Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
BANNER CORPORATION
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(Name of Registrant as Specified in Its Charter)
BANNER CORPORATION
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transactions applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
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(2) Form, schedule or registration statement no.:
N/A
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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March 16, 2001
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Banner Corporation. The meeting will be held at the Elks Lodge at 351 E. Rose
Street, Walla Walla, Washington, on Friday, April 20, 2001, at 10:00 a.m.,
local time.
The Notice of Annual Meeting of Shareholders and Proxy Statement
appearing on the following pages describe the formal business to be transacted
at the meeting. During the meeting, we will also report on the operations of
the Company. Directors and officers of the Company, as well as a
representative of Deloitte & Touche LLP, the Company's independent auditors,
will be present to respond to appropriate questions of shareholders.
It is important that your shares are represented at this meeting, whether
or not you attend the meeting in person and regardless of the number of shares
you own. To make sure your shares are represented, we urge you to complete
and mail the enclosed proxy card. If you attend the meeting, you may vote in
person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/Gary Sirmon
Gary Sirmon
President and Chief Executive Officer
BANNER CORPORATION
10 S. First Avenue
Walla Walla, Washington 99362
(509) 527-3636
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On April 20, 2001
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NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Shareholders of
Banner Corporation ("Company") will be held at the Elks Lodge at 351 E. Rose
Street, Walla Walla, Washington, on Friday, April 20, 2001, at 10:00 a.m.,
local time, for the following purposes:
(1) To elect three directors to serve for a three year term and one
director for a two year term;
(2) The approval of the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December
31, 2001;
(3) To consider and vote upon a proposal to adopt the Banner Corporation
2001 Stock Option Plan; and
(4) To consider and act upon such other matters as may properly come
before the meeting or any adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to come
before the meeting.
Any action may be taken on the foregoing proposals at the meeting on the
date specified above or on any date or dates to which, by original or later
adjournment, the meeting may be adjourned. Shareholders of record at the
close of business on March 1, 2001 are entitled to notice of and to vote at
the meeting and any adjournments or postponements thereof.
Please complete and sign the enclosed form of proxy, which is solicited
by the Board of Directors, and mail it promptly in the enclosed envelope. The
proxy will not be used if you attend the meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ALBERT H. MARSHALL
ALBERT H. MARSHALL
SECRETARY
Walla Walla, Washington
March 16, 2001
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IMPORTANT: The prompt return of proxies will save your company the expense of
further requests for proxies in order to ensure a quorum. A self-addressed
envelope is enclosed for your convenience. No postage is required if mailed
in the United States.
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PROXY STATEMENT
OF
BANNER CORPORATION
10 S. First Avenue
Walla Walla, Washington 99362
(509) 527-3636
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ANNUAL MEETING OF SHAREHOLDERS
April 20, 2001
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Banner Corporation ("Company") to be used
at the 2001 Annual Meeting of Shareholders ("Annual Meeting") of the Company.
In connection with the recent reorganization of its subsidiaries, the Company
changed its name from First Washington Bancorp, Inc. to Banner Corporation,
effective October 30, 2000. Also on that date, the Company reorganized its
banking subsidiaries into two state chartered commercial banks. As a result
of this reorganization, First Savings Bank of Washington and its divisions,
Whatcom State Bank and Seaport Citizens Bank, and Towne Bank merged into one
Washington chartered commercial bank, known as Banner Bank. Inland Empire
Bank, which changed its name to Banner Bank of Oregon, continues to be an
Oregon chartered commercial bank in order to take advantage of its status as a
community financial institution. The Company is the holding company for
Banner Bank and Banner Bank of Oregon. Banner Bank and Banner Bank of Oregon
are referred to collectively herein as the "Banks." The Annual Meeting will
be held at the Elks Lodge at 351 E. Rose Street, Walla Walla, Washington on
Friday, April 20, 2001, at 10:00 a.m., local time. This Proxy Statement and
the enclosed proxy card are being first mailed to shareholders on or about
March 16, 2001.
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VOTING AND PROXY PROCEDURE
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Shareholders Entitled to Vote. Shareholders of record as of the close of
business on March 1, 2001 are entitled to one vote for each share of common
stock ("Common Stock") of the Company then held. As of March 1, 2001, the
Company had 12,000,753 shares of Common Stock issued and outstanding.
If you are a beneficial owner of Company common stock held by a broker,
bank or other nominee (i.e., in "street name"), you will need proof of
ownership to be admitted to the meeting. A recent brokerage statement or
letter from a bank or broker are examples of proof of ownership. If you want
to vote your shares of Company common stock held in street name in person at
the meeting, you will have to get a written proxy in your name from the
broker, bank or other nominee who holds your shares.
Quorum. The presence, in person or by proxy, of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum at the Annual Meeting. Abstentions will be
counted as shares present and entitled to vote at the Annual Meeting for
purposes of determining the existence of a quorum. Broker non-votes will be
considered shares present and will be included in determining whether a quorum
is present.
Voting. The Board of Directors solicits proxies so that each shareholder
has the opportunity to vote on the proposals to be considered at the Annual
Meeting. When a proxy card is returned properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. Where no instructions are indicated, proxies will be voted in
accordance with the recommendations of the Board of Directors. If a
shareholder of record attends the Annual Meeting, he or she may vote by
ballot. The Board recommends a vote:
. FOR the election of the nominees for director;
1
. FOR the approval of the appointment of Deloitte & Touche LLP as
independent auditors; and
. FOR the adoption of the Banner Corporation 2001 Stock Option Plan.
The affirmative vote of a plurality of the votes cast at the Annual
Meeting is required for the election of directors. Shareholders are not
permitted to cumulate their votes for the election of directors. Votes may be
cast for or withheld from each nominee. Votes that are withheld and broker
non-votes will have no effect on the outcome of the election because the
nominees receiving the greatest number of votes will be elected. In voting on
the ratification of the appointment of Deloitte & Touche LLP as independent
auditors and the proposal to adopt the Banner Corporation 2001 Stock Option
Plan, you may vote in favor of the proposals, vote against the proposals or
abstain from voting. These matters will be decided by the affirmative vote of
a majority of the votes present in person or represented by proxy at the
annual meeting and broker non-votes will have no effect on the voting.
However, abstentions will have the effect of a vote against the proposal.
Revocation of a Proxy. Shareholders who execute proxies retain the right
to revoke them at any time before they are voted. Proxies may be revoked by
written notice delivered in person or mailed to the Secretary of the Company
or by filing a later proxy prior to a vote being taken on a particular
proposal at the Annual Meeting. Attendance at the Annual Meeting will not
automatically revoke a proxy, but a shareholder of record in attendance may
request a ballot and vote in person, thereby revoking a prior granted proxy.
If your Company common stock is held in street name, you will receive
instructions from your broker, bank or other nominee that you must follow in
order to have your shares voted. Your broker or bank may allow you to deliver
your voting instructions via the telephone or the Internet. Please see the
instruction form that accompanies this proxy statement. If you wish to change
your voting instructions after you have returned your voting instruction form
to your broker or bank, you must contact your broker or bank.
Participants in the Banner Corporation ESOP. If a shareholder is a
participant in the Banner Corporation Employee Stock Ownership Plan (the
"ESOP"), the proxy card represents a voting instruction to the trustees of the
ESOP as to the number of shares in the participant's plan account. Each
participant in the ESOP may direct the trustees as to the manner in which
shares of Common Stock allocated to the participant's plan account are to be
voted. Unallocated shares of Common Stock held by the ESOP and allocated
shares for which no voting instructions are received will be voted by the
trustees in the same proportion as shares for which the trustees have received
voting instructions.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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Persons and groups who beneficially own in excess of 5% of the Company's
Common Stock are required to file certain reports disclosing such ownership
pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act").
Based on such reports, the following table sets forth, as of February 1, 2001,
certain information as to those persons who were beneficial owners of more
than 5% of the outstanding shares of Common Stock. To the Company's
knowledge, no other person or entity beneficially owned more than 5% of the
Company's outstanding Common Stock as of February 1, 2001. Shares reflect the
10% stock dividend paid by the Company on August 17, 1998 and November 10,
2000.
The following table also sets forth, as of February 1, 2001, information
as to the shares of Common Stock beneficially owned by (a) each director, (b)
each of the executive officers named in the Summary Compensation Table found
below (the "named executive officers") and (c) all executive officers and
directors of the Company as a group.
2
Number of Shares Percent of Shares
Name Beneficially Owned (1) Outstanding
- ---- ---------------------- -----------
Beneficial Owners of More Than 5%
Banner Corporation 1,031,015 (2) 8.6%
Employee Stock Ownership Plan Trust
Westport Asset Management, Inc. 1,055,483 (3) 8.8
253 Riverside Avenue
Westport, Connecticut 06880
Dimensional Fund Advisors 944,372 (4) 7.9
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Directors
Robert D. Adams 85,281 (5) *
David B. Casper 90,264 (6) *
Margaret C. Langlie 16,003 *
Dean W. Mitchell 78,628 (7) *
Brent A. Orrico 116,995 (8) *
Wilber Pribilsky 95,036 (9) *
Marvin Sundquist 99,981 *
Named Executive Officers
Gary Sirmon** 341,359 2.8
Jesse G. Foster** 87,705 *
S. Rick Meikle** 96,736 *
Lloyd W. Baker 24,113 (10)
Michael K. Larsen 152,502 (11) 1.3
All Executive Officers and 1,291,022 10.8
Directors as a Group
(13 persons)
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* Less than 1 percent of shares outstanding.
** Messrs. Sirmon, Foster and Meikle are also directors of the Company.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner, for purposes of this table, of any shares of
Common Stock if he or she has voting and/or investment power with respect
to such security. The table includes shares owned by spouses, other
immediate family members in trust, shares held in retirement accounts or
funds for the benefit of the named individuals, and other forms of
ownership, over which shares the persons named in the table may possess
voting and/or investment power. Shares held in accounts under the
Company's ESOP and shares of restricted stock granted under the Company's
Management Recognition and Development Plan, as to which the holders have
voting power but not investment power, are included as follows: Mr.
Adams, 4,134 shares; Mr. Casper, 4,134 shares; Mr. Mitchell, 4,134
shares; Mr. Pribilsky, 4,134 shares; Mr.
(footnotes continued on next page)
3
Sundquist, 4,134 shares; Mr. Orrico, 2,420 shares; Ms. Langlie, 3,025
shares; Mr. Sirmon, 26,304 shares; Mr. Foster, 1,801 shares; Mr. Meikle,
1,487 shares; Mr. Baker, 4,619 shares; Mr. Larsen, 16,997 shares; and all
executive officers and directors as a group, 78,316 shares. The amounts
shown also include the following amounts of Common Stock which the
indicated individuals have the right to acquire within 60 days of
February 1, 2001 through the exercise of stock options granted pursuant
to the Company's stock option plans: Mr. Adams, 37,395; Mr. Casper,
37,395; Mr. Mitchell, 37,395; Mr. Pribilsky, 37,395; Mr. Sundquist,
37,395; Mr. Orrico, 6,754; Ms. Langlie, 2,904; Mr. Sirmon, 198,456; Mr.
Foster, 83,920; Mr. Meikle, 61,593; Mr. Baker, 11,377; Mr. Larsen,
83,119; and all executive officers and directors as a group, 640,500.
(2) Under the terms of the ESOP, the trustees will vote unallocated shares
and allocated shares for which no voting instructions are received in the
same proportion as shares for which the trustees have received voting
instructions from participants. As of March 1, 2001, 397,738 shares have
been allocated to participants' accounts, excluding allocations to
individuals who no longer participate in the ESOP. The trustees of the
ESOP are Directors Casper, Mitchell, Sundquist, Adams, Pribilsky, Orrico
and Langlie.
(3) Information concerning the shares owned by Westport Asset Management,
Inc. as of December 31, 2000 was obtained from a Schedule 13G dated
February 12, 2001. According to this filing, Westport Asset Management,
Inc., an investment advisor registered under the Investment Advisors Act
of 1940, has shared voting power with respect to 789,283 shares and
shared dispositive power with respect to 1,055,483 shares.
(4) Information concerning the shares owned by Dimensional Fund Advisors as
of December 31, 2000 was obtained from a Schedule 13G dated February 2,
2001. According to this filing, Dimensional Fund Advisors, an investment
advisor registered under the Investment Advisors Act of 1940, has sole
voting and dispositive power with respect to 944,372 shares.
(5) Includes 2,622 shares owned by Mr. Adams' wife.
(6) Includes 1,718 shares owned by a company controlled by Mr. Casper.
(7) Includes 1,210 shares owned by a company controlled by Mr. Mitchell.
(8) Includes 11,964 shares owned by companies controlled by Mr. Orrico and
85,283 shares owned by trusts directed by Mr. Orrico.
(9) Includes 3,025 shares owned by a company controlled by Mr. Pribilsky.
(10) Includes 847 shares owned by Mr. Baker's wife.
(11) Includes 2,752 shares owned by Mr. Larsen's wife.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
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The Board of Directors is divided into three classes with three-year
staggered terms, with one third of the directors elected each year. Three
directors will be elected at the Annual Meeting to serve for a three year
period, or until their respective successors have been elected and qualified.
The nominees for election this year are Gary Sirmon, Wilber Pribilsky, Robert
D. Adams and Steve Sundquist. Marvin Sundquist will retire as a director of
the Company, effective April 20, 2001, and Steve Sundquist, Marvin Sundquist's
son, has been nominated to fill the vacancy created by his retirement.
It is intended that the proxies solicited by the Board of Directors will
be voted for the election of the above named nominees. If any nominee is
unable to serve, the shares represented by all valid proxies will be voted for
the election of such substitute as the Board of Directors may recommend or the
Board of Directors may adopt a resolution to amend the Bylaws and reduce the
size of the Board. At this time the Board of Directors knows of no reason why
any nominee might be unavailable to serve.
The Board of Directors recommends a vote "FOR" the election of Messrs.
Sirmon, Pribilsky, Adams and Sundquist (Steve).
The following table sets forth certain information regarding the nominees
for election at the Annual Meeting, as well as information regarding those
directors continuing in office after the Annual Meeting.
4
Year First Elected
or Appointed Term to
Name Age (1) Director (2) Expire
---- ------- ------------ ------
BOARD NOMINEES
Gary Sirmon 57 1983 2004(3)
Wilber Pribilsky 67 1987 2004(3)
Robert D. Adams 59 1984 2004(3)
Steve Sundquist 50 2001 2003(4)
DIRECTORS CONTINUING IN OFFICE
Jesse G. Foster 62 1996 2002
Dean W. Mitchell 66 1979 2002
S. Rick Meikle 53 1998 2002
Brent A. Orrico 51 1999 2002
David B. Casper 64 1976 2003
Margaret C. Langlie 55 2000 2003
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(1) As of December 31, 2000.
(2) Includes prior service on the Board of Directors of Banner Bank.
(3) Assuming the individual is re-elected.
(4) Assuming the individual is elected.
The present principal occupation and other business experience during the
last five years of each nominee for election and each director continuing in
office is set forth below:
Gary Sirmon is Chief Executive Officer, President and a Director of the
Company and Chief Executive Officer and a Director of Banner Bank. He joined
Banner Bank in 1980 as an executive vice president and became its Chief
Executive Officer in 1982.
Wilber Pribilsky is the Chairman and Chief Executive Officer of Bur-Bee
Co., Inc., a wholesale food distributor, with which he has been affiliated for
53 years.
Robert D. Adams is a partner in and the President and Chief Executive
Officer of Carroll Adams Tractor Co., which sells and rents farm, industrial
and consumer equipment and with which he has been affiliated for 31 years.
Steve Sundquist is the President and General Manager of SundRoy, LLC, a
fruit packing and shipping company. He is also the Secretary and Management
Team Leader of Sundquist Fruit and Cold Storage, Inc., a fruit grower and
shipper.
Jesse G. Foster is the Chief Executive Officer, President and a Director
of Banner Bank of Oregon, formerly Inland Empire Bank. He joined the Bank in
1962.
Dean W. Mitchell is Manager of Tri-Cities Communications, Inc., which
operates KONA AM and FM radio stations, with which he has been affiliated for
43 years.
S. Rick Meikle is the President and a Director of Banner Bank. He was
formerly the Chief Executive Officer, President and a Director of Towne Bank,
which he helped form in 1991.
5
Brent A. Orrico is a former Director of Towne Bank. He is President of
FAO Corporation, an asset management company, and is a principal of B & O
Financial Management Company.
David B. Casper is President of David Casper Ranch, Inc., a farming
operation he has owned since 1973.
Margaret C. Langlie is a former Director of Towne Bank, which she helped
found in 1991. She is a partner in the law firm of Langlie & Goddu which has
offices in Woodinville and Leavenworth, Washington.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The Board of Directors of the Company conducts its business through
meetings of the Board and through its committees. During the calendar year
ended December 31, 2000, the Board of Directors of the Company held 13
meetings. No director of the Company attended fewer than 75% of the total
meetings of the Board and committees on which such person served during this
period.
The Executive Committee, consisting of Directors Casper, Adams, Pribilsky
and Sirmon, acts for the Board of Directors when formal Board action is
required between regular meetings. This committee has the authority to
exercise all powers of the full Board of Directors, except that it does not
have the power, among other things, to: declare dividends, issue stock, amend
the Bylaws, or approve any agreement of merger or consolidation other than
mergers with a subsidiary of the Company. The Executive Committee did not
meet during the year ended December 31, 2000.
The Audit Committee, consisting of Directors Adams, Pribilsky, Casper,
Mitchell, Sundquist (Marvin), Orrico and Langlie, oversees management's
fulfillment of its financial reporting responsibilities and maintenance of an
appropriate internal control system. It also recommends the appointment of
the Company's independent public accountants and oversees the activities of
the Company's internal audit functions. The Audit Committee has a Charter
which specifies its obligation and the Audit Committee believes it has
fulfilled its responsibility under the Charter. All members of the Audit
Committee are non-employee directors. The Audit Committee met seven times
during the year ended December 31, 2000.
The Compensation Committee, which consists of Directors, Mitchell,
Casper, Sundquist (Marvin), Adams, Pribilisky, Orrico and Langlie, sets salary
policies and levels for senior management and oversees all salary and
incentive compensation programs for the Company. The Compensation Committee
met two times during the year ended December 31, 2000.
The Incentive Stock Option Plan Committee, consisting of Directors
Casper, Mitchell, Sundquist (Marvin), Adams, Pribilsky, Orrico and Langlie,
administers the Company's stock option plan. This committee met six times
during the year ended December 31, 2000.
The Management Recognition and Development Plan Committee, consisting of
Directors Casper, Mitchell, Sundquist (Marvin), Adams, Pribilsky, Orrico and
Langlie, administers the Company's Management Recognition and Development
Plan. This committee met once during the year ended December 31, 2000.
The Nominating Committee, which consists of the entire Board of
Directors, selects nominees for the election of directors and develops a list
of nominees for board vacancies. The Nominating Committee met once during the
year ended December 31, 2000.
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DIRECTORS' COMPENSATION
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Non-employee directors of the Company receive a retainer of $12,000 and a
fee of $1,000 per meeting attended, $500 per special meeting attended and $500
per committee meeting attended. Officers of the Company or its
6
subsidiaries who are also directors do not receive any fee or remuneration for
services as members of the Board of Directors or of any committee of the Board
of Directors.
In order to encourage the retention of qualified directors, the Company
has entered into deferred fee agreements whereby directors may defer all or a
portion of their regular fees until retirement. Each director may direct the
investment of the deferred fees toward the purchase of life insurance or the
Company's Common Stock. The Company has established a grantor trust to hold
the Common Stock investments. The assets of the trust are considered part of
the Company's general assets and the directors have the status of unsecured
creditors of the Company with respect to the trust assets. The deferred fee
agreements provide pre-retirement death and disability benefits in an amount
based on the value of the director's account balance upon the occurrence of
either event. At retirement, a director may elect to receive the balance of
his account in a lump sum or in annual installments over a period not
exceeding the life expectancy of the director and his beneficiary. At
December 31, 2000, the Company's estimated deferred compensation liability
expense accrual with respect to non-employee directors was $2.0 million.
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EXECUTIVE COMPENSATION
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Summary Compensation Table. The following information is furnished for
the Chief Executive Officer of the Company and for the four highest paid
executive officers of the Company who received salary and incentive
compensation in excess of $100,000 for the year ended December 31, 2000.
Shares reflect the 10% stock dividend paid by the Company on August 17, 1998
and November 10, 2000.
Long-Term Compensation
Annual Compensation Awards
------------------------------------- ----------------------
Incentive Other Annual Restricted Securities All Other
Name and Compen- Compen- Stock Underlying Compen-
Position Year* Salary($) sation($)(1) sation($)(2) Award($) Options(#) sation($)(3)
- -------- ----- --------- ----------- ------------ -------- ---------- ------------
Gary Sirmon 2000 308,275 122,238 --- --- 18,350 68,651
Chief Executive 1999** 295,000 --- --- --- 33,769 56,985
Officer 1999*** 256,375 96,363 --- --- 20,071 60,373
Lloyd W. Baker 2000 121,737 28,404 --- --- 4,800 20,212
Treasurer 1999** 113,000 --- --- --- 3,880 15,929
1999*** 94,361 17,600 --- --- 2,306 9,915
Michael K. Larsen 2000 144,210 43,177 --- --- 4,800 30,823
Executive Vice 1999** 138,000 --- --- --- 6,317 31,986
President 1999*** 133,265 35,000 --- --- 3,754 33,200
Jesse G. Foster 2000 149,112 39,071 --- --- 9,000 19,868
President of 1999** 142,008 --- --- --- 8,165 20,317
Banner Bank of 1999*** 135,511 39,636 --- --- 4,830 18,126
Oregon
S. Rick Meikle 2000 171,375 59,821 --- --- 16,250 24,026
President of 1999** 141,000 ---(4) --- --- 8,798 44,662
Banner Bank 1999*** 125,250 106,000(4) --- --- 125,643(5) 15,474
- --------------------
* Effective December 31, 1999, the Company changed its fiscal year from
March 31 to December 31.
** Year ended December 31, 1999.
*** Year ended March 31, 1999.
(footnotes continued on next page)
7
(1) Incentive compensation for the calendar year ended December 31, 1999 was
accrued during the year but paid in January 2000.
(2) Does not include certain benefits, the aggregate amounts of which do not
exceed 10% of total annual salary and incentive compensation.
(3) Amounts for calendar year 2000 reflect: for Mr. Sirmon, cash distribution
of accrued vacation leave of $23,119 pursuant to executive's election,
deferred compensation contribution of $28,532, and ESOP contribution of
$17,000; for Mr. Baker, cash distribution of accrued vacation leave of
$4,346 pursuant to executive's election and ESOP contribution of $15,866;
for Mr. Larsen, cash distribution of accrued vacation leave of $10,615
pursuant to executive's election, deferred compensation contribution of
$3,208, and ESOP contribution of $17,000; for Mr.Foster, cash
distribution of accrued vacation leave of $2,868 pursuant to executive's
election, and ESOP contribution of $17,000; and for Mr. Meikle, deferred
compensation contribution of $7,026 and ESOP contribution of $17,000.
(4) Mr. Meikle's incentive compensation was paid in January 1999 and was
included for the fiscal year ended March 31, 1999 and not included in the
year ended December 31, 1999.
(5) Amount includes 29,690 of assumed options.
Option Grants in Last Fiscal Year. The following table sets forth
information concerning the grant of stock options to the named executive
officers during the calendar year ended December 31, 2000. Shares reflect the
10% stock dividend paid by the Company on August 17, 1998 and November 10,
2000.
Individual Grants
---------------------------------------------------
Percent Potential Realizable Value at
Number of of Total Assumed Annual Rates of Stock
Securities Options Price Appreciation for Option
Underlying Granted to Exercise Term(2)
Options Employees in Price Expiration -----------------------------
Name Granted(1) Fiscal Year ($/sh) Date 5%($) 10%($)
---- ---------- ----------- ------ ---- ----- ------
Gary Sirmon 18,350 9.2% $13.09375 11/21/10 $151,105 $382,929
Lloyd W. Baker 4,800 2.4 13.09375 11/21/10 39,526 100,167
Michael K. Larsen 4,800 2.4 13.09375 11/21/10 39,526 100,167
Jesse G. Foster 9,000 4.5 13.09375 11/21/10 74,111 187,813
S. Rick Meikle 16,250 8.2 13.09375 11/21/10 133,812 339,106
- --------------------
(1) Each option grant reported in the table vests at the rate of 20% per
annum. Options will become immediately exercisable in the event of a
change in control of the Company.
(2) The dollar gains under these columns result from calculations required by
the Securities and Exchange Commission's rules and are not intended to
forecast future price appreciation of the Common Stock of the Company.
It is important to note that options have value to the listed executives
only if the stock price increases above the exercise price shown in the
table during the effective option period. In order for the listed
executives to realize the potential values set forth in the 5% and 10%
columns in the table, the price per share of the Company's Common Stock
would be approximately $21.33 and $33.96, respectively, as of the
expiration of the options granted on November 21, 2000.
Option Exercise/Value Table. The following information with respect to
options exercised during the fiscal year ended December 31, 2000, and
remaining unexercised at the end of the fiscal year, is presented for the
named executive officers. Shares reflect the 10% stock dividend paid by the
Company on August 17, 1998 and November 10, 2000.
8
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year End At Fiscal Year End ($)(1)
Acquired on Value -------------------------- --------------------------
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ----------- ----------- ------------- ----------- -------------
Gary Sirmon --- $ --- 198,456 103,331 $553,577 $217,398
Jesse G. Foster --- --- 83,920 38,522 206,917 80,674
Lloyd W. Baker --- --- 11,377 11,709 29,828 22,337
Michael K. Larsen --- --- 83,119 32,199 239,550 77,620
S. Rick Meikle 22,892 180,810 43,441 80,863 49,035 45,998
- ---------------
(1) Value of unexercised in-the-money options equals market value of shares
covered by in-the-money options on December 31, 2000 less the option
exercise price. Options are in-the-money if the market value of the
shares covered by the options is greater than the option exercise price.
Employment Agreements with Named Executive Officers. The Company entered
into employment agreements with Messrs. Sirmon, Larsen and Baker
(individually, the "Executive") on July 1, 1998. The agreements provide that
the Executive's base salary is subject to annual review. The current base
salaries for Messrs. Sirmon, Larsen and Baker, are $325,000, $152,810 and
$140,000, respectively. In addition to base salary, the agreements provide
for the Executive's participation in the employee benefit plans and other
fringe benefits applicable to executive personnel. The initial three-year
term of each agreement may be extended annually for an additional year at the
discretion of the Board of Directors of Banner Bank. The employment of the
Executive is terminable at any time for cause as defined in the agreements.
In addition, the Executive may be terminated without cause in which case the
Executive would continue to receive base salary and other benefits over the
remaining term of the agreement.
The agreements also provide for the payment of severance benefits to the
Executive in the event of his termination of employment following a change in
control of Banner Bank or the Company. Such benefits would include a lump sum
payment equal to 2.99 times the average of the Executive's five preceding
years' compensation and continuation of retirement, life, health, and
disability coverage for a three-year period. In the event of a change in
control of Banner Bank or the Company, the total cash payment due under the
agreements, excluding any benefits payable under any employee benefit plan,
would be approximately $2,011,859, $992,029 and $350,721 for Messrs. Sirmon,
Larsen and Baker, respectively. For purposes of the agreements, "change in
control" includes, among other things, a change in control within the meaning
of the rules and regulations promulgated by the Board of Governors of the
Federal Reserve System under the Change in Bank Control Act of 1978, the
acquisition by any person of securities representing 20% or more of the
outstanding securities of Banner Bank or the Company, or a plan of
reorganization, merger, consolidation, or sale of substantially all of the
assets of Banner Bank or the Company in which Banner Bank or the Company is
not the resulting entity.
The agreements restrict the right of the Executive to compete against
Banner Bank or the Company for a period of one year following retirement in
the area of Walla Walla or any other area in which Banner Bank maintains a
full service branch office.
Banner Bank of Oregon entered into an employment agreement with Mr.
Foster on September 30, 1994. The agreement was continued, with certain
modifications, following the acquisition of Banner Bank of Oregon by the
Company. The initial term of the agreement expired on September 30, 1999.
The agreement provides for an automatic one-year extension unless either party
gives notice of an intention not to renew at least 60 days prior to the
expiration date. Mr. Foster's base salary, which is subject to periodic
review, is currently $159,996. In the event of Mr. Foster's termination
without cause, Banner Bank of Oregon is obligated to continue his then current
salary through the expiration date of the agreement. In the event of Mr.
Foster's resignation following a change in control of Banner Bank of Oregon
(as defined in the agreement), Banner Bank of Oregon is obligated to continue
his base salary for a 12 month period
9
but, in any event, not longer than the expiration date of the agreement. The
agreement restricts Mr. Foster's ability to compete with Banner Bank of Oregon
within a 50-mile radius of Banner Bank of Oregon's main and branch office
locations during any period in which he is receiving compensation payments
from Banner Bank of Oregon.
Towne Bank and the Company entered into an employment agreement with Mr.
Meikle on April 1, 1998. The initial term of the agreement expires on April
1, 2001. The agreement provides for automatic one-year extensions. Mr.
Meikle's base salary, which is subject to periodic review, is currently
$225,000. In the event of Mr. Meikle's termination without cause, Banner Bank
is obligated to continue his then current salary through the expiration date
of the agreement. In the event of Mr. Meikle's voluntary resignation during
the term of the agreement, Banner Bank shall pay to Mr. Meikle the
compensation due him through his date of termination. The agreement restricts
Mr. Meikle's ability to compete with Banner Bank for a period of three years
following such termination in any city, town or county in which Banner Bank
and/or the Company has an office or has filed an application for regulatory
approval to establish an office, determined as of the effective date of such
termination.
Salary Continuation and Deferred Compensation Agreements. Banner Bank
has entered into salary continuation agreements with Messrs. Sirmon and Larsen
(individually, the "Executive") to ensure their continued service with Banner
Bank through retirement. Banner Bank has purchased life insurance to finance
the benefits payable under the agreements. Assuming that the Executive
remains in the employ of Banner Bank to age 65, the agreements provide for
monthly payments over a minimum of a 180-month period following retirement.
The annual payment for Messrs. Sirmon and Larsen would be $112,000 and
$64,000, respectively. In the event of the Executive's termination of
employment by reason of death or disability prior to age 65, the salary
continuation benefit would be payable to the Executive or his designated
beneficiary.
For 1994 and subsequent years, Section 401(a)(17) of the Code limits to
$150,000 (indexed) per employee the amount of compensation that is considered
for purposes of determining the maximum contribution to Banner Bank's
tax-qualified profit sharing plan on behalf of each eligible employee. Banner
Bank credits certain executive officers whose total compensation exceeds
$150,000 with additional deferred compensation to restore amounts that may not
be contributed to the profit sharing plan as a consequence of the Section
401(a)(17) limitation. For the fiscal year ended December 31, 2000, $28,532
was credited as deferred compensation on behalf of Mr. Sirmon; $3,208 was
credited as deferred compensation for Mr. Larsen; and $7,026 was credited as
deferred compensation for Mr. Meikle.
Banner Bank of Oregon has entered into an agreement with Mr. Foster to
provide him with supplemental retirement benefits. The agreement was
continued, with certain modifications, following the acquisition of Banner
Bank of Oregon by the Company. The agreement provides that, following Mr.
Foster's retirement at or after attaining age 62 (or in the event of his prior
death or disability) and for a 12-year period thereafter, Banner Bank of
Oregon will pay him (or his beneficiary) an annual benefit equal to 40 percent
of his average annual salary during the three years preceding his retirement.
In the event of his termination of employment prior to age 62, Mr. Foster's
benefits would be deferred until age 62. The agreement also restricts Mr.
Foster's ability to compete with the Bank within a 50-mile radius of Banner
Bank of Oregon's main and branch office locations for a one-year period
following his termination of employment.
- ------------------------------------------------------------------------------
AUDIT COMMITTEE MATTERS
- ------------------------------------------------------------------------------
Audit Committee Charter. The Audit Committee operates pursuant to a
Charter approved by the Company's Board of Directors. The Audit Committee
reports to the Board of Directors and is responsible for overseeing and
monitoring financial accounting and reporting, the system of internal controls
established by management and the audit process of the Company. The Audit
Committee Charter sets out the responsibilities, authority and specific duties
of the Audit Committee. The Charter specifies, among other things, the
structure and membership requirements of the Audit Committee, as well as the
relationship of the Audit Committee to the independent accountants, the
internal audit department, and management of the Company. A copy of the Audit
Committee Charter is attached to this Proxy Statement as Exhibit A.
10
Report of the Audit Committee. The Audit Committee reports as follows
with respect to the Company's audited financial statements for the year ended
December 31, 2000:
. The Audit Committee has completed its initial review and discussion
of the Company's 2000 audited financial statements with management;
. The Audit Committee has discussed with the independent auditors
(Deloitte & Touche LLP) the matters required to be discussed by
Statement on Auditing Standards ("SAS") No. 61, Communication with
Audit Committees, as amended by SAS No. 90, Audit Committee
Communications, including matters related to the conduct of the
audit of the Company's financial statements;
. The Audit Committee has received written disclosures, as required by
Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committee, indicating all relationships, if
any, between the independent auditor and its related entities and
the Company and its related entities which, in the auditors'
professional judgment, reasonably may be thought to bear on the
auditors' independence, and the letter from the independent auditors
confirming that, in its professional judgment, it is independent
from the Company and its related entities, and has discussed with
the auditors the auditors' independence from the Company; and
. The Audit Committee has, based on its initial review and discussions
with management of the Company's 2000 audited financial statements
and discussions with the independent auditors, recommended to the
Board of Directors that the Company's audited financial statements
for the year ended December 31, 2000 be included in the Company's
Annual Report on Form 10-K.
Audit Committee: Robert D. Adams, Chairman
Wilber Pribilsky
David B. Casper
Dean W. Mitchell
Marvin Sundquist
Brent A. Orrico
Margaret C. Langlie
Independence and Other Matters. Each member of the Audit Committee is
"independent," as defined, in the case of the Company, under The Nasdaq Stock
Market Rules. The Audit Committee members do not have any relationship to the
Company that may interfere with the exercise of their independence from
management and the Company. None of the Audit Committee members are current
officers or employees of the Company or its affiliates.
- ------------------------------------------------------------------------------
COMPENSATION COMMITTEE MATTERS
- ------------------------------------------------------------------------------
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or
the Exchange Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Report of the Compensation
Committee and Performance Graph shall not be incorporated by reference into
any such filings.
Report of the Compensation Committee. Under rules established by the
Securities and Exchange Commission, the Company is required to provide certain
data and information in regard to the compensation and benefits provided to
the Company's Chief Executive Officer and other executive officers. The
disclosure requirements for the Chief Executive Officer and other executive
officers include the use of tables and a report explaining the rationale and
considerations that led to the fundamental executive compensation decisions
affecting those individuals. The Compensation Committee of the Board of
Directors of the Company is responsible for establishing and monitoring
11
compensation policies of the Company and for reviewing and ratifying the
actions of the Compensation Committees of the Boards of Directors of Banner
Bank and Banner Bank of Oregon. Performance is evaluated and salaries are set
by the Compensation Committees of the Banks.
General. The Banks' Compensation Committees' duties are to recommend and
administer policies that govern executive compensation. The Committees
evaluate individual executive performance, compensation policies and salaries.
The Committees are responsible for evaluating the performance of the Chief
Executive Officers of the Banks while the Chief Executive Officers of the
Banks evaluate the performance of other senior officers of the respective
Banks and make recommendations to the Committees regarding compensation
levels. The committees have final authority to set compensation levels.
Compensation Policies. The executive compensation policies of the Banks
are designed to establish an appropriate relationship between executive pay
and the Company's and the Banks' annual performance, to reflect the attainment
of short- and long-term financial performance goals and to enhance the ability
of the Company and the Banks to attract and retain qualified executive
officers. The principles underlying the executive compensation policies
include the following:
. To attract and retain key executives who are vital to the long-term
success of the Company and the Banks and are of the highest caliber;
. To provide levels of compensation competitive with those offered
throughout the financial industry and consistent with the Company's
and the Banks' level of performance;
. To motivate executives to enhance long-term shareholder value by
building their equity interest in the Company; and
. To integrate the compensation program with the Company's and the
Banks' annual and long-term strategic planning and performance
measurement processes.
The Committees consider a variety of subjective and objective factors in
determining the compensation package for individual executives including: (1)
the performance of the Company and the Banks as a whole with emphasis on
annual performance factors and long-term objectives; (2) the responsibilities
assigned to each executive; and (3) the performance of each executive of
assigned responsibilities as measured by the progress of the Company and the
Banks during the year.
Base Salary. The Banks' current compensation plan involves a combination
of salary, at-risk incentives to reward short-term performance, stock options
to reward long-term performance and deferred compensation. The salary levels
of executive officers are designed to be competitive within the banking and
financial services industries. In setting competitive salary levels, the
Compensation Committees continually evaluate current salary levels by
surveying similar institutions in Washington, Oregon, the Northwest and the
United States. The Committees' peer group analysis focuses on asset size,
nature of ownership, type of operation and other common factors.
Specifically, the Committees annually review the Northwest Financial Industry
Salary Survey prepared by Milliman & Robertson, Inc. (actuaries and
consultants) in association with the Washington Bankers Association, the
Washington Financial League and the Oregon Bankers Association, covering 110
Northwest financial organizations, the Federal Home Loan Bank ("FHLB") of
Seattle data covering the seven states of the 12th FHLB District, the
America's Community Bankers' Compensation Survey which covers 533 responding
financial institutions, the Watson Wyatt Survey of Top Management
Compensation, and the Moss Adams Pacific Northwest Bankers Compensation Survey
covering 80 respondents in Washington, Oregon, Idaho and Montana.
Incentive (at-risk) Compensation Program. A short-term incentive plan is
in effect for the officers of the Banks which is designed to compensate for
performance. The plan is designed to provide for incentive compensation of up
to 35% of salary for the chief executive officers, up to 25% of salary for
executive vice presidents, up to 20% of
12
salary for senior vice presidents and up to 15% of salary for vice presidents
and certain other officers. In certain circumstances, incentive compensation
may be payable at higher levels based on exceptional performance in excess of
established targets. The performance incentive is based primarily on
quantifiable data such as return on assets, return on equity, loan and deposit
growth, asset quality and level of operating expenses. Subjective evaluation
of performance is limited.
Deferred Compensation. To the extent that executive officers'
contributions to Banner Bank's retirement programs are limited by applicable
law, Banner Bank credits each affected executive with deferred compensation in
the amount of the additional annual contribution the executive would have
received if such limits were not applicable.
Long Term Incentive Compensation. The Company, with shareholder
approval, on July 26, 1996, adopted the 1996 Management Recognition and
Development Plan and the 1996 Stock Option Plan, and on July 24, 1998, the
1998 Stock Option Plan, under which officers may receive grants and awards.
The Company believes that stock ownership by the Company's and the Banks'
officers is a significant factor in aligning the interests of the officers
with those of shareholders. Stock options and stock awards under such plans
were allocated based upon regulatory practices and policies, the practices of
other recently converted financial institutions as verified by external
surveys and based upon the officers' level of responsibility and contributions
to the Company and the Banks.
Compensation of the Chief Executive Officer. During the calendar year
ended December 31, 2000, the base salary of Gary Sirmon, President and Chief
Executive Officer of the Company and Chief Executive Officer of Banner Bank,
was $308,275. In addition, he received incentive compensation of $122,238,
which was accrued during the calendar year ended December 31, 1999 but was
paid in January 2000, and was credited with $45,532 in other compensation
(comprised of Deferred Compensation - $28,532 and Employees' Stock Ownership
Plan - $17,000). This resulted in total compensation of $476,045, which,
excluding the incentive compensation accrued during the calendar year ended
December 31, 1999 but not paid until January 2000, represents an 8.2% increase
from the twelve month period ended December 31, 1999. In addition, Mr. Sirmon
took a $23,119 cash distribution of accrued vacation. The Committee believes
that Mr. Sirmon's compensation is appropriate based on the Company's overall
compensation policy, on the basis of the Committee's consideration of peer
group data, and the financial performance of the Company during the fiscal
year.
Compensation Committee: Dean Mitchell, Chairman
Marvin Sundquist, Vice-Chairman
Robert D. Adams
David B. Casper
Wilber Pribilsky
Brent A. Orrico
Margaret C. Langlie
Compensation Committee Interlocks and Insider Participation. No inside
directors, i.e. Messrs. Sirmon, Foster, or Meikle, serve as members of the
Compensation Committee of the Company and/or the Banks.
Performance Graph. The following graph compares the cumulative total
shareholder return on the Company's Common Stock with the cumulative total
return on the Nasdaq (U.S. Stock) Index, a peer group of the SNL $1 Billion to
$5 Billion Asset Bank Index and a peer group of the SNL $1 Billion to $5
Billion Asset Thrift Index. Total return assumes the reinvestment of all
dividends.
13
COMPARISON OF CUMULATIVE TOTAL RETURN *
[graph appears here]
Period Ending
---------------------------------------------------------
Index 11/01/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ------------------------------------------------------------------------------
Banner Corporation $100.00 $141.82 $214.84 $209.26 $132.12 $155.98
Nasdaq Total U.S. 100.00 123.04 150.69 212.51 394.94 237.68
SNL $1B-$5B Banks 100.00 129.63 216.19 215.69 198.23 224.95
SNL $1B-$5B Thrifts 100.00 131.21 232.91 209.06 187.22 226.30
* Assumes $100 invested in the Company's Common Stock at the closing price
per share and each index on December 31, 1995 and that all dividends were
reinvested. Information for the graph was provided by SNL Securities L.C.
14
- ------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- ------------------------------------------------------------------------------
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of any registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Executive
officers, directors and greater than 10% shareholders are required by
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms it has received
and written representations provided to the Company by the above referenced
persons, the Company believes that during the fiscal year ended December 31,
2000 all filing requirements applicable to its reporting officers, directors
and greater than 10% shareholders were properly and timely complied with.
- ------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
- ------------------------------------------------------------------------------
Federal regulations require that all loans or extensions of credit to
executive officers and directors of insured financial institutions must be
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other
persons, except for loans made pursuant to programs generally available to all
employees, and must not involve more than the normal risk of repayment or
present other unfavorable features. The Company's subsidiary financial
institutions are therefore prohibited from making any new loans or extensions
of credit to executive officers and directors at different rates or terms than
those offered to the general public, except for loans made pursuant to
programs generally available to all employees, and has adopted a policy to
this effect. In addition, loans made to a director or executive officer in an
amount that, when aggregated with the amount of all other loans to such person
and his or her related interests, are in excess of the greater of $25,000 or
5% of the institution's capital and surplus (up to a maximum of $500,000) must
be approved in advance by a majority of the disinterested members of the Board
of Directors.
- ------------------------------------------------------------------------------
PROPOSAL II -- APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------
Deloitte & Touche LLP served as the Company's independent auditors for
the calendar year ended December 31, 2000. The Board of Directors has
appointed Deloitte & Touche LLP as independent auditors for the fiscal year
ending December 31, 2001, subject to approval by stockholders. A
representative of Deloitte & Touche LLP will be present at the Annual Meeting
to respond to stockholders' questions and will have the opportunity to make a
statement if he or she so desires.
Audit Fees
The aggregate fees billed to the Company by Deloitte & Touche LLP for
professional services rendered for the audit of the Company's financial
statements for fiscal 2000 and the reviews of the financial statements
included in the Company Forms 10-Q for that year, including travel expenses,
were $236,000.
Financial Information Systems Design and Implementation Fees
Deloitte & Touche LLP performed no financial information system design or
implementation work for the Company during the fiscal year ended December 31,
2000.
All Other Fees
Other than audit fees, the aggregate fees billed to the Company by
Deloitte & Touche LLP for fiscal 2000, none of which were financial
information systems design and implementation fees, were $16,000. The Audit
Committee of
15
the Board of Directors determined that the services performed by Deloitte &
Touche LLP other than audit services are not incompatible with Deloitte &
Touche LLP maintaining its independence.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2001.
- ------------------------------------------------------------------------------
PROPOSAL III -- APPROVAL OF 2001 STOCK OPTION PLAN
- ------------------------------------------------------------------------------
General
On February 22, 2001, the Board of Directors of the Company adopted,
subject to shareholder approval, the Banner Corporation 2001 Stock Option Plan
(the "2001 Plan").
The objective of the 2001 Plan is to reward performance and build the
participants' equity interest in the Company by providing long-term incentives
and rewards to directors, key employees and other persons who provide services
to the Company and its subsidiaries and who contribute to the success of the
Company by their innovation, ability, industry, loyalty and exceptional
service.
The Company currently maintains the 1996 Stock Option Plan and 1998 Stock
Option Plan both of which were previously approved by shareholders. Stock
options were awarded pursuant to the 1996 and 1998 Stock Option Plans to
officers and directors of the Company and Banner Bank, as well as to the
officers and directors of Inland Empire, Towne Bank and Whatcom State Bank in
connection with their acquisition by the Company. The Company also assumed
certain option plans of Towne Bancorp, Inc. and Whatcom State Bancorp, Inc. in
connection with the acquisition of each of their respective subsidiary banks,
Towne Bank and Whatcom State Bank. As of March 1, 2001, options to acquire
1,853,895 shares of Common Stock were outstanding and 18,591 shares remained
available for grant. Awards under these prior plans will not be affected by
adoption of the 2001 Plan. The Company believes that the availability of
stock compensation programs is an important element of the Company's overall
incentive compensation strategy and that the adoption of the 2001 Plan will
assist the Company in meeting the objectives of such strategy.
The following summary is a brief description of the material features of
the 2001 Plan. This summary is qualified in its entirety by reference to the
2001 Plan, a copy of which is attached as Exhibit B.
Summary of the 2001 Plan
Type of Stock Option Grants. The 2001 Plan provides for the grant of
incentive stock options ("ISOs"), within the meaning of Section 422(b) of the
Internal Revenue Code of 1986, as amended ("Code"), and Non-Qualified Stock
Options ("NQSOs"), which do not satisfy the requirements for ISO treatment.
Administration. The 2001 Plan is administered by a committee, the members
of which are appointed by the Company's Board of Directors ("Committee").
Subject to the terms of the 2001 Plan and resolutions of the Board, the
Committee interprets the 2001 Plan and is authorized to make all
determinations and decisions thereunder. The Committee also determines the
individuals to whom stock options will be granted, the type and amount of
stock options that will be granted, and the terms and conditions applicable to
such grants.
Participants. All directors, advisory directors, directors emeriti and
employees of the Company and its subsidiaries are eligible to participate in
the 2001 Plan, except that only employees may be granted ISOs.
Number of Shares of Common Stock Available. The Company has reserved
480,000 shares of Common Stock for issuance under the 2001 Plan in connection
with the exercise of awards. Shares of Common Stock to be issued under the
2001 Plan will be authorized but unissued shares. To the extent the Company
utilizes authorized but unissued
16
shares to fund the 2001 Plan, the interests of current shareholders will be
diluted. If all options are granted through the use of authorized but unissued
Common Stock, current shareholders would be diluted by approximately 4.00%
based on the number of shares outstanding on March 1, 2001. Any shares subject
to an award which expires or is terminated unexercised will again be available
for issuance under the 2001 Plan.
Adjustments Upon Changes in Capitalization. Shares awarded under the
2001 Plan will be adjusted by the Committee in the event of a reorganization,
recapitalization, stock split, stock dividend, combination or exchange of
shares, merger, consolidation or other change in corporate structure or the
Common Stock of the Company.
Stock Option Grants. The exercise price of each ISO or NQSO will be at
least equal to the fair market value of a share of Common Stock, as determined
by the average of the highest and lowest selling price of the Common Stock on
The Nasdaq Stock Market on the date the option is granted. The average of the
highest and lowest selling price of the Common Stock on The Nasdaq Stock
Market on March 1, 2001 was $16.50.
The aggregate fair market value of ISO shares granted to any employee
that may be exercisable for the first time by such employee during any
calendar year (under all stock option plans of the Company and its
subsidiaries) may not exceed $100,000. The exercise price of an option may be
paid in cash, Common Stock or other property, by the immediate sale through a
broker of the number of shares being acquired sufficient to pay the purchase
price, or by a combination of these methods, as and to the extent permitted by
the Committee.
Transferability of Awards. Under the 2001 Plan, no ISO is transferable
other than by will or the laws of descent and distribution. Any other option
shall be transferable by will, the laws of descent and distribution, a
"domestic relations order," as defined in the Code, or a gift to any member of
the participant's immediate family or to a trust for the benefit of one or
more of such immediate family members. Options may become exercisable in full
at the time of grant or at such other times and in such installments as the
Committee determines or as may be specified in the 2001 Plan. Options may be
exercised during periods before and after the participant terminates
employment, as the case may be, to the extent authorized by the Committee or
specified in the 2001 Plan. However, no ISO may be exercised after the tenth
anniversary of the date the option was granted.
Effect of a Change in Control. In the event of a tender offer, exchange
offer for shares, or a change in control (as defined in the 2001 Plan) of the
Company, each outstanding stock option grant will become fully vested. In
addition, in the event of a merger or other corporate event in which the
Company is not the surviving entity, the 2001 Plan provides that the
participant may elect to receive the excess of the fair market value of the
Common Stock underlying the option over the option's exercise price in cash or
property, as determined in the Committee's discretion.
Term of the 2001 Plan. The 2001 Plan will be effective only upon approval
by the shareholders of the Company. The 2001 Plan will expire on the tenth
anniversary of the effective date, unless terminated sooner by the Board.
Prohibition on Repricing Underwater Options. The Committee may not,
without the further approval of the shareholders of the Company, authorize the
amendment of any outstanding option to reduce the option price. Furthermore,
no option may be canceled and replaced with awards having a lower option price
without further approval of the shareholders.
Amendment of the 2001 Plan. The 2001 Plan allows the Board to amend,
suspend or terminate the 2001 Plan without shareholder approval unless such
approval is required to comply with a tax law or regulatory requirement.
Shareholder approval will generally be required with respect to an amendment
to the 2001 Plan that will (i) increase the aggregate number of securities
which may be issued under the 2001 Plan, except as specifically set forth
under the 2001 Plan, (ii) materially increase the benefits accruing to
participants under the 2001 Plan, (iii) materially change the requirements as
to eligibility for participation in the 2001 Plan, or (iv) change the class of
persons eligible to participate in the 2001 Plan. No amendment, suspension or
termination of the stock option plan, however, will impair the rights of any
participant, without his or her consent, in any award made under the stock
option plan.
17
Certain Federal Income Tax Consequences. The following brief description
of the tax consequences of stock option grants under the 2001 Plan is based on
federal income tax laws currently in effect and does not purport to be a
complete description of such federal income tax consequences.
There are no federal income tax consequences either to the optionee or to
the Company upon the grant of an ISO or a NQSO. On the exercise of an ISO
during employment or within three months thereafter, the optionee will not
recognize any income and the Company will not be entitled to a deduction,
although the excess of the fair market value of the shares on the date of
exercise over the option price is includible in the optionee's alternative
minimum taxable income, which may give rise to alternative minimum tax
liability for the optionee. Generally, if the optionee disposes of shares
acquired upon exercise of an ISO within two years of the date of grant or one
year of the date of exercise, the optionee will recognize ordinary income, and
the Company will be entitled to a deduction, equal to the excess of the fair
market value of the shares on the date of exercise over the option price
(limited generally to the gain on the sale). The balance of any gain or loss
will be treated as a capital gain or loss to the optionee. If the shares are
disposed of after the two year and one year periods mentioned above, the
Company will not be entitled to any deduction, and the entire gain or loss for
the optionee will be treated as a capital gain or loss.
On exercise of a NQSO, the excess of the date-of-exercise fair market
value of the shares acquired over the option price will generally be taxable
to the optionee as ordinary income and deductible by the Company, provided the
Company properly reports the income in respect of the exercise. The
disposition of shares acquired upon the exercise of a NQSO will generally
result in a capital gain or loss for the optionee, but will have no tax
consequences for the Company.
New Plan Benefits.
Although the Company anticipates that option grants will be made to
directors, officers and employees following the effective date and during the
term of the 2001 Plan, no specific determinations have been made regarding the
timing, recipients, size or terms of individual awards.
Board of Directors Recommendation.
The Board of Directors recommends a vote "FOR" the adoption of the 2001
Plan attached to this Proxy Statement as Exhibit B.
- ------------------------------------------------------------------------------
OTHER MATTERS
- ------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy
Statement. However, if any other matters should properly come before the
Annual Meeting, it is intended that proxies in the accompanying form will be
voted in respect thereof in accordance with the judgment of the person or
persons voting the proxies.
- ------------------------------------------------------------------------------
MISCELLANEOUS
- ------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy
materials to the beneficial owners of the Common Stock. In addition to
solicitations by mail, directors, officers and regular employees of the
Company may solicit proxies personally or by telecopier or telephone without
additional compensation. The Company has retained Georgeson Shareholder
Communications, Inc. to assist in soliciting proxies of shareholders whose
shares are held in street name by brokers, banks and other institutions at a
cost of $5,500 plus expenses.
18
The Company's 2000 Annual Report to Shareholders, including financial
statements, has been mailed to all shareholders of record as of the close of
business on March 1, 2001. Any shareholder who has not received a copy of
such annual report may obtain a copy by writing to the Company. The Annual
Report is not to be treated as part of the proxy solicitation material or
having been incorporated herein by reference.
A copy of the Company's Form 10-K for the calendar year ended December
31, 2000, as filed with the Securities and Exchange Commission, will be
furnished without charge to shareholders of record as of March 1, 2001 upon
written request to Albert H. Marshall, Secretary, Banner Corporation, 10 S.
First Avenue, PO Box 907, Walla Walla, Washington 99362.
- ------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- ------------------------------------------------------------------------------
Proposals of shareholders intended to be presented at the Company's
annual meeting to be held in 2002 must be received by the Company no later
than November 23, 2001 to be considered for inclusion in the proxy materials
and form of proxy relating to such meeting. Any such proposals shall be
subject to the requirements of the proxy rules adopted under the Exchange Act.
In addition, the Company's Articles of Incorporation provide that in
order for business to be brought before the Annual Meeting, a shareholder must
deliver notice to the Secretary not less than 30 nor more than 60 days prior
to the date of the Annual Meeting; provided that if less than 31 days' notice
of the Annual Meeting is given to shareholders, such notice must be delivered
not later than the close of the tenth day following the day on which notice of
the Annual Meeting was mailed to shareholders. The notice must state the
shareholder's name, address and number of shares of Common Stock held, and
briefly discuss the business to be brought before the Annual Meeting, the
reasons for conducting such business at the Annual Meeting and any interest of
the shareholder in the proposal.
The Company's Articles of Incorporation provide that if a shareholder
intends to nominate a candidate for election as a director, the shareholder
must deliver written notice of his or her intention to the Secretary of the
Company not less than thirty days nor more than sixty days prior to the date
of the Annual Meeting of shareholders; provided, however, that if less than
thirty-one days' notice of the Annual Meeting is given to shareholders, such
written notice must be delivered to the Secretary of the Company not later
than the close of the tenth day following the day on which notice of the
Annual Meeting was mailed to shareholders. The notice must set forth (i) the
name, age, business address and, if known, residence address of each nominee
for election as a director, (ii) the principal occupation or employment of
each nominee, (iii) the number of shares of Common Stock of the Company which
are beneficially owned by each such nominee, (iv) such other information as
would be required to be included pursuant to the Exchange Act in a proxy
statement soliciting proxies for the election of the proposed nominee,
including, without limitation, such person's written consent to being named in
the proxy statement as a nominee and to serving as a director, if elected, and
(v) as to the shareholder giving such notice (a) his or her name and address
as they appear on the Company's books and (b) the class and number of shares
of the Company which are beneficially owned by such shareholder.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ALBERT H. MARSHALL
ALBERT H. MARSHALL
SECRETARY
Walla Walla, Washington
March 16, 2001
19
BANNER CORPORATION EXHIBIT A
AUDIT COMMITTEE CHARTER
I. Purpose
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing the
quality and integrity of financial reports and other financial information
provided by the Corporation; the Corporation's systems of internal controls
regarding finance, accounting, legal compliance and ethics that management and
the Board have established; and the Corporation's auditing, accounting and
financial reporting processes generally. Consistent with this function, the
Audit Committee should encourage continuous improvement of, and should foster
adherence to, the Corporation's policies, procedures and practices at all
levels. The Audit Committee's primary duties and responsibilities are to:
1. Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
2. Review and appraise the audit efforts of the Corporation's
independent accountants and internal auditing department.
3. Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. Composition
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationships that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment, as a member of the Committee.
All members of the Committee shall have a working familiarity with basic
finance and accounting practices. Member independence and experience will be
in conformance with rules established by the SEC, NASD, and the AICPA. The
members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board and shall serve until their successors
shall be duly elected and qualified. Unless a Chair is selected by the full
Board, the members of the Committee may designate a Chair by majority vote of
the full Committee membership.
III. Meetings
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. As part of its job to foster open communication,
the Committee should meet at least annually with management, the Internal
Audit Officer and the independent accountants in separate executive sessions
to discuss any matters that the Committee or each of these groups believe
should be discussed privately. In addition, the Committee or at least its
Chair should meet with the independent accountants and management quarterly to
review the Corporation's financials consistent with IV. 4. below.
IV. Responsibilities and Duties
To fulfill its responsibilities and duties, the Audit Committee shall:
Documents / Reports Review
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the organization's annual financial statements and any
submitted to the public, including any certification, report,
opinion, or review rendered by the independent accountants.
3. Review the regular internal reports prepared by the internal
auditing department and management's response.
4. Review with financial management and the independent accountants the
10-Q, 10-K and annual report to shareholders prior to its filing or
prior to the release of earnings. The Chair of the Committee may
represent the entire Committee for purposes of this review.
A-1
Independent Accountants
5. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness, and approve
the fees and other compensation to be paid to the independent
accountants. On an annual basis, the Committee should review and
discuss with the accountants all significant relationships the
accountants have with the Corporation to determine the accountants'
independence.
6. Review the performance of the independent accountants and approve
any proposed discharge of the independent accountants when
circumstances warrant.
7. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and
accuracy of the organization's financial statements.
8. Discuss with the independent auditors all matters required by
Statement of Auditing Standards No. 61 relating to the conduct of
the audit.
Financial Reporting Processes
9. In consultation with the independent accountants and the internal
auditors, review the integrity of the organization's financial
reporting processes, both internal and external.
10. Consider the independent accountants' judgments about the quality
and appropriateness of the Corporation's accounting principles as
applied in its financial reporting.
11. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent accountants, management, or the
internal auditing department.
Process Improvements
12. Establish regular and separate systems of reporting to the Audit
Committee by each of management, the independent accountants and the
internal auditors regarding any significant judgments made in
management's preparation of the financial statements and the view
of each as to appropriateness of such judgments.
13. Following completion of the annual audit, review separately, as
needed, with each of management, the independent accountants and the
internal auditing department any significant difficulties
encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
14. Review any significant disagreement among management and the
independent accountants or the internal auditing department in
connection with the preparation of the financial statements.
15. Review with the independent accountants, the internal auditing
department and management the extent to which changes or
improvements in financial or accounting practices, as approved by
the Audit Committee, have been implemented.
Compliance
16. Review the Corporation's financial statements, reports and other
information disseminated to the public. Assess compliance with
legal requirements and engage outside consultants, when necessary.
17. Review activities, organizational structure, and qualifications of
the internal audit department.
18. Review, with the organization's counsel, legal compliance matters
including corporate securities trading policies.
19. Review, with the organization's counsel, any legal matter that could
have a significant impact on the organization's public financial
statements.
20. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the
Board deems necessary or appropriate.
* * * * *
A-2
BANNER CORPORATION EXHIBIT B
2001 STOCK OPTION PLAN
1. Plan Purpose. The purpose of the Plan is to foster and promote the
long-term success of the Corporation and its shareholders by a means of
attracting and retaining directors, advisory directors, directors emeriti and
employees of the Corporation and its Affiliates.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" -- means any "parent corporation" or "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e)
and (f), respectively, of the Code.
"Award" -- means the grant by the Committee of an Incentive Stock
Option, a Non-Qualified Stock Option, or any combination thereof, as provided
in the Plan.
"Award Agreement" -- means the agreement evidencing the grant of an
Award made under the Plan.
"Board" -- means the board of directors of the Corporation.
"Cause" -- means Termination of Service by reason of personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties or
gross negligence.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Committee" -- means the Committee referred to in Section 3 hereof.
"Corporation" -- means Banner Corporation, a Washington corporation, and
any successor thereto.
"Disability" -- means any physical or mental injury or disease of a
permanent nature which renders a Participant incapable of meeting the
requirements of the employment or service performed by such Participant
immediately prior to the commencement of such disability. The determination
of whether a Participant is disabled shall be made by the Board in its sole
and absolute discretion.
"Incentive Stock Option" -- means an option to purchase Shares granted
by the Committee which is intended to qualify as an incentive stock option
under Section 422(b) of the Code. Unless otherwise set forth in the Award
Agreement, any Option which does not qualify as an Incentive Stock Option for
any reason shall be deemed ab initio to be a Non-Qualified Stock Option.
"Market Value" -- means:
(a) If the Shares are traded or quoted on The Nasdaq Stock Market or
other national securities exchange on any date, then the Market Value shall be
the average of the highest and lowest selling price on such exchange on such
date or, if there were no sales on such date, then on the next prior business
day on which there was a sale.
(b) If the Shares are not traded or quoted on The Nasdaq Stock Market or
other national securities exchange, then the Market Value shall be a value
determined by the Committee in good faith on such basis as it deems
appropriate.
"Non-Qualified Stock Option" -- means an option to purchase Shares
granted by the Committee which does not qualify, for any reason, as an
Incentive Stock Option.
B-1
"Option" -- means an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" -- means any director, advisory director, director
emeritus or employee of the Corporation or any Affiliate who is selected by
the Committee to receive an Award.
"Plan" -- means this Banner Corporation 2001 Stock Option Plan.
"Shares" -- means the shares of common stock, $0.01 par value, of the
Corporation.
"Termination of Service" -- means cessation of service, for any reason,
whether voluntary or involuntary, so that the affected individual is not
either (i) an employee of the Corporation or any Affiliate for purposes of an
Incentive Stock Option, or (ii) a director (including an advisory director or
director emeritus) or employee of the Corporation or any Affiliate for
purposes of any other Award.
3. Administration. The Plan shall be administered by a Committee
consisting of two or more members of the Board, each of whom (i) shall be an
"outside director," as defined under Section 162(m) of the Code and the
Treasury regulations thereunder, and (ii) shall be a "non-employee director,"
as defined under Rule 16(b) of the Securities Exchange Act of 1934 or any
similar or successor provision. The members of the Committee shall be
appointed by the Board. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion to (i) select Participants and grant Awards;
(ii) determine the number of Shares to be subject to types of Awards
generally, as well as to individual Awards granted under the Plan; (iii)
determine the terms and conditions upon which Awards shall be granted under
the Plan; (iv) prescribe the form and terms of Award Agreements; (v) establish
from time to time regulations for the administration of the Plan; and (vi)
interpret the Plan and make all determinations deemed necessary or advisable
for the administration of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.
4. Shares Subject to Plan.
(a) Subject to adjustment by the operation of Section 6, the maximum
number of Shares with respect to which Awards may be made under the Plan is
480,000. The Shares with respect to which Awards may be made under the Plan
will be authorized and unissued Shares. An Award shall not be considered to
have been made under the Plan with respect to any Option which terminates, and
new Awards may be granted under the Plan with respect to the number of Shares
as to which such termination has occurred.
(b) During any calendar year, no Participant may be granted Awards
under the Plan with respect to more than 100,000 Shares, subject to adjustment
as provided in Section 6.
5. Awards. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan and the
requirements of applicable law as the Committee shall determine, including the
granting of Options in tandem with other Awards under the Plan:
(i) Exercise Price. The exercise price per Share for an Option
shall be determined by the Committee; provided, however, that such exercise
price shall not be less than 100% of the Market Value of a Share on the date
of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee, but shall be no greater than ten (10) years for either an Incentive
Stock Option or a Non-Qualified Stock Option.
B-2
(iii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part and the
method or methods by which, and the form or forms (including, without
limitation, cash, Shares, other Awards or any combination thereof, having a
fair market value on the exercise date equal to the relevant exercise price)
in which, payment of the exercise price with respect thereto may be made or
deemed to have been made. The Committee may, in its discretion, arrange
procedures for the payment of the exercise price with one or more stock
brokerage firms for the purpose of allowing a Participant to make a "cashless
exercise" of an Option.
(iv) Incentive Stock Options. Incentive Stock Options may be
granted by the Committee only to employees of the Corporation or its
Affiliates.
(v) Termination of Service. Unless otherwise determined by the
Committee and set forth in the Award Agreement evidencing the grant of the
Option, upon Termination of Service of the Participant for any reason other
than for Cause, all Options then currently exercisable shall remain
exercisable for the lesser of (A) three years following such Termination of
Service or (B) until the expiration of the Option by its terms. Upon
Termination of Service for Cause, all Options not previously exercised shall
immediately be forfeited.
6. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan
by reason of any reorganization, recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation or any
change in the corporate structure or Shares of the Corporation, the maximum
aggregate number and class of shares and exercise price of the Award, if any,
as to which Awards may be granted under the Plan and the number and class of
shares and exercise price of the Award, if any, with respect to which Awards
have been granted under the Plan shall be appropriately adjusted by the
Committee, whose determination shall be conclusive. Except as otherwise
provided herein, any Award which is adjusted as a result of this Section 6
shall be subject to the same terms and conditions as the original Award.
7. Effect of Merger on Options. In the case of any merger,
consolidation or combination of the Corporation (other than a merger,
consolidation or combination in which the Corporation is the continuing
corporation and which does not result in the outstanding Shares being
converted into or exchanged for different securities, cash or other property,
or any combination thereof), any Participant to whom an Option has been
granted shall have the additional right (subject to the provisions of the Plan
and any limitation applicable to such Option), thereafter and during the term
of each such Option, to receive upon exercise of any such Option an amount
equal to the excess of the fair market value on the date of such exercise of
the securities, cash or other property, or combination thereof, receivable
upon such merger, consolidation or combination in respect of a Share over the
exercise price of such Option, multiplied by the number of Shares with respect
to which such Option shall have been exercised. Such amount may be payable
fully in cash, fully in one or more of the kind or kinds of property payable
in such merger, consolidation or combination, or partly in cash and partly in
one or more of such kind or kinds of property, all in the discretion of the
Committee.
8. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 8 shall be deemed a
"change in control": (i) any third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, shall become the
beneficial owner of shares of the Corporation with respect to which 25% or
more of the total number of votes for the election of the Board may be cast,
(ii) as a result of, or in connection with, any cash tender offer, merger or
other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of the
Corporation shall cease to constitute a majority of the Board, or (iii) the
shareholders of the Corporation shall approve an agreement providing either
for a transaction in which the Corporation will cease to be an independent
publicly-owned corporation or for a sale or other disposition of all or
substantially all the assets of the Corporation. If a tender offer or
exchange offer for Shares (other than such an offer by the Corporation) is
commenced, or if a change in control shall occur, unless the Committee shall
have otherwise provided in the Award Agreement, all Options granted and not
fully exercisable shall become exercisable in full upon the happening of such
event. Provided, however, that no Option which has previously been exercised
or otherwise terminated shall become exercisable.
B-3
9. Assignments and Transfers. No Incentive Stock Option granted under
the Plan shall be transferable other than by will or the laws of descent and
distribution. Any other Award shall be transferable by will, the laws of
descent and distribution, a "domestic relations order," as defined in Section
414(p)(1)(B) of the Code, or a gift to any member of the Participant's
immediate family or to a trust for the benefit of one or more of such
immediate family members. During the lifetime of an Award recipient, an Award
shall be exercisable only by the Award recipient unless it has been
transferred as permitted hereby, in which case it shall be exercisable only by
such transferee. For the purpose of this Section 9, a Participant's
"immediate family" shall mean the Participant's spouse, children and
grandchildren.
10. Employee Rights Under the Plan. No person shall have a right to be
selected as a Participant nor, having been so selected, to be selected again
as a Participant, and no employee or other person shall have any claim or
right to be granted an Award under the Plan or under any other incentive or
similar plan of the Corporation or any Affiliate. Neither the Plan nor any
action taken thereunder shall be construed as giving any employee any right to
be retained in the employ of the Corporation or any Affiliate.
11. Delivery and Registration of Stock. The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests,
be conditioned upon the receipt of a representation as to the investment
intention of the Participant to whom such Shares are to be delivered, in such
form as the Committee shall determine to be necessary or advisable to comply
with the provisions of the Securities Act of 1933 or any other federal, state
or local securities legislation. It may be provided that any representation
requirement shall become inoperative upon a registration of the Shares or
other action eliminating the necessity of such representation under such
Securities Act or other securities legislation. The Corporation shall not be
required to deliver any Shares under the Plan prior to (i) the admission of
such Shares to listing on any stock exchange on which Shares may then be
listed and (ii) the completion of such registration or other qualification of
such Shares under any state or federal law, rule or regulation, as the
Committee shall determine to be necessary or advisable.
12. Withholding Tax. Where a Participant or other person is entitled to
receive Shares pursuant to the exercise of an Option pursuant to the Plan, the
Corporation shall have the right to require the Participant or such other
person to pay the Corporation the amount of any taxes which the Corporation is
required to withhold with respect to such Shares, or, in lieu thereof, to
retain, or sell without notice, a number of such Shares sufficient to cover
the amount required to be withheld. All withholding decisions pursuant to
this Section 12 shall be at the sole discretion of the Committee or the
Corporation.
13. Amendment or Termination.
(a) The Board may amend, alter, suspend, discontinue, or terminate
the Plan without the consent of shareholders or Participants, except that any
such action will be subject to the approval of the Corporation's shareholders
if, when and to the extent such shareholder approval is necessary or required
for purposes of any applicable federal or state law or regulation or the rules
of any stock exchange or automated quotation system on which the Shares may
then be listed or quoted, or if the Board, in its discretion, determines to
seek such shareholder approval.
(b) The Committee may waive any conditions of or rights of the
Corporation or modify or amend the terms of any outstanding Award. The
Committee may not, however, amend, alter, suspend, discontinue or terminate
any outstanding Award without the consent of the Participant or holder
thereof, except as otherwise provided herein.
(c) The Committee shall not, without the further approval of the
shareholders of the Corporation, authorize the amendment of any outstanding
Option to reduce the exercise price of the Option. Furthermore, no Option
shall be canceled and replaced with awards having a lower exercise price
without further approval of the shareholders of the Company. This Section
13(c) is intended to prohibit the repricing of "underwater" Options and shall
not be construed to prohibit or in any way restrict the adjustments provided
for in Section 6 of this Plan.
B-4
14. Effective Date and Term of Plan. The Plan shall become effective
upon the later of its adoption by the Board or its approval by the
shareholders of the Corporation. It shall continue in effect for a term of
ten (10) years thereafter unless sooner terminated under Section 13 hereof.
* * * * *
B-5
REVOCABLE PROXY The undersigned hereby appoints Dean W.
BANNER CORPORATION Mitchell and David B. Casper, and each
ANNUAL MEETING OF SHAREHOLDERS of them, with full powers of substitution
April 20, 2001 to act as attorneys and proxies for the
undersigned, to vote all shares of Common
Stock of Banner Corporation (the "Company")
which the undersigned is entitled to vote
at the Annual Meeting of Shareholders
("Annual Meeting"), to be held at the Elks
Lodge at 351 E. Rose Street, Walla Walla,
Washington, on Friday, April 20, 2001, at
10:00 a.m., local time, and at any and all
adjournments thereof, as indicated.
1. The election as director of the nominees listed below (except as marked to
the contrary below).
Gary Sirmon (three Wilber Pribilsky (three
year term) year term [ ] FOR [ ] VOTE
Steve Sundquist (two Robert D. Adams (three WITHHELD
year term) year term)
INSTRUCTIONS: To withhold your vote for any individual nominee, write the
nominee's name on this line.
------------------------------------------------
2. The approval of the appointment of [ ] FOR [ ] AGAINST [ ] ABSTAIN
Deloitte & Touche LLP as independent
auditors for the fiscal year ending
December 31, 2001.
3. The adoption of the Banner Corporation [ ] FOR [ ] AGAINST [ ] ABSTAIN
2001 Stock Option Plan.
4. In their discretion, upon such other
matters as may properly come before
the meeting.
The Board of Directors recommends a vote "FOR" the listed propositions.
The proxies or the Trustees of the ESOP, as the case may be, will vote your
shares as directed on this card. If you do not indicate your choices on this
card, the proxies will vote your shares in accordance with the directors'
recommendations. If any other business is presented at the Annual Meeting,
the proxies will vote your shares in accordance with the directors'
recommendations. At the present time, the Board of Directors knows of no
other business to be presented at the Annual Meeting. This proxy card also
confers discretionary authority on the Board of Directors to vote with respect
to the election of any person as director where the nominees are unable to
serve or for good cause will not serve and on matters incident to the conduct
of the Annual Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment thereof and after notification to the Secretary of the
Company at the Annual Meeting of the shareholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of the Notice of Annual Meeting of Shareholders, a
Proxy Statement dated March 16, 2001 and the Annual Report to Shareholders.
Please sign exactly as your name appears on the
address label. When signing as attorney,
executor, administrator, trustee or guardian,
please give your full title. If shares are held
jointly, each holder should sign.
Dated: , 2001
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PRINT NAME OF SHAREHOLDER
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SIGNATURE OF SHAREHOLDER
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PRINT NAME OF SHAREHOLDER
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SIGNATURE OF SHAREHOLDER
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS
PROXY PROMPTLY IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE.