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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Commission File Number: 000-24503
WASHINGTON BANKING COMPANY
(Name of registrant as specified in its charter)
WASHINGTON 91-1725825
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1421 S.W. BARLOW STREET
OAK HARBOR, WASHINGTON 98277
(Address of principal executive offices) (Zip Code)
(360) 679-3121
(Registrant's Telephone Number, Including Area Code)
Payment of Filing Fee (check appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14-a6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
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[WASHINGTON BANKING COMPANY LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2000
NOTICE IS HEREBY GIVEN that, pursuant to call of its directors, the
Annual Meeting of Shareholders of Washington Banking Company ("WBCO") will be
held at the Best Western Harbor Plaza, 33175 State Route 20, Oak Harbor,
Washington, on Thursday, May 25, 2000 at 3:00 p.m., to consider and to vote upon
the following matters:
1. ELECTION OF DIRECTORS. Election of three persons to serve on the
Board of Directors until 2003.
2. WHATEVER OTHER BUSINESS as may properly be brought before the Annual
Meeting, or any adjournment thereof.
Only those shareholders of record at the close of business on March 30,
2000 shall be entitled to notice of and to vote at the Annual Meeting, or any
adjournment thereof.
By Order of the Board of Directors
/s/ SHELLY L. ANGUS
Shelly L. Angus
Corporate Secretary
Oak Harbor, Washington
March 31, 2000
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. IF YOU DO ATTEND
THE ANNUAL MEETING, YOU MAY THEN WITHDRAW YOUR PROXY AND VOTE IN PERSON. THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
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WASHINGTON BANKING COMPANY
1421 SW BARLOW STREET
OAK HARBOR, WA 98277
PROXY STATEMENT
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement and the accompanying Proxy are being first sent to
shareholders on or about April 14, 2000, for use in connection with the Annual
Meeting of Shareholders of Washington Banking Company ("WBCO" or "Company") to
be held on Thursday, May 25, 2000 at 3:00 p.m. at the Best Western Harbor Plaza,
33175 State Route 20, Oak Harbor, Washington (the "Annual Meeting"). Only those
shareholders of record of WBCO's common stock, no par value, at the close of
business on March 30, 2000 (the "Record Date") will be entitled to notice of and
to vote at the Annual Meeting. The number of shares of common stock outstanding
and entitled to vote at the Annual Meeting is 4,069,285.
The enclosed Proxy is solicited by the Board of Directors of WBCO. The
costs of solicitation will be borne by WBCO. In addition to the use of the
mails, solicitation may be made, without additional compensation by directors
and officers of WBCO and regular employees of WBCO and/or its banking
subsidiary, Whidbey Island Bank (the "Bank"), by telephone, facsimile and/or
personal contact. WBCO does not expect to pay any compensation for the
solicitation of proxies, except to brokers, nominees and similar recordholders
for reasonable expenses in mailing proxy materials to beneficial owners.
On each matter before the Annual Meeting, including the election of
directors, shareholders have one vote for each share of common stock held.
Shareholders are not entitled to cumulate their votes in the election of
directors. Under Washington law, if a quorum is present at the Annual Meeting,
the nominees for election as directors who receive the greatest number of votes
cast for the election of directors by the holders of shares entitled to vote and
present in person or by proxy at the Annual Meeting will be elected directors.
With regard to the election of directors, votes may be cast in favor of
some or all of the nominees or withheld as to some or all of the nominees. Votes
withheld will have the effect of a negative vote. Abstentions may be specified
on all proposals except the election of directors. An abstention from voting
will have the practical effect of voting against a proposal since the shares
which are the subject of the abstention will be considered present and entitled
to vote but will not be voted in favor of the proposal. If shares are held in
"street name" through a broker or other nominee (that is, the broker or nominee
is the record holder but not the beneficial owner), the broker or nominee is
permitted to exercise voting discretion with respect to the election of
directors. Thus, if the broker or nominee is not given specific voting
instructions by the beneficial owner, shares may be voted on the election of
directors by the broker or nominee in their own discretion.
If the enclosed Proxy is duly executed and received in time for the
Annual Meeting, it is the intention of the persons named in the Proxy to vote
the shares represented by the Proxy "FOR" the nominees for director listed in
this Proxy Statement, unless otherwise directed. Any Proxy given by a
shareholder may be revoked before its exercise by notice to WBCO in writing,
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by a subsequently dated Proxy, or in open meeting prior to the taking of the
shareholder vote. The shares represented by properly executed Proxies that are
not revoked will be voted in accordance with the specifications in such Proxies,
or, if no preference is specified, in accordance with the recommendation of
management as specified above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of March 1, 2000 with
respect to beneficial ownership of WBCO's common stock by (a) each director and
director nominee; (b) the chief executive officer of WBCO; (c) all directors and
executive officers of WBCO as a group and (d) all shareholders known by WBCO to
be the beneficial owners of more than 5% of the outstanding shares of WBCO
common stock. Except as noted below, WBCO believes that the beneficial owners of
the shares listed below, based on information furnished by such owners, have
sole voting and investment power with respect to such shares. The percentages
shown are based on the number of shares of WBCO common stock deemed to be
outstanding, under applicable regulations (including options exercisable within
sixty days).
SHARES BENEFICIALLY OWNED AT MARCH 1, 2000
Name Number Percentage of Outstanding
Common Stock
Michal D. Cann 81,951(1) 2.02%
Marlen L. Knutson 31,860(2) *
Karl C. Krieg, III 61,832(3) 1.52%
Jay T. Lien 57,093(4) 1.41%
Robert B. Olson 68,160(5) 1.68%
Anthony B. Pickering 21,960(6) *
Alvin J. Sherman 22,976(7) *
Edward J. (Bud) Wallgren 81,694(8) 2.01%
Directors and executive officers as a group (9 persons) 483,431(9) 11.90%
Frontier Financial Corporation
PO Box 2215 371,150 9.14%
Everett, WA 98203
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* Represents less than 1.0% of WBCO's outstanding common stock.
(1) Includes 66,500 shares issuable upon exercise of options, 37,500 of
which are exercisable at $2.93 per share, 7,500 of which are exercisable
at $3.37 per share, 12,000 of which are exercisable at $4.08 per share,
4,500 of which are exercisable at $5.37 per share, 3,000 of which are
exercisable at $9.26 per share and 2,000 of which are exercisable at
$12.00 per share.
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(2) All shares are owned by the Knutson Hauling, Inc. Profit Sharing Trust,
for which Mr. Knutson is the trustee. Includes 1,560 shares issuable
upon exercise of options at $9.26 per share.
(3) Includes (a) 17,760 shares issuable upon exercise of options, 11,250 of
which are exercisable at $3.00 per share, 3,750 of which are exercisable
at $3.07 per share, 1,200 of which are exercisable at $4.08 per share
and 1,560 of which are exercisable at $9.26 per share and (b) 11,499
shares owned by the Krieg Construction 401(k) Plan, for which Mr. Krieg
is the Trustee.
(4) Includes (a) 17,760 shares issuable upon exercise of options, 11,250 of
which are exercisable at $3.00 per share, 3,750 of which are exercisable
at $3.07 per share, 1,200 of which are exercisable at $4.08 per share
and 1,560 of which are exercisable at $9.26 per share and (b) 10,383
shares owned by the Dan Garrison, Inc. Profit Sharing Plan, for which
Mr. Lien is the Trustee.
(5) Includes 17,760 shares issuable upon exercise of options, 11,250 of
which are exercisable at $3.00 per share, 3,750 of which are exercisable
at $3.07 per share, 1,200 of which are exercisable at $4.08 per share
and 1,560 of which are exercisable at $9.26 per share.
(6) Includes 1,560 shares issuable upon exercise of options at $9.26 per
share.
(7) Includes 1,560 shares issuable upon exercise of options at $9.26 per
share.
(8) Includes 2,760 shares issuable upon exercise of options, 1,200 of which
are exercisable at $4.08 per share and 1,560 of which are exercisable at
$9.26 per share.
(9) Includes 169,370 shares issuable pursuant to options exercisable within
60 days.
ELECTION OF DIRECTORS
WBCO's Articles of Incorporation provide that the number of directors to
be elected by the shareholders shall be not less than five nor more than 12 and
that, within such minimum and maximum, the exact number of directors shall be
fixed by resolution of the Board of Directors. The Board of Directors has fixed
the number of directors at ten. Directors are divided into three classes, each
class serving a period of three years. The terms of Class 2 directors expire in
2001, of Class 3 directors expire in 2002, and of Class 1 directors expire in
the year 2003. Approximately one-third of the members of the Board of Directors
are elected by the shareholders annually. The directors whose terms expire at
the Annual Meeting are Karl C. Krieg III, Robert B. Olson and Anthony B.
Pickering, all of whom have been nominated by the Board of Directors for
re-election at the Annual Meeting. If elected, such directors will hold office
until the annual meeting of shareholders in the year 2003 and until their
successors are elected and qualified.
There are currently two vacancies on the Board of Directors. The vacant
positions are not ones that are up for reelection this year. Consequently, the
Board of Directors may fill those vacancies as provided for in the Bylaws until
the next annual meeting at which those positions are elected.
Each nominee has indicated that he is able and willing to serve on the
Board of Directors. If any nominee should become unable or unwilling to serve,
the Proxy will be voted for such person as is designated by the Board of
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Directors to replace any such nominee. The Board of Directors presently has no
knowledge that any of the nominees will be unable or unwilling to serve.
INFORMATION WITH RESPECT TO NOMINEES
The following information is provided with respect to the nominees for
election at the Annual Meeting as Class 1 directors whose terms will expire in
2003, and regarding all other incumbent directors, including their respective
names, ages, principal occupations during the past five years and the year first
elected a director of WBCO or the Bank. The address for each of the nominees and
all incumbent directors is 1421 SW Barlow Street, Oak Harbor, Washington 98277.
All nominees are presently directors of WBCO and the Bank.
NOMINEES FOR ELECTION AS CLASS 1 DIRECTORS (TERMS EXPIRE IN 2003)
KARL C. KRIEG, III Director since 1990
Mr. Krieg, 63, has been the President of Krieg Construction, Inc. since 1979.
Mr. Krieg is also the President of Krieg Concrete Products, Inc. and serves as
Vice Chairman of the Board of WBCO and the Bank.
ROBERT B. OLSON Director since 1992
Mr. Olson, 64, has been the co-owner and co-managing director of H&H Properties,
Inc., a land development company, since 1991. Mr. Olson previously has served as
the President and Chief Executive Officer of four community banks in Washington
and Oregon. Mr. Olson also serves as Chairman of WIB Financial Services, Inc.
ANTHONY B. PICKERING Director since 1996
Mr. Pickering, 52, has been the owner of Max Dale's Restaurant since 1983. Mr.
Pickering currently serves as a director of Skagit Valley Hospital Foundation
and is a Trustee for the Washington State University Foundation Board of
Trustees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THESE NOMINEES.
CLASS 2 INCUMBENT DIRECTORS (TERMS EXPIRE IN 2001; ONE POSITION VACANT):
MICHAL D. CANN Director since 1992
Mr. Cann, 51, has been the President and Chief Executive Officer of WBCO since
1996, and the President and Chief Executive Officer of the Bank, and President
and Secretary of WIB Financial Services, Inc. since 1993. Mr. Cann has 29 years
of banking experience, previously having served as the President of Valley Bank,
Mt. Vernon, Washington, and in other senior management positions in other banks
and/or bank holding companies.
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MARLEN L. KNUTSON Director since 1996
Mr. Knutson, 67, is the President of Knutson Hauling, Inc., an excavation
company. Mr. Knutson was also the owner of Knutson Distributors, Inc., having
retired in 1990. Mr. Knutson previously served as Chairman of Valley Bank of Mt.
Vernon, Washington.
CLASS 3 INCUMBENT DIRECTORS (TERMS EXPIRE IN 2002; ONE POSITION VACANT):
JAY T. LIEN Director since 1987
Mr. Lien, 56, has been the President of Dan Garrison, Inc., a real estate
company, since 1986. Mr. Lien has been Chairman of the Board of WBCO and the
Bank since September 1998.
ALVIN J. SHERMAN Director since 1996
Mr. Sherman, 67, is currently retired, having served until 1997 as a co-owner of
Sherman Farms, Inc. Mr. Sherman also serves as a director of WIB Financial
Services, Inc., a subsidiary of the Bank, which offers for sale nondeposit
investment products.
EDWARD J. (BUD) WALLGREN Director since 1991
Mr. Wallgren, 61, has been the President of Island O.K. Tires, Inc. since 1968,
and is currently the owner of six Les Schwab Tire stores in Northwestern
Washington.
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES
The Board of Directors of WBCO has established certain standing
committees, including an Audit Committee and a Compensation Committee. There
presently is no standing nominating committee.
AUDIT COMMITTEE. The main functions performed by the Audit Committee include
reviewing and approving the services of the independent auditors, reviewing the
plan, scope, and audit results of the internal auditors and the independent
auditors, and reviewing the reports of bank regulatory authorities. The Audit
Committee also reviews the annual and other reports to the Securities and
Exchange Commission and the annual report to WBCO shareholders. Current members
of the Audit Committee are Messrs. Olson (Chairman), Pickering and Lien (who, as
Chairman of the Board is automatically an ex-officio member of all committees).
Mr. Orlan Dean, who retired from his position as a director effective January 1,
2000, was also a member of the Audit Committee during 1999. There were seven
meetings of the Audit Committee during 1999.
COMPENSATION COMMITTEE. The Compensation Committee reviews and recommends
remuneration arrangements for senior management. Current members of the
Compensation Committee are Messrs. Wallgren (Chairman), Knutson, Krieg, Lien and
Olson. There were five meetings of the Compensation Committee during 1999.
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BOARD OF DIRECTORS MEETINGS. There were 14 meetings of the Board of Directors of
WBCO during 1998. All directors attended at least 75% of the total meetings of
the Board and all committees of which they were members in 1999.
DIRECTOR COMPENSATION. During 1999, WBCO's directors received a monthly fee in
the amount of $700. In addition to the monthly fee, such directors received $300
for each Special Board meeting of the Company and meetings of the Board of WIB
Financial Services, Inc. attended and non-officer directors received $300 for
each committee meeting attended.
A performance based bonus plan was implemented in 1993 whereby, in
addition to the base fees discussed above, directors receive bonuses based on
WBCO's annual performance. During the fiscal year 1999, each director was paid a
bonus in the amount of $4,625. See "Executive Compensation".
SHAREHOLDER NOMINATIONS FOR 2001 ANNUAL MEETING OF SHAREHOLDERS
In accordance with WBCO's Bylaws, shareholder nominations for the 2001
Annual Meeting of Shareholders, if any, must be made in writing not less than 14
nor more than 50 days prior to the Annual Meeting, and must be delivered or
mailed to the Chairman of WBCO. However, if less than 21 days' notice of the
Annual Meeting is given to shareholders, the notification must be mailed or
delivered to the Chairman not later than the close of business on the seventh
day following the day on which notice of the Annual Meeting was mailed. Such
notification should contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of stock of WBCO that will be voted for each proposed nominee; (d) the
name and address of the notifying shareholder; and (e) the number of shares of
stock of WBCO owned by the notifying shareholder. Nominations not made in
accordance with the above requirements may be disregarded by the Chairman of the
Annual meeting, in his discretion, and upon the Chairman's instruction, the vote
teller may disregard all votes cast for such a nominee.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
This report of WBCO's Compensation Committee ("Committee") describes in
general terms the process the Committee undertakes and the factors it considers
in determining the appropriate compensation for WBCO's executive officers,
including the executive officers who are named in the Summary Compensation Table
that follows (the "Named Executives").
GENERAL
The Committee is responsible for establishing and monitoring
compensation programs for executive officers of WBCO and its subsidiaries. The
Committee reviews and approves individual executive officer salaries, bonuses
and stock option grants and other equity-based awards. The Committee is
responsible for establishing the compensation and evaluating the
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performance of the other executive officers and recommends individual
compensation levels for approval by the Committee.
COMPENSATION PHILOSOPHY
WBCO, acting through the Committee, believes that compensation of its
executive officers and other key personnel should reflect and support the goals
and strategies that WBCO establishes. The Company's objective has been to expand
its geographical presence outside Whidbey and Camano Islands, while solidifying
its market position in Island County.
While continuing to geographically expand, management's strategy is to
continue to provide a high level of personal service to its customers and to
expand loans, deposits and other products and services that it offers its
customers. Maintenance of asset quality will be emphasized by controlling
nonperforming assets and adhering to prudent underwriting standards. In
addition, management will strive to improve operating efficiencies to further
manage non-interest expense and will continue to improve internal operating
systems.
WBCO's goals are intended to create long-term value for WBCO's
shareholders, consistent with protecting the interests of depositors. The
Committee believes that these goals are best supported by attracting and
retaining well-qualified executive officers and other personnel through
competitive compensation arrangements, with emphasis on rewards for significant
contributions to WBCO's success and on aligning the interests of the executive
officers and other personnel with those of WBCO's shareholders.
The Committee follows a compensation philosophy that emphasizes options
and other stock-based compensation. This emphasis is intended to create a close
link between the interests of employees and shareholders and to focus on growth
in assets and earnings while maintaining good asset quality and increasing
long-term shareholder value.
The Committee anticipates that it will continue to emphasize stock-based
compensation in the future.
COMPENSATION PROGRAMS AND PRACTICES
WBCO's compensation program includes competitive salary and benefits, an
annual incentive cash bonus based upon attainment of Company and individual
performance goals, and opportunities for employee ownership of WBCO common stock
through a stock option program.
In determining compensation packages for individual executives, the
Committee considers various subjective and objective factors, including (1)
individual job responsibilities and experience; (2) individual performance in
terms of both qualitative and quantitative goals; (3) WBCO's overall
performance, as measured by attainment of strategic and budgeted financial goals
and prior performance; and (4) industry surveys of compensation for comparable
positions with similar institutions in the State of Washington, the Pacific
Northwest and the United States.
It is not anticipated that the limitations on deductibility, under the
Internal Revenue Code Section 162(m), of compensation to any one executive that
exceeds $1,000,000 in a single year will apply to WBCO or its subsidiaries in
the foreseeable future. In the event that such limitation would apply, the
Committee will analyze the circumstances presented and act in a manner that, in
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its judgment, is in the best interests of WBCO. This may or may not involve
actions to preserve deductibility.
Components of WBCO's compensation program are the following:
BASE SALARY. Salary levels of executive officers are designed to be
competitive within the banking industry. In setting competitive salary ranges,
the Committee works with management to periodically evaluate current salary
levels of other financial institutions with size, lines of business, geographic
locations and market place position similar to WBCO's. Base salaries for WBCO's
executive officers other than the Chief Executive Officer are based upon
recommendations by him, taking into account the subjective and objective factors
described above. The Committee reviews and approves or disapproves such
recommendations.
ANNUAL INCENTIVE BONUS. Executive officers have an annual incentive
opportunity with cash awards (bonuses) based on the overall performance of WBCO
and on attainment of individual performance targets. Performance targets may be
based on one or more of the following criteria: return on average assets, return
on average equity, core deposit growth, loan growth, asset quality, growth in
earnings. The annual bonus pool is determined by the Committee, with final
approval by the Board of Directors, each fiscal year and is based upon an
assessment of the Company's performance as compared to both budgeted and prior
fiscal year performance. Once the bonus pool has been established, the Chief
Executive Officer makes individual bonus recommendations to the Committee based
upon an evaluation of an executive's individual performance and contribution to
WBCO's overall performance.
STOCK OPTION AND OTHER STOCK-BASED COMPENSATION. Equity-based
compensation is intended to more closely align the financial interests of WBCO's
executives with long term shareholder value and to assist in the retention of
executives who are key to the success of WBCO and Whidbey Island Bank.
Equity-based compensation generally has been in the form of incentive stock
options pursuant to existing stock option plans. The Committee, with final
approval by the Board, determines from time to time which executives, if any,
will receive stock options and determines the number of shares subject to each
option. Grants of stock options and awards are based on the performance of WBCO
and various subjective factors relating primarily to the responsibilities of
individual executives, their expected future contributions to WBCO and prior
option grants. There were no stock options granted during 1999.
CHIEF EXECUTIVE OFFICER COMPENSATION
In evaluating the compensation of Mr. Cann for services rendered in
1999, the Committee considered both quantitative and qualitative factors.
In reviewing quantitative factors, the Committee reviewed WBCO's 1999
financial results and compared them with WBCO's budget and actual financial
results for 1998. Specifically, the Committee considered that (1) year-end net
income from operations increased 6% from 1998; (2) total assets, total loans and
total deposits grew by 30%, 49% and 34%, respectively from year-end 1998 to
year-end 1999; and (3) despite rapid loan growth, credit quality continued to
improve in 1999.
The Committee also considered certain qualitative accomplishments by Mr.
Cann in 1999. The Committee recognized Mr. Cann's leadership in strategically
positioning WBCO for
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future significant developments in the banking industry and in WBCO's market
area and otherwise developing long-term strategies for the organization.
Based on the foregoing and consistent with the Committee's overall
compensation philosophy, the Committee made the following determinations with
respect to Mr. Cann's compensation in 1999. Mr. Cann's annual salary in 1999 was
set at $130,000 and he was awarded an incentive (bonus) payment of $30,000.
CONCLUSION
The Committee believes that for the 1999 fiscal year, the compensation
of Mr. Cann, as well as for the other executive officers, was consistent with
WBCO's overall compensation philosophy and clearly related to the realization of
WBCO's goals and strategies for the year.
Respectfully submitted by:
Edward J. (Bud) Wallgren, Chairman Jay T. Lien
Marlen L. Knutson Robert B. Olson
Karl C. Krieg, III
STOCK OPTION PLANS
In 1992, the Company adopted an employee stock option plan ("1992
Plan"), under which 450,000 shares of common stock were authorized to be issued
upon exercise of incentive stock options ("ISOs"). Of the shares authorized by
the 1992 Plan and as of the Record Date, 346,500 shares currently are subject to
options granted but not exercised and 103,500 shares have been issued upon
exercise of options granted. The Company adopted a plan permitting grants of
nonqualified stock options ("NSOs") to directors in 1993 ("1993 Plan") for up to
150,000 shares of WBCO stock. Under the 1993 Plan and as of the Record Date,
98,700 shares are currently subject to options granted but not exercised and
50,550 shares have been issued upon exercise of options granted. The 1992 and
1993 Plans were terminated as to further grants of options upon the adoption of
the 1998 Stock Option and Restricted Stock Award Plan ("1998 Plan") which was
approved at the 1998 Annual Meeting of Shareholders. Under the 1998 Plan and as
of the Record Date, there are 41,000 shares currently subject to options granted
but not exercised. No shares have been issued upon exercise of options granted
under the 1998 Plan. There were no material differences in the principal terms
and conditions of the three stock option plans except for the differences
required to issue ISOs versus nonqualified options.
The following is a summary of the principal provisions of the 1998 Plan:
PURPOSE. The purpose of the 1998 Plan is to (1) enhance the long-term
profitability and shareholder value of WBCO by offering stock-based incentives
("Awards") to employees, directors, consultants and agents of, and individuals
to whom offers of employment have been made by, WBCO or its subsidiaries; (2)
attract and retain the best available personnel for positions of responsibility
with WBCO and its subsidiaries; and (3) encourage employees and directors to
acquire and maintain stock ownership in WBCO.
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SHARES SUBJECT TO PLAN. The 1998 Plan authorizes the issuance of up to a maximum
of 161,000 shares of WBCO common stock plus any shares subject to stock options
that are forfeited, expire or are canceled under the 1992 and 1993 Plans. To the
extent permitted by applicable law, expired, forfeited, terminated or canceled
Award shares will again become available for delivery as pursuant to the 1998
Plan.
LIMITATIONS. Not more than 25% of the aggregate number of shares available for
delivery pursuant to an Award granted under the Plan may be issued to any
participant during any one calendar year. In addition, in the case of Incentive
Stock Options, the aggregate fair market value of all shares becoming
exercisable in any one year shall not exceed $100,000.
TYPES OF AWARDS. Awards may include ISOs, which are intended to meet all the
requirements of an "Incentive Stock Option" as defined in Section 422 of Code,
NSOs and restricted stock awards.
STOCK OPTION GRANTS. The exercise price for each option granted will be
determined by WBCO's Compensation Committee ("Committee"), but for ISOs will not
be less than 100% of the fair market value of WBCO common stock on the date of
grant. For purposes of the 1998 Plan, "fair market value" means the closing
transaction price of the common stock on the date of grant as reported on the
Nasdaq National Market.
The term of options will be fixed by the Committee. No ISO granted under
the 1998 Plan can be exercisable after 10 years from the date of the grant. Each
option will be exercisable pursuant to a vesting schedule determined by the
Committee.
Since option grants and stock awards are discretionary, WBCO cannot
currently determine the number of shares that will be subject to Awards in the
future pursuant to the Plan. The Committee currently intends to make Awards
primarily to officers and key employees of WBCO and the Bank.
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation for services
rendered to WBCO or its subsidiaries in all capacities paid or accrued for the
fiscal year ended December 31, 1999 to the Company's Chief Executive Officer,
who is the only executive officer of WBCO whose aggregate cash and cash
equivalent forms of compensation exceeded $100,000 (the "Named Executive")
during 1999.
LONG TERM
COMPENSATION
NAME AND ANNUAL COMPENSATION NUMBER OF SHARES ALL OTHER
PRINCIPAL POSITION SALARY BONUS(1) UNDERLYING OPTIONS COMPENSATION(2)
------------------ --------- ---------- ------------------ ----------------
Michal D. Cann, $130,000 $30,000 85,000 $2,428
President and Chief
Executive Officer
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(1) Reflects bonus earned in 1999 but paid in 2000.
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(2) The amount disclosed in this column represents matching contributions
under WBCO's 401(k) Plan, together with term life insurance premiums.
OPTION GRANTS IN 1999
There were no options granted to the Named Executive in 1999.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table summarizes option exercises and the value of
unexercised options held by the Named Executive at December 31, 1999:
Number of Shares
Underlying Unexercised Value of Unexercised
Shares Acquired on Options (Exercisable/ In-the-Money Options
Name Exercise Value Realized Unexercisable) (Exercisable/Unexercisable)(1)
---- -------- -------------- ----------------------- -------------------------------
Michal D. Cann -0- -0- 66,500/18,500 $288,519/($13,348)
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(1) In accordance with applicable rules of the Securities and Exchange
Commission, values are calculated by subtracting the exercise price from
the fair market value of the underlying stock. For purposes of this
table, fair market value is deemed to be $8.25, the last sale price of
WBCO's common stock reported on the Nasdaq National Market on December
31, 1999.
OTHER EMPLOYEE BENEFITS
The Company maintains a salary savings 401(k) Plan for its employees,
including its executive officers. All persons employed for at least one year who
are at least 21 years of age and have a minimum of 1,000 hours service may
participate in the 401(k) Plan. Employees who participate may contribute a
portion of their salary to the 401(k) Plan; contributions of up to 5% of salary
are matched 50% by the Company, subject to certain specified limits. WBCO
contributed approximately $80,282 in matching funds to the 401(k) Plan during
1999.
Certain employees and officers of the Company may participate in the
Company's discretionary bonus plan. Contributions by the Company are based upon
year-end results of operations for the Company and attainment of goals by
individuals. In 1999, the Company contributed $363,280 to the bonus plan for
such employees and officers.
The Company provides a group health insurance plan along with the normal
vacation and sick pay benefits.
EXECUTIVE SEVERANCE AGREEMENT
The Company has entered into an executive severance agreement with Mr.
Cann. The agreement provides that Mr. Cann would receive a severance benefit in
an amount equal to two times the amount of his highest compensation paid during
the previous three years, if his employment is terminated in certain cases
preceding, and for any reason following by up to three
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years, a change in control of the Company. The Company has also entered into
severance agreements with six additional officers that provide each officer with
a severance benefit in an amount equal to one and one half times the amount of
their highest compensation paid during the previous three years, if their
employment is terminated in certain cases preceding, and for any reason
following by up to three years, a change in control of the Company.
The provisions of the severance agreements are triggered by a "change in
control," which means a change "in the ownership or effective control" or "in
the ownership of a substantial portion of the assets" of the Company, as such
quoted terms are defined and used in Section 280 G(b)(2)(A) of the Internal
Revenue Code. Severance payments are conditioned on a termination of the
executive as a result of the change in control.
BENEFICIAL OWNERSHIP AND
SECTION 16(a) REPORTING COMPLIANCE
WBCO is a reporting company pursuant to Section 12 of the Securities
Exchange Act of 1934 ("Exchange Act"). Under Section 16(a) of the Exchange Act,
and the rules promulgated thereunder, directors, officers, greater than 10%
shareholders, and certain other key personnel (the "Reporting Persons") are
required to report their ownership and any change in ownership of WBCO
securities to the Securities and Exchange Commission ("SEC"). WBCO believes that
the Reporting Persons have complied with all Section 16(a) filing requirements
applicable to them.
In making the foregoing statement, WBCO has relied solely upon written
representations of the Reporting Persons, its lack of knowledge of the existence
of any holder of greater than 10% of WBCO outstanding common stock, and copies
of the reports the Reporting Persons have filed with the SEC.
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
During 1999, certain directors and executive officers of WBCO and the
Bank, and their associates, were customers of the Bank, and it is anticipated
that such individuals will be customers of the Bank in the future. All
transactions between the Bank and its officers and directors, and their
associates, were made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other, unrelated persons. In the opinion
of management, such transactions with executive officers and directors did not
involve more than the normal risk of collectability or present other unfavorable
features.
RELATIONSHIP WITH
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG LLP ("KPMG") has been selected by WBCO to be its
independent accountants for the current year. Shareholders are not required to
take action in this selection. A representative of KPMG is expected to be
present at the Annual Meeting to make a statement, if desired, and to be
available to respond to appropriate questions.
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INFORMATION CONCERNING SHAREHOLDER PROPOSALS
A shareholder proposing to transact business at WBCO's 2001 Annual
Meeting of Shareholders must provide notice of such proposal to WBCO no later
than February 1, 2001. For shareholder proposals to be considered for inclusion
in WBCO's proxy statement and form of proxy relating to its 2001 Annual Meeting
of Shareholders, such proposals must be received by WBCO no later than November
17, 2000. If WBCO receives notices of a shareholder proposal after February 1,
2001, the persons named as proxies in the proxy statement and/or form of proxy
will have discretionary authority to vote on such shareholder proposal.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before
the Annual Meeting. If other matters should properly come before the Annual
Meeting, it is the intention of the persons appointed in the Proxy to vote the
shares represented by the Proxy in accordance with recommendations of management
on such matters.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. IF YOU
DO ATTEND THE ANNUAL MEETING, YOU MAY THEN WITHDRAW YOUR PROXY AND VOTE IN
PERSON. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
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WASHINGTON BANKING COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- MAY 25, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
WASHINGTON BANKING COMPANY
PLEASE SIGN AND RETURN IMMEDIATELY
The undersigned shareholder of WASHINGTON BANKING COMPANY ("WBCO") hereby
nominates, constitutes and appoints, Michal D. Cann and Jay T. Lien, and each of
them (with full power to act alone), the true and lawful attorneys and proxies,
each with full power of substitution, for me and in my name, place and stead, to
act and vote all the common stock of WBCO standing in my name and on its books
on March 30, 2000 at the Annual Meeting of Shareholders to be held at the Best
Western Harbor Plaza, 33175 State Route 20, Oak Harbor, Washington on May 25,
2000, at 3:00 p.m., and at any adjournment thereof, with all the powers the
undersigned would possess if personally present, as follows:
1. Election of Directors. A proposal to elect as directors the persons listed
below to serve until the Annual Meeting of Shareholders in the year 2003 or
until their successors are duly elected and qualified.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY TO VOTE
for all nominees listed below
(in the manner described below)
Instructions: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name listed below.
Karl C. Krieg, III, Robert B. Olson, Anthony B. Pickering
2. In their discretion, upon such other business as may properly come before the
Annual Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED ABOVE. IF NO
DIRECTION IS MADE,
THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS SET FORTH ABOVE.
17
Management knows of no other matters that may properly be, or which are
likely to be, brought before the Annual Meeting. However, if any other matters
are properly presented at the Annual Meeting, this Proxy will be voted in
accordance with the recommendations of management.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders for the May 25, 2000 Annual Meeting, and the accompanying
documents forwarded therewith, and ratifies all lawful action taken by the
above-named attorneys and proxies.
Date: , 2000
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Signature
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Signature
NOTE: Signature(s) should
agree with name(s) on WBCO
stock certificate(s).
Executors, administrators,
trustees and other
fiduciaries, and persons
signing on behalf of
corporations or
partnerships should so
indicate when signing. All
joint owners must sign.