SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-26556
OREGON TRAIL FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Oregon 91-1829481
- ------------------------------------------------------------------------------
State or other jurisdiction of (I.R.S. Employer or organization
incorporation Identification Number)
2055 First Street, Baker City, Oregon 97814
- ------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (541) 523-6327
--------------
Securities registered pursuant to Section 12(b) of the Act: None
--------------
Securities registered pursuant to Common Stock. Par value $.01 per share
Section 12(g) of the Act: --------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. YES [ X ] NO [ ]
As of February 9, 2001 there were issued and outstanding 3,318,551 shares of
the Registrant's Common Stock. The Registrant's voting common stock is traded
and listed on the Nasdaq National Market under the symbol "OTFC".
OREGON TRAIL FINANCIAL CORP.
TABLE OF CONTENTS
Part I. Financial Information
Item I. Financial Statements (Unaudited) Page
Consolidated Balance Sheets 2
as of December 31, 2000 and March 31, 2000
Consolidated Statements of Income; For the Three and Nine 3
Months Ended December 31, 2000 and 1999
Consolidated Statements of Shareholders' Equity
(For the Nine Months Ended December 31, 2000 and for
the Year Ended March 31, 2000). 4
Consolidated Statements of Cash Flows (For the
Nine Months Ended December 31, 2000 and 1999) 5 - 6
Notes to Consolidated Financial Statements 7 - 11
Item II. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 -15
Item III. Quantitative and Qualitative Disclosures about
Market Risk 16
Part II. Other Information
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 and MARCH 31, 2000
(UNAUDITED)
($ in thousands)
December 31 March 31
ASSETS 2000 2000
----------- -----------
Cash and cash equivalents (including interest
earning accounts of $20,270 and $7,588) $ 22,431 $ 9,261
Securities:
Available for sale, at fair value (amortized cost:
$90,279 and $127,373) 90,404 122,051
Loans receivable, net of allowance for loan
losses of $2,057 and $1,396 251,855 220,591
Accrued interest receivable 2,288 2,452
Premises and equipment, net 10,308 9,902
Stock in Federal Home Loan Bank of Seattle, at cost 4,578 3,897
Real estate owned and other repossessed assets - 8
Net deferred tax asset - 1,822
Other assets 704 628
----------- -----------
TOTAL ASSETS $ 382,568 $ 370,612
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Interest-bearing $ 106,816 $ 106,285
Noninterest-bearing 19,324 14,961
Time certificates 129,831 116,489
----------- -----------
Total deposits 255,971 237,735
Advances from Federal Home Loan Bank of Seattle 66,725 76,750
Accrued expenses and other liabilities 3,152 2,333
Net deferred tax liability 293 -
Advances from borrowers for taxes and insurance 14 690
----------- -----------
Total liabilities 326,155 317,508
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock - $.01 par value; 1,000,000 shares
authorized; no shares issued or outstanding - -
Common stock, $.01 par value; 8,000,000 shares
authorized; December 31, 2000, 4,694,875 issued,
3,318,551 outstanding; March 31, 2000, 4,694,875
issued, 3,317,006 outstanding; 35 36
Additional paid-in capital 31,053 31,743
Retained earnings (substantially restricted) 27,795 27,759
Unearned shares issued to the Employee Stock
Ownership Plan (2,012) (2,415)
Unearned shares issued to the Management Recognition
and Development Plan (596) (740)
Accumulated other comprehensive income (loss) 138 (3,279)
----------- -----------
Total shareholders' equity 56,413 53,104
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 382,568 $ 370,612
=========== ===========
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
(2)
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
(UNAUDITED)
($ in thousands except per share data)
3 MOS ENDED 3 MOS ENDED 9 MOS ENDED 9 MOS ENDED
31-Dec-00 31-Dec-99 31-Dec-00 31-Dec-99
INTEREST INCOME:
Interest and fees on
loans receivable $5,231 $4,291 $15,023 $12,292
Securities:
Mortgage-backed and
related securities 1,360 1,422 4,294 3,747
U.S. government and
government agencies 574 586 1,788 1,789
Other interest and dividends 74 61 213 179
----------- ----------- ----------- -----------
Total interest income 7,239 6,360 21,318 18,007
INTEREST EXPENSE:
Deposits 2,811 2,250 7,890 6,184
Federal Home Loan Bank of
Seattle advances 1,167 873 3,753 2,272
----------- ----------- ----------- -----------
Total interest expense 3,978 3,123 11,643 8,456
Net interest income 3,261 3,237 9,675 9,551
Provision for loan losses 117 (12) 723 118
Net interest income after ----------- ----------- ----------- -----------
provision for loan losses 3,144 3,249 8,952 9,433
NONINTEREST INCOME:
Service charges on deposit
accounts 469 290 1,311 817
Loan servicing fees 101 102 299 272
Other Income (expense) (4) 14 (29) 182
----------- ----------- ----------- -----------
Total noninterest income 566 406 1,581 1,271
NONINTEREST EXPENSE:
Employee compensation and
benefits 1,944 1,563 5,083 4,452
Supplies, postage, and
telephone 187 227 641 636
Depreciation 230 173 671 483
Occupancy and equipment 201 176 524 462
FDIC insurance premium 12 32 37 91
Customer accounts 162 102 415 281
Advertising 40 124 175 371
Professional fees 65 53 251 147
Loss on sale of investment
securities 561 - 953 -
Other 140 208 515 555
----------- ----------- ----------- -----------
Total noninterest expense 3,542 2,658 9,265 7,478
Income before income taxes 168 997 1,268 3,226
Provision for income taxes 52 355 423 1,174
----------- ----------- ----------- -----------
NET INCOME $116 $642 $845 $2,052
=========== =========== =========== ===========
Basic Earnings per share $0.03 $0.18 $0.25 $0.57
=========== =========== =========== ===========
Weighted Average Number of
Shares Outstanding 3,339,166 3,486,408 3,333,054 3,593,967
Diluted Earnings per share $0.03 $0.18 $0.25 $0.54
=========== =========== =========== ===========
Weighted Average Number of
Dilutive Shares 3,403,884 3,655,537 3,355,564 3,781,177
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
(3)
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND THE YEAR ENDED MARCH 31, 2000
(UNAUDITED)
($ in thousands)
Unearned
Shares
Unearned Issued to
Shares Management Accumu-
Issued to Recogni- lated
Employee tion Other
Stock and Compre- Compre-
Additional Owner- Develop- hensive hensive
Common Stock Paid-In Retained ship ment Income Income
Shares Amount Capital Earnings Trust Plan (Loss) (Loss) Total
------ ------ ------- -------- ----- ---- ------ ------ -----
Balance, April 1,
1999 3,763,564 $42 $38,357 $26,206 ($2,951) ($1,453) ($118) $60,083
Net income 2,609 $2,609 2,609
Cash dividends
paid (1,056) (1,056)
Stock repurchased (534,228) (6) (6,350) (6,356)
Earned ESOP shares 53,656 76 536 612
New MRDP shares
granted 71 (71) 0
Earned MRDP shares 34,014 373 373
Forfeiture of MRDP
shares (411) 411 0
Unrealized loss on
securities
available for sale,
net of tax (3,161) (3,161) (3,161)
------
Comprehensive loss ($552)
--------- --- ------- ------- ------- ------- ====== ------- -------
Balance, March 31,
2000 3,317,006 36 31,743 27,759 (2,415) (740) (3,279) 53,104
Net income 845 845 845
Cash dividends
paid (809) (809)
Stock repurchased (64,508) (1) (777) (778)
Earned ESOP shares 40,239 45 403 448
Earned MRDP shares 25,814 144 144
Unearned MRDP shares 42 42
Unrealized gain on
securities
available for sale,
net of tax 3,417 3,417 3,417
------
Comprehensive income $4,262
--------- --- ------- ------- ------- ------- ====== ------- -------
Balance, December
31, 2000 3,318,551 $35 $31,053 $27,795 ($2,012) ($596) $138 $56,413
The accompanying notes are an integral part of these unaudited consolidated financial statements.
(4)
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
(UNAUDITED)
($ in thousands)
31-Dec-00 31-Dec-99
CASH FLOWS FROM OPERATING ACTIVITIES --------- ---------
Net income $845 $2,052
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 671 483
Compensation expense related to ESOP 448 482
Compensation expense related to MRDP 186 307
Amortization of deferred loan fees, net (57) (146)
Provision for loan losses 723 118
Amortization(accretion) of premiums/discounts 614 143
on investments and loans purchased
Federal Home Loan Bank of Seattle dividends (213) (179)
Gain on sale of real estate owned (16)
(Gain) loss on sale of premises and equipment (3) 9
Changes in assets and liabilities:
Accrued interest receivable 164 (176)
Other assets (373) (305)
Accrued expenses and other liabilities 1,112 (424)
--------- ---------
Net cash provided by operating activities 4,117 2,348
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations (87,417) (106,583)
Loan principal repayments 72,949 84,346
Loans purchased (17,644) (9,520)
Purchase of stock in Federal Home Loan Bank of
Seattle (468) (238)
Purchase of securities available for sale (4,000) (32,865)
Proceeds from sale of securities available
for sale 30,459 -
Proceeds from maturity of securities available
for sale - 5,004
Principal repayments of securities available
for sale 10,300 11,396
Proceeds from sales of real estate owned - 124
Proceeds from sales of premises and equipment - 212
Purchases of premises and equipment (1,074) (2,169)
--------- ---------
Net cash provided by (used) in investing activities 3,105 (50,293)
--------- ---------
(5)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits, net of withdrawals $18,236 $36,469
Change in advances from borrowers for taxes and
insurance (676) (558)
Change in borrowings from Federal Home Loan Bank
of Seattle (10,025) 20,425
Payment of cash dividend (809) (787)
Stock repurchase (778) (5,214)
--------- ---------
Net cash provided by financing activities 5,948 50,335
--------- ---------
Net increase in cash 13,170 2,391
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,261 6,276
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $22,431 $8,667
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits and other borrowings $3,964 $8,042
Income taxes 435 1,025
Noncash investing activities:
Transfer of loans to foreclosed real estate - 84
Unrealized gain(loss) on securities available
for sale, net of tax 3,417 (3,049)
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
(6)
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary for a fair presentation
of Oregon Trail Financial Corp. and Subsidiary's (the "Company") financial
condition as of December 31, 2000 and March 31, 2000, the results of
operations for the three and nine months ended December 31, 2000 and 1999 and
of cash flows for the nine months ended December 31, 2000 and 1999. All
adjustments are of a normal recurring nature. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report to Shareholders filed as an exhibit to the Company's Form 10-K
for the year ended March 31, 2000. The results of operations for the three
and nine months ended December 31, 2000 are not necessarily indicative of the
results which may be expected for the entire fiscal year.
2. REORGANIZATION
On October 3, 1997, Pioneer Bank, A Federal Savings Bank, (the "Bank")
completed a mutual-to-stock conversion and formation of the Company as its
holding company. In connection with the conversion, the Company sold
4,694,875 shares of its common stock ("Common Stock") at $10 per share, 8% or
375,590 of which shares were purchased by an Employee Stock Ownership Plan
(the "ESOP"). Proceeds from the sale were recorded as $46,949 of Common Stock
at $.01 par value and $45,681,982 of Paid in Capital. The Common Stock and
Paid in Capital at December 31, 2000 are partially offset by the unissued ESOP
shares and unissued Management Recognition and Development Plan ("MRDP")
shares.
The Company purchased all of the stock of the Bank for one-half of the net
investable proceeds of the offering. The retained earnings of the Company
represent all prior earnings of the Bank as a mutual savings bank and all
earnings since the conversion.
The primary business of the Company is overseeing the operations of the Bank.
Accordingly, the information presented herein relates primarily to the Bank.
3. COMPREHENSIVE INCOME (LOSS)
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" requires all items that are required to be recognized
under accounting standards as components of comprehensive income to be
reported in a financial statement that is displayed in equal prominence with
the other financial statements and to disclose as a part of shareholders'
equity accumulated other comprehensive income. Comprehensive income is
defined as the change in equity during a period from transactions and other
events from nonowner sources. Comprehensive income is the total of net income
and other comprehensive income, which for the Company is comprised entirely of
unrealized gains and losses on securities available for sale, net of tax.
(7)
4. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows for the
year ended March 31, 2000 and for nine months ended December 31, 2000:
December 31, 2000 March 31, 2000
(in thousands) (in thousands)
-------------- --------------
Balance, beginning of period $ 1,396 $ 1,228
Charge-offs (80) (42)
Recoveries 18 32
Provision for loan losses 723 178
-------------- --------------
Balance, end of period $ 2,057 $ 1,396
============== ==============
5. ADVANCES FROM FEDERAL HOME LOAN BANK
Borrowings at December 31, 2000 consisted of 15 term advances varying in
length from two days to 356 months totaling $66.7 million from the Federal
Home Loan Bank ("FHLB")of Seattle. The advances are collateralized in
aggregate as provided for in the Advances Security and Deposit Agreement with
the FHLB by certain mortgages or deeds of trust, government agency securities
and cash on deposit with the FHLB. Scheduled maturities of advances from the
FHLB were as follows at December 31, 2000:
Due in less than one year:
- --------------------------
Amount Range of Interest Weighted Average
Rates Interest Rate
- ---------------------------------------------------------
$22,225,000 4.93% - 6.64% 5.63%
Due within one to five years:
- -----------------------------
Amount Range of Interest Weighted Average
Rates Interest Rate
- ----------------------------------------------------------
$29,500,000 5.20% - 7.22% 6.47%
Due in greater than five years:
- -------------------------------
Amount Range of interest Weighted Average
Rates Interest Rate
- ---------------------------------------------------------
$15,000,000 7.03% - 7.12% 7.09%
(8)
6. SHAREHOLDERS' EQUITY
In February 2000, the Company received a non-objection response from the
Office of Thrift Supervision ("OTS") in connection with a request to
repurchase 5% of its outstanding shares of Common Stock, or 179,005 shares.
As of December 31, 2000, all shares had been repurchased under the program at
a weighted average price per share of $10.71. In December 2000, the Company
received an additional non-objection response from the OTS to repurchase 10%
of its outstanding shares of Common Stock or 331,850 shares. Since converting
to a stock company, the Company has repurchased 1,234,941 shares, or 26% of
shares initially outstanding.
7. EARNINGS PER SHARE
Shares held by the Company's ESOP that are committed for release are
considered common stock equivalents and are included in weighted average
shares outstanding (denominator) for the calculation of basic and diluted
Earnings Per Share ("EPS"). Diluted EPS is computed using the treasury stock
method, giving effect to potential additional common shares that were
outstanding during the period. Potential dilutive common shares include
shares awarded but not released under the Company's MRDP and stock options
granted under the Stock Option Plan. Following is a summary of the effect of
dilutive securities on weighted average number of shares (denominator) for the
basic and diluted EPS calculations. There are no resulting adjustments to net
earnings.
For the Three Months Ended For the Nine Months Ended
December 31, December 31,
- ------------------------------------------------------------------------------
2000 1999 2000 1999
- ------------------------------------------------------------------------------
Weighted average common
shares outstanding -
basic 3,339,166 3,486,408 3,333,054 3,593,967
- ------------------------------------------------------------------------------
Effect of Dilutive
Securities on
Number of Shares:
MRDP shares 18,831 119,858 15,070 138,134
Stock Options 45,887 49,271 7,440 49,076
- ------------------------------------------------------------------------------
Total Dilutive
Securities 64,718 169,129 22,510 187,210
- ------------------------------------------------------------------------------
Weighted average common
shares outstanding -
with dilution 3,403,884 3,655,537 3,355,564 3,781,177
- ------------------------------------------------------------------------------
8. REGULATORY CAPITAL
The Company's primary sources of funding include deposits, proceeds from
loan principal and interest payments, interest income on investment
securities, and FHLB advances. The Bank has a borrowing capacity at FHLB
equal to 30 percent of total assets, which on December 31, 2000 permitted
additional advances of $48.0 million. The Bank also has an unsecured line of
credit with Key Bank of $16.0 million, and a $50.0 million reverse repurchase
line of credit with Merrill Lynch which have remained unused. While
maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows and loan prepayments are greatly influenced by general
interest rates, economic conditions, and competition.
(9)
Regulations require the Bank to maintain a minimum liquidity equal to 4
percent of deposits and short-term borrowings. Liquidity is measured by cash
and readily marketable securities which are not committed, pledged, or
required as collateral for specific liabilities. The Bank had an average
liquidity ratio of 10.46% and 9.40% for the quarters ended December 31, 1999
and 2000, respectively.
The Company is not subject to separate regulatory capital requirements. The
following table illustrates the Bank's compliance with currently applicable
regulatory capital requirements at December 31, 2000 and March 31, 2000.
As of December 31, 2000:
Categorized as
"Well Capitalized"
For Capital Under Prompt
Adequacy Corrective
Actual Purposes Action Provision
(In Thousands) (In Thousands) (In Thousands)
------------------- ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
As of Dec.31,
2000:
Total Capital:
(To Risk Weighted
Assets) $ 49,636 22.7% $ 17,440 8.0% $ 21,800 10.0%
Tier I Capital:
(To Risk Weighted
Assets) 47,579 21.8 N/A N/A 13,080 6.0
Tier I Capital:
(To Tangible
Assets) 47,579 12.5 15,279 4.0 19,099 5.0
Tangible Capital:
(To Tangible
Assets) 47,579 12.5 5,730 1.5 N/A N/A
As of March 31, 2000
Categorized as
"Well Capitalized"
For Capital Under Prompt
Adequacy Corrective
Actual Purposes Action Provision
(In Thousands) (In Thousands) (In Thousands)
------------------- ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
As of March 31,
2000:
Total Capital:
(To Risk Weighted
Assets) $ 53,812 28.5% $ 15,114 8.0% $ 18,892 10.0%
Tier I Capital:
(To Risk Weighted
Assets) 52,416 27.7 N/A N/A 11,335 6.0
Tier I Capital:
(To Tangible
Assets) 52,416 14.0 14,934 4.0 18,667 5.0
Tangible Capital:
(To Tangible
Assets) 52,416 14.0 5,600 1.5 N/A N/A
(10)
9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In September 2000, the Financial Accounting Standards Board issued SFAS
No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". This pronouncement replaces SFAS No. 125,
issued in June 1996. SFAS No. 140 is effective for transfers occurring after
March 31, 2001 and for disclosures relating to securitization transactions and
collateral for fiscal years ending after December 15, 2000. The Company does
not expect the adoption of SFAS No. 140 to have a material impact on its
financial statements.
ITEM II.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Safe Harbor Clause. This report contains certain "forward-looking
statements". The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is
including this statement for the express purpose of availing itself of the
protection of such safe harbor with respect to all such forward-looking
statements. These forward-looking statements, which are included in
Management's Discussion and Analysis, describe future plans or strategies and
include the Company's expectations of future financial results. The words
"believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward-looking statements. The Company's ability to
predict results or the effect of future plans or strategies is inherently
uncertain. Factors which could affect actual results include interest rate
trends, the general economic climate in the Company's market area and the
country as a whole, loan delinquency rates, and changes in federal and state
regulation. These factors should be considered in evaluating the
forward-looking statements, and undue reliance should not be placed on such
statements.
General
The Company, an Oregon corporation, was organized on June 9, 1997 for the
purpose of becoming the holding company for the Bank upon the Bank's
conversion from a federal mutual to a federal stock savings bank
("Conversion"). The Conversion was completed on October 3, 1997. At December
31, 2000, the Company had total assets of $382.6 million, total deposits of
$256.0 million and shareholders' equity of $56.4 million. The Company is
currently not engaged in any business activity other than holding the stock of
the Bank. Accordingly, the information set forth in this report, including
financial statements and related data, relates primarily to the Bank. All
references to the Company herein include the Bank where applicable.
The Bank was organized in 1901. It is regulated by the OTS and its deposits
are insured up to applicable limits under the Savings Association Insurance
Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
The Bank is a member of the FHLB of Seattle, conducting its business through
nine office facilities, with the headquarters located in Baker City, Oregon.
The primary market areas of the Bank are the counties of Wallowa, Union,
Baker, Malheur, Harney, Grant and Umatilla in Eastern Oregon. On May 30, 2000
the Company purchased Western Bank's Pendleton branch located in Umatilla
County to increase the Bank's potential customer base.
(11)
The Bank is a community oriented financial institution whose principal
business is attracting retail deposits from the general public and using these
funds to originate one-to-four family residential mortgage loans and consumer
loans within its primary market area. The Bank also actively originates home
equity and second mortgage loans. At December 31, 2000, one-to-four family
residential mortgage loans totaled $136.7 million, or 53.8% of total loans
receivable. Beginning in 1996, the Bank began supplementing its traditional
lending activities with commercial business loans, agricultural loans and the
purchase of dealer-originated automobile contracts. As a result of these
activities at December 31, 2000 the Company had agricultural loans of $17.2
million, commercial business loans of $21.5 million, commercial real estate
loans of $20.0 million, agricultural real estate loans of $3.2 million, and
automobile loans of $27.3 million (including $22.3 million of purchased
dealer-originated contracts).
Net interest income, which is the difference between interest and dividend
income on interest-earning assets, primarily loans and investment securities,
and interest expense on interest-bearing deposits and borrowings, is the major
source of income for the Company. Because the Company depends primarily on
net interest income for its earnings, the focus of management is to create and
implement strategies that will provide stable, positive spreads between the
yield on interest-earning assets and the cost of interest-bearing liabilities.
Such strategies include increasing the origination of commercial and
agricultural loans with rates that are adjustable based upon The Wall Street
Journal prime rate or the current five-year Treasury Note yield. Commercial
(including both commercial real estate and commercial business) and
agricultural loans outstanding totaled $30.9 million and $15.7 million,
respectively, at March 31, 2000 and increased to $41.5 million and $20.4
million respectively at December 31, 2000. The Company has also increased the
origination of shorter-term consumer loans, increasing automobile loans from
$21.6 million at March 31, 2000 to $27.3 million at December 31, 2000.
To a lesser degree, the net earnings of the Company rely on the level of its
non-interest income. The Company is focusing on improvements in its fee
structure for income generation, and to control its non-interest expense,
which includes employee compensation and benefits, and occupancy and equipment
expense.
Changes in Financial Condition
At December 31, 2000, the consolidated assets of the Company totaled $382.6
million, an increase of $12.0 million, or 3.2%, compared to $370.6 million at
March 31, 2000. The primary reason for the increase was a $31.3 million
increase in net loans receivable and a $13.2 million increase in cash, offset
by $31.6 million decrease in securities. The increase in assets was funded by
an $18.2 million increase in deposits offset by a $10.0 million decrease in
FHLB borrowings.
Net loans receivable increased by $31.3 million, or 14.2%, to $251.9 million
at December 31, 2000 compared to $220.6 million at March 31, 2000. The
increase was primarily the result of continued new loan demand for all types
of loans exceeding loan repayments, as well as the purchase of $2.9 million in
loans through the Pendleton branch acquisition in May 2000.
(12)
Non-performing assets, consisting of non-accruing loans, real estate owned and
other repossessed assets, decreased $90,000 from $163,000 at March 31, 2000 to
$73,000 at December 31, 2000. Non-performing assets were .02% of total assets
at December 31, 2000 and .04% of total assets at March 31, 2000. The
allowance for loan losses was 2818% of non-performing loans at December 31,
2000, compared to 901% at March 31, 2000.
Deposits increased $18.3 million or 7.67%, from $237.7 million at March 31,
2000 to $256.0 million at December 31, 2000. This includes the purchase of
$3.4 million in deposits through the Pendleton branch acquisition in May 2000.
Advances from borrowers for taxes and insurance decreased $676,000 from
$690,000 at March 31, 2000 to $14,000 at December 31, 2000 due to the payment
of annual property taxes in November. The Company had $66.7 million in
advances from the FHLB at December 31, 2000 compared to $76.8 million at March
31, 2000. Proceeds from the sale of securities available for sale attributed
to the decrease in borrowings.
Results of Operations
Comparison of Nine Months Ended December 31, 2000 and 1999
General. The decrease in net income of $1.2 million was primarily due to an
increase in the provision for loan losses, a loss on the sale of investment
securities, and the cost of severance packages issued in connection with a
downsizing of the Company's workforce. Non-interest income increased
$310,000, or 24.4% for the nine-month period ended December 31, 2000compared
to the same period in the prior year. Net interest income increased $124,000,
or 1.3% while interest income increased $3.3 million, or 18.4%, and interest
expense increased $3.2 million, or 37.7%. The provision for loan losses
increased $605,000, or 512.7%. Non-interest expense increased $1.8 million,
or 23.9%, and the provision for income taxes decreased $751,000, or 64.0%.
Interest Income. The increase of $3.3 million in interest income was
generated by an additional $42.9 million in average interest earning assets
for the nine months ended December 31, 2000 compared to the same period in
1999. The increase in average interest-earning assets was primarily due to
increases in the average loan portfolio of $36.9 million and the average
investment portfolio of $4.9 million.
The average yield on interest earning assets increased from 7.36% for the nine
months ended December 31, 1999 to 7.68% for the same period in 2000. The
increase in the average yield was primarily due to the $36.9 million increase
in the average balance of the loan portfolio. The Company has focused on
growing commercial, agricultural and dealer-originated loans which yield a
higher rate.
Interest Expense. Interest expense on savings deposits increased $1.7 million
for the nine months ended December 31, 2000 compared to the same period in
1999. Average deposits increased by $28.2 million for the same period. The
average interest paid on deposits increased 48 basis points from 3.72% for the
nine months ended December 31, 1999 to 4.20% for the same period in 2000. The
increase in cost of deposits is primarily due to an increased balance of
higher costing certificates of deposits in the deposit mix. The cost of all
funds, including FHLB borrowings, increased from 4.04% for the nine months
ended December 31, 1999 to 4.72% for
(13)
the same period in 2000. The increase was due to a $20.4 million increase in
the average balance of FHLB borrowings. The average cost of FHLB borrowings
for the nine-month period ending December 31, 2000 was 6.38%. The increased
borrowings were used to fund increases in average interest earning assets.
Provision for Loan Losses. The provision for loan losses was $723,000 and net
charge-offs amounted to $62,000 during the nine months ended December 31, 2000
compared to a provision for loan losses of $118,000 and net recoveries of
$5,000 for the nine-month period ended December 31, 1999. The allowance for
loan losses totaled $2.1 million or .81% of total loans at December 31, 2000
compared to $1.4 million or .63% of total loans at March 31, 2000. The
provision for loan losses was increased due primarily to portfolio growth,
especially in commercial, agricultural and consumer loans.
Non-Interest Income. Non-interest income increased $310,000, or 24.4%, for
the nine months ended December 31, 2000 to $1.6 million compared to $1.3
million for the same period in the prior year. The increase in income from
deposit accounts of $494,000, or 60.5%, was due to strong growth in core
deposits as well as an improved fee schedule. A $173,000 gain on the sale of
investment real estate was realized in the nine months ended December 31,
1999.
Non-Interest Expense. Non-interest expense increased $1.8 million, or 23.9%,
to $9.3 million for the nine months ended December 31, 2000 compared to $7.5
million for the same period in 1999. This increase includes a $953,000 loss
on sale of investment securities, a $303,000 severance cost associated with a
downsizing of the Company's workforce, as well as costs associated with the
expanding infrastructure to support positioning the Company in new market
areas and widening its customer base.
Income Taxes. The effective tax rate decreased to 33.4% for the nine months
ended December 31, 2000 compared to 36.4% for the same period in the prior
year. The decrease was attributable to a lower level of net income before
taxes, as well as an investment in loans to school districts where the Bank
receives tax credits rather than interest income.
Comparison of Three Months Ended December 31, 2000 and 1999
General. The decrease in net income of $526,000 for the three months ended
December 31, 2000 compared to the same period in 1999 was primarily due to an
increase in non-interest expense and an increase in provision for loan losses.
Net interest income increased $24,000, or .7% for the three-month period ended
December 31, 2000 compared to the same period in 1999. Non-interest income
increased $160,000 while the provision for loan losses increased $129,000.
Non-interest expense increased $884,000, and the provision for income taxes
decreased $303,000.
Interest Income. The increase of $878,000 in interest income was generated by
an additional $29.9 million in average interest earning assets for the three
months ended December 31, 2000 compared to the same period in 1999. The
increase in average interest earning assets was primarily due to increases in
the average loan portfolio of $34.7 million and an increase in interest
earning accounts of $3.1 million, offset by a decrease in the average
investment portfolio of $7.9 million.
(14)
The average yield on interest-earning assets increased from 7.42% for the
three months ended December 31, 1999 to 7.74% compared to the same period in
2000. The increase in the average yield was primarily due to the $34.7
million increase in the average balance of the loan portfolio. The Company
has focused on increasing its portfolio of commercial, agricultural and
dealer-originated loans which yield a higher interest rate.
Interest Expense. Interest expense on savings deposits increased by $561,000
for the three months ended December 31, 2000 compared to the same period in
1999. Average deposits increased by $22.1 million for the same period. The
average interest paid on deposits increased 53 basis points from 3.81% for the
three months ended December 31, 1999 to 4.34% compared to the same period in
2000. The cost of deposits increased primarily due to an increased balance of
higher costing certificates of deposits in the deposit mix. The cost of all
funds, including FHLB borrowings, increased by 63 basis points from 4.17% for
the quarter ended December 31, 1999 to 4.80% for the same period in 2000. The
increase in cost of funds was due to an $8.2 million increase in the average
balance of FHLB borrowings, which are typically at a higher cost than
deposits. The average cost of borrowings for the quarter ended December 31,
2000 was 6.47%.
Provision for Loan Losses. The provision for loan losses was $117,000 and net
charge-offs were $18,000 for the three months ended December 31, 2000 compared
to a provision for loan losses of a $12,000 credit and net charge-offs of
$7,000 for the three-month period ended December 31, 1999. At December 31,
2000, the allowance for loan losses was equal to 2818% of non-performing loans
compared to 901% at March 31, 2000. The allowance for loan losses totaled
$2.1 million or .81% of total loans at December 31, 2000 compared to $1.4
million or .63% of total loans at March 31, 2000. The provision was increased
due primarily to portfolio growth, especially in commercial, agricultural and
consumer loans.
Non-Interest Income. Non-interest income increased $160,000, or 39.4%, to
$566,000 for the three months ended December 31, 2000 from $406,000 for the
same period in the prior year. The primary reason for the increase was a
$179,000 increase in service charges on deposit accounts due to an improved
fee schedule and strong deposit growth.
Non-Interest Expense. Non-interest expense increased $884,000, or 33.3% to
$3.5 million for the three months ended December 31, 2000, from $2.7 million
compared to the same period in 1999. This increase includes a $561,000 loss
on sale of investment securities, and a $303,000 severance cost associated
with downsizing the Company's workforce.
Income Taxes. The effective tax rate decreased to 31.0% for the three months
ended December 30, 2000 compared to 33.6% for the same period in 1999. The
decrease was attributable to a lower level of net income before taxes as well
as an investment in loans to school districts where the Bank receives tax
credits rather than interest income.
Liquidity and Capital Resources. For a discussion of the Company's liquidity
and capital resources see Note 8 of Notes to Consolidated Financial
Statements.
(15)
Item No. III
Quantitative and Qualitative Disclosures about Market Risk
The mismatch between maturities and interest rate sensitivities of balance
sheet items results in interest rate risk. The extent of interest rate risk
to which the Bank is subject is monitored by management by modeling the change
in net portfolio value ("NPV") over a variety of interest rate scenarios. NPV
is the present value of expected cash flows from assets, liabilities and off-
balance sheet contracts. The calculation is intended to illustrate the change
in NPV that will occur in the event of an immediate change in interest rates
of at least 200 basis points with no effect given to any steps which
management might take to counter the effect of that interest rate movement.
At March 31, 2000 there was a $20.6 million, or 55.4% decrease in the Bank's
NPV as a percent of the present value of assets, assuming a 200 point increase
in interest rates. The Bank has taken steps to decrease its interest rate
risk by better matching maturities of its balance sheet items. Based on the
OTS model at December 31, 2000 the decrease in the Bank's NPV was $12.2
million, or 23.0%.
(16)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is involved in various claims and legal actions arising
in the normal course of business. Management believes that these
proceedings will not result in a material loss to the Company.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's Annual Meeting of Stockholders ("Meeting") was held on
August 8, 2000. The results of the vote on the matters presented at
the Meeting were as follows:
1. The following individuals were elected as directors for three year
terms:
Vote For Vote Withheld
-------- -------------
Stephen R. Whittemore 2,899,177 223,920
Charles H. Rouse 2,899,402 223,695
2. The appointment of the Company's auditors, Deloitte & Touche LLP,
as Independent auditors for the fiscal year ending March 31, 2001
was approved by stockholders by the following vote:
For 3,069,958; Against 46,956; Abstain 6,183; Broker Non-Votes 0
--------- ------ ----- -
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
3(a) Articles of Incorporation of the Registrant (1)
3(b) Bylaws of the Registrant (1)
3(c) Amendment to Bylaws of the Registrant
10(a) Employment Agreement with Berniel Maughan
10(b) Amended Employment Agreement with Zane Lockwood
10(c) Severance Agreement with William H. Winegar (2)
10(d) Severance Agreement with Thomas F. Bennett (2)
10(e) Severance Agreement with Jerry Kincaid (2)
10(f) Severance Agreement with Marvin L. Sumner (2)
10(g) Amended Employee Severance Compensation Plan (3)
10(h) Pioneer Bank, a Federal Savings Bank Employee Stock Ownership
Plan (3)
10(i) Pioneer Bank, a Federal Savings Bank 401 (k) Plan (1)
10(j) Pioneer Bank Director Emeritus Plan (1)
10(k) 1998 Stock Option Plan (4)
10(l) 1998 Management Recognition and Development Plan (4)
27 Financial Data Schedule
- ----------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (333-30051), as amended.
(2) Canceled as of January 31, 2001, because they are covered under Pioneer
Bank, a Federal Savings Bank Employee Severance Compensation Plan.
(3) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended June 30, 2000.
(4) Incorporated by reference to the Registrant's Definitive Proxy Statement
for the 1998 Annual Meeting of Shareholders.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the quarter ended
December 31, 2000.
(17)
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OREGON TRAIL FINANCIAL CORP.
Date: February 16, 2001 By: /s/ Berniel L. Maughan
-------------------------------------
Berniel L. Maughan, President and
Chief Executive Officer
(18)
Exhibit 3(c)
CONSENT TO ACTION TAKEN BY THE
BOARD OF DIRECTORS OF
OREGON TRAIL FINANCIAL CORP.
The Board of Directors of Oregon Trail Financial Corporation, an Oregon
corporation (the "Corporation"), desires to take the actions set forth without
a duly and legally called meeting. Section 60.341 of the Oregon Business
Corporation Act provides that any action that may be taken at a meeting of
directors may be taken without a meeting provided that the directors
unanimously consent in writing to such action.
The undersigned, who constitute all of the directors of the Corporation,
hereby consent to the adoption of the following resolutions:
RESOLVED, that Section 15 of Article III of the Corporation's Bylaws be
amended to read in its entirety as follows:
"Section 15. Residency Requirement. To be eligible for nomination and
election to the Board of Directors or for continued service on the Board of
Directors, a nominee's or member's primary residence shall be located in a
county in which Pioneer Bank, a Federal Savings Bank, occupies a branch office
or other office, or in a county contiguous thereto. Should a director fail to
satisfy the continuing service requirement, the director shall be deemed to
have submitted his or her resignation which shall become effective upon
adoption of a resolution acknowledging such ineligibility by the Board of
Directors. The foregoing residency requirement shall not apply to any person
serving as a director of the Corporation as of the initial filing date of the
Articles of Incorporation of the Corporation."
This consent to corporate action is executed effective as of January 1,
2001.
/s/ Albert H. Durgan /s/ Edward H. Elms
- -------------------------------- -----------------------------------
Albert H. Durgan, Director Edward H. Elms, Director
/s/ Stephen R. Whittemore /s/ John W. Gentry
- -------------------------------- -----------------------------------
Stephen R. Whittemore, Director John W. Gentry, Director
/s/ Charles H. Rouse /s/ John A. Lienkaemper
- -------------------------------- -----------------------------------
Charles H. Rouse, Director John A. Lienkaemper, Director
Exhibit 10(a)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this 22nd day of May, 2000, and amended on February 12, 2001, by and
between Oregon Trail Financial Corp. (the "Company") and Berniel L. Maughan
(the "Employee").
WHEREAS, the Employee serves as the President and Chief Executive Officer
of the Company and of the Company's wholly-owned subsidiary, Pioneer Bank, a
Federal Savings Bank (the "Bank");
WHEREAS, the board of directors of the Company (the "Board of Directors")
believes it is in the best interests of the Company and its subsidiaries for
the Company to enter into this Agreement with the Employee in order to assure
continuity of management of the Company and its subsidiaries; and
WHEREAS, the Board of Directors has approved and authorized the execution
of this Agreement with the Employee;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1. Definitions.
(a) A "Change in Control" of the Company or the Bank shall be
deemed to occur if and when (1) an individual or entity other than the Company
purchases shares of the stock of the Company or the Bank pursuant to a tender
or exchange offer for such shares; (2) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
("Exchange Act")) is or becomes the beneficial owner, as defined in Section
13d-3 of the Exchange Act, directly or indirectly, of securities of the
Company or the Bank representing twenty-five percent (25%) or more of the
combined voting power of the Company's or the Bank's then outstanding shares;
(3) the membership of the Board of Directors of the Company or the Bank
changes as the result of a contested election, such that individuals who were
directors at the beginning of any twenty-four (24) month period (whether
commencing before or after the date of adoption of this Agreement) do not
constitute a majority of the Board at the end of such period; or (4)
shareholders of the Company or the Bank approve a merger, consolidation, sale
or disposition of all or substantially all of the Company's or the Bank's
assets, or a plan of partial or complete liquidation. Whether a Change in
Control has occurred shall be decided by the Board of either the Company or
the Bank, as applicable, in its reasonable, good faith discretion.
(b) The term "Consolidated Subsidiaries" means any subsidiary or
subsidiaries of the Company (or its successors) that are part of the
consolidated group of the Company (or its successors) for federal income tax
reporting.
(c) The term "Date of Termination" means the date upon which the
Employee's employment with the Company or the Bank or both ceases, as
specified in a notice of termination pursuant to Section 8 of this Agreement.
(d) The term "Effective Date" means May 22, 2000.
(e) The term "Involuntary Termination" means the termination of the
employment of Employee (i) by either the Company or the Bank or both without
his express written consent; or (ii) by the Employee by reason of a material
diminution of or interference with his duties, responsibilities or benefits,
including (without limitation) any of the following actions unless consented
to in writing by the Employee: (1) a requirement that the Employee be based
at any place other than Baker City, Oregon, or within 35 miles thereof, except
for reasonable travel on Company or Bank business; (2) a material demotion of
the Employee; (3) a material reduction in the number or seniority of personnel
reporting to the Employee or a material reduction in the frequency with which,
or in the nature of the matters with respect to which such personnel are to
report to the Employee, other than as part of a Bank- or Company-wide
reduction in staff; (4) a reduction in the Employee's salary or a material
adverse change in the Employee's perquisites, benefits, contingent benefits or
vacation; (5) a material permanent increase in the required hours of work or
the workload of the Employee; or (6) the failure of the Board of Directors (or
a board of directors of a successor of the Company) to elect him as President
and Chief Executive Officer of the Company (or a successor of the Company) or
any action by the Board of Directors (or a board of directors of a successor
of the Company) removing him from any of such offices, or the failure of the
board of directors of the Bank (or any successor of the Bank) to elect him as
President and Chief Executive Officer of the Bank (or any successor of the
Bank) or any action by such board (or board of a successor of the Bank)
removing him from any of such offices. The term "Involuntary Termination"
does not include Termination for Cause or termination of employment due to
death or permanent disability pursuant to Section 7(g) of this Agreement, or
suspension or temporary or permanent prohibition from participation in the
conduct of the affairs of a depository institution under Section 8 of the
Federal Deposit Insurance Act ("FDIA").
(f) The terms "Termination for Cause" and "Terminated for Cause"
mean termination of the employment of the Employee with either the Company or
the Bank, as the case may be, because of the Employee's dishonesty,
incompetence, willful misconduct, breach of a fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (excluding violations which do not
have a material adverse affect on the Company or the Bank) or final
cease-and-desist order, or (except as provided below) material breach of any
provision of this Agreement. No act or failure to act by the Employee shall
be considered willful unless the Employee acted, or failed to act, with an
absence of good faith and without a reasonable belief that his action or
failure to act was in the best interest of the Company. The Employee shall
not be deemed to have been Terminated for Cause unless and until there shall
have been delivered to the Employee a copy of a resolution, duly adopted by
the affirmative vote of not less than a majority of the entire membership of
the Board of Directors at a meeting of the Board duly called and held for such
purpose (after reasonable notice to the Employee and an opportunity for the
Employee, together with the Employee's counsel, to be heard before the Board),
stating that in the good faith opinion of
2
the Board of Directors the Employee has engaged in conduct described in the
preceding sentence and specifying the particulars thereof in detail.
2. Term. The term of this Agreement shall be a period of four years
commencing on the Effective Date, subject to earlier termination as provided
herein. On each anniversary of this Agreement the term shall be extended for
a period of one year in addition to the then-remaining term, provided that the
Company has not given notice to the Employee in writing at least 90 days prior
to such anniversary that the term of this Agreement shall not be extended
further, and provided further that the Employee has not received an
unsatisfactory performance review by either the Board of Directors or the
board of directors of the Bank. Reference herein to the term of this
Agreement shall refer to both the initial term and any extended terms.
3. Employment. The Employee will be employed as the President and Chief
Executive Officer of the Company and as the President and Chief Executive
Officer of the Bank. As such, the Employee shall render administrative and
management services as are customarily performed by persons situated in
similar executive capacities, and shall have such other powers and duties as
the Board of Directors or the board of directors of the Bank may prescribe
from time to time. The Employee shall also render services to any subsidiary
or subsidiaries of the Company or the Bank as requested by the Company or the
Bank from time to time consistent with his executive position. The Employee
shall devote his best efforts and reasonable time and attention to the
business and affairs of the Company and the Bank to the extent necessary to
discharge his responsibilities hereunder. The Employee may (i) serve on
corporate or charitable boards or committees, and (ii) manage personal
investments, so long as such activities do not interfere materially with the
performance of his responsibilities hereunder.
4. Cash Compensation.
(a) Salary. The Company agrees to pay the Employee during the term
of this Agreement a base salary (the "Company Salary") the annualized amount
of which shall be not less than $150,000; provided that any amounts of salary
actually paid to the Employee by any Consolidated Subsidiaries shall reduce
the amount to be paid by the Company to the Employee. The Company Salary
shall be paid no less frequently than monthly and shall be subject to
customary tax withholding. The amount of the Employee's Company Salary shall
be increased (but shall not be decreased) from time to time in accordance with
the amounts of salary approved by the Board of Directors or the board of
directors of any of the Consolidated Subsidiaries after the Effective Date.
The amount of the Company Salary shall be reviewed by the Board at least
annually during the term of this Agreement.
(b) Bonuses. The Employee shall be entitled to participate in an
equitable manner with all other executive officers of the Company and the Bank
in such performance-based and discretionary bonuses, if any, as are authorized
and declared by the Board of Directors for executive officers of the Company
and by the board of directors of the Bank for executive officers of the Bank.
In addition, Employee is eligible to earn an annual performance bonus ranging
from 30% to 50% of
3
his Company Salary, to be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the annual bonus is
awarded, unless the Employee shall elect to defer the receipt of such bonus.
The bonus performance criteria applicable solely to Employee and the
calculations will be contained in a separate document that will be mutually
agreed to by the Employee and the Company, and will be referred to as
"Executive Bonus Calculations."
(c) Signing Bonus. Upon accepting the position of President and
Chief Executive Officer and commencing his employment with the Company,
Employee shall receive a signing bonus in the amount of $25,000 to be payable
at the time of Employee's choosing, prior to March 31, 2001.
(d) Stock Option Grant. Upon commencing employment with the
Company, Employee shall receive a stock option grant of 50,000 shares of
Company common stock pursuant to the Company's stock option plan. All options
shall have an exercise price equal to the fair market value of the Company's
common stock on the date of grant, shall vest over five years in equal annual
installments with the first 20% installment vesting on April 8, 2001, shall be
intended to qualify as Incentive Stock Options and shall be exercisable for a
ten year period, subject to the terms and conditions of the stock option plan.
(e) Expenses. The Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in
performing services under this Agreement in accordance with the policies and
procedures applicable to the executive officers of the Company and the Bank,
provided that the Employee accounts for such expenses as required under such
policies and procedures.
(f) Deferral of Non-Deductible Compensation. In the event that the
Employee's aggregate compensation (including compensatory benefits which are
deemed remuneration for purposes of Section 162(m) of the Internal Revenue
Code of 1986 as amended (the "Code")) from the Company and the Consolidated
Subsidiaries for any calendar year exceeds the greater of (i) $1,000,000 or
(ii) the maximum amount of compensation deductible by the Company or any of
the Consolidated Subsidiaries in any calendar year under Section 162(m) of the
Code (the "maximum allowable amount"), then any such amount in excess of the
maximum allowable amount shall be mandatorily deferred with interest thereon
at 8% per annum, compounded annually, to a calendar year such that the amount
to be paid to the Employee in such calendar year, including deferred amounts
and interest thereon, does not exceed the maximum allowable amount. Subject
to the foregoing, deferred amounts including interest thereon shall be payable
at the earliest time permissible. All unpaid deferred amounts shall be paid
to the Employee not later than his Date of Termination unless his Date of
Termination is on a December 31st, in which case, the unpaid deferred amounts
shall be paid to the Employee on the first business day of the next succeeding
calendar year. The provisions of this subsection shall survive any
termination of the Employee's employment and any termination of this
Agreement.
4
5. Benefits.
(a) Participation in Benefit Plans. The Employee shall be entitled
to participate, to the same extent as executive officers of the Company and
the Bank generally, in all plans of the Company and the Bank relating to
pension, retirement, thrift, profit-sharing, savings, group or other life
insurance, hospitalization, medical and dental coverage, travel and accident
insurance, education, cash bonuses, and other retirement or employee benefits
or combinations thereof. In addition, the Employee shall be entitled to be
considered for benefits under all of the stock and stock option related plans
in which the Company's or the Bank's executive officers are eligible or become
eligible to participate.
(b) Fringe Benefits. The Employee shall be eligible to participate
in, and receive benefits under, any other fringe benefit plans or perquisites
which are or may become generally available to the Company's or the Bank's
executive officers, including but not limited to supplemental retirement,
incentive compensation, supplemental medical or life insurance plans, club
dues, physical examinations, financial planning and tax preparation services.
The Company will pay Employee an additional $1,200 per month which Employee
will use at his discretion to offset the expenses related to the purchase or
lease, insurance, maintenance and upkeep of an automobile as Employee deems
appropriate, with this payment continuing through the term of this Agreement.
6. Vacations; Leave. The Employee shall be entitled to paid vacation of
20 days upon the Effective Date of this Agreement, plus 2.5 days per month to
accrue through the term of this Agreement. Employee shall also be entitled to
voluntary leaves of absence, with or without pay, from time to time at such
times and upon such conditions as the Board of Directors may determine in its
discretion.
7. Termination of Employment.
(a) Involuntary Termination. If the Employee experiences an
Involuntary Termination, such termination of employment shall be subject to
the Company's obligations under this Section 7. In the event of the
Involuntary Termination of the Employee, subject to Section 7(b) of this
Agreement, the Company shall, during the lesser period of the remaining term
of this Agreement or three years following the Date of Termination (the
"Liquidated Damage Period"), as liquidated damages (i) pay to the Employee
monthly one-twelfth of the Company Salary at the annual rate in effect
immediately prior to the Date of Termination and one-twelfth of the average
annual amount of cash bonus of the Employee, based on the average amounts of
such compensation earned by the Employee from the Company and the Bank for the
two full fiscal years preceding the Date of Termination (or such lesser period
of at least one full fiscal year if Employee has not been an employee for such
two year period); and (ii) maintain substantially the same group life
insurance, hospitalization, medical, dental, prescription drug and other
health benefits, and long-term disability insurance (if any) for the benefit
of the Employee and his dependents and beneficiaries who would have been
eligible for such benefits if the Employee had not suffered Involuntary
Termination and on terms substantially as favorable to the Employee including
amounts of coverage and deductibles and other costs to him in effect
immediately prior to such Involuntary Termination (the "Employee's Health
Coverage").
5
(b) Reduction of the Company's Obligations Under Section 7(a).
(1) In the event that the Employee becomes entitled to
liquidated damages pursuant to Section 7(a), (i) the Company's obligation
thereunder with respect to cash damages shall be reduced by the amount of the
Employee's cash income, if any, earned from providing personal services during
the Liquidated Damage Period; and (ii) the Company's obligation to maintain
Health Coverage shall be reduced to the extent, if any, that the Employee
receives such benefits, on no less favorable terms, from another employer
during the Liquidated Damage Period. For purposes of this Section 7(b), the
term "cash income" shall include amounts of salary, wages, bonuses, incentive
compensation and fees paid to the Employee in cash but shall not include
shares of stock, stock options, stock appreciation rights or other earned
income not paid to the Employee in cash. To the extent the provisions of this
Section 7(b)(1) are applicable and an overpayment has been made to the
Employee as of the expiration of the Liquidated Damage Period, the Employee
shall reimburse the Company in an amount equal to the after tax benefit
realized by the Employee from such overpayment (i.e., amount realized net of
all federal, state, local, employment and medicare taxes). In making the
reimbursement calculation it shall be presumed that the Employee is subject to
the highest marginal federal and state income tax rates.
(2) The Employee agrees that in the event he becomes entitled
to liquidated damages pursuant to Section 7(a), throughout the Liquidated
Damage Period, he shall promptly inform the Company of the nature and amounts
of cash income and the type of health benefits and coverage which he earns or
receives from providing personal services, and shall provide such
documentation of such cash income and such health benefits and coverage as the
Company may request. In the event of changes to such cash income or such
health benefits or coverage from time to time, the Employee shall inform the
Company of such changes, in each case within five days after the change
occurs, and shall provide such documentation concerning the change as the
Company may request.
(c) Change in Control; Cut Back; and Tax Gross Up. In the event
that the Employee experiences an Involuntary Termination within the six months
preceding, at the time of, or within 24 months following a Change in Control,
in addition to the Company's obligations under Section 7(a) of this Agreement,
the Company shall pay to the Employee in cash, within 30 days after the later
of the date of such Change in Control or the Date of Termination, an amount
equal to 299% of the Employee's "base amount" as determined under Section 280G
of the Code, less the acceleration and lapse value of options granted to the
Employee by the Company that are taken into account in the determination of
"parachute payments" under 280G(b)(2) of the Code by virtue of vesting
acceleration or deemed vesting acceleration in connection with such Change in
Control.
In the event that any payments or benefits provided or to be provided to
the Employee pursuant to this Agreement, in combination with payments or
benefits, if any, from other plans or arrangements maintained by the Company
or any of the Consolidated Subsidiaries, constitute "excess parachute
payments" under Section 280G of the Code that are subject to excise tax under
Section 4999 of the Code, the Company shall pay to the Employee in cash an
additional amount equal to the
6
amount of the Gross Up Payment (as hereinafter defined). The "Gross Up
Payment" shall be the amount needed to ensure that the amount of such payments
and the value of such benefits received by the Employee (net of such excise
tax and any federal, state and local tax on the Company's payment to him
attributable to such excise tax) equals the amount of such payments and value
of such benefits as he would receive in the absence of such excise tax and any
federal, state and local tax on the Company's payment to him attributable to
such excise tax. The Company shall pay the Gross Up Payment within 30 days
after the Date of Termination. For purposes of determining the amount of the
Gross Up Payment, the value of any non-cash benefits and deferred payments or
benefits shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the Code. In
the event that, after the Gross Up Payment is made, the amount of the excise
tax is determined to be less than the amount calculated in the determination
of the actual Gross Up Payment made by the Company, the Employee shall repay
to the Company, at the time that such reduction in the amount of excise tax is
finally determined, the portion of the Gross Up Payment attributable to such
reduction, plus interest on the amount of such repayment at the applicable
federal rate under Section 1274 of the Code from the date of the Gross Up
Payment to the date of the repayment. The amount of the reduction of the
Gross Up Payment shall reflect any subsequent reduction in excise taxes
resulting from such repayment. In the event that, after the Gross Up Payment
is made, the amount of the excise tax is determined to exceed the amount
anticipated at the time the Gross Up Payment was made, the Company shall pay
to the Employee, in immediately available funds, at the time that such
additional amount of excise tax is finally determined, an additional payment
("Additional Gross Up Payment") equal to such additional amount of excise tax
and any federal, state and local taxes thereon, plus all interest and
penalties, if any, owned by the Employee with respect to such additional
amount of excise and other tax. The Company shall have the right to
challenge, on the Employee's behalf, any excise tax assessment against him as
to which the Employee is entitled to (or would be entitled if such assessment
is finally determined to be proper) a Gross Up Payment or Additional Gross Up
Payment, provided that all costs and expenses incurred in such a challenge
shall be borne by the Company and the Company shall indemnify the Employee and
hold him harmless, on an after-tax basis, from any excise or other tax
(including interest and penalties with respect thereto) imposed as a result of
such payment of costs and expenses by the Company.
(d) Termination for Cause. In the event of Termination for Cause,
the Company shall have no further obligation to the Employee under this
Agreement after the Date of Termination other than deferred amounts under
Section 4(f).
(e) Voluntary Termination. The Employee may terminate his
employment voluntarily at any time by a notice pursuant to Section 8 of this
Agreement. In the event that the Employee voluntarily terminates his
employment other than by reason of any of the actions that constitute
Involuntary Termination under Section 1(e)(ii) of this Agreement ("Voluntary
Termination"), the Company shall be obligated to the Employee for the amount
of his Company Salary and benefits only through the Date of Termination, at
the time such payments are due, and the Company shall have no further
obligation to the Employee under this Agreement except as provided in Section
4(f).
7
(f) Death. In the event of the death of the Employee while
employed under this Agreement and prior to any termination of employment, the
Company shall pay to the Employee's estate, or such person as the Employee may
have previously designated in writing, (i) the Company Salary which was not
previously paid to the Employee through the last day of the calendar month in
which Employee's death occurred and, if applicable, the Change in Control
payment set forth in the first paragraph of Section 7(c), provided Employee
died within 24 months following such change in control; (ii) the amounts of
any benefits or awards which, pursuant to the terms of any applicable plan or
plans, were earned with respect to the fiscal year in which the Employee died
and which the Employee would have been entitled to receive if he had continued
to be employed, and the amount of any bonus or incentive compensation for such
fiscal year which the Employee would have been entitled to receive if he had
continued to be employed, pro-rated in accordance with the portion of the
fiscal year prior to his death, provided that such amounts shall be payable
when and as ordinarily payable under the applicable plans; and (iii) the
unpaid deferred amounts under Section 4(f).
(g) Permanent Disability. For purposes of this Agreement, the term
"permanently disabled" means that the Employee has a mental or physical
infirmity which permanently impairs his ability to perform substantially his
duties and responsibilities under this Agreement and which results in (i)
eligibility of the Employee under the long-term disability plan of the Company
or the Bank, if any; or (ii) inability of the Employee to perform
substantially his duties and responsibilities under this Agreement for a
period of 90 consecutive days. Either the Company or the Bank or both may
terminate the employment of the Employee after having established that the
Employee is permanently disabled. Notwithstanding such termination, however,
the Company shall pay to Employee the remainder of his Company Salary for the
remaining term of this Agreement as if this Agreement had not been terminated,
offset by any amounts actually paid to Employee as a result of any disability
insurance payments from any source.
(h) Regulatory Action. Notwithstanding any other provisions of
this Agreement:
(1) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the affairs of a depository institution
by an order issued under Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C.
Section 1818(e)(4) and (g)(1), all obligations of the Company under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected;.
(2) If the Bank is in default (as defined in Section 3(x)(1)
of the FDIA), all obligations of the Company under this Agreement shall
terminate as of the date of default, but this provision shall not affect any
vested rights of the contracting parties; and
(3) All obligations of the Company under this Agreement shall
be terminated, except to the extent determined that continuation of this
Agreement is necessary for the continued operation of the Bank: (i) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee, at the time the Federal Deposit Insurance Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the
authority contained in Section 13(c) of the FDIA; or (ii) by the Director or
his or her designee, at the time the Director or his or her designee
8
approves a supervisory merger to resolve problems related to operation of the
Bank or when the Bank is determined by the Director to be in an unsafe or
unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by any such action.
(4) If the Employee is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served
under Section 8(e)(3) or (g)(1) of the FDIA, 12 U.S.C. Section 1818(e)(3) and
(g)(1), the Company's obligations under this Agreement shall be suspended as
of the date of service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Company may in its discretion (1) pay
the Employee all or part of the compensation withheld while its obligations
under this Agreement were suspended and (ii) reinstate in whole or in part any
of its obligations which were suspended.
(5) Any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. 1828(k) and any regulations promulgated thereunder.
8. Notice of Termination. In the event that the Company or the Bank, or
both, desire to terminate the employment of the Employee during the term of
this Agreement, the Company or the Bank, or both, shall deliver to the
Employee a written notice of termination, stating whether such termination
constitutes Termination for Cause or Involuntary Termination, setting forth in
reasonable detail the facts and circumstances that are the basis for the
termination, and specifying the date upon which employment shall terminate,
which date shall be at least 30 days after the date upon which the notice is
delivered, except in the case of Termination for Cause. In the event that the
Employee determines in good faith that he has experienced an Involuntary
Termination of his employment, he shall send a written notice to the Company
stating the circumstances that constitute such Involuntary Termination and the
date upon which his employment shall have ceased due to such Involuntary
Termination. In the event that the Employee desires to effect a Voluntary
Termination, he shall deliver a written notice to the Company, stating the
date upon which employment shall terminate, which date shall be at least 30
days after the date upon which the notice is delivered, unless the parties
agree to a date sooner.
9. Attorneys Fees. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by
the Employee as a result of (i) the Employee's contesting or disputing any
termination of employment, or (ii) the Employee's seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company (or its successors) or the Consolidated
Subsidiaries under which the Employee is or may be entitled to receive
benefits; provided that the Company's obligation to pay such fees and expenses
is subject to the Employee's prevailing with respect to the matters in dispute
in any action initiated by the Employee or the Employee's having been
determined to have acted reasonably and in good faith with respect to any
action initiated by the Company or the Bank.
9
10. Restrictive Covenants.
(a) Non-Disclosure. The Employee acknowledges that he has
acquired, and will continue to acquire while employed by the Company and/or
any Consolidated Subsidiary, special knowledge of the business, affairs,
strategies and plans of the Company and the Consolidated Subsidiaries which
has not been disclosed to the public and which constitutes confidential and
proprietary business information owned by the Company and the Consolidated
Subsidiaries, including but not limited to, information about the customers,
customer lists, software, data, formulae, processes, inventions, trade
secrets, marketing information and plans, and business strategies of the
Company and the Consolidated Subsidiaries, and other information about the
products and services offered or developed or planned to be offered or
developed by the Company and/or the Consolidated Subsidiaries ("Confidential
Information"). The Employee agrees that, without the prior written consent
of the Company, he shall not, during the term of his employment or at any
time thereafter, in any manner directly or indirectly disclose any
Confidential Information to any person or entity other than the Company and
the Consolidated Subsidiaries. Notwithstanding the foregoing, if the Employee
is requested or required (including but not limited to by oral questions,
interrogatories, requests for information or documents in legal proceeding,
subpoena, civil investigative demand or other similar process) to disclose any
Confidential Information the Employee shall provide the Company with prompt
written notice of any such request or requirement so that the Company and/or a
Consolidated Subsidiary may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section 10(a). If,
in the absence of a protective order or other remedy or the receipt of a
waiver from the Company, the Employee is nonetheless legally compelled to
disclose Confidential Information to any tribunal or else stand liable for
contempt or suffer other censure or penalty, the Employee may, without
liability hereunder, disclose to such tribunal only that portion of the
Confidential Information which is legally required to be disclosed, provided
that the Employee exercise his best efforts to preserve the confidentiality of
the Confidential Information, including without limitation by cooperating with
the Company and/or a Consolidated Subsidiary to obtain an appropriate
protective order or other reliable assurance that confidential treatment will
be accorded the Confidential Information by such tribunal. On the Date of
Termination, the Employee shall promptly deliver to the Company all copies of
documents or other records (including without limitation electronic records)
containing any Confidential Information that is in his possession or under his
control, and shall retain no written or electronic record of any Confidential
Information.
(b) Non-Compete. Employee agrees that for a period of one year
following the termination of this Agreement he shall not personally compete
with the Company or the Bank within a distance of 150 miles of the current
market areas then being served by the Company or the Bank.
The provisions of this Section 10 shall survive any termination of the
Employee's employment and any termination of this Agreement.
10
11. No Assignments.
(a) This Agreement is personal to each of the parties hereto, and
neither party may assign or delegate any of its rights or obligations
hereunder without first obtaining the written consent of the other party;
provided, however, that the Company shall require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
by an assumption agreement in form and substance satisfactory to the Employee,
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession or assignment had taken place. Failure of the Company to obtain
such an assumption agreement prior to the effectiveness of any such succession
or assignment shall be a breach of this Agreement and shall entitle the
Employee to compensation and benefits from the Company in the same amount and
on the same terms as provided for an Involuntary Termination under Section 7
hereof. For purposes of implementing the provisions of this Section 11(a),
the date on which any such succession becomes effective shall be deemed the
Date of Termination.
(b) This Agreement and all rights of the Employee hereunder shall
inure to the benefit of and be enforceable by the Employee's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
12. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, to the Company at its home
office, to the attention of the Board of Directors with a copy to the
Secretary of the Company, or, if to the Employee, to such home or other
address as the Employee has most recently provided in writing to the Company.
13. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein
otherwise provided.
14. Headings. The headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Governing Law. This Agreement shall be governed by the laws of the
State of Oregon.
17. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
11
18. Equitable and Other Judicial Relief. In the event of an actual or
threatened breach by the Employee of any of the provisions of Section 10,
following a decision by an arbitrator, the Company shall be entitled to
equitable relief in the form of an injunction from a court of competent
jurisdiction and such other equitable and legal relief as such court deems
appropriate under the circumstances. The parties agree that the Company shall
not be required to post any bond in connection with the grant or issuance of
an injunction (preliminary, temporary and/or permanent) by a court of
competent jurisdiction, and if a bond is nevertheless required, the parties
agree that it shall be in a nominal amount. The parties further agree that in
the event of a breach by the Employee of any of the provisions of Section 10,
the Company will suffer irreparable damage and its remedy at law against the
Employee is inadequate to compensate it for such damage.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
Attest: Oregon Trail Financial Corp.
/s/ Zane Lockwood /s/ Stephen R. Whittemore
- ---------------------------- ---------------------------------
Secretary By: Stephen R. Whittemore
Its: Chairman
Employee
/s/ Berniel L. Maughan
---------------------------------
Berniel L. Maughan
12
Exhibit 10(b)
EMPLOYMENT AGREEMENT
THIS AMENDED EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into as of this first day of April 2000 and amended on February 12, 2001 by
and between Oregon Trail Financial Corp. (the "Company") and Zane F. Lockwood
(the "Employee").
WHEREAS, the Employee serves as the Executive Vice President of the
Company's wholly-owned subsidiary, Pioneer Bank, a Federal Savings Bank (the
"Bank");
WHEREAS, the board of directors of the Company (the "Board of Directors")
believes it is in the best interests of the Company and its subsidiaries for
the Company to enter into this Agreement with the Employee in order to assure
continuity of management of the Company and its subsidiaries; and
WHEREAS, the Board of Directors has approved and authorized the execution
of this Agreement with the Employee;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1. Definitions.
(a) A "Change in Control" of the Company or the Bank shall be
deemed to occur if and when (1) an individual or entity other than the Company
purchases shares of the stock of the Company or the Bank pursuant to a tender
or exchange offer for such shares; (2) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
("Exchange Act")) is or becomes the beneficial owner, as defined in Section
13d-3 of the Exchange Act, directly or indirectly, of securities of the
Company or the Bank representing twenty-five percent (25%) or more of the
combined voting power of the Company's or the Bank's then outstanding shares;
(3) the membership of the Board of Directors of the Company or the Bank
changes as the result of a contested election, such that individuals who were
directors at the beginning of any twenty-four (24) month period (whether
commencing before or after the date of adoption of this Agreement) do not
constitute a majority of the Board at the end of such period; or (4)
shareholders of the Company or the Bank approve a merger, consolidation, sale
or disposition of all or substantially all of the Company's or the Bank's
assets, or a plan of partial or complete liquidation. Whether a Change in
Control has occurred shall be decided by the Board of either the Company or
the Bank, as applicable, in its reasonable, good faith discretion.
(b) The term "Consolidated Subsidiaries" means any subsidiary or
subsidiaries of the Company (or its successors) that are part of the
consolidated group of the Company (or its successors) for federal income tax
reporting.
(c) The term "Date of Termination" means the date upon which the
Employee's employment with the Company or the Bank or both ceases, as
specified in a notice of termination pursuant to Section 8 of this Agreement.
(d) The term "Effective Date" means April 1, 2000.
(e) The term "Involuntary Termination" means the termination of the
employment of Employee (i) by either the Company or the Bank or both without
his express written consent; or (ii) by the Employee by reason of a material
diminution of or interference with his duties, responsibilities or benefits,
including (without limitation) any of the following actions unless consented
to in writing by the Employee: (1) a requirement that the Employee be based
at any place other than Baker City, Oregon, or within 35 miles thereof, except
for reasonable travel on Company or Bank business; (2) a material demotion of
the Employee; (3) a material reduction in the number or seniority of personnel
reporting to the Employee or a material reduction in the frequency with which,
or in the nature of the matters with respect to which such personnel are to
report to the Employee, other than as part of a Bank- or Company-wide
reduction in staff; (4) a reduction in the Employee's salary or a material
adverse change in the Employee's perquisites, benefits, contingent benefits or
vacation; (5) a material permanent increase in the required hours of work or
the workload of the Employee; or (6) the failure of the Board of Directors (or
a board of directors of a successor of the Company) to elect him as Executive
Vice President of the Bank (or a successor of the Bank) or any action by the
Board of Directors (or a board of directors of the Bank or a successor of the
Bank) removing him from such office. The term "Involuntary Termination" does
not include Termination for Cause or termination of employment due to death or
permanent disability pursuant to Section 7(g) of this Agreement, or suspension
or temporary or permanent prohibition from participation in the conduct of the
affairs of a depository institution under Section 8 of the Federal Deposit
Insurance Act ("FDIA").
(f) The terms "Termination for Cause" and "Terminated for Cause"
mean termination of the employment of the Employee with either the Company or
the Bank, as the case may be, because of the Employee's dishonesty,
incompetence, willful misconduct, breach of a fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (excluding violations which do not
have a material adverse affect on the Company or the Bank) or final
cease-and-desist order, or (except as provided below) material breach of any
provision of this Agreement. No act or failure to act by the Employee shall
be considered willful unless the Employee acted, or failed to act, with an
absence of good faith and without a reasonable belief that his action or
failure to act was in the best interest of the Company. The Employee shall
not be deemed to have been Terminated for Cause unless and until there shall
have been delivered to the Employee a copy of a resolution, duly adopted by
the affirmative vote of not less than a majority of the entire membership of
the Board of Directors or the board of directors of the Bank at a meeting of
such board duly called and held for such purpose (after reasonable notice to
the Employee and an opportunity for the Employee, together with the Employee's
counsel, to be heard before such board), stating that in the good faith
opinion of such board the Employee has engaged in conduct described in the
preceding sentence and specifying the particulars thereof in detail.
2
2. Term. The term of this Agreement shall be a period of twenty (20)
months commencing on the Effective Date, subject to earlier termination as
provided herein. On June 1, 2001, and each anniversary of that date, the term
shall be extended for a period of one year in addition to the then-remaining
term, provided that the Company has not given notice to the Employee in
writing at least 90 days prior to such anniversary that the term of this
Agreement shall not be extended further, and provided further that the
Employee has not received an unsatisfactory performance review by either the
Board of Directors or the board of directors of the Bank. Reference herein to
the term of this Agreement shall refer to both the initial term and any
extended terms.
3. Employment. The Employee will be employed as the Executive Vice
President of the Bank. As such, the Employee shall render administrative and
management services as are customarily performed by persons situated in
similar executive capacities, and shall have such other powers and duties as
the Board of Directors or the board of directors of the Bank may prescribe
from time to time. The Employee shall also render services to the Company, or
to any subsidiary or subsidiaries of the Company or the Bank as requested by
the Company or the Bank from time to time consistent with his executive
position. The Employee shall devote his best efforts and reasonable time and
attention to the business and affairs of the Company and the Bank to the
extent necessary to discharge his responsibilities hereunder. The Employee
may (i) serve on corporate or charitable boards or committees, and (ii) manage
personal investments, so long as such activities do not interfere materially
with the performance of his responsibilities hereunder.
4. Cash Compensation.
(a) Salary. The Company agrees to pay the Employee during the term
of this Agreement a base salary (the "Company Salary") the annualized amount
of which shall be not less than $96,000; provided that any amounts of salary
actually paid to the Employee by any Consolidated Subsidiaries shall reduce
the amount to be paid by the Company to the Employee. The Company Salary
shall be paid no less frequently than monthly and shall be subject to
customary tax withholding. The amount of the Employee's Company Salary shall
be increased (but shall not be decreased) from time to time in accordance with
the amounts of salary approved by the Board of Directors or the board of
directors of any of the Consolidated Subsidiaries after the Effective Date.
The amount of the Company Salary shall be reviewed by the Board of Directors
of the board of directors of the Bank at least annually during the term of
this Agreement.
(b) Bonuses. The Employee shall be entitled to participate in any
incentive compensation or other bonus program that the Company may establish
and for which his position is eligible. In addition, the Employee may
participate in an equitable manner with all other executive officers of the
Company and the Bank in such performance-based and discretionary bonuses, if
any, as are authorized and declared by the Board of Directors for executive
officers of the Company and by the board of directors of the Bank for
executive officers of the Bank.
(c) Expenses. The Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in
performing services under this Agreement in
3
accordance with the policies and procedures applicable to the executive
officers of the Company and the Bank, provided that the Employee accounts for
such expenses as required under such policies and procedures.
(d) Deferral of Non-Deductible Compensation. In the event that the
Employee's aggregate compensation (including compensatory benefits which are
deemed remuneration for purposes of Section 162(m) of the Internal Revenue
Code of 1986 as amended (the "Code")) from the Company and the Consolidated
Subsidiaries for any calendar year exceeds the greater of (i) $1,000,000 or
(ii) the maximum amount of compensation deductible by the Company or any of
the Consolidated Subsidiaries in any calendar year under Section 162(m) of the
Code (the "maximum allowable amount"), then any such amount in excess of the
maximum allowable amount shall be mandatorily deferred with interest thereon
at 8% per annum, compounded annually, to a calendar year such that the amount
to be paid to the Employee in such calendar year, including deferred amounts
and interest thereon, does not exceed the maximum allowable amount. Subject
to the foregoing, deferred amounts including interest thereon shall be payable
at the earliest time permissible. All unpaid deferred amounts shall be paid
to the Employee not later than his Date of Termination unless his Date of
Termination is on a December 31st, in which case, the unpaid deferred amounts
shall be paid to the Employee on the first business day of the next succeeding
calendar year. The provisions of this subsection shall survive any
termination of the Employee's employment and any termination of this
Agreement.
5. Benefits.
(a) Participation in Benefit Plans. The Employee shall be entitled
to participate, to the same extent as executive officers of the Company and
the Bank generally, in all plans of the Company and the Bank relating to
pension, retirement, thrift, profit-sharing, savings, group or other life
insurance, hospitalization, medical and dental coverage, travel and accident
insurance, education, cash bonuses, and other retirement or employee benefits
or combinations thereof. In addition, the Employee shall be entitled to be
considered for benefits under all of the stock and stock option related plans
in which the Company's or the Bank's executive officers are eligible or become
eligible to participate.
(b) Fringe Benefits. The Employee shall be eligible to participate
in, and receive benefits under, any other fringe benefit plans or perquisites
which are or may become generally available to the Company's or the Bank's
executive officers, including but not limited to supplemental retirement,
incentive compensation, supplemental medical or life insurance plans, club
dues, physical examinations, financial planning and tax preparation services.
6. Vacations; Leave. The Employee shall be entitled to paid vacation in
accordance with the vacation program or policy in effect from time to time
for the Company's or the Bank's executive officers. The Employee shall also
be entitled to voluntary leaves of absence, with or without pay, from time to
time at such times and upon such conditions as the Board of Directors may
determine in its discretion.
4
7. Termination of Employment.
(a) Involuntary Termination. If the Employee experiences an
Involuntary Termination, such termination of employment shall be subject to
the Company's obligations under this Section 7. In the event of the
Involuntary Termination of the Employee, subject to Section 7(b) of this
Agreement, the Company shall, during the lesser period of the remaining term
of this Agreement or 18 months following the Date of Termination (the
"Liquidated Damage Period"), as liquidated damages (i) pay to the Employee
monthly one-twelfth of the Company Salary at the annual rate in effect
immediately prior to the Date of Termination; and (ii) maintain substantially
the same group life insurance, hospitalization, medical, dental, prescription
drug and other health benefits, and long-term disability insurance (if any)
for the benefit of the Employee and his dependents and beneficiaries who would
have been eligible for such benefits if the Employee had not suffered
Involuntary Termination and on terms substantially as favorable to the
Employee including amounts of coverage and deductibles and other costs to him
in effect immediately prior to such Involuntary Termination (the "Employee's
Health Coverage").
(b) Reduction of the Company's Obligations Under Section 7(a).
(1) In the event that the Employee becomes entitled to
liquidated damages pursuant to Section 7(a), (i) the Company's obligation
thereunder with respect to cash damages shall be reduced by the amount of the
Employee's cash income, if any, earned from providing personal services during
the Liquidated Damage Period from the date of his Involuntary Termination
until the date this Agreement would have terminated had the Involuntary
Termination not occurred; and (ii) the Company's obligation to maintain Health
Coverage shall be reduced to the extent, if any, that the Employee receives
such benefits, on no less favorable terms, from another employer during the
Liquidated Damage Period. For purposes of this Section 7(b), the term "cash
income" shall include amounts of salary, wages, bonuses, incentive
compensation and fees paid to the Employee in cash but shall not include
shares of stock, stock options, stock appreciation rights or other earned
income not paid to the Employee in cash. To the extent the provisions of this
Section 7(b)(1) are applicable and an overpayment has been made to the
Employee as of the expiration of the Liquidated Damage Period, the Employee
shall reimburse the Company in an amount equal to the after tax benefit
realized by the Employee from such overpayment (i.e., amount realized net of
all federal, state, local, employment and medicare taxes). In making the
reimbursement calculation it shall be presumed that the Employee is subject to
the highest marginal federal and state income tax rates.
(2) The Employee agrees that in the event he becomes entitled
to liquidated damages pursuant to Section 7(a), throughout the Liquidated
Damage Period, he shall promptly inform the Company of the nature and amounts
of cash income and the type of health benefits and coverage which he earns or
receives from providing personal services, and shall provide such
documentation of such cash income and such health benefits and coverage as the
Company may request. In the event of changes to such cash income or such
health benefits or coverage from time to time, the Employee shall inform the
Company of such changes, in each case within five days after the change
occurs, and shall provide such documentation concerning the change as the
Company may request.
5
(c) Change in Control; Cut Back; and Tax Gross Up. In the event
that the Employee experiences an Involuntary Termination within the six months
preceding, at the time of, or within 24 months following a Change in Control,
in addition to the Company's obligations under Section 7(a) of this Agreement,
the Company shall pay to the Employee in cash, within 30 days after the later
of the date of such Change in Control or the Date of Termination, an amount
equal to 299% of the Employee's "base amount" as determined under Section 280G
of the Code, less the acceleration and lapse value of options granted to the
Employee by the Company that are taken into account in the determination of
"parachute payments" under 280G(b)(2) of the Code by virtue of vesting
acceleration or deemed vesting acceleration in connection with such Change in
Control.
In the event that any payments or benefits provided or to be provided to
the Employee pursuant to this Agreement, in combination with payments or
benefits, if any, from other plans or arrangements maintained by the Company
or any of the Consolidated Subsidiaries, constitute "excess parachute
payments" under Section 280G of the Code that are subject to excise tax under
Section 4999 of the Code, the Company shall pay to the Employee in cash an
additional amount equal to the amount of the Gross Up Payment (as hereinafter
defined). The "Gross Up Payment" shall be the amount needed to ensure that
the amount of such payments and the value of such benefits received by the
Employee (net of such excise tax and any federal, state and local tax on the
Company's payment to him attributable to such excise tax) equals the amount of
such payments and value of such benefits as he would receive in the absence of
such excise tax and any federal, state and local tax on the Company's payment
to him attributable to such excise tax. The Company shall pay the Gross Up
Payment within 30 days after the Date of Termination. For purposes of
determining the amount of the Gross Up Payment, the value of any non-cash
benefits and deferred payments or benefits shall be determined by the
Company's independent auditors in accordance with the principles of Section
280G(d)(3) and (4) of the Code. In the event that, after the Gross Up Payment
is made, the amount of the excise tax is determined to be less than the amount
calculated in the determination of the actual Gross Up Payment made by the
Company, the Employee shall repay to the Company, at the time that such
reduction in the amount of excise tax is finally determined, the portion of
the Gross Up Payment attributable to such reduction, plus interest on the
amount of such repayment at the applicable federal rate under Section 1274 of
the Code from the date of the Gross Up Payment to the date of the repayment.
The amount of the reduction of the Gross Up Payment shall reflect any
subsequent reduction in excise taxes resulting from such repayment. In the
event that, after the Gross Up Payment is made, the amount of the excise tax
is determined to exceed the amount anticipated at the time the Gross Up
Payment was made, the Company shall pay to the Employee, in immediately
available funds, at the time that such additional amount of excise tax is
finally determined, an additional payment ("Additional Gross Up Payment")
equal to such additional amount of excise tax and any federal, state and local
taxes thereon, plus all interest and penalties, if any, owned by the Employee
with respect to such additional amount of excise and other tax. The Company
shall have the right to challenge, on the Employee's behalf, any excise tax
assessment against him as to which the Employee is entitled to (or would be
entitled if such assessment is finally determined to be proper) a Gross Up
Payment or Additional Gross Up Payment, provided that all costs and expenses
incurred in such a challenge shall be borne by the Company and the Company
shall indemnify the Employee and hold him harmless, on an after-tax basis,
from any excise or other tax (including interest and
6
<PAGE
penalties with respect thereto) imposed as a result of such payment of costs
and expenses by the Company.
(d) Termination for Cause. In the event of Termination for Cause,
the Company shall have no further obligation to the Employee under this
Agreement after the Date of Termination other than deferred amounts under
Section 4(d).
(e) Voluntary Termination. The Employee may terminate his
employment voluntarily at any time by a notice pursuant to Section 8 of this
Agreement. In the event that the Employee voluntarily terminates his
employment other than by reason of any of the actions that constitute
Involuntary Termination under Section 1(e)(ii) of this Agreement ("Voluntary
Termination"), the Company shall be obligated to the Employee for the amount
of his Company Salary and benefits only through the Date of Termination, at
the time such payments are due, and the Company shall have no further
obligation to the Employee under this Agreement except as provided in Section
4(d).
(f) Death. In the event of the death of the Employee while
employed under this Agreement and prior to any termination of employment, the
Company shall pay to the Employee's estate, or such person as the Employee may
have previously designated in writing, (i) the Company Salary which was not
previously paid to the Employee through the last day of the calendar month in
which Employee's death occurred and, if applicable, the Change in Control
payment set forth in the first paragraph of Section 7(c), provided Employee
died within 24 months following such change in control; (ii) the amounts of
any benefits or awards which, pursuant to the terms of any applicable plan or
plans, were earned with respect to the fiscal year in which the Employee died
and which the Employee would have been entitled to receive if he had continued
to be employed, and the amount of any bonus or incentive compensation for such
fiscal year which the Employee would have been entitled to receive if he had
continued to be employed, pro-rated in accordance with the portion of the
fiscal year prior to his death, provided that such amounts shall be payable
when and as ordinarily payable under the applicable plans; and (iii) the
unpaid deferred amounts under Section 4(d).
(g) Permanent Disability. For purposes of this Agreement, the term
"permanently disabled" means that the Employee has a mental or physical
infirmity which permanently impairs his ability to perform substantially his
duties and responsibilities under this Agreement and which results in (i)
eligibility of the Employee under the long-term disability plan of the Company
or the Bank, if any; or (ii) inability of the Employee to perform
substantially his duties and responsibilities under this Agreement for a
period of 90 consecutive days. Either the Company or the Bank or both may
terminate the employment of the Employee after having established that the
Employee is permanently disabled. Notwithstanding such termination, however,
the Company shall pay to Employee the remainder of his Company Salary for the
remaining term of this Agreement as if this Agreement had not been terminated,
offset by any amounts actually paid to Employee as a result of any disability
insurance payments from any source.
7
(h) Regulatory Action. Notwithstanding any other provisions of
this Agreement:
(1) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the affairs of a depository institution
by an order issued under Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C.
Section 1818(e)(4) and (g)(1), all obligations of the Company under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected;
(2) If the Bank is in default (as defined in Section 3(x)(1)
of the FDIA), all obligations of the Company under this Agreement shall
terminate as of the date of default, but this provision shall not affect any
vested rights of the contracting parties; and
(3) All obligations of the Company under this Agreement shall
be terminated, except to the extent determined that continuation of this
Agreement is necessary for the continued operation of the Bank: (i) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee, at the time the Federal Deposit Insurance Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the
authority contained in Section 13(c) of the FDIA; or (ii) by the Director or
his or her designee, at the time the Director or his or her designee approves
a supervisory merger to resolve problems related to operation of the Bank or
when the Bank is determined by the Director to be in an unsafe or unsound
condition. Any rights of the parties that have already vested, however, shall
not be affected by any such action.
(4) If the Employee is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served
under Section 8(e)(3) or (g)(1) of the FDIA, 12 U.S.C. Section 1818(e)(3) and
(g)(1), the Company's obligations under this Agreement shall be suspended as
of the date of service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Company may in its discretion (1) pay
the Employee all or part of the compensation withheld while its obligations
under this Agreement were suspended and (ii) reinstate in whole or in part any
of its obligations which were suspended.
(5) Any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. 1828(k) and any regulations promulgated thereunder.
8. Notice of Termination. In the event that the Company or the Bank, or
both, desire to terminate the employment of the Employee during the term of
this Agreement, the Company or the Bank, or both, shall deliver to the
Employee a written notice of termination, stating whether such termination
constitutes Termination for Cause or Involuntary Termination, setting forth in
reasonable detail the facts and circumstances that are the basis for the
termination, and specifying the date upon which employment shall terminate,
which date shall be at least 30 days after the date upon which the notice is
delivered, except in the case of Termination for Cause. In the event that the
Employee determines in good faith that he has experienced an Involuntary
Termination of his employment, he shall send a written notice to the Company
stating the circumstances that constitute such Involuntary Termination and the
date upon which his employment shall have ceased due to such Involuntary
8
Termination. In the event that the Employee desires to effect a Voluntary
Termination, he shall deliver a written notice to the Company, stating the
date upon which employment shall terminate, which date shall be at least 30
days after the date upon which the notice is delivered, unless the parties
agree to a date sooner.
9. Attorneys Fees. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by
the Employee as a result of (i) the Employee's contesting or disputing any
termination of employment, or (ii) the Employee's seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company (or its successors) or the Consolidated
Subsidiaries under which the Employee is or may be entitled to receive
benefits; provided that the Company's obligation to pay such fees and expenses
is subject to the Employee's prevailing with respect to the matters in dispute
in any action initiated by the Employee or the Employee's having been
determined to have acted reasonably and in good faith with respect to any
action initiated by the Company or the Bank.
10. Restrictive Covenants.
(a) Non-Disclosure. The Employee acknowledges that he has
acquired, and will continue to acquire while employed by the Company and/or
any Consolidated Subsidiary, special knowledge of the business, affairs,
strategies and plans of the Company and the Consolidated Subsidiaries which
has not been disclosed to the public and which constitutes confidential and
proprietary business information owned by the Company and the Consolidated
Subsidiaries, including but not limited to, information about the customers,
customer lists, software, data, formulae, processes, inventions, trade
secrets, marketing information and plans, and business strategies of the
Company and the Consolidated Subsidiaries, and other information about the
products and services offered or developed or planned to be offered or
developed by the Company and/or the Consolidated Subsidiaries ("Confidential
Information"). The Employee agrees that, without the prior written consent
of the Company, he shall not, during the term of his employment or at any
time thereafter, in any manner directly or indirectly disclose any
Confidential Information to any person or entity other than the Company and
the Consolidated Subsidiaries. Notwithstanding the foregoing, if the Employee
is requested or required (including but not limited to by oral questions,
interrogatories, requests for information or documents in legal proceeding,
subpoena, civil investigative demand or other similar process) to disclose any
Confidential Information the Employee shall provide the Company with prompt
written notice of any such request or requirement so that the Company and/or a
Consolidated Subsidiary may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section 10(a). If,
in the absence of a protective order or other remedy or the receipt of a
waiver from the Company, the Employee is nonetheless legally compelled to
disclose Confidential Information to any tribunal or else stand liable for
contempt or suffer other censure or penalty, the Employee may, without
liability hereunder, disclose to such tribunal only that portion of the
Confidential Information which is legally required to be disclosed, provided
that the Employee exercise his best efforts to preserve the confidentiality of
the Confidential Information, including without limitation by cooperating with
the Company and/or a Consolidated Subsidiary to obtain an appropriate
protective order or other reliable assurance that confidential treatment will
be
9
accorded the Confidential Information by such tribunal. On the Date of
Termination, the Employee shall promptly deliver to the Company all copies of
documents or other records (including without limitation electronic records)
containing any Confidential Information that is in his possession or under his
control, and shall retain no written or electronic record of any Confidential
Information.
(b) Non-Compete. Employee agrees that for a period of one year
following the termination of this Agreement he shall not personally compete
with the Company or the Bank within a distance of 150 miles of the current
market areas then being served by the Company or the Bank.
The provisions of this Section 10 shall survive any termination of the
Employee's employment and any termination of this Agreement.
11. No Assignments.
(a) This Agreement is personal to each of the parties hereto, and
neither party may assign or delegate any of its rights or obligations
hereunder without first obtaining the written consent of the other party;
provided, however, that the Company shall require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
by an assumption agreement in form and substance satisfactory to the Employee,
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession or assignment had taken place. Failure of the Company to obtain
such an assumption agreement prior to the effectiveness of any such succession
or assignment shall be a breach of this Agreement and shall entitle the
Employee to compensation and benefits from the Company in the same amount and
on the same terms as provided for an Involuntary Termination under Section 7
hereof. For purposes of implementing the provisions of this Section 11(a),
the date on which any such succession becomes effective shall be deemed the
Date of Termination.
(b) This Agreement and all rights of the Employee hereunder shall
inure to the benefit of and be enforceable by the Employee's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
12. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, to the Company at its home
office, to the attention of the Board of Directors with a copy to the
Secretary of the Company, or, if to the Employee, to such home or other
address as the Employee has most recently provided in writing to the Company.
13. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein
otherwise provided.
10
14. Headings. The headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Governing Law. This Agreement shall be governed by the laws of the
State of Oregon.
17. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
18. Equitable and Other Judicial Relief. In the event of an actual or
threatened breach by the Employee of any of the provisions of Section 10,
following a decision by an arbitrator, the Company shall be entitled to
equitable relief in the form of an injunction from a court of competent
jurisdiction and such other equitable and legal relief as such court deems
appropriate under the circumstances. The parties agree that the Company shall
not be required to post any bond in connection with the grant or issuance of
an injunction (preliminary, temporary and/or permanent) by a court of
competent jurisdiction, and if a bond is nevertheless required, the parties
agree that it shall be in a nominal amount. The parties further agree that in
the event of a breach by the Employee of any of the provisions of Section 10,
the Company will suffer irreparable damage and its remedy at law against the
Employee is inadequate to compensate it for such damage.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
Attest: OREGON TRAIL FINANCIAL CORP.
/s/ Berniel Maughan /s/ Stephen R. Whittemore
- ----------------------------- -------------------------------
By: Stephen R. Whittemore
Its: Chairman
EMPLOYEE
/s/ Zane F. Lockwood
-------------------------------
Zane F. Lockwood
11