merges or
consolidates or to which Bancorp transfers all or substantially all of
its assets. But, the corporation, financial institution, or other
entity accepting assignment (the "assignee") must by operation of law
or expressly in writing assume all obligations of the Company under
this Agreement, as fully as if the assignee had been an original party.
The Company may not otherwise assign this Agreement or any of its
rights under it. The Company may not through assignment avoid an
obligation to pay a Salary Continuation Payment once the obligation is
triggered under this Agreement, although it may assign to assignee the
obligation to pay, as long as assignee agrees to pay in accordance with
this Agreement. Executive may not assign or transfer this Agreement or
any rights or obligations under it.
9. GENERAL PROVISIONS.
(a) Choice of Law/Venue. The parties intend that Oregon law govern
this Agreement and its interpretation. Any dispute arising out
of this Agreement must be brought in either Clackamas County
or Multnohmah County in Oregon, and the parties will submit to
personal jurisdiction in either of those counties.
(b) Arbitration. Any dispute or claim arising out of or brought in
connection with this Agreement, will, if requested by any
party, be submitted to and settled by, arbitration under the
rules then in effect of the American Arbitration Association
(or under any other form of arbitration mutually acceptable to
the parties involved). Any award rendered in arbitration will
be final and will bind the parties, and a judgement on it may
be entered in the highest court of the forum having
jurisdiction. The arbitrator will render a written decision,
naming the substantially prevailing party in the action, and
will award such party all costs and expenses incurred,
including reasonable attorneys' fees.
(c) Attorney Fees. If any breach of or default under this
Agreement results in either party incurring attorney or other
fees, costs or expenses (including in arbitration), the
substantially prevailing party is entitled to recover from the
non-prevailing party any and all legal fees, costs and
expenses, including attorney fees.
(d) Waiver. This Agreement supercedes all previous agreements
between Executive and the Company and any of its affiliates
pertaining to this subject matter. By signing this Agreement,
Executive waives any and all rights Executive may have had
under any previous salary continuation, severance, or other
similar Agreements Executive may have entered into with the
Company or any of its affiliates or predecessors.
(e) Successors. This Agreement binds and inures to the benefit of
the parties and each of their respective affiliates, legal
representatives, successors and assigns.
4
<PAGE> 5
(f) Construction. This Agreement contains the entire agreement
among the parties with respect to its subject matter, and may
be amended only through a written document signed by all of
the parties. Its language is 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.
(g) Section Headings. The section headings used in this Agreement
have been included for convenience and reference only.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, and all counterparts will be construed together
as one Agreement.
Signed as of April 1, 1999:
BANCORP AND BANK:
/S/
---------------------------------------
By: Victor L. Bartruff
Its: President and CEO
EXECUTIVE:
/S/
---------------------------------------
Signature of Executive
5
<PAGE> 1
EXHIBIT 10.9
SALARY CONTINUATION AGREEMENT
This SALARY CONTINUATION AGREEMENT ("Agreement") is dated as of April
1, 1999 (the "Effective Date"). The parties to the Agreement ("Parties") are
WEST COAST BANCORP ("Bancorp"), West Coast Bank ("Bank"), and Kevin M. McClung
("Executive").
RECITALS
A. Executive is employed by Bank in a managerial capacity, presently
holding the position of Vice President and Controller.
B. Bancorp and Bank (collectively, "Company") wishes to ensure the
continued availability of Executive's services in the event of a change
in control of Bancorp, in order to assist Bancorp in maximizing the
benefits obtainable from such a change.
C. To encourage Executive's continued services, Bancorp wishes to provide
an incentive for Executive's continued employment.
Therefore, the parties agree as follows:
AGREEMENT
1. EFFECTIVE DATE AND TERM. As of the Effective Date, this Agreement is a
binding obligation of the parties and is not subject to revocation or
amendment, except by mutual consent or in accordance with its terms.
The term of this Agreement ("Term") begins on the Effective Date and
ends on March 31, 2000. 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 will automatically be extended to
twelve months after the consummation of the Change in Control, and the
Board will not have authority to cancel this Agreement during that
period, unless Executive consents in writing to the cancellation.
2. COMMITMENT OF EXECUTIVE. If any person extends any proposal or offer
intended to or with the potential to result in a Change in Control (a
"Change in Control Proposal"), Executive must, at Bancorp's request,
assist Bancorp in evaluating the Proposal. Further, as a condition to
receipt of the Salary Continuation Payment described below, Executive
will not resign Executive's position with the Company during the period
beginning when the Company receives a Change in Control Proposal and
ending when the transaction contemplated by the Proposal is either
consummated or abandoned.
3. SALARY CONTINUATION PAYMENT.
(a) Payment Trigger and Timing. If a Termination Event After a
Change in Control (as defined in Section 4) occurs, Executive
will receive a salary continuation payment ("Salary
Continuation Payment"). Unless limited below, the Salary
Continuation Payment will equal the Regular Salary
Continuation Payment plus the Bonus Continuation Payment. The
Company will pay this Salary Continuation Payment to Executive
on the later of (i) the date Executive's employment terminates
or (ii) the date the Change in Control occurs.
1
<PAGE> 2
(b) Payment Amount. The Regular Salary Continuation Payment will
equal Executive's regular monthly salary in effect when
Executive's employment terminates (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) that would be payable to Executive but for the
termination from the day Executive's employment terminates to
the date twelve months after the Change in Control. The Bonus
Continuation Payment will 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 twelve months
after the Change in Control divided by (y) 365.
(c) Limitation on Payment. The Salary Continuation Payment will
not exceed an amount equal to $1.00 less than the amount which
would cause the payment, together with any other payments
received from the 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 will be deemed to occur when, and only when, one or
more of the following events occur:
(a) Executive terminates Executive's employment for Good Reason
within twelve months after a Change In Control; or
(b) The Company terminates Executive's employment other than for
Cause, Disability, Retirement, or death within twelve months
after a Change In Control; or
(c) The Company terminates Executive's employment other than for
Cause, Disability, Retirement, or death before a Change In
Control, if the termination occurs either (i) on or after the
announcement by Bancorp, or any other party, that a Change In
Control is contemplated or intended, 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 twelve months after the termination of
Executive's employment.
5. DEFINITIONS.
(a) Cause. "Cause" means only any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Executive's duties; or
(ii) Conviction of a crime in connection with such duties;
or
(iii) Conduct demonstrably and significantly harmful to the
financial condition of the Company.
2
<PAGE> 3
(b) Disability. "Disability" means a physical or mental impairment
that renders Executive incapable of substantially performing
the duties required under this Agreement and that is expected
to continue rendering Executive so incapable for the
reasonably foreseeable future.
(c) Retirement. "Retirement" means voluntary termination by
Executive in accordance with the Company's applicable
retirement policies, including early retirement, if applicable
to its salaried employees.
(d) Good Reason. "Good Reason" means only any one or more of the
following:
(i) Any reduction in Executive's salary or reduction or
elimination of any compensation or benefit plan
benefiting Executive, which reduction or elimination
is not of general application to substantially all
similarly situated employees of the Company or such
employees of any successor entity or of any entity in
control of Bancorp or the Bank;
(ii) A relocation or transfer of Executive's place of
employment that would reasonably require Executive to
commute more than twenty miles each way from
Executive's principal residence; or
(iii) A material diminution in the responsibilities, title,
or duties of Executive.
(e) Change In Control. "Change In Control" means one of the
following:
(i) A Person or Entity acquiring or otherwise becoming
the owner (as a result of a purchase, merger, stock
exchange, or otherwise) of more than 50% of Bancorp's
outstanding common stock; or
(ii) Bancorp's merger into any corporation or other
business entity, or the merger of any corporation or
other business entity into Bancorp, where more than
50% of the stock (or other form of ownership) of the
corporation or business entity ("Surviving
Corporation") is owned by other than the owners of
the common stock of Bancorp before the merger; or
(iii) A Person or Entity acquiring more than fifty percent
of the Company's assets, measured by the total fair
market value of all of the Company's assets
immediately before the acquisition, during the
twelve-month period ending on the date of the most
recent acquisition. A Change in Control does not
include a transfer of assets by the Company if the
assets are transferred to an Entity, 50% or more of
the total value or voting power of which is owned,
directly or indirectly, by the Company.
(f) Person or Entity. "Person or Entity" includes, without
limitation, any one or more persons 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, other than providing for the Salary
Continuation Payment, this Agreement will not affect the determination
of any compensation payable by the Company to Executive, nor will it
affect the other terms of Executive's
3
<PAGE> 4
employment with the Company. The specific arrangements referred to in
this Agreement are not intended to exclude or circumvent any other
benefits that may be available to Executive under the Company's
employee benefit or other applicable plans, if his or her employment
terminates.
7. WITHHOLDING. All payments made to Executive under this Agreement are
subject to the withholding of amounts for tax and other payroll
deductions that the Company reasonably determines appropriate under
applicable law or regulation.
8. ASSIGNABILITY. The Company may assign this Agreement and its rights
under it in whole, but not in part, to any corporation, financial
institution or other entity with or into which Bancorp merges or
consolidates or to which Bancorp transfers all or substantially all of
its assets. But, the corporation, financial institution, or other
entity accepting assignment (the "assignee") must by operation of law
or expressly in writing assume all obligations of the Company under
this Agreement, as fully as if the assignee had been an original party.
The Company may not otherwise assign this Agreement or any of its
rights under it. The Company may not through assignment avoid an
obligation to pay a Salary Continuation Payment once the obligation is
triggered under this Agreement, although it may assign to assignee the
obligation to pay, as long as assignee agrees to pay in accordance with
this Agreement. Executive may not assign or transfer this Agreement or
any rights or obligations under it.
9. GENERAL PROVISIONS.
(a) Choice of Law/Venue. The parties intend that Oregon law govern
this Agreement and its interpretation. Any dispute arising out
of this Agreement must be brought in either Clackamas County
or Multnohmah County in Oregon, and the parties will submit to
personal jurisdiction in either of those counties.
(b) Arbitration. Any dispute or claim arising out of or brought in
connection with this Agreement, will, if requested by any
party, be submitted to and settled by, arbitration under the
rules then in effect of the American Arbitration Association
(or under any other form of arbitration mutually acceptable to
the parties involved). Any award rendered in arbitration will
be final and will bind the parties, and a judgement on it may
be entered in the highest court of the forum having
jurisdiction. The arbitrator will render a written decision,
naming the substantially prevailing party in the action, and
will award such party all costs and expenses incurred,
including reasonable attorneys' fees.
(c) Attorney Fees. If any breach of or default under this
Agreement results in either party incurring attorney or other
fees, costs or expenses (including in arbitration), the
substantially prevailing party is entitled to recover from the
non-prevailing party any and all legal fees, costs and
expenses, including attorney fees.
(d) Waiver. This Agreement supercedes all previous agreements
between Executive and the Company and any of its affiliates
pertaining to this subject matter. By signing this Agreement,
Executive waives any and all rights Executive may have had
under any previous salary continuation, severance, or other
similar Agreements Executive may have entered into with the
Company or any of its affiliates or predecessors.
4
<PAGE> 5
(e) Successors. This Agreement binds and inures 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 only through a written document signed by all of
the parties. Its language is 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.
(g) Section Headings. The section headings used in this Agreement
have been included for convenience and reference only.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, and all counterparts will be construed together
as one Agreement.
Signed as of April 1, 1999:
BANCORP AND BANK:
/S/
---------------------------------------
By: Victor L. Bartruff
Its: President and CEO
EXECUTIVE:
/S/
---------------------------------------
Signature of Executive
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