West Coast Bancorp Form 10-K

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BulhJoxCqyGSswP9BL06PGqfIJ3bE6O+bFxC5GspXga5A4hdaHbsny7ByWSXBi+m IwS0QLPF3Spp+R8HJD+S8Q== 0000891020-04-000270.txt : 20040226 0000891020-04-000270.hdr.sgml : 20040226 20040226113438 ACCESSION NUMBER: 0000891020-04-000270 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEST COAST BANCORP /NEW/OR/ CENTRAL INDEX KEY: 0000717059 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 930810577 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-10997 FILM NUMBER: 04629550 BUSINESS ADDRESS: STREET 1: 5335 SW MEADOWS RD STREET 2: SUITE 201 CITY: LAKE OSWEGO STATE: OR ZIP: 97035 BUSINESS PHONE: 5036840884 MAIL ADDRESS: STREET 1: 5335 SW MEADOWS RD STREET 2: SUITE 201 CITY: LAKE OSWEGO STATE: OR ZIP: 97035 FORMER COMPANY: FORMER CONFORMED NAME: COMMERCIAL BANCORP DATE OF NAME CHANGE: 19920703 10-K 1 v96690e10vk.htm FORM 10-K FISCAL YEAR ENDED 12-31-03 West Coast Bancorp Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2003

Commission file number 0-10997

WEST COAST BANCORP

(Exact name of registrant as specified in its charter)


Oregon (State or other jurisdiction of incorporation or organization)		93-0810577 (I.R.S. Employer Identification No.)


5335 Meadows Road – Suite 201 Lake Oswego, Oregon (Address of principal executive offices)		97035 (Zip Code)

Registrant’s telephone number, including area code: (503) 684-0884

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, No Par Value

(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

The approximate aggregate market value of Registrant’s Common Stock held by non-affiliates of the Registrant on June 30, 2003, was $273,064,000.

The number of shares of Registrant’s Common Stock outstanding on January 31, 2004, was 15,076,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the West Coast Bancorp Definitive Proxy Statement for the 2004 annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS


Forward Looking Statement Disclosure
PART I
	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 9A. CONTROLS AND PROCEDURES
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
SIGNATURES
INDEX TO EXHIBITS
EXHIBIT 3.1
EXHIBIT 3.2
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 10.6
EXHIBIT 10.18
EXHIBIT 10.19
EXHIBIT 10.20
EXHIBIT 10.21
EXHIBIT 10.22
EXHIBIT 21
EXHIBIT 23
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

Table of Contents


		PAGE

PART I
	Forward Looking Statement Disclosure		2
Item 1.	Business		3
Item 2.	Properties		9
Item 3.	Legal Proceedings		9
Item 4.	Submission of Matters to a Vote of Security Holders		9
PART II
Item 5.	Market for the Registrant's Common Equity and Related Stockholder Matters		10
Item 6.	Selected Financial Data		11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		29
Item 8.	Financial Statements and Supplementary Data		31
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		61
Item 9A.	Controls and Procedures		61
PART III
Item 10.	Directors and Executive Officers of the Registrant		61
Item 11.	Executive Compensation		61
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		62
Item 13.	Certain Relationships and Related Transactions		62
Item 14.	Principal Accountant Fees and Services		62
PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K		63
Signatures			64
Index to Exhibits			65

Forward Looking Statement Disclosure

Statements in this Annual Report regarding future events or performance are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”) and are made pursuant to the safe harbors of the PSLRA. Actual results of West Coast Bancorp (“Bancorp” or the “Company”) could be quite different from those expressed or implied by the forward-looking statements. Any statements that expressly or implicitly predict future results, performance, or events should be considered forward-looking. Factors that could cause results to differ from forward-looking statements include, among others, risks discussed in the text of this Annual Report as well as the following specific items: general economic conditions, whether national or regional, that could affect the demand for loans or lead to increased loan losses; evolving banking industry standards; legal developments; competitive factors, including increased competition with community, regional, and national financial institutions that may lead to pricing pressures on Bancorp’s loan yield and rates paid on deposits; loss of customers of greatest value to Bancorp, changing customer investment, deposit and lending behaviors; credit policies of regulatory authorities, increasing or decreasing interest rate environments, including the shape and the level of the yield curve, that could lead to decreased net interest margin, net interest income and fee income, including lower gains on sales of loans; changing business conditions in the banking industry; changes in the regulatory environment or new legislation affecting the financial services industry; changes in government funding of Small Business Administration (“SBA”) loans; and changes in technology or required investments in technology.

Furthermore, the forward-looking statements are subject to risks and uncertainties related to the Company’s ability to: attract and retain additional lending officers and other key personnel; close loans in the pipeline; generate loan and deposit balances at projected spreads; sustain fee generation, including lower gains on sales of loans; maintain asset quality; control the level of net charge-offs; increase productivity; generate retail investments; control expense growth; monitor and manage the Company’s internal operating and disclosure control environments; and other matters.

Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s analysis only as of the date of the statements. Readers should carefully review the disclosures we file from time to time with the Securities and Exchange Commission (“SEC”). Bancorp undertakes no obligation to publicly revise or update forward-looking statements to reflect events or circumstances that arise after the date of this report.

PART I
ITEM 1. BUSINESS

General

Bancorp is a bank holding company, originally organized under the laws of the state of Oregon in 1981 under the name “Commercial Bancorp.” Commercial Bancorp merged with West Coast Bancorp, a one-bank holding company based in Newport, Oregon, on February 28, 1995. The combined corporation retained the name “West Coast Bancorp,” and moved its headquarters to Lake Oswego, Oregon. References in this report to “we,” “us,” or “our” refer to Bancorp.

Bancorp’s principal business activities are conducted through its full-service, commercial bank subsidiary West Coast Bank (the “Bank”), an Oregon state-chartered bank with deposits insured by the Federal Deposit Insurance Corporation (“FDIC”). At December 31, 2003, the Bank had facilities in 36 cities and towns in western Oregon and western Washington, operating a total of 44 full-service and three limited-service branches and a mortgage office in Bend, Oregon. Bancorp also owns West Coast Trust Company, Inc. (“WCT” or “West Coast Trust”), an Oregon trust company that provides agency, fiduciary and other related trust services. The market value of assets managed for others at December 31, 2003 totaled $294.6 million.

Bancorp’s net income for 2003 was $19.8 million, or $1.26 per diluted share, and its consolidated equity at December 31, 2003, was $140.1 million, with 15.1 million common shares outstanding and a book value of $9.29 per share. Net loans of $1.2 billion at December 31, 2003, represented approximately 72.3% of total assets of $1.7 billion. Bancorp had deposits totaling $1.4 billion at December 31, 2003. For more information regarding Bancorp’s financial results, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Statements and Supplementary Data,” contained in this report.

Bancorp is committed to community banking and intends West Coast Bank to remain community-focused. Bancorp’s strategic vision includes greater commercial banking market penetration, as well as expanded distribution capability in the Pacific Northwest. The Bank intends to grow its distribution and reach through development of new branch locations in key growth markets. Consistent with that strategy, we opened 2 new branches in Portland, Oregon and one branch in Eugene, Oregon, during 2003. We also opened a mortgage office in Bend, Oregon. In addition to internal growth, Bancorp will continue to seek acquisition opportunities with other community banks that share its business philosophies.

Bancorp’s filings with the SEC, including its annual report on Form 10-K, quarterly reports on Form 10-Q, periodic reports on Form 8-K and amendments to these reports, are accessible free of charge at our website at http://www.wcb.com as soon as reasonably practicable after filing with the SEC. By making this reference to our website, we do not intend to incorporate into this report all information contained in the website. The website should not be considered part of this report.

The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers including the Company that file electronically with the SEC.

Subsidiaries

West Coast Bank

The Bank was organized in 1925 under the name “The Bank of Newport,” and its head office is currently located in Lake Oswego, Oregon. The Bank resulted from the merger on December 31, 1998, of the Bank of Newport of Newport, Oregon, The Commercial Bank of Salem, Oregon, Bank of Vancouver of Vancouver, Washington, and Centennial Bank of Olympia, Washington, into a single entity, which was named “West Coast Bank”.

The Bank conducts business through 47 branches located in western Oregon and southwestern Washington. The Oregon branches are located in the following cities and towns: Beaverton, Canby, Clackamas, Dallas, Depoe Bay, Eugene, Forest Grove, Hillsboro (2), Keizer (3), King City, Lake Oswego, Lincoln City, McMinnville, Molalla, Monmouth, Newberg, Newport (2), North Plains, Portland (4), Salem (4), Silverton, Stayton, Sublimity, Tigard, Toledo, Waldport, Wilsonville, and Woodburn. The Bank’s Washington branches are located in Centralia, Chehalis, Hoodsport, Lacey, Olympia (2), Shelton, and Vancouver (2).

The primary business strategy of the Bank is to provide comprehensive banking and related financial services tailored to individuals, professionals, and small to medium-sized businesses. The Bank emphasizes the diversity of its product lines and convenient access typically associated with larger financial organizations, while maintaining the local decision making authority, market knowledge, and customer service orientation of a community bank. The Bank has significant focus on four targeted segments: 1) high value consumers (including the mature market), 2) smaller businesses with credit needs under $250,000, 3) medium-sized commercial businesses with credit needs over $250,000 up to $20 million, and 4) commercial real estate and construction-related businesses.

For consumer banking customers, the Bank offers a variety of flexible checking and savings plans, as well as competitive borrowing products, including lines of credit, home equity loans, mortgages, credit cards, and other types of consumer loans. Customers have access to the Bank’s products through a variety of convenient channels such as 24 hour a day, 7 days a week automated phone or Internet access, and through ATMs (both shared and proprietary networks), and our 47 branch locations.

For business banking customers, the Bank offers tailored deposit plans, packaged checking with sophisticated, Internet-based cash management and a full array of investment services all with online and/or CD-ROM information reporting. Customized financing packages for commercial, commercial real estate and construction purposes are developed from a suite of loan offerings, including: Short-to-intermediate term loans, receivable and inventory financing, equipment leasing, revolving lines-of-credit, SBA loans, business VISA credit cards, and other types of credit. The Bank’s portfolio has some concentration in real estate-secured loans, construction loans, and agricultural and light manufacturing-related businesses.

The principal office of the Bank is at 5335 Meadows Road, Suite 201, Lake Oswego, OR 97035 (503) 684-0884.

West Coast Trust

West Coast Trust provides trust services to individuals, partnerships, corporations, and institutions. WCT acts as fiduciary of estates and conservatorships, and as a trustee under various wills, trusts, and pension and profit-sharing plans. Annuity products and services are available and offered through a third party broker-dealer with offices at certain bank branches. The main office of WCT is located at 301 Church Street, Salem, OR 97301 (503) 399-2993.

Totten, Inc.

Totten, Inc., a Washington corporation, serves as trustee under deeds of trust and holds certain real estate licenses.

Centennial Funding Corporation

Centennial Funding Corporation, a Washington corporation, is an FHA-approved mortgage lender that can make home loans and residential development loans.

ELD, Inc.

ELD, Inc, a Washington corporation incorporated by Centennial Bank in October, 1990, conducts real estate reconveyances.

West Coast Statutory Trusts I, II, and III

West Coast Statutory Trusts I, II and III are wholly-owned subsidiary trusts of Bancorp formed to facilitate the issuance of Pooled Trust Preferred Securities (“trust preferred securities”). The trusts were organized November 27, 2001, June 26, 2002, and September 17, 2003, respectively, in connection with three offerings of trust preferred securities. For more information regarding Bancorp’s issuance of trust preferred securities, see Footnote 7 “Junior Subordinated debentures and mandatorily redeemable trust preferred securities,” included in this report.

Employees

At December 31, 2003, Bancorp and its subsidiaries had approximately 658 employees. None of these employees are represented by labor unions and management believes that Bancorp’s relationship with its employees is good. A number of benefit programs are available to eligible employees, including group medical plans, paid sick leave, paid vacation, group life insurance, a 401(k) plan and a stock incentive plan. Employees are also eligible to purchase Bancorp’s common stock through direct payroll deductions under the Company’s dividend reinvestment plan. In addition, bank owned life insurance, a deferred compensation plan and supplemental retirement benefits are available to certain officers and executives in Bancorp.

Competition

Commercial banking in the state of Oregon and southwest Washington is highly competitive with respect to providing banking services, including making loans and attracting deposits. The Bank competes with other banks, as well as with savings and loan associations, savings banks, credit unions, mortgage companies, investment banks, insurance companies, securities brokerages, and other financial institutions. Banking in Oregon and Washington is dominated by several significant banking institutions, including U.S. Bank, Wells Fargo Bank, Bank of America, and Washington Mutual Bank, which together account for a majority of the total commercial and savings bank deposits in Oregon and Washington. These competitors have significantly greater financial resources and offer a greater number of branch locations (with statewide branch networks), higher lending limits, and a variety of services not offered by the Bank. Bancorp has attempted to offset some of the advantages of the larger competitors by arranging participations with other banks for loans above its legal lending limits, as well as leveraging technology and third party arrangements to better compete in targeted customer segments. Bancorp has positioned itself successfully as a local alternative to banking conglomerates that may be perceived by customers or potential customers to be impersonal, out-of-touch with the community, or simply not interested in providing banking services to some of Bancorp’s target customers.

In addition to larger institutions, numerous “community” banks have been formed or moved into Bancorp’s market areas and have developed a similar focus to Bancorp. These institutions have further increased competition, particularly in the Portland metropolitan area where Bancorp has enjoyed significant recent growth and focused much of its expansion efforts. This growing number of similar banks and an increased focus by larger institutions on the Bank’s market segments in response to declining market perception and/or market share has led to intensified competition in all aspects of Bancorp’s business.

The adoption of the Gramm-Leach-Bliley Act of 1999 (the “Financial Services Modernization Act”) has led to further intensification of competition in the banking industry. The Financial Services Modernization Act has eliminated many of the barriers to affiliation among providers of various types of financial services and has permitted business combinations among financial service providers such as banks, insurance companies, securities or brokerage firms, and other financial service providers. Additionally, the rapid adoption of financial services through the Internet has reduced or even eliminated many barriers to entry by financial services providers physically located outside our market area. Although Bancorp has been able to compete effectively in the financial services business in its markets to date, there can be no assurance that it will be able to continue to do so in the future.

The financial services industry has experienced widespread consolidation over the last decade. Bancorp anticipates that consolidation among financial institutions in its market area will continue. As noted, Bancorp seeks acquisition opportunities in its core markets from time to time. However, other financial institutions aggressively compete against Bancorp in the acquisition market. Some of these institutions have greater access to capital markets, larger cash reserves and a more liquid currency than Bancorp.

Supervision and Regulation

Introduction

We are subject to extensive regulation under federal and state law. These laws and regulations are primarily intended to protect depositors, not shareholders. Changes in applicable laws or regulations or in the policies of banking and other government regulators may have a material effect on our business and prospects. The following is a brief description of the significant laws and regulations that govern our activities.

Bank Holding Company Regulation

General. As a bank holding company, Bancorp is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”), which places Bancorp under the supervision of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Bancorp must file annual reports with the Federal Reserve and must provide it with such additional information as it may require. In addition, the Federal Reserve periodically examines Bancorp and its subsidiaries, including the Bank.

The BHCA, among other things, requires that bank holding companies obtain prior Federal Reserve approval before they: (1) acquire direct or indirect ownership or control of any voting shares of any bank that results in total ownership or control, directly or indirectly, of more than 5% of the voting shares of such bank; (2) merge or consolidate with another bank holding company; or (3) acquire substantially all of the assets of another bank or bank holding company. Furthermore, under the BHCA, bank holding companies are, with narrow exceptions, limited to owning or controlling banks and engaging in banking-related activities.

Control of Nonbanks. With some exceptions, the BHCA also prohibits bank holding companies from acquiring direct or indirect ownership or control of more than 5% of the voting shares in any company that is not a bank or a bank holding company unless the Federal Reserve determines that the activities of such company are incidental or closely related to the business of banking. If a bank holding company is well-capitalized and meets certain criteria specified by the Federal Reserve, it may engage in certain permissible nonbanking activities without prior Federal Reserve approval.

Support of Subsidiary Banks. Bank holding companies must act as a source of financial and managerial strength to subsidiary banks. This means that Bancorp is required to commit, as necessary, resources to support the Bank. Under certain conditions, the Federal Reserve may conclude that certain actions of a bank holding company, such as payment of cash dividends, would constitute unsafe and unsound banking practices. Also, capital loans from a bank holding company to its subsidiary banks are subordinate to deposits and to certain other indebtedness of the banks.

Financial Services Modernization Act. The Gramm-Leach-Bliley Act of 1999 (the “Financial Services Modernization Act”) came into effect in March 2000. The Financial Services Modernization Act established a comprehensive framework to enable previously prohibited affiliations among bank holding companies, securities firms and insurance companies. The law allows bank holding companies to elect financial holding company status and, after approval thereof, to affiliate with insurance companies, securities firms, and other financial service providers engaged in activities that are “financial in nature.” To date, we have not elected to become a financial holding company.

The Financial Services Modernization Act and related regulations also:

• Broadened the activities that may be conducted by national banks, and by banking subsidiaries of bank holding companies and their financial subsidiaries;

• Created an enhanced framework for protecting the privacy of consumer information and limited the ability of banks and other financial institutions to disclose nonpublic information about consumers to nonaffiliated third parties; and

• Modified certain laws and regulations relating to the Community Reinvestment Act (the “CRA”).

We do not believe that the Financial Services Modernization Act has negatively affected our operations in the near-term. However, to the extent that the financial services industry further consolidates, we may face increased competition from larger institutions with substantially greater resources and a wider variety of financial product offerings than we have.

Transactions with Affiliates. Subsidiary banks of a bank holding company are subject to certain restrictions under the Federal Reserve Act on transactions with affiliates generally and in particular on extensions of credit to the parent holding company or any affiliate, investments in the securities of the parent, and on the use of such securities as collateral for loans to any borrower. Regulation W, which codified many existing interpretations of provisions of the Federal Reserve Act, became effective in April 2003. The regulation restricts loans, asset purchases and other transactions between a depository institution and its affiliated entities. The various regulations and restrictions that apply may limit our ability to obtain funds from the Bank for our cash needs, including funds for payment of dividends and operational expenses.

Bank Regulation

General. The Bank is an Oregon commercial bank operating in Oregon and Washington with deposits insured by the FDIC in an amount up to $100,000 per customer. As a result, the Bank is subject to supervision and regulation by the Oregon Department of Consumer and Business Services, the Washington Department of Financial Institutions, and the FDIC. These agencies have the authority to prohibit banks from engaging in what they believe to be unsafe or unsound banking practices.

Insider Credit Transactions. Banks are subject to certain restrictions imposed by the Federal Reserve Act on extensions of credit to executive officers, directors, principal stockholders or any related interests of such persons. Extensions of credit (1) must be made on substantially the same terms, including interest rates and collateral, as, and follow credit underwriting procedures that are not less stringent than, those prevailing at the time for comparable transactions with persons not listed above and who are not employees, and (2) must not involve more than the normal risk of repayment or present other unfavorable features. Banks are also subject to certain lending limits and restrictions on overdrafts to insiders. A violation of these restrictions may result in the assessment of substantial civil monetary penalties, the imposition of a cease and desist order, and other regulatory sanctions. The prohibition contained in the Sarbanes-Oxley Act of 2002 on loans to directors, executive officers and major stockholders of pubic companies does not apply to loans by FDIC insured depository institutions, such as the Bank.

Regulation of Management. Federal law (1) sets forth circumstances under which officers or directors of a bank may be removed by the institution’s federal supervisory agency; (2) places restraints on lending by a bank to its executive officers, directors, principal stockholders, and their related interests; and (3) prohibits management personnel of a bank from serving as a director or in other management positions of another financial institution whose assets exceed a specified amount or which has an office within a specified geographic area.

Premiums for Deposit Insurance. The Bank is required to pay quarterly deposit insurance premiums to the FDIC. Premiums are based on how much risk a particular institution presents to the Bank Insurance Fund. Banks with higher levels of capital and a low degree of supervisory concern are assessed lower premiums than banks with lower levels of capital or a higher degree of supervisory concern. The Bank presently qualifies for the lowest premium level.

Community Reinvestment Act and Fair Lending and Reporting Requirements. We are subject to the CRA and to certain fair lending and reporting requirements that relate primarily to home mortgage lending operations. The CRA generally requires the federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of the institution. The federal banking agencies may take into account compliance with the CRA when regulating and supervising other activities, such as evaluating mergers, acquisitions and applications to open a branch or facility. In connection with its assessment of CRA performance, the FDIC assigns a rating of “outstanding,” “satisfactory,” “needs to improve” or “substantial noncompliance.”

There are several rules and regulations governing fair lending and reporting practices by financial institutions. A bank may be subject to substantial damages, penalties and corrective measures for any violation of fair lending and reporting, including credit reporting, laws and regulations.

FDICIA. Under the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”), each federal banking agency has prescribed, by regulation, non-capital safety and soundness standards for institutions under its authority. These standards cover internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings and stock valuation. An institution which fails to meet these standards must develop a plan acceptable to the agency, specifying the steps that the institution will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory sanctions. Management believes that the Bank currently satisfies all such standards.

Capital Adequacy

Federal bank regulatory agencies use capital adequacy guidelines in the examination and regulation of bank holding companies and banks. If capital falls below minimum guideline levels, the bank holding company or bank may be denied approval to acquire or establish additional banks or non-bank businesses or to open new facilities.

The FDIC and Federal Reserve use risk-based capital guidelines for banks and bank holding companies. Risk-based guidelines are designed to make capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. The guidelines are minimums, and the Federal Reserve may require that a banking organization maintain ratios in excess of the minimums, particularly organizations contemplating significant expansion. Current guidelines require all bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier I capital. Tier I capital for bank holding companies includes common stockholders’ equity, qualifying preferred stock and minority interests in equity accounts of consolidated subsidiaries, minus specified intangibles and accumulated other comprehensive income (loss).

The Federal Reserve also employs a leverage ratio, which is Tier I capital as a percentage of total assets minus intangibles, to be used as a supplement to risk-based guidelines. The principal objective of the leverage ratio is to constrain the maximum degree to which a bank holding company may leverage its equity capital base. The Federal Reserve requires a minimum leverage ratio of 3%. However, for all but the most highly rated bank holding companies and for bank holding companies seeking to expand, the Federal Reserve expects an additional cushion of at least 1% to 2%.

FDICIA, among other things, created a statutory framework of supervisory actions indexed to the capital level of the individual institution. Under regulations adopted by the FDIC, an institution is assigned to one of five capital categories – well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized — depending on its total risk-based capital ratio, Tier I risk-based capital ratio, and leverage ratio, together with certain subjective factors. Institutions which are deemed to be “undercapitalized” depending on the category to which they are assigned are subject to certain mandatory supervisory corrective actions. Under current regulations, a “well-capitalized” institution must have a Tier 1 risk-based capital ratio of at least 6%, a total risk-based capital ratio of at least 10%, and a leverage ratio of at least 5% and not be subject to a capital directive order. Under these guidelines, Bancorp is considered well capitalized as of the end of the fiscal year.

Dividends

The principal source of Bancorp’s cash reserves is dividends received from the Bank. The banking regulators may prohibit banks and bank holding companies from paying dividends that would constitute an unsafe or unsound banking practice. In addition, banks and bank holding companies may not pay cash dividends if doing so would reduce the amount of its capital below that necessary to meet minimum applicable regulatory capital requirements. Oregon law also limits the ability of Bancorp and the Bank to pay dividends. Under the restrictions of maintaining adequate minimum capital, as of December 31, 2003, the Bank could have declared dividends totaling $45.2 million without obtaining prior regulatory approval.

Stock Repurchases

A bank holding company, except for certain “well-capitalized” and highly rated bank holding companies, is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of its consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order, or any condition imposed by, or written agreement with, the Federal Reserve. We have in place a stock repurchase program that complies with current banking regulations. See “Management Discussion and Analysis – Capital Resources”. Our stock repurchase program is highly dependent upon our ability to issue trust preferred securities which are used to fund stock repurchases. See “Management Discussion and Analysis – Liquidity and Sources of Funds”.

Interstate Banking and Branching

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Act”) generally authorizes interstate branching and relaxes federal law restrictions on interstate banking. Currently, bank holding companies may purchase banks in any state, and states may not prohibit these purchases. Additionally, banks are permitted to merge with banks in other states, as long as the home state of neither merging bank has opted out under the legislation. Oregon and Washington each enacted “opting in” legislation in accordance with the Interstate Act. The Interstate Act requires regulators to consult with community organizations before permitting an interstate institution to close a branch in a low-income area.

The USA Patriot Act

The USA Patriot Act was signed into law on October 26, 2001. The USA Patriot Act gives the federal government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, the USA Patriot Act takes measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Among other requirements, the USA Patriot Act requires banks to establish anti-money laundering programs, to adopt procedures and controls to detect and report money laundering, and to comply with certain enhanced recordkeeping obligations with respect to correspondent accounts of foreign banks. Compliance with these new requirements has not had a material effect on our operations.

Monetary and Fiscal Policy Effects on Interest Rates

The earnings and growth of Bancorp, the Bank and Bancorp’s other subsidiaries, as well as their existing and future business activities, are affected not only by general economic conditions, but also by the fiscal and monetary policies of the Federal Reserve. The Federal Reserve implements national monetary policies (intended to curb inflation and combat recession) by its open-market operations in United States government securities, by adjusting the required level of reserves for financial institutions subject to its reserve requirements, and by varying the discount rates applicable to borrowings by banks from the Federal Reserve Bank. The actions of the Federal Reserve in these areas influence the growth of bank loans, investments and deposits, and also affect interest rates charged on loans and paid on deposits.

In addition, community banking is generally a business which depends on interest rate differentials. In general, the differences between the interest paid by a bank on its deposits and its other borrowings and the interest received by a bank on loans extended to its customers and securities held in its investment portfolio constitute the major portion of a bank’s earnings. Thus, our earnings and growth are constantly subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The nature and timing of changes in such policies and their impact cannot be predicted.

Future Legislation

Various legislation ranging from consumer protection legislation to additional legislation proposing to substantially change the financial institution regulatory system is considered by Congress from time to time. Future legislation may change banking statutes and our operating environment in substantial and unpredictable ways. For instance, new legislation could increase or decrease the cost of doing business, limit or expand permissible activities, or change the competitive balance among various types of financial institutions. We cannot predict whether any legislation will be enacted that would have a material effect on our business.

ITEM 2. PROPERTIES

The principal properties owned by the Bank include a 40,000-square-foot office and branch facility in downtown Salem, Oregon, a 15,600-square-foot office and branch facility in Newport, Oregon, and a 12,000-square-foot branch and office facility in Lacey, Washington. In total, we own 27 buildings, primarily to house branch offices. We lease the land under 5 buildings and own the land under 22 buildings. In addition, Bancorp leases 20 office spaces and buildings for branch locations.

Other non-branch office facilities are located in leased office space, including the Bank’s headquarters office in Lake Oswego, Oregon, office and processing space in Salem, Oregon, where the Bank’s data center is located, Wilsonville, Oregon, where its servicing and operations center is located, and Bend, Oregon, where we have a residential mortgage office. In addition, we lease 2 smaller office spaces for lending personnel in Lake Oswego and Downtown Portland, Oregon.

The aggregate approximate monthly rental on 31 leased properties is approximately $201,000.

ITEM 3. LEGAL PROCEEDINGS

On August 22, 2003, the lawsuit against the Company entitled Walter L. West, dba Walter West Construction Co. v. Jeffrey Teeny, Stephen L. Stoelk, Shauna L. Stoelk, B.A.S.S. Construction Co., Inc., and West Coast Bancorp was dismissed by the plaintiff voluntarily. In doing so, the plaintiff indicated that the action would be re-filed in another county. The plaintiff has not yet re-filed.

Bancorp is periodically party to other litigation arising in the ordinary course of business. Based on information currently known to management, although there are uncertainties inherent in litigation, we do not believe there is any legal action to which Bancorp or any of its subsidiaries is a party that, individually or in the aggregate, will have a materially adverse effect on Bancorp’s financial condition and results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Stock Price and Dividends

West Coast Bancorp common stock trades on the National Market tier of The Nasdaq Stock Market under the symbol “WCBO”. The high and low closing sale prices per share of our common stock for each quarter during the last two years are shown in the table below, together with dividend information for each period. The prices below do not include retail mark-ups, mark-downs or commissions, and may not represent actual transactions. As of December 31, 2003, we had approximately 1,545 holders of record.


	2003						2002

	Market Price						Market Price
					Cash dividend						Cash dividend
	High		Low		declared		High		Low		declared

1st Quarter	$	16.52	$	14.01	$	0.0775	$	15.85	$	13.02	$	0.0725
2nd Quarter	$	18.24	$	14.20	$	0.0775	$	17.15	$	14.15	$	0.0725
3rd Quarter	$	21.02	$	17.50	$	0.0850	$	17.09	$	13.91	$	0.0775
4th Quarter	$	22.05	$	19.50	$	0.0850	$	16.59	$	13.67	$	0.0775

Dividends are limited under federal and Oregon laws and regulations pertaining to Bancorp’s financial condition. Payment of dividends may also be subject to direct regulation by state banking regulators. See “Business – Supervision and Regulation.”

Information regarding securities authorized for issuance under equity compensation plans has been incorporated by reference into Item 12 of this report.

ITEM 6. SELECTED FINANCIAL DATA

Consolidated five year financial data

The following selected consolidated five year financial data should be read in conjunction with Bancorp’s consolidated financial statements and the accompanying notes presented in this report. The per share information has been adjusted retroactively for all stock dividends and splits.


		As of and For the Year ended December 31,

(Dollars in thousands, except per share data)		2003			2002			2001			2000			1999

Interest income		$	89,678		$	96,028		$	100,277		$	107,913		$	97,363
Interest expense			20,639			28,532			40,572			48,082			36,890

Net interest income			69,039			67,496			59,705			59,831			60,473
Provision for loan loss			3,800			4,979			3,282			2,068			2,190

Net interest income after provision for loan loss			65,239			62,517			56,423			57,763			58,283
Noninterest income			22,046			18,694			17,031			13,873			16,234
Noninterest expense			58,150			54,018			51,999			54,573			49,271

Income before income taxes			29,135			27,193			21,455			17,063			25,246
Provision for income taxes			9,338			8,990			6,695			5,443			7,914

Net income		$	19,797		$	18,203		$	14,760		$	11,620		$	17,332

Per share data:
	Basic earnings per share	$	1.31		$	1.17		$	0.92		$	0.70		$	1.02
	Diluted earnings per share	$	1.26		$	1.13		$	0.90		$	0.69		$	1.00
	Cash dividends	$	0.32		$	0.30		$	0.28		$	0.25		$	0.21
	Period end book value	$	9.29		$	8.70		$	8.04		$	7.39		$	6.92
	Weighted average common shares outstanding		15,077			15,575			16,126			16,711			16,987
	Weighted average diluted shares outstanding		15,674			16,069			16,453			16,834			17,370
Total assets		$	1,662,882		$	1,532,327		$	1,435,701		$	1,354,961		$	1,354,687
Total deposits		$	1,404,859		$	1,266,453		$	1,171,433		$	1,076,608		$	1,080,798
Total long-term borrowings		$	78,000		$	98,000		$	90,500		$	45,022		$	65,689
Net loans		$	1,202,750		$	1,143,077		$	1,069,798		$	985,968		$	962,817
Stockholders’ equity		$	140,053		$	133,387		$	128,790		$	121,269		$	116,793
Financial ratios:
	Return on average assets		1.24	%		1.22	%		1.08	%		0.86	%		1.37	%
	Return on average equity		14.52	%		13.96	%		11.72	%		9.86	%		14.86	%
	Average equity to average assets		8.57	%		8.76	%		9.21	%		8.72	%		9.24	%
	Dividend payout ratio		25.73	%		26.55	%		29.89	%		35.80	%		20.49	%
	Efficiency ratio (1)		62.64	%		61.32	%		65.98	%		71.63	%		62.37	%
	Net loans to assets		72.33	%		74.60	%		74.51	%		72.77	%		71.07	%
	Average yields earned (2)		6.08	%		6.99	%		8.00	%		8.76	%		8.54	%
	Average rates paid		1.78	%		2.56	%		3.90	%		4.65	%		3.91	%
	Net interest spread (2)		4.29	%		4.43	%		4.10	%		4.11	%		4.63	%
	Net interest margin (2)		4.70	%		4.95	%		4.83	%		4.94	%		5.38	%
	Nonperforming assets to total assets (3)		0.27	%		0.44	%		0.54	%		0.52	%		0.34	%
	Allowance for loan loss to total loans		1.49	%		1.45	%		1.41	%		1.42	%		1.38	%
	Allowance for loan loss to nonperforming assets (3)		411.08	%		248.81	%		198.00	%		203.32	%		289.95	%

(1) The efficiency ratio has been computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income.

(2) Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis.

(3) Nonperforming assets include litigation settlement property in certain periods.

Consolidated quarterly financial data

The following table presents selected consolidated quarterly financial data for each quarter of 2003 and 2002. The financial information contained in this table reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods.


	2003 Quarters ended

(Dollars in thousands, except per share data)	March 31,			June 30,			Sept. 30,			Dec. 31,

Interest income	$	22,548		$	22,523		$	22,209		$	22,399
Interest expense		5,850			5,289			4,874			4,627

Net interest income		16,698			17,234			17,335			17,772
Provision for loan loss		850			850			875			1,225

Net interest income after provision for loan loss		15,848			16,384			16,460			16,547
Noninterest income		4,982			5,840			5,794			5,429
Noninterest expense		13,684			14,827			14,847			14,792

Income before income taxes		7,146			7,397			7,407			7,184
Provision for income taxes		2,427			2,398			2,362			2,150

Net income	$	4,719		$	4,999		$	5,045		$	5,034

Basic earnings per share	$	0.31		$	0.33		$	0.33		$	0.34
Diluted earnings per share	$	0.30		$	0.32		$	0.32		$	0.32
Return on average assets		1.25	%		1.29	%		1.24	%		1.20	%
Return on average equity		14.35	%		14.76	%		14.59	%		14.39	%


	2002 Quarters ended

(Dollars in thousands, except per share data)	March 31,			June 30,			Sept. 30,			Dec. 31,

Interest income	$	23,658		$	23,859		$	24,882		$	23,629
Interest expense		7,599			7,013			7,504			6,416

Net interest income		16,059			16,846			17,378			17,213
Provision for loan loss		878			1,442			1,467			1,192

Net interest income after provision for loan loss		15,181			15,404			15,911			16,021
Noninterest income		5,215			4,510			4,264			4,705
Noninterest expense		13,964			13,087			13,183			13,784

Income before income taxes		6,432			6,827			6,992			6,942
Provision for income taxes		2,189			2,303			2,339			2,159

Net income	$	4,243		$	4,524		$	4,653		$	4,783

Basic earnings per share	$	0.27		$	0.29		$	0.30		$	0.31
Diluted earnings per share	$	0.26		$	0.28		$	0.29		$	0.30
Return on average assets		1.20	%		1.24	%		1.22	%		1.24	%
Return on average equity		13.30	%		14.11	%		14.16	%		14.26	%

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our audited consolidated financial statements and related notes to those statements as of December 31, 2003 and 2002 and for each of the three years in the period ended December 31, 2003, that appear under the heading “Financial Statements and Supplementary Data” of this report.

Forward Looking Statement Disclosure

West Coast Bancorp

West Coast Bancorp is a Northwest bank holding company with $1.7 billion in assets, operating 47 branches and a mortgage loan office in Oregon and Washington. West Coast Bancorp, the parent company of West Coast Bank and West Coast Trust, is headquartered in Lake Oswego, Oregon. West Coast Bank serves clients who seek the resources, sophisticated products and expertise of larger financial institutions, along with the local decision making, market knowledge, and customer service orientation of a community bank. It is our mission to consistently produce superior earnings, meet the financial needs of the communities we serve, provide excellent service to our customers, and provide a rewarding environment for our employees.

At West Coast Bancorp, we have a proven management team committed to enhancing earnings per share and long-term stockholder value. We have recruited first class sales teams, supported by a contemporary full service product line, that take advantage of new growth opportunities in local markets we serve. We maintain and value local decision making and a community bank culture to distinguish our brand. We offer a broad range of banking, investment, fiduciary and trust services to the markets we serve. For more information, please visit the Company’s web site at www.wcb.com.

Critical Accounting Policies

We have identified our most critical accounting policy to be that related to the allowance for loan loss. Bancorp’s allowance for loan loss methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan loss that management believes is appropriate at each reporting date. Quantitative factors include our historical loss experience, delinquency and charge-off trends, collateral values, changes in non-performing loans, and other factors. Qualitative factors include the general economic environment in our markets and, in particular, the state of certain industries. Size and complexity of individual loans in relation to the lending officer’s background and experience levels, loan structure, extent and nature of waivers of existing loan policies and pace of portfolio growth are other qualitative factors that are considered in our methodology. As we add new products, increase complexity of the portfolio, and expand our geographic coverage, we intend to enhance and adapt our methodology to keep pace with the size and complexity of the loan portfolio. Changes in any of the above factors could have a significant effect on the calculation of the allowance for loan loss in any given period. Management believes that our systematic methodology continues to be appropriate given our size and level of complexity. This discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report, including the section “Loan Loss Allowance and Provision”.

Financial Overview

Years Ended December 31, 2003, 2002 and 2001.

The Company’s financial objectives are focused on earnings per diluted share growth and return on average equity. Over the last two years, our compounded annual earnings per diluted share growth has been 18%, while our return on average equity improved from 11.7% in 2001 to 14.5% in 2003. The compounded annual growth rate for period end loans and deposits for the last two years were 6% and 10%, respectively. To sustain future growth and accomplish our financial objectives, we have defined five strategies:

• Focus on profitable customer segments

• Improve franchise performance levels

• Leverage technology

• Expand branch distribution

• Maintain community and customer ownership

Our strategies are designed to direct our tactical investment decisions supporting our financial objectives. Our most significant revenue source continues to be net interest income, defined as total interest income less interest expense, which in 2003 accounted for approximately 76% of our total revenue. To produce net interest income and consistent earnings growth over the long-term, we must generate loan and deposit growth at acceptable economic spreads within its market of operation. To generate and grow loans and deposits, the company must focus on a number of areas including, but not limited to, the economy, branch expansion, sales practices, customer and employee satisfaction and retention, competition, evolving customer behavior, technology, product innovation, interest rates, credit performance of its customers, and vendor relationships.

We also consider non-interest income important to our continued financial success. Fee income generation is partly related to the loan and deposit operations, such as deposit service charges, as well as selling financial products including residential mortgages, trust services, and investment products. To limit the risks associated with doing business and growing revenues, the Company has put in place numerous policies, processes, and controls.

While we review and manage all customer segments we have focused increased efforts on four targeted segments: 1) high value consumers (including the mature market), 2) smaller businesses with credit needs under $250,000, 3) medium-sized commercial businesses with credit needs over $250,000 up to $20 million, and 4) commercial real estate and construction-related businesses. These efforts have resulted in material growth in our commercial and home equity loan portfolios as well as core deposits over the last two years.

We have made a concerted effort to improve the measurement and tracking of business line and overall Company performance levels. Improved information systems, a result of leveraging new technology, have increased our ability to track key indicators and enhance corporate performance levels. Better measurement against goals and objectives and increased accountability have resulted in desired loan, deposit and fee income production through both branch and non-branch sales channels. To support growth in targeted customer segments, we have opened eight branches over the last three years. The results produced by these branches have met our expectations. With all new and existing branches, the Company has strived to maintain a local community management based philosophy. We have emphasized hiring local branch and lending personnel with strong ties to the specific local communities we enter and serve.

Income Statement Overview

Our net income for 2003 was $19.8 million, compared with $18.2 million in 2002 and $14.8 million in 2001. Diluted earnings per share for the years ended 2003, 2002, and 2001 were $1.26, $1.13, and $.90, respectively. Our return on equity for the years ended 2003, 2002, and 2001 was 14.5%, 14.0%, and 11.7%, respectively.

Net Interest Income. The following table displays information on the yields on average interest earning assets, expense on interest bearing liabilities, and average yields earned, rates paid as well as net interest spread and margin information for the periods indicated on a tax equivalent basis. This information can be used to follow the changes in our yields and rates and the changes in our earning assets and liabilities over the past three years:


	Year Ended December 31,									Increase (Decrease)						Change

(Dollars in thousands)	2003			2002			2001			03-02			02-01			03-02			02-01

Interest and fee income (1)	$	91,432		$	97,934		$	102,346		($	6,502	)	($	4,412	)		-6.64	%		-4.31	%
Interest expense	$	20,639		$	28,532		$	40,572		($	7,893	)	($	12,040	)		-27.66	%		-29.68	%

Net interest income (1)	$	70,793		$	69,402		$	61,774		$	1,391		$	7,628			2.00	%		12.35	%
Average interest earning assets	$	1,504,949		$	1,401,525		$	1,279,953		$	103,424		$	121,572			7.38	%		9.50	%
Average interest bearing liabilities	$	1,158,755		$	1,113,308		$	1,039,933		$	45,447		$	73,375			4.08	%		7.06	%
Average interest earning assets/ Average interest bearing liabilities		129.88	%		125.89	%		123.08	%		3.99	%		2.81	%
Average yields earned (1)		6.08	%		6.99	%		8.00	%		-0.91	%		-1.01	%
Average rates paid		1.78	%		2.56	%		3.90	%		-0.78	%		-1.34	%
Net interest spread (1)		4.29	%		4.43	%		4.10	%		-0.14	%		0.33	%
Net interest margin (1)		4.70	%		4.95	%		4.83	%		-0.25	%		0.12	%

(1) Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis.

Net interest income on a tax equivalent basis totaled $70.8 million for the year ended December 31, 2003, an increase of $1.4 million, or 2.0%, from $69.4 million for 2002, which was up $7.6 million from the year ended 2001. The increase in net interest income from 2002 to 2003 was due to increased earning asset volumes and lower cost of funds, offset in part by lower interest income on earning assets. Average total loans grew $69 million or 6% in 2003 compared to 2002. Despite having experienced margin compression from 4.95% in 2002 to 4.70% in 2003, we have increased net interest income with interest earning asset volume increases particularly in commercial lending and home equity loans. The net interest margin was compressed from declining yields on investments and loans, which were only partly offset by lower deposit and borrowing rates, as well as from the low interest rate environment which reduced the value of investing non-interest bearing deposits.

During 2003, we had an increase of $103 million or 8% in average total deposits over 2002. In 2003’s low interest rate environment, consumers were willing to hold more bank deposits in demand, interest checking, and money market accounts. These three categories increased materially with average demand deposits up $49 million, average interest checking up $32 million, and average money market deposits up $46 million. Conversely consumers and businesses were unwilling to invest in certificates of deposits (“CD”) at historically low rates, and CD balances declined by $24 million. With the strong overall deposit growth, total borrowings declined.

The volume increase in deposits over that of loans led to higher investments in securities. Additional investments in securities were concentrated in US Agency related securities and mortgage backed securities (“MBS”). Prepayments on MBS and the resulting acceleration of premium amortization negatively impacted the yields on the investment portfolio. The yields on MBS began to improve late in 2003 as prepayments slowed down.

During 2003, we invested $16 million in bank owned life insurance (“BOLI”). This investment shifted interest earning assets to assets that produce non-interest BOLI income. We also issued additional trust preferred securities in 2003 to fund stock repurchases and balance sheet growth while we lowered our long term Federal Home Loan Bank of Seattle (“FHLB”) debt outstanding. Decreases in rates on our long term debt helped increase our net interest income.

The $7.6 million increase in net interest income from 2001 to 2002 was due to increased earning asset volumes and lower cost of funds offset in part by lower interest income on earning assets. Our net interest spread increased 33 basis points in 2002 compared to 2001. This increase was due to a lower cost of funds partly offset by lower yields earned on earning assets. The average rate paid on interest bearing liabilities declined 134 basis points while the average yield earned decreased 101 basis points in 2002, primarily as a function of being able to reprice deposit rates down faster than loans repriced.

Average Balances and Average Rates Earned and Paid. The following table sets forth, for the periods indicated, information with regard to (1) average balances of assets and liabilities, (2) the total dollar amounts of interest income on interest earning assets and interest expense on interest bearing liabilities, (3) resulting yields or costs, (4) net interest income, and (5) net interest spread. Nonaccrual loans have been included in the tables as loans carrying a zero yield. Loan fees are recognized as income using the interest method over the life of the loan.


			Year Ended December 31,

			2003								2002								2001

			Average								Average								Average
			Outstanding			Interest		Yield/			Outstanding			Interest		Yield/			Outstanding			Interest		Yield/
(Dollars in thousands)			Balance			Earned/ Paid		Rate (1)			Balance			Earned/ Paid		Rate (1)			Balance			Earned/ Paid		Rate (1)

ASSETS:
	Interest earning balances due from banks		$	8,307		$	76		0.91	%	$	7,618		$	110		1.44	%	$	6,288		$	247		3.93	%
	Federal funds sold			13,959			133		0.95	%		8,313			144		1.73	%		2,311			92		3.96	%
	Taxable securities			207,620			8,891		4.28	%		175,969			9,245		5.25	%		166,669			10,014		6.01	%
	Nontaxable securities(2)			72,409			5,011		6.92	%		75,760			5,446		7.19	%		80,228			5,910		7.37	%
	Loans, including fees(3)			1,202,655			77,321		6.43	%		1,133,865			82,989		7.32	%		1,024,457			86,083		8.40	%

		Total interest earning assets		1,504,950			91,432		6.08	%		1,401,525			97,934		6.99	%		1,279,953			102,346		8.00	%
	Allowance for loan loss			(17,868	)							(16,219	)							(14,588	)
	Premises and equipment			26,682								27,837								29,101
	Other assets			76,478								74,421								72,853

		Total assets	$	1,590,242							$	1,487,564							$	1,367,319

LIABILITIES AND STOCKHOLDERS’ EQUITY:
	Savings and interest bearing demand deposits		$	669,689		$	4,492		0.67	%	$	592,150		$	7,076		1.19	%	$	542,945		$	13,516		2.49	%
	Certificates of deposit			371,533			10,639		2.86	%		395,161			14,243		3.60	%		382,865			20,647		5.39	%
	Short-term borrowings			17,799			277		1.56	%		15,401			329		2.14	%		43,458			2,109		4.85	%
	Long-term borrowings (4)			99,734			5,231		5.24	%		110,596			6,884		6.22	%		70,665			4,300		6.09	%

		Total interest bearing liabilities		1,158,755			20,639		1.78	%		1,113,308			28,532		2.56	%		1,039,933			40,572		3.90	%
	Demand deposits			283,504								234,189								192,709
	Other liabilities			11,666								9,692								8,689

		Total liabilities		1,453,925								1,357,189								1,241,331
	Stockholders’ equity			136,317								130,375								125,988

		Total liabilities and stockholders’ equity	$	1,590,242							$	1,487,564							$	1,367,319

	Net interest income					$	70,793							$	69,402							$	61,774

	Net interest spread								4.29	%							4.43	%							4.10	%

	Net interest margin								4.70	%							4.95	%							4.83	%

(1) Yield/rate calculations have been based on more detailed information and therefore may not recompute exactly due to rounding.

(2) Interest earned on nontaxable securities has been computed on a 35 % tax equivalent basis.

(3) Includes balances for loans held for sale.

(4) Includes junior subordinated debentures and mandatorily redeemable trust preferred securities with average balances of $15.1 million and $8.9 million in 2003 and 2002, respectively.

Net interest income – Changes due to Rate and Volume. The following table sets forth the dollar amounts of the changes in consolidated net interest income attributable to changes in volume and to changes in interest rates. Changes not due solely to volume or rate and changes due to new product lines, are allocated to volume.


		Year Ended December 31,

		2003 compared to 2002									2002 compared to 2001

		Increase (Decrease) due to:									Increase (Decrease) due to:
								Total Increase									Total Increase
(Dollars in thousands)		Volume			Yield/Rate			(Decrease)			Volume			Yield/Rate			(Decrease)

Interest income:
Interest earning balances due from banks		$	6		$	(40	)	$	(34	)	$	17		$	(154	)	$	(137	)
Federal funds sold			54			(64	)		(10	)		103			(51	)		52
Investment security income:
	Interest on taxable securities		1,262			(1,616	)		(354	)		504			(1,273	)		(769	)
	Interest on nontaxable securities (1)		(232	)		(204	)		(436	)		(322	)		(142	)		(464	)
Loans, including fees on loans			3,644			(9,312	)		(5,668	)		7,598			(10,692	)		(3,094	)

	Total interest income (1)		4,734			(11,236	)		(6,502	)		7,900			(12,312	)		(4,412	)
Interest expense:
Savings and interest bearing demand			569			(3,154	)		(2,585	)		612			(7,052	)		(6,440	)
Certificates of deposit			(651	)		(2,952	)		(3,603	)		330			(6,734	)		(6,404	)
Short-term borrowings			(99	)		47			(52	)		(603	)		(1,177	)		(1,780	)
Long-term borrowings (2)			(121	)		(1,532	)		(1,653	)		2,495			89			2,584

	Total interest expense		(302	)		(7,591	)		(7,893	)		2,834			(14,874	)		(12,040	)

Increase (decrease) in net interest income (1)		$	5,036		$	(3,645	)	$	1,391		$	5,066		$	2,562		$	7,628

(1) Tax-exempt income has been adjusted to a tax-equivalent basis using a 35 % tax equivalent basis.

(2) Long-term borrowings include junior subordinated debentures and mandatorily redeemable trust preferred securities.

Provision for Loan Losses. The provision for loan losses is recorded to bring the allowance for loan losses to an amount considered appropriate by management based on factors which are described in the “Lending and Credit Management” and “Allowance for Loan Losses” sections of this report. Provisions for loan losses of $3.8 million, $5.0 million, and $3.3 million were recorded for the years ended December 31, 2003, 2002 and 2001, respectively. Net charge-offs of $2.5 million, $3.4 million, and $2.3 million, were recorded in 2003, 2002 and 2001, respectively. The provision for loan losses decreased $1.2 million in 2003 compared to 2002 due to a lower loan volume growth in 2003 and lower net charge-offs.

Noninterest Income. Noninterest income remains a key focus for Bancorp. Our noninterest income for the year ended December 31, 2003, was $22.0 million, up 18%, compared to $18.7 million in 2002 and up from $17.0 million in 2001. Combined service charges on deposit accounts and other service charges, commissions and fees were up 18% in 2003. This is indicative of our strong deposit growth, increased investment sales from branch referrals, and a significant increase in merchant bankcard income. In 2003, gains on sales of loans increased $1.1 million or 27% over 2002. The increase was driven by continued strong demand for single family residential loans, which was influenced by lower interest rates. We also maintain a strategy of selling certain originated SBA loans. The national SBA loan program is subject to government funding changes that could influence our ability to generate future fees on the sale of SBA loans. Gains on the sales of SBA loans, at $.9 million, remained flat in 2003 compared to 2002. During 2003, we invested $16 million in bank owned life insurance which contributed $.8 million to noninterest income, compared to $.2 million in 2002.

Noninterest Expense. Noninterest expenses during the last three years were $58.1 million in 2003, $54.0 million in 2002 and $52.0 million in 2001. Noninterest expense increased $4.1 million in 2003 compared to 2002, with approximately 70% of the increase centered in salaries and employee benefits expense growth. Investments in our commercial banking sales teams, new branches and higher performance-based compensation were the key drivers of increased personnel expense. Overall, we increased our full-time equivalent employees from 555 in 2002 to 588 in 2003.

Equipment expense was stable in 2003 at $5.1 million as we continue to leverage technology, specifically software and other internet product delivery tools. Occupancy expenses were $4.9 million, $4.6 million and $4.4 million for 2003, 2002, and 2001, respectively. Our occupancy expense increased in 2003 primarily due to the addition of three new Oregon branches (Raleigh Hills and Airport Way in Portland, and Eugene), the new mortgage office in Bend, and from the full year impact of our Beaverton and Pearl district branches added in 2002, as well as from lease rate increases. We expect to continue to grow through strategically placed offices in 2004 and beyond. In general, opening a new branch results in higher costs, which are not offset until a certain level of deposits and loans is achieved. Check and other transaction processing fess increased in 2003 over 2002, due mainly to increased deposit volumes and expenses associated with processing higher volumes of ATM transactions.

Income Taxes. Our income tax expense for 2003 was $9.3 million, or 32.1% of income before income taxes, compared to $9.0 million or 33.1% of income before income taxes in 2002. Income tax expense in 2001 was $6.7 million or 31.2% of income before income taxes. Bancorp’s income tax expense over the last three years has increased due to increased pre-tax income. Our effective tax rate decreased in 2003 primarily due to our increase nontaxable income generated from investments in bank owned life insurance. In addition to bank owned life insurance, we have also invested in housing tax credits which increased in 2003 over both 2002 and 2001. Nontaxable interest income from municipal securities decreased $.3 million in 2003 compared to 2002. We continue to evaluate strategies to manage our income tax expense, including additional investments in tax credits or other non taxable income.

Balance Sheet overview

Period end total assets increased 8.5% to $1.66 billion as of December 31, 2003, from $1.53 billion at December 31, 2002, while period end investment securities and loans increased 21% and 5%, respectively, in 2003. Period end total deposits increased approximately 11% in 2003 compared to December 31, 2002. Our balance sheet has been focused on growth in targeted areas that support our corporate objectives and include:

• Small business and middle market commercial lending

• Home equity lending

• Core deposit production

During 2003, our year to date average commercial loans were up 16%, or $33 million over 2002, while average home equity loans were up $34 million, or 35% over the same time period.

In addition to focusing on certain targeted loan segments, we increased our investments in securities in 2003, mainly due to the strong deposit production. Our strategy of opening additional branches has continued to assist us in generating meaningful core deposit growth.

Investment Portfolio

The following table shows the amortized cost and fair value of Bancorp’s investment portfolio. At December 31, 2003 Bancorp had no securities classified as held to maturity.


		2003				2002

(Dollars in thousands		Amortized				Amortized
Available for sale		Cost		Fair value		Cost		Fair value

U.S. Treasury securities		$	—	$	—	$	5,500	$	5,583
U.S. Agency securities			107,339		108,282		64,461		66,483
Obligations of state and political subdivisions			76,202		80,082		83,372		87,592
Other securities			132,695		133,606		104,621		106,749

	Total	$	316,236	$	321,970	$	257,954	$	266,407

Bancorp’s investment portfolio increased by $55.6 million, or 20.9%, from December 31, 2002 to December 31, 2003.

At December 31, 2003 the net unrealized gain on the investment portfolio was $5.7 million representing 1.78% of the total portfolio. Management will consider realizing gains and or losses on the Company’s investment portfolio on an on-going basis as part of Bancorp’s overall business strategy. The following table summarizes the contractual maturities and weighted average yields of investment securities.


							After					After
		One year					One through					Five through					Due after
(Dollars in thousands)		or less		Yield			five years		Yield			ten years		Yield			ten years		Yield			Total		Yield

U.S. Agency securities		$	6,093		7.25	%	$	76,656		3.99	%	$	25,533		4.60	%	$	—		0.00	%	$	108,282		4.32	%
Obligations of state and political subdivisions (1)			8,525		5.25	%		36,565		4.84	%		31,858		4.57	%		3,134		3.48	%		80,082		4.72	%
Other securities (2)			5,140		7.06	%		6,668		5.07	%		21,651		4.62	%		100,147		3.81	%		133,606		4.13	%

	Total (1)	$	19,758		6.34	%	$	119,889		4.31	%	$	79,042		4.60	%	$	103,281		3.80	%	$	321,970		4.34	%

(1) Yields are stated on a federal tax equivalent basis at 35%.

(2) Does not reflect anticipated maturity from prepayments on mortgage-based and asset-based securities. Anticipated lives are significantly shorter than contractual maturities.

The average life of Bancorp’s investment portfolio increased from 2.9 years at December 31, 2002 to 3.3 years at December 31, 2003 as investments were made in medium term bonds and as prepayments decelerated on the mortgage backed securities.

Loan Portfolio and Credit Management

Interest and fees earned on the loan portfolio is our primary source of revenue. Loans represented 73% of total assets, or $1.22 billion as of December 31, 2003, compared to 76% or $1.16 billion at December 31, 2002. A certain degree of credit risk is inherent in our lending activities. The Bank manages the general risks inherent in the loan portfolio by following loan policies and underwriting practices designed to result in prudent lending activities. In addition, we attempt to manage our risk through our credit administration and credit review functions, which are designed to help ensure compliance with our credit standards. Through the Credit Review function the Bank is able to monitor all credit-related policies and practices on a post approval basis, ensuring uniform application. The findings of these reviews are communicated with senior management and the Loan, Investment, and Asset Liability Committee, which is made up of certain directors. As part of our ongoing lending process, internal risk ratings are assigned to each Commercial and Commercial Real Estate credit before the funds are extended to the customer. Credit risk ratings are based on apparent credit worthiness of the borrower at the time the loan is made. Large balance accounts have the credit risk rating reviewed on at least an annual basis. Credit files are examined periodically on a sample test basis, by internal and external auditors, as well as regulatory examiners.

Although a risk of nonpayment exists with respect to all loans, certain specific types of risks are associated with different types of loans. As a result of the nature of our customer base and the growth experienced in the market areas served, real estate is frequently a material component of collateral for the Bank’s loans. The expected source of repayment of these loans is generally the cash flow of the project, operations of the borrower’s business, or personal income. Risks associated with real estate loans include decreasing land values, material increases in interest rates, deterioration in local economic conditions, changes in tax policies, and a concentration of loans within any one area.

Loans held for sale at December 31, 2003 were $4.7 million compared to $10.9 million at December 31, 2002. Bancorp periodically sells all types of loans to generate fee income and to manage interest rate risk and credit risk. The majority of Bancorp’s loan sales are residential real estate mortgage loans and the guaranteed portion of SBA loans. These loans are sold on an individual basis. Real estate mortgage loans have been generally sold without recourse and without retaining servicing rights or obligations. The guaranteed part of SBA loans have been sold from time to time with servicing rights and obligations usually retained. Gains on sales of loans totaled $5.1 million in 2003 compared to $4.0 million in 2002 and $3.7 million in 2001. Increases in gains on the sales in the past three years are due to increased demand for single family home loans which was influenced by lower interest rates.

As of December 31, 2003 and 2002, we had $5.9 million and $5.4 million, respectively, in outstanding loans to persons serving as directors, officers, principal stockholders and their related interests. These loans were made substantially on the same terms, including interest rates, maturities and collateral, as those made to other customers of the Bank. At December 31, 2003 and 2002, the Bank had no bankers acceptances.

As part of our strategic efforts, we have placed an emphasis on increasing the commercial and home equity loan segments of our portfolio. Real estate commercial loans continue to be the largest portion of our loan portfolio at 54%, down from 58% at the end of 2000. We believe our focus on commercial business loans is a key contributor to our strategy of core deposit growth.

The following table is the composition of the loan portfolio and allowance for loan loss as of December 31:


		Year Ended December 31,

		2003						2002						2001						2000						1999

(Dollars in thousands)		Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent

Commercial loans		$	236,949			19.4	%	$	205,725			17.7	%	$	198,252			18.3	%	$	159,861			16.0	%	$	157,912			16.2	%
Real estate construction			112,732			9.2	%		121,711			10.5	%		94,470			8.7	%		105,219			10.5	%		124,102			12.7	%
Real estate-mortgage			179,331			14.7	%		148,350			12.8	%		113,462			10.5	%		97,377			9.7	%		101,579			10.4	%
Real estate-commercial			652,882			53.5	%		637,978			55.0	%		633,216			58.4	%		583,971			58.4	%		531,600			54.5	%
Installment and other consumer			38,987			3.2	%		46,151			4.0	%		45,650			4.2	%		53,784			5.4	%		61,104			6.3	%

	Total loans		1,220,881			100	%		1,159,915			100	%		1,085,050			100	%		1,000,212			100	%		976,297			100	%
Allowance for loan loss			(18,131	)		1.49	%		(16,838	)		1.45	%		(15,252	)		1.41	%		(14,244	)		1.42	%		(13,480	)		1.38	%

	Total loans, net	$	1,202,750					$	1,143,077					$	1,069,798					$	985,968					$	962,817

The composition of commercial real estate loan types based on collateral is as follows:


	December 31,

	2003					2002

(Dollars in thousands)	Amount		Percent			Amount		Percent

Office Buildings	$	153,900		23.7	%	$	138,700		21.7	%
Retail Facilities		80,600		12.3	%		73,000		11.4	%
Hotels/Motels		66,100		10.1	%		72,200		11.3	%
Multi-Family - 5+ Residential		65,000		10.0	%		66,900		10.5	%
Assisted Living		42,100		6.4	%		39,600		6.2	%
Medical Offices		29,000		4.4	%		32,100		5.0	%
Industrial parks and related		28,000		4.3	%		18,600		2.9	%
Health spa and gym		19,900		3.0	%		11,400		1.8	%
Mini Storage		17,500		2.7	%		18,000		2.8	%
Food Establishments		17,300		2.6	%		15,200		2.4	%
Manufacturing Plants		16,500		2.5	%		15,900		2.5	%
Land Development and Raw Land		13,400		2.1	%		11,200		1.8	%
Church, Civic, Nonprofit facilities		10,100		1.5	%		14,400		2.3	%
RV Parks, Marinas, related		7,600		1.2	%		10,800		1.7	%
Commercial/Agricultural		6,700		1.0	%		13,000		2.0	%
Other		79,200		12.2	%		86,900		13.6	%

Total real estate commercial loans	$	652,900		100.0	%	$	637,900		100.0	%

The maturity distribution of the categories of Bancorp’s loan portfolio at December 31, 2003 and the interest sensitivity are estimated in the following table.


			Commercial		Real Estate		Real Estate		Real Estate		Installment
(Dollars in thousands)			Loans		Construction		Mortgage		Commercial		and other		Total

Maturity distribution:
	Due within one year		$	93,048	$	96,256	$	5,656	$	52,989	$	2,887	$	250,836
	Due after one through five years			106,156		13,042		6,394		102,742		22,165		250,499
	Due after five years			37,745		3,434		167,281		497,151		13,935		719,546

		Total	$	236,949	$	112,732	$	179,331	$	652,882	$	38,987	$	1,220,881

Interest sensitivity:
	Fixed-interest rate loans		$	49,182	$	17,229	$	25,692	$	67,796	$	19,982	$	179,881
	Floating or adjustable interest rate loans(1)			187,767		95,503		153,639		585,086		19,005		1,041,000

		Total	$	236,949	$	112,732	$	179,331	$	652,882	$	38,987	$	1,220,881

(1) Certain loans contain provisions which place maximum or minimum limits on interest rate changes, as well as loans where interest rates change less frequently than annually. Table based on stated maturity.

Loan Loss Allowance and Provision

A loan loss allowance has been established to absorb losses inherent in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the probable estimated losses inherent in the loan portfolio. Our methodology for assessing the appropriateness of the allowance consists of several key elements, which are:

— Specific allowances for identified problem loans and portfolio segments,

— The formula allowance, and

— The unallocated allowance.

The evaluation of each element and the overall allowance is based on a continuing assessment of problem loans, related off-balance sheet items, recent and historical loss experience, and other factors, including regulatory guidance and economic factors. Management believes that the allowance for loan losses is adequate at December 31, 2003.

Our allowance incorporates the results of measuring impaired loans as provided in: Statement of Financial Accounting Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan,” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan – Income Recognition and Disclosures.” These accounting standards prescribe the measurement, income recognition and guidelines concerning impaired loans.

Specific allowances are established where management has identified significant conditions or circumstances related to a credit that management believes indicate the probability that a loss may be incurred in an amount different than the amount determined by the application of the formula allowance.

The formula allowance is calculated by applying loss factors to outstanding loans, in each case based on the internal risk grade of those loans or pools of loans. Changes in risk grades of both performing and nonperforming loans affect the amount of the formula allowance. Loss factors are based on our historical loss experience and other such pertinent data and may be adjusted for significant factors that, in management’s judgement, affect the collectibility of the portfolio as of the evaluation date. Management believes that Commercial and Commercial Real Estate loans have in the industry produced significant losses in brief periods at particular points in economic cycles. Therefore, management believes it is appropriate to use a reserve higher than recent charge-off experience would suggest in these categories of loans. This decision is supported by what management perceives to be industry practices for minimum reserve levels and is intended to prevent an understatement of reserves based upon over-reliance on recent economic conditions.

Loss factors used in the formula allowance are described as follows:

— Problem graded loan loss factors are obtained from historical loss experience, and other relevant factors including trends in past dues, non-accruals, and risk rating changes.

— Pooled loan loss factors, not individually graded loans, are based on expected net charge-offs and other factors including trends in past dues and collateral values. Pooled loans are loans and leases that are homogeneous in nature, such as consumer installment and residential mortgage loans.

The unallocated allowance uses a more subjective method and considers such factors as the following:

— Existing general economic and business conditions affecting our key lending areas,

— Credit quality trends, including trends in nonperforming loans expected to result from existing conditions,

— Loan growth rates and concentrations,

— Specific industry conditions within portfolio segments,

— Recent loss experience in particular segments of the portfolio,

— Interest rate environment,

— Duration of the current business cycle, and

— Bank regulatory examination results and findings of our internal credit examiners.

Executive credit management reviews these conditions quarterly in discussion with our senior credit officers and credit review. If any of these conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s estimate of the effect of this condition may be reflected as a specific allowance applicable to this credit or portfolio segment. Where any of these conditions is not evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s evaluation of the probable loss concerning this condition is reflected in the unallocated allowance.

The allowance for loan losses is based upon estimates of probable losses inherent in the loan portfolio. The amount actually observed for these losses can vary significantly from the estimated amounts. Our methodology includes several features that are intended to reduce the differences between estimated and actual losses. By assessing the probable estimated losses inherent in the loan portfolio on a quarterly basis, we are able to adjust specific and inherent loss estimates based upon the most recent information available.

At December 31, 2003, our allowance for loan losses was $18.1 million, or 1.49% of total loans, and 411% of total non-performing assets, compared with an allowance for loan losses at December 31, 2002 of $16.8 million, or 1.45% of total loans, and 249% of total non-performing assets.

At December 31, 2003, the allowance for loan losses of $18.1 million, consisted of a $17.0 million formula allowance, a $95,000 specific allowance and a $1.0 million unallocated allowance. At December 31, 2002, the allowance for loan losses of $16.8 million consisted of a $15.5 million formula allowance, a $90,000 specific allowance and a $1.2 million unallocated allowance. The increase in allowance for loan losses from 2002, despite a lower provision in 2003, reflects continued loan portfolio growth and the level of classified and watch credits impacted by the soft economies in Oregon and Washington.

The following table presents the composition of the allowance for loan loss.


		December 31,

		2003					2002

				Percentage of					Percentage of
				loans in each					loans in each
				category to total					category to total
(Dollars in thousands)		Amount		loans			Amount		loans

Commercial loans		$	5,433		19.4	%	$	5,104		17.7	%
Real estate-commercial			9,787		62.7	%		8,710		65.5	%
Real estate-mortagage			1,232		14.7	%		948		12.8	%
Installment and other			688		3.2	%		843		4.0	%
Unallocated			991		—			1,233		—

	Total allowance for loan loss	$	18,131		100.0	%	$	16,838		100.0	%

The unallocated reserve decreased to $1.0 million in 2003 from $1.2 million in 2002. The slight decrease was due to lower nonaccrual loans, reduced delinquencies and a reduction in watch and classified loans.

Asset Quality

Interest income on loans is accrued daily on the principal balance outstanding. Generally, no interest is accrued on loans when factors indicate collection of interest or principal is doubtful or when the principal or interest payment becomes 90 days past due. Increases in nonaccrual loans in recent years are due primarily to growth in the loan portfolio. The nonaccrual loans consist of a number of loans in different categories and are largely secured. For such loans, previously accrued but uncollected interest is charged against current earnings, and income is only recognized to the extent payments are subsequently received and the loan comes out of nonaccrual status. Interest income foregone on nonaccrual loans was approximately $231,000 during 2003 and $314,000 in 2002.

During our normal loan review procedures, a loan is considered to be impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. A loan is usually not considered to be impaired during a period of minimal delay (less than 90 days). Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair market value of the collateral if the loan is collateral dependent. Impaired loans are currently measured at lower of cost or fair value. Leases and certain large groups of smaller balance homogeneous loans, that are collectively measured for impairment, are excluded. Impaired loans are charged to the allowance when management believes, after considering economic and business conditions, collection efforts and collateral position that the borrower’s financial condition is such that collection of principal is not probable.

At December 31, 2003 and 2002, Bancorp’s recorded investment in certain loans that were considered to be impaired was $2.6 million and $4.9 million, respectively, all of which was classified as non-performing. Of these impaired loans, $181,000 and $0 had a specific related valuation allowance of $95,000 and $0, respectively, while $2.4 million and $4.9 million did not require a specific valuation allowance. The balance of the allowance for loan loss in excess of these specific reserves is available to absorb the inherent losses from all loans in the portfolio. The average recorded investment in impaired loans for the years ended December 31, 2003, 2002, and 2001 was approximately $4.0 million, $5.2 million and $6.2 million, respectively. For the years ended December 31, 2003, 2002 and 2001, interest income recognized on impaired loans totaled $193,000, $17,000 and $12,000, respectively, all of which was recognized on a cash basis.

The following table presents information with respect to the change in the allowance for loan loss and other loan information.


		December 31,

(Dollars in thousands)		2003			2002			2001			2000			1999

Loans outstanding at end of period		$	1,220,881		$	1,159,915		$	1,085,050		$	1,000,212		$	976,297
Average loans outstanding during the period		$	1,196,962		$	1,127,761		$	1,017,536		$	1,000,992		$	904,931
Allowance for loan loss, beginning of period		$	16,838		$	15,252		$	14,244		$	13,480		$	12,453
Loans charged off:
	Commercial		1,494			1,878			1,542			934			450
	Real estate		844			526			310			82			487
	Installment and consumer		760			1,276			698			658			490

	Total loans charged off		3,098			3,680			2,550			1,674			1,427
Recoveries:
	Commercial		380			160			205			61			129
	Real estate		70			25			7			266			58
	Installment and consumer		141			102			64			43			77

	Total recoveries		591			287			276			370			264
Net loans charged off			(2,507	)		(3,393	)		(2,274	)		(1,304	)		(1,163	)
Provision for loan loss			3,800			4,979			3,282			2,068			2,190

Allowance for loan loss, end of period		$	18,131		$	16,838		$	15,252		$	14,244		$	13,480

Ratio of net loans charged off to average loans outstanding			0.21	%		0.30	%		0.22	%		0.13	%		0.13	%
Ratio of allowance for loan losses to end of period loans			1.49	%		1.45	%		1.41	%		1.42	%		1.38	%

During 2003, net loans charged off were $2.5 million, compared to $3.4 million during 2002. The percentage of net loans charged off to average loans outstanding was 0.21% during 2003, compared to 0.30% and 0.22% for the years ended December 31, 2002 and 2001, respectively. Charge-offs of loans generally reflect the realization of losses in the portfolio that were recognized previously through provisions for loan losses. Recoveries are comprised of balances previously charged off that were collected in the period. The provision for loan loss exceeded the net loans charged off during 2003, reflecting continued loan growth and management’s belief, based on the foregoing analysis, that there are additional losses inherent in the portfolio.

The following table presents information with respect to nonperforming assets.


		December 31,

(Dollars in thousands)		2003			2002			2001			2000			1999

Commercial		$	403		$	780		$	1,918		$	1,678		$	1,386
Real estate construction			—			1,653			329			429			513
Real estate mortgage			498			—			210			540			756
Real estate commercial			1,689			2,486			3,790			2,927			1,463
Installment and other consumer			79			161			144			152			198

Loans on nonaccrual status			2,669			5,080			6,391			5,726			4,316
Loans past due 90 days or more but not on nonaccrual status			—			15			4			270			8
Other real estate owned (1)			1,741			1,672			1,308			1,009			325

	Total nonperforming assets	$	4,410		$	6,767		$	7,703		$	7,005		$	4,649

Percentage of nonperforming assets to total assets			0.27	%		0.44	%		0.54	%		0.52	%		0.34	%
Total assets		$	1,662,882		$	1,532,327		$	1,435,701		$	1,354,961		$	1,354,687

(1) Nonperforming assets include litigation settlement property in 2001 and 2000.

The other real estate owned total, while increasing slightly over 2002, represents an almost complete turnover of properties for the year. The largest single property is an RV park representing $1.2 million of the $1.7 million total.

Deposits and Borrowings

The following table summarizes the average amount of, and the average rate paid on, each of the deposit and borrowing categories for the periods shown.


	2003					2002					2001

(Dollars in thousands)	Average Balance		Rate Paid			Average Balance		Rate Paid			Average Balance		Rate Paid

Demand	$	283,504		—		$	234,189		—		$	192,709		—
Savings, money market and interest bearing demand		669,689		0.67	%		592,150		1.19	%		542,945		2.49	%
Certificates of deposit		371,533		2.86	%		395,161		3.60	%		382,865		5.39	%
Short-term borrowings		17,799		1.56	%		15,401		2.14	%		43,458		4.85	%
Long-term borrowings (1)		99,734		5.24	%		110,596		6.22	%		70,665		6.09	%

Total deposits and borrowings	$	1,442,259		1.78	%	$	1,347,497		2.56	%	$	1,232,642		3.90	%

(1) Long-term borrowings include junior subordinated debentures and mandatorily redeemable trust preferred securities.

Average core deposits consisting of demand and savings, money market and interest bearing demand increased 15% in 2003 compared to 2002. Our core deposit increase was mainly due to:

• Improved sales practices by the branches and commercial teams resulting in both consumer and business core deposit growth

• Businesses maintaining higher balances to avoid service charges

• Minimal, if any, yield differences between non-insured investments and similar FDIC insured deposit products

• Higher escrow deposits

Average time deposits declined $23.6 million in 2003 compared to 2002, or 6.0%, as customers likely viewed the rates offered on such deposits unattractive relative to historical rates. Although a significant amount of time deposits will mature and reprice in the next twelve months, we expect to retain the majority of these deposits. A continued decrease in time deposits is unlikely to affect our liquidity or short term operations. These deposits can generally be retained with increases in rates paid which would increase our cost of funds. As of December 31, 2003, time deposit liabilities are presented below at the earlier of the next repricing date or maturity.


		Time Deposits
		of $100,000 or More					Other Time Deposits					Total time deposits

(Dollars in thousands)		Amount		Percent			Amount		Percent			Amount		Percent

Reprice/mature in 3 months or less		$	66,547		47.75	%	$	70,307		34.03	%	$	136,854		39.56	%
Reprice/mature after 3 months through 6 months			20,895		14.99	%		30,880		14.95	%		51,775		14.97	%
Reprice/mature after 6 months through one year			17,313		12.42	%		44,992		21.78	%		62,305		18.01	%
Reprice/mature after one year through five years			34,366		24.66	%		60,398		29.23	%		94,764		27.39	%
Reprice/mature after five years			236		0.18	%		34		0.01	%		270		0.08	%

	Total	$	139,357		100.00	%	$	206,611		100.00	%	$	345,968		100.00	%

As of December 31, 2003, long term and short term borrowings had the following items remaining to contractual maturity.


				Due after
		Due in three		three months		Due after one year		Due after
(Dollars in thousands)		months or less		through one year		through five years		five years		Total

Reverse repurchase agreements		$	—	$	5,027	$	—	$	—	$	5,027
Long-term borrowings (1)			—		12,500		65,500		—		78,000

	Total borrowings	$	—	$	17,527	$	65,500	$	—	$	83,027

(1) Based on contractual maturities, and may vary based on possible call dates.

Capital Resources

The Federal Reserve and FDIC have established minimum requirements for capital adequacy for bank holding companies and member banks. The requirements address both risk-based capital and leveraged capital. The regulatory agencies may establish higher minimum requirements if, for example, a corporation has previously received special attention or has a high susceptibility to interest rate risk. The Federal Reserve and FDIC risk-based capital guidelines require banks and bank holding companies to have a ratio of tier one capital to total risk-weighted assets of at least 4% and a ratio of total capital to total risk-weighted assets of 8% or greater. In addition, the leverage ratio of tier one capital to total assets less intangibles is required to be at least 3%. See “Liquidity and Sources of Funds” for further discussion on impact of trust preferred securities on capital adequacy requirements. As of December 31, 2003, Bancorp and the Bank are considered “Well Capitalized” under the regulatory risk based capital guidelines.

Stockholders’ equity was $140.1 million at December 31, 2003, compared to $133.4 million at December 31, 2002, an increase of $6.7 million, or 5%, over that period of time. At December 31, 2003, stockholders’ equity, as a percentage of total assets, was 8.42%, compared to 8.70% at December 31, 2002. The change in equity to assets was primarily a result of asset growth and stockholders’ equity increasing slightly less due to the net effect of income recognition, plus cash from the exercise of stock options, less dividends and stock repurchased, and the change in net value of the available for sale investment portfolio.

As the following table indicates, Bancorp currently exceeds the regulatory minimum capital ratio requirements.


	December 31, 2003

(Dollars in thousands)	Amount		Ratio

Tier 1 capital	$	156,116		10.62	%
Tier 1 capital minimum requirement		58,824		4.00	%

Excess Tier 1 capital	$	97,292		6.62	%

Total capital	$	174,246		11.85	%
Total capital minimum requirement		117,648		8.00	%

Excess total capital	$	56,598		3.85	%

Risk-adjusted assets	$	1,470,601

Leverage ratio				9.45	%
Minimum leverage requirement				3.00	%

Excess leverage ratio				6.45	%

Adjusted total assets	$	1,651,518

In December 1998, Bancorp announced a stock repurchase program associated with its stock option plans. Under this plan the Company repurchased .9 million shares for $12.8 million or $13.86 per share through July of 2000, when activity under this plan was discontinued. This stock repurchase plan was formally cancelled in September 2002.

In July 2000, Bancorp announced a stock repurchase program that was expanded in September 2000, June 2001, and again in September 2002. Under this plan, the Company can buy up to 2.88 million shares of the Company’s common stock, including completed purchases. The Company intends to use existing funds and/or long-term borrowings to finance the repurchases. Total shares available for repurchase under this plan were approximately 320,000 at December 31, 2003. The following table presents information with respect to Bancorp’s July 2000 stock repurchase program.


						Average cost per
(Shares and dollars in thousands)		Shares repurchased in period		Cost of shares repurchased		share

Year ended 2000			573	$	5,264	$	9.19
Year ended 2001			534		6,597		12.35
Year ended 2002			866		13,081		15.11
Year ended 2003			587		10,461		17.81

	Plan to date total		2,560	$	35,403	$	13.83

Liquidity and Sources of Funds

The Bank’s primary sources of funds are customer deposits, maturities of investment securities, sales of “Available for Sale” securities, loan sales, loan repayments, net income, advances from the FHLB, and the use of Federal Funds markets. The holding company specifically relies on dividends from the Bank and proceeds from the issuance of trust preferred securities to fund dividends to stockholders and stock repurchases.

At December 31, 2003, three wholly-owned subsidiary grantor trusts established by Bancorp had issued $20 million of pooled trust preferred securities. Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the indentures. The trusts use the net proceeds from the offering to purchase a like amount of Junior Subordinated Debentures (the “Debentures”) of the Company. The Debentures are the sole assets of the trusts. The Company’s obligations under the Junior Subordinated Debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. The Company has the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date.

The following table is a summary of current trust preferred securities at December 31, 2003.

(Dollars in thousands)


		Preferred
		security						Rate at
Issuance Trust	Issuance date	amount		Rate type (1)	Initial rate			12/31/03			Maturity date

West Coast Statutory Trust I	December 2001	$	5,000	Variable		5.60	%		4.77	%	December 2031
West Coast Statutory Trust II	June 2002	$	7,500	Variable		5.34	%		4.62	%	June 2032
West Coast Statutory Trust III	September 2003	$	7,500	Fixed		6.75	%		6.75	%	September 2033

(1) The variable rate preferred securities reprice quarterly.

The total amount of trust preferred securities outstanding at December 31, 2003, and 2002, was $20 million and $12.5 million, respectively. The interest rates on the trust preferred securities issued in December 2001, and June 2002 reset quarterly and are tied to the London Interbank Offered Rate (“LIBOR”) rate. In connection with these two variable rate offerings, Bancorp entered into swap agreements that will result in a fixed interest rate on the securities for five years, equal to 8.62% and 8.14%, respectively. The Company has the right to redeem the debentures of the December 2001 issuance in December 2006; the June 2002 issuance in June 2007 and the September 2003 issuance in September 2008.

On July 2, 2003, the Federal Reserve Bank issued Supervisory Letter SR 03-13 clarifying that Bank Holding Companies should continue to report trust preferred securities in accordance with current Federal Reserve Bank instructions which allows trust preferred securities to be counted in Tier 1 capital subject to certain limitations. The Federal Reserve has indicated it will review the implications of any accounting treatment changes and, if necessary or warranted, will provide appropriate guidance. For additional information regarding trust preferred securities, this discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report including the Footnote 7, “Junior Subordinated debentures and mandatorily redeemable trust preferred securities.”

Scheduled loan repayments are a relatively stable sources of funds, while deposit inflows and unscheduled loan prepayments are not. Deposit inflows and unscheduled loan prepayments are influenced by general interest rate levels, interest rates available on other investments, competition, economic conditions, and other factors.

Deposits are the primary source of new funds. Total deposits were $1.4 billion at December 31, 2003, up from $1.3 billion at December 31, 2002. Brokered deposits are generally not accepted, and we have none outstanding at December 31, 2003. We have attempted to attract deposits in our market areas through competitive pricing and delivery of quality products.

Management expects to continue relying on customer deposits, maturity of investment securities, sales of “Available for Sale” securities, loan sales, loan repayments, net income, Federal Funds markets, advances from the FHLB, and other borrowings to provide liquidity. Management may also consider engaging in further offerings of trust preferred securities if the opportunity presents an attractive means of raising funds in the future. Although deposit balances at times have shown historical growth, such balances may be influenced by changes in the financial services industry, interest rates available on other investments, general economic conditions, competition, customer management of cash resources and other factors. Borrowings may be used on a short-term and long-term basis to compensate for reductions in other sources of funds. Borrowings may also be used on a long-term basis to support expanded lending activities and to match maturities or repricing intervals of assets. The sources of such funds will include Federal Funds purchased, reverse repurchase agreements and borrowings from the FHLB.

Bancorp is party to many contractual financial obligations, including repayment of borrowings, operating lease payments and commitments to extend credit. The table below presents certain future financial obligations.


		Payments due within time period at December 31, 2003

								Due After Five
(Dollars in thousands)		0-12 Months		1-3 Years		4-5 Years		Years		Total

Reverse repurchase agreements		$	5,027	$	—	$	—	$	—	$	5,027
Operating leases			2,151		3,579		3,158		10,932		19,820
Junior subordinated debentures			—		—		20,000		—		20,000
Long-term borrowings			12,500		45,500		20,000		—		78,000

	Total	$	19,678	$	49,079	$	43,158	$	10,932	$	122,847

At December 31, 2003, Bancorp had commitments to extend credit of $427 million compared to $343 million at December 31, 2002. For additional information regarding future financial commitments, this discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report including Footnote 18 “Financial instruments with off-balance sheet risk.”

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk. Interest rate, credit and operations risks are the most significant market risks impacting our performance. Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of our business activities. We rely on loan reviews, prudent loan underwriting standards and an adequate allowance for loan loss to mitigate credit risk. Interest rate risk is reviewed at least quarterly by the Asset Liability Management Committee (“ALCO”) which includes senior management representatives. The ALCO manages our balance sheet to maintain the forecasted impact of interest rates on net interest income and present value of equity within acceptable ranges despite unforeseeable changes in interest rates.

Asset/liability management simulation models are used to measure interest rate risk. The models quantify interest rate risk through simulating forecasted net interest income over a 12-month time horizon under various rate scenarios, as well as monitoring the change in the present value of equity under the same rate scenarios. The present value of equity is defined as the difference between the market value of current assets less current liabilities. By measuring the change in the present value of equity under different rate scenarios, management is able to identify interest rate risk that may not be evident in simulating changes in forecasted net interest income.

The following tables show the approximate percentage change in forecasted net interest income over a 12-month period and the percentage change in the present value of equity under several rate scenarios. For the net interest income analysis, three rate scenarios provided by Global Insight, an outside economic service, are compared to a stable (flat) rate scenario:


	Actual rates December			Base Case			Declining Rates			Rising Rates
	2003			2004 (average)			2004 (average)			2004 (average)

Federal Funds Rate		1.00	%		1.30	%		.57	%		3.07	%
Prime Rate		4.00	%		4.30	%		3.57	%		6.06	%
Treasury Yield Curve Spread 10-year to 3 month	336 basis points			353 basis points			281 basis points			220 basis points


Stable rate scenario	Percent Change in
compared to:	Net Interest Income

Rising		+3.4	%
Base Case		+.5	%
Falling		-.8	%

As illustrated in the above table, at December 31, 2003, we estimate our balance sheet was slightly asset sensitive over a 12 month horizon, meaning that interest earning assets mature or reprice more quickly than interest-bearing liabilities in a given period. Therefore, a significant decrease in market rates of interest could adversely affect net interest income, while an increase in market rates may increase net interest income. We attempt to limit our interest rate risk through managing the repricing characteristics of our assets and liabilities.

For the present value of equity analysis, the results are compared to the net present value of equity using the yield curve as of December 31, 2003. This curve is then shifted up and down and the net present value of equity is computed. In the –100 basis point scenarios, rates were not allowed to decline below zero. This table does not include flattening or steepening yield curve effects. Readers are referred to management’s “Forward Looking Statement Disclosure” in connection with this discussion of market risks faced by Bancorp.


December 31, 2003	Percent Change in
Change in Interest Rates	Present Value of Equity

Up 200 basis points		-11.4	%
Up 100 basis points		-5.5	%
Down 100 basis points		+3.0	%

It should be noted that the simulation model does not take into account future management actions that could be undertaken, should a change occur in actual market interest rates during the year. Also, certain assumptions are required to perform modeling simulations that may have a significant impact on the results. These include important assumptions regarding the level of interest rates and balance changes on deposit products that do not have stated maturities, as well as the relationship between loan yields and deposit rates relative to market interest rates. These assumptions have been developed through a combination of industry standards and future expected pricing behavior but could be significantly influenced by future competitor pricing behavior. The model also includes assumptions about changes in the composition or mix of the balance sheet. The results derived from the simulation model could vary significantly due to external factors such as changes in the prepayment assumptions, early withdrawals of deposits and competition. Any merger activity will also have an impact on the asset/liability position as new assets are acquired and added.

Interest Rate Sensitivity (Gap) Table

The primary objective of our asset/liability management is to maximize net interest income while maintaining acceptable levels of interest-rate sensitivity. We seek to meet this objective through influencing the maturity and repricing characteristics of our assets and liabilities.

The following table sets forth the estimated maturity and repricing and the resulting interest rate gap between interest earning assets and interest bearing liabilities at December 31, 2003. The amounts in the table are derived from internal data from the Bank based on maturities and next repricing dates including contractual repayments.


			Estimated Maturity or Repricing at December 31, 2003

												Due After Five
(Dollars in thousands)			0-3 Months			4-12 Months			1-5 Years			Years			Total

Interest Earning Assets:
	Interest earning balances due from banks		$	38		$	—		$	—		$	—		$	38
	Federal funds sold			3,510			—			—			—			3,510
	Trading assets			991			—			—			—			991
	Investments available for sale(1)(2)			27,031			85,748			167,912			41,279			321,970
	Loans held for sale			4,729			—			—			—			4,729
	Loans, including fees			331,342			379,978			456,048			53,513			1,220,881

		Total interest earning assets	$	367,641		$	465,726		$	623,960		$	94,792			1,552,119

	Allowance for loan loss															(18,131	)
	Cash and due from banks															59,956
	Other assets															68,938

		Total assets													$	1,662,882

Interest Bearing Liabilities:
	Savings and interest bearing demand deposits(3)		$	82,940		$	247,768		$	372,583		$	38,989		$	742,280
	Certificates of deposit			136,854			114,080			94,764			270			345,968
	Borrowings (2)			5,027			12,500			65,500			—			83,027
	Junior subordinated debentures			—			—			20,000			—			20,000

		Total interest bearing liabilities	$	224,821		$	374,348		$	552,847		$	39,259			1,191,275

	Other liabilities															331,554

	Total liabilities															1,522,829
	Stockholders’ equity															140,053

		Total liabilities & stockholders’ equity													$	1,662,882

	Interest sensitivity gap		$	142,820		$	91,378		$	71,113		$	55,533		$	360,844
	Cumulative interest sensitivity gap		$	142,820		$	234,198		$	305,311		$	360,844
	Cumulative interest sensitivity gap as a percentage of total assets			9	%		14	%		18	%		22	%

(1) Equity investments have been placed in the 0-3 month category.

(2) Repricing is based on anticipated call dates, and may vary from contractual maturities.

(3) Repricing is based on estimated average lives.

Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities and periods of repricing, they may react differently to changes in market interest rates. Also, interest rates on assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other assets and liabilities may follow changes in market interest rates. Given these shortcomings, management believes that rate risk is best measured by simulation modeling as opposed to measuring interest rate risk through interest rate gap measurement.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following audited consolidated financial statements and related documents are set forth in this Annual Report on Form 10-K on the pages indicated:


Independent Auditors’ Report			32
Consolidated Balance Sheets			33
Consolidated Statements of Income			34
Consolidated Statements of Cash Flows			35
Consolidated Statements of Changes in Stockholders’ Equity			36
Notes to Consolidated Financial Statements			37

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of West Coast Bancorp
Lake Oswego, Oregon

We have audited the accompanying consolidated balance sheets of West Coast Bancorp and subsidiaries (the “Company”) as of December 31, 2003 and 2002, and the related consolidated statements of income, cash flows, and changes in stockholders’ equity for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of West Coast Bancorp and Subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Portland, Oregon
February 23, 2004

WEST COAST BANCORP
CONSOLIDATED BALANCE SHEETS


As of December 31 (Dollars in thousands)				2003			2002

ASSETS:
Cash and cash equivalents:
		Cash and due from banks		$	59,956		$	55,026
		Interest-bearing deposits in other banks			38			2,316
		Federal funds sold			3,510			391

			Total cash and cash equivalents		63,504			57,733
Trading assets					991			967
Investment securities available for sale, at fair value (amortized cost: $316,237 and $257,954)					321,970			266,407
Loans held for sale					4,729			10,924
Loans					1,220,881			1,159,915
Allowance for loan loss					(18,131	)		(16,838	)

			Loans, net		1,202,750			1,143,077
Premises and equipment, net					27,176			26,609
Intangible assets					865			1,218
Bank owned life insurance					18,062			1,757
Other assets					22,835			23,635

			Total assets	$	1,662,882		$	1,532,327

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
		Demand		$	316,611		$	275,724
		Savings and interest-bearing demand			742,280			619,502
		Certificates of deposit			345,968			371,227

			Total deposits		1,404,859			1,266,453
Short-term borrowings					5,027			9,902
Long-term borrowings					78,000			98,000
Junior subordinated debentures					20,000			—
Mandatorily redeemable trust preferred securities					—			12,500
Other liabilities					14,943			12,085

			Total liabilities		1,522,829			1,398,940
Commitments and contingent liabilities (Note 8)
STOCKHOLDERS’ EQUITY:
Preferred stock: no par value, none issued; 10,000,000 shares authorized					—			—
Common stock: no par value, 55,000,000 shares authorized; 15,075,875 and 15,325,937 shares issued and outstanding, respectively					18,845			19,158
Additional paid-in capital					66,462			72,279
Retained earnings					52,916			38,047
Deferred compensation					(1,242	)		(671	)
Accumulated other comprehensive income					3,072			4,574

	Total stockholders’ equity				140,053			133,387

			Total liabilities and stockholders’ equity	$	1,662,882		$	1,532,327

See notes to consolidated financial statements

WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF INCOME


Year ended December 31 (In thousands, except per share amounts)			2003		2002		2001

INTEREST INCOME:
Interest and fees on loans			$	77,321	$	82,989	$	86,083
Interest on taxable investment securities				8,891		9,245		10,014
Interest on nontaxable investment securities				3,257		3,540		3,841
Interest on deposits in other banks				76		110		247
Interest on federal funds sold				133		144		92

		Total interest income		89,678		96,028		100,277
INTEREST EXPENSE:
Savings and interest-bearing demand				4,492		7,076		13,516
Certificates of deposit				10,639		14,243		20,647
Short-term borrowings				277		329		2,109
Long-term borrowings				4,023		6,122		4,285
Mandatorily redeemable trust preferred securities and junior subordinated debentures				1,208		762		15

	Total interest expense			20,639		28,532		40,572

NET INTEREST INCOME				69,039		67,496		59,705
Provision for loan loss				3,800		4,979		3,282

Net interest income after provision for loan loss				65,239		62,517		56,423
NONINTEREST INCOME:
Service charges on deposit accounts				6,960		6,352		6,094
Other service charges, commissions and fees				6,577		5,099		4,731
Trust revenue				1,776		1,683		1,742
Gains on sales of loans				5,124		4,024		3,671
Bank owned life insurance				827		227		—
Other				590		1,309		793
Net gains on sales of securities				192		—		—

		Total noninterest income		22,046		18,694		17,031
NONINTEREST EXPENSE:
Salaries and employee benefits				32,487		29,499		26,070
Equipment				5,139		5,100		5,470
Occupancy				4,901		4,642		4,388
Check and other transaction processing				2,778		2,572		2,583
Professional fees				2,314		1,834		1,738
Courier and postage				1,953		1,948		1,908
Marketing				2,047		2,018		1,757
Other loan expense				1,624		1,276
Communications				1,166		1,100		1,282
Other taxes and insurance				700		721		837
Printing and office supplies				637		710		770
Kiting charge				—		—		1,945
Other noninterest expense				2,404		2,598		3,251

	Total noninterest expense			58,150		54,018		51,999

INCOME BEFORE INCOME TAXES				29,135		27,193		21,455
PROVISION FOR INCOME TAXES				9,338		8,990		6,695

NET INCOME			$	19,797	$	18,203	$	14,760

	Basic earnings per share		$	1.31	$	1.17	$	0.92
	Diluted earnings per share		$	1.26	$	1.13	$	0.90
	Weighted average common shares			15,077		15,575		16,126
	Weighted average diluted shares			15,674		16,069		16,453

See notes to consolidated financial statements

WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS


Year ended December 31 (Dollars in thousands)				2003			2002			2001

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income				$	19,797		$	18,203		$	14,760
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment					2,831			3,226			3,702
(Increase) decrease in net deferred tax assets					(1,681	)		1,148			1,110
Write-down of buildings/equipment					—			613			—
Amortization of intangibles					353			357			375
Net gains on sales of available for sale securities					(192	)		—			—
Provision for loan loss					3,800			4,979			3,282
(Increase) decrease in interest receivable					(38	)		735			1,578
(Increase) decrease in other assets					2,519			(4,830	)		420
Gain on sale of loans					5,124			4,024			3,671
Origination of loans held for sale					(188,825	)		(135,590	)		(91,396	)
Proceeds from sales of loans held for sale					189,896			134,665			77,123
Decrease in interest payable					(342	)		(219	)		(658	)
Increase (decrease) in other liabilities					3,200			(985	)		3,312
Increase in cash surrender value of bank owned life insurance					(743	)		—			—
Gain on benefit of proceeds from bank owned life insurance					(202	)		—			—
Stock based compensation expense					679			566			582
Tax benefit associated with stock options					732			301			185
(Increase) decrease in trading assets					(24	)		125			(213	)

			Net cash provided by operating activities		36,884			27,318			17,833
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of available for sale securities					118,188			71,138			119,364
Proceeds from sales of available for sale securities					4,158			—			—
Purchase of available for sale securities					(179,219	)		(90,695	)		(113,994	)
Purchase of bank owned life insurance					(16,000	)		—			—
Proceeds from death benefit paid on bank owned life insurance					640			—			—
Loans made to customers greater than principal collected on loans					(63,473	)		(78,258	)		(87,112	)
Net capital expenditures					(3,398	)		(1,332	)		(4,280	)

			Net cash used in investing activities		(139,104	)		(99,147	)		(86,022	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand, savings and interest bearing transaction accounts					163,665			100,711			98,638
Net decrease in certificates of deposit					(25,259	)		(5,691	)		(3,813	)
Proceeds from issuance of junior subordinated debentures					7,500			7,500			5,000
Proceeds from issuance of long-term borrowings					5,000			60,000			80,500
Repayment of long-term borrowings					(25,000	)		(52,500	)		(35,022	)
Net decrease in short-term borrowings					(4,875	)		(16,786	)		(74,738	)
Repurchase of common stock					(10,461	)		(13,081	)		(6,597	)
Net proceeds from issuance of common stock					2,349			1,147			813
Dividends paid and cash paid for fractional shares					(4,928	)		(4,699	)		(4,465	)

			Net cash provided by financing activities		107,991			76,601			60,316

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					5,771			4,772			(7,873	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR					57,733			52,961			60,834

CASH AND CASH EQUIVALENTS AT END OF YEAR				$	63,504		$	57,733		$	52,961

Supplemental cash flow information:
	Cash paid in the year for:
		Interest		$	20,981		$	28,750		$	41,230
		Income taxes		$	9,158		$	6,070		$	8,989

See notes to consolidated financial statements.

WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


																		Accumulated
									Additional									Other
			Common Stock						Paid-In			Retained			Deferred			Comprehensive
(Shares and Dollars in thousands)			Shares			Amount			Capital			Earnings			Compensation			Income (Loss)			Total

BALANCE, January 1, 2001				16,415		$	20,518		$	87,364		$	14,248		$	(1,032	)	$	171		$	121,269
Comprehensive income:
	Net income			—			—			—			14,760			—			—		$	14,760
	Other comprehensive income, net of tax:
		Net unrealized investment gains		—			—			—			—			—			2,243			2,243

	Other comprehensive income, net of tax																					2,243

Comprehensive income																					$	17,003

Cash dividends, $.28 per common share				—			—			—			(4,465	)		—			—			(4,465	)
Issuance of common stock pursuant to option plans				138			172			923			—			—			—			1,095
Redemption of stock pursuant stock plans				(28	)		(32	)		(250	)		—			—			—			(282	)
Issuance of common stock pursuant to restricted stock plans				34			42			386			—			(428	)		—			—
Amortization of deferred compensation restricted stock				—			—			—			—			582			—			582
Common stock repurchased and retired				(534	)		(668	)		(5,929	)					—			—			(6,597	)
Tax benefit associated with stock options				—			—			185			—			—			—			185

BALANCE, December 31, 2001				16,025			20,032			82,679			24,543			(878	)		2,414			128,790
Comprehensive income:
	Net income			—			—			—			18,203			—			—		$	18,203
	Other comprehensive income, net of tax:
		Net unrealized investment/derivative gains		—			—			—			—			—			2,160			2,160

	Other comprehensive income, net of tax																					2,160

Comprehensive income																					$	20,363

Cash dividends, $.30 per common share				—			—			—			(4,699	)		—			—			(4,699	)
Issuance of common stock pursuant to option plans				164			205			1,272			—			—			—			1,477
Redemption of stock pursuant to stock plans				(35	)		(44	)		(464	)		—			18			—			(490	)
Activity in Deferred Compensation Plan				13			16			144			—			—			—			160
Issuance of common stock pursuant to restricted stock plans				25			31			346			—			(377	)		—			—
Amortization of deferred compensation restricted stock				—			—			—			—			566			—			566
Common stock repurchased and retired				(866	)		(1,082	)		(11,999	)					—			—			(13,081	)
Tax benefit associated with stock options				—			—			301			—			—			—			301

BALANCE, December 31, 2002				15,326			19,158			72,279			38,047			(671	)		4,574			133,387
Comprehensive income:
	Net income			—			—			—			19,797			—			—		$	19,797
	Other comprehensive income, net of tax:
		Net unrealized investment/derivative losses		—			—			—			—			—			(1,502	)		(1,502	)

	Other comprehensive income, net of tax																					(1,502	)

Comprehensive income																					$	18,295

Cash dividends, $.32 per common share				—			—			—			(4,928	)		—			—			(4,928	)
Issuance of common stock pursuant to option plans				291			363			2,500			—			—			—			2,863
Redemption of stock pursuant to stock plans				(29	)		(36	)		(457	)		—			27			—			(466	)
Activity in Deferred Compensation Plan				(3	)		(3	)		(45	)		—			—			—			(48	)
Issuance of common stock pursuant to restricted stock plans				78			97			1,180			—			(1,277	)		—			—
Amortization of deferred compensation restricted stock				—			—			—			—			679			—			679
Common stock repurchased and retired				(587	)		(734	)		(9,727	)		—			—			—			(10,461	)
Tax benefit associated with stock options				—			—			732			—			—			—			732

BALANCE, December 31, 2003				15,076		$	18,845		$	66,462		$	52,916		$	(1,242	)	$	3,072		$	140,053

See notes to consolidated financial statements

WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. The accompanying consolidated financial statements include the accounts of West Coast Bancorp (“Bancorp” or “the Company”), which operates its wholly-owned subsidiaries, West Coast Bank (the “Bank”), West Coast Trust, Centennial Funding Corporation, Eld, Inc., and Totten, Inc., after elimination of intercompany transactions and balances. In accordance with Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities”, West Coast Statutory Trust I, II, and III are considered related parties to West Coast Bancorp and their financial results are not consolidated in West Coast Bancorp’s financial statements effective December 31, 2003. Certain reclassifications of prior year amounts have been made to conform to current classifications.

Nature of Operations. West Coast Bancorp’s activities include offering a full range of financial services through 48 branch and mortgage offices in western Oregon and Washington. West Coast Trust provides agency, trust and related services.

Trading Assets. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Trading assets held at December 31, 2003 and 2002 are related solely to assets held in a Rabbi Trust for benefit of the Company’s deferred compensation plans.

Investment Securities. Investment securities are classified as either available for sale or held to maturity. For purposes of computing gains and losses, cost of securities sold is determined using the specific identification method. Available for sale securities are carried at fair value with unrealized gains and losses, net of any tax effect, added to or deducted directly from stockholders’ equity. Held to maturity securities are carried at amortized cost. The Company does not have any held to maturity securities as of December 31, 2003 or 2002.

Loans Held for Sale. Loans held for sale are carried at the lower of cost or market. Market value is determined in the aggregate. When a loan is sold, the gain is recognized in the consolidated statement of income as the proceeds less the book value of the loan including unamortized fees and capitalized direct costs. In addition, we originate loans to customers under Small Business Administration (“SBA”) programs that generally provide for SBA guarantees of 70% to 90% of each loan. We periodically sell the guaranteed portion of certain SBA loans to investors and retain the unguaranteed portion and servicing rights in our loan portfolio. Gains on these sales are earned through the sale of the guaranteed portion of the loan for an amount in excess of the adjusted carrying value of the portion of the loan sold. We allocate the carrying value of such loans between the portion sold, the portion retained and a value assigned to the right to service the loan. The difference between the adjusted carrying value of the portion retained and the face amount of the portion retained is amortized to interest income over the life of the related loan using a straight-line method over the anticipated lives of the pool of SBA loans.

Loans. Loans are reported net of unearned income. Interest income on loans is accrued daily on the principal balance outstanding. Loan and commitment fees and the direct cost of originating a loan are deferred and recognized over the life of the loan and/or commitment period as yield adjustments. Generally, no interest is accrued on loans when factors indicate collection of interest is doubtful or when the principal or interest payment becomes 90 days past due. For such loans, previously accrued but uncollected interest is charged against current earnings, and income is only recognized to the extent payments are subsequently received.

Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair market value of the collateral if the loan is collateral dependent. Loans that are currently measured at fair value or at lower of cost or fair value, leases and certain large groups of smaller balance homogeneous loans that are collectively measured for impairment are excluded.

Allowance for Loan Loss. The allowance for loan loss is based on management’s estimates. Management determines the adequacy of the allowance for loan loss based on evaluations of the loan portfolio, recent loss experience, and other factors, including economic conditions. The Company determines the amount of the allowance for loan loss required for certain sectors based on relative risk characteristics of the loan portfolio and other financial instruments with credit exposure. Actual losses may vary from current estimates. These estimates are reviewed periodically and, as adjustments become necessary, are reported in earnings in the periods in which they become known. The allowance for loan loss is increased by provisions for loan losses in operating earnings. Losses are charged to the allowance while recoveries are credited to the allowance.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Premises and Equipment. Premises and equipment are stated at cost, less accumulated depreciation. The provision for depreciation is computed on the straight-line method over the estimated useful lives of the related assets, which range from 3 to 40 years. Improvements are capitalized and depreciated over their estimated useful lives. Minor repairs, maintenance, and improvements are charged to operations as incurred. When property is replaced or otherwise disposed of, the cost of such assets and the related accumulated depreciation are removed from their respective accounts. Related gain or loss, if any, is recorded in current operations.

Servicing of Financial Assets. Bancorp originates loans under SBA loan programs. Bancorp periodically sells such loans, and retains servicing rights on the loans originated and sold. The fair value of the servicing rights are determined based upon discounted cash flow analysis and such servicing rights are being amortized in proportion to, and over the period of, estimated future net servicing income. The servicing rights are periodically evaluated for impairment. No impairment was recognized during 2003, 2002, or 2001.

Intangible Assets. Intangible assets are composed of deposit premiums of $.9 million and $1.2 million (net of accumulated amortization of $2.4 million and $2.1 million) at December 31, 2003 and 2002, respectively. These deposit premiums are being amortized over a ten-year period.

Other Borrowings. Federal funds purchased and securities sold under agreements to repurchase generally mature within one to four days from the transaction date. Other short-term borrowed funds mature within one year from the transaction date. Other long-term borrowed funds extend beyond one year.

Income Taxes. Income taxes are accounted for using the asset and liability method. Under this method, a deferred tax asset or liability is determined based on the enacted tax rates that will be in effect when the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in Bancorp’s income tax returns. The deferred tax provision for the year is equal to the net change in the net deferred tax asset from the beginning to the end of the year, less amounts applicable to the change in value related to investments available for sale as well as value changes in interest rate swaps accounted for as hedges. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

Trust Department Assets. Assets (other than cash deposits) held by West Coast Trust in fiduciary or agency capacities for its trust customers are not included in the accompanying consolidated balance sheets, since such items are not assets of West Coast Trust.

Supplemental Cash Flow Information. For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds are purchased and sold for one-day periods.

Use Of Estimates In The Preparation Of Financial Statements. The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

New Accounting Pronouncements.

In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. This statement is effective for fiscal years ending after December 15, 2002. The provisions of SFAS No. 148 have not impacted our results of operations or financial condition.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS No. 149 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, for certain decisions made by the FASB and to incorporate clarifications of the definition of a derivative. Management does not expect that the provisions of SFAS No. 149 will impact our results of operations or financial condition.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability or an asset in some circumstances. Many of those instruments were previously classified as equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not impact our results of operations or financial condition.

In November 2002, the FASB issued FASB Interpretation (“FIN”) No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 is an interpretation of FASB Statements No. 5, 57 and 107 and rescinds FIN No. 35. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. The disclosure requirements in this Interpretation were effective for financial statements of interim or annual periods ending after December 15, 2002. The Company has adopted the provisions of FIN No. 45. The provisions of FIN 45 did not materially impact our results of operations or financial condition.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities. This interpretation requires a variable interest entity to be consolidated by the primary beneficiary of that entity. The consolidation requirements of this interpretation apply immediately to variable interest entities created after January 31, 2003, and apply to existing entities for the first fiscal year or interim period beginning after June 15, 2003. Certain disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The Company has adopted the provisions of FIN No. 46. In accordance with FIN No. 46, West Coast Statutory Trust I, II, and III are considered related parties to West Coast Bancorp and their financial results are not consolidated in West Coast Bancorp’s financial statements.

Accounting for Stock-Based Compensation. At December 31, 2003, Bancorp has multiple stock option plans, which are described in Note 16. Bancorp accounts for its stock option plans using the intrinsic value method under Accounting Principles Board (“APB”) Opinion 25, under which no compensation cost has been recognized in the periods presented. All options granted under our stock option plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the fair value based method established in SFAS No. 123, Accounting for Stock-Based Compensation had been applied to all outstanding and unvested awards in each period.


		Year ended December 31

(Dollars in thousands, except per share data)		2003			2002			2001

Net income, as reported		$	19,797		$	18,203		$	14,760
Deduct: Total stock-based compensation expense determined under fair value based method for all options, net of related tax effects			(793	)		(773	)		(633	)

Pro forma net income		$	19,004		$	17,430		$	14,127

Earnings per share:
	Basic-as reported	$	1.31		$	1.17		$	0.92
	Basic-proforma	$	1.26		$	1.12		$	0.88
	Diluted-as reported	$	1.26		$	1.13		$	0.90
	Diluted-proforma	$	1.21		$	1.08		$	0.86

2. INVESTMENT SECURITIES

The following table presents the investment portfolio as of December 31, 2003 and 2002:


		AVAILABLE FOR SALE

(Dollars in thousands)		Amortized		Unrealized		Unrealized
December 31, 2003		Cost		Gross Gains		Gross Losses			Fair Value

U.S. Government agency securities		$	107,339	$	1,345	$	(402	)	$	108,282
Corporate securities			23,552		549		—			24,101
Mortgage-backed securities			94,497		547		(236	)		94,808
Obligations of state and political subdivisions			76,202		3,935		(55	)		80,082
Equity and other securities			14,647		50		—			14,697

	Total	$	316,237	$	6,426	$	(693	)	$	321,970


		AVAILABLE FOR SALE

(Dollars in thousands)		Amortized		Unrealized		Unrealized
December 31, 2002		Cost		Gross Gains		Gross Losses			Fair Value

U.S. Treasury securities		$	5,500	$	83	$	—		$	5,583
U.S. Government agency securities			64,461		2,051		(29	)		66,483
Corporate securities			21,682		815		—			22,497
Mortgage-backed securities			67,921		1,317		(4	)		69,234
Obligations of state and political subdivisions			83,372		4,243		(23	)		87,592
Equity and other securities			15,018		—		—			15,018

	Total	$	257,954	$	8,509	$	(56	)	$	266,407

Gross realized gains in 2003, 2002 and 2001 were $192,000, $0, and $0, respectively. There were no gross realized losses in 2003, 2002, or 2001. Securities with a fair value of approximately $38.8 million and $34.3 million were pledged to secure public deposits at December 31, 2003 and 2002, respectively. In addition, Bancorp pledged $5.1 million and $10.1 million of U.S. government agency securities at December 31, 2003 and 2002, respectively, to secure borrowings under reverse repurchase agreements. Under regulatory guidelines, no outstanding mortgage-backed securities were classified as high risk at December 31, 2003 or 2002.

The following table provides information on unrealized losses in the investment securities portfolio at December 31, 2003:


		Amortized cost of		Fair value of
		securities with an		securities with an
(Dollars in thousands)		unrealized loss less than		unrealized loss less than		Unrealized
December 31, 2003		12 continuous months		12 continuous months		Gross Losses

U.S. Government agency securities		$	28,437	$	28,035	$	(402	)
Mortgage-backed securities			52,799		52,563		(236	)
Obligations of state and political subdivisions			4,141		4,086		(55	)

	Total	$	85,377	$	84,684	$	(693	)

There are no investment securities with a 12 month or greater continuous unrealized loss in the investment portfolio at December 31, 2003. At December 31, 2003 there were approximately 40 securities with an unrealized loss of $.7 million, or an average loss of $18,000 per security. The impairment on these fixed income securities is due to an increase in interest rates subsequent to their purchase. The fair value of these securities will fluctuate as market interest rates change.

3. MATURITIES OF INVESTMENT SECURITIES

The follow table presents the maturities of the investment portfolio at December 31, 2003:


(Dollars in thousands)			Available for sale

December 31, 2003			Amortized cost		Fair value

U.S. Government agency securities:
	One year or less		$	6,880	$	7,149
	After one year through five years			74,975		75,600
	After five through ten years			25,484		25,533

				107,339		108,282
Corporate Securities:
	One year or less			5,003		5,132
	After one year through five years			6,307		6,666
	After five through ten years			4,242		4,303
	Due after ten years			8,000		8,000

		Total		23,552		24,101
Obligations of state and political subdivisions:
	One year or less			8,367		8,525
	After one year through five years			34,435		36,565
	After five through ten years			30,251		31,858
	Due after ten years			3,149		3,134

		Total		76,202		80,082

		Sub-total		207,093		212,465
Mortgage-backed securities				94,497		94,808
Equity investments and other securities				14,647		14,697

		Total securities	$	316,237	$	321,970

4. LOANS AND ALLOWANCE FOR LOAN LOSS

The following table presents the loan portfolio as of December 31, 2003 and 2002:


		December 31,

(Dollars in thousands)		2003			2002

Commercial loans		$	236,949		$	205,725
Real estate – construction			112,732			121,711
Real estate – mortgage			179,331			148,350
Real estate – commercial			652,882			637,978
Installment and other consumer			38,987			46,151

	Total loans		1,220,881			1,159,915
Allowance for loan loss			(18,131	)		(16,838	)

	Total loans, net	$	1,202,750		$	1,143,077

4. LOANS AND ALLOWANCE FOR LOAN LOSS (Continued)

The following is an analysis of the changes in the allowance for loan loss:


	Year Ending December 31,

(Dollars in thousands)	2003			2002			2001

Balance, beginning of period	$	16,838		$	15,252		$	14,244
Provision for loan loss		3,800			4,979			3,282
Losses charged to the allowance		(3,098	)		(3,680	)		(2,550	)
Recoveries credited to the allowance		591			287			276

Balance, end of period	$	18,131		$	16,838		$	15,252

Loans on which the accrual of interest has been discontinued, amounted to approximately $2.7 million, $5.1 million and $6.4 million at December 31, 2003, 2002, and 2001, respectively. Interest income foregone on non-accrual loans was approximately $231,000, $314,000 and $533,000 in 2003, 2002, and 2001, respectively.

At December 31, 2003 and 2002, Bancorp’s recorded investment in certain loans that were considered to be impaired was $2.6 million and $4.9 million, respectively, all of which was classified as non-performing. Of these impaired loans, $181,000 and $0 had a specific related valuation allowance of $95,000 and $0, respectively, while $2.4 million and $4.9 million did not require a specific valuation allowance. The balance of the allowance for loan loss in excess of these specific reserves is available to absorb the inherent losses from all loans in the portfolio. The average recorded investment in impaired loans for the years ended December 31, 2003, 2002, and 2001 was approximately, $4.0 million, $5.2 million and $6.2 million, respectively. For the years ended December 31, 2003, 2002 and 2001, interest income recognized on impaired loans totaled $193,000, $17,000 and $12,000, respectively, all of which was recognized on a cash basis.

The Bank makes commercial and residential loans to customers primarily throughout Oregon and Washington. Although the Bank has a diversified loan portfolio, a substantial portion of the portfolio belongs to debtors whose ability to honor their contracts is dependent upon the economies of Oregon and/or Washington.

As of December 31, 2003 and 2002, the Bank had loans to persons serving as directors, officers, principal stockholders and their related interests totaling $5.9 million and $5.4 million, respectively. These loans were made substantially on the same terms, including interest rates, maturities and collateral as those made to other customers of the Bank.

The following table presents a summary of loans made to directors, officers, principal stockholders and their related interests, of the Company:


	December 31,

(Dollars in thousands)	2003			2002

Balance, beginning of period	$	5,440		$	13,968
New loans and advances		4,208			1,627
Principal payments and payoffs		(3,715	)		(10,155	)

Balance, end of period	$	5,933		$	5,440

5. PREMISES AND EQUIPMENT

Premises and equipment consists of the following:


	December 31,

(Dollars in thousands)	2003			2002

Land	$	4,796		$	4,796
Buildings and improvements		23,523			22,881
Furniture and equipment		24,103			22,432
Construction in progress		80			37

		52,502			50,146
Accumulated depreciation		(25,326	)		(23,537	)

Total	$	27,176		$	26,609

Depreciation included in net occupancy and equipment expense amounted to $2.8 million, $3.2 million and $3.7 million for the years ended December 31, 2003, 2002, and 2001, respectively. The Company periodically reviews the recorded value of its long-lived assets, specifically premises and equipment, to determine whether impairment exists. During the first quarter of 2002, the Company disposed of antiquated computer and printer related equipment with a net book value of $258,000. In 2002, the Company also sold a house and an administration building in Shelton, Washington. A branch location in Lincoln County, Oregon was also examined and found to be impaired under the guidance provided in SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The amount of impairment loss relating to this building was $355,000. The Company recognized a total of $613,000 of expenses in other noninterest expense related to these fixed asset write-offs and impairment charges in 2002. The fair value of the properties was based on pending sale prices and independent appraisals. No impairment write-downs occurred in 2003 or 2001.

6. BORROWINGS

Borrowings consist of the following:


	December 31,

(Dollars in thousands)	2003		2002

Short-term borrowings:
Securities sold under agreements to repurchase	$	5,027	$	9,902
Long-term borrowings:
FHLB advances		78,000		98,000

Total borrowings	$	83,027	$	107,902

Short-term borrowings generally consist of Federal Home Loan Bank of Seattle (“FHLB”) borrowings, security reverse repurchase agreements and Federal Funds Purchased overnight from correspondent banks. At December 31, 2003, Bancorp had $5.0 million in reverse repurchase agreements maturing in March 2004, with a rate of 1.12%. Bancorp had no outstanding Federal Funds purchased at December 31, 2003 and 2002.

Securities sold under agreements to repurchase with an amortized cost of $5.0 million and $9.9 million at December 31, 2003 and 2002 were collateralized by available for sale securities held in Bancorp’s portfolio.

Long-term borrowings at December 31, 2003 consist of notes with fixed maturities, balloon payments and putable advances with the FHLB totaling $78.0 million. Total long-term borrowings with fixed maturities were $68.0 million with rates ranging from 2.21% to 5.63%. Bancorp’s putable advances total $10.0 million with an original term of five years and quarterly put options and final maturity in June 2005; the rate on this advance is currently 6.84%. Principal payments due on Bancorp’s long-term borrowings at December 31, 2003 are $12.5 million in 2004, $25 million in 2005, $20.5 million in 2006, and $20 million in 2007, with no balances due thereafter.

6. BORROWINGS (Continued)

Long-term borrowings at December 31, 2002 consisted of notes with fixed maturities, balloon payments and putable advances with the FHLB totaling $98.0 million. Total long-term borrowings with fixed maturities were $88.0 million with rates ranging from 1.82% to 5.63%. Bancorp’s putable advances totaled $10.0 million with an original term of five years with quarterly put options and final maturity in June 2005.

FHLB advances are collateralized as provided for in the advance, pledge and security agreements with the FHLB, by certain investment and mortgage-backed securities, stock owned by Bancorp including deposits at the FHLB and certain loans. At December 31, 2003 the Company had additional borrowing capacity available of $172.1 million at the FHLB.

7. JUNIOR SUBORDINATED DEBENTURES AND MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES

At December 31, 2003, three wholly-owned subsidiary grantor trusts established by Bancorp had issued $20 million of pooled Trust Preferred Securities (“trust preferred securities”). Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the indentures. The trusts used the net proceeds from the offering to purchase a like amount of Junior Subordinated Debentures (the “Debentures”) of the Company. The Debentures are the sole assets of the trusts. The Company’s obligations under the Junior Subordinated Debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. The Company has the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date.

The following table is a summary of current trust preferred securities at December 31, 2003:

(Dollars in thousands)


		Preferred
		security						Rate at
Issuance Trust	Issuance date	amount		Rate type(1)	Initial rate			12/31/03			Maturity date

West Coast Statutory Trust I	December 2001	$	5,000	Variable		5.60	%		4.77	%	December 2031
West Coast Statutory Trust II	June 2002	$	7,500	Variable		5.34	%		4.62	%	June 2032
West Coast Statutory Trust III	September 2003	$	7,500	Fixed		6.75	%		6.75	%	September 2033

(1) The variable rate preferred securities reprice quarterly.

The total amount of trust preferred securities outstanding at December 31, 2003, and 2002, was $20 million and $12.5 million, respectively. The interest rates on the trust preferred securities issued in December 2001, and June 2002 reset quarterly and are tied to the LIBOR rate. In connection with the variable rate offerings, Bancorp entered into swap agreements that will result in a fixed interest rate on the securities for five years, equal to 8.62% and 8.14%, respectively. The Company has the right to redeem the debentures issued in the December 2001 offering in December 2006; the June 2002 offering in June 2007 and the September 2003 offering in September 2008.

Prior to the issuance of FIN No. 46, the three wholly-owned grantor trusts were considered consolidated subsidiaries of Bancorp; the $12.5 million of preferred securities as of December 31, 2002 were included in West Coast Bancorp’s consolidated balance sheet in the Liabilities section, under the caption “Mandatorily redeemable trust preferred securities,” and the retained common capital securities of the grantor trusts were eliminated against Bancorp’s investment in the issuer trusts. Distributions on the preferred securities were recorded as interest expense on the consolidated statement of income.

With the adoption of FIN No. 46, Bancorp deconsolidated the three grantor trusts as of December 31, 2003. As a result, the junior subordinated debentures issued by Bancorp to the grantor trusts, totaling $20 million, are reflected in our consolidated balance sheet in the liabilities section at December 31, 2003, under the caption “junior subordinated debentures.” We will record interest expense on the corresponding junior subordinated debentures in the consolidated statements of income. Bancorp also recorded $.6 million in other assets in the consolidated balance sheet at December 31, 2003 for the common capital securities issued by the issuer trusts.

8. COMMITMENTS AND CONTINGENT LIABILITIES

The Company leases land and office space under 31 leases, of which 28 are long-term noncancellable operating leases that expire between 2004 and 2021. At the end of the respective lease terms, Bancorp may renew the leases at fair rental value. At December 31, 2003, minimum future lease payments under these leases and other operating leases were:


(Dollars in thousands)		Minimum Future
Year		Lease Payments

2004		$	2,151
2005			1,829
2006			1,750
2007			1,690
2008			1,468
	Thereafter		10,932

Total		$	19,820

Rental expense for all operating leases was $2,143,000, $1,969,000, and $1,712,000 for the years ended December 31, 2003, 2002, and 2001, respectively.

9. INCOME TAXES

The provision (benefit) for income taxes for the last three years consisted of the following:


		Year ended December 31,

(Dollars in thousands)		2003			2002			2001

Current
	Federal	$	8,348		$	7,255		$	5,979
	State		1,699			1,484			1,058

			10,047			8,739			7,037
Deferred
	Federal		(591	)		(208	)		(291	)
	State		(118	)		(43	)		(51	)

			(709	)		(251	)		(342	)
Total
	Federal		7,757			7,463			5,688
	State		1,581			1,527			1,007

Total		$	9,338		$	8,990		$	6,695

Net deferred taxes are included in other assets on the Company’s balance sheet. The tax effect of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities as of December 31, 2003 and 2002 are presented below:


			December 31,

(Dollars in thousands)			2003		2002

Deferred tax assets:
	Allowance for loan loss		$	7,124	$	6,486
	Net unrealized loss on derivatives-Swap			264		361
	Deferred employee benefits			878		484
	Other			128		—

		Total deferred tax assets		8,394		7,331
Deferred tax liabilities:
	Accumulated depreciation			1,243		1,280
	Federal Home Loan Bank stock dividends			1,987		1,247
	Net unrealized gains on investments available for sale			2,253		3,322
Intangible assets				162		280
Other				303		437

		Total deferred tax liabilities		5,948		6,566

	Net deferred tax assets		$	2,446	$	765

The effective tax rate varies from the federal income tax statutory rate. The reasons for the variance are as follows:


		Year ended December 31,

(Dollars in thousands)		2003			2002			2001

Expected federal income tax provision (1)		$	10,197		$	9,518		$	7,509
State income tax, net of federal income tax effect			1,029			992			920
Interest on obligations of state and political subdivisions exempt from federal tax			(1,144	)		(1,293	)		(1,200	)
Investment tax credits			(520	)		(480	)		(171	)
Bank owned life insurance			(285	)		—			—
Other, net			61			253			(363	)

	Total	$	9,338		$	8,990		$	6,695

(1) Federal income tax provision applied at 35%.

10. STOCKHOLDERS’ EQUITY AND REGULATORY REQUIREMENTS

Authorized capital of Bancorp includes 10,000,000 shares of Preferred Stock no par value, none of which were issued at December 31, 2003, or 2002. No stock dividend was declared in 2003, 2002, or 2001.

In July 2000, Bancorp announced a stock repurchase program that was expanded in September 2000, June 2001, and again in September of 2002. Under this plan, the Company can buy up to 2.88 million shares of the Company’s common stock. The Company intends to use existing funds and/or long-term borrowings to finance the repurchases. Total shares available for repurchase under this plan are 320,000 at December 31, 2003. The following table presents information with respect to Bancorp’s July 2002 stock repurchase program.


						Average cost per
(Shares and dollars in thousands)		Shares repurchased in period		Cost of shares repurchased		share

Year ended 2000			573	$	5,264	$	9.19
Year ended 2001			534		6,597		12.35
Year ended 2002			866		13,081		15.11
Year ended 2003			587		10,461		17.81

	Plan to date total		2,560	$	35,403	$	13.83

The Federal Reserve and FDIC have established minimum requirements for capital adequacy for bank holding companies and member banks. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Bancorp and its significant bank subsidiaries must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items. The Federal Reserve and FDIC risk based capital guidelines require banks and bank holding companies to have a ratio of tier one capital to total risk weighted assets of at least 4%, and a ratio of total capital to total risk weighted assets of 8% or greater. In addition, the leverage ratio of tier one capital to total average assets less intangibles is required to be at least 3%. Well capitalized guidelines require banks and bank holding companies to maintain tier one capital of at least 6%, total risk based capital of at least 10% and a leverage ratio of at least 5%. Bancorp and its bank subsidiary’s capital components, classification, risk weightings and other factors are also subject to qualitative judgements by regulators. Failure to meet minimum capital requirements can initiate certain action by regulators that, if undertaken, could have a material effect on Bancorp’s financial statements. As of December 31, 2003, Bancorp and its subsidiary bank are considered “Well Capitalized” under current risk based capital regulatory guidelines. Management believes that no events or changes in conditions have subsequently occurred which would significantly change Bancorp’s capital position. Under the restrictions of maintaining adequate minimum capital, as of December 31, 2003, the Bank could have declared dividends totaling $45.2 million without obtaining prior regulatory approval.

The following table presents selected risk adjusted capital information as of December 31, 2003 and 2002:


	2003										2002

						Amount		Percent								Amount		Percent
						Required For		Required For								Required For		Required For
						Minimum		Minimum								Minimum		Minimum
						Capital		Capital								Capital		Capital
	Actual					Adequacy		Adequacy			Actual					Adequacy		Adequacy

(Dollars in thousands)	Amount		Ratio			Amount					Amount		Ratio			Amount

Tier 1 Capital
West Coast Bancorp	$	156,116		10.62	%	$	58,824		4	%	$	140,095		10.10	%	$	55,474		4	%
West Coast Bank		144,583		9.84	%		58,768		4	%		133,958		9.66	%		55,467		4	%
Total Capital
West Coast Bancorp	$	174,246		11.85	%	$	117,648		8	%	$	156,933		11.32	%	$	110,947		8	%
West Coast Bank		162,713		11.07	%		117,536		8	%		150,796		10.87	%		110,933		8	%
Leverage Ratio
West Coast Bancorp	$	156,116		9.45	%	$	49,546		3	%	$	140,095		9.19	%	$	45,725		3	%
West Coast Bank		144,583		8.75	%		49,544		3	%		133,958		8.78	%		45,748		3	%

11. BALANCES WITH THE FEDERAL RESERVE BANK

The Bank is required to maintain cash reserves or deposits with the Federal Reserve Bank equal to a percentage of reservable deposits. The average required reserves for the Bank were $6.7 million during 2003 and $8.8 million in 2002.

12. EARNINGS PER SHARE

The following table reconciles the numerator and denominator of the basic and diluted earnings per share computations:


				Weighted Average
		Net Income		Shares		Per Share Amount
(Dollars and shares in thousands)		For the year ended December 31, 2003

Basic earnings		$	19,797		15,077	$	1.31
	Stock options				561
	Restricted stock				36

Diluted earnings		$	19,797		15,674	$	1.26


		For the year ended December 31, 2002

Basic earnings		$	18,203	15,575	$	1.17
	Stock options			450
	Restricted stock			44

Diluted earnings		$	18,203	16,069	$	1.13


		For the year ended December 31, 2001

Basic earnings		$	14,760	16,126	$	0.92
	Stock options			280
	Restricted stock			47

Diluted earnings		$	14,760	16,453	$	0.90

Bancorp, for the periods reported, had no reconciling items between net income and income available to common stockholders. Shares of 0, 171,000, and 572,000 having an antidilutive effect on earnings per share have been excluded from calculations in 2003, 2002 and 2001, respectively.

13. COMPREHENSIVE INCOME

The following table displays the components of other comprehensive income for the last three years:


	Year ended December 31,

(Dollars in thousands)	2003			2002			2001

Net income as reported	$	19,797		$	18,203		$	14,760
Unrealized gains (losses) on securities:
Unrealized holding (losses) gains arising during the year		(2,528	)		4,477			3,695
Tax benefit (provision)		994			(1,759	)		(1,452	)

Unrealized holding (losses) gains arising during the year, net of tax		(1,534	)		2,718			2,243
Unrealized gains (losses) on derivative- cash flow hedges		246			(919	)		—
Tax (provision) benefit		(97	)		361			—

Unrealized gains (losses) on derivative- cash flow hedges, net of tax		149			(558	)		—
Less: Reclassification adjustment for gains on sales of securities		(192	)		—			—
Tax provision		75			—			—

Net realized gains, net of tax		(117	)		—			—

Total comprehensive income	$	18,295		$	20,363		$	17,003

14. CERTIFICATES OF DEPOSIT

Included in certificates of deposit are certificates in denominations of $100,000 or greater, totaling $130.6 million and $133.3 million at December 31, 2003 and 2002, respectively. Interest expense relating to certificates of deposit in denominations of $100,000 or greater was $4.7 million, $6.8 million and $6.2 million for the years ended December 31, 2003, 2002 and 2001, respectively. Maturity amounts on Bancorp’s certificates of deposit include $226.2 million in 2003, $103.0 million in 2004, $26.1 million in 2005, $4.0 in 2006, and $11.3 million in 2007, with $.7 million due thereafter. Included in the maturity amounts are $7 million in variable rate certificates of deposit that reprice monthly with maturities in the first quarter of 2004.

15. EMPLOYEE BENEFIT PLANS

West Coast Bancorp employee benefits include a plan established under section 401(k) of the Internal Revenue Code for certain qualified employees (the “401(k) plan”). Employee contributions up to 15 percent of salaries under the Internal Revenue Code guidelines can be made under the 401(k) plan, of which Bancorp matches 50 percent of the employees’ contributions up to a maximum of 6 percent of the employees’ salary. Bancorp may also elect to make discretionary contributions to the plan. Employees vest immediately in their own contributions and earnings thereon and vest in Bancorp’s contributions over five years of eligible service. Bancorp has merged previously acquired companies’ plans into its own plan. Bancorp’s expenses totaled $523,000, $491,000 and $395,000 for 2003, 2002, and 2001, respectively, none of which were discretionary.

Bancorp provides a non-qualified Deferred Compensation Plan for Directors and a non-qualified Deferred Compensation Plan for Executive Officers (“Deferred Compensation Plans”) as supplemental benefit plans which permit directors and selected officers to elect to defer receipt of all or any portion of their future salary, bonus or directors’ fees. In addition, the Deferred Compensation Plans restore benefits lost by employees under the 401(k) plan due to specified Internal Revenue Code restrictions on the maximum benefits that may be paid under those plans. All contributions are invested at the participants’ direction among a variety of investment alternatives. Amounts contributed to these plans to restore benefits otherwise limited by the Internal Revenue Code restrictions have been included in the 401(k) plan contribution expense reported in the previous paragraph. A deferred compensation liability of $1.9 million and $1.4 million was accrued as of December 31, 2003 and 2002, respectively.

Bancorp has multiple deferred compensation contracts and supplemental executive retirement plans with former and current executives. The following table reconciles the accumulated liability for the benefit obligation of these contracts:


	Year ended December 31,

(Dollars in thousands)	2003			2002

Beginning balance	$	448		$	391
Benefit expense		172			201
Benefit payments		(193	)		(144	)

Ending balance	$	427		$	448

Bancorp’s deferred compensation contracts and supplemental executive retirement plans are unfunded plans and have no plan assets. The benefit obligation represents the vested net present value of future payments to individuals under the deferred compensation contracts. Bancorp’s deferred compensation benefit expense, as specified in the plans, for the entire year 2004 is expected to be $407,000. The benefits expected to be paid are presented in the following table:


	Benefits expected
(Dollars in thousands)	to be paid

2004	$	96
2005		36
2006		36
2007		36
2008		89
2009 through 2013		799

16. STOCK PLANS

Bancorp’s stock option plans include the 2002 Stock Incentive Plan (2002 Plan), 1999 Stock Option Plan (1999 Plan), the Combined 1991 Employee Stock Option Plan and Non-Qualified Stock Option Plan (1991 Plan), the 1995 Directors Stock Option Plan (1995 Plan), the 1989 and 1985 Non-Qualified Stock Option Plans and the 1989 and 1985 Qualified Stock Option Plans (1985 and 1989 Plans). At December 31, 2003, the 2002 Plan had 972,000 shares available for future grants. No additional grants may be made under plans other than the 2002 Plan.

All stock options have an exercise price that is equal to the fair market value of Bancorp’s stock on the date the options were granted. Options granted under the 2002 Plan are generally exercisable over a three-year period. Options previously issued under the 1999 or prior plans are fully vested.


															2001
					2003					2002					Weighted
		2003 Common			Weighted		2002 Common			Weighted		2001 Common			Avg. Ex.
		Shares			Avg. Ex. Price		Shares			Avg. Ex. Price		Shares			Price

Balance, beginning of year			1,935,937		$	11.53		1,768,126		$	10.65		1,591,980		$	10.55
	Granted		277,530			16.47		364,895			14.71		500,890			10.45
	Exercised		(290,920	)		9.84		(164,159	)		8.82		(137,587	)		7.96
	Forfeited		(53,749	)		13.20		(32,925	)		12.80		(187,157	)		11.34

Balance, end of year			1,868,798		$	12.48		1,935,937		$	11.53		1,768,126		$	10.65

Exercisable, end of year			1,279,856					1,179,215					1,048,653
Avg. fair value of options granted					$	3.40				$	3.25				$	3.75

As of December 31, 2003, outstanding stock options consist of the following:


				Options		Weighted Avg.		Weighted Avg.		Options		Weighted Avg.
Exercise Price Range				Outstanding		Exercise Price		Remaining Life		Exercisable		Exercise Price

$	4.42 -	$	9.20		428,273	$	8.77		5.60		425,918	$	8.77
	9.26 -		10.28		394,380		10.18		7.15		266,194		10.14
	10.71 -		14.60		322,371		12.79		5.21		318,857		12.78
	14.67 -		15.64		367,220		14.80		8.00		154,113		14.93
	16.24 -		21.18		356,554		16.81		8.14		114,774		17.39

Total					1,868,798	$	12.48		6.82		1,279,856	$	11.57

16. STOCK PLANS, (Continued)

Bancorp accounts for these plans under APB Opinion No. 25, under which no compensation cost has been recognized. See footnote 1, “ Summary of significant accounting policies”, for further information.

The average fair value of options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The following table presents the assumptions used in the fair value calculation:


	Non-Qualified Director Options									Employee Options

	2003			2002			2001			2003			2002			2001

Risk Free interest rates		2.95	%		4.52	%		4.74	%		2.32%-3.21	%		2.70%-4.77	%		4.02%-5.09	%
Expected dividend		1.80	%		2.25	%		1.99	%		1.80	%		2.25	%		1.99	%
Expected lives, in years		5			5			5			5			5			5
Expected volatility		23	%		23	%		41	%		23	%		23	%		41	%

Bancorp grants restricted stock periodically as a part of the 2002 Plan for the benefit of employees and directors. At December 31, 2003, there were 113,000 shares authorized for restricted stock grants under this plan and 11,597 shares remained available for restricted stock grants. Restricted stock grants are made at the discretion of the Board of Directors, except with regard to grants to Bancorp’s Section 16 officers, which are made at the discretion of the Board’s Compensation and Personnel Committee. Restricted shares issued currently vest over three years. Compensation expense for restricted stock is based on the market price of the Company stock at the time of the grant and amortized on a straight-line basis over the vesting period which is currently three years for all grants issued. Recipients of restricted stock do not pay any cash consideration to the Company for the shares, and have the right to vote all shares subject to such grant, and receive all dividends with respect to such shares, whether or not the shares have vested. The restriction is based upon continuous service. Restricted stock consists of the following for the years ended December 31, 2003, 2002 and 2001:


					Average					Average					Average
		2003 Restricted			Market Price		2002 Restricted			Market Price		2001 Restricted			Market Price
		Shares			at Grant		Shares			at Grant		Shares			at Grant

Balance, beginning of year			86,359					115,166					140,598
	Granted		77,650		$	16.45		24,700		$	15.25		34,150		$	12.50
	Forfeited/vested		(59,759	)				(53,507	)				(59,582	)

Balance, end of year			104,250					86,359					115,166

The balance of unearned compensation related to these restricted shares as of December 31, 2003 and 2002 was $1.24 million and $.7 million respectively. Total compensation and professional expense recognized for the restricted shares granted to employees and directors was $679,000, $566,000 and $582,000 in 2003, 2002 and 2001, respectively.

17. FAIR VALUES OF FINANCIAL INSTRUMENTS

A financial instrument is defined as cash, evidence of an ownership interest in an entity, or a contract that conveys or imposes the contractual right or obligation to either receive or deliver cash or another financial instrument. Examples of financial instruments included in Bancorp’s balance sheet are cash, federal funds sold or purchased, debt and equity securities, loans, demand, savings and other interest-bearing deposits, notes and debentures. Examples of financial instruments which are not included in the Bancorp balance sheet are commitments to extend credit and standby letters of credit.

Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price if one exists.

Accounting standards require the fair value of deposit liabilities with no stated maturity, such as demand deposits, NOW and money market accounts, to equal the carrying value of these financial instruments and does not allow for the recognition of the inherent value of core deposit relationships when determining fair value.

Bancorp has estimated fair value based on quoted market prices where available. In cases where quoted market prices were not available, fair values were based on the quoted market price of a financial instrument with similar characteristics, the present value of expected future cash flows or other valuation techniques that utilize assumptions which are highly subjective and judgmental in nature. Subjective factors include, among other things, estimates of cash flows, the timing of cash flows, risk and credit quality characteristics and interest rates. Accordingly, the results may not be precise, and modifying the assumptions may significantly affect the values derived. In addition, fair values established utilizing alternative valuation techniques may or may not be substantiated by comparison with independent markets. Further, fair values may or may not be realized if a significant portion of the financial instruments were sold in a bulk transaction or a forced liquidation. Therefore, any aggregate unrealized gains or losses should not be interpreted as a forecast of future earnings or cash flows. Furthermore, the fair values disclosed should not be interpreted as the aggregate current value of Bancorp.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents — The carrying amount is a reasonable estimate of fair value.

Investment Securities — For securities held for investment purposes, fair values are based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans — The fair value of loans is estimated by discounting the future cash flows using the current rate at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Bank owned life insurance – The carrying amount is the cash surrender value of all policies.

Deposit Liabilities — The fair value of demand deposits, savings accounts and other deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Short-term borrowings — The carrying amount is a reasonable estimate of fair value given the short-term nature of these financial instruments.

Long-term borrowings — The fair value of the long-term borrowings is estimated by discounting the future cash flows using the current rate at which similar borrowings with similar remaining maturities could be made.

Junior subordinated debentures and mandatorily redeemable trust preferred securities — The carrying amount for the variable rate junior subordinated debentures and trust preferred securities is a reasonable estimate of fair value given the quarterly repricing characteristics. The fair value of the fixed rate junior subordinated debentures and trust preferred securities approximates the pricing of a preferred security offering at current market prices.

Commitments to Extend Credit, Standby Letters of Credit and Financial Guarantees — The majority of our commitments to extend credit carry current market interest rates if converted to loans. Because these commitments are generally unassignable by either the borrower or us, they only have value to the borrower and us. The estimated fair value approximates the recorded deferred fee amounts and is excluded from the following tables.

17. FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

The estimated fair values of financial instruments at December 31, 2003 are as follows:


(Dollars in thousands)	Carrying Value		Fair Value

FINANCIAL ASSETS:
Cash and cash equivalents	$	63,504	$	63,504
Trading assets		991		991
Investment securities		321,970		321,970
Net Loans (net of allowance for loan losses and including loans held for sale)		1,207,479		1,226,483
Bank owned life insurance		18,062		18,062
FINANCIAL LIABILITIES:
Deposits	$	1,404,859	$	1,407,619
Short-term borrowings		5,027		5,027
Long-term borrowings		78,000		82,190
Junior subordinated debentures-variable		12,500		12,500
Junior subordinated debentures-fixed		7,500		7,542
Derivative instruments - Swaps		748		748

The estimated fair values of financial instruments at December 31, 2002 are as follows:


(Dollars in thousands)	Carrying Value		Fair Value

FINANCIAL ASSETS:
Cash and cash equivalents	$	57,733	$	57,733
Trading assets		967		967
Investment securities		266,407		266,407
Net Loans (net of allowance for loan losses and including loans held for sale)		1,154,001		1,202,099
Bank owned life insurance		1,757		1,757
FINANCIAL LIABILITIES:
Deposits	$	1,266,453	$	1,272,281
Short-term borrowings		9,902		9,902
Long-term borrowings		98,000		103,392
Mandatorily redeemable trust preferred securities - variable		12,500		12,500
Derivative instruments - Swaps		957		957

18. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Financial instruments held or issued for lending-related purposes.

The Bank has financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as for on-balance sheet instruments. As of December 31, 2003, outstanding commitments consist of the following:


				Contract or
(Dollars in thousands)				Notional Amount

Financial instruments whose contract amounts represent credit risk:
	Commitments to extend credit
			Real estate secured for commercial construction or land development	$	65,144
			Revolving open-end lines secured by 1-4 family residential properties		94,881
			Credit card lines		29,121
			Other		233,237
Standby letters of credit and financial guarantees					4,160

		Total		$	426,543

Commitments to extend credit are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Many of the commitments may expire without being drawn upon, therefore the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued to guarantee a customer’s performance or payment to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Interest rates on residential one- to -four family mortgage loan applications are typically rate locked during the application stage for periods ranging from 15 to 45 days, the most typical period being 30 days. These loans are locked with various qualified investors under a best-efforts delivery program. The Company makes every effort to deliver these loans before their rate locks expire. This arrangement generally requires the Bank to deliver the loans prior to the expiration of the rate lock. Delays in funding the loans can require a lock extension. The cost of a lock extension at times is borne by the borrower and at times by the Bank. These lock extension costs paid by the Company are not expected to have a material impact to operations. This activity is managed daily.

18. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (continued)

Financial instruments held or issued for asset and liability management purposes.

Bancorp currently uses single interest-rate swaps to convert its variable rate trust preferred securities to fixed rates. These swaps have been entered into concurrently with the issuance of the trust preferred securities. These swaps are accounted for as cash flow hedges under SFAS No. 133. The swaps possess a term equal to the non-callable term of the trust preferred securities, with a fixed pay rate and a receive rate indexed to rates paid on the trust preferred securities and a notional amount equal to the amount of the trust preferred securities being hedged. The specific terms and notional amount of the swaps exactly match those of the trust preferred securities being hedged with the exception that the trust preferred securities have an interest rate cap of 12.5%. As such the swaps are not considered to be 100% effective and changes in the fair value of the hedge are recorded in other comprehensive income and the measure of the ineffective portion is recorded in other expense on the statement of income. For the years ended December 31, 2003 and 2002 the expense recognized for hedge ineffectiveness was $37,000 and $39,000, respectively. The floating rate combined with the cash flow hedge created a synthetic fixed rate debt instrument. The unrealized loss on the cash flow hedge approximated the unrealized loss the Company would have incurred if it had issued a fixed rate debt instrument.

The notional amount of the swaps is $12.5 million at December 31, 2003. These swaps have a term of 5 years expiring June 2007 and December 2006, respectively. The Company intends to use the swaps as a hedge of the related debt for 5 years. The periodic settlement date of the swap results in reclassifying as earnings the gains or losses that are reported in accumulated other comprehensive income. The estimated amount of existing unrealized gains that will be reclassified into earnings in 2004 is approximately $277,000. The fair value of Bancorp’s swaps recorded in other liabilities was $748,000 at December 31, 2003 and $957,000 at December 31, 2002.

19. PARENT COMPANY ONLY FINANCIAL DATA

The following sets forth the condensed financial information of West Coast Bancorp on a stand-alone basis:

WEST COAST BANCORP
UNCONSOLIDATED BALANCE SHEETS


As of December 31 (Dollars in thousands)				2003		2002

Assets:
		Cash and cash equivalents		$	10,514	$	5,104
		Investment in subsidiaries			151,796		142,815
		Other assets			619		—

	Total assets			$	162,929	$	147,919

Liabilities and stockholders’ equity:
			Junior subordinated debentures	$	20,000	$	12,500
			Other liabilities		2,876		2,032

	Total liabilities				22,876		14,532
Stockholders’ equity					140,053		133,387

	Total liabilities and stockholders’ equity			$	162,929	$	147,919

WEST COAST BANCORP
UNCONSOLIDATED STATEMENTS OF INCOME


Year ended December 31 (Dollars in thousands)			2003		2002		2001

Income:
	Cash dividends from subsidiaries		$	10,000	$	2,320	$	12,384
	Other income from the subsidiaries			7		94		56
	Other income			10		10		1

		Total income		10,017		2,424		12,441
Expenses:
	Interest expense			758		497		9
	Other expense			—		2		7

		Total expense		758		499		16
Income before income taxes and equity in undistributed earnings of the bank				9,259		1,925		12,425
Income tax expense (benefit)				286		158		(16	)

Net income before equity in undistributed earnings of the bank				9,545		2,083		12,409
Equity in undistributed earnings of the bank				10,252		16,120		2,351

		Net income	$	19,797	$	18,203	$	14,760

19. PARENT COMPANY ONLY FINANCIAL DATA (Continued)

WEST COAST BANCORP
UNCONSOLIDATED STATEMENTS OF CASH FLOW


Year ended December 31 (Dollars in thousands)			2003			2002			2001

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	19,797		$	18,203		$	14,760
Adjustments to reconcile net income to net cash provided by operating activities:
	Undistributed earnings of subsidiaries			(10,252	)		(16,120	)		(2,351	)
	(Increase) decrease in other assets			(619	)		3,211			(2,730	)
	Increase in other liabilities			844			625			138
	Tax benefit associated with stock options			732			301			185

		Net cash provided by operating activities		10,502			6,220			10,002
CASH FLOWS FROM FINANCING ACTIVITIES:
	Net proceeds from issuance of junior subordinated debentures			7,500			7,500			5,000
	Net proceeds from issuance of common stock			2,349			1,148			813
	Repurchase of common stock			(10,461	)		(13,081	)		(6,597	)
	Dividends paid and cash paid for fractional shares			(4,928	)		(4,699	)		(4,465	)
	Other, net			448			565			306

		Net cash used in financing activities		(5,092	)		(8,567	)		(4,943	)
Net increase (decrease) in cash and cash equivalents				5,410			(2,347	)		5,059
Cash and cash equivalents at beginning of year				5,104			7,451			2,392

Cash and cash equivalents at end of year			$	10,514		$	5,104		$	7,451

20. SEGMENT AND RELATED INFORMATION

Bancorp accounts for intercompany fees and services at an estimated fair value according to regulatory requirements for the service provided. Intercompany items relate primarily to the use of accounting, human resources, data processing and marketing services provided by the Parent Company. All other accounting policies are the same as those described in the summary of significant accounting policies.

Summarized financial information concerning Bancorp’s reportable segments and the reconciliation to Bancorp’s consolidated results is shown in the following table. The “Other” column includes Bancorp’s Trust operations and corporate related items including support services such as accounting, human resources, data processing and marketing. Investment in subsidiaries is netted out of the presentations below. The “Intersegment” column identifies the intersegment activities of revenues, expenses and other assets, between the “Banking” and “Other” segment.


			As of and for the year ended
			December 31, 2003

(Dollars in thousands)			Banking		Other			Intersegment			Consolidated

Interest income			$	89,601	$	91		$	(14	)	$	89,678
Interest expense				19,895		758			(14	)		20,639

	Net interest income (expense)			69,706		(667	)		—			69,039

Provision for loan loss				3,800		—			—			3,800
Noninterest income				20,405		1,886			(245	)		22,046
Noninterest expense				56,401		1,994			(245	)		58,150

		Income (loss) before income taxes		29,910		(775	)		—			29,135
Provision (benefit) for income taxes				9,637		(299	)		—			9,338

		Net income (loss)	$	20,273	$	(476	)	$	—		$	19,797

Depreciation and amortization			$	3,180	$	4		$	—		$	3,184
Assets			$	1,660,072	$	14,632		$	(11,822	)	$	1,662,882
Loans, net			$	1,202,750	$	—		$	—		$	1,202,750
Deposits			$	1,416,287	$	—		$	(11,428	)	$	1,404,859
Equity			$	148,490	$	(8,437	)	$	—		$	140,053


			As of and for the year ended
			December 31, 2002

(Dollars in thousands)			Banking		Other			Intersegment			Consolidated

Interest income			$	95,937	$	684		$	(593	)	$	96,028
Interest expense				28,139		986			(593	)		28,532

	Net interest income (expense)			67,798		(302	)		—			67,496

Provision for loan loss				4,979		—			—			4,979
Noninterest income				17,161		1,688			(155	)		18,694
Noninterest expense				52,467		1,706			(155	)		54,018

		Income (loss) before income taxes		27,513		(320	)		—			27,193
Provision (benefit) for income taxes				9,120		(130	)		—			8,990

		Net income (loss)	$	18,393	$	(190	)	$	—		$	18,203

Depreciation and amortization			$	3,582	$	1		$	—		$	3,583
Assets			$	1,530,746	$	7,940		$	(6,359	)	$	1,532,327
Loans, net			$	1,143,077	$	12,887		$	(12,887	)	$	1,143,077
Deposits			$	1,272,467	$	—		$	(6,014	)	$	1,266,453
Equity			$	139,702	$	(6,315	)	$	—		$	133,387

20. SEGMENT AND RELATED INFORMATION (Continued)


			As of and for the year ended
			December 31, 2001

(Dollars in thousands)			Banking		Other		Intersegment			Consolidated

Interest income			$	100,179	$	164	$	(66	)	$	100,277
Interest expense				40,619		19		(66	)		40,572

	Net interest income			59,560		145		—			59,705

Provision for loan loss				3,282		—		—			3,282
Noninterest income				15,431		1,750		(150	)		17,031
Noninterest expense				50,515		1,634		(150	)		51,999

		Income before income taxes		21,194		261		—			21,455
Provision for income taxes				6,594		101		—			6,695

		Net income	$	14,600	$	160	$	—		$	14,760

Depreciation and amortization			$	4,076	$	1	$	—		$	4,077
Assets			$	1,434,315	$	10,230	$	(8,844	)	$	1,435,701
Loans, net			$	1,069,798	$	5,155	$	(5,155	)	$	1,069,798
Deposits			$	1,179,772	$	—	$	(8,339	)	$	1,171,433
Equity			$	121,492	$	7,298	$	—		$	128,790

]

21. QUARTERLY FINANCIAL INFORMATION (unaudited)


(Dollars in thousands, except per share data)			March 31,		June 30,		September 30,		December 31,

2003
Interest income			$	22,548	$	22,523	$	22,209	$	22,399
Interest expense				5,850		5,289		4,874		4,627

	Net interest income			16,698		17,234		17,335		17,772
Provision for loan loss				850		850		875		1,225
Noninterest income				4,982		5,840		5,794		5,429
Noninterest expense				13,684		14,827		14,847		14,792

	Income before income taxes			7,146		7,397		7,407		7,184
Provision for income taxes				2,427		2,398		2,362		2,150

	Net income		$	4,719	$	4,999	$	5,045	$	5,034

Earnings per common share:
		Basic	$	0.31	$	0.33	$	0.33	$	0.34
		Diluted	$	0.30	$	0.32	$	0.32	$	0.32


(Dollars in thousands, except per share data)			March 31,		June 30,		September 30,		December 31,

2002
Interest income			$	23,658	$	23,859	$	24,882	$	23,629
Interest expense				7,599		7,013		7,504		6,416

	Net interest income			16,059		16,846		17,378		17,213
Provision for loan loss				878		1,442		1,467		1,192
Noninterest income				5,215		4,510		4,264		4,705
Noninterest expense				13,964		13,087		13,183		13,784

	Income before income taxes			6,432		6,827		6,992		6,942
Provision for income taxes				2,189		2,303		2,339		2,159

	Net income		$	4,243	$	4,524	$	4,653	$	4,783

Earnings per common share:
		Basic	$	0.27	$	0.29	$	0.30	$	0.31
		Diluted	$	0.26	$	0.28	$	0.29	$	0.30

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES

Our disclosure controls and procedures are designed to ensure that information the Company must disclose in its reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported on a timely basis. Our management has evaluated, with the participation and under the supervision of our chief executive officer (“CEO”) and chief financial officer (“CFO”), the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our CEO and CFO have concluded that, as of such date, the Company’s disclosure controls and procedures are effective in ensuring that information relating to the Company, including its consolidated subsidiaries, required to be disclosed in reports that it files under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

No change in the Company’s internal control over financial reporting occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information concerning directors and executive officers of Bancorp required to be included in this item is set forth under the headings “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Management” in Bancorp’s Proxy Statement for its 2004 Annual Meeting of Stockholders to be filed within 120 days of Bancorp’s fiscal year end of December 31, 2003 (the “Proxy Statement”), and is incorporated into this report by reference.

Audit and Compliance Committee

Bancorp has a separately-designated standing Audit and Compliance Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit and Compliance Committee are Steven Spence (Chair), Lloyd D. Ankeny, Duane C. McDougall, J. F. Ouderkirk, and Nancy Wilgenbusch, each of whom is independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.

Audit Committee Financial Expert

Bancorp’s Board of Directors has determined that Duane C. McDougall, an Audit and Compliance Committee member, is an audit committee financial expert as defined in Item 401(h) of Regulation S-K of the Exchange Act and is independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.

Code of Ethics

We have adopted a code of ethics (the “Code of Ethics”), for our CEO, CFO principal accounting officer, and persons performing similar functions, entitled the West Coast Bancorp Code of Ethics for Senior Financial Officers. The Code of Ethics is available on our website at www.wcb.com under the tab for investor relations. Stockholders may request a free copy of the Code of Ethics from:

West Coast Bancorp
Attention: Secretary
5335 S.W. Meadows Road, Suite 201
Lake Oswego, Oregon 97035
(503) 684-0884

ITEM 11. EXECUTIVE COMPENSATION

Information concerning executive and director compensation required by this item is set forth under the headings “Executive Compensation,” “Management” and “Election of Directors — Compensation of Directors” in the Proxy Statement and is incorporated into this report by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS

Information concerning the security ownership of certain beneficial owners and management required by this item is set forth under the headings “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement and is incorporated into this report by reference.

Equity Compensation Plan Information

Information concerning Bancorp’s equity compensation plans, including both stockholder approved plans and non-stockholder approved plans, required by this item is set forth under the heading “Executive Compensation — Equity Compensation Plan Information” in the Proxy Statement and is incorporated into this report by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information concerning certain relationships and related transactions required by this item is set forth under the heading “Transactions with Management” in the Proxy Statement and is incorporated into this report by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information concerning fees paid to our accountants required by this item is included under the heading “Independent Auditors — Fees Paid to Independent Auditors” in the Proxy Statement and is incorporated into this report by reference.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) Financial Statements:

The financial statements and related documents listed in the Index set forth in Item 8 of this report are filed as part of this report.

(2) Financial Statements Schedules:

All other schedules to the consolidated financial statements are omitted because they are not applicable or not material or because the information is included in the consolidated financial statements or related notes in Item 8 above.

(3) Exhibits:

Exhibits to this report are listed in the Index to Exhibits immediately following the signature page.

(b) Reports on Form 8-K:

During the three months ended December 31, 2003, Bancorp filed a current report on Form 8-K dated October 20, 2003, reporting a temporary suspension of trading by employees related to a black-out period under Bancorp’s 401(k) Plan.

The response to this portion of Item 15 is submitted as a separate section of this report entitled “Index to Exhibits.”

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 24th day of February, 2004.

WEST COAST BANCORP

(Registrant)


By:		/s/ Robert D. Sznewajs

		President and CEO

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 24th day of February, 2004.


Principal Executive Officer:
/s/ Robert D. Sznewajs Robert D. Sznewajs		President and CEO and Director

Principal Financial Officer:
/s/ Anders Giltvedt Anders Giltvedt		Executive Vice President and Chief Financial Officer

Principal Accounting Officer:
/s/ Kevin M. McClung Kevin M. McClung		Vice President and Controller

Remaining Directors:
/s/ Lloyd D. Ankeny Lloyd D. Ankeny, Chairman

/s/ Michael J. Bragg Michael J. Bragg

/s/ William B. Loch William B. Loch

/s/ Jack E. Long Jack E. Long

/s/ Duane C. McDougall Duane C. McDougall

/s/ Steven Oliva Steven Oliva

/s/ J.F. Ouderkirk J.F. Ouderkirk

/s/ Steven Spence Steven Spence

/s/ Nancy Wilgenbusch Nancy Wilgenbusch

INDEX TO EXHIBITS


Exhibit No.		Exhibit

3.1		Restated Articles of Incorporation.

3.2		Restated Bylaws.

4		The Company has incurred long-term indebtedness as to which the amount involved is less than ten percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish instruments relating to such indebtedness to the Commission upon its request.

10.1		Form of Indemnification Agreement for all directors and executive officers. Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.*

10.2		Change in Control Agreement between the Company and Robert D. Sznewajs dated January 1, 2004.*

10.3		Change in Control Agreement between the Company and Anders Giltvedt dated January 1, 2004.*

10.4		Change in Control Agreement between the Company and Xandra McKeown dated January 1, 2004.*

10.5		Change in Control Agreement between the Company and James D. Bygland dated January 1, 2004.*

10.6		Change in Control Agreement between the Company and David Prysock dated January 1, 2004.*

10.7		401(k) Profit Sharing Plan. Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-01649) filed March 12, 1996.*

10.8		Directors’ Deferred Compensation Plan. Incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-104835) filed April 30, 2003 (the “April 2003 S-8”).*

10.9		Executives’ Deferred Compensation Plan. Incorporated by reference to Exhibit 4.4 to the April 2003 S-8.*

10.10		Combined 1991 Incentive Stock Option Plan and 1991 Nonqualified Stock Option Plan. Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-01651) filed March 12, 1996.*

10.11		Directors’ Stock Option Plan and Form of Agreement. Incorporated by reference to Exhibits 99.1 and 99.2 to the Company’s Registration Statement on Form S-8 (Reg. No. 033-60259) filed June 15, 1995 (the “1995 S-8”).*

10.12		Incentive Stock Option Plan and Form of Agreement. Incorporated by reference to Exhibits 99.3 and 99.4 to the 1995 S-8.*

10.13		Nonqualified Stock Option Plan and Form of Agreement. Incorporated by reference to Exhibits 99.5 and 99.6 to the 1995 S-8.*

10.14		1999 Stock Option Plan and Form of Agreement. Incorporated by reference to Exhibits 99.1 and 99.2 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-86113) filed August 30, 1999.*

10.15		2000 Restricted Stock Plan. Incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-35208) filed April 20, 2000.*

10.16		1999 Director Stock Option Plan and Form of Agreement. Incorporated by reference to Exhibits 99.1 and 99.2 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-35318) filed April 21, 2000.*

10.17		2002 Stock Incentive Plan and Forms of Option Agreement and Restricted Stock Agreement. Incorporated by reference to Exhibits 10.1, 10.2 and 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.*

10.18		Supplemental Executive Retirement Plan adopted by West Coast Bank, the Company and Robert D. Sznewajs dated August 1, 2003.*

10.19		Supplemental Executive Retirement Plan adopted by West Coast Bank, the Company and Anders Giltvedt dated August 1, 2003.*

______________________________

* Indicates a management contract or compensatory plan, contract or arrangement.

INDEX TO EXHIBITS (continued)


10.20		Supplemental Executive Retirement Plan adopted by West Coast Bank, the Company and Xandra McKeown dated August 1, 2003.*

10.21		Supplemental Executive Retirement Plan adopted by West Coast Bank, the Company and James D. Bygland dated August 1, 2003.*

10.22		Supplemental Executive Retirement Plan adopted by West Coast Bank, the Company and David Prysock dated August 1 2003.*

21		Subsidiaries of the Company.

23		Consent of Deloitte & Touche LLP.

31.1		Certification of Chief Executive Officer under Rule 13(a) - 14(a).

31.2		Certification of Chief Financial Officer under Rule 13(a) - 14(a).

32		Certification of Chief Executive Officer and Chief Financial Officer under Section 18 U.S.C. Section 1350.

______________________________

* Indicates a management contract or compensatory plan, contract or arrangement.

66 EX-3.1 3 v96690exv3w1.txt EXHIBIT 3.1 Exhibit 3.1 RESTATED ARTICLES OF INCORPORATION OF WEST COAST BANCORP (Including Amendments Approved April 22, 2003) ARTICLE I NAME The name of the corporation is WEST COAST BANCORP. ARTICLE II CAPITALIZATION The corporation is authorized to issue 60,000,000 shares of stock divided into two classes as follows: A. Common Stock. 50,000,000 shares of common stock which shall have unlimited voting rights, subject only to such voting rights as may be specified in respect of preferred stock, and shall have the right to receive the net assets of the corporation upon dissolution, subject only to prior payment of such amount of the net assets of the corporation as may be specified in respect of shares of preferred stock. B. Preferred Stock. 10,000,000 shares of preferred stock issuable from time to time in one or more series as permitted by law and the provisions of the articles of incorporation as may be determined from time to time by the board of directors (or a committee of the board of directors or an officer duly authorized to take such action) and stated in a resolution or resolutions authorizing the issuance of shares of such series prior to the issuance of any such shares; provided that such issuance shall be subject to the affirmative vote of the holders of a majority of the shares present and entitled to vote at a meeting at which such action is submitted for approval if the board of directors has received notice of or is otherwise aware of any transaction or other event pursuant to which (i) any "person" (as such term is used in Sections 13(d) and 14(d) or any successor provisions of the Securities Exchange Act of 1934 and the Securities and Exchange Commission's rules and regulations pursuant thereto (collectively, the "Exchange Act")), other than the corporation, a subsidiary of the corporation, an employee benefit or similar plan sponsored by the corporation, or a person permitted to file reports of beneficial ownership of the corporation's common stock on Schedule 13G under the Exchange Act, is or proposes to become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the corporation representing 10 percent or more of the combined voting power of the corporation's then outstanding securities or (ii) the corporation or any of its subsidiaries representing 50 percent or more of its assets would be a party to a merger or consolidation in which less than 50 percent of the outstanding voting securities of the surviving or resulting corporation or such surviving or resulting corporation's - 1 - parent would be owned in the aggregate by persons who were shareholders of the corporation immediately prior to such merger or consolidation: 1. Issuance in Series. The board of directors (or a committee of the board of directors or an officer duly authorized to take such action) shall have the authority to fix and determine, subject to the provisions hereof, the rights and preferences of the shares of any series so established, including, without limitation, the rate of dividend, whether the dividend shall be cumulative, whether shares may be redeemed and, if so, the redemption price and the terms and conditions of the redemption, the amount payable upon shares in the event of voluntary or involuntary liquidation, sinking fund provisions, if any, for the redemption or purchase of shares, the terms and conditions, if any, on which shares may be converted, and voting rights, if any. 2. Dividends. The holders of shares of preferred stock of a series shall be entitled to receive dividends, out of funds legally available therefor, at the rate and at the time or times as may be provided in respect of a particular series of preferred stock. If such dividends shall be cumulative, and if dividends shall not have been paid, then the deficiency shall be fully paid or the dividends declared and set apart for payment before any dividends on the common stock shall be paid or declared and set apart for payment. Unless otherwise provided in respect of a particular series of preferred stock, the holders of the preferred stock shall not be entitled to receive any dividends thereon other than the dividends referred to in this section. 3. Redemption. The preferred stock of a series may be redeemed in such amount or amounts, and at such time or times, if any, as may be provided in respect of a particular series of preferred stock. In any event, preferred stock may be repurchased by the corporation to the extent legally permissible. 4. Liquidation. In the event of any liquidation, dissolution, or winding up of the affairs of the corporation, whether voluntary or involuntary, then, before any distribution shall be made to the holders of the common stock, the holders of the preferred stock of a series shall be entitled to be paid the preferential amount or amounts as may be provided in respect of a particular series of preferred stock per share and dividends accrued thereon to the date of such payment. The holders of the preferred stock shall not be entitled to receive any distributive amounts upon the liquidation, dissolution, or winding up of the affairs of the corporation other than the distributive amounts referred to in this section, unless otherwise provided in respect of a particular series of preferred stock. 5. Conversion. Shares of a particular series of preferred stock may be convertible or converted into common stock or other securities of the corporation on such terms and conditions as may be provided in respect of that series. - 2 - 6. Voting Rights. Holders of preferred stock of a series shall have such voting rights not in excess of one vote per share as may be provided in respect of a particular series of preferred stock. C. Preemptive Rights. Shareholders shall have no preemptive right to acquire shares or other securities of the corporation which would otherwise be available to the shareholders pursuant to ORS 60.174. D. Cumulative Rights. Shareholders do not have cumulative voting rights with respect to the election of directors of the corporation. ARTICLE III BOARD OF DIRECTORS A. Number of Directors. The board of directors shall consist of not fewer than eight (8) or more than twenty (20) directors. The exact number within such minimum and maximum limits shall be fixed and determined by resolutions approved by at least a 75 percent vote of the total number of directors then in office. The board of directors may fill vacancies on the board of directors, whether caused by resignation, death or otherwise; provided, that at no time shall the total number exceed twenty (20). B. Terms of Directors. Beginning with the directors elected at the corporation's 2003 annual meeting of shareholders, each director shall serve for a term ending on the date of the next annual meeting of shareholders and until his or her successor is elected and qualified or until his or her earlier resignation, removal from office, or death. C. Removal from Office. No director may be removed from office without cause except by a vote of 66 2/3 percent of the shares then entitled to vote at an election of directors. Except as otherwise provided by law, cause for removal shall exist only if the board of directors has reasonable grounds to believe that the corporation has suffered or will suffer substantial injury as a result of the gross negligence, willful misconduct, or dishonesty of the director whose removal is proposed. ARTICLE IV DIRECTOR LIABILITY Directors of the corporation shall not be liable to the corporation or its shareholders for monetary damages for conduct as directors except to the extent that the Oregon Business Corporation Act, as it now exists or may hereafter be amended, prohibits elimination or limitation of director liability. No repeal or amendment of this Article V or of the Oregon Business Corporation Act shall adversely affect any right or protection of a director for actions or omissions prior to the repeal or amendment. - 3 - ARTICLE V INDEMNIFICATION The corporation shall indemnify each of its directors to the fullest extent permissible under the Oregon Business Corporation Act, as the same exists or may hereafter be amended, against all expense, liability, and loss (including, without limitation, attorneys' fees) incurred or suffered by such person by reason of or arising from the fact that such person is or was a director of the corporation, or is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, and such indemnification shall continue as to a person who has ceased to be a director, officer, partner, trustee, employee, or agent and shall inure to the benefit of his or her heirs, executors, and administrators. The corporation may, in its bylaws or as otherwise authorized by its board of directors, provide indemnification to officers, employees, and agents of the corporation to the extent permitted by law. The indemnification provided in this Article VI shall not be exclusive of any other rights to which any person may be entitled under any statute, bylaw, agreement, resolution of shareholders or directors, contract, or otherwise. ARTICLE VI SHAREHOLDER APPROVAL OF CERTAIN TRANSACTIONS A. Except as set forth in Section B of this Article VI: 1. any transaction or series of related transactions to which the corporation or any of its subsidiaries is a party, the consummation of which would result in a Change of Control of the corporation (as hereinafter defined); or 2. any sale, lease, exchange, or other disposition of all or substantially all of the property, with or without goodwill, of the corporation and its subsidiaries to any other corporation, person, trust, partnership, limited liability company, or other entity; shall require the affirmative vote of the holders of shares representing at least 66 1/3 percent of all classes of capital stock of the corporation then entitled to vote at an election of directors, considered for the purposes of this Article VI as one class. For purposes of this Article VI, a "Change in Control" of the corporation would occur if: (a) any "person" (as such term is used in Sections 13(d) and 14(d) or any successor provisions of the Securities Exchange Act of 1934 and the Securities and Exchange Commission's rules and regulations pursuant thereto, as in effect from time to time (collectively, the Exchange Act")), other than the corporation, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the corporation representing 30 percent or more of the combined voting power of the corporation's then outstanding securities; or - 4 - (b) the corporation is merged or consolidated with another corporation and as a result of such merger or consolidation less than 50 percent of the outstanding voting securities of the surviving or resulting corporation would be owned in the aggregate by persons or entities who were shareholders of the corporation immediately prior to such merger or consolidation, other than shareholders who are "affiliates" (as defined in Rule 12b-2 under the Exchange Act) of any party to such merger or consolidation; or (c) the transaction is of the type that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act. Also for purposes of this Article VI, the term "substantially all of the property, with or without goodwill, of the corporation and its subsidiaries" shall mean those properties and assets involved in any single transaction or series of related transactions having an aggregate fair market value of more than a majority of the total consolidated assets of the corporation and its subsidiaries. B. The provisions of this Article VI shall not apply to any transaction or series of transactions described in Section A of this Article VI if, prior to the consummation of such transaction or transactions, the board of directors of the corporation shall have approved the transaction or transactions by the affirmative vote of more than 75 percent of the directors. The board of directors of this corporation shall have the power and duty to determine for the purposes of this Article VI, on the basis of information known to the corporation, whether any transaction or series of transactions is subject to the voting requirements of this Article VI. Any such determination made in good faith shall be conclusive and binding for all purposes of this Article VI. C. No amendment to the articles of incorporation of this corporation shall amend, alter, change, or repeal any of the provisions of this Article VI unless the amendment effecting such amendment, alteration, change, or repeal (i) shall be approved by more than 75 percent of the directors, or (ii) shall receive the affirmative vote of 66 2/3 percent of all classes of stock of the corporation entitled to vote at an election of directors, considered for the purposes of this Article VI as one class. D. Nothing contained in this Article VI shall be construed to relieve any beneficial owner of shares of the corporation from any fiduciary obligation imposed by law. ARTICLE VII CONSIDERATION OF NON-MONETARY FACTORS The board of directors of the corporation, when evaluating any offer of another party to (a) make a tender or exchange for any equity security of the corporation, (b) merge or consolidate the corporation with another corporation or association, or (c) purchase or otherwise acquire all or substantially all of the properties and assets of the corporation, may, in connection with the exercise of its judgment in determining what is in the best interests of the corporation - 5 - and its stockholders, give due consideration to all relevant factors, including without limitation the social and economic effects on the employees, customers, suppliers, and other constituents of the corporation and its subsidiaries and on the communities in which the corporation and its subsidiaries operate or are located. As amended by the Shareholders on April 24, 1998, and April 22, 2003. - 6 - EX-3.2 4 v96690exv3w2.txt EXHIBIT 3.2 Exhibit 3.2 AMENDED AND RESTATED BYLAWS OF WEST COAST BANCORP (AS AMENDED THROUGH DECEMBER 17, 2002) TABLE OF CONTENTS
PAGE SECTION 1 Shareholders' Meetings................................................................. 1 1.1 Place..................................................................................... 1 1.2 Annual Meeting............................................................................ 1 1.3 Special Meetings.......................................................................... 1 1.4 Notices of Meetings....................................................................... 1 1.5 Waiver of Notice.......................................................................... 1 1.6 Adjourned Meetings........................................................................ 2 1.7 Quorum of Shareholders.................................................................... 2 1.8 Voting of Shares.......................................................................... 2 1.9 Action Without Meeting.................................................................... 2 1.10 Stockholder Business...................................................................... 2 SECTION 2 Board of Directors..................................................................... 3 2.1 Number and Qualifications................................................................. 3 2.2 Nominations for Directors................................................................. 3 2.3 Vacancies................................................................................. 4 2.4 Regular Meetings.......................................................................... 4 2.5 Special Meetings.......................................................................... 4 2.6 Notice of Meetings........................................................................ 4 2.7 Waiver of Notice.......................................................................... 4 2.8 Quorum of Directors; Attendance........................................................... 4 2.9 Dissent by Directors...................................................................... 5 2.10 Action Without Meeting.................................................................... 5 2.11 Committees................................................................................ 5 SECTION 3 Officers............................................................................... 6 3.1 Officers Enumerated; Election............................................................. 6 3.2 Qualifications............................................................................ 6 3.3 Chairman and Vice Chairman of the Board................................................... 6 3.4 Chief Executive Officer................................................................... 6 3.5 Co-Chief Executive Officers............................................................... 7 3.6 President................................................................................. 7
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PAGE 3.7 Co-Presidents............................................................................. 7 3.8 Vice President............................................................................ 7 3.9 Secretary................................................................................. 7 3.10 Treasurer................................................................................. 7 3.11 Other Officers and Agents................................................................. 8 3.12 Removal of Officers....................................................................... 8 3.13 Vacancies................................................................................. 8 3.14 Salaries.................................................................................. 8 SECTION 4 Business of the Corporation............................................................ 8 4.1 Obligations............................................................................... 8 4.2 Contracts................................................................................. 8 4.3 Loans to Corporation...................................................................... 8 4.4 Checks and Drafts......................................................................... 8 SECTION 5 Indemnification........................................................................ 8 5.1 Definitions............................................................................... 8 5.2 Directors and Officers.................................................................... 9 5.3 Employees and Agents...................................................................... 9 5.4 Procedure for Seeking Indemnification or Advance.......................................... 10 5.5 Contract and Related Rights............................................................... 11 5.6 Exceptions................................................................................ 12 5.7 Service for Other Entities................................................................ 13 SECTION 6 Stock.................................................................................. 13 6.1 Certificate of Stock...................................................................... 13 6.2 Transfer.................................................................................. 13 6.3 Shareholders of Record.................................................................... 14 6.4 Loss or Destruction of Certificates....................................................... 14 6.5 Record Date and Transfer Books............................................................ 14 6.6 Regulations............................................................................... 14 SECTION 7 Books and Records...................................................................... 14 7.1 Records of the Corporate Meetings and Share Register...................................... 14
-ii- TABLE OF CONTENTS (CONTINUED)
PAGE 7.2 Reliance of Records....................................................................... 15 7.3 Form of Records........................................................................... 15 SECTION 8 Corporate Seal......................................................................... 15 SECTION 9 Amendments............................................................................. 15 9.1 Action by board........................................................................... 15 9.2 Amendment by Shareholders................................................................. 15 9.3 Amendments to Shareholder Quorum Requirements............................................. 15 9.4 Amendments to board Quorum Requirements................................................... 15
-iii- AMENDED AND RESTATED BYLAWS OF WEST COAST BANCORP SECTION 1 Shareholders' Meetings 1.1 Place. Shareholders' meetings may be held at the principal office of the corporation, or at any other location within or without the State of Oregon as determined by the board of directors and stated in the notice of meeting 1.2 Annual Meeting. The annual meeting of the shareholders of the corporation for the election of directors to succeed those whose terms then expire and for the transaction of any other business as may properly come before the meeting will be held each year on a date and at a time selected by the board of directors that is not later than five (5) months after the end of the corporation's fiscal year. Failure to hold an election of directors at the annual meeting of the shareholders within the time stated in these bylaws, through oversight or otherwise, does not affect the validity of any corporate action, and a meeting of the shareholders may be held at a later date for the election of directors and for the transaction of any other business that may properly come before the meeting. Any election held or other business transacted at a later meeting will be as valid as if done or transacted at the annual meeting of the shareholders. Any later meeting will be called in the same manner as a special meeting of the shareholders, and notice of the time, place, and purpose of the meeting will be given in the same manner as notice of a special meeting of the shareholders. 1.3 Special Meetings. Special meetings of the shareholders, for any purpose or purposes, may be called by the president or by the board of directors, and shall be called by the president if one or more written demands for a meeting describing the purpose or purposes for which it is to be held are signed, dated, and delivered to the secretary by the holders of at least 10 percent of all votes entitled to be cast on any issue proposed to be considered at the meeting. 1.4 Notices of Meetings. Written notice stating the date, time, and place of the meeting, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting. Notice of any shareholders' meeting may be given either personally or by mail, by or at the direction of the president, the secretary, or the person or persons calling the meeting, to each shareholder of record entitled to vote at the meeting and to others as required by law. If mailed, the notice will be effective when deposited in the United States mail with postage prepaid, addressed to the shareholder at his or her address as it appears in the current records of the corporation. 1.5 Waiver of Notice. Notice of any shareholders' meeting may be waived at any time, either before or after the meeting, if the waiver is in writing, signed by the shareholders entitled to notice, and delivered to the corporation. A shareholder's attendance at a meeting waives objection to lack of notice or defective notice of the meeting unless the shareholder objects at the beginning of the meeting to holding the meeting or transacting business at the -1- meeting. A shareholder waives objection to consideration of a particular matter at a meeting that is not within the purpose or purposes described in the meeting notice unless the shareholder objects to considering the matter when it is presented. 1.6 Adjourned Meetings. An adjournment or adjournments of any shareholders' meeting may be taken until the time and place determined by those present, without new notice being given, whether by reason of the failure of a quorum to attend or otherwise. 1.7 Quorum of Shareholders. Shares entitled to vote as a separate voting group may take action on a matter only if a quorum of those shares exists with respect to the matter. A majority of the votes entitled to be cast on the matter by voting group, represented in person or by proxy, shall constitute a quorum of that voting group for action on that matter. If a quorum exists, action on a matter, other than the election of directors, shall be approved by a voting group if the votes cast within the voting group favoring the action exceed the votes cast opposing the action unless the Oregon Business Corporation Act, the articles of incorporation, or these bylaws require a greater number of affirmative votes. Directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. Once a share is represented for any purpose at a meeting, it shall be deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. Shareholders may participate in a meeting of the shareholders by means of a conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other during the meeting. 1.8 Voting of Shares. A shareholder may vote either in person or by proxy executed in writing by the shareholder or his or her duly authorized attorney-in-fact. No proxy will be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. Any proxy shall be filed with the secretary of the corporation before or at the time of the meeting. 1.9 Action Without Meeting. Any action required or permitted to be taken at a meeting of the shareholders of the corporation may be taken without a meeting if a written consent resolution, setting forth the action taken, is signed by all shareholders entitled to vote on the action and is delivered to the corporation. Once delivered, the consent resolution will have the same force and effect as a unanimous vote of the shareholders. 1.10 Stockholder Business. At any annual meeting of the shareholders, only such business shall be conducted (other than procedural matters relating to the conduct of the meeting) as shall have been brought before the meeting (a) by or at the direction of the board of directors, (b) as specified in the notice of such meeting, or (c) by any stockholder of record of the corporation who complies with the notice procedures set forth in this Section 1.10. For business to be properly brought before an annual meeting by any such shareholder, the shareholder must given written notice thereof to the secretary, either by personal delivery or by certified mail, postage prepaid, addressed to the secretary at the corporation's executive offices not less than sixty (60) days in advance of such meeting (provided that if the date of such annual meeting of shareholders has not been publicly announced by the corporation more than 90 days in advance of such meeting, such written notice must be given within fifteen (15) days after the first public -2- disclosure of the date of the annual meeting, including, without limitation, disclosure of the meeting date set forth in any document or exhibit thereto filed by the corporation with the Securities and Exchange Commission). Each such notice shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the corporation's stock ledger of the shareholder of record of shares of the corporation entitled to vote at such meeting and intends to appear at the meeting in person or by proxy to propose such business, and (d) any material interest of such shareholder in the proposed business. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that any such business was not properly brought before the meeting and in accordance with the provisions of this Section 1.10, and if he should so determine, he shall so declare to the meeting and such business not properly brought before the meeting shall not be transacted. SECTION 2 Board of Directors 2.1 Number and Qualifications. The business and affairs of the corporation will be managed by a board of directors, the members of which need not be shareholders of the corporation or residents of the State of Oregon. The number of directors shall be fixed in the manner set forth in the articles of incorporation. 2.2 Nominations for Directors. Nominations for election to the board of directors may be made by the board of directors or by any shareholder of any outstanding class of capital stock of the corporation entitled to vote for the election of directors. Nominations by the board of directors of candidates for election to the board shall be approved by at least a majority of the members of the board of directors. Any shareholder entitled to vote for the election of directors may nominate at a meeting persons for election as directors only if written notice of such shareholder's intent to make such nomination is given, either by personal delivery or by certified mail, postage prepaid, addressed to the secretary at the corporation's executive offices not later than (i) with respect to an election to be held at an annual meeting of shareholders, sixty (60) days prior to the date of such meeting (provided that if the date of such annual meeting of shareholders has not been publicly announced by the corporation more than 90 days in advance of such meeting, such written notice must be given within fifteen (15) days after the first public disclosure of the date of the annual meeting, including without limitation, disclosure of the meeting date set forth in any document or exhibit thereto filed by the corporation with the Securities and Exchange Commission), and (ii) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. Each such notice shall set forth: (a) the name and address, as they appear on the corporation's stock ledger of the shareholder who intends to make the nomination and the name and address of each person to be nominated; (b) a representation that such shareholder is a holder of record of shares of the corporation entitled to vote at such meeting and intends to appear at the meeting in person or by proxy to nominate the person or persons specified in the notice as directors; (c) a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such shareholder; (d) such other information regarding each -3- nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission were such nominee to be nominated by the board of directors; and (e) the consent of each proposed nominee to serve as a director of the corporation if so elected. The chairman of any meeting of shareholders to elect directors may refuse to permit the nomination of any person to be made without compliance with the foregoing procedure. No person may stand for election or re-election for director if such person has attained the age of sixty-nine (69); provided that this restriction will not be applicable with respect to the election of directors at the 2003 and 2004 annual meetings of shareholders. 2.3 Vacancies. In the event of any increase or decrease in the authorized number of directors, each director then serving as such shall nevertheless continue as a director until the expiration of his current term, or his earlier resignation, removal from office or death. 2.4 Regular Meetings. Regular meetings of the board of directors will be held on the dates and at the times and places decided by the board of directors. 2.5 Special Meetings. Special meetings of the board of directors may be held at any time and at any place whenever called by an executive officer or director of the corporation. 2.6 Notice of Meetings. Notice of the annual or regular meetings of the board of directors is not required. Notice of the date, time, and place of special meetings of the board of directors must be given, by or at the direction of the chairman of the board, the president, the secretary, or any person or persons calling the meeting, by mail, facsimile, radio, telegram, or personal communication over the telephone or otherwise, at least two (2) days prior to the day on which the meeting is to be held. No notice need be given if the time and place of the meeting has been fixed by resolution of the board of directors and a copy of the resolution has been mailed to every director at least three (3) days before the meeting. 2.7 Waiver of Notice. Notice of any meeting of the board of directors may be waived at any time, either before or after a meeting, if the waiver is in writing, signed by the director entitled to notice, and delivered to the corporation. Notice is waived by any director attending or participating in a meeting unless the director, at the beginning of the meeting or promptly on the director's arrival, objects to holding the meeting or transacting business at the meeting and does not vote for or assent to any action taken at the meeting. 2.8 Quorum of Directors; Attendance. A majority of the number of directors fixed in accordance with the articles of incorporation or bylaws from time to time will constitute a quorum for the transaction of business. The act of a majority of the directors present at a meeting at which a quorum is present will be the act of the board of directors unless a greater requirement is imposed by law, the articles of incorporation, or these bylaws. Members of the board of directors or any committee designated by the board of directors may participate in a meeting of the Board or committee by means of a conference telephone or similar communication equipment by which all persons participating in the meeting can hear each other at the meeting. Participation by such means will constitute presence in person at a meeting. -4- 2.9 Dissent by Directors. A director of the corporation who is present at a meeting of its board of directors at which action on any corporate matter is taken will be presumed to have assented to the action unless (a) the director objects at the beginning of the meeting, or promptly on his or her arrival, to holding the meeting or transacting business at the meeting; (b) the director's dissent or abstention from the action taken is entered in the minutes of the meeting, or (c) the director delivers written notice of his or her dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation within a reasonable time after adjournment. The right of dissent or abstention is not available to a director who votes in favor of the action taken. 2.10 Action Without Meeting. Any action which may be or is required to be taken at a meeting of the board of directors, or any action which may be taken at a meeting of a committee designated by the board of directors, may be taken without a meeting if a written consent resolution, setting forth the action taken, is signed by all of the directors or all of the members of the committee, as the case may be, and is delivered to the corporation. The fully signed consent resolution will have the same force and effect as a unanimous vote. 2.11 Committees. The board of directors, by resolution adopted by a majority of the full board of directors, shall designate from among its members an executive committee and may designate one or more other committees. Each must consist of two (2) or more persons. The committees will be governed by the same rules regarding meetings, actions without meetings, notices, waivers of notice, and quorum and voting requirements applied to the board of directors. To the extent provided in the resolution forming the committee, each committee may have and may exercise all the authority of the board of directors, except that no committee will have the authority to: (a) Authorize or approve a distribution except as may be permitted by paragraph (g) below; (b) Approve or propose to shareholders action required to be approved by shareholders; (c) Fill vacancies on the board of directors or on any of its committees; (d) Amend the articles of incorporation of the corporation except as may be necessary to document a determination of the relative rights, preferences, and limitations of a series of shares as permitted by paragraph (h) below; (e) Adopt, amend, or repeal the bylaws of the corporation; (f) Approve a plan of merger not requiring shareholder approval; (g) Authorize or approve reacquisition of shares, except within limits presented by the board of directors; or (h) Authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a -5- class or series of shares, except that the board of directors may authorize a committee or an officer of the corporation to do so: 1. Pursuant to a stock option or other stock compensation plan; or 2. By approving the maximum number of shares to be issued and delegating the authority to determine all or any part of the terms of the issuance or sale or contract of sale and the designation and relative rights, preferences, and limitations of the class or series of shares. The creation of delegation of authority to, or action by such a committee of the Board will not operate to relieve the board of directors, or any of its members, of any responsibility imposed by law. SECTION 3 Officers 3.1 Officers Enumerated; Election. The officers of the corporation will include a chief executive officer, president, secretary, and treasurer and one or more vice presidents, as well as any assistants to the officers as the board of directors may determine. The offices of president and chief executive officer may be held by two (2) individuals as co-presidents and co-chief executive officers. The board of directors, in its discretion, may also elect a chairman of the board and a vice chairman of the board from among the members of the board who shall not be deemed an officer of the corporation unless so designated by the board of directors. All officers will be elected by the board of directors. 3.2 Qualifications. None of the officers of the corporation need be a director. Any two or more offices may be held by the same person. 3.3 Chairman and Vice Chairman of the Board. The chairman of the board, if any, or, in the chairman's absence, the vice chairman of the board, if any, will preside at all meetings of the board of directors and of the shareholders at which he or she is present, and will perform any other duties assigned by the board of directors from time to time. 3.4 Chief Executive Officer. Subject to the authority of the board of directors, the chief executive officer will have general charge, supervision, and control over the business and affairs of the corporation and will be responsible for its management. The chief executive officer shall have the power and shall perform the duties as are regularly and customarily performed by the chief executive officer of a corporation and may delegate such duties as appropriate to other officers of the corporation. The chief executive officer will submit a report of the operations of the corporation for the preceding year to the shareholders at their annual meeting. If no chairman of the board is elected by the board of directors or in the absence of the chairman of the board, the chief executive officer will preside at all meetings of the shareholders, and of the board of directors if he or she is a member of the shareholders, and of the board of directors if he or she is a member of the board. Any shares of stock of another corporation held by the corporation will be voted by the chief executive officer subject to direction from the board of directors. The chief executive officer will perform any other duties assigned to that office from time to time by the board of directors. -6- 3.5 Co-Chief Executive Officers. The office of chief executive officer may be shared by two (2) individuals. In the event that two persons hold office as co-chief executive officers, the co-chief executive officers shall determine between themselves those areas of which each shall have primary responsibility, it being understood that both of them shall be involved in and be responsible for all major policy decisions and both of them shall have general oversight over the business and affairs of the Combined Corporation. Any matters upon which the co-chief executive officers are unable to agree shall be referred to the Executive Committee. If one co-chief executive officer is absent or disabled, the other shall exercise all the duties of that office. 3.6 President. The president, who also may be the chief executive officer of the corporation, shall have such authority and shall exercise such duties as shall, from time to time, be assigned to that office by the board of directors or, as appropriate, the chief executive officer. 3.7 Co-Presidents. The office of president may be shared by two (2) individuals, one of whom or both of whom may also be the chief executive officer or co-chief executive officers of the corporation. In the event that two persons hold office as co-presidents, the board of directors or, as appropriate, the chief executive officer or co-chief executive officers shall determine those areas of which each co-president shall have primary responsibility. Any matters upon which the co-presidents are unable to agree shall be referred to the chief executive officer or co-chief executive officers, if such person or persons are not also a co-president or co-presidents, and otherwise to the Executive Committee. If one co-president is absent or disabled, the other shall exercise all the duties of that office. 3.8 Vice President. If the president is absent or disabled, the vice president will have and may exercise and perform the authority and duties of the president. In addition, the vice president will perform any other duties assigned to that office by the board of directors, the chief executive officer, or president from time to time. If more than one vice president is elected, the vice presidents will have the titles, seniority, and duties established for them by the board of directors. 3.9 Secretary. The secretary will prepare and keep minutes of meetings of shareholders and directors, will be responsible for authenticating records of the corporation, and will exercise the usual authority pertaining to the office of secretary. The secretary will keep and, when proper, affix the seal of the corporation, if any, and will perform any other duties assigned to that office by the board of directors, the CEO, or president from time to time. 3.10 Treasurer. The treasurer, who may also be the chief financial officer, will have charge and custody of and be responsible for all funds and securities of the corporation. The treasurer will deposit all such funds in the name of the corporation in the depositories or invest them in the investments designated or approved by the board of directors, and will authorize disbursements of the funds of the corporation in payment of just demands against the corporation or as may be ordered by the board of directors on securing proper vouchers. The treasurer will render to the board of directors from time to time, as may be required, an account of all transactions as treasurer; and will perform any other duties assigned to that office from time to time by the board of directors, the CEO, or president. -7- 3.11 Other Officers and Agents. The board of directors may appoint other officers and agents as it deems necessary or expedient. These other officers and agents will exercise the authority and perform the duties prescribed for them by the board of directors, which authority and duties may include, in the case of the other officers, one or more of the duties of the named officers of the corporation. 3.12 Removal of Officers. Any officer or agent may be removed by the board of directors whenever in its judgment the best interests of the corporation will be served by doing so. Removal will be without prejudice to the contract rights, if any, of the person removed. Election or appointment of an officer or agent will not of itself create contract rights. 3.13 Vacancies. Vacancies in any office arising from any cause may be filled by the board of directors at any regular or special meeting. 3.14 Salaries. Salaries of all officers of the corporation appointed by the board of directors will be fixed by the board of directors or by a person or committee authorized by the board of directors. SECTION 4 Business of the Corporation 4.1 Obligations. Any agreements or other documents requiring Board approval will be valid if approved by the Board and signed by the chief executive officer, president, or vice president and attested by the secretary or an assistant secretary 4.2 Contracts. The board of directors may authorize any officer or agent to enter into any contract or execute and deliver any instrument in the name and on behalf of the corporation. This authority may be general or confined to specific instances. 4.3 Loans to Corporation. No loans will be contracted on behalf of the corporation, and no evidence of indebtedness will be issued in its name, unless authorized by the board of directors. This authority may be general or confined to specific instances. 4.4 Checks and Drafts. All checks, drafts, or other orders for the payment of money, notes, or other evidence of indebtedness issued in the name of the corporation will be signed by the officer(s) or agent(s) of the corporation and in the manner prescribed from time to time by the board of directors. SECTION 5 Indemnification 5.1 Definitions. As used in this Section: (a) "Act" means the Oregon Business Corporations Act, now or hereafter in force. (b) "Corporation" means this corporation, and any domestic or foreign predecessor entity which, in a merger or other transaction, ceased to exist. -8- (c) "Director" means an individual who is or was a director of the corporation or an individual who, while a director of the corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust employee benefit plan, or other enterprise. "Director" includes the estate or personal representative of a director, unless the context requires otherwise. (d) "Expenses" include counsel fees. (e) "Indemnitee" means an individual made a party to a proceeding because the individual is or was a director, officer, employee, or agent of the corporation and who possesses indemnification rights pursuant to the Articles of Incorporation, these bylaws, or other corporate action. It also includes any individual entitled t indemnification pursuant to this Section. It also includes the heirs, executors, and other successors in interest of the above individuals. (f) "Liability" means the obligation to pay a judgment, settlement, penalty, fine, including any excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding. (g) "Party" includes an individual who was, is, or is threatened to be named a defendant or respondent in a proceeding. (h) "Proceeding" means any threatened, pending, or completed action, suit, or proceeding whether civil, criminal, administrative, or investigative and whether formal or informal. 5.2 Directors and Officers. The corporation will indemnify its directors and officers to the full extent permitted by the Act. However, the indemnity will not apply on account of: (a) Acts or omissions of a director or officer finally adjudged to be intentional misconduct or a knowing violation of law; (b) A proceeding by or in the right of the corporation in which the director or officer was adjudged liable to the corporation; or (c) Any proceeding charging improper personal benefit to the director or officer in which the director or officer was adjudged liable on the basis that personal benefit was improperly received by the director or officer. The corporation will advance expenses for such persons pursuant to the terms set forth in these bylaws, in a resolution of the Board of Directors, or in a contract which any such person. 5.3 Employees and Agents. The corporation may, by action of the Board, grant rights to indemnification and advancement of expenses to employees and agents of the corporation within the same scope and effect allowed by the provisions of this Section with respect to the -9- indemnification and advancement of expenses of directors and officers of the corporation or by the Act or otherwise. 5.4 Procedure for Seeking Indemnification or Advance. (a) Notification and Defense of Claim. An Indemnitee will promptly notify the corporation in writing of any proceeding for which indemnification is sought under this Section. In addition, the Indemnitee will provide the corporation with information and cooperation that the corporation may reasonably require and which is within the Indemnitee's power. With respect to any proceeding of which the Indemnitee has notified the corporation: 1. The corporation will be entitled to participate in the proceeding at its own expense; and 2. Except as otherwise provided below, to the extent that it may wish, the corporation, jointly and any other indemnifying party similarly notified, will be entitled to assume the defense of the proceeding, with counsel satisfactory to the Indemnitee. The Indemnitee's consent to such counsel will not be unreasonably withheld. The corporation will not be entitled to assume the defense of any proceeding brought by or o behalf of the corporation or as to which Indemnitee has reasonably concluded that a conflict of interest may exist between the corporation and the Indemnitee in the conduct of the defense. After notice from the corporation to the Indemnitee of its election to assume the defense, the corporation will not be liable to the Indemnitee under this Section for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense. However, the fees and expenses of the Indemnitee's counsel will be paid by the corporation if: 1. The employment of counsel by the Indemnitee has been authorized by the corporation; 2. Indemnitee reasonably concludes that a conflict of interest may exist between the corporation and the Indemnitee in the conduct of the defense; or 3. The corporation did not in fact employ counsel to assume the defense of the proceeding. Notwithstanding the assumption of defense by the corporation in any proceeding, the Indemnitee will continue to have the right to employ its counsel in the proceeding, at the Indemnitee's expense. (b) Information Required and Determination of Indemnification. For purposes of pursuing rights to indemnification under this Section, the Indemnitee will submit to the Board an Indemnification Statement, consisting of: -10- 1. A sworn statement requesting indemnification; and 2. Any evidence that the Board may reasonably request of all amounts for which indemnification is requested. Submission of an Indemnification Statement to the Board will create a presumption that the Indemnitee is entitled to indemnification and, if requested in accordance with the following Subsection, advancement of expenses. The corporation will, within sixty (60) calendar days after submission of the Indemnification Statement (or twenty (20) calendar days in the case of advancement of expenses), make the payments requested in the Indemnification Statement to or for the benefit of the Indemnitee, unless within sixty (60) or twenty (20) day period the corporation determines (in the manner provided below) that the Indemnitee is not entitled to indemnification under this Section and gives the Indemnitee notice in writing of such determination, which notice will disclose with particularity the evidence on which the determination is based. Such determination will be based on clear and convincing evidence, sufficient to rebut the foregoing presumption. At the election of the President of the corporation, the foregoing determination may be made as provided in ORS 60.404. Any determination that the Indemnitee is not entitled to indemnification and any failure to make the payments requested in the Indemnification Statement will be subject to judicial review by any court of competent jurisdiction. (c) Special Procedure Regarding Advances. An Indemnitee seeking payment or reimbursement of expenses in advance of a final disposition of the proceeding must furnish the corporation, as part of the Indemnification Statement, with: 1. A written affirmation of the Indemnitee's good faith belief that the Indemnitee has met the standard of conduct required to be eligible for indemnification; and 2. A written undertaking, constituting an unlimited general obligation of the Indemnitee, to repay the advance if it is ultimately determined that the Indemnitee did not meet the required standard of conduct. (d) Settlement. The corporation is not liable to indemnify Indemnitee for any amounts paid in settlement of any proceeding without the corporation's written consent. The corporation will not settle any proceeding in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the corporation nor Indemnitee will unreasonably withhold its consent to a proposed settlement. 5.5 Contract and Related Rights. (a) Contract Rights. The right of an Indemnitee to indemnification and advancement of expenses is a contract right on which the Indemnitee will be presumed to have relied in determining to serve or continue to serve in his or her -11- capacity with the corporation. Such right will continue as long as Indemnitee is subject to any possible proceeding. Any amendment to or repeal of this Section will not adversely affect any right or protection of an Indemnitee with respect to any acts or omissions of the Indemnitee occurring prior to the amendment or repeal. (b) Optional Insurance, Contracts, and Funding. The corporation may: 1. Maintain insurance, at its expense, to protect itself and any Indemnitee against any liability, whether or not the corporation would have power to indemnify the individual against the same liability under the Act; 2. Enter into contracts with any Indemnitee in furtherance of this Section and consistent with the Act; and 3. Create a trust fund, grant a security interest, or use other means (including, without limitation, a letter of credit) to ensure the payment of amounts that may be necessary to effect indemnification as provided in this Section. (c) Severability. If any provision or application of this Section is invalid or unenforceable, the remainder of this Section and its remaining applications will not be affected thereby and will continue in full force and effect. (d) Right of Indemnitee to Bring Suit. If a claim under this Section for indemnification is not paid in full by the corporation within sixty (60) days, or for advancement of expenses is not paid in full by the corporation within twenty (20) days, after an Indemnification Statement setting forth the claim has been received by the corporation, the Indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim. To the extent such suit is successful, the Indemnitee will be entitled to recover from the corporation the expense (to be prorated if the Indemnitee is only partially successful) of prosecuting the claim. Neither (1) the future of the corporation (including its Board of Directors, shareholders, or independent legal counsel) to have made a determination prior to the commencement of a proceeding that indemnification of, or reimbursement or advance of expenses to, the Indemnitee is proper in the circumstances, nor (2) an actual determination by the corporation (including its Board of Directors, shareholders, or independent legal counsel) that the Indemnitee is not entitled to indemnification or to the reimbursement or advancement of expenses, will create a presumption that the Indemnitee is not so entitled. 5.6 Exceptions. Notwithstanding any other provision of this Section, the corporation will not be obligated pursuant to the terms of these bylaws to indemnify or advance expenses to Indemnitee with respect to any proceeding: -12- (a) Claims Initiated by Indemnitee. Initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right of indemnification under these bylaws or any other statute or law or as otherwise required under the Act. However, indemnification or advancement of expenses may be provided by the corporation in specific cases if the Board of Directors finds it to be appropriate. (b) Lack of Good Faith. Initiated or brought voluntarily by Indemnitee to enforce or interpret these bylaws if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous. (c) Insured Claims. For which any of the expenses or liabilities for indemnification being sought have been paid directly to Indemnitee by an insurance carrier under a policy of insurance maintained by the corporation. (d) Prohibited by Law. If the corporation is prohibited by the Act, or other applicable law as then in effect from paying such indemnification and/or advancement of expenses. 5.7 Service for Other Entities. The indemnification and advancement of expenses provided under this Section will apply to directors, officers, employees, or agents of the corporation for both (a) service in such capacities for the corporation, and (b) service at the corporation's request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. A person is considered to be serving an employee benefit plan at the corporation's request if that person's duties to the corporation also impose duties on, or otherwise involve services by, that person to the plan or to participants or beneficiaries of the plan. SECTION 6 Stock 6.1 Certificate of Stock. Certificates of stock will be issued in numerical order. Each shareholder will be entitled to a certificate signed, either manually or in facsimile, by the president or vice president and the secretary, or by the board of directors. The certificate may be sealed with the corporate seal. Every certificate of stock will state: (a) The name of the corporation and the fact that the corporation is incorporated under the laws of the State of Oregon; (b) The name of the registered holder of the shares represented by the certificate; and (c) The number and class of the shares and the designation of the series, if any, represented by the certificate. 6.2 Transfer. Subject to any legend appearing on the certificate, shares of stock may be transferred by delivery of the certificate, accompanied by either an assignment in writing on -13- the back of the certificate or a separate written assignment and power of attorney to transfer the same, which in either event is signed by the record holder of the certificate. No transfer will be valid, except as between the parties to the transfer, until the transfer is made on the books of the corporation. Except as otherwise specifically provided in these bylaws, no shares of stock will be transferred on the books of the corporation until the outstanding certificate or certificates representing the transferred stock have been surrendered to the corporation accompanied by an assignment as above. 6.3 Shareholders of Record. The corporation will be entitled to treat the holder of record on the books of the corporation of any share or shares of stock as the holder in fact of those shares for all purposes, including the payment of dividends on and the right to vote the stock, unless provided otherwise by the board of directors. 6.4 Loss or Destruction of Certificates. If any certificate of stock is lost or destroyed, another may be issued in its place on proof of loss or destruction and on the giving of a satisfactory bond of indemnity to the corporation. A new certificate may be issued without requiring any bond when, in the judgment of the board of directors, it is proper to do so. 6.5 Record Date and Transfer Books. For the purpose of determining shareholders entitled to notice of or vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, or in order to make a determination of shareholders for any other proper purpose, the board of directors will make in advance a record date for any such determination of shareholders. The record date in any case will not be more than seventy (70) days and, in the case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring the determination of shareholders is to be taken. If no record date is fixed for these purposes, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring the dividend is adopted, as the case ma be, will be the record date for the determination of shareholders. 6.6 Regulations. The board of directors will have the power and authority to make all rules and regulations it deems expedient concerning the issue, transfer, conversion, and registration of certificates for shares of stock of the corporation not inconsistent with these bylaws, the articles of incorporate, or the laws of the United States or the State of Oregon. SECTION 7 Books and Records 7.1 Records of the Corporate Meetings and Share Register. The corporation will keep at either its principal place of business, its registered office, or another place permitted by law, as the board of directors may designate, (a) books and records of account and minutes or records of all of the proceedings of the board of directors, director committees, and shareholders, and (b) a record of shareholders, giving the name of the shareholders and showing their respective addresses and the number and class of shares held by each. -14- 7.2 Reliance of Records. Any person dealing with the corporation may rely on a copy of any of the records of the proceedings, resolutions, or votes of the board of directors, director committees, or shareholders when certified by the president, vice president, or secretary. 7.3 Form of Records. All books and records may be kept on paper or in electronic or other format. SECTION 8 Corporate Seal The corporation may adopt, but will not be required to adopt, a corporate seal. If a seal is adopted, it will be circular and will include the name of the corporation and the words "corporate seal." SECTION 9 Amendments 9.1 Action by board. The board of directors may amend or repeal the bylaws unless: (a) The articles of incorporation or the provisions of law reserve this power exclusively to the shareholders in whole or in part; or (b) The shareholders in amending or adopting a particular bylaw provide expressly that the board of directors may not amend or repeal that bylaw. 9.2 Amendment by Shareholders. The shareholders may amend or repeal the bylaws even though the bylaws may also be amended and repealed by its board of directors. 9.3 Amendments to Shareholder Quorum Requirements. If expressly authorized by the articles of incorporation, the shareholders may adopt or amend a bylaw that fixes a greater quorum or voting requirement for shareholders, or voting groups of shareholders, than is required by law. The adoption or amendment of a bylaw that adds, changes, or deletes a greater quorum or voting requirement for shareholders must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirement then in effect or the quorum or voting requirement proposed to be adopted, whichever is greater. A bylaw that fixes a greater quorum or voting requirement for shareholders under this Section 9.3 may not be adopted, amended, or repealed by the board of directors. 9.4 Amendments to board Quorum Requirements. A bylaw provision that fixes a greater quorum or voting requirement for the board of directors may be amended or repealed: (a) If the provision was originally adopted by the shareholders, only by the shareholders; or (b) If the provision was originally adopted by the board of directors, either by the shareholders or by the board of directors. -15- A bylaw provision adopted or amended by the shareholders that fixes a greater quorum or voting requirement for the board of directors may provide that it may be amended or repealed only by a specified vote of either the shareholders or the board of directors. -16- EX-10.2 5 v96690exv10w2.txt EXHIBIT 10.2 EXHIBIT 10.2 CHANGE IN CONTROL AGREEMENT EFFECTIVE DATE: JANUARY 1, 2004 This CHANGE IN CONTROL AGREEMENT ("Agreement") is made by WEST COAST BANCORP ("Bancorp") and WEST COAST BANK ("Bank") (collectively "Company") ROBERT D. SZNEWAJS ("Executive"). RECITALS A. The Executive is employed by Bank as its President and Chief Executive Officer. B. The Board recognizes that a possible or threatened Change in Control may result in key management personnel being concerned about their continued employment status or responsibilities. In addition, they may be approached by other companies offering competing employment opportunities. Consequently, they will be distracted from their duties and may even leave the Company during a time when their undivided attention and commitment to the best interests of the Company and Bancorp's shareholders would be vitally important. C. The Company considers it essential to its best interests and those of Bancorp's shareholders to provide for the continued employment of key management personnel in the event of a Change in Control. D. Therefore, in order to-- (1) Encourage the Executive to assist the Company during a Change in Control and be available during the transition afterwards; (2) Give assurance regarding the Executive's continued employment status and responsibilities in the event of a Change in Control; and (3) Provide the Executive with Change in Control benefits competitive with the Company's peers --the parties agree on the following: TERMS AND CONDITIONS 1. DEFINITIONS. Words and phrases appearing in this Agreement with initial capitalization are defined terms that have the meanings stated below. Words appearing in the following definitions which are themselves defined terms are also indicated by initial capitalization. (a) "BENEFICIAL OWNERSHIP" means direct or indirect ownership within the meaning of Rule 13(d)(3) under the Exchange Act. (b) "BOARD" means Bancorp's Board of Directors. Page 1 CHANGE IN CONTROL AGREEMENT (c) "CAUSE" means either: (1) Any of the circumstances that qualify as grounds for termination for cause under the Executive's employment agreement as in effect at the time; or (2) If no employment agreement is in effect at that time or if the employment agreement in effect at that time does not specify grounds for termination for cause, any of the circumstances listed in subparagraph (A) below shall qualify as "Cause" under this Agreement, subject to the due process requirement of subparagraph (B) below: (A) Any of the following circumstances shall qualify as "Cause:" (i) Embezzlement, dishonesty or other fraudulent acts involving the Company or the Company's business operations; (ii) Material breach of any confidentiality agreement or policy; (iii) Conviction (whether entered upon a verdict or a plea, including a plea of no contest) on any felony charge or on a misdemeanor reflecting upon the Executive's honesty; (iv) An act or omission that materially injures the Company's reputation, business affairs or financial condition, if that injury could have been reasonably avoided by the Executive; or (v) Willful misfeasance or gross negligence in the performance of the Executive's duties provided, however, that the Executive is first given: (I) Written notice by the Committee specifying in detail the performance issues; and (II) A reasonable opportunity to cure the issues specified in the notice. (B) The Company may not terminate the Executive's employment for Cause unless: (i) The determination that Cause exists is made and approved by two-thirds of the Board; (ii) The Executive is given reasonable notice of the Board meeting called to make that determination; and Page 2 CHANGE IN CONTROL AGREEMENT (iii) The Executive and the Executive's legal counsel are given the opportunity to address that meeting. (d) "CHANGE IN CONTROL" means: (1) Except as provided in subparagraph (B) below, an acquisition or series of acquisitions as described in subparagraph (A) below. (A) The acquisition by a Person of the Beneficial Ownership of more than 30% of either: (i) Bancorp's then outstanding shares of common stock; or (ii) The combined voting power of Bancorp's then outstanding voting securities entitled to vote generally in the election of directors; (B) This paragraph (1) does not apply to any acquisition: (i) Directly from the Company; (ii) By the Company; or (iii) Which is part of a transaction that satisfies the exception in paragraph (3)(A), (B) and (C) below; (2) The incumbent directors cease for any reason to be a majority of the Board. The "incumbent directors" are directors who are either: (A) Directors on the Effective Date; or (B) Elected, or nominated for election, to the Board by a majority vote of the members of the Board or the Nominating Committee of the Board who were directors on the Effective Date. However this subparagraph (B) does not include any director whose election came as a result of an actual or threatened election contest regarding the election or removal of directors or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board; (3) Consummation of a merger, reorganization or consolidation of Bancorp or the sale or other disposition of substantially all of it assets, except where: (A) Persons who, immediately before the consummation, had, respectively, a Controlling Interest in and Voting Control of Bancorp have, respectively, a Controlling Interest in, and Voting Control of the resulting entity; Page 3 CHANGE IN CONTROL AGREEMENT (B) No Person (other than the entity resulting from the transaction or an employee benefit plan maintained by that entity) has the Beneficial Ownership of more than 30% of either: (i) The resulting entity's then outstanding shares of common stock or other comparable equity security; or (ii) The combined voting power of the resulting entity's then outstanding voting securities entitled to vote generally in the election of directors, except to the extent that Person held that Beneficial Ownership before the consummation; and (C) A majority of the members of the board of directors of the resulting entity were members of the Board at either the time: (i) The transaction was approved by the Board; or (ii) The initial agreement for the transaction was signed; or (4) Approval by Bancorp's shareholders of its complete liquidation or dissolution. (e) "CHANGE IN CONTROL PROPOSAL" means any proposal or offer that is intended to or has the potential to result in a Change in Control. (f) "CODE" means the Internal Revenue Code of 1986. (g) "COMMITTEE" means the Compensation and Personnel Committee of the Board. (h) "CONTROLLING INTEREST" means Beneficial Ownership of more than 50% of the outstanding shares common stock of a corporation or the comparable equity securities of a noncorporate business entity. (i) "DISABILITY" means that either the carrier of any Company-provided individual or group long-term disability insurance policy covering the Executive or the Social Security Administration has determined that the Executive is disabled. Upon the request of the Committee, the Executive will submit proof of the carrier's or the Social Security Administration's determination. (j) "EFFECTIVE DATE" means January 1, 2004. (k) "ERISA" means the Employee Retirement Security Act of 1974. (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934. Page 4 CHANGE IN CONTROL AGREEMENT (m) "GOOD REASON" means any one of the following: (1) Any reduction in the Executive's salary or reduction or elimination of any compensation or benefit plan benefiting the Executive, which reduction or elimination does not generally apply to substantially all similarly situated employees of the Company or such employees of any successor entity or of any entity in control of Bancorp or the Bank; (2) A relocation or transfer of the Executive's place of employment to an office or location that is more than 35 miles from the Executive's then current place of employment; or (3) A material diminution in the Executive's responsibilities, title or duties. (n) "PERSON" means any individual, entity or group within the meaning of Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or fiduciary holding securities under an employee benefit plan of the Company. (o) "TERMINATION EVENT" means any of the following events: (1) The Executive terminates employment for Good Reason within 36 months after a Change in Control; (2) The Company terminates the Executive's employment other than for Cause, Disability or death within 36 months after a Change in Control; (3) The Company terminates the Executive's employment before a Change in Control if: (A) The termination is not for Cause, Disability or death; and (B) The termination occurs either on or after: (i) The announcement by Bancorp, or any other Person, that a Change in Control is contemplated or intended; or (ii) The date a contemplated or intended Change in Control should have been announced under applicable securities or other laws; or (4) The date the Executive's continued employment begins under Section 3(b). (p) "VOTING CONTROL" means holding more than 50% of the combined voting power of an entity's then outstanding securities entitled to vote in the election of its directors or other governing body. Page 5 CHANGE IN CONTROL AGREEMENT 2. INITIAL TERM; RENEWALS; EXTENSION. (a) The initial term of this Agreement begins on the Effective Date and ends on December 31, 2004. (b) Following this initial term, this Agreement will automatically renew on January 1 of each year for subsequent one-year terms, unless not later than the September 30 preceding the upcoming renewal date, either the Company or the Executive gives the other written notice terminating this Agreement as of the upcoming December 31. (c) If a definitive agreement providing for a Change in Control is signed on or before the expiration date of the initial term or any renewal term, the term of this Agreement then in effect will automatically be extended to 36 months after the effective date (as stated in the definitive agreement) of the Change in Control. During this extended period, the Board may not terminate this Agreement without the Executive's written consent. 3. EXECUTIVE'S OBLIGATIONS. (a) The Executive agrees that, upon notification that the Company has received a Change in Control Proposal, the Executive shall: (1) At the Company's request, assist the Company in evaluating that proposal; and (2) Not resign the Executive's position with the Company until the transaction contemplated by that proposal is either consummated or abandoned. (b) If, within 36 months following a Change in Control, the Company wants the Executive to continue employment in a position or under circumstances that would qualify as Good Reason for the Executive terminating employment: (1) The Executive shall nevertheless agree to that continued employment, provided that: (A) The term of this continued employment shall not exceed 90 days or such shorter or longer term as agreed by the Company and the Executive; (B) The continued employment will be at an executive level position that is reasonably comparable to the Executive's then current position; (C) The continued employment shall be at either: (i) The Executive's then current place of employment; or (ii) Such other location as agreed by the Company and the Executive; and Page 6 CHANGE IN CONTROL AGREEMENT (D) As compensation for this continued employment, the Executive shall receive: (i) The same base pay and bonus arrangement as in effect on the day before the continued employment agreement became effective (or their hourly equivalent); and (ii) Either: (I) Continuation of the Executive's employee benefits, fringe benefits and perquisites at their then current level; or (II) If that continuation is not reasonably feasible, the Executive shall receive additional cash compensation equal to the amount the Company would have paid as the employer contribution for the items that cannot be continued. (2) The date this continued employment begins shall be treated as a Termination Event, so that benefits will be payable under this Agreement, in accordance with its terms and conditions, even though the Executive's employment with the Company has not terminated. 4. SEVERANCE BENEFITS. Upon a Termination Event, the Executive will receive severance benefits as follows: (a) COMPONENTS. The severance benefits will consist of: (1) The cash compensation payment under subsection (b) below; (2) The equity acceleration under subsection (c) below; (3) The health plan continuation benefits under subsection (d) below; (4) The 401(k) equivalency payment under subsection (e) below; and (5) The outplacement/tax planning benefits under subsection (f) below. (b) CASH COMPENSATION PAYMENT. (1) This payment will equal three times the Executive's cash compensation. The Executive's "cash compensation" is the sum of: (A) The Executive's adjusted salary as determined under paragraph (2) below; and (B) The Executive's average bonus as determined under paragraph (3) below. Page 7 CHANGE IN CONTROL AGREEMENT (2) The Executive's "adjusted salary" is the Executive's annualized regular monthly salary in effect on the date of the Termination Event as reportable on IRS Form W-2, adjusted by including and excluding the following items: (A) Include any salary deferral contributions made under any employee benefit plan maintained by the Company, including Bancorp's Executives' Deferred Compensation Plan; (B) Exclude: (i) Bonus payments; (ii) Bonus amounts deferred including any made under any employee benefit plan maintained by the Company, including Bancorp's Executives' Deferred Compensation Plan; (iii) Reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, severance or disability pay and welfare benefits; (iv) Employer contributions to a deferred compensation plan to the extent the contributions are not included in the Executive's gross income for the calendar year in which contributed, and any distributions from a deferred compensation plan, regardless of whether those amounts are includible in the Executive's gross income when distributed; (v) Amounts realized from the exercise of non-qualified stock options or when restricted stock (or property) becomes freely transferable or no longer subject to a substantial risk of forfeiture; (vi) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; (vii) The value of a non-qualified stock option included in income in the year in which granted; (viii) Amounts includible in income upon making a Code Section 83(b) election; (ix) Taxable benefits, such as premiums for excess group term life insurance; (x) Imputed income from any life insurance on the Executive's life that is owned by or funded in whole or in part by the Company; and Page 8 CHANGE IN CONTROL AGREEMENT (xi) Other similar recurring or non-recurring payments. (3) The Executive's "average bonus" is the average of: (A) The actual bonus paid for the year before the year in which the Termination Event occurs; and (B) The annualized amount of the bonus the Executive earned through the date of the Termination Event for the bonus computation year in which the Termination Event occurs. (c) EQUITY ACCELERATION. (1) Subject to paragraph (2) below, upon the date of the Termination Event: (A) All stock options held by the Executive that are not otherwise vested as of that date shall become immediately vested and exercisable notwithstanding any vesting provisions in the grant of those options; and (B) Any restrictions on the restricted stock held by the Executive shall immediately lapse. (2) The Board may exclude any particular grant of stock options or restricted stock from the acceleration provisions of paragraph (1) above, but only as follows: (A) Any current grants as of the Effective Date that are to be excluded must be listed in a separate appendix to this Agreement. (B) Any grants made after the Effective Date will be excluded only if the exclusion is made at the time the grant is made. (d) HEALTH PLAN CONTINUATION BENEFITS. The Company will provide health plan continuation benefits as follows: (1) For the period specified in paragraph (3) below, the Company will pay the premiums (both the employer and employee portions) for COBRA continuation coverage under the Company's group health plans as in effect at that time. (2) The Executive will have all the rights available under COBRA to change plans and coverage category (i.e., employee only, employee plus spouse or full family or such other categories that are in effect at that time). Page 9 CHANGE IN CONTROL AGREEMENT (3) The Company will make the COBRA premium payments until the earliest of the following events occurs: (A) The date COBRA coverage would otherwise end by law; or (B) 18 months of premiums have been paid. (e) 401(k) EQUIVALENCY PAYMENT. The Company shall pay the Executive a lump sum cash payment equal to three times the sum of the Executive's "deemed matching contribution" (as determined under paragraph (2) below) and the Executive's "deemed profit-sharing contribution" (as determined under paragraph (3) below. (1) For purposes of determining the Executive's deemed matching and profit-sharing contributions, the Executive's "deemed 401(k) Plan compensation" will be the Executive's cash compensation under subsection (b)(1) above, but limited to the maximum amount allowable under the 401(k) Plan's definition of "compensation" as in effect at that time; (2) The deemed matching contributions will be determined as follows: (A) First, the Executive's "deemed elective deferral contributions" will be determined by multiplying the Executive's deemed 401(k) Plan compensation under paragraph (1) above by the lesser of: (i) The deferral percentage the Executive had in effect under the 401(k) Plan on the date of the Termination Event; or (ii) The maximum deferral percentage allowed by the 401(k) Plan for highly compensated employees (if applicable to the Executive) for the plan year in which the Termination Event occurs, if that percentage has been determined by the date of Termination Event. (B) Second, the deemed matching contribution formula will be applied to the amount of the deemed elective deferral contributions as calculated under subparagraph (A) above, to determine the amount of the deemed matching contributions. For this purpose, the "deemed matching contribution formula" is: (i) The 401(k) Plan's matching contribution formula for the plan year in which the Termination Event occurs; or (ii) If that formula has not been determined by the date of the Termination Event, the formula for the previous plan year. Page 10 CHANGE IN CONTROL AGREEMENT (3) The deemed profit-sharing contributions will be determined by multiplying the Executive's deemed 401(k) Plan compensation under paragraph (1) above by: (A) The actual bonus paid or payable for the bonus computation year that ended before the bonus computation year in which the Termination Event occurs; and (B) The annualized amount of the bonus the Executive earned, determined as of the end of the month in which the Termination Event occurs, for the bonus computation year in which the Termination Event occurs. (f) OUTPLACEMENT/TAX PLANNING SERVICES. At the Executive's election, for up to 12 months from the date of the Termination Event, the Executive may receive up to $10,000 in outplacement and/or tax planning services from service providers selected by the Company. The Company will pay the service providers directly for these benefits. The Executive will not have an option to receive cash in lieu of these outplacement or tax planning benefits. (g) TIMES FOR PAYMENT. (1) The cash compensation payment under subsection (b) and the 401(k) equivalency payment under subsection (e) will be paid within 30 days after the date of the Termination Event; (2) The COBRA premiums under subsection (d) will be paid as due under the terms of the applicable group health plan; and (3) Outplacement services will be paid as billed by the service provider. 5. GROSS-UP PAYMENT. If any or all of the severance benefits under Section 4 constitute a "parachute payment" under Code Section 280G, the Company shall pay the Executive a "Gross-Up Payment" as follows: (a) AMOUNT OF PAYMENT. The Gross-Up Payment shall be equal to the amount necessary so that the net amount of the severance benefits retained by the Executive, after subtracting the excise tax imposed under Code Section 4999 ("excise tax"), and after also subtracting all federal, state or local income tax, FICA and the excise tax on the Gross-Up Payment itself, shall be equal to the net amount the Executive would have retained if no excise tax had been imposed and no Gross-Up Payment had been paid. (b) CALCULATION OF PAYMENT AMOUNT. The amount of the Gross-Up Payment shall be determined as follows: (1) The determination will be made by independent accountants and/or tax counsel (the "consultant") selected by the Company with the Executive's consent (which consent will not be unreasonably withheld). The Company shall pay all of the consultant's fees and expenses. Page 11 CHANGE IN CONTROL AGREEMENT (2) As part of this determination, the consultant will provide the Company and the Executive with a detailed analysis and supporting calculations of: (A) The extent to which any payments or benefits paid or payable to the Executive are subject to Code Section 280G (including the reasonableness of any compensation provided for services rendered before or after the Change in Control); and (B) The calculation of the excise tax under Code Section 4999. (3) The consultant may make such assumptions and approximations concerning applicable tax rates and rely on such interpretations regarding the application of Code Sections 280G and 4999 as it deems reasonable. The Company and the Executive will provide the consultant with any information or documentation the consultant may reasonably request. (c) TIME FOR PAYMENT. The Gross-Up Payment shall be made within 30 days after the date of the Termination Event, provided that if the Gross-Up Payment cannot be determined within that time, the following will apply: (1) The Company shall pay the Executive within that time an estimate, determined in good faith by the Company, of the minimum amount of the Gross-Up Payment; (2) The Company shall pay the remainder (plus interest as determined under Code Section 7872(f)(2)(B)) as soon as the amount can be determined, but in no event later than the 45 days after the date of the Termination Event; and (3) If the estimated payment is more than the amount later determined to have been due, the excess (plus interest as determined under Code Section 7872(f)(2)(B)) shall be repaid by the Executive within 30 days after written demand by the Company. (d) ADJUSTMENTS. Subject to the Company's right under subsection (e) below to contest an excise tax assessment by the Internal Revenue Service, the amount of the Gross-Up Payment will be adjusted as follows: (1) OVERPAYMENT. If the actual excise tax imposed is less than the amount that was taken into account in determining the amount of the Gross-Up Payment, the Executive shall repay at the time that the amount of the reduced excise tax is finally determined the portion of the Gross-Up Payment attributable to that reduction (plus the portion of the Gross-Up Payment attributable to the excise tax, FICA and federal, state and local income tax imposed on the portion of the Gross-Up Payment being repaid by the Executive, to the extent the repayment results in a reduction in or refund of excise tax, FICA or federal, state or local income tax), plus interest as determined under Code Section 7872(f)(2)(B) on the amount of the repayment. Page 12 CHANGE IN CONTROL AGREEMENT (2) UNDERPAYMENT. If the actual excise tax imposed is more than the amount that was taken into account in determining the amount of the Gross-Up Payment, the Company shall make an additional gross-up payment to compensate for that excess (plus interest as determined under Code Section 7872(f)(2)(B)) within 10 days of the date the amount of the excess is finally determined. (e) COMPANY'S RIGHT TO CONTEST. The Company has the right to contest any excise tax assessment made by the Internal Revenue Service on the following terms and conditions: (1) The Executive must notify the Company in writing of any claim by the Internal Revenue Service that, if upheld, would result in the payment of excise taxes in amounts different from the amount initially determined by the consultant. The Executive shall give this notice as soon as possible but in no event later than 15 days after the Executive receives the notice from the Internal Revenue Service. (2) If the Company decides to contest the assessment, it must notify the Executive within 30 days of receiving the notice from the Executive. (3) The Company will have full control of the proceedings, including settlement authority and the right to appeal. (4) The Executive will cooperate fully in providing any testimony, information or documentation reasonably required by the Company in connection with the proceedings. (5) The adjustments required under subsection (d) above shall not be made until the Company has concluded a settlement agreement with the Internal Revenue Service, exhausted its (or the Executive's) rights to contest the Internal Revenue Service's determination or notified the Executive that it intends to concede the matter, whichever occurs first. (6) The Company shall bear all fees and costs associated with the contest. (7) The Company will indemnify the Executive from any taxes, interest and penalties that may be imposed upon the Executive with respect to the payments made under paragraph (6) above and this paragraph (7). (f) EFFECT OF REPEAL. If Code Sections 280G and 4999 are repealed without successor provisions being enacted, this Section shall be of no further force or effect. 6. OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Agreement is not an employment agreement. Accordingly, other than providing for the benefits payable upon a Change in Control, this Agreement will not affect the determination of any compensation payable by the Company to the Executive, nor will it affect the other terms of the Executive's employment with the Company. The specific arrangements referred to in this Agreement are not intended to exclude or circumvent any other benefits that may be available to the Executive under the Company's employee benefit or other applicable plans, programs or arrangements upon the termination of the Executive's employment. Page 13 CHANGE IN CONTROL AGREEMENT 7. WITHHOLDING. All payments made to the Executive under this Agreement are subject to the withholding of income and payroll taxes and other payroll deductions that the Company reasonably determines are appropriate under applicable law or regulations. 8. ASSIGNMENT. (a) The Company will require any successor (by purchase, merger, consolidation or otherwise, whether direct or indirect) to all or substantially all of its business or assets to expressly assume this Agreement. This assumption shall be obtained before the effective date of the succession. Failure of the Company to obtain this assumption shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms that the Executive would be entitled to under this Agreement following a Change in Control, except that for this purpose: (1) The date the definitive agreement providing for the succession is signed shall be deemed to be the date of the Termination Event (the "deemed Termination Event"), regardless of whether the Executive's employment terminates on that date; (2) The Executive will have no continued employment obligation under Section 3(b) as of the deemed Termination Event; (3) The equity acceleration under Section 4(c) will be effective on the date of the deemed Termination Event; (4) Within five (5) business days of the deemed Termination Event, the Company with pay the Executive a lump sum cash payment equal to the sum of: (A) The cash compensation payment under Section 4(b); (B) Thirty-six times the monthly COBRA premium amount for the group health plan coverage the Executive had in effect on the date of the deemed Termination Event; (C) The 401(k) equivalency payment under Section 4(e); and (D) The maximum amount that would have been paid under Section 4(f) to the outplacement service provider; and (5) Section 6 will no longer apply as of the date of the deemed Termination Event. (b) The Executive may not assign or transfer this Agreement or any rights or obligations under it. Page 14 CHANGE IN CONTROL AGREEMENT 9. UNSECURED GENERAL CREDITOR. Neither the Executive nor anyone else claiming on behalf of or through the Executive shall have any right with respect to, or claim against, any insurance policy or other asset the Company may acquire to assist it in financing its obligations under this Agreement. The Executive shall be an unsecured general creditor of the Company with respect to any amount payable under this Agreement. 10. JOINT AND SEVERAL OBLIGATION. Bancorp and Bank will be jointly and severally liable for the payment obligations under this Agreement. 11. DEATH BENEFIT. (a) Any severance benefits under Section 4 remaining unpaid at the Executive's death shall be paid under the terms and conditions of this Agreement, to the Beneficiary or Beneficiaries determined under subsection (b) below. (b) The Executive may designate the Beneficiary or Beneficiaries (who may be designated concurrently or contingently) to receive the death benefit under the Plan under the following terms and conditions: (1) The beneficiary designation must be in a form satisfactory to the Committee and must be signed by the Executive. (2) A beneficiary designation shall be effective upon receipt by the Committee or its designee and shall cancel all beneficiary designations previously filed by the Executive, provided it is received before the Executive's death. (3) The Executive may revoke a previous beneficiary designation without the consent of the previously designated Beneficiary. This revocation is made by filing a new beneficiary designation form with the Committee or its designee, and shall be effective upon receipt. (4) A divorce will automatically revoke the portion of a beneficiary designation designating the former spouse as a Beneficiary. (5) If a Beneficiary disclaims a death benefit, the benefit will be paid as if the Beneficiary had predeceased the Executive. (6) If a Beneficiary who is in pay status dies before full distribution is made to the Beneficiary, the unpaid balance of the distribution will be paid to the Beneficiary's estate. (7) If, at the time of the Executive's death, the Executive has failed to designate a Beneficiary, the Executive's beneficiary designation has become completely invalid under the provisions of this subsection or there is no surviving Beneficiary, the benefit will be paid in the following order of priority: (A) To the Executive's spouse, if living; or (B) To the Executive's estate. Page 15 CHANGE IN CONTROL AGREEMENT 12. GENERAL PROVISIONS. (a) CHOICE OF LAW/VENUE. (1) This Agreement shall be construed and its validity determined according to the laws of the State of Oregon, other than its law regarding conflicts of law or choice of law, to the extent not preempted by federal law. (2) Any dispute arising out of this Agreement must be brought in either Clackamas County or Multnomah County, Oregon, and the parties will submit to personal jurisdiction in either of those counties. (b) ARBITRATION. Any dispute or claim arising out of or brought in connection with this Agreement, shall be submitted to final and binding arbitration as follows: (1) Before proceeding to arbitration, the parties shall first attempt, in good faith, to resolve the dispute or claim by informal meetings and discussions between them and/or their attorneys. The Chairman of the Board will act on behalf of the Company at these meetings and discussions. This informal dispute resolution process will be concluded within 30 days or such longer or shorter period as may be mutually agreed by the parties. (2) After exhausting the informal dispute resolution process under paragraph (1) above, upon the request of any party, the matter will be submitted to and settled by arbitration under the rules then in effect of the American Arbitration Association (or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered in arbitration will be final and will bind the parties, and a judgment on it may be entered in the highest court of the forum having jurisdiction. The arbitrator will render a written decision, naming the substantially prevailing party in the action and will award such party all costs and expenses incurred, including reasonable attorneys' fees. (c) ATTORNEYS' FEES. (1) If any breach of or default under this Agreement results in either party incurring attorneys' or other fees, costs or expenses (including those incurred in an arbitration), the substantially prevailing party is entitled to recover from the non-prevailing party its reasonable legal fees, costs and expenses, including attorneys' fees and the costs of the arbitration, except as provided in paragraph (2) below. (2) If the Executive is not the substantially prevailing party, the Executive shall be liable to pay the Company under paragraph (1) above only if the arbitrator determines that: (A) There was no reasonable basis for the Executive's claim (or the Executive's response to the Company's claim); or Page 16 CHANGE IN CONTROL AGREEMENT (B) The Executive had engaged in unreasonable delay, failed to comply with a discovery order or otherwise acted in bad faith in the arbitration. (3) Either party shall be entitled to recover any reasonable attorneys' fees and other costs and expenses it incurs in enforcing or collecting an arbitration award. (4) If an award under this subsection is made to the Executive and accountants or tax counsel selected by Company with the Executive's consent (which shall not be unreasonably withheld) determine that the award is includible in Executive's gross income, Company shall also pay Executive a gross-up payment to offset the taxes imposed on that award, including the taxes on the gross-up payment itself. This gross-up payment shall be determined following the methodology employed in Section 5(b). (d) ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties with respect to its subject matter, and it supercedes all previous agreements between the Executive and the Company and any of its subsidiaries pertaining to this subject matter. By signing this Agreement, The Executive waives any and all rights the Executive may have had under any previous agreement providing for benefits upon a Change in Control (regardless of how that term is defined in those prior agreements) that the Executive may have entered into with the Company or any of its subsidiaries. (e) SUCCESSORS. This Agreement binds and inures to the benefit of the parties and each of their respective affiliates, legal representatives, heirs and, to the extent permitted in this Agreement, their successors and assigns. (f) AMENDMENT. This Agreement may be amended only through a written document signed by all of the parties. (g) CONSTRUCTION. The language of this Agreement was chosen jointly by the parties to express their mutual intent. No rule of construction based on which party drafted the Agreement or certain of its provisions will be applied against any party. (h) SECTION HEADINGS. The section headings used in this Agreement have been included for convenience and reference only. (i) CITATIONS. Citations to a statute, act or rule are to that statute, act or rule as amended or to its successor at the relevant time. Citations to a particular section of a statute, act or rule are to that section as amended or renumbered or to the comparable provision of any successor as in effect at the relevant date. (j) COUNTERPARTS. This Agreement may be executed in one or more counterparts, and all counterparts will be construed together as one Agreement. Page 17 CHANGE IN CONTROL AGREEMENT (k) SEVERABILITY. If any provision of this Agreement is, to any extent, held to be invalid or unenforceable, it will be deemed amended as necessary to conform to the applicable laws or regulations. However, if it cannot be amended without materially altering the intentions of the parties, it will be deleted and the remainder of this Agreement will be enforced to the extent permitted by law. EXECUTIVE: COMPANY: WEST COAST BANCORP ________________________________ By:_________________________________ Robert Sznewajs Title ______________________________ Date: __________________________ Date: ______________________________ WEST COAST BANK By:_________________________________ Title: _____________________________ Date: ______________________________ Page 18 CHANGE IN CONTROL AGREEMENT EX-10.3 6 v96690exv10w3.txt EXHIBIT 10.3 EXHIBIT 10.3 CHANGE IN CONTROL AGREEMENT EFFECTIVE DATE: JANUARY 1, 2004 This CHANGE IN CONTROL AGREEMENT ("Agreement") is made by WEST COAST BANCORP ("Bancorp") and WEST COAST BANK ("Bank") (collectively "Company") and ANDERS GILTVEDT ("Executive"). RECITALS A. The Executive is employed by the Company as its Executive Vice President and Chief Financial Officer. B. The Board recognizes that a possible or threatened Change in Control may result in key management personnel being concerned about their continued employment status or responsibilities. In addition, they may be approached by other companies offering competing employment opportunities. Consequently, they will be distracted from their duties and may even leave the Company during a time when their undivided attention and commitment to the best interests of the Company and Bancorp's shareholders would be vitally important. C. The Company considers it essential to its best interests and those of Bancorp's shareholders to provide for the continued employment of key management personnel in the event of a Change in Control. D. Therefore, in order to-- (1) Encourage the Executive to assist the Company during a Change in Control and be available during the transition afterwards; (2) Give assurance regarding the Executive's continued employment status and responsibilities in the event of a Change in Control; and (3) Provide the Executive with Change in Control benefits competitive with the Company's peers --the parties agree on the following: TERMS AND CONDITIONS 1. DEFINITIONS. Words and phrases appearing in this Agreement with initial capitalization are defined terms that have the meanings stated below. Words appearing in the following definitions which are themselves defined terms are also indicated by initial capitalization. (a) "BENEFICIAL OWNERSHIP" means direct or indirect ownership within the meaning of Rule 13(d)(3) under the Exchange Act. (b) "BOARD" means Bancorp's Board of Directors. Page 1 CHANGE IN CONTROL AGREEMENT (Giltvedt) (c) "CAUSE" means either: (1) Any of the circumstances that qualify as grounds for termination for cause under the Executive's employment agreement as in effect at the time; or (2) If no employment agreement is in effect at that time or if the employment agreement in effect at that time does not specify grounds for termination for cause, any of the circumstances listed in subparagraph (A) below shall qualify as "Cause" under this Agreement, subject to the due process requirement of subparagraph (B) below: (A) Any of the following circumstances shall qualify as "Cause:" (i) Embezzlement, dishonesty or other fraudulent acts involving the Company or the Company's business operations; (ii) Material breach of any confidentiality agreement or policy; (iii) Conviction (whether entered upon a verdict or a plea, including a plea of no contest) on any felony charge or on a misdemeanor reflecting upon the Executive's honesty; (iv) An act or omission that materially injures the Company's reputation, business affairs or financial condition, if that injury could have been reasonably avoided by the Executive; or (v) Willful misfeasance or gross negligence in the performance of the Executive's duties provided, however, that the Executive is first given: (I) Written notice by the Committee specifying in detail the performance issues; and (II) A reasonable opportunity to cure the issues specified in the notice. (B) The Company may not terminate the Executive's employment for Cause unless: (i) The determination that Cause exists is made and approved by two-thirds of the Board; (ii) The Executive is given reasonable notice of the Board meeting called to make that determination; and Page 2 CHANGE IN CONTROL AGREEMENT (Giltvedt) (iii) The Executive and the Executive's legal counsel are given the opportunity to address that meeting. (d) "CHANGE IN CONTROL" means: (1) Except as provided in subparagraph (B) below, an acquisition or series of acquisitions as described in subparagraph (A) below. (A) The acquisition by a Person of the Beneficial Ownership of more than 30% of either: (i) Bancorp's then outstanding shares of common stock; or (ii) The combined voting power of Bancorp's then outstanding voting securities entitled to vote generally in the election of directors. (B) This paragraph (1) does not apply to any acquisition: (i) Directly from the Company; (ii) By the Company; or (iii) Which is part of a transaction that satisfies the exception in paragraph (3)(A), (B) and (C) below; (2) The incumbent directors cease for any reason to be a majority of the Board. The "incumbent directors" are directors who are either: (A) Directors on the Effective Date; or (B) Elected, or nominated for election, to the Board by a majority vote of the members of the Board or the Nominating Committee of the Board who were directors on the Effective Date. However this subparagraph (B) does not include any director whose election came as a result of an actual or threatened election contest regarding the election or removal of directors or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board; (3) Consummation of a merger, reorganization or consolidation of Bancorp or the sale or other disposition of substantially all of it assets, except where: (A) Persons who, immediately before the consummation, had, respectively, a Controlling Interest in and Voting Control of Bancorp have, respectively, a Controlling Interest in, and Voting Control of the resulting entity; Page 3 CHANGE IN CONTROL AGREEMENT (Giltvedt) (B) No Person (other than the entity resulting from the transaction or an employee benefit plan maintained by that entity) has the Beneficial Ownership of more than 30% of either: (i) The resulting entity's then outstanding shares of common stock or other comparable equity security; or (ii) The combined voting power of the resulting entity's then outstanding voting securities entitled to vote generally in the election of directors, except to the extent that Person held that Beneficial Ownership before the consummation; and (C) A majority of the members of the board of directors of the resulting entity were members of the Board at either the time: (i) The transaction was approved by the Board; or (ii) The initial agreement for the transaction was signed; or (4) Approval by Bancorp's shareholders of its complete liquidation or dissolution. (e) "CHANGE IN CONTROL PROPOSAL" means any proposal or offer that is intended to or has the potential to result in a Change in Control. (f) "CODE" means the Internal Revenue Code of 1986. (g) "COMMITTEE" means the Compensation and Personnel Committee of the Board. (h) "CONTROLLING INTEREST" means Beneficial Ownership of more than 50% of the outstanding shares common stock of a corporation or the comparable equity securities of a noncorporate business entity. (i) "DISABILITY" means that either the carrier of any Company-provided individual or group long-term disability insurance policy covering the Executive or the Social Security Administration has determined that the Executive is disabled. Upon the request of the Committee, the Executive will submit proof of the carrier's or the Social Security Administration's determination. (j) "EFFECTIVE DATE" means January 1, 2004. (k) "ERISA" means the Employee Retirement Security Act of 1974. (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934. Page 4 CHANGE IN CONTROL AGREEMENT (Giltvedt) (m) "GOOD REASON" means any one of the following: (1) Any reduction in the Executive's salary or reduction or elimination of any compensation or benefit plan benefiting the Executive, which reduction or elimination does not generally apply to substantially all similarly situated employees of the Company or such employees of any successor entity or of any entity in control of Bancorp or the Bank; (2) A relocation or transfer of the Executive's place of employment to an office or location that is more than 35 miles from the Executive's then current place of employment; or (3) A material diminution in the Executive's responsibilities, title or duties. (n) "PERSON" means any individual, entity or group within the meaning of Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or fiduciary holding securities under an employee benefit plan of the Company. (o) "TERMINATION EVENT" means any of the following events: (1) The Executive terminates employment for Good Reason within 24 months after a Change in Control; (2) The Company terminates the Executive's employment other than for Cause, Disability or death within 24 months after a Change in Control; (3) The Company terminates the Executive's employment before a Change in Control if: (A) The termination is not for Cause, Disability or death; and (B) The termination occurs either on or after: (i) The announcement by Bancorp, or any other Person, that a Change in Control is contemplated or intended; or (ii) The date a contemplated or intended Change in Control should have been announced under applicable securities or other laws; or (4) The date the Executive's continued employment begins under Section 3(b). (p) "VOTING CONTROL" means holding more than 50% of the combined voting power of an entity's then outstanding securities entitled to vote in the election of its directors or other governing body. Page 5 CHANGE IN CONTROL AGREEMENT (Giltvedt) 2. INITIAL TERM; RENEWALS; EXTENSION. (a) The initial term of this Agreement begins on the Effective Date and ends on December 31, 2004. (b) Following this initial term, this Agreement will automatically renew on January 1 of each year for subsequent one-year terms, unless not later than the September 30 preceding the upcoming renewal date, either the Company or the Executive gives the other written notice terminating this Agreement as of the upcoming December 31. (c) If a definitive agreement providing for a Change in Control is signed on or before the expiration date of the initial term or any renewal term, the term of this Agreement then in effect will automatically be extended to 24 months after the effective date (as stated in the definitive agreement) of the Change in Control. During this extended period, the Board may not terminate this Agreement without the Executive's written consent. 3. EXECUTIVE'S OBLIGATIONS. (a) The Executive agrees that, upon notification that the Company has received a Change in Control Proposal, the Executive shall: (1) At the Company's request, assist the Company in evaluating that proposal; and (2) Not resign the Executive's position with the Company until the transaction contemplated by that proposal is either consummated or abandoned. (b) If, within 24 months following a Change in Control, the Company wants the Executive to continue employment in a position or under circumstances that would qualify as Good Reason for the Executive terminating employment: (1) The Executive shall nevertheless agree to that continued employment, provided that: (A) The term of this continued employment shall not exceed 90 days or such shorter or longer term as agreed by the Company and the Executive; (B) The continued employment will be at an executive level position that is reasonably comparable to the Executive's then current position; (C) The continued employment shall be at either: (i) The Executive's then current place of employment; or (ii) Such other location as agreed by the Company and the Executive; and Page 6 CHANGE IN CONTROL AGREEMENT (Giltvedt) (D) As compensation for this continued employment, the Executive shall receive: (i) The same base pay and bonus arrangement as in effect on the day before the continued employment agreement became effective (or their hourly equivalent); and (ii) Either: (I) Continuation of the Executive's employee benefits, fringe benefits and perquisites at their then current level; or (II) If that continuation is not reasonably feasible, the Executive shall receive additional cash compensation equal to the amount the Company would have paid as the employer contribution for the items that cannot be continued. (2) The date this continued employment begins shall be treated as a Termination Event, so that benefits will be payable under this Agreement, in accordance with its terms and conditions, even though the Executive's employment with the Company has not terminated. 4. SEVERANCE BENEFITS. Upon a Termination Event, the Executive will receive severance benefits as follows: (a) COMPONENTS. The severance benefits will consist of: (1) The cash compensation payment under subsection (b) below; (2) The equity acceleration under subsection (c) below; (3) The health plan continuation benefits under subsection (d) below; (4) The 401(k) equivalency payment under subsection (e) below; and (5) The outplacement/tax planning benefits under subsection (f) below. (b) CASH COMPENSATION PAYMENT. (1) This payment will equal two times the Executive's cash compensation. The Executive's "cash compensation" is the sum of: (A) The Executive's adjusted salary as determined under paragraph (2) below; and (B) The Executive's average bonus as determined under paragraph (3) below. Page 7 CHANGE IN CONTROL AGREEMENT (Giltvedt) (2) The Executive's "adjusted salary" is the Executive's annualized regular monthly salary in effect on the date of the Termination Event as reportable on IRS Form W-2, adjusted by including and excluding the following items: (A) Include any salary deferral contributions made under any employee benefit plan maintained by the Company, including Bancorp's Executives' Deferred Compensation Plan; (B) Exclude: (i) Bonus payments; (ii) Bonus amounts deferred including any made under any employee benefit plan maintained by the Company, including Bancorp's Executives' Deferred Compensation Plan; (iii) Reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, severance or disability pay and welfare benefits; (iv) Employer contributions to a deferred compensation plan to the extent the contributions are not included in the Executive's gross income for the calendar year in which contributed, and any distributions from a deferred compensation plan, regardless of whether those amounts are includible in the Executive's gross income when distributed; (v) Amounts realized from the exercise of non-qualified stock options or when restricted stock (or property) becomes freely transferable or no longer subject to a substantial risk of forfeiture; (vi) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; (vii) The value of a non-qualified stock option included in income in the year in which granted; (viii) Amounts includible in income upon making a Code Section 83(b) election; (ix) Taxable benefits, such as premiums for excess group term life insurance; (x) Imputed income from any life insurance on the Executive's life that is owned by or funded in whole or in part by the Company; and Page 8 CHANGE IN CONTROL AGREEMENT (Giltvedt) (xi) Other similar recurring or non-recurring payments. (3) The Executive's "average bonus" is the average of: (A) The actual bonus paid or payable for the bonus computation year that ended before the bonus computation year in which the Termination Event occurs; and (B) The annualized amount of the bonus the Executive earned, determined as of the end of the month in which the Termination Event occurs, for the bonus computation year in which the Termination Event occurs. (c) EQUITY ACCELERATION. (1) Subject to paragraph (2) below, upon the date of the Termination Event: (A) All stock options held by the Executive that are not otherwise vested as of that date shall become immediately vested and exercisable notwithstanding any vesting provisions in the grant of those options; and (B) Any restrictions on the restricted stock held by the Executive shall immediately lapse. (2) The Board may exclude any particular grant of stock options or restricted stock from the acceleration provisions of paragraph (1) above, but only as follows: (A) Any current grants as of the Effective Date that are to be excluded must be listed in a separate appendix to this Agreement. (B) Any grants made after the Effective Date will be excluded only if the exclusion is made at the time the grant is made. (d) HEALTH PLAN CONTINUATION BENEFITS. The Company will provide health plan continuation benefits as follows: (1) For the period specified in paragraph (3) below, the Company will pay the premiums (both the employer and employee portions) for COBRA continuation coverage under the Company's group health plans as in effect at that time. (2) The Executive will have all the rights available under COBRA to change plans and coverage category (i.e., employee only, employee plus spouse or full family or such other categories that are in effect at that time). Page 9 CHANGE IN CONTROL AGREEMENT (Giltvedt) (3) The Company will make the COBRA premium payments until the earliest of the following events occurs: (A) The date COBRA coverage would otherwise end by law; or (B) 18 months of premiums have been paid. (e) 401(k) EQUIVALENCY PAYMENT. The Company shall pay the Executive a lump sum cash payment equal to two times the sum of the Executive's "deemed matching contribution" (as determined under paragraph (2) below) and the Executive's "deemed profit-sharing contribution" (as determined under paragraph (3) below. (1) For purposes of determining the Executive's deemed matching and profit-sharing contributions, the Executive's "deemed 401(k) Plan compensation" will be the Executive's cash compensation under subsection (b)(1) above, but limited to the maximum amount allowable under the 401(k) Plan's definition of "compensation" as in effect at that time; (2) The deemed matching contributions will be determined as follows: (A) First, the Executive's "deemed elective deferral contributions" will be determined by multiplying the Executive's deemed 401(k) Plan compensation under paragraph (1) above by the lesser of: (i) The deferral percentage the Executive had in effect under the 401(k) Plan on the date of the Termination Event; or (ii) The maximum deferral percentage allowed by the 401(k) Plan for highly compensated employees (if applicable to the Executive) for the plan year in which the Termination Event occurs, if that percentage has been determined by the date of Termination Event. (B) Second, the deemed matching contribution formula will be applied to the amount of the deemed elective deferral contributions as calculated under subparagraph (A) above, to determine the amount of the deemed matching contributions. For this purpose, the "deemed matching contribution formula" is: (i) The 401(k) Plan's matching contribution formula for the plan year in which the Termination Event occurs; or (ii) If that formula has not been determined by the date of the Termination Event, the formula for the previous plan year. Page 10 CHANGE IN CONTROL AGREEMENT (Giltvedt) (3) The deemed profit-sharing contributions will be determined by multiplying the Executive's deemed 401(k) Plan compensation under paragraph (1) above by: (A) The 401(k) Plan's profit-sharing contribution rate for the plan year in which the Termination Event occurs; or (B) If that rate has not been determined by the date of the Termination Event, the average of the profit-sharing contribution rate for the three plan years before the plan year in which the Termination Event occurs. (f) OUTPLACEMENT/TAX PLANNING SERVICES. At the Executive's election, for up to 12 months from the date of the Termination Event, the Executive may receive up to $5,000 in outplacement and/or tax planning services from service providers selected by the Company. The Company will pay the service providers directly for these benefits. The Executive will not have an option to receive cash in lieu of these outplacement or tax planning benefits. (g) TIMES FOR PAYMENT. (1) The cash compensation payment under subsection (b) and the 401(k) equivalency payment under subsection (e) will be paid within 30 days after the date of the Termination Event; (2) The COBRA premiums under subsection (d) will be paid as due under the terms of the applicable group health plan; and (3) Outplacement services will be paid as billed by the service provider. 5. GROSS-UP PAYMENT. If any or all of the severance benefits under Section 4 constitute a "parachute payment" under Code Section 280G, the Company shall pay the Executive a "Gross-Up Payment" as follows: (a) AMOUNT OF PAYMENT. The Gross-Up Payment shall be equal to the amount necessary so that the net amount of the severance benefits retained by the Executive, after subtracting the excise tax imposed under Code Section 4999 ("excise tax"), and after also subtracting all federal, state or local income tax, FICA and the excise tax on the Gross-Up Payment itself, shall be equal to the net amount the Executive would have retained if no excise tax had been imposed and no Gross-Up Payment had been paid. (b) CALCULATION OF PAYMENT AMOUNT. The amount of the Gross-Up Payment shall be determined as follows: (1) The determination will be made by independent accountants and/or tax counsel (the "consultant") selected by the Company with the Executive's consent (which consent will not be unreasonably withheld). The Company shall pay all of the consultant's fees and expenses. Page 11 CHANGE IN CONTROL AGREEMENT (Giltvedt) (2) As part of this determination, the consultant will provide the Company and the Executive with a detailed analysis and supporting calculations of: (A) The extent to which any payments or benefits paid or payable to the Executive are subject to Code Section 280G (including the reasonableness of any compensation provided for services rendered before or after the Change in Control); and (B) The calculation of the excise tax under Code Section 4999. (3) The consultant may make such assumptions and approximations concerning applicable tax rates and rely on such interpretations regarding the application of Code Sections 280G and 4999 as it deems reasonable. The Company and the Executive will provide the consultant with any information or documentation the consultant may reasonably request. (c) TIME FOR PAYMENT. The Gross-Up Payment shall be made within 30 days after the date of the Termination Event, provided that if the Gross-Up Payment cannot be determined within that time, the following will apply: (1) The Company shall pay the Executive within that time an estimate, determined in good faith by the Company, of the minimum amount of the Gross-Up Payment; (2) The Company shall pay the remainder (plus interest as determined under Code Section 7872(f)(2)(B)) as soon as the amount can be determined, but in no event later than the 45 days after the date of the Termination Event; and (3) If the estimated payment is more than the amount later determined to have been due, the excess (plus interest as determined under Code Section 7872(f)(2)(B)) shall be repaid by the Executive within 30 days after written demand by the Company. (d) ADJUSTMENTS. Subject to the Company's right under subsection (e) below to contest an excise tax assessment by the Internal Revenue Service, the amount of the Gross-Up Payment will be adjusted as follows: (1) OVERPAYMENT. If the actual excise tax imposed is less than the amount that was taken into account in determining the amount of the Gross-Up Payment, the Executive shall repay at the time that the amount of the reduced excise tax is finally determined the portion of the Gross-Up Payment attributable to that reduction (plus the portion of the Gross-Up Payment attributable to the excise tax, FICA and federal, state and local income tax imposed on the portion of the Gross-Up Payment being repaid by the Executive, to the extent the repayment results in a reduction in or refund of excise tax, FICA or federal, state or local income tax), plus interest as determined under Code Section 7872(f)(2)(B) on the amount of the repayment. Page 12 CHANGE IN CONTROL AGREEMENT (Giltvedt) (2) UNDERPAYMENT. If the actual excise tax imposed is more than the amount that was taken into account in determining the amount of the Gross-Up Payment, the Company shall make an additional gross-up payment to compensate for that excess (plus interest as determined under Code Section 7872(f)(2)(B)) within 10 days of the date the amount of the excess is finally determined. (e) COMPANY'S RIGHT TO CONTEST. The Company has the right to contest any excise tax assessment made by the Internal Revenue Service on the following terms and conditions: (1) The Executive must notify the Company in writing of any claim by the Internal Revenue Service that, if upheld, would result in the payment of excise taxes in amounts different from the amount initially determined by the consultant. The Executive shall give this notice as soon as possible but in no event later than 15 days after the Executive receives the notice from the Internal Revenue Service. (2) If the Company decides to contest the assessment, it must notify the Executive within 30 days of receiving the notice from the Executive. (3) The Company will have full control of the proceedings, including settlement authority and the right to appeal. (4) The Executive will cooperate fully in providing any testimony, information or documentation reasonably required by the Company in connection with the proceedings. (5) The adjustments required under subsection (d) above shall not be made until the Company has concluded a settlement agreement with the Internal Revenue Service, exhausted its (or the Executive's) rights to contest the Internal Revenue Service's determination or notified the Executive that it intends to concede the matter, whichever occurs first. (6) The Company shall bear all fees and costs associated with the contest. (7) The Company will indemnify the Executive from any taxes, interest and penalties that may be imposed upon the Executive with respect to the payments made under paragraph (6) above and this paragraph (7). (f) EFFECT OF REPEAL. If Code Sections 280G and 4999 are repealed without successor provisions being enacted, this Section shall be of no further force or effect. 6. OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Agreement is not an employment agreement. Accordingly, other than providing for the benefits payable upon a Change in Control, this Agreement will not affect the determination of any compensation payable by the Company to the Executive, nor will it affect the other terms of the Executive's employment with the Company. The specific arrangements referred to in this Agreement are not intended to exclude or circumvent any other benefits that may be available to the Executive under the Company's employee benefit or other applicable plans, programs or arrangements upon the termination of the Executive's employment. Page 13 CHANGE IN CONTROL AGREEMENT (Giltvedt) 7. WITHHOLDING. All payments made to the Executive under this Agreement are subject to the withholding of income and payroll taxes and other payroll deductions that the Company reasonably determines are appropriate under applicable law or regulations. 8. ASSIGNMENT. (a) The Company will require any successor (by purchase, merger, consolidation or otherwise, whether direct or indirect) to all or substantially all of its business or assets to expressly assume this Agreement. This assumption shall be obtained before the effective date of the succession. Failure of the Company to obtain this assumption shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms that the Executive would be entitled to under this Agreement following a Change in Control, except that for this purpose: (1) The date the definitive agreement providing for the succession is signed shall be deemed to be the date of the Termination Event (the "deemed Termination Event"), regardless of whether the Executive's employment terminates on that date; (2) The Executive will have no continued employment obligation under Section 3(b) as of the deemed Termination Event; (3) The equity acceleration under Section 4(c) will be effective on the date of the deemed Termination Event; (4) Within five (5) business days of the deemed Termination Event, the Company with pay the Executive a lump sum cash payment equal to the sum of: (A) The cash compensation payment under Section 4(b); (B) Twenty-four times the monthly COBRA premium amount for the group health plan coverage the Executive had in effect on the date of the deemed Termination Event; (C) The 401(k) equivalency payment under Section 4(e); (D) The maximum amount that would have been paid under Section 4(f) to the outplacement service provider; and (5) Section 6 will no longer apply as of the date of the deemed Termination Event. (b) The Executive may not assign or transfer this Agreement or any rights or obligations under it. Page 14 CHANGE IN CONTROL AGREEMENT (Giltvedt) 9. UNSECURED GENERAL CREDITOR. Neither the Executive nor anyone else claiming on behalf of or through the Executive shall have any right with respect to, or claim against, any insurance policy or other asset the Company may acquire to assist it in financing its obligations under this Agreement. The Executive shall be an unsecured general creditor of the Company with respect to any amount payable under this Agreement. 10. JOINT AND SEVERAL OBLIGATION. Bancorp and Bank will be jointly and severally liable for the payment obligations under this Agreement. 11. DEATH BENEFIT. (a) Any severance benefits under Section 4 remaining unpaid at the Executive's death shall be paid under the terms and conditions of this Agreement, to the Beneficiary or Beneficiaries determined under subsection (b) below. (b) The Executive may designate the Beneficiary or Beneficiaries (who may be designated concurrently or contingently) to receive the death benefit under the Plan under the following terms and conditions: (1) The beneficiary designation must be in a form satisfactory to the Committee and must be signed by the Executive. (2) A beneficiary designation shall be effective upon receipt by the Committee or its designee and shall cancel all beneficiary designations previously filed by the Executive, provided it is received before the Executive's death. (3) The Executive may revoke a previous beneficiary designation without the consent of the previously designated Beneficiary. This revocation is made by filing a new beneficiary designation form with the Committee or its designee, and shall be effective upon receipt. (4) A divorce will automatically revoke the portion of a beneficiary designation designating the former spouse as a Beneficiary. (5) If a Beneficiary disclaims a death benefit, the benefit will be paid as if the Beneficiary had predeceased the Executive. (6) If a Beneficiary who is in pay status dies before full distribution is made to the Beneficiary, the unpaid balance of the distribution will be paid to the Beneficiary's estate. (7) If, at the time of the Executive's death, the Executive has failed to designate a Beneficiary, the Executive's beneficiary designation has become completely invalid under the provisions of this subsection or there is no surviving Beneficiary, the benefit will be paid in the following order of priority: (A) To the Executive's spouse, if living; or (B) To the Executive's estate. Page 15 CHANGE IN CONTROL AGREEMENT (Giltvedt) 12. GENERAL PROVISIONS. (a) CHOICE OF LAW/VENUE. (1) This Agreement shall be construed and its validity determined according to the laws of the State of Oregon, other than its law regarding conflicts of law or choice of law, to the extent not preempted by federal law. (2) Any dispute arising out of this Agreement must be brought in either Clackamas County or Multnomah County, Oregon, and the parties will submit to personal jurisdiction in either of those counties. (b) ARBITRATION. Any dispute or claim arising out of or brought in connection with this Agreement, shall be submitted to final and binding arbitration as follows: (1) Before proceeding to arbitration, the parties shall first attempt, in good faith, to resolve the dispute or claim by informal meetings and discussions between them and/or their attorneys. Acting on behalf of the Company at any of these meetings and discussions will be, at the discretion of its Chief Executive Officer, the Chief Executive Officer, the Executive Vice-President, Human Resources or both of them. The Chief Executive Officer and the Executive Vice-President, Human Resources will make their recommendation to the Committee for its decision on the matter. This informal dispute resolution process will be concluded within 30 days or such longer or shorter period as may be mutually agreed by the parties. (2) After exhausting the informal dispute resolution process under paragraph (1) above, upon the request of any party, the matter will be submitted to and settled by arbitration under the rules then in effect of the American Arbitration Association (or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered in arbitration will be final and will bind the parties, and a judgment on it may be entered in the highest court of the forum having jurisdiction. The arbitrator will render a written decision, naming the substantially prevailing party in the action and will award such party all costs and expenses incurred, including reasonable attorneys' fees. (c) ATTORNEYS' FEES. (1) If any breach of or default under this Agreement results in either party incurring attorneys' or other fees, costs or expenses (including those incurred in an arbitration), the substantially prevailing party is entitled to recover from the non-prevailing party its reasonable legal fees, costs and expenses, including attorneys' fees and the costs of the arbitration, except as provided in paragraph (2) below. Page 16 CHANGE IN CONTROL AGREEMENT (Giltvedt) (2) If the Executive is not the substantially prevailing party, the Executive shall be liable to pay the Company under paragraph (1) above only if the arbitrator determines that: (A) There was no reasonable basis for the Executive's claim (or the Executive's response to the Company's claim); or (B) The Executive had engaged in unreasonable delay, failed to comply with a discovery order or otherwise acted in bad faith in the arbitration. (3) Either party shall be entitled to recover any reasonable attorneys' fees and other costs and expenses it incurs in enforcing or collecting an arbitration award. (4) If an award under this subsection is made to the Executive and accountants or tax counsel selected by Company with the Executive's consent (which shall not be unreasonably withheld) determine that the award is includible in Executive's gross income, Company shall also pay Executive a gross-up payment to offset the taxes imposed on that award, including the taxes on the gross -up payment itself. This gross-up payment shall be determined following the methodology employed in Section 5(b). (d) ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties with respect to its subject matter, and it supercedes all previous agreements between the Executive and the Company and any of its subsidiaries pertaining to this subject matter. By signing this Agreement, the Executive waives any and all rights the Executive may have had under any previous agreement providing for benefits upon a Change in Control (regardless of how that term is defined in those prior agreements) that the Executive may have entered into with the Company or any of its subsidiaries. (e) SUCCESSORS. This Agreement binds and inures to the benefit of the parties and each of their respective affiliates, legal representatives, heirs and, to the extent permitted in this Agreement, their successors and assigns. (f) AMENDMENT. This Agreement may be amended only through a written document signed by all of the parties. (g) CONSTRUCTION. The language of this Agreement was chosen jointly by the parties to express their mutual intent. No rule of construction based on which party drafted the Agreement or certain of its provisions will be applied against any party. (h) SECTION HEADINGS. The section headings used in this Agreement have been included for convenience and reference only. Page 17 CHANGE IN CONTROL AGREEMENT (Giltvedt) (i) CITATIONS. Citations to a statute, act or rule are to that statute, act or rule as amended or to its successor at the relevant time. Citations to a particular section of a statute, act or rule are to that section as amended or renumbered or to the comparable provision of any successor as in effect at the relevant date. (j) COUNTERPARTS. This Agreement may be executed in one or more counterparts, and all counterparts will be construed together as one Agreement. (k) SEVERABILITY. If any provision of this Agreement is, to any extent, held to be invalid or unenforceable, it will be deemed amended as necessary to conform to the applicable laws or regulations. However, if it cannot be amended without materially altering the intentions of the parties, it will be deleted and the remainder of this Agreement will be enforced to the extent permitted by law. EXECUTIVE: COMPANY: WEST COAST BANCORP ________________________________ By:_________________________________ Anders Giltvedt Title ______________________________ Date: __________________________ Date: ______________________________ WEST COAST BANK By: ________________________________ Title: _____________________________ Date: ______________________________ Page 18 CHANGE IN CONTROL AGREEMENT (Giltvedt) EX-10.4 7 v96690exv10w4.txt EXHIBIT 10.4 EXHIBIT 10.4 CHANGE IN CONTROL AGREEMENT EFFECTIVE DATE: JANUARY 1, 2004 This CHANGE IN CONTROL AGREEMENT ("Agreement") is made by WEST COAST BANCORP ("Bancorp") and WEST COAST BANK ("Bank") (collectively "Company") and XANDRA McKEOWN ("Executive"). RECITALS A. The Executive is employed by the Company as its Executive Vice President, Commercial Banking Group Manager. B. The Board recognizes that a possible or threatened Change in Control may result in key management personnel being concerned about their continued employment status or responsibilities. In addition, they may be approached by other companies offering competing employment opportunities. Consequently, they will be distracted from their duties and may even leave the Company during a time when their undivided attention and commitment to the best interests of the Company and Bancorp's shareholders would be vitally important. C. The Company considers it essential to its best interests and those of Bancorp's shareholders to provide for the continued employment of key management personnel in the event of a Change in Control. D. Therefore, in order to-- (1) Encourage the Executive to assist the Company during a Change in Control and be available during the transition afterwards; (2) Give assurance regarding the Executive's continued employment status and responsibilities in the event of a Change in Control; and (3) Provide the Executive with Change in Control benefits competitive with the Company's peers --the parties agree on the following: TERMS AND CONDITIONS 1. DEFINITIONS. Words and phrases appearing in this Agreement with initial capitalization are defined terms that have the meanings stated below. Words appearing in the following definitions which are themselves defined terms are also indicated by initial capitalization. (a) "BENEFICIAL OWNERSHIP" means direct or indirect ownership within the meaning of Rule 13(d)(3) under the Exchange Act. (b) "BOARD" means Bancorp's Board of Directors. Page 1 CHANGE IN CONTROL AGREEMENT (McKeown) (c) "CAUSE" means either: (1) Any of the circumstances that qualify as grounds for termination for cause under the Executive's employment agreement as in effect at the time; or (2) If no employment agreement is in effect at that time or if the employment agreement in effect at that time does not specify grounds for termination for cause, any of the following circumstances shall qualify as "Cause" under this Agreement: (A) Embezzlement, dishonesty or other fraudulent acts involving the Company or the Company's business operations; (B) Material breach of any confidentiality agreement or policy; (C) Conviction (whether entered upon a verdict or a plea, including a plea of no contest) on any felony charge or on a misdemeanor reflecting upon the Executive's honesty; (D) An act or omission that materially injures the Company's reputation, business affairs or financial condition, if that injury could have been reasonably avoided by the Executive; or (E) Willful misfeasance or gross negligence in the performance of the Executive's duties provided, however, that the Executive is first given: (i) Written notice by the Company specifying in detail the performance issues; and (ii) A reasonable opportunity to cure the issues specified in the notice. (d) "CHANGE IN CONTROL" means: (1) Except as provided in subparagraph (B) below, an acquisition or series of acquisitions as described in subparagraph (A) below. (A) The acquisition by a Person of the Beneficial Ownership of more than 30% of either: (i) Bancorp's then outstanding shares of common stock; or (ii) The combined voting power of Bancorp's then outstanding voting securities entitled to vote generally in the election of directors. Page 2 CHANGE IN CONTROL AGREEMENT (McKeown) (B) This paragraph (1) does not apply to any acquisition: (i) Directly from the Company; (ii) By the Company; or (iii) Which is part of a transaction that satisfies the exception in paragraph (3)(A), (B) and (C) below; (2) The incumbent directors cease for any reason to be a majority of the Board. The "incumbent directors" are directors who are either: (A) Directors on the Effective Date; or (B) Elected, or nominated for election, to the Board by a majority vote of the members of the Board or the Nominating Committee of the Board who were directors on the Effective Date. However this subparagraph (B) does not include any director whose election came as a result of an actual or threatened election contest regarding the election or removal of directors or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board; (3) Consummation of a merger, reorganization or consolidation of Bancorp or the sale or other disposition of substantially all of it assets, except where: (A) Persons who, immediately before the consummation, had, respectively, a Controlling Interest in and Voting Control of Bancorp have, respectively, a Controlling Interest in, and Voting Control of the resulting entity; (B) No Person (other than the entity resulting from the transaction or an employee benefit plan maintained by that entity) has the Beneficial Ownership of more than 30% of either: (i) The resulting entity's then outstanding shares of common stock or other comparable equity security; or (ii) The combined voting power of the resulting entity's then outstanding voting securities entitled to vote generally in the election of directors, except to the extent that Person held that Beneficial Ownership before the consummation; and (C) A majority of the members of the board of directors of the resulting entity were members of the Board at either the time: (i) The transaction was approved by the Board; or Page 3 CHANGE IN CONTROL AGREEMENT (McKeown) (ii) The initial agreement for the transaction was signed; or (4) Approval by Bancorp's shareholders of its complete liquidation or dissolution. (e) "CHANGE IN CONTROL PROPOSAL" means any proposal or offer that is intended to or has the potential to result in a Change in Control. (f) "CODE" means the Internal Revenue Code of 1986. (g) "COMMITTEE" means the Compensation and Personnel Committee of the Board. (h) "CONTROLLING INTEREST" means Beneficial Ownership of more than 50% of the outstanding shares common stock of a corporation or the comparable equity securities of a noncorporate business entity. (i) "DISABILITY" means that either the carrier of any Company-provided individual or group long-term disability insurance policy covering the Executive or the Social Security Administration has determined that the Executive is disabled. Upon the request of the Committee, the Executive will submit proof of the carrier's or the Social Security Administration's determination. (j) "EFFECTIVE DATE" means January 1, 2004. (k) "ERISA" means the Employee Retirement Security Act of 1974. (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934. (m) "GOOD REASON" means any one of the following: (1) Any reduction in the Executive's salary or reduction or elimination of any compensation or benefit plan benefiting the Executive, which reduction or elimination does not generally apply to substantially all similarly situated employees of the Company or such employees of any successor entity or of any entity in control of Bancorp or the Bank; (2) A relocation or transfer of the Executive's place of employment to an office or location that is more than 35 miles from the Executive's then current place of employment; or (3) A material diminution in the Executive's responsibilities, title or duties. (n) "PERSON" means any individual, entity or group within the meaning of Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or fiduciary holding securities under an employee benefit plan of the Company. (o) "TERMINATION EVENT" means any of the following events: (1) The Executive terminates employment for Good Reason within 24 months after a Change in Control; Page 4 CHANGE IN CONTROL AGREEMENT (McKeown) (2) The Company terminates the Executive's employment other than for Cause, Disability or death within 24 months after a Change in Control; (3) The Company terminates the Executive's employment before a Change in Control if: (A) The termination is not for Cause, Disability or death; and (B) The termination occurs either on or after: (i) The announcement by Bancorp, or any other Person, that a Change in Control is contemplated or intended; or (ii) The date a contemplated or intended Change in Control should have been announced under applicable securities or other laws; or (4) The date the Executive's continued employment begins under Section 3(b). (p) "VOTING CONTROL" means holding more than 50% of the combined voting power of an entity's then outstanding securities entitled to vote in the election of its directors or other governing body. 2. INITIAL TERM; RENEWALS; EXTENSION. (a) The initial term of this Agreement begins on the Effective Date and ends on December 31, 2004. (b) Following this initial term, this Agreement will automatically renew on January 1 of each year for subsequent one-year terms, unless not later than the September 30 preceding the upcoming renewal date, either the Company or the Executive gives the other written notice terminating this Agreement as of the upcoming December 31. (c) If a definitive agreement providing for a Change in Control is signed on or before the expiration date of the initial term or any renewal term, the term of this Agreement then in effect will automatically be extended to 24 months after the effective date (as stated in the definitive agreement) of the Change in Control. During this extended period, the Board may not terminate this Agreement without the Executive's written consent. 3. EXECUTIVE'S OBLIGATIONS. (a) The Executive agrees that, upon notification that the Company has received a Change in Control Proposal, the Executive shall: (1) At the Company's request, assist the Company in evaluating that proposal; and Page 5 CHANGE IN CONTROL AGREEMENT (McKeown) (2) Not resign the Executive's position with the Company until the transaction contemplated by that proposal is either consummated or abandoned. (b) If, within 24 months following a Change in Control, the Company wants the Executive to continue employment in a position or under circumstances that would qualify as Good Reason for the Executive terminating employment: (1) The Executive shall nevertheless agree to that continued employment, provided that: (A) The term of this continued employment shall not exceed 90 days or such shorter or longer term as agreed by the Company and the Executive; (B) The continued employment will be at an executive level position that is reasonably comparable to the Executive's then current position; (C) The continued employment shall be at either: (i) The Executive's then current place of employment; or (ii) Such other location as agreed by the Company and the Executive; and (D) As compensation for this continued employment, the Executive shall receive: (i) The same base pay and bonus arrangement as in effect on the day before the continued employment agreement became effective (or their hourly equivalent); and (ii) Either: (I) Continuation of the Executive's employee benefits, fringe benefits and perquisites at their then current level; or (II) If that continuation is not reasonably feasible, the Executive shall receive additional cash compensation equal to the amount the Company would have paid as the employer contribution for the items that cannot be continued. (2) The date this continued employment begins shall be treated as a Termination Event, so that benefits will be payable under this Agreement, in accordance with its terms and conditions, even though the Executive's employment with the Company has not terminated. Page 6 CHANGE IN CONTROL AGREEMENT (McKeown) 4. SEVERANCE BENEFITS. Upon a Termination Event, the Executive will receive severance benefits as follows: (a) COMPONENTS. The severance benefits will consist of: (1) The cash compensation payment under subsection (b) below; (2) The equity acceleration under subsection (c) below; (3) The health plan continuation benefits under subsection (d) below; (4) The 401(k) equivalency payment under subsection (e) below; and (5) The outplacement/tax planning benefits under subsection (f) below. (b) CASH COMPENSATION PAYMENT. (1) This payment will equal two times the Executive's cash compensation. The Executive's "cash compensation" is the sum of: (A) The Executive's adjusted salary as determined under paragraph (2) below; and (B) The Executive's average bonus as determined under paragraph (3) below. (2) The Executive's "adjusted salary" is the Executive's annualized regular monthly salary in effect on the date of the Termination Event as reportable on IRS Form W-2, adjusted by including and excluding the following items: (A) Include any salary deferral contributions made under any employee benefit plan maintained by the Company, including Bancorp's Executives' Deferred Compensation Plan; (B) Exclude: (i) Bonus payments; (ii) Bonus amounts deferred including any made under any employee benefit plan maintained by the Company, including Bancorp's Executives' Deferred Compensation Plan; (iii) Reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, severance or disability pay and welfare benefits; (iv) Employer contributions to a deferred compensation plan to the extent the contributions are not included in the Executive's gross income for the calendar year in which Page 7 CHANGE IN CONTROL AGREEMENT (McKeown) contributed, and any distributions from a deferred compensation plan, regardless of whether those amounts are includible in the Executive's gross income when distributed; (v) Amounts realized from the exercise of non-qualified stock options or when restricted stock (or property) becomes freely transferable or no longer subject to a substantial risk of forfeiture; (vi) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; (vii) The value of a non-qualified stock option included in income in the year in which granted; (viii) Amounts includible in income upon making a Code Section 83(b) election; (ix) Taxable benefits, such as premiums for excess group term life insurance; (x) Imputed income from any life insurance on the Executive's life that is owned by or funded in whole or in part by the Company; and (xi) Other similar recurring or non-recurring payments. (3) The Executive's "average bonus" is the average of: (A) The actual bonus paid or payable for the bonus computation year that ended before the bonus computation year in which the Termination Event occurs; and (B) The annualized amount of the bonus the Executive earned, determined as of the end of the month in which the Termination Event occurs, for the bonus computation year in which the Termination Event occurs. (c) EQUITY ACCELERATION. (1) Subject to paragraph (2) below, upon the date of the Termination Event: (A) All stock options held by the Executive that are not otherwise vested as of that date shall become immediately vested and exercisable notwithstanding any vesting provisions in the grant of those options; and (B) Any restrictions on the restricted stock held by the Executive shall immediately lapse. Page 8 CHANGE IN CONTROL AGREEMENT (McKeown) (2) The Board may exclude any particular grant of stock options or restricted stock from the acceleration provisions of paragraph (1) above, but only as follows: (A) Any current grants as of the Effective Date that are to be excluded must be listed in a separate appendix to this Agreement. (B) Any grants made after the Effective Date will be excluded only if the exclusion is made at the time the grant is made. (d) HEALTH PLAN CONTINUATION BENEFITS. The Company will provide health plan continuation benefits as follows: (1) For the period specified in paragraph (3) below, the Company will pay the premiums (both the employer and employee portions) for COBRA continuation coverage under the Company's group health plans as in effect at that time. (2) The Executive will have all the rights available under COBRA to change plans and coverage category (i.e., employee only, employee plus spouse or full family or such other categories that are in effect at that time). (3) The Company will make the COBRA premium payments until the earliest of the following events occurs: (A) The date COBRA coverage would otherwise end by law; or (B) 18 months of premiums have been paid. (e) 401(k) EQUIVALENCY PAYMENT. The Company shall pay the Executive a lump sum cash payment equal to two times the sum of the Executive's "deemed matching contribution" (as determined under paragraph (2) below) and the Executive's "deemed profit-sharing contribution" (as determined under paragraph (3) below. (1) For purposes of determining the Executive's deemed matching and profit-sharing contributions, the Executive's "deemed 401(k) Plan compensation" will be the Executive's cash compensation under subsection (b)(1) above, but limited to the maximum amount allowable under the 401(k) Plan's definition of "compensation" as in effect at that time; Page 9 CHANGE IN CONTROL AGREEMENT (McKeown) (2) The deemed matching contributions will be determined as follows: (A) First, the Executive's "deemed elective deferral contributions" will be determined by multiplying the Executive's deemed 401(k) Plan compensation under paragraph (1) above by the lesser of: (i) The deferral percentage the Executive had in effect under the 401(k) Plan on the date of the Termination Event; or (ii) The maximum deferral percentage allowed by the 401(k) Plan for highly compensated employees (if applicable to the Executive) for the plan year in which the Termination Event occurs, if that percentage has been determined by the date of Termination Event. (B) Second, the deemed matching contribution formula will be applied to the amount of the deemed elective deferral contributions as calculated under subparagraph (A) above, to determine the amount of the deemed matching contributions. For this purpose, the "deemed matching contribution formula" is: (i) The 401(k) Plan's matching contribution formula for the plan year in which the Termination Event occurs; or (ii) If that formula has not been determined by the date of the Termination Event, the formula for the previous plan year. (3) The deemed profit-sharing contributions will be determined by multiplying the Executive's deemed 401(k) Plan compensation under paragraph (1) above by: (A) The 401(k) Plan's profit-sharing contribution rate for the plan year in which the Termination Event occurs; or (B) If that rate has not been determined by the date of the Termination Event, the average of the profit-sharing contribution rate for the three plan years before the plan year in which the Termination Event occurs. (f) OUTPLACEMENT/TAX PLANNING SERVICES. At the Executive's election, for up to 12 months from the date of the Termination Event, the Executive may receive up to $5,000 in outplacement and/or tax planning services from service providers selected by the Company. The Company will pay the service providers directly for these benefits. The Executive will not have an option to receive cash in lieu of these outplacement or tax planning benefits. Page 10 CHANGE IN CONTROL AGREEMENT (McKeown) (g) TIMES FOR PAYMENT. (1) The cash compensation payment under subsection (b) and the 401(k) equivalency payment under subsection (e) will be paid within 30 days after the date of the Termination Event; (2) The COBRA premiums under subsection (d) will be paid as due under the terms of the applicable group health plan; and (3) Outplacement services will be paid as billed by the service provider. 5. GROSS-UP PAYMENT. If any or all of the severance benefits under Section 4 constitute a "parachute payment" under Code Section 280G, the Company shall pay the Executive a "Gross-Up Payment" as follows: (a) AMOUNT OF PAYMENT. The Gross-Up Payment shall be equal to the amount necessary so that the net amount of the severance benefits retained by the Executive, after subtracting the excise tax imposed under Code Section 4999 ("excise tax"), and after also subtracting all federal, state or local income tax, FICA and the excise tax on the Gross-Up Payment itself, shall be equal to the net amount the Executive would have retained if no excise tax had been imposed and no Gross-Up Payment had been paid. (b) CALCULATION OF PAYMENT AMOUNT. The amount of the Gross-Up Payment shall be determined as follows: (1) The determination will be made by independent accountants and/or tax counsel (the "consultant") selected by the Company with the Executive's consent (which consent will not be unreasonably withheld). The Company shall pay all of the consultant's fees and expenses. (2) As part of this determination, the consultant will provide the Company and the Executive with a detailed analysis and supporting calculations of: (A) The extent to which any payments or benefits paid or payable to the Executive are subject to Code Section 280G (including the reasonableness of any compensation provided for services rendered before or after the Change in Control); and (B) The calculation of the excise tax under Code Section 4999. (3) The consultant may make such assumptions and approximations concerning applicable tax rates and rely on such interpretations regarding the application of Code Sections 280G and 4999 as it deems reasonable. The Company and the Executive will provide the consultant with any information or documentation the consultant may reasonably request. Page 11 CHANGE IN CONTROL AGREEMENT (McKeown) (c) TIME FOR PAYMENT. The Gross-Up Payment shall be made within 30 days after the date of the Termination Event, provided that if the Gross-Up Payment cannot be determined within that time, the following will apply: (1) The Company shall pay the Executive within that time an estimate, determined in good faith by the Company, of the minimum amount of the Gross-Up Payment; (2) The Company shall pay the remainder (plus interest as determined under Code Section 7872(f)(2)(B)) as soon as the amount can be determined, but in no event later than the 45 days after the date of the Termination Event; and (3) If the estimated payment is more than the amount later determined to have been due, the excess (plus interest as determined under Code Section 7872(f)(2)(B)) shall be repaid by the Executive within 30 days after written demand by the Company. (d) ADJUSTMENTS. Subject to the Company's right under subsection (e) below to contest an excise tax assessment by the Internal Revenue Service, the amount of the Gross-Up Payment will be adjusted as follows: (1) OVERPAYMENT. If the actual excise tax imposed is less than the amount that was taken into account in determining the amount of the Gross-Up Payment, the Executive shall repay at the time that the amount of the reduced excise tax is finally determined the portion of the Gross-Up Payment attributable to that reduction (plus the portion of the Gross-Up Payment attributable to the excise tax, FICA and federal, state and local income tax imposed on the portion of the Gross-Up Payment being repaid by the Executive, to the extent the repayment results in a reduction in or refund of excise tax, FICA or federal, state or local income tax), plus interest as determined under Code Section 7872(f)(2)(B) on the amount of the repayment. (2) UNDERPAYMENT. If the actual excise tax imposed is more than the amount that was taken into account in determining the amount of the Gross-Up Payment, the Company shall make an additional gross-up payment to compensate for that excess (plus interest as determined under Code Section 7872(f)(2)(B)) within 10 days of the date the amount of the excess is finally determined. (e) COMPANY'S RIGHT TO CONTEST. The Company has the right to contest any excise tax assessment made by the Internal Revenue Service on the following terms and conditions: (1) The Executive must notify the Company in writing of any claim by the Internal Revenue Service that, if upheld, would result in the payment of excise taxes in amounts different from the amount initially determined by the consultant. The Executive shall give this notice as soon as possible but in no event later than 15 days after the Executive receives the notice from the Internal Revenue Service. Page 12 CHANGE IN CONTROL AGREEMENT (McKeown) (2) If the Company decides to contest the assessment, it must notify the Executive within 30 days of receiving the notice from the Executive. (3) The Company will have full control of the proceedings, including settlement authority and the right to appeal. (4) The Executive will cooperate fully in providing any testimony, information or documentation reasonably required by the Company in connection with the proceedings. (5) The adjustments required under subsection (d) above shall not be made until the Company has concluded a settlement agreement with the Internal Revenue Service, exhausted its (or the Executive's) rights to contest the Internal Revenue Service's determination or notified the Executive that it intends to concede the matter, whichever occurs first. (6) The Company shall bear all fees and costs associated with the contest. (7) The Company will indemnify the Executive from any taxes, interest and penalties that may be imposed upon the Executive with respect to the payments made under paragraph (6) above and this paragraph (7). (f) EFFECT OF REPEAL. If Code Sections 280G and 4999 are repealed without successor provisions being enacted, this Section shall be of no further force or effect. 6. OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Agreement is not an employment agreement. Accordingly, other than providing for the benefits payable upon a Change in Control, this Agreement will not affect the determination of any compensation payable by the Company to the Executive, nor will it affect the other terms of the Executive's employment with the Company. The specific arrangements referred to in this Agreement are not intended to exclude or circumvent any other benefits that may be available to the Executive under the Company's employee benefit or other applicable plans, programs or arrangements upon the termination of the Executive's employment. 7. WITHHOLDING. All payments made to the Executive under this Agreement are subject to the withholding of income and payroll taxes and other payroll deductions that the Company reasonably determines are appropriate under applicable law or regulations. 8. ASSIGNMENT. (a) The Company will require any successor (by purchase, merger, consolidation or otherwise, whether direct or indirect) to all or substantially all of its business or assets to expressly assume this Agreement. This assumption shall be obtained before the effective date of the succession. Failure of the Company to obtain this assumption shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms that the Executive would be entitled to under this Agreement following a Change in Control, except that for this purpose: Page 13 CHANGE IN CONTROL AGREEMENT (McKeown) (1) The date the definitive agreement providing for the succession is signed shall be deemed to be the date of the Termination Event (the "deemed Termination Event"), regardless of whether the Executive's employment terminates on that date; (2) The Executive will have no continued employment obligation under Section 3(b) as of the deemed Termination Event; (3) The equity acceleration under Section 4(c) will be effective on the date of the deemed Termination Event; (4) Within five (5) business days of the deemed Termination Event, the Company with pay the Executive a lump sum cash payment equal to the sum of: (A) The cash compensation payment under Section 4(b); (B) Twenty-four times the monthly COBRA premium amount for the group health plan coverage the Executive had in effect on the date of the deemed Termination Event; (C) The 401(k) equivalency payment under Section 4(e); (D) The maximum amount that would have been paid under Section 4(f) to the outplacement service provider; and (5) Section 6 will no longer apply as of the date of the deemed Termination Event. (b) The Executive may not assign or transfer this Agreement or any rights or obligations under it. 9. UNSECURED GENERAL CREDITOR. Neither the Executive nor anyone else claiming on behalf of or through the Executive shall have any right with respect to, or claim against, any insurance policy or other asset the Company may acquire to assist it in financing its obligations under this Agreement. The Executive shall be an unsecured general creditor of the Company with respect to any amount payable under this Agreement. 10. JOINT AND SEVERAL OBLIGATION. Bancorp and Bank will be jointly and severally liable for the payment obligations under this Agreement. 11. DEATH BENEFIT. (a) Any severance benefits under Section 4 remaining unpaid at the Executive's death shall be paid under the terms and conditions of this Agreement, to the Beneficiary or Beneficiaries determined under subsection (b) below. Page 14 CHANGE IN CONTROL AGREEMENT (McKeown) (b) The Executive may designate the Beneficiary or Beneficiaries (who may be designated concurrently or contingently) to receive the death benefit under the Plan under the following terms and conditions: (1) The beneficiary designation must be in a form satisfactory to the Committee and must be signed by the Executive. (2) A beneficiary designation shall be effective upon receipt by the Committee or its designee and shall cancel all beneficiary designations previously filed by the Executive, provided it is received before the Executive's death. (3) The Executive may revoke a previous beneficiary designation without the consent of the previously designated Beneficiary. This revocation is made by filing a new beneficiary designation form with the Committee or its designee, and shall be effective upon receipt. (4) A divorce will automatically revoke the portion of a beneficiary designation designating the former spouse as a Beneficiary. (5) If a Beneficiary disclaims a death benefit, the benefit will be paid as if the Beneficiary had predeceased the Executive. (6) If a Beneficiary who is in pay status dies before full distribution is made to the Beneficiary, the unpaid balance of the distribution will be paid to the Beneficiary's estate. (7) If, at the time of the Executive's death, the Executive has failed to designate a Beneficiary, the Executive's beneficiary designation has become completely invalid under the provisions of this subsection or there is no surviving Beneficiary, the benefit will be paid in the following order of priority: (A) To the Executive's spouse, if living; or (B) To the Executive's estate. 12. GENERAL PROVISIONS. (a) CHOICE OF LAW/VENUE. (1) This Agreement shall be construed and its validity determined according to the laws of the State of Oregon, other than its law regarding conflicts of law or choice of law, to the extent not preempted by federal law. (2) Any dispute arising out of this Agreement must be brought in either Clackamas County or Multnomah County, Oregon, and the parties will submit to personal jurisdiction in either of those counties. Page 15 CHANGE IN CONTROL AGREEMENT (McKeown) (b) ARBITRATION. Any dispute or claim arising out of or brought in connection with this Agreement, shall be submitted to final and binding arbitration as follows: (1) Before proceeding to arbitration, the parties shall first attempt, in good faith, to resolve the dispute or claim by informal meetings and discussions between them and/or their attorneys. Acting on behalf of the Company at any of these meetings and discussions will be, at the discretion of its Chief Executive Officer, the Chief Executive Officer, the Executive Vice-President, Human Resources or both of them. The Chief Executive Officer and the Executive Vice-President, Human Resources will make their recommendation to the Committee for its decision on the matter. This informal dispute resolution process will be concluded within 30 days or such longer or shorter period as may be mutually agreed by the parties. (2) After exhausting the informal dispute resolution process under paragraph (1) above, upon the request of any party, the matter will be submitted to and settled by arbitration under the rules then in effect of the American Arbitration Association (or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered in arbitration will be final and will bind the parties, and a judgment on it may be entered in the highest court of the forum having jurisdiction. The arbitrator will render a written decision, naming the substantially prevailing party in the action and will award such party all costs and expenses incurred, including reasonable attorneys' fees. (c) ATTORNEYS' FEES. (1) If any breach of or default under this Agreement results in either party incurring attorneys' or other fees, costs or expenses (including those incurred in an arbitration), the substantially prevailing party is entitled to recover from the non-prevailing party its reasonable legal fees, costs and expenses, including attorneys' fees and the costs of the arbitration, except as provided in paragraph (2) below. (2) If the Executive is not the substantially prevailing party, the Executive shall be liable to pay the Company under paragraph (1) above only if the arbitrator determines that: (A) There was no reasonable basis for the Executive's claim (or the Executive's response to the Company's claim); or (B) The Executive had engaged in unreasonable delay, failed to comply with a discovery order or otherwise acted in bad faith in the arbitration. (3) Either party shall be entitled to recover any reasonable attorneys' fees and other costs and expenses it incurs in enforcing or collecting an arbitration award. Page 16 CHANGE IN CONTROL AGREEMENT (McKeown) (4) If an award under this subsection is made to the Executive and accountants or tax counsel selected by Company with the Executive's consent (which shall not be unreasonably withheld) determine that the award is includible in Executive's gross income, Company shall also pay Executive a gross-up payment to offset the taxes imposed on that award, including the taxes on the gross -up payment itself. This gross-up payment shall be determined following the methodology employed in Section 5(b). (d) ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties with respect to its subject matter, and it supercedes all previous agreements between the Executive and the Company and any of its subsidiaries pertaining to this subject matter. By signing this Agreement, the Executive waives any and all rights the Executive may have had under any previous agreement providing for benefits upon a Change in Control (regardless of how that term is defined in those prior agreements) that the Executive may have entered into with the Company or any of its subsidiaries. (e) SUCCESSORS. This Agreement binds and inures to the benefit of the parties and each of their respective affiliates, legal representatives, heirs and, to the extent permitted in this Agreement, their successors and assigns. (f) AMENDMENT. This Agreement may be amended only through a written document signed by all of the parties. (g) CONSTRUCTION. The language of this Agreement was chosen jointly by the parties to express their mutual intent. No rule of construction based on which party drafted the Agreement or certain of its provisions will be applied against any party. (h) SECTION HEADINGS. The section headings used in this Agreement have been included for convenience and reference only. (i) CITATIONS. Citations to a statute, act or rule are to that statute, act or rule as amended or to its successor at the relevant time. Citations to a particular section of a statute, act or rule are to that section as amended or renumbered or to the comparable provision of any successor as in effect at the relevant date. (j) COUNTERPARTS. This Agreement may be executed in one or more counterparts, and all counterparts will be construed together as one Agreement. Page 17 CHANGE IN CONTROL AGREEMENT (McKeown) (k) SEVERABILITY. If any provision of this Agreement is, to any extent, held to be invalid or unenforceable, it will be deemed amended as necessary to conform to the applicable laws or regulations. However, if it cannot be amended without materially altering the intentions of the parties, it will be deleted and the remainder of this Agreement will be enforced to the extent permitted by law. EXECUTIVE: COMPANY: WEST COAST BANCORP ______________________________ By:_____________________________ Xandra McKeown Title __________________________ Date: ________________________ Date:___________________________ WEST COAST BANK By: ____________________________ Title:__________________________ Date:___________________________ Page 18 CHANGE IN CONTROL AGREEMENT (McKeown) EX-10.5 8 v96690exv10w5.txt EXHIBIT 10.5 EXHIBIT 10.5 CHANGE IN CONTROL AGREEMENT EFFECTIVE DATE: JANUARY 1, 2004 This CHANGE IN CONTROL AGREEMENT ("Agreement") is made by WEST COAST BANCORP ("Bancorp") and WEST COAST BANK ("Bank") (collectively "Company") and JAMES D. BYGLAND ("Executive"). RECITALS A. The Executive is employed by the Company as its Executive Vice President, Chief Information Officer. B. The Board recognizes that a possible or threatened Change in Control may result in key management personnel being concerned about their continued employment status or responsibilities. In addition, they may be approached by other companies offering competing employment opportunities. Consequently, they will be distracted from their duties and may even leave the Company during a time when their undivided attention and commitment to the best interests of the Company and Bancorp's shareholders would be vitally important. C. The Company considers it essential to its best interests and those of Bancorp's shareholders to provide for the continued employment of key management personnel in the event of a Change in Control. D. Therefore, in order to-- (1) Encourage the Executive to assist the Company during a Change in Control and be available during the transition afterwards; (2) Give assurance regarding the Executive's continued employment status and responsibilities in the event of a Change in Control; and (3) Provide the Executive with Change in Control benefits competitive with the Company's peers --the parties agree on the following: TERMS AND CONDITIONS 1. DEFINITIONS. Words and phrases appearing in this Agreement with initial capitalization are defined terms that have the meanings stated below. Words appearing in the following definitions which are themselves defined terms are also indicated by initial capitalization. (a) "BENEFICIAL OWNERSHIP" means direct or indirect ownership within the meaning of Rule 13(d)(3) under the Exchange Act. (b) "BOARD" means Bancorp's Board of Directors. Page 1 CHANGE IN CONTROL AGREEMENT (Bygland) (c) "CAUSE" means either: (1) Any of the circumstances that qualify as grounds for termination for cause under the Executive's employment agreement as in effect at the time; or (2) If no employment agreement is in effect at that time or if the employment agreement in effect at that time does not specify grounds for termination for cause, any of the following circumstances shall qualify as "Cause" under this Agreement: (A) Embezzlement, dishonesty or other fraudulent acts involving the Company or the Company's business operations; (B) Material breach of any confidentiality agreement or policy; (C) Conviction (whether entered upon a verdict or a plea, including a plea of no contest) on any felony charge or on a misdemeanor reflecting upon the Executive's honesty; (D) An act or omission that materially injures the Company's reputation, business affairs or financial condition, if that injury could have been reasonably avoided by the Executive; or (E) Willful misfeasance or gross negligence in the performance of the Executive's duties provided, however, that the Executive is first given: (i) Written notice by the Company specifying in detail the performance issues; and (ii) A reasonable opportunity to cure the issues specified in the notice. (d) "CHANGE IN CONTROL" means: (1) Except as provided in subparagraph (B) below, an acquisition or series of acquisitions as described in subparagraph (A) below. (A) The acquisition by a Person of the Beneficial Ownership of more than 30% of either: (i) Bancorp's then outstanding shares of common stock; or (ii) The combined voting power of Bancorp's then outstanding voting securities entitled to vote generally in the election of directors. Page 2 CHANGE IN CONTROL AGREEMENT (Bygland) (B) This paragraph (1) does not apply to any acquisition: (i) Directly from the Company; (ii) By the Company; or (iii) Which is part of a transaction that satisfies the exception in paragraph (3)(A), (B) and (C) below; (2) The incumbent directors cease for any reason to be a majority of the Board. The "incumbent directors" are directors who are either: (A) Directors on the Effective Date; or (B) Elected, or nominated for election, to the Board by a majority vote of the members of the Board or the Nominating Committee of the Board who were directors on the Effective Date. However this subparagraph (B) does not include any director whose election came as a result of an actual or threatened election contest regarding the election or removal of directors or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board; (3) Consummation of a merger, reorganization or consolidation of Bancorp or the sale or other disposition of substantially all of it assets, except where: (A) Persons who, immediately before the consummation, had, respectively, a Controlling Interest in and Voting Control of Bancorp have, respectively, a Controlling Interest in, and Voting Control of the resulting entity; (B) No Person (other than the entity resulting from the transaction or an employee benefit plan maintained by that entity) has the Beneficial Ownership of more than 30% of either: (i) The resulting entity's then outstanding shares of common stock or other comparable equity security; or (ii) The combined voting power of the resulting entity's then outstanding voting securities entitled to vote generally in the election of directors, except to the extent that Person held that Beneficial Ownership before the consummation; and (C) A majority of the members of the board of directors of the resulting entity were members of the Board at either the time: (i) The transaction was approved by the Board; or Page 3 CHANGE IN CONTROL AGREEMENT (Bygland) (ii) The initial agreement for the transaction was signed; or (4) Approval by Bancorp's shareholders of its complete liquidation or dissolution. (e) "CHANGE IN CONTROL PROPOSAL" means any proposal or offer that is intended to or has the potential to result in a Change in Control. (f) "CODE" means the Internal Revenue Code of 1986. (g) "COMMITTEE" means the Compensation and Personnel Committee of the Board. (h) "CONTROLLING INTEREST" means Beneficial Ownership of more than 50% of the outstanding shares common stock of a corporation or the comparable equity securities of a noncorporate business entity. (i) "DISABILITY" means that either the carrier of any Company-provided individual or group long-term disability insurance policy covering the Executive or the Social Security Administration has determined that the Executive is disabled. Upon the request of the Committee, the Executive will submit proof of the carrier's or the Social Security Administration's determination. (j) "EFFECTIVE DATE" means January 1, 2004. (k) "ERISA" means the Employee Retirement Security Act of 1974. (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934. (m) "GOOD REASON" means any one of the following: (1) Any reduction in the Executive's salary or reduction or elimination of any compensation or benefit plan benefiting the Executive, which reduction or elimination does not generally apply to substantially all similarly situated employees of the Company or such employees of any successor entity or of any entity in control of Bancorp or the Bank; (2) A relocation or transfer of the Executive's place of employment to an office or location that is more than 35 miles from the Executive's then current place of employment; or (3) A material diminution in the Executive's responsibilities, title or duties. (n) "PERSON" means any individual, entity or group within the meaning of Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or fiduciary holding securities under an employee benefit plan of the Company. (o) "TERMINATION EVENT" means any of the following events: (1) The Executive terminates employment for Good Reason within 24 months after a Change in Control; Page 4 CHANGE IN CONTROL AGREEMENT (Bygland) (2) The Company terminates the Executive's employment other than for Cause, Disability or death within 24 months after a Change in Control; (3) The Company terminates the Executive's employment before a Change in Control if: (A) The termination is not for Cause, Disability or death; and (B) The termination occurs either on or after: (i) The announcement by Bancorp, or any other Person, that a Change in Control is contemplated or intended; or (ii) The date a contemplated or intended Change in Control should have been announced under applicable securities or other laws; or (4) The date the Executive's continued employment begins under Section 3(b). (p) "VOTING CONTROL" means holding more than 50% of the combined voting power of an entity's then outstanding securities entitled to vote in the election of its directors or other governing body. 2. INITIAL TERM; RENEWALS; EXTENSION. (a) The initial term of this Agreement begins on the Effective Date and ends on December 31, 2004. (b) Following this initial term, this Agreement will automatically renew on January 1 of each year for subsequent one-year terms, unless not later than the September 30 preceding the upcoming renewal date, either the Company or the Executive gives the other written notice terminating this Agreement as of the upcoming December 31. (c) If a definitive agreement providing for a Change in Control is signed on or before the expiration date of the initial term or any renewal term, the term of this Agreement then in effect will automatically be extended to 24 months after the effective date (as stated in the definitive agreement) of the Change in Control. During this extended period, the Board may not terminate this Agreement without the Executive's written consent. 3. EXECUTIVE'S OBLIGATIONS. (a) The Executive agrees that, upon notification that the Company has received a Change in Control Proposal, the Executive shall: (1) At the Company's request, assist the Company in evaluating that proposal; and Page 5 CHANGE IN CONTROL AGREEMENT (Bygland) (2) Not resign the Executive's position with the Company until the transaction contemplated by that proposal is either consummated or abandoned. (b) If, within 24 months following a Change in Control, the Company wants the Executive to continue employment in a position or under circumstances that would qualify as Good Reason for the Executive terminating employment: (1) The Executive shall nevertheless agree to that continued employment, provided that: (A) The term of this continued employment shall not exceed 90 days or such shorter or longer term as agreed by the Company and the Executive; (B) The continued employment will be at an executive level position that is reasonably comparable to the Executive's then current position; (C) The continued employment shall be at either: (i) The Executive's then current place of employment; or (ii) Such other location as agreed by the Company and the Executive; and (D) As compensation for this continued employment, the Executive shall receive: (i) The same base pay and bonus arrangement as in effect on the day before the continued employment agreement became effective (or their hourly equivalent); and (ii) Either: (I) Continuation of the Executive's employee benefits, fringe benefits and perquisites at their then current level; or (II) If that continuation is not reasonably feasible, the Executive shall receive additional cash compensation equal to the amount the Company would have paid as the employer contribution for the items that cannot be continued. (2) The date this continued employment begins shall be treated as a Termination Event, so that benefits will be payable under this Agreement, in accordance with its terms and conditions, even though the Executive's employment with the Company has not terminated. Page 6 CHANGE IN CONTROL AGREEMENT (Bygland) 4. SEVERANCE BENEFITS. Upon a Termination Event, the Executive will receive severance benefits as follows: (a) COMPONENTS. The severance benefits will consist of: (1) The cash compensation payment under subsection (b) below; (2) The equity acceleration under subsection (c) below; (3) The health plan continuation benefits under subsection (d) below; (4) The 401(k) equivalency payment under subsection (e) below; and (5) The outplacement/tax planning benefits under subsection (f) below. (b) CASH COMPENSATION PAYMENT. (1) This payment will equal two times the Executive's cash compensation. The Executive's "cash compensation" is the sum of: (A) The Executive's adjusted salary as determined under paragraph (2) below; and (B) The Executive's average bonus as determined under paragraph (3) below. (2) The Executive's "adjusted salary" is the Executive's annualized regular monthly salary in effect on the date of the Termination Event as reportable on IRS Form W-2, adjusted by including and excluding the following items: (A) Include any salary deferral contributions made under any employee benefit plan maintained by the Company, including Bancorp's Executives' Deferred Compensation Plan; (B) Exclude: (i) Bonus payments; (ii) Bonus amounts deferred including any made under any employee benefit plan maintained by the Company, including Bancorp's Executives' Deferred Compensation Plan; (iii) Reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, severance or disability pay and welfare benefits; (iv) Employer contributions to a deferred compensation plan to the extent the contributions are not included in the Executive's gross income for the calendar year in which Page 7 CHANGE IN CONTROL AGREEMENT (Bygland) contributed, and any distributions from a deferred compensation plan, regardless of whether those amounts are includible in the Executive's gross income when distributed; (v) Amounts realized from the exercise of non-qualified stock options or when restricted stock (or property) becomes freely transferable or no longer subject to a substantial risk of forfeiture; (vi) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; (vii) The value of a non-qualified stock option included in income in the year in which granted; (viii) Amounts includible in income upon making a Code Section 83(b) election; (ix) Taxable benefits, such as premiums for excess group term life insurance; (x) Imputed income from any life insurance on the Executive's life that is owned by or funded in whole or in part by the Company; and (xi) Other similar recurring or non-recurring payments. (3) The Executive's "average bonus" is the average of: (A) The actual bonus paid or payable for the bonus computation year that ended before the bonus computation year in which the Termination Event occurs; and (B) The annualized amount of the bonus the Executive earned, determined as of the end of the month in which the Termination Event occurs, for the bonus computation year in which the Termination Event occurs. (c) EQUITY ACCELERATION. (1) Subject to paragraph (2) below, upon the date of the Termination Event: (A) All stock options held by the Executive that are not otherwise vested as of that date shall become immediately vested and exercisable notwithstanding any vesting provisions in the grant of those options; and (B) Any restrictions on the restricted stock held by the Executive shall immediately lapse. Page 8 CHANGE IN CONTROL AGREEMENT (Bygland) (2) The Board may exclude any particular grant of stock options or restricted stock from the acceleration provisions of paragraph (1) above, but only as follows: (A) Any current grants as of the Effective Date that are to be excluded must be listed in a separate appendix to this Agreement. (B) Any grants made after the Effective Date will be excluded only if the exclusion is made at the time the grant is made. (d) HEALTH PLAN CONTINUATION BENEFITS. The Company will provide health plan continuation benefits as follows: (1) For the period specified in paragraph (3) below, the Company will pay the premiums (both the employer and employee portions) for COBRA continuation coverage under the Company's group health plans as in effect at that time. (2) The Executive will have all the rights available under COBRA to change plans and coverage category (i.e., employee only, employee plus spouse or full family or such other categories that are in effect at that time). (3) The Company will make the COBRA premium payments until the earliest of the following events occurs: (A) The date COBRA coverage would otherwise end by law; or (B) 18 months of premiums have been paid. (e) 401(k) EQUIVALENCY PAYMENT. The Company shall pay the Executive a lump sum cash payment equal to two times the sum of the Executive's "deemed matching contribution" (as determined under paragraph (2) below) and the Executive's "deemed profit-sharing contribution" (as determined under paragraph (3) below. (1) For purposes of determining the Executive's deemed matching and profit-sharing contributions, the Executive's "deemed 401(k) Plan compensation" will be the Executive's cash compensation under subsection (b)(1) above, but limited to the maximum amount allowable under the 401(k) Plan's definition of "compensation" as in effect at that time; Page 9 CHANGE IN CONTROL AGREEMENT (Bygland) (2) The deemed matching contributions will be determined as follows: (A) First, the Executive's "deemed elective deferral contributions" will be determined by multiplying the Executive's deemed 401(k) Plan compensation under paragraph (1) above by the lesser of: (i) The deferral percentage the Executive had in effect under the 401(k) Plan on the date of the Termination Event; or (ii) The maximum deferral percentage allowed by the 401(k) Plan for highly compensated employees (if applicable to the Executive) for the plan year in which the Termination Event occurs, if that percentage has been determined by the date of Termination Event. (B) Second, the deemed matching contribution formula will be applied to the amount of the deemed elective deferral contributions as calculated under subparagraph (A) above, to determine the amount of the deemed matching contributions. For this purpose, the "deemed matching contribution formula" is: (i) The 401(k) Plan's matching contribution formula for the plan year in which the Termination Event occurs; or (ii) If that formula has not been determined by the date of the Termination Event, the formula for the previous plan year. (3) The deemed profit-sharing contributions will be determined by multiplying the Executive's deemed 401(k) Plan compensation under paragraph (1) above by: (A) The 401(k) Plan's profit-sharing contribution rate for the plan year in which the Termination Event occurs; or (B) If that rate has not been determined by the date of the Termination Event, the average of the profit-sharing contribution rate for the three plan years before the plan year in which the Termination Event occurs. (f) OUTPLACEMENT/TAX PLANNING SERVICES. At the Executive's election, for up to 12 months from the date of the Termination Event, the Executive may receive up to $5,000 in outplacement and/or tax planning services from service providers selected by the Company. The Company will pay the service providers directly for these benefits. The Executive will not have an option to receive cash in lieu of these outplacement or tax planning benefits. Page 10 CHANGE IN CONTROL AGREEMENT (Bygland) (g) TIMES FOR PAYMENT. (1) The cash compensation payment under subsection (b) and the 401(k) equivalency payment under subsection (e) will be paid within 30 days after the date of the Termination Event; (2) The COBRA premiums under subsection (d) will be paid as due under the terms of the applicable group health plan; and (3) Outplacement services will be paid as billed by the service provider. 5. GROSS-UP PAYMENT. If any or all of the severance benefits under Section 4 constitute a "parachute payment" under Code Section 280G, the Company shall pay the Executive a "Gross-Up Payment" as follows: (a) AMOUNT OF PAYMENT. The Gross-Up Payment shall be equal to the amount necessary so that the net amount of the severance benefits retained by the Executive, after subtracting the excise tax imposed under Code Section 4999 ("excise tax"), and after also subtracting all federal, state or local income tax, FICA and the excise tax on the Gross-Up Payment itself, shall be equal to the net amount the Executive would have retained if no excise tax had been imposed and no Gross-Up Payment had been paid. (b) CALCULATION OF PAYMENT AMOUNT. The amount of the Gross-Up Payment shall be determined as follows: (1) The determination will be made by independent accountants and/or tax counsel (the "consultant") selected by the Company with the Executive's consent (which consent will not be unreasonably withheld). The Company shall pay all of the consultant's fees and expenses. (2) As part of this determination, the consultant will provide the Company and the Executive with a detailed analysis and supporting calculations of: (A) The extent to which any payments or benefits paid or payable to the Executive are subject to Code Section 280G (including the reasonableness of any compensation provided for services rendered before or after the Change in Control); and (B) The calculation of the excise tax under Code Section 4999. (3) The consultant may make such assumptions and approximations concerning applicable tax rates and rely on such interpretations regarding the application of Code Sections 280G and 4999 as it deems reasonable. The Company and the Executive will provide the consultant with any information or documentation the consultant may reasonably request. Page 11 CHANGE IN CONTROL AGREEMENT (Bygland) (c) TIME FOR PAYMENT. The Gross-Up Payment shall be made within 30 days after the date of the Termination Event, provided that if the Gross-Up Payment cannot be determined within that time, the following will apply: (1) The Company shall pay the Executive within that time an estimate, determined in good faith by the Company, of the minimum amount of the Gross-Up Payment; (2) The Company shall pay the remainder (plus interest as determined under Code Section 7872(f)(2)(B)) as soon as the amount can be determined, but in no event later than the 45 days after the date of the Termination Event; and (3) If the estimated payment is more than the amount later determined to have been due, the excess (plus interest as determined under Code Section 7872(f)(2)(B)) shall be repaid by the Executive within 30 days after written demand by the Company. (d) ADJUSTMENTS. Subject to the Company's right under subsection (e) below to contest an excise tax assessment by the Internal Revenue Service, the amount of the Gross-Up Payment will be adjusted as follows: (1) OVERPAYMENT. If the actual excise tax imposed is less than the amount that was taken into account in determining the amount of the Gross-Up Payment, the Executive shall repay at the time that the amount of the reduced excise tax is finally determined the portion of the Gross-Up Payment attributable to that reduction (plus the portion of the Gross-Up Payment attributable to the excise tax, FICA and federal, state and local income tax imposed on the portion of the Gross-Up Payment being repaid by the Executive, to the extent the repayment results in a reduction in or refund of excise tax, FICA or federal, state or local income tax), plus interest as determined under Code Section 7872(f)(2)(B) on the amount of the repayment. (2) UNDERPAYMENT. If the actual excise tax imposed is more than the amount that was taken into account in determining the amount of the Gross-Up Payment, the Company shall make an additional gross-up payment to compensate for that excess (plus interest as determined under Code Section 7872(f)(2)(B)) within 10 days of the date the amount of the excess is finally determined. (e) COMPANY'S RIGHT TO CONTEST. The Company has the right to contest any excise tax assessment made by the Internal Revenue Service on the following terms and conditions: (1) The Executive must notify the Company in writing of any claim by the Internal Revenue Service that, if upheld, would result in the payment of excise taxes in amounts different from the amount initially determined by the consultant. The Executive shall give this notice as soon as possible but in no event later than 15 days after the Executive receives the notice from the Internal Revenue Service. Page 12 CHANGE IN CONTROL AGREEMENT (Bygland) (2) If the Company decides to contest the assessment, it must notify the Executive within 30 days of receiving the notice from the Executive. (3) The Company will have full control of the proceedings, including settlement authority and the right to appeal. (4) The Executive will cooperate fully in providing any testimony, information or documentation reasonably required by the Company in connection with the proceedings. (5) The adjustments required under subsection (d) above shall not be made until the Company has concluded a settlement agreement with the Internal Revenue Service, exhausted its (or the Executive's) rights to contest the Internal Revenue Service's determination or notified the Executive that it intends to concede the matter, whichever occurs first. (6) The Company shall bear all fees and costs associated with the contest. (7) The Company will indemnify the Executive from any taxes, interest and penalties that may be imposed upon the Executive with respect to the payments made under paragraph (6) above and this paragraph (7). (f) EFFECT OF REPEAL. If Code Sections 280G and 4999 are repealed without successor provisions being enacted, this Section shall be of no further force or effect. 6. OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Agreement is not an employment agreement. Accordingly, other than providing for the benefits payable upon a Change in Control, this Agreement will not affect the determination of any compensation payable by the Company to the Executive, nor will it affect the other terms of the Executive's employment with the Company. The specific arrangements referred to in this Agreement are not intended to exclude or circumvent any other benefits that may be available to the Executive under the Company's employee benefit or other applicable plans, programs or arrangements upon the termination of the Executive's employment. 7. WITHHOLDING. All payments made to the Executive under this Agreement are subject to the withholding of income and payroll taxes and other payroll deductions that the Company reasonably determines are appropriate under applicable law or regulations. 8. ASSIGNMENT. (a) The Company will require any successor (by purchase, merger, consolidation or otherwise, whether direct or indirect) to all or substantially all of its business or assets to expressly assume this Agreement. This assumption shall be obtained before the effective date of the succession. Failure of the Company to obtain this assumption shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms that the Executive would be entitled to under this Agreement following a Change in Control, except that for this purpose: Page 13 CHANGE IN CONTROL AGREEMENT (Bygland) (1) The date the definitive agreement providing for the succession is signed shall be deemed to be the date of the Termination Event (the "deemed Termination Event"), regardless of whether the Executive's employment terminates on that date; (2) The Executive will have no continued employment obligation under Section 3(b) as of the deemed Termination Event; (3) The equity acceleration under Section 4(c) will be effective on the date of the deemed Termination Event; (4) Within five (5) business days of the deemed Termination Event, the Company with pay the Executive a lump sum cash payment equal to the sum of: (A) The cash compensation payment under Section 4(b); (B) Twenty-four times the monthly COBRA premium amount for the group health plan coverage the Executive had in effect on the date of the deemed Termination Event; (C) The 401(k) equivalency payment under Section 4(e); (D) The maximum amount that would have been paid under Section 4(f) to the outplacement service provider; and (5) Section 6 will no longer apply as of the date of the deemed Termination Event. (b) The Executive may not assign or transfer this Agreement or any rights or obligations under it. 9. UNSECURED GENERAL CREDITOR. Neither the Executive nor anyone else claiming on behalf of or through the Executive shall have any right with respect to, or claim against, any insurance policy or other asset the Company may acquire to assist it in financing its obligations under this Agreement. The Executive shall be an unsecured general creditor of the Company with respect to any amount payable under this Agreement. 10. JOINT AND SEVERAL OBLIGATION. Bancorp and Bank will be jointly and severally liable for the payment obligations under this Agreement. 11. DEATH BENEFIT. (a) Any severance benefits under Section 4 remaining unpaid at the Executive's death shall be paid under the terms and conditions of this Agreement, to the Beneficiary or Beneficiaries determined under subsection (b) below. Page 14 CHANGE IN CONTROL AGREEMENT (Bygland) (b) The Executive may designate the Beneficiary or Beneficiaries (who may be designated concurrently or contingently) to receive the death benefit under the Plan under the following terms and conditions: (1) The beneficiary designation must be in a form satisfactory to the Committee and must be signed by the Executive. (2) A beneficiary designation shall be effective upon receipt by the Committee or its designee and shall cancel all beneficiary designations previously filed by the Executive, provided it is received before the Executive's death. (3) The Executive may revoke a previous beneficiary designation without the consent of the previously designated Beneficiary. This revocation is made by filing a new beneficiary designation form with the Committee or its designee, and shall be effective upon receipt. (4) A divorce will automatically revoke the portion of a beneficiary designation designating the former spouse as a Beneficiary. (5) If a Beneficiary disclaims a death benefit, the benefit will be paid as if the Beneficiary had predeceased the Executive. (6) If a Beneficiary who is in pay status dies before full distribution is made to the Beneficiary, the unpaid balance of the distribution will be paid to the Beneficiary's estate. (7) If, at the time of the Executive's death, the Executive has failed to designate a Beneficiary, the Executive's beneficiary designation has become completely invalid under the provisions of this subsection or there is no surviving Beneficiary, the benefit will be paid in the following order of priority: (A) To the Executive's spouse, if living; or (B) To the Executive's estate. 12. GENERAL PROVISIONS. (a) CHOICE OF LAW/VENUE. (1) This Agreement shall be construed and its validity determined according to the laws of the State of Oregon, other than its law regarding conflicts of law or choice of law, to the extent not preempted by federal law. (2) Any dispute arising out of this Agreement must be brought in either Clackamas County or Multnomah County, Oregon, and the parties will submit to personal jurisdiction in either of those counties. Page 15 CHANGE IN CONTROL AGREEMENT (Bygland) (b) ARBITRATION. Any dispute or claim arising out of or brought in connection with this Agreement, shall be submitted to final and binding arbitration as follows: (1) Before proceeding to arbitration, the parties shall first attempt, in good faith, to resolve the dispute or claim by informal meetings and discussions between them and/or their attorneys. Acting on behalf of the Company at any of these meetings and discussions will be, at the discretion of its Chief Executive Officer, the Chief Executive Officer, the Executive Vice-President, Human Resources or both of them. The Chief Executive Officer and the Executive Vice-President, Human Resources will make their recommendation to the Committee for its decision on the matter. This informal dispute resolution process will be concluded within 30 days or such longer or shorter period as may be mutually agreed by the parties. (2) After exhausting the informal dispute resolution process under paragraph (1) above, upon the request of any party, the matter will be submitted to and settled by arbitration under the rules then in effect of the American Arbitration Association (or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered in arbitration will be final and will bind the parties, and a judgment on it may be entered in the highest court of the forum having jurisdiction. The arbitrator will render a written decision, naming the substantially prevailing party in the action and will award such party all costs and expenses incurred, including reasonable attorneys' fees. (c) ATTORNEYS' FEES. (1) If any breach of or default under this Agreement results in either party incurring attorneys' or other fees, costs or expenses (including those incurred in an arbitration), the substantially prevailing party is entitled to recover from the non-prevailing party its reasonable legal fees, costs and expenses, including attorneys' fees and the costs of the arbitration, except as provided in paragraph (2) below. (2) If the Executive is not the substantially prevailing party, the Executive shall be liable to pay the Company under paragraph (1) above only if the arbitrator determines that: (A) There was no reasonable basis for the Executive's claim (or the Executive's response to the Company's claim); or (B) The Executive had engaged in unreasonable delay, failed to comply with a discovery order or otherwise acted in bad faith in the arbitration. (3) Either party shall be entitled to recover any reasonable attorneys' fees and other costs and expenses it incurs in enforcing or collecting an arbitration award. Page 16 CHANGE IN CONTROL AGREEMENT (Bygland) (4) If an award under this subsection is made to the Executive and accountants or tax counsel selected by Company with the Executive's consent (which shall not be unreasonably withheld) determine that the award is includible in Executive's gross income, Company shall also pay Executive a gross-up payment to offset the taxes imposed on that award, including the taxes on the gross -up payment itself. This gross-up payment shall be determined following the methodology employed in Section 5(b). (d) ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties with respect to its subject matter, and it supercedes all previous agreements between the Executive and the Company and any of its subsidiaries pertaining to this subject matter. By signing this Agreement, the Executive waives any and all rights the Executive may have had under any previous agreement providing for benefits upon a Change in Control (regardless of how that term is defined in those prior agreements) that the Executive may have entered into with the Company or any of its subsidiaries. (e) SUCCESSORS. This Agreement binds and inures to the benefit of the parties and each of their respective affiliates, legal representatives, heirs and, to the extent permitted in this Agreement, their successors and assigns. (f) AMENDMENT. This Agreement may be amended only through a written document signed by all of the parties. (g) CONSTRUCTION. The language of this Agreement was chosen jointly by the parties to express their mutual intent. No rule of construction based on which party drafted the Agreement or certain of its provisions will be applied against any party. (h) SECTION HEADINGS. The section headings used in this Agreement have been included for convenience and reference only. (i) CITATIONS. Citations to a statute, act or rule are to that statute, act or rule as amended or to its successor at the relevant time. Citations to a particular section of a statute, act or rule are to that section as amended or renumbered or to the comparable provision of any successor as in effect at the relevant date. (j) COUNTERPARTS. This Agreement may be executed in one or more counterparts, and all counterparts will be construed together as one Agreement. Page 17 CHANGE IN CONTROL AGREEMENT (Bygland) (k) SEVERABILITY. If any provision of this Agreement is, to any extent, held to be invalid or unenforceable, it will be deemed amended as necessary to conform to the applicable laws or regulations. However, if it cannot be amended without materially altering the intentions of the parties, it will be deleted and the remainder of this Agreement will be enforced to the extent permitted by law. EXECUTIVE: COMPANY: WEST COAST BANCORP __________________________________ By: _________________________________ James D. Bygland Title _______________________________ Date: ____________________________ Date: _______________________________ WEST COAST BANK By: _______________________________ Title: _____________________________ Date: _______________________________ Page 18 CHANGE IN CONTROL AGREEMENT (Bygland) EX-10.6 9 v96690exv10w6.txt EXHIBIT 10.6 EXHIBIT 10.6 CHANGE IN CONTROL AGREEMENT EFFECTIVE DATE: JANUARY 1, 2004 This CHANGE IN CONTROL AGREEMENT ("Agreement") is made by WEST COAST BANCORP ("Bancorp") and WEST COAST BANK ("Bank") (collectively "Company") and DAVID L. PRYSOCK ("Executive"). RECITALS A. The Executive is employed by the Company as its Executive Vice President, Chief Credit Officer. B. The Board recognizes that a possible or threatened Change in Control may result in key management personnel being concerned about their continued employment status or responsibilities. In addition, they may be approached by other companies offering competing employment opportunities. Consequently, they will be distracted from their duties and may even leave the Company during a time when their undivided attention and commitment to the best interests of the Company and Bancorp's shareholders would be vitally important. C. The Company considers it essential to its best interests and those of Bancorp's shareholders to provide for the continued employment of key management personnel in the event of a Change in Control. D. Therefore, in order to-- (1) Encourage the Executive to assist the Company during a Change in Control and be available during the transition afterwards; (2) Give assurance regarding the Executive's continued employment status and responsibilities in the event of a Change in Control; and (3) Provide the Executive with Change in Control benefits competitive with the Company's peers --the parties agree on the following: TERMS AND CONDITIONS 1. DEFINITIONS. Words and phrases appearing in this Agreement with initial capitalization are defined terms that have the meanings stated below. Words appearing in the following definitions which are themselves defined terms are also indicated by initial capitalization. (a) "BENEFICIAL OWNERSHIP" means direct or indirect ownership within the meaning of Rule 13(d)(3) under the Exchange Act. (b) "BOARD" means Bancorp's Board of Directors. Page 1 CHANGE IN CONTROL AGREEMENT (Prysock) (c) "CAUSE" means either: (1) Any of the circumstances that qualify as grounds for termination for cause under the Executive's employment agreement as in effect at the time; or (2) If no employment agreement is in effect at that time or if the employment agreement in effect at that time does not specify grounds for termination for cause, any of the following circumstances shall qualify as "Cause" under this Agreement: (A) Embezzlement, dishonesty or other fraudulent acts involving the Company or the Company's business operations; (B) Material breach of any confidentiality agreement or policy; (C) Conviction (whether entered upon a verdict or a plea, including a plea of no contest) on any felony charge or on a misdemeanor reflecting upon the Executive's honesty; (D) An act or omission that materially injures the Company's reputation, business affairs or financial condition, if that injury could have been reasonably avoided by the Executive; or (E) Willful misfeasance or gross negligence in the performance of the Executive's duties provided, however, that the Executive is first given: (i) Written notice by the Company specifying in detail the performance issues; and (ii) A reasonable opportunity to cure the issues specified in the notice. (d) "CHANGE IN CONTROL" means: (1) Except as provided in subparagraph (B) below, an acquisition or series of acquisitions as described in subparagraph (A) below. (A) The acquisition by a Person of the Beneficial Ownership of more than 30% of either: (i) Bancorp's then outstanding shares of common stock; or (ii) The combined voting power of Bancorp's then outstanding voting securities entitled to vote generally in the election of directors. Page 2 CHANGE IN CONTROL AGREEMENT (Prysock) (B) This paragraph (1) does not apply to any acquisition: (i) Directly from the Company; (ii) By the Company; or (iii) Which is part of a transaction that satisfies the exception in paragraph (3)(A), (B) and (C) below; (2) The incumbent directors cease for any reason to be a majority of the Board. The "incumbent directors" are directors who are either: (A) Directors on the Effective Date; or (B) Elected, or nominated for election, to the Board by a majority vote of the members of the Board or the Nominating Committee of the Board who were directors on the Effective Date. However this subparagraph (B) does not include any director whose election came as a result of an actual or threatened election contest regarding the election or removal of directors or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board; (3) Consummation of a merger, reorganization or consolidation of Bancorp or the sale or other disposition of substantially all of it assets, except where: (A) Persons who, immediately before the consummation, had, respectively, a Controlling Interest in and Voting Control of Bancorp have, respectively, a Controlling Interest in, and Voting Control of the resulting entity; (B) No Person (other than the entity resulting from the transaction or an employee benefit plan maintained by that entity) has the Beneficial Ownership of more than 30% of either: (i) The resulting entity's then outstanding shares of common stock or other comparable equity security; or (ii) The combined voting power of the resulting entity's then outstanding voting securities entitled to vote generally in the election of directors, except to the extent that Person held that Beneficial Ownership before the consummation; and (C) A majority of the members of the board of directors of the resulting entity were members of the Board at either the time: (i) The transaction was approved by the Board; or Page 3 CHANGE IN CONTROL AGREEMENT (Prysock) (ii) The initial agreement for the transaction was signed; or (4) Approval by Bancorp's shareholders of its complete liquidation or dissolution. (e) "CHANGE IN CONTROL PROPOSAL" means any proposal or offer that is intended to or has the potential to result in a Change in Control. (f) "CODE" means the Internal Revenue Code of 1986. (g) "COMMITTEE" means the Compensation and Personnel Committee of the Board. (h) "CONTROLLING INTEREST" means Beneficial Ownership of more than 50% of the outstanding shares common stock of a corporation or the comparable equity securities of a noncorporate business entity. (i) "DISABILITY" means that either the carrier of any Company-provided individual or group long-term disability insurance policy covering the Executive or the Social Security Administration has determined that the Executive is disabled. Upon the request of the Committee, the Executive will submit proof of the carrier's or the Social Security Administration's determination. (j) "EFFECTIVE DATE" means January 1, 2004. (k) "ERISA" means the Employee Retirement Security Act of 1974. (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934. (m) "GOOD REASON" means any one of the following: (1) Any reduction in the Executive's salary or reduction or elimination of any compensation or benefit plan benefiting the Executive, which reduction or elimination does not generally apply to substantially all similarly situated employees of the Company or such employees of any successor entity or of any entity in control of Bancorp or the Bank; (2) A relocation or transfer of the Executive's place of employment to an office or location that is more than 35 miles from the Executive's then current place of employment; or (3) A material diminution in the Executive's responsibilities, title or duties. (n) "PERSON" means any individual, entity or group within the meaning of Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or fiduciary holding securities under an employee benefit plan of the Company. (o) "TERMINATION EVENT" means any of the following events: (1) The Executive terminates employment for Good Reason within 24 months after a Change in Control; Page 4 CHANGE IN CONTROL AGREEMENT (Prysock) (2) The Company terminates the Executive's employment other than for Cause, Disability or death within 24 months after a Change in Control; (3) The Company terminates the Executive's employment before a Change in Control if: (A) The termination is not for Cause, Disability or death; and (B) The termination occurs either on or after: (i) The announcement by Bancorp, or any other Person, that a Change in Control is contemplated or intended; or (ii) The date a contemplated or intended Change in Control should have been announced under applicable securities or other laws; or (4) The date the Executive's continued employment begins under Section 3(b). (p) "VOTING CONTROL" means holding more than 50% of the combined voting power of an entity's then outstanding securities entitled to vote in the election of its directors or other governing body. 2. INITIAL TERM; RENEWALS; EXTENSION. (a) The initial term of this Agreement begins on the Effective Date and ends on December 31, 2004. (b) Following this initial term, this Agreement will automatically renew on January 1 of each year for subsequent one-year terms, unless not later than the September 30 preceding the upcoming renewal date, either the Company or the Executive gives the other written notice terminating this Agreement as of the upcoming December 31. (c) If a definitive agreement providing for a Change in Control is signed on or before the expiration date of the initial term or any renewal term, the term of this Agreement then in effect will automatically be extended to 24 months after the effective date (as stated in the definitive agreement) of the Change in Control. During this extended period, the Board may not terminate this Agreement without the Executive's written consent. 3. EXECUTIVE'S OBLIGATIONS. (a) The Executive agrees that, upon notification that the Company has received a Change in Control Proposal, the Executive shall: (1) At the Company's request, assist the Company in evaluating that proposal; and Page 5 CHANGE IN CONTROL AGREEMENT (Prysock) (2) Not resign the Executive's position with the Company until the transaction contemplated by that proposal is either consummated or abandoned. (b) If, within 24 months following a Change in Control, the Company wants the Executive to continue employment in a position or under circumstances that would qualify as Good Reason for the Executive terminating employment: (1) The Executive shall nevertheless agree to that continued employment, provided that: (A) The term of this continued employment shall not exceed 90 days or such shorter or longer term as agreed by the Company and the Executive; (B) The continued employment will be at an executive level position that is reasonably comparable to the Executive's then current position; (C) The continued employment shall be at either: (i) The Executive's then current place of employment; or (ii) Such other location as agreed by the Company and the Executive; and (D) As compensation for this continued employment, the Executive shall receive: (i) The same base pay and bonus arrangement as in effect on the day before the continued employment agreement became effective (or their hourly equivalent); and (ii) Either: (I) Continuation of the Executive's employee benefits, fringe benefits and perquisites at their then current level; or (II) If that continuation is not reasonably feasible, the Executive shall receive additional cash compensation equal to the amount the Company would have paid as the employer contribution for the items that cannot be continued. (2) The date this continued employment begins shall be treated as a Termination Event, so that benefits will be payable under this Agreement, in accordance with its terms and conditions, even though the Executive's employment with the Company has not terminated. Page 6 CHANGE IN CONTROL AGREEMENT (Prysock) 4. SEVERANCE BENEFITS. Upon a Termination Event, the Executive will receive severance benefits as follows: (a) COMPONENTS. The severance benefits will consist of: (1) The cash compensation payment under subsection (b) below; (2) The equity acceleration under subsection (c) below; (3) The health plan continuation benefits under subsection (d) below; (4) The 401(k) equivalency payment under subsection (e) below; and (5) The outplacement/tax planning benefits under subsection (f) below. (b) CASH COMPENSATION PAYMENT. (1) This payment will equal two times the Executive's cash compensation. The Executive's "cash compensation" is the sum of: (A) The Executive's adjusted salary as determined under paragraph (2) below; and (B) The Executive's average bonus as determined under paragraph (3) below. (2) The Executive's "adjusted salary" is the Executive's annualized regular monthly salary in effect on the date of the Termination Event as reportable on IRS Form W-2, adjusted by including and excluding the following items: (A) Include any salary deferral contributions made under any employee benefit plan maintained by the Company, including Bancorp's Executives' Deferred Compensation Plan; (B) Exclude: (i) Bonus payments; (ii) Bonus amounts deferred including any made under any employee benefit plan maintained by the Company, including Bancorp's Executives' Deferred Compensation Plan; (iii) Reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, severance or disability pay and welfare benefits; (iv) Employer contributions to a deferred compensation plan to the extent the contributions are not included in the Executive's gross income for the calendar year in which Page 7 CHANGE IN CONTROL AGREEMENT (Prysock) contributed, and any distributions from a deferred compensation plan, regardless of whether those amounts are includible in the Executive's gross income when distributed; (v) Amounts realized from the exercise of non-qualified stock options or when restricted stock (or property) becomes freely transferable or no longer subject to a substantial risk of forfeiture; (vi) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; (vii) The value of a non-qualified stock option included in income in the year in which granted; (viii) Amounts includible in income upon making a Code Section 83(b) election; (ix) Taxable benefits, such as premiums for excess group term life insurance; (x) Imputed income from any life insurance on the Executive's life that is owned by or funded in whole or in part by the Company; and (xi) Other similar recurring or non-recurring payments. (3) The Executive's "average bonus" is the average of: (A) The actual bonus paid or payable for the bonus computation year that ended before the bonus computation year in which the Termination Event occurs; and (B) The annualized amount of the bonus the Executive earned, determined as of the end of the month in which the Termination Event occurs, for the bonus computation year in which the Termination Event occurs. (c) EQUITY ACCELERATION. (1) Subject to paragraph (2) below, upon the date of the Termination Event: (A) All stock options held by the Executive that are not otherwise vested as of that date shall become immediately vested and exercisable notwithstanding any vesting provisions in the grant of those options; and (B) Any restrictions on the restricted stock held by the Executive shall immediately lapse. Page 8 CHANGE IN CONTROL AGREEMENT (Prysock) (2) The Board may exclude any particular grant of stock options or restricted stock from the acceleration provisions of paragraph (1) above, but only as follows: (A) Any current grants as of the Effective Date that are to be excluded must be listed in a separate appendix to this Agreement. (B) Any grants made after the Effective Date will be excluded only if the exclusion is made at the time the grant is made. (d) HEALTH PLAN CONTINUATION BENEFITS. The Company will provide health plan continuation benefits as follows: (1) For the period specified in paragraph (3) below, the Company will pay the premiums (both the employer and employee portions) for COBRA continuation coverage under the Company's group health plans as in effect at that time. (2) The Executive will have all the rights available under COBRA to change plans and coverage category (i.e., employee only, employee plus spouse or full family or such other categories that are in effect at that time). (3) The Company will make the COBRA premium payments until the earliest of the following events occurs: (A) The date COBRA coverage would otherwise end by law; or (B) 18 months of premiums have been paid. (e) 401(k) EQUIVALENCY PAYMENT. The Company shall pay the Executive a lump sum cash payment equal to two times the sum of the Executive's "deemed matching contribution" (as determined under paragraph (2) below) and the Executive's "deemed profit-sharing contribution" (as determined under paragraph (3) below. (1) For purposes of determining the Executive's deemed matching and profit-sharing contributions, the Executive's "deemed 401(k) Plan compensation" will be the Executive's cash compensation under subsection (b)(1) above, but limited to the maximum amount allowable under the 401(k) Plan's definition of "compensation" as in effect at that time; Page 9 CHANGE IN CONTROL AGREEMENT (Prysock) (2) The deemed matching contributions will be determined as follows: (A) First, the Executive's "deemed elective deferral contributions" will be determined by multiplying the Executive's deemed 401(k) Plan compensation under paragraph (1) above by the lesser of: (i) The deferral percentage the Executive had in effect under the 401(k) Plan on the date of the Termination Event; or (ii) The maximum deferral percentage allowed by the 401(k) Plan for highly compensated employees (if applicable to the Executive) for the plan year in which the Termination Event occurs, if that percentage has been determined by the date of Termination Event. (B) Second, the deemed matching contribution formula will be applied to the amount of the deemed elective deferral contributions as calculated under subparagraph (A) above, to determine the amount of the deemed matching contributions. For this purpose, the "deemed matching contribution formula" is: (i) The 401(k) Plan's matching contribution formula for the plan year in which the Termination Event occurs; or (ii) If that formula has not been determined by the date of the Termination Event, the formula for the previous plan year. (3) The deemed profit-sharing contributions will be determined by multiplying the Executive's deemed 401(k) Plan compensation under paragraph (1) above by: (A) The 401(k) Plan's profit-sharing contribution rate for the plan year in which the Termination Event occurs; or (B) If that rate has not been determined by the date of the Termination Event, the average of the profit-sharing contribution rate for the three plan years before the plan year in which the Termination Event occurs. (f) OUTPLACEMENT/TAX PLANNING SERVICES. At the Executive's election, for up to 12 months from the date of the Termination Event, the Executive may receive up to $5,000 in outplacement and/or tax planning services from service providers selected by the Company. The Company will pay the service providers directly for these benefits. The Executive will not have an option to receive cash in lieu of these outplacement or tax planning benefits. Page 10 CHANGE IN CONTROL AGREEMENT (Prysock) (g) TIMES FOR PAYMENT. (1) The cash compensation payment under subsection (b) and the 401(k) equivalency payment under subsection (e) will be paid within 30 days after the date of the Termination Event; (2) The COBRA premiums under subsection (d) will be paid as due under the terms of the applicable group health plan; and (3) Outplacement services will be paid as billed by the service provider. 5. GROSS-UP PAYMENT. If any or all of the severance benefits under Section 4 constitute a "parachute payment" under Code Section 280G, the Company shall pay the Executive a "Gross-Up Payment" as follows: (a) AMOUNT OF PAYMENT. The Gross-Up Payment shall be equal to the amount necessary so that the net amount of the severance benefits retained by the Executive, after subtracting the excise tax imposed under Code Section 4999 ("excise tax"), and after also subtracting all federal, state or local income tax, FICA and the excise tax on the Gross-Up Payment itself, shall be equal to the net amount the Executive would have retained if no excise tax had been imposed and no Gross-Up Payment had been paid. (b) CALCULATION OF PAYMENT AMOUNT. The amount of the Gross-Up Payment shall be determined as follows: (1) The determination will be made by independent accountants and/or tax counsel (the "consultant") selected by the Company with the Executive's consent (which consent will not be unreasonably withheld). The Company shall pay all of the consultant's fees and expenses. (2) As part of this determination, the consultant will provide the Company and the Executive with a detailed analysis and supporting calculations of: (A) The extent to which any payments or benefits paid or payable to the Executive are subject to Code Section 280G (including the reasonableness of any compensation provided for services rendered before or after the Change in Control); and (B) The calculation of the excise tax under Code Section 4999. (3) The consultant may make such assumptions and approximations concerning applicable tax rates and rely on such interpretations regarding the application of Code Sections 280G and 4999 as it deems reasonable. The Company and the Executive will provide the consultant with any information or documentation the consultant may reasonably request. Page 11 CHANGE IN CONTROL AGREEMENT (Prysock) (c) TIME FOR PAYMENT. The Gross-Up Payment shall be made within 30 days after the date of the Termination Event, provided that if the Gross-Up Payment cannot be determined within that time, the following will apply: (1) The Company shall pay the Executive within that time an estimate, determined in good faith by the Company, of the minimum amount of the Gross-Up Payment; (2) The Company shall pay the remainder (plus interest as determined under Code Section 7872(f)(2)(B)) as soon as the amount can be determined, but in no event later than the 45 days after the date of the Termination Event; and (3) If the estimated payment is more than the amount later determined to have been due, the excess (plus interest as determined under Code Section 7872(f)(2)(B)) shall be repaid by the Executive within 30 days after written demand by the Company. (d) ADJUSTMENTS. Subject to the Company's right under subsection (e) below to contest an excise tax assessment by the Internal Revenue Service, the amount of the Gross-Up Payment will be adjusted as follows: (1) OVERPAYMENT. If the actual excise tax imposed is less than the amount that was taken into account in determining the amount of the Gross-Up Payment, the Executive shall repay at the time that the amount of the reduced excise tax is finally determined the portion of the Gross-Up Payment attributable to that reduction (plus the portion of the Gross-Up Payment attributable to the excise tax, FICA and federal, state and local income tax imposed on the portion of the Gross-Up Payment being repaid by the Executive, to the extent the repayment results in a reduction in or refund of excise tax, FICA or federal, state or local income tax), plus interest as determined under Code Section 7872(f)(2)(B) on the amount of the repayment. (2) UNDERPAYMENT. If the actual excise tax imposed is more than the amount that was taken into account in determining the amount of the Gross-Up Payment, the Company shall make an additional gross-up payment to compensate for that excess (plus interest as determined under Code Section 7872(f)(2)(B)) within 10 days of the date the amount of the excess is finally determined. (e) COMPANY'S RIGHT TO CONTEST. The Company has the right to contest any excise tax assessment made by the Internal Revenue Service on the following terms and conditions: (1) The Executive must notify the Company in writing of any claim by the Internal Revenue Service that, if upheld, would result in the payment of excise taxes in amounts different from the amount initially determined by the consultant. The Executive shall give this notice as soon as possible but in no event later than 15 days after the Executive receives the notice from the Internal Revenue Service. Page 12 CHANGE IN CONTROL AGREEMENT (Prysock) (2) If the Company decides to contest the assessment, it must notify the Executive within 30 days of receiving the notice from the Executive. (3) The Company will have full control of the proceedings, including settlement authority and the right to appeal. (4) The Executive will cooperate fully in providing any testimony, information or documentation reasonably required by the Company in connection with the proceedings. (5) The adjustments required under subsection (d) above shall not be made until the Company has concluded a settlement agreement with the Internal Revenue Service, exhausted its (or the Executive's) rights to contest the Internal Revenue Service's determination or notified the Executive that it intends to concede the matter, whichever occurs first. (6) The Company shall bear all fees and costs associated with the contest. (7) The Company will indemnify the Executive from any taxes, interest and penalties that may be imposed upon the Executive with respect to the payments made under paragraph (6) above and this paragraph (7). (f) EFFECT OF REPEAL. If Code Sections 280G and 4999 are repealed without successor provisions being enacted, this Section shall be of no further force or effect. 6. OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Agreement is not an employment agreement. Accordingly, other than providing for the benefits payable upon a Change in Control, this Agreement will not affect the determination of any compensation payable by the Company to the Executive, nor will it affect the other terms of the Executive's employment with the Company. The specific arrangements referred to in this Agreement are not intended to exclude or circumvent any other benefits that may be available to the Executive under the Company's employee benefit or other applicable plans, programs or arrangements upon the termination of the Executive's employment. 7. WITHHOLDING. All payments made to the Executive under this Agreement are subject to the withholding of income and payroll taxes and other payroll deductions that the Company reasonably determines are appropriate under applicable law or regulations. 8. ASSIGNMENT. (a) The Company will require any successor (by purchase, merger, consolidation or otherwise, whether direct or indirect) to all or substantially all of its business or assets to expressly assume this Agreement. This assumption shall be obtained before the effective date of the succession. Failure of the Company to obtain this assumption shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms that the Executive would be entitled to under this Agreement following a Change in Control, except that for this purpose: Page 13 CHANGE IN CONTROL AGREEMENT (Prysock) (1) The date the definitive agreement providing for the succession is signed shall be deemed to be the date of the Termination Event (the "deemed Termination Event"), regardless of whether the Executive's employment terminates on that date; (2) The Executive will have no continued employment obligation under Section 3(b) as of the deemed Termination Event; (3) The equity acceleration under Section 4(c) will be effective on the date of the deemed Termination Event; (4) Within five (5) business days of the deemed Termination Event, the Company with pay the Executive a lump sum cash payment equal to the sum of: (A) The cash compensation payment under Section 4(b); (B) Twenty-four times the monthly COBRA premium amount for the group health plan coverage the Executive had in effect on the date of the deemed Termination Event; (C) The 401(k) equivalency payment under Section 4(e); (D) The maximum amount that would have been paid under Section 4(f) to the outplacement service provider; and (5) Section 6 will no longer apply as of the date of the deemed Termination Event. (b) The Executive may not assign or transfer this Agreement or any rights or obligations under it. 9. UNSECURED GENERAL CREDITOR. Neither the Executive nor anyone else claiming on behalf of or through the Executive shall have any right with respect to, or claim against, any insurance policy or other asset the Company may acquire to assist it in financing its obligations under this Agreement. The Executive shall be an unsecured general creditor of the Company with respect to any amount payable under this Agreement. 10. JOINT AND SEVERAL OBLIGATION. Bancorp and Bank will be jointly and severally liable for the payment obligations under this Agreement. 11. DEATH BENEFIT. (a) Any severance benefits under Section 4 remaining unpaid at the Executive's death shall be paid under the terms and conditions of this Agreement, to the Beneficiary or Beneficiaries determined under subsection (b) below. Page 14 CHANGE IN CONTROL AGREEMENT (Prysock) (b) The Executive may designate the Beneficiary or Beneficiaries (who may be designated concurrently or contingently) to receive the death benefit under the Plan under the following terms and conditions: (1) The beneficiary designation must be in a form satisfactory to the Committee and must be signed by the Executive. (2) A beneficiary designation shall be effective upon receipt by the Committee or its designee and shall cancel all beneficiary designations previously filed by the Executive, provided it is received before the Executive's death. (3) The Executive may revoke a previous beneficiary designation without the consent of the previously designated Beneficiary. This revocation is made by filing a new beneficiary designation form with the Committee or its designee, and shall be effective upon receipt. (4) A divorce will automatically revoke the portion of a beneficiary designation designating the former spouse as a Beneficiary. (5) If a Beneficiary disclaims a death benefit, the benefit will be paid as if the Beneficiary had predeceased the Executive. (6) If a Beneficiary who is in pay status dies before full distribution is made to the Beneficiary, the unpaid balance of the distribution will be paid to the Beneficiary's estate. (7) If, at the time of the Executive's death, the Executive has failed to designate a Beneficiary, the Executive's beneficiary designation has become completely invalid under the provisions of this subsection or there is no surviving Beneficiary, the benefit will be paid in the following order of priority: (A) To the Executive's spouse, if living; or (B) To the Executive's estate. 12. GENERAL PROVISIONS. (a) CHOICE OF LAW/VENUE. (1) This Agreement shall be construed and its validity determined according to the laws of the State of Oregon, other than its law regarding conflicts of law or choice of law, to the extent not preempted by federal law. (2) Any dispute arising out of this Agreement must be brought in either Clackamas County or Multnomah County, Oregon, and the parties will submit to personal jurisdiction in either of those counties. Page 15 CHANGE IN CONTROL AGREEMENT (Prysock) (b) ARBITRATION. Any dispute or claim arising out of or brought in connection with this Agreement, shall be submitted to final and binding arbitration as follows: (1) Before proceeding to arbitration, the parties shall first attempt, in good faith, to resolve the dispute or claim by informal meetings and discussions between them and/or their attorneys. Acting on behalf of the Company at any of these meetings and discussions will be, at the discretion of its Chief Executive Officer, the Chief Executive Officer, the Executive Vice-President, Human Resources or both of them. The Chief Executive Officer and the Executive Vice-President, Human Resources will make their recommendation to the Committee for its decision on the matter. This informal dispute resolution process will be concluded within 30 days or such longer or shorter period as may be mutually agreed by the parties. (2) After exhausting the informal dispute resolution process under paragraph (1) above, upon the request of any party, the matter will be submitted to and settled by arbitration under the rules then in effect of the American Arbitration Association (or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered in arbitration will be final and will bind the parties, and a judgment on it may be entered in the highest court of the forum having jurisdiction. The arbitrator will render a written decision, naming the substantially prevailing party in the action and will award such party all costs and expenses incurred, including reasonable attorneys' fees. (c) ATTORNEYS' FEES. (1) If any breach of or default under this Agreement results in either party incurring attorneys' or other fees, costs or expenses (including those incurred in an arbitration), the substantially prevailing party is entitled to recover from the non-prevailing party its reasonable legal fees, costs and expenses, including attorneys' fees and the costs of the arbitration, except as provided in paragraph (2) below. (2) If the Executive is not the substantially prevailing party, the Executive shall be liable to pay the Company under paragraph (1) above only if the arbitrator determines that: (A) There was no reasonable basis for the Executive's claim (or the Executive's response to the Company's claim); or (B) The Executive had engaged in unreasonable delay, failed to comply with a discovery order or otherwise acted in bad faith in the arbitration. (3) Either party shall be entitled to recover any reasonable attorneys' fees and other costs and expenses it incurs in enforcing or collecting an arbitration award. Page 16 CHANGE IN CONTROL AGREEMENT (Prysock) (4) If an award under this subsection is made to the Executive and accountants or tax counsel selected by Company with the Executive's consent (which shall not be unreasonably withheld) determine that the award is includible in Executive's gross income, Company shall also pay Executive a gross-up payment to offset the taxes imposed on that award, including the taxes on the gross -up payment itself. This gross-up payment shall be determined following the methodology employed in Section 5(b). (d) ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties with respect to its subject matter, and it supercedes all previous agreements between the Executive and the Company and any of its subsidiaries pertaining to this subject matter. By signing this Agreement, the Executive waives any and all rights the Executive may have had under any previous agreement providing for benefits upon a Change in Control (regardless of how that term is defined in those prior agreements) that the Executive may have entered into with the Company or any of its subsidiaries. (e) SUCCESSORS. This Agreement binds and inures to the benefit of the parties and each of their respective affiliates, legal representatives, heirs and, to the extent permitted in this Agreement, their successors and assigns. (f) AMENDMENT. This Agreement may be amended only through a written document signed by all of the parties. (g) CONSTRUCTION. The language of this Agreement was chosen jointly by the parties to express their mutual intent. No rule of construction based on which party drafted the Agreement or certain of its provisions will be applied against any party. (h) SECTION HEADINGS. The section headings used in this Agreement have been included for convenience and reference only. (i) CITATIONS. Citations to a statute, act or rule are to that statute, act or rule as amended or to its successor at the relevant time. Citations to a particular section of a statute, act or rule are to that section as amended or renumbered or to the comparable provision of any successor as in effect at the relevant date. (j) COUNTERPARTS. This Agreement may be executed in one or more counterparts, and all counterparts will be construed together as one Agreement. Page 17 CHANGE IN CONTROL AGREEMENT (Prysock) (k) SEVERABILITY. If any provision of this Agreement is, to any extent, held to be invalid or unenforceable, it will be deemed amended as necessary to conform to the applicable laws or regulations. However, if it cannot be amended without materially altering the intentions of the parties, it will be deleted and the remainder of this Agreement will be enforced to the extent permitted by law. EXECUTIVE: COMPANY: WEST COAST BANCORP _________________________________ By: __________________________ David L. Prysock Title ________________________ Date: ___________________________ Date: ________________________ WEST COAST BANK By: __________________________ Title: _______________________ Date: ________________________ Page 18 CHANGE IN CONTROL AGREEMENT (Prysock) EX-10.18 10 v96690exv10w18.txt EXHIBIT 10.18 EXHIBIT 10.18 WEST COAST BANK SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP) EFFECTIVE DATE: AUGUST 1, 2003 THIS SERP is adopted by WEST COAST BANK (the "Bank"), WEST COAST BANCORP ("Bancorp"), its parent holding company, (collectively referred to as the "Company") and ROBERT D. SZNEWAJS (the "Executive"). ARTICLE 1 PURPOSE 1.1 DUAL PURPOSES. This Plan is intended to: (a) Assist in assuring the Executive's continued service to the Company by providing supplemental retirement benefits that are competitive with the Company's peers; and (b) Discourage the Executive from engaging in any competitive business after the Executive leaves the Company. 1.2 TOP-HAT PLAN STATUS. This is an unfunded Plan maintained primarily for the purpose of providing deferred compensation for the Executive, who is a member of a select group of management or highly compensated employees. As such, this Plan is intended to qualify as a "top hat plan" exempt from Part 2 (minimum participation and vesting standards), Part 3 (minimum funding standards) and Part 4 (fiduciary responsibility provisions) of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). The provisions of the Plan shall be interpreted and administered according to this intention. ARTICLE 2 DEFINITIONS Words and phrases appearing in this Plan with initial capitalization are defined terms that have the meanings stated below. Words appearing in the following definitions which are themselves defined terms are also indicated by initial capitalization. 2.1 ACCRUAL BALANCE means the benefit liability accrued by the Company under Article 6. 2.2 ADJUSTED ACCRUAL BALANCE means the Accrual Balance determined as of the end of the month that is on or before the date of the Executive's Termination of Employment. 2.3 BENEFICIARY means the person or persons or estate, trust or charitable organization entitled under Article 5 to receive the death benefit payable under this Plan. 2.4 BOARD means Bancorp's Board of Directors. 2.5 CHANGE IN CONTROL AGREEMENT means the "Change In Control Agreement" effective January 1, 2004, between the Executive and the Company. 2.6 COMPENSATION COMMITTEE means the Compensation and Personnel Committee of Bancorp's Board. 2.7 DISABILITY means that either the carrier of any Company-provided individual or group long-term disability insurance policy covering the Executive or the Social Security Administration has determined that the Executive is disabled. Upon the request of the Compensation Committee, the Executive will submit proof of the carrier's or the Social Security Administration's determination. 2.8 EARLY INVOLUNTARY TERMINATION means that the Company has terminated the Executive's employment before Normal Retirement Age for any reason other than: (a) Termination for Cause; (b) Disability; or (c) A Termination Event. 2.9 EARLY VOLUNTARY TERMINATION means that before Normal Retirement Age, the Executive has voluntarily terminated Executive's employment with the Company for reasons other than: (a) Disability; or (b) A Termination Event. 2.10 EFFECTIVE DATE means the date first stated above (immediately below the title of this Plan). 2.11 NORMAL RETIREMENT AGE means age 64. 2.12 NORMAL RETIREMENT DATE means the later of Normal Retirement Age or Termination of Employment. 2.13 PLAN YEAR means the calendar year, except for the first Plan Year which is a short year beginning August 1, 2003, and ending December 31, 2003. 2.14 ROE means, for any given Plan Year, the greater of: (a) Bancorp's return on equity, which shall be determined under GAAP and expressed as a percentage calculated by dividing its: (1) Annual net income before common stock dividends are paid; by (2) Average annual common shareholder equity; or (b) Bancorp's adjusted return on equity which shall be determined by calculating the percentage under subsection (a) above on an adjusted basis to address the effects of items that are required to be included or excluded by GAAP for that Plan Year, but would normally not be included or excluded from Bancorp's net income or shareholder equity. 2.15 TERMINATION EVENT means the termination of the Executive's employment under circumstances that entitle the Executive to benefits under the Change In Control Agreement. 2.16 TERMINATION FOR CAUSE OR TERMINATED FOR CAUSE means that the Company has terminated the Executive's employment for "cause" as defined in the Change In Control Agreement. 2.17 TERMINATION OF EMPLOYMENT means that the Executive's employment with the Company has terminated for any reason, voluntary or involuntary. 2.18 YEAR OF SERVICE means a Plan Year in which: (a) The Company achieved an ROE of not less than ten percent (10%); and (b) The Executive is actively at work with the Company or on a Company-approved leave of absence at the end of that year. ARTICLE 3 BENEFITS DURING LIFETIME 3.1 NORMAL RETIREMENT BENEFIT. Upon Termination of Employment on or after Normal Retirement Age for reasons other than death, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustment under subsection (c) below and forfeiture under Article 7, the Normal Retirement Benefit is the annual "Benefit Level" installment as shown in Column (1) of Schedule A to this SERP. (b) PAYMENT SCHEDULE. The Normal Retirement Benefit is payable monthly for a period of fifteen (15) years beginning on the first day of the month on or after the Executive's Normal Retirement Date. (c) BENEFIT INCREASES. (1) As of each anniversary of the Effective Date, the Compensation Committee, in its sole discretion, may increase the Normal Retirement Benefit by increasing: (A) The amount of the scheduled installment payments; (B) The length of the payment schedule; or (C) Both the amount and the length of the installment payments. (2) If the Normal Retirement Benefit is increased, Schedule A to this SERP shall be revised, including adjusting the other scheduled benefit payments accordingly. 3.2 EARLY VOLUNTARY TERMINATION BENEFIT. Upon an Early Voluntary Termination, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below and forfeiture under Article 7, the Early Voluntary Termination Benefit is the annual installment payment under a deferred 15-year term certain fixed annuity calculated as follows: (1) The present value of the annuity is the vested Adjusted Accrual Balance (with vesting determined under subsection (e) below); (2) The annuity starting date is the first day of the month on or after Normal Retirement Age; and (3) Interest is credited at an annual rate of six percent (6%) compounded monthly during both the period from the Termination of Employment to the annuity starting date and the 15-year payout period. (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Early Voluntary Termination Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Early Voluntary Termination Benefit in a lump-sum payment as follows: (1) The payment amount shall equal the Executive's vested Adjusted Accrual Balance together with interest credited at the annual rate of six percent (6%) compounded monthly until paid under paragraph (2) below. (2) The lump-sum payment will be paid to the Executive at either: (A) Normal Retirement Age; or (B) Such earlier date as the Compensation Committee, in its sole discretion, may elect. (d) BENEFIT INCREASES. The Early Voluntary Termination Benefit may be increased as follows: (1) The amount of the benefit will be adjusted for any increases in the Normal Retirement Benefit granted under Section 3.1(c)(1). (2) In its sole discretion, the Compensation Committee may, from time to time as of any anniversary of the Effective Date, separately increase the amount of the Early Voluntary Termination Benefit without increasing the Normal Retirement Benefit. (3) If the Early Voluntary Termination Benefit is adjusted or increased, Schedule A to this SERP shall be revised accordingly. (e) VESTING. The vested portion of the Executive's Adjusted Accrual Balance will be determined as follows: (1) The Executive will be seventy percent (70%) vested immediately upon the Effective Date. Beginning with the Plan Year commencing January 1, 2004, the Executive will receive an additional ten percent (10%) vesting for each Year of Service until the Executive is one hundred percent (100%) vested after completing three (3) Years of Service. (2) In its sole discretion, the Compensation Committee may at any time and from time to time increase the Executive's vested percentage (including granting full vesting). 3.3 EARLY INVOLUNTARY TERMINATION BENEFIT. Upon an Early Involuntary Termination, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below, immediate full vesting under subsection (e) below and forfeiture under Article 7, the Early Involuntary Termination Benefit is the annual installment payment determined in the same manner as the Early Voluntary Termination Benefit under Section 3.2(a). (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Early Involuntary Termination Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Early Involuntary Termination Benefit in a lump-sum payment under the same terms and conditions that apply to a lump-sum payment of the Early Voluntary Termination Benefit (see Section 3.2(c)). (d) BENEFIT INCREASES. The Early Involuntary Termination Benefit may be separately increased under the same terms and conditions that apply to increases in the Early Voluntary Termination Benefit (see Section 3.2(d)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. 3.4 DISABILITY BENEFIT. Upon Termination of Employment before Normal Retirement Age due to Disability, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below, immediate full vesting under subsection (e) below and forfeiture under Article 7, the Disability Benefit is the annual installment payment determined in the same manner as for the Early Voluntary Termination Benefit (see Section 3.2(a)). (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Disability Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Disability Benefit in a lump-sum payment under the same terms and conditions that apply to a lump-sum payment of the Early Voluntary Termination Benefit (see Section 3.2(c)). (d) BENEFIT INCREASES. The Disability Benefit may be increased under the same terms and conditions that apply to increases in the Early Voluntary Termination Benefit (see Section 3.2(d)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. 3.5 CHANGE IN CONTROL BENEFIT. If the Executive becomes entitled to benefits under the Change in Control Agreement, the Company will pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below and forfeiture under Article 7, the Change In Control Benefit is the annual "Change of Control Installment" set forth in Column (10) of Schedule A to this SERP. (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Change In Control benefit is payable in the same manner as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Change In Control Benefit in a lump-sum payment as follows: (1) The payment will be equal to the present value of the Normal Retirement Benefit as of the date of the Executive's Termination of Employment. The present value will be determined using an annual rate of six percent (6%) interest compounded monthly. (2) The lump-sum payment will be paid to the Executive within sixty (60) days following the Executive's Termination of Employment. (d) BENEFIT INCREASES. The Change in Control Benefit may be increased in the same manner as the Normal Retirement Benefit (see Section 3.1(c)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. ARTICLE 4 DEATH BENEFITS 4.1 PRE-RETIREMENT DEATH BENEFIT. If the Executive dies before a Termination of Employment and before attaining Normal Retirement Age, the Company will pay the following benefit to the Executive's Beneficiary: (a) AMOUNT OF BENEFIT. The Pre-Retirement Death Benefit is the annual "Pre-Retirement Death Benefit Installment" as shown in Column (11) of Schedule A to this SERP. (b) PAYMENT OF BENEFIT. Unless a lump-sum payment is made under subsection (c) below, the Pre-Retirement Death Benefit is payable monthly for a period of fifteen (15) years beginning on the first day of the month following the Executive's death. (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Beneficiary or upon its own motion, to pay the Pre-Retirement Death Benefit in a lump-sum payment as follows: (1) The payment will be equal to the Normal Retirement Age Accrual Balance. (2) The lump-sum payment will be paid to the Beneficiary by the earlier of the following dates: (A) Sixty (60) days after the lump-sum payment is requested by the Beneficiary; or (B) Such other date as elected by the Compensation Committee in its sole discretion. 4.2 DEATH DURING PAYMENT OF A BENEFIT. If the Executive dies after any benefit payments have commenced under Article 3, the Company shall pay the remaining benefits to the Executive's Beneficiary either: (a) At the same time and in the same amounts they would have been paid to the Executive had the Executive survived; or (b) In the Committee's sole discretion, upon a request by the Beneficiary or upon its own motion, in a lump-sum payment. The amount of the lump-sum payment shall be determined under the provisions for calculating the alternative lump-sum payment for the particular type of benefit the Executive was receiving. If the Executive was receiving the Normal Retirement Benefit, the lump sum payment shall be the lump sum present value of the remaining payments as of the date of payment, determined using an annual rate of six percent (6%) interest compounded monthly. 4.3 DEATH BEFORE PAYMENTS COMMENCE. If the Executive is entitled to a benefit under Article 3, but dies before benefit payments begin, the Company shall pay the Executive's Beneficiary either: (a) The same benefit payments that the Executive was entitled to at the date of the Executive's death, except that the benefit payments shall commence as of the first day of the month following the Executive's death; or (b) The lump sum equivalent of those benefits as determined under Section 4.2(b). ARTICLE 5 BENEFICIARIES 5.1 DESIGNATION OF BENEFICIARY. The Executive may designate the Beneficiary or Beneficiaries (who may be designated concurrently or contingently) to receive the death benefit under the Plan under the following terms and conditions: (a) The beneficiary designation must be in a form satisfactory to the Compensation Committee and must be signed by the Executive. (b) A beneficiary designation shall be effective upon receipt by the Compensation Committee or its designee, provided it is received before the Executive's death. (c) The Executive may revoke a previous beneficiary designation without the consent of the previously designated Beneficiary. This revocation is made by filing a new beneficiary designation form with the Compensation Committee or its designee, and shall be effective upon receipt. 5.2 DIVORCE. A divorce will automatically revoke the portion of a beneficiary designation designating the former spouse as a Beneficiary. The former spouse will be a Beneficiary under this SERP only if a new beneficiary designation is filed after the date the dissolution decree is entered. 5.3 DISCLAIMERS. If a Beneficiary disclaims a death benefit, the benefit will be paid as if the Beneficiary had predeceased the Executive. 5.4 DEATH OF BENEFICIARY. If a Beneficiary who is in pay status dies before full distribution is made to the Beneficiary, the unpaid balance of the distribution will be paid to the Beneficiary's estate. 5.5 DEFAULT BENEFICIARY. If, at the time of the Executive's death, the Executive has failed to designate a Beneficiary, the Executive's beneficiary designation has become completely invalid under the provisions of this Article or there is no surviving Beneficiary, payment of the death benefit will be made in the following order of priority: (a) To the Executive's spouse, if living; (b) To the Executive's surviving children, in equal shares; or (c) To the Executive's estate. ARTICLE 6 ACCRUAL BALANCE 6.1 COMPENSATION LIABILITY. The Accrual Balance shall be equal to the financial statement compensation liability accrued by the Company (under Section 6.2) as of any applicable determination date (as defined in Section 6.3) for its payment obligation under this SERP. 6.2 ACCRUAL CALCULATION. The value of the Accrual Balance shall: (a) Be determined using Generally Accepted Accounting Principles applying APB 12 as amended by FAS 106; and (b) Equal the sum of the: (1) Principal accrual (service cost); plus (2) Interest accrual at six percent (6%) interest. 6.3 DETERMINATION DATES. The Accrual Balance shall be determined as of the last day of the month. 6.4 YEAR-END VALUES. The year-end values and Normal Retirement Age value of the Accrual Balance are listed in Column (2) of Schedule A to this SERP. 6.5 REPORTING. The Compensation Committee will report the Accrual Balance to the Executive at least annually and within a reasonable period of time not to exceed 30 days after the date of the Termination of Employment if the Executive is to be paid the Early Voluntary Termination, Early Involuntary Termination or Disability Benefit. ARTICLE 7 FORFEITURE 7.1 GROUNDS FOR FORFEITURE. (a) The Executive will forfeit any benefits payable under this Plan upon a Termination for Cause. (b) The Company shall not pay the Pre-Retirement Death Benefit under Section 4.1 under the Plan if the Executive: (1) Commits suicide within two years after the Effective Date; or (2) Dies within two years after the Effective Date and has made any material misstatement of fact on any application for life insurance that may be used by the Company to finance its obligations under the Plan. (c) The Executive will forfeit the balance of any remaining unpaid benefits under this Plan if the Executive violates the noncompetition restrictions of Section 7.2. 7.2 NONCOMPETITION RESTRICTIONS. (a) DEFINITIONS. For purposes of this section, the following terms have the meanings stated below: (1) "BANKING INSTITUTION" means any state or national bank, state or federal savings and loan association, mutual savings bank or state or federal credit union. (2) "COMPETING ACTIVITIES" mean any activities that are competitive with the business activities of Bancorp, the Bank or any of their subsidiaries as conducted at the commencement of, or during the term of, the restricted period. (3) "FINANCIAL INSTITUTION" means any banking institution (as defined in paragraph (1) above), trust company or mortgage company regardless of: (A) Its legal form of organization; or (B) Whether it is in existence or is in formation. (4) "RESTRICTED AREA" means any county in Oregon or Washington in which Bancorp, the Bank or any of their subsidiaries either: (A) Has a branch or other office at the commencement of the restricted period; or (B) Has decided to open a branch or other office during the restricted period, provided that fact has been communicated to the Executive before the Executive's Termination of Employment. (5) "RESTRICTED PERIOD" means a period of: (A) 24 months from the date of the Executive's Termination of Employment; or (B) 36 months from the date of the Executive's Termination Event if the Change in Control Benefit under Section 3.5 is payable. (6) "SUBSIDIARIES" mean any current or future subsidiary of Bancorp or the Bank, regardless of whether it is one hundred percent (100%) owned by Bancorp or the Bank. (b) RESTRICTIONS. The Executive agrees that, during the restricted period, the Executive will not, directly or indirectly: (1) Except as provided in subsection (c)(1) below, be employed by or provide services to any financial institution that engages in competing activities in the restricted area, whether as an employee, officer, director, agent, consultant, promoter or in any similar position, function or title; (2) Have any ownership or financial interest in any financial institution that engages in competing activities in the restricted area that violates the Company's then current published ethical standards on ownership interests in competing businesses; (3) Induce any employee of Bancorp, the Bank or their subsidiaries to terminate their employment with Bancorp, the Bank or their subsidiaries; (4) Hire or assist in the hiring of any employee of Bancorp, the Bank or their subsidiaries for or by any financial institution that is not affiliated with Bancorp, the Bank or their subsidiaries; or (5) Induce any person or entity (other than the Executive's relatives or entities controlled by them) to terminate or curtail its business or contractual relationships with the Bank, Bancorp or their subsidiaries. (c) EXCEPTIONS. Regardless of the restriction in subsection (b)(1) above, the Executive may be employed outside the restricted area as an employee, officer, agent, consultant or promoter of a financial institution that engages in competing activities in the restricted area, provided the Executive will not: (1) Act within the restricted area as an employee or other representative or agent of that financial institution; (2) Have any responsibilities for that financial institution's operations within the restricted area; or (3) Directly or indirectly violate the restrictions of subsection (b)(3), (4) and (5) above. (d) FORFEITURE. If the Executive breaches the restrictions under subsection (b) above, Executive will: (1) Forfeit any benefits payable under this Plan that were unpaid as of the date of the breach; and (2) Promptly repay the Company, upon demand, any payments made after the date of the breach. If the Executive does not repay that amount within 15 days after the date of the demand, the Executive will also pay interest on that amount at the rate of nine percent (9%) per annum. ARTICLE 8 CLAIMS AND APPEALS PROCEDURE 8.1 CLAIMS PROCEDURE. (a) ROUTINE PAYMENTS. The Compensation Committee may authorize distribution of payments to the Executive or the Executive's Beneficiary even though a formal claim has not been filed. (b) FORMAL CLAIMS. (1) MANDATORY PROCEDURE. Any claim that the Executive or a Beneficiary or anyone claiming on behalf of or through the Executive or a Beneficiary may make under ERISA or under any other applicable federal or state law must first be brought as a formal claim under this section. If that claim is denied, it will be subject to the claims appeal procedures of Section 8.2. (2) FORM AND CONTENT OF CLAIM. The claim shall be in any form reasonably acceptable to the Compensation Committee and must state the basis of the claim and also authorize the Compensation Committee and its designees to conduct any examinations necessary to determine the validity of the claim and take any steps necessary to facilitate the benefit payment. (3) SUBMISSIONS BY CLAIMANT. The claimant shall file the claim with the Executive Vice-President, Human Resources. The claimant may also submit written comments, documents, records and other information relating to the claim. (4) ACCESS TO INFORMATION. The claimant will be provided, upon request and free of charge, reasonable access to, and copies of, all nonconfidential or nonprivileged Company documents, records and other information relevant to the claim. (5) AUTHORIZED REPRESENTATIVE. The claimant may be represented by an individual authorized to act on behalf of the claimant. A representative's authorization to act on behalf of the claimant must be established to the Compensation Committee's reasonable satisfaction. (6) REVIEW AND RECOMMENDATION. The claim shall be reviewed by the Company's Chief Executive Officer and the Executive Vice-President, Human Resources, who shall make their recommendation to the Compensation Committee. (c) TIMELINE. The Compensation Committee shall make a determination on the claim within 90 days after the date the claimant filed it with the Executive Vice-President, Human Resources. If more time is required for a special case, the Compensation Committee may take up to an additional 90 days to render a determination, but the claimant must be notified of the need for the extension of time within the initial 90-day period. This notification will explain the special circumstances requiring the extension of time as well as the date by which a determination is expected. (d) EXPLANATION OF DENIAL. If a claim is wholly or partially denied, the Compensation Committee shall provide the claimant with a notice of the decision, written in a manner calculated to be understood by the claimant, containing the following information: (1) The specific reason or reasons for the denial and a discussion of why the specific reason or reasons apply. (2) References to the specific provisions of this Plan upon which the denial was based. (3) A description of any additional material or information necessary for the claimant to perfect the claim. (4) An explanation of the claims appeal procedures under this Plan. (e) DEEMED DENIAL. If a determination is not furnished to the claimant within 90 days of the date the claim was filed--or 180 days if it is a special case--the claim shall be deemed to be denied. (f) APPEAL OF DENIAL. If the claimant disagrees with the denial, the claimant's sole remedy shall be to proceed with the claims appeal procedure under Section 8.2. 8.2 CLAIMS APPEAL PROCEDURES. (a) WRITTEN REQUEST. If a claim is denied in whole or in part, the claimant or the claimant's authorized representative may submit a written request for a review of the denial, including a statement of the reasons for the review. (b) DEADLINE. This request must be filed with the Compensation Committee within 60 days after the claimant receives notice of the denial. This time limit may be extended by the Compensation Committee if an extension appears to be reasonable in view of the nature of the claim and the pertinent circumstances. (c) CONDUCT OF APPEAL. Upon receipt of such a request, the Compensation Committee shall afford the claimant an opportunity to review relevant documents and to submit issues and comments in writing. The Compensation Committee may hold a hearing or conduct an independent investigation. The Compensation Committee will consider all of the claimant's submissions, regardless of whether they were submitted or considered in the initial determination of the claim. (d) TIMELINE. A decision on the review shall be rendered by the Compensation Committee not later than 60 days after receipt of the claimant's request for the review. If more time is required for a special case, the Compensation Committee may take up to an additional 60 days to render a decision, but the claimant must be notified of the need for the extension of time within the initial 60-day period. This notification shall explain the special circumstances (such as the need to hold a hearing) which require the extension of time. (e) DECISION ON APPEAL. The decision shall be written in a manner calculated to be understood by the claimant and shall include: (1) Specific reasons for the decision; (2) Specific references to the provisions of this Plan on which the decision is based; (3) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits; and (4) A statement of the claimant's right to bring a civil action under ERISA Section 502(a), to the extent such an action is not preempted by the mandatory arbitration provision of Section 10.10. (f) DEEMED DENIAL. If the determination on the appeal is not furnished to the claimant within 60 days--or 120 days if it is a special case--the appeal shall be deemed to be denied. (g) EXHAUSTION OF APPEAL PROCESS REQUIRED. A claimant whose claim has been denied is required to exhaust the claims appeal procedures set forth in this section before commencing any arbitration or legal action. 8.3 DISCRETIONARY AUTHORITY; STANDARDS OF PROOF AND REVIEW; RECORD ON REVIEW. (a) The Compensation Committee is the "named fiduciary" for purposes of ERISA. This Plan confers full discretionary authority on the Compensation Committee with regard to the administration of this Plan, including the discretion to: (1) Make findings of fact and determine the sufficiency of the evidence presented regarding a claim; and (2) Interpret and construe the provisions of this Plan and related administrative documents, if any, (including words and phrases that are not defined in this Plan or those documents) and correct any defect, supply any omission or reconcile any ambiguity or inconsistency. (b) A decision by the Compensation Committee is required to be supported by substantial evidence only. That is, proof by a preponderance of the evidence, clear and convincing evidence or beyond a reasonable doubt is not required. (c) A court of law or arbitrator reviewing any decision of the Compensation Committee, including those relating to the interpretation of this Plan or a claim for benefits under this Plan, shall be required to use the arbitrary and capricious standard of review. That is, the Compensation Committee's determination may be reversed only if it was made in bad faith, is not supported by substantial evidence or is erroneous as to a question of law. (d) In conducting its review of the Compensation Committee's decision, a court or arbitrator shall be limited to the record of documents, testimony and facts presented to or actually known to the Compensation Committee at the time the decision was made. ARTICLE 9 AMENDMENT AND TERMINATION 9.1 BY MUTUAL AGREEMENT. Except as provided in Section 9.2, this Plan may be amended or terminated only by a written agreement signed by the Company and the Executive. 9.2 BY THE COMPANY. (a) Subject to the restrictions in subparagraph (b) below, the Company may unilaterally amend or terminate this Plan at any time if in the opinion of the Company's counsel or accountants, as a result of legislative, judicial or regulatory action, continuation of the Plan would: (1) Cause benefits to be taxable to the Executive before their actual receipt; or (2) Result in material financial penalties or other materially detrimental ramifications to the Company (other than the financial impact of paying the benefits). (b) Except as required by law, banking regulatory requirements or financial accounting requirements, an amendment or termination under subparagraph (a) above may not reduce: (1) The vested percentage of the Executive's Adjusted Accrual Balance; (2) The amount of the Executive's vested Adjusted Accrual Balance as determined as of the later of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved; or (3) The amount of the benefit payments that are being made if the Executive's benefits were in pay status as of the earlier of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved. (c) Except as required by law, banking regulatory requirements or financial accounting requirements, upon the termination of this Plan under subsection (a) above: (1) The Executive's Adjusted Accrual Balance and vesting credit will be frozen as of the later of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved; or (2) Interest will be credited on the Executive's frozen vested Accrual Balance at an annual rate of six percent (6%) compounded monthly; and (3) The Company may either: (A) Hold and disburse the Executive's frozen vested Accrual Balance (as adjusted under paragraph (2) above) in accordance with the otherwise applicable terms and conditions of this Plan; or (B) Disburse that amount in a lump sum at such earlier date as the Company, in its sole discretion, may elect. ARTICLE 10 GENERAL PROVISIONS 10.1 ADMINISTRATION. The Compensation Committee shall have all powers necessary or desirable to administer this Plan, including but not limited to: (a) Establishing and revising the method of accounting for the Plan; (b) Maintaining a record of benefit payments; (c) Establishing rules and prescribing any forms necessary or desirable to administer the Plan; (d) Interpreting the provisions of the Plan; and (e) Delegating to others certain aspects of the Compensation Committee's managerial and operational responsibilities, including employing advisors and delegating ministerial duties. 10.2 RECEIPT AND RELEASE FOR PAYMENTS. (a) The Compensation Committee may require the recipient of a payment, as a condition precedent to the payment, to execute a receipt and, in the case of a payment in full, a release for the payment. The receipt and the release shall be in a form satisfactory to the Compensation Committee. (b) Payment may be made by a deposit to the credit of the Executive or a Beneficiary, as applicable, in any bank or trust company. (c) Payment may be made to the individual or institution maintaining or having custody of the Executive or Beneficiary, as applicable, if the Compensation Committee receives satisfactory evidence that-- (1) A person entitled to receive any benefit under this Plan is, at the time the benefit is payable, physically, mentally or legally incompetent to receive payment and provides a valid receipt for it; (2) An individual or institution is maintaining or has custody of that person; and (3) No guardian, custodian or other representative of the estate of that person has been appointed. (d) The receipt of the recipient or a canceled check shall be a sufficient voucher for the Company. The Company is not required to obtain from the recipient an accounting for the payment. (e) If a dispute arises over a distribution, payment may be withheld until the dispute is determined by a court of competent jurisdiction or settled, to the satisfaction of the Compensation Committee, by the parties concerned. The Compensation Committee may require a hold harmless agreement on behalf of the Company and the Plan before making payment. 10.3 OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Plan is not an express or implied employment agreement. Accordingly, other than providing for certain benefits payable upon a Termination of Employment, this Plan will not affect the determination of any compensation payable by the Company to the Executive, nor will it affect the other terms of the Executive's employment with the Company. The specific arrangements referred to in this Plan are not intended to exclude or circumvent any other benefits that may be available to the Executive under the Company's employee benefit or other applicable plans, upon the Executive's Termination of Employment. 10.4 WITHHOLDING. (a) INCOME TAX. Applicable federal, state and local income tax withholding will be withheld from all payments made under this Plan. (b) FICA. To the extent allowable under applicable regulations: (1) The present value of the vested benefits under this Plan will be taken into account as FICA wages in the year they become vested; (2) Present value will be determined using reasonable actuarial equivalency factors acceptable to the Compensation Committee; (3) The employee portion of each year's FICA liability will be deducted from the Executive's other cash compensation for that year; and (4) FICA will not be deducted from any payments made under this Plan. 10.5 UNFUNDED ARRANGEMENT. (a) The Company's payment obligation under this Plan is purely contractual and is not funded or secured in any manner by any asset, pledge or encumbrance of the Company's property. (b) This Plan is not intended to create, and should not be construed as creating, any trust or trust fund. The benefits accrued under this Plan and any assets acquired by the Company to finance its payment obligations under this Plan shall not be held in a trust (other than a grantor trust of the Company), escrow or similar fiduciary capacity. (c) Any insurance policy on the Executive's life the Company may acquire to assist it in financing its obligations under this Plan is a general asset of the Company and neither the Executive nor anyone else claiming on behalf of or through the Executive shall have any right with respect to, or claim against, that policy. (d) The Executive and any Beneficiary are general unsecured creditors of the Company with respect to the payment of the benefits under this Plan. 10.6 BENEFITS NOT ASSIGNABLE. The accrued benefits under this Plan shall not be considered assets under state law or bankruptcy law of the Executive or of any Beneficiary. The Executive and any Beneficiary shall not have any right to alienate, anticipate, pledge, encumber or assign any of the benefits payable under this Plan. The Executive's or any Beneficiary's benefits shall not be subject to any claim of, or any attachment, garnishment or other legal process brought by, any of his or her creditors. 10.7 BINDING EFFECT. This Plan binds and inures to the benefit of the parties and their respective legal representatives, heirs, successors and assigns. 10.8 REORGANIZATION. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless that succeeding or continuing company, firm or person agrees to assume and discharge the obligations of the Company under this Plan. Upon the occurrence of such an event, the term "Company" as used in this Plan shall be deemed to refer to the successor or survivor company. 10.9 APPLICABLE LAW. (a) This Plan shall be construed and its validity determined according to the laws of the State of Oregon, other than its law regarding conflicts of law or choice of law, to the extent not preempted by federal law. (b) Any dispute arising out of this Plan must be brought in either Clackamas County or Multnomah County, Oregon, and the parties will submit to personal jurisdiction in either of those counties. 10.10 ARBITRATION. Any dispute or claim arising out of or brought in connection with this Plan, will, if requested by any party, be submitted to and settled by arbitration under the rules then in effect of the American Arbitration Association (or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered in arbitration will be final and will bind the parties, and a judgment on it may be entered in the highest court of the forum having jurisdiction. The arbitrator will render a written decision, naming the substantially prevailing party in the action, and, subject to Section 10.11(b), will award that party all costs and expenses incurred, including reasonable attorneys' fees. 10.11 ATTORNEYS' FEES. (a) If any breach of or default under this Plan results in either party incurring attorneys' or other fees, costs or expenses (including those incurred in an arbitration), the substantially prevailing party is entitled to recover from the non-prevailing party its reasonable legal fees, costs and expenses, including attorneys' fees and the costs of the arbitration, except as provided in subsection (b) below. (b) If the Executive is not the substantially prevailing party, the Executive shall be liable to pay the Company under subsection (a) above only if the arbitrator determines that: (1) There was no reasonable basis for the Executive's claim (or the Executive's response to the Company's claim); or (2) The Executive had engaged in unreasonable delay, failed to comply with a discovery order or otherwise acted in bad faith in the arbitration. (c) Either party shall be entitled to recover any reasonable attorneys' fees and other costs and expenses it incurs in enforcing or collecting an arbitration award. (d) If an award under this section is made to the Executive and accountants or tax counsel selected by Company with the Executive's consent (which shall not be unreasonably withheld) determine that the award is includible in Executive's gross income, the Company shall also pay the Executive a gross-up payment to offset the taxes imposed on that award, including the taxes on the gross-up payment itself. This gross-up payment shall be determined following the methodology employed in the Change in Control Agreement. 10.12 ENTIRE AGREEMENT. This Plan constitutes the entire agreement between the Company and the Executive as to its subject matter. No rights are granted to the Executive by virtue of this Plan other than those specifically set forth in this document and any amendments to it. 10.13 CONSTRUCTION. The language of this Plan was chosen jointly by the parties to express their mutual intent. No rule of construction based on which party drafted the Plan or certain of its provisions will be applied against any party. 10.14 SECTION HEADINGS. The section headings used in this Plan have been included for convenience of reference only. 10.15 COUNTERPARTS. This Plan may be executed in one or more counterparts, and all counterparts will be construed together as one Plan. 10.16 SEVERABILITY. If any provision of this Plan is, to any extent, held to be invalid or unenforceable, it will be deemed amended as necessary to conform to the applicable laws or regulations. However, if it cannot be amended without materially altering the intentions of the parties, it will be deleted and the remainder of this Plan will be enforced to the extent permitted by law. 10.17 JOINT AND SEVERAL OBLIGATION. Bancorp and Bank will be jointly and severally liable for the payment obligations under this Agreement. EXECUTIVE: COMPANY: WEST COAST BANCORP ___________________________________ By:_________________________________ Robert D. Sznewajs Title ______________________________ Date: ______________________________ Date:_______________________________ WEST COAST BANK By: ________________________________ Title: _____________________________ Date: ______________________________ CLARKCONSULTING(TM) PLAN YEAR REPORTING HYPOTHETICAL TERMINATION BENEFIT SCHEDULE ROBERT SZNEWAJS
DOB: 10/22/1946 EARLY VOLUNTARY EARLY INVOLUNTARY Plan Anniv Date: 12/31/2003 TERMINATION TERMINATION Normal Retirement: 10/22/2008, Age 62 Installment Installment Payments: Monthly Installments Payable at 62 Payable at 62 - -------------------------------------- ------------------- --------------------- BENEFIT ACCRUAL Based On Based On LEVEL BALANCE Vesting Accrual Vesting Accrual PERIOD DISCOUNT ------- --------- ------- -------- ------- -------- ENDING RATE (1) (2) (3) (4) (5) (6) - ------ -------- ------- --------- ------- -------- ------- -------- Dec 2003(1) 6% 105,000 108,725 70% 10,241 100% 14,630 Dec 2004 6% 105,000 380,998 80% 38,631 100% 48,289 Dec 2005 6% 105,000 670,065 90% 71,993 100% 79,992 Oct 2006 6% 105,000 924,528 90% 94,500 100% 105,000 Starting November 1, 2006, only interest is accrued. Dec 2006 6% 105,000 933,796 100% 105,000 100% 105,000 Dec 2007 6% 105,000 991,390 100% 105,000 100% 105,000 Oct 2008 6% 105,000 1,042,090 100% 105,000 100% 105,000 October 22, 2008 Retirement; November 1, 2008 First Payment Date

DOB: 10/22/1946 PRE-RETIRE. Plan Anniv Date: 12/31/2003 DISABILITY CHANGE OF CONTROL DEATH Normal Retirement: 10/22/2008, Age 62 Installment Installment BENEFIT Payments: Monthly Installments Payable at 62 Payable at 62 Installment - ------------------------------------ ------------------- -------------------- ------------ Based On Based On Based On Vesting Accrual Vesting Benefit Benefit PERIOD DISCOUNT ------- -------- ------- -------- -------- ENDING RATE (7) (8) (9) (10) (11) - -------- -------- ------- -------- ------- -------- -------- Dec 2003(1) 6% 100% 14,630 100% 105,000 105,000 Dec 2004 6% 100% 48,289 100% 105,000 105,000 Dec 2005 6% 100% 79,992 100% 105,000 105,000 Oct 2006 6% 100% 105,000 100% 105,000 105,000 Starting November 1, 2006, only interest is accrued. Dec 2006 6% 100% 105,000 100% 105,000 105,000 Dec 2007 6% 100% 105,000 100% 105,000 105,000 Oct 2008 6% 100% 105,000 100% 105,000 105,000 October 22, 2008 Retirement; November 1, 2008 First Payment Date
(1)The first line reflects 5 months of data, August 2003 to December 2003. *The purpose of this hypothetical illustration is to show the participant's annual benefit based on various termination assumptions. Actual benefits are based on the terms and provisions of the plan agreement executed between the company and participant and may differ from those shown. *IF THERE IS A CONFLICT IN ANY TERMS OR PROVISIONS BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT. Copyright (c) 2003 Clark Consulting. Securities offered through Clark Securities, Inc., Salary Continuation Plan for West Coast Bank - Lake Oswego, OR a wholly owned subsidiary of Clark, Inc., member NASD & SIPC, 1001811 16948 137755 v5.31.04 12/18/2003:13 SCP-E NB Los Angeles, CA 90071, (213) 486-6300.

EX-10.19 11 v96690exv10w19.txt EXHIBIT 10.19 EXHIBIT 10.19 WEST COAST BANK SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP) EFFECTIVE DATE: AUGUST 1, 2003 THIS SERP is adopted by WEST COAST BANK (the "Bank"), WEST COAST BANCORP ("Bancorp"), its parent holding company, (collectively referred to as the "Company") and ANDERS GILTVEDT (the "Executive"). ARTICLE 1 PURPOSE 1.1 DUAL PURPOSES. This Plan is intended to: (a) Assist in assuring the Executive's continued service to the Company by providing supplemental retirement benefits that are competitive with the Company's peers; and (b) Discourage the Executive from engaging in any competitive business after the Executive leaves the Company. 1.2 TOP-HAT PLAN STATUS. This is an unfunded Plan maintained primarily for the purpose of providing deferred compensation for the Executive, who is a member of a select group of management or highly compensated employees. As such, this Plan is intended to qualify as a "top hat plan" exempt from Part 2 (minimum participation and vesting standards), Part 3 (minimum funding standards) and Part 4 (fiduciary responsibility provisions) of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). The provisions of the Plan shall be interpreted and administered according to this intention. ARTICLE 2 DEFINITIONS Words and phrases appearing in this Plan with initial capitalization are defined terms that have the meanings stated below. Words appearing in the following definitions which are themselves defined terms are also indicated by initial capitalization. 2.1 ACCRUAL BALANCE means the benefit liability accrued by the Company under Article 6. 2.2 ADJUSTED ACCRUAL BALANCE means the Accrual Balance determined as of the end of the month that is on or before the date of the Executive's Termination of Employment. 2.3 BENEFICIARY means the person or persons or estate, trust or charitable organization entitled under Article 5 to receive the death benefit payable under this Plan. 2.4 BOARD means Bancorp's Board of Directors. 2.5 CHANGE IN CONTROL AGREEMENT means the "Change In Control Agreement" effective January 1, 2004, between the Executive and the Company. 2.6 COMPENSATION COMMITTEE means the Compensation and Personnel Committee of Bancorp's Board. 2.7 DISABILITY means that either the carrier of any Company-provided individual or group long-term disability insurance policy covering the Executive or the Social Security Administration has determined that the Executive is disabled. Upon the request of the Compensation Committee, the Executive will submit proof of the carrier's or the Social Security Administration's determination. 2.8 EARLY INVOLUNTARY TERMINATION means that the Company has terminated the Executive's employment before Normal Retirement Age for any reason other than: (a) Termination for Cause; (b) Disability; or (c) A Termination Event. 2.9 EARLY VOLUNTARY TERMINATION means that before Normal Retirement Age, the Executive has voluntarily terminated Executive's employment with the Company for reasons other than: (a) Disability; or (b) A Termination Event. 2.10 EFFECTIVE DATE means the date first stated above (immediately below the title of this Plan). 2.11 NORMAL RETIREMENT AGE means age 64. 2.12 NORMAL RETIREMENT DATE means the later of Normal Retirement Age or Termination of Employment. 2.13 PLAN YEAR means the calendar year, except for the first Plan Year which is a short year beginning August 1, 2003, and ending December 31, 2003. 2.14 ROE means, for any given Plan Year, the greater of: (a) Bancorp's return on equity, which shall be determined under GAAP and expressed as a percentage calculated by dividing its: (1) Annual net income before common stock dividends are paid; by (2) Average annual common shareholder equity; or (b) Bancorp's adjusted return on equity which shall be determined by calculating the percentage under subsection (a) above on an adjusted basis to address the effects of items that are required to be included or excluded by GAAP for that Plan Year, but would normally not be included or excluded from Bancorp's net income or shareholder equity. 2.15 TERMINATION EVENT means the termination of the Executive's employment under circumstances that entitle the Executive to benefits under the Change In Control Agreement. 2.16 TERMINATION FOR CAUSE OR TERMINATED FOR CAUSE means that the Company has terminated the Executive's employment for "cause" as defined in the Change In Control Agreement. 2.17 TERMINATION OF EMPLOYMENT means that the Executive's employment with the Company has terminated for any reason, voluntary or involuntary. 2.18 YEAR OF SERVICE means a Plan Year in which: (a) The Company achieved an ROE of not less than ten percent (10%); and (b) The Executive is actively at work with the Company or on a Company-approved leave of absence at the end of that year. ARTICLE 3 BENEFITS DURING LIFETIME 3.1 NORMAL RETIREMENT BENEFIT. Upon Termination of Employment on or after Normal Retirement Age for reasons other than death, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustment under subsection (c) below and forfeiture under Article 7, the Normal Retirement Benefit is the annual "Benefit Level" installment as shown in Column (1) of Schedule A to this SERP. (b) PAYMENT SCHEDULE. The Normal Retirement Benefit is payable monthly for a period of fifteen (15) years beginning on the first day of the month on or after the Executive's Normal Retirement Date. (c) BENEFIT INCREASES. (1) As of each anniversary of the Effective Date, the Compensation Committee, in its sole discretion, may increase the Normal Retirement Benefit by increasing: (A) The amount of the scheduled installment payments; (B) The length of the payment schedule; or (C) Both the amount and the length of the installment payments. (2) If the Normal Retirement Benefit is increased, Schedule A to this SERP shall be revised, including adjusting the other scheduled benefit payments accordingly. 3.2 EARLY VOLUNTARY TERMINATION BENEFIT. Upon an Early Voluntary Termination, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below and forfeiture under Article 7, the Early Voluntary Termination Benefit is the annual installment payment under a deferred 15-year term certain fixed annuity calculated as follows: (1) The present value of the annuity is the vested Adjusted Accrual Balance (with vesting determined under subsection (e) below); (2) The annuity starting date is the first day of the month on or after Normal Retirement Age; and (3) Interest is credited at an annual rate of six percent (6%) compounded monthly during both the period from the Termination of Employment to the annuity starting date and the 15-year payout period. (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Early Voluntary Termination Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Early Voluntary Termination Benefit in a lump-sum payment as follows: (1) The payment amount shall equal the Executive's vested Adjusted Accrual Balance together with interest credited at the annual rate of six percent (6%) compounded monthly until paid under paragraph (2) below. (2) The lump-sum payment will be paid to the Executive at either: (A) Normal Retirement Age; or (B) Such earlier date as the Compensation Committee, in its sole discretion, may elect. (d) BENEFIT INCREASES. The Early Voluntary Termination Benefit may be increased as follows: (1) The amount of the benefit will be adjusted for any increases in the Normal Retirement Benefit granted under Section 3.1(c)(1). (2) In its sole discretion, the Compensation Committee may, from time to time as of any anniversary of the Effective Date, separately increase the amount of the Early Voluntary Termination Benefit without increasing the Normal Retirement Benefit. (3) If the Early Voluntary Termination Benefit is adjusted or increased, Schedule A to this SERP shall be revised accordingly. (e) VESTING. The vested portion of the Executive's Adjusted Accrual Balance will be determined as follows: (1) The Executive will be thirty percent (30%) vested immediately upon the Effective Date. Beginning with the Plan Year commencing January 1, 2004, the Executive will receive an additional ten percent (10%) vesting for each Year of Service until the Executive is one hundred percent (100%) vested after completing seven (7) Years of Service. (2) In its sole discretion, the Compensation Committee may at any time and from time to time increase the Executive's vested percentage (including granting full vesting). 3.3 EARLY INVOLUNTARY TERMINATION BENEFIT. Upon an Early Involuntary Termination, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below, immediate full vesting under subsection (e) below and forfeiture under Article 7, the Early Involuntary Termination Benefit is the annual installment payment determined in the same manner as the Early Voluntary Termination Benefit under Section 3.2(a). (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Early Involuntary Termination Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Early Involuntary Termination Benefit in a lump-sum payment under the same terms and conditions that apply to a lump-sum payment of the Early Voluntary Termination Benefit (see Section 3.2(c)). (d) BENEFIT INCREASES. The Early Involuntary Termination Benefit may be separately increased under the same terms and conditions that apply to increases in the Early Voluntary Termination Benefit (see Section 3.2(d)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. 3.4 DISABILITY BENEFIT. Upon Termination of Employment before Normal Retirement Age due to Disability, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below, immediate full vesting under subsection (e) below and forfeiture under Article 7, the Disability Benefit is the annual installment payment determined in the same manner as for the Early Voluntary Termination Benefit (see Section 3.2(a)). (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Disability Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Disability Benefit in a lump-sum payment under the same terms and conditions that apply to a lump-sum payment of the Early Voluntary Termination Benefit (see Section 3.2(c)). (d) BENEFIT INCREASES. The Disability Benefit may be increased under the same terms and conditions that apply to increases in the Early Voluntary Termination Benefit (see Section 3.2(d)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. 3.5 CHANGE IN CONTROL BENEFIT. If the Executive becomes entitled to benefits under the Change in Control Agreement, the Company will pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below and forfeiture under Article 7, the Change In Control Benefit is the annual "Change of Control Installment" set forth in Column (10) of Schedule A to this SERP. (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Change In Control benefit is payable in the same manner as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Change In Control Benefit in a lump-sum payment as follows: (1) The payment will be equal to the present value of the Normal Retirement Benefit as of the date of the Executive's Termination of Employment. The present value will be determined using an annual rate of six percent (6%) interest compounded monthly. (2) The lump-sum payment will be paid to the Executive within sixty (60) days following the Executive's Termination of Employment. (d) BENEFIT INCREASES. The Change in Control Benefit may be increased in the same manner as the Normal Retirement Benefit (see Section 3.1(c)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. ARTICLE 4 DEATH BENEFITS 4.1 PRE-RETIREMENT DEATH BENEFIT. If the Executive dies before a Termination of Employment and before attaining Normal Retirement Age, the Company will pay the following benefit to the Executive's Beneficiary: (a) AMOUNT OF BENEFIT. The Pre-Retirement Death Benefit is the annual "Pre-Retirement Death Benefit Installment" as shown in Column (11) of Schedule A to this SERP. (b) PAYMENT OF BENEFIT. Unless a lump-sum payment is made under subsection (c) below, the Pre-Retirement Death Benefit is payable monthly for a period of fifteen (15) years beginning on the first day of the month following the Executive's death. (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Beneficiary or upon its own motion, to pay the Pre-Retirement Death Benefit in a lump-sum payment as follows: (1) The payment will be equal to the Normal Retirement Age Accrual Balance. (2) The lump-sum payment will be paid to the Beneficiary by the earlier of the following dates: (A) Sixty (60) days after the lump-sum payment is requested by the Beneficiary; or (B) Such other date as elected by the Compensation Committee in its sole discretion. 4.2 DEATH DURING PAYMENT OF A BENEFIT. If the Executive dies after any benefit payments have commenced under Article 3, the Company shall pay the remaining benefits to the Executive's Beneficiary either: (a) At the same time and in the same amounts they would have been paid to the Executive had the Executive survived; or (b) In the Committee's sole discretion, upon a request by the Beneficiary or upon its own motion, in a lump-sum payment. The amount of the lump-sum payment shall be determined under the provisions for calculating the alternative lump-sum payment for the particular type of benefit the Executive was receiving. If the Executive was receiving the Normal Retirement Benefit, the lump sum payment shall be the lump sum present value of the remaining payments as of the date of payment, determined using an annual rate of six percent (6%) interest compounded monthly. 4.3 DEATH BEFORE PAYMENTS COMMENCE. If the Executive is entitled to a benefit under Article 3, but dies before benefit payments begin, the Company shall pay the Executive's Beneficiary either: (a) The same benefit payments that the Executive was entitled to at the date of the Executive's death, except that the benefit payments shall commence as of the first day of the month following the Executive's death; or (b) The lump sum equivalent of those benefits as determined under Section 4.2(b). ARTICLE 5 BENEFICIARIES 5.1 DESIGNATION OF BENEFICIARY. The Executive may designate the Beneficiary or Beneficiaries (who may be designated concurrently or contingently) to receive the death benefit under the Plan under the following terms and conditions: (a) The beneficiary designation must be in a form satisfactory to the Compensation Committee and must be signed by the Executive. (b) A beneficiary designation shall be effective upon receipt by the Compensation Committee or its designee, provided it is received before the Executive's death. (c) The Executive may revoke a previous beneficiary designation without the consent of the previously designated Beneficiary. This revocation is made by filing a new beneficiary designation form with the Compensation Committee or its designee, and shall be effective upon receipt. 5.2 DIVORCE. A divorce will automatically revoke the portion of a beneficiary designation designating the former spouse as a Beneficiary. The former spouse will be a Beneficiary under this SERP only if a new beneficiary designation is filed after the date the dissolution decree is entered. 5.3 DISCLAIMERS. If a Beneficiary disclaims a death benefit, the benefit will be paid as if the Beneficiary had predeceased the Executive. 5.4 DEATH OF BENEFICIARY. If a Beneficiary who is in pay status dies before full distribution is made to the Beneficiary, the unpaid balance of the distribution will be paid to the Beneficiary's estate. 5.5 DEFAULT BENEFICIARY. If, at the time of the Executive's death, the Executive has failed to designate a Beneficiary, the Executive's beneficiary designation has become completely invalid under the provisions of this Article or there is no surviving Beneficiary, payment of the death benefit will be made in the following order of priority: (a) To the Executive's spouse, if living; (b) To the Executive's surviving children, in equal shares; or (c) To the Executive's estate. ARTICLE 6 ACCRUAL BALANCE 6.1 COMPENSATION LIABILITY. The Accrual Balance shall be equal to the financial statement compensation liability accrued by the Company (under Section 6.2) as of any applicable determination date (as defined in Section 6.3) for its payment obligation under this SERP. 6.2 ACCRUAL CALCULATION. The value of the Accrual Balance shall: (a) Be determined using Generally Accepted Accounting Principles applying APB 12 as amended by FAS 106; and (b) Equal the sum of the: (1) Principal accrual (service cost); plus (2) Interest accrual at six percent (6%) interest. 6.3 DETERMINATION DATES. The Accrual Balance shall be determined as of the last day of the month. 6.4 YEAR-END VALUES. The year-end values and Normal Retirement Age value of the Accrual Balance are listed in Column (2) of Schedule A to this SERP. 6.5 REPORTING. The Compensation Committee will report the Accrual Balance to the Executive at least annually and within a reasonable period of time not to exceed 30 days after the date of the Termination of Employment if the Executive is to be paid the Early Voluntary Termination, Early Involuntary Termination or Disability Benefit. ARTICLE 7 FORFEITURE 7.1 GROUNDS FOR FORFEITURE. (a) The Executive will forfeit any benefits payable under this Plan upon a Termination for Cause. (b) The Company shall not pay the Pre-Retirement Death Benefit under Section 4.1 under the Plan if the Executive: (1) Commits suicide within two years after the Effective Date; or (2) Dies within two years after the Effective Date and has made any material misstatement of fact on any application for life insurance that may be used by the Company to finance its obligations under the Plan. (c) The Executive will forfeit the balance of any remaining unpaid benefits under this Plan if the Executive violates the noncompetition restrictions of Section 7.2. 7.2 NONCOMPETITION RESTRICTIONS. (a) DEFINITIONS. For purposes of this section, the following terms have the meanings stated below: (1) "BANKING INSTITUTION" means any state or national bank, state or federal savings and loan association, mutual savings bank, state or federal credit union or any of their holding companies. (2) "COMPETING ACTIVITIES" mean any activities that are competitive with the business activities of Bancorp, the Bank or any of their subsidiaries as conducted at the commencement of, or during the term of, the restricted period. (3) "FINANCIAL INSTITUTION" means any banking institution (as defined in paragraph (1) above) or financial services company (as defined in paragraph (4) below), regardless of: (A) Its legal form of organization; or (B) Whether it is in existence or is in formation. (4) "FINANCIAL SERVICES COMPANY" means any company providing nonbanking financial products and services, such as trust, mortgage, asset management, investment banking, securities and insurance products and services, but only if the Executive had direct operating responsibility of any subsidiary, division or other business operation of Bancorp or the Bank providing materially similar products or services at the date of the Executive's: (A) Termination of Employment; or (B) Termination Event if the Change in Control Benefit under Section 3.5 is payable. (5) "RESTRICTED AREA" means any county in Oregon or Washington in which Bancorp, the Bank or any of their subsidiaries either: (A) Has a branch or other office at the commencement of the restricted period; or (B) Has decided to open a branch or other office during the restricted period, provided that fact has been communicated to the Executive before the Executive's Termination of Employment. (6) "RESTRICTED PERIOD" means a period of: (A) 12 months from the date of the Executive's Termination of Employment; or (B) 24 months from the date of the Executive's Termination Event if the Change in Control Benefit under Section 3.5 is payable. (7) "SUBSIDIARIES" mean any current or future subsidiary of Bancorp or the Bank, regardless of whether it is one hundred percent (100%) owned by Bancorp or the Bank. (b) RESTRICTIONS. The Executive agrees that, during the restricted period, the Executive will not, directly or indirectly: (1) Except as provided in subsection (c)(1) below, be employed by or provide services to any financial institution that engages in competing activities in the restricted area, whether as an employee, officer, director, agent, consultant, promoter or in any similar position, function or title; (2) Have any ownership or financial interest in any financial institution that engages in competing activities in the restricted area that violates the Company's then current published ethical standards on ownership interests in competing businesses; (3) Induce any employee of Bancorp, the Bank or their subsidiaries to terminate their employment with Bancorp, the Bank or their subsidiaries; (4) Hire or assist in the hiring of any employee of Bancorp, the Bank or their subsidiaries for or by any financial institution that is not affiliated with Bancorp, the Bank or their subsidiaries; or (5) Induce any person or entity (other than the Executive's relatives or entities controlled by them) to terminate or curtail its business or contractual relationships with the Bank, Bancorp or their subsidiaries. (c) EXCEPTIONS. Regardless of the restriction in subsection (b)(1) above, the Executive may be employed outside the restricted area as an employee, officer, agent, consultant or promoter of a financial institution that engages in competing activities in the restricted area, provided the Executive will not: (1) Act within the restricted area as an employee or other representative or agent of that financial institution; (2) Have any responsibilities for that financial institution's operations within the restricted area; or (3) Directly or indirectly violate the restrictions of subsection (b)(3), (4) and (5) above. (d) FORFEITURE. If the Executive breaches the restrictions under subsection (b) above, Executive will: (1) Forfeit any benefits payable under this Plan that were unpaid as of the date of the breach; and (2) Promptly repay the Company, upon demand, any payments made after the date of the breach. If the Executive does not repay that amount within 15 days after the date of the demand, the Executive will also pay interest on that amount at the rate of nine percent (9%) per annum. ARTICLE 8 CLAIMS AND APPEALS PROCEDURE 8.1 CLAIMS PROCEDURE. (a) ROUTINE PAYMENTS. The Compensation Committee may authorize distribution of payments to the Executive or the Executive's Beneficiary even though a formal claim has not been filed. (b) FORMAL CLAIMS. (1) MANDATORY PROCEDURE. Any claim that the Executive or a Beneficiary or anyone claiming on behalf of or through the Executive or a Beneficiary may make under ERISA or under any other applicable federal or state law must first be brought as a formal claim under this section. If that claim is denied, it will be subject to the claims appeal procedures of Section 8.2. (2) FORM AND CONTENT OF CLAIM. The claim shall be in any form reasonably acceptable to the Compensation Committee and must state the basis of the claim and also authorize the Compensation Committee and its designees to conduct any examinations necessary to determine the validity of the claim and take any steps necessary to facilitate the benefit payment. (3) SUBMISSIONS BY CLAIMANT. The claimant shall file the claim with the Executive Vice-President, Human Resources. The claimant may also submit written comments, documents, records and other information relating to the claim. (4) ACCESS TO INFORMATION. The claimant will be provided, upon request and free of charge, reasonable access to, and copies of, all nonconfidential or nonprivileged Company documents, records and other information relevant to the claim. (5) AUTHORIZED REPRESENTATIVE. The claimant may be represented by an individual authorized to act on behalf of the claimant. A representative's authorization to act on behalf of the claimant must be established to the Compensation Committee's reasonable satisfaction. (6) REVIEW AND RECOMMENDATION. The claim shall be reviewed by the Company's Chief Executive Officer and the Executive Vice-President, Human Resources, who shall make their recommendation to the Compensation Committee. (c) TIMELINE. The Compensation Committee shall make a determination on the claim within 90 days after the date the claimant filed it with the Executive Vice-President, Human Resources. If more time is required for a special case, the Compensation Committee may take up to an additional 90 days to render a determination, but the claimant must be notified of the need for the extension of time within the initial 90-day period. This notification will explain the special circumstances requiring the extension of time as well as the date by which a determination is expected. (d) EXPLANATION OF DENIAL. If a claim is wholly or partially denied, the Compensation Committee shall provide the claimant with a notice of the decision, written in a manner calculated to be understood by the claimant, containing the following information: (1) The specific reason or reasons for the denial and a discussion of why the specific reason or reasons apply. (2) References to the specific provisions of this Plan upon which the denial was based. (3) A description of any additional material or information necessary for the claimant to perfect the claim. (4) An explanation of the claims appeal procedures under this Plan. (e) DEEMED DENIAL. If a determination is not furnished to the claimant within 90 days of the date the claim was filed--or 180 days if it is a special case--the claim shall be deemed to be denied. (f) APPEAL OF DENIAL. If the claimant disagrees with the denial, the claimant's sole remedy shall be to proceed with the claims appeal procedure under Section 8.2. 8.2 CLAIMS APPEAL PROCEDURES. (a) WRITTEN REQUEST. If a claim is denied in whole or in part, the claimant or the claimant's authorized representative may submit a written request for a review of the denial, including a statement of the reasons for the review. (b) DEADLINE. This request must be filed with the Compensation Committee within 60 days after the claimant receives notice of the denial. This time limit may be extended by the Compensation Committee if an extension appears to be reasonable in view of the nature of the claim and the pertinent circumstances. (c) CONDUCT OF APPEAL. Upon receipt of such a request, the Compensation Committee shall afford the claimant an opportunity to review relevant documents and to submit issues and comments in writing. The Compensation Committee may hold a hearing or conduct an independent investigation. The Compensation Committee will consider all of the claimant's submissions, regardless of whether they were submitted or considered in the initial determination of the claim. (d) TIMELINE. A decision on the review shall be rendered by the Compensation Committee not later than 60 days after receipt of the claimant's request for the review. If more time is required for a special case, the Compensation Committee may take up to an additional 60 days to render a decision, but the claimant must be notified of the need for the extension of time within the initial 60-day period. This notification shall explain the special circumstances (such as the need to hold a hearing) which require the extension of time. (e) DECISION ON APPEAL. The decision shall be written in a manner calculated to be understood by the claimant and shall include: (1) Specific reasons for the decision; (2) Specific references to the provisions of this Plan on which the decision is based; (3) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits; and (4) A statement of the claimant's right to bring a civil action under ERISA Section 502(a), to the extent such an action is not preempted by the mandatory arbitration provision of Section 10.10. (f) DEEMED DENIAL. If the determination on the appeal is not furnished to the claimant within 60 days--or 120 days if it is a special case--the appeal shall be deemed to be denied. (g) EXHAUSTION OF APPEAL PROCESS REQUIRED. A claimant whose claim has been denied is required to exhaust the claims appeal procedures set forth in this section before commencing any arbitration or legal action. 8.3 DISCRETIONARY AUTHORITY; STANDARDS OF PROOF AND REVIEW; RECORD ON REVIEW. (a) The Compensation Committee is the "named fiduciary" for purposes of ERISA. This Plan confers full discretionary authority on the Compensation Committee with regard to the administration of this Plan, including the discretion to: (1) Make findings of fact and determine the sufficiency of the evidence presented regarding a claim; and (2) Interpret and construe the provisions of this Plan and related administrative documents, if any, (including words and phrases that are not defined in this Plan or those documents) and correct any defect, supply any omission or reconcile any ambiguity or inconsistency. (b) A decision by the Compensation Committee is required to be supported by substantial evidence only. That is, proof by a preponderance of the evidence, clear and convincing evidence or beyond a reasonable doubt is not required. (c) A court of law or arbitrator reviewing any decision of the Compensation Committee, including those relating to the interpretation of this Plan or a claim for benefits under this Plan, shall be required to use the arbitrary and capricious standard of review. That is, the Compensation Committee's determination may be reversed only if it was made in bad faith, is not supported by substantial evidence or is erroneous as to a question of law. (d) In conducting its review of the Compensation Committee's decision, a court or arbitrator shall be limited to the record of documents, testimony and facts presented to or actually known to the Compensation Committee at the time the decision was made. ARTICLE 9 AMENDMENT AND TERMINATION 9.1 BY MUTUAL AGREEMENT. Except as provided in Section 9.2, this Plan may be amended or terminated only by a written agreement signed by the Company and the Executive. 9.2 BY THE COMPANY. (a) Subject to the restrictions in subparagraph (b) below, the Company may unilaterally amend or terminate this Plan at any time if in the opinion of the Company's counsel or accountants, as a result of legislative, judicial or regulatory action, continuation of the Plan would: (1) Cause benefits to be taxable to the Executive before their actual receipt; or (2) Result in material financial penalties or other materially detrimental ramifications to the Company (other than the financial impact of paying the benefits). (b) Except as required by law, banking regulatory requirements or financial accounting requirements, an amendment or termination under subparagraph (a) above may not reduce: (1) The vested percentage of the Executive's Adjusted Accrual Balance; (2) The amount of the Executive's vested Adjusted Accrual Balance as determined as of the later of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved; or (3) The amount of the benefit payments that are being made if the Executive's benefits were in pay status as of the earlier of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved. (c) Except as required by law, banking regulatory requirements or financial accounting requirements, upon the termination of this Plan under subsection (a) above: (1) The Executive's Adjusted Accrual Balance and vesting credit will be frozen as of the later of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved; or (2) Interest will be credited on the Executive's frozen vested Accrual Balance at an annual rate of six percent (6%) compounded monthly; and (3) The Company may either: (A) Hold and disburse the Executive's frozen vested Accrual Balance (as adjusted under paragraph (2) above) in accordance with the otherwise applicable terms and conditions of this Plan; or (B) Disburse that amount in a lump sum at such earlier date as the Company, in its sole discretion, may elect. ARTICLE 10 GENERAL PROVISIONS 10.1 ADMINISTRATION. The Compensation Committee shall have all powers necessary or desirable to administer this Plan, including but not limited to: (a) Establishing and revising the method of accounting for the Plan; (b) Maintaining a record of benefit payments; (c) Establishing rules and prescribing any forms necessary or desirable to administer the Plan; (d) Interpreting the provisions of the Plan; and (e) Delegating to others certain aspects of the Compensation Committee's managerial and operational responsibilities, including employing advisors and delegating ministerial duties. 10.2 RECEIPT AND RELEASE FOR PAYMENTS. (a) The Compensation Committee may require the recipient of a payment, as a condition precedent to the payment, to execute a receipt and, in the case of a payment in full, a release for the payment. The receipt and the release shall be in a form satisfactory to the Compensation Committee. (b) Payment may be made by a deposit to the credit of the Executive or a Beneficiary, as applicable, in any bank or trust company. (c) Payment may be made to the individual or institution maintaining or having custody of the Executive or Beneficiary, as applicable, if the Compensation Committee receives satisfactory evidence that-- (1) A person entitled to receive any benefit under this Plan is, at the time the benefit is payable, physically, mentally or legally incompetent to receive payment and provides a valid receipt for it; (2) An individual or institution is maintaining or has custody of that person; and (3) No guardian, custodian or other representative of the estate of that person has been appointed. (d) The receipt of the recipient or a canceled check shall be a sufficient voucher for the Company. The Company is not required to obtain from the recipient an accounting for the payment. (e) If a dispute arises over a distribution, payment may be withheld until the dispute is determined by a court of competent jurisdiction or settled, to the satisfaction of the Compensation Committee, by the parties concerned. The Compensation Committee may require a hold harmless agreement on behalf of the Company and the Plan before making payment. 10.3 OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Plan is not an express or implied employment agreement. Accordingly, other than providing for certain benefits payable upon a Termination of Employment, this Plan will not affect the determination of any compensation payable by the Company to the Executive, nor will it affect the other terms of the Executive's employment with the Company. The specific arrangements referred to in this Plan are not intended to exclude or circumvent any other benefits that may be available to the Executive under the Company's employee benefit or other applicable plans, upon the Executive's Termination of Employment. 10.4 WITHHOLDING. (a) INCOME TAX. Applicable federal, state and local income tax withholding will be withheld from all payments made under this Plan. (b) FICA. To the extent allowable under applicable regulations: (1) The present value of the vested benefits under this Plan will be taken into account as FICA wages in the year they become vested; (2) Present value will be determined using reasonable actuarial equivalency factors acceptable to the Compensation Committee; (3) The employee portion of each year's FICA liability will be deducted from the Executive's other cash compensation for that year; and (4) FICA will not be deducted from any payments made under this Plan. 10.5 UNFUNDED ARRANGEMENT. (a) The Company's payment obligation under this Plan is purely contractual and is not funded or secured in any manner by any asset, pledge or encumbrance of the Company's property. (b) This Plan is not intended to create, and should not be construed as creating, any trust or trust fund. The benefits accrued under this Plan and any assets acquired by the Company to finance its payment obligations under this Plan shall not be held in a trust (other than a grantor trust of the Company), escrow or similar fiduciary capacity. (c) Any insurance policy on the Executive's life the Company may acquire to assist it in financing its obligations under this Plan is a general asset of the Company and neither the Executive nor anyone else claiming on behalf of or through the Executive shall have any right with respect to, or claim against, that policy. (d) The Executive and any Beneficiary are general unsecured creditors of the Company with respect to the payment of the benefits under this Plan. 10.6 BENEFITS NOT ASSIGNABLE. The accrued benefits under this Plan shall not be considered assets under state law or bankruptcy law of the Executive or of any Beneficiary. The Executive and any Beneficiary shall not have any right to alienate, anticipate, pledge, encumber or assign any of the benefits payable under this Plan. The Executive's or any Beneficiary's benefits shall not be subject to any claim of, or any attachment, garnishment or other legal process brought by, any of his or her creditors. 10.7 BINDING EFFECT. This Plan binds and inures to the benefit of the parties and their respective legal representatives, heirs, successors and assigns. 10.8 REORGANIZATION. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless that succeeding or continuing company, firm or person agrees to assume and discharge the obligations of the Company under this Plan. Upon the occurrence of such an event, the term "Company" as used in this Plan shall be deemed to refer to the successor or survivor company. 10.9 APPLICABLE LAW. (a) This Plan shall be construed and its validity determined according to the laws of the State of Oregon, other than its law regarding conflicts of law or choice of law, to the extent not preempted by federal law. (b) Any dispute arising out of this Plan must be brought in either Clackamas County or Multnomah County, Oregon, and the parties will submit to personal jurisdiction in either of those counties. 10.10 ARBITRATION. Any dispute or claim arising out of or brought in connection with this Plan, will, if requested by any party, be submitted to and settled by arbitration under the rules then in effect of the American Arbitration Association (or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered in arbitration will be final and will bind the parties, and a judgment on it may be entered in the highest court of the forum having jurisdiction. The arbitrator will render a written decision, naming the substantially prevailing party in the action, and, subject to Section 10.11(b), will award that party all costs and expenses incurred, including reasonable attorneys' fees. 10.11 ATTORNEYS' FEES. (a) If any breach of or default under this Plan results in either party incurring attorneys' or other fees, costs or expenses (including those incurred in an arbitration), the substantially prevailing party is entitled to recover from the non-prevailing party its reasonable legal fees, costs and expenses, including attorneys' fees and the costs of the arbitration, except as provided in subsection (b) below. (b) If the Executive is not the substantially prevailing party, the Executive shall be liable to pay the Company under subsection (a) above only if the arbitrator determines that: (1) There was no reasonable basis for the Executive's claim (or the Executive's response to the Company's claim); or (2) The Executive had engaged in unreasonable delay, failed to comply with a discovery order or otherwise acted in bad faith in the arbitration. (c) Either party shall be entitled to recover any reasonable attorneys' fees and other costs and expenses it incurs in enforcing or collecting an arbitration award. (d) If an award under this section is made to the Executive and accountants or tax counsel selected by Company with the Executive's consent (which shall not be unreasonably withheld) determine that the award is includible in Executive's gross income, the Company shall also pay the Executive a gross-up payment to offset the taxes imposed on that award, including the taxes on the gross-up payment itself. This gross-up payment shall be determined following the methodology employed in the Change in Control Agreement. 10.12 ENTIRE AGREEMENT. This Plan constitutes the entire agreement between the Company and the Executive as to its subject matter. No rights are granted to the Executive by virtue of this Plan other than those specifically set forth in this document and any amendments to it. 10.13 CONSTRUCTION. The language of this Plan was chosen jointly by the parties to express their mutual intent. No rule of construction based on which party drafted the Plan or certain of its provisions will be applied against any party. 10.14 SECTION HEADINGS. The section headings used in this Plan have been included for convenience of reference only. 10.15 COUNTERPARTS. This Plan may be executed in one or more counterparts, and all counterparts will be construed together as one Plan. 10.16 SEVERABILITY. If any provision of this Plan is, to any extent, held to be invalid or unenforceable, it will be deemed amended as necessary to conform to the applicable laws or regulations. However, if it cannot be amended without materially altering the intentions of the parties, it will be deleted and the remainder of this Plan will be enforced to the extent permitted by law. 10.17 JOINT AND SEVERAL OBLIGATION. Bancorp and Bank will be jointly and severally liable for the payment obligations under this Agreement. EXECUTIVE: COMPANY: WEST COAST BANCORP ___________________________________ By:_________________________________ Anders Giltvedt Title ______________________________ Date: _____________________________ Date: ______________________________ WEST COAST BANK By: ________________________________ Title: _____________________________ Date: ______________________________ CLARKCONSULTING(TM) PLAN YEAR REPORTING HYPOTHETICAL TERMINATION BENEFIT SCHEDULE ANDERS GILTVEDT
DOB: 5/19/1959 EARLY VOLUNTARY EARLY INVOLUNTARY PRE-RETIRE. Plan Anniv Date: 12/31/2003 TERMINATION TERMINATION DISABILITY CHANGE OF CONTROL DEATH Normal Retirement: 5/19/2023, Age 64 Installment Installment Installment Installment BENEFIT Payments: Monthly Installments Payable at 64 Payable at 64 Payable at 64 Payable at 64 Installment - ---------------------------------------------------------------------------------------------------------------------------------- BENEFIT ACCRUAL Based On Based On Based On Based On Based On LEVEL BALANCE Vesting Accrual Vesting Accrual Vesting Accrual Vesting Benefit Benefit PERIOD DISCOUNT ---------------------------------------------------------------------------------------------------------- ENDING RATE (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) - ---------------------------------------------------------------------------------------------------------------------------------- Dec 2003 (1) 6% 61,250 6,740 30% 651 100% 2,171 100% 2,171 100% 61,250 61,250 Dec 2004 6% 61,250 23,619 40% 2,866 100% 7,166 100% 7,166 100% 61,250 61,250 Dec 2005 6% 61,250 41,540 50% 5,935 100% 11,870 100% 11,870 100% 61,250 61,250 Dec 2006 6% 61,250 60,565 60% 9,781 100% 16,301 100% 16,301 100% 61,250 61,250 Dec 2007 6% 61,250 80,764 70% 14,333 100% 20,475 100% 20,475 100% 61,250 61,250 Dec 2008 6% 61,250 102,209 80% 19,525 100% 24,406 100% 24,406 100% 61,250 61,250 Dec 2009 6% 61,250 124,977 90% 25,298 100% 28,109 100% 28,109 100% 61,250 61,250 Dec 2010 6% 61,250 149,148 100% 31,597 100% 31,597 100% 31,597 100% 61,250 61,250 Dec 2011 6% 61,250 174,811 100% 34,882 100% 34,882 100% 34,882 100% 61,250 61,250 Dec 2012 6% 61,250 202,056 100% 37,976 100% 37,976 100% 37,976 100% 61,250 61,250 Dec 2013 6% 61,250 230,982 100% 40,891 100% 40,891 100% 40,891 100% 61,250 61,250 Dec 2014 6% 61,250 261,692 100% 43,636 100% 43,636 100% 43,636 100% 61,250 61,250 Dec 2015 6% 61,250 294,296 100% 46,222 100% 46,222 100% 46,222 100% 61,250 61,250 Dec 2016 6% 61,250 328,911 100% 48,657 100% 48,657 100% 48,657 100% 61,250 61,250 Dec 2017 6% 61,250 365,661 100% 50,952 100% 50,952 100% 50,952 100% 61,250 61,250 Dec 2018 6% 61,250 404,678 100% 53,112 100% 53,112 100% 53,112 100% 61,250 61,250 Dec 2019 6% 61,250 446,101 100% 55,148 100% 55,148 100% 55,148 100% 61,250 61,250 Dec 2020 6% 61,250 490,079 100% 57,064 100% 57,064 100% 57,064 100% 61,250 61,250 Dec 2021 6% 61,250 536,770 100% 58,870 100% 58,870 100% 58,870 100% 61,250 61,250 Dec 2022 6% 61,250 586,340 100% 60,571 100% 60,571 100% 60,571 100% 61,250 61,250 May 2023 6% 61,250 607,886 100% 61,250 100% 61,250 100% 61,250 100% 61,250 61,250
MAY 19, 2023 RETIREMENT; JUNE 1, 2023 FIRST PAYMENT DATE (1) The first line reflects 5 months of data, August 2003 to December 2003. Copyright(C)2003 Clark Consulting. Securities offered through Clark Salary Continuation Plan for West Securities, Inc., Coast Bank - Lake Oswego, OR a wholly owned subsidiary of Clark, 1001811 16948 137756 v5.31.04 Inc., member NASD & SIPC, 12/18/2003:13 SCP-E NB Los Angeles, CA 90071, (213) 486-6300. CLARKCONSULTING(TM) PLAN YEAR REPORTING HYPOTHETICAL TERMINATION BENEFIT SCHEDULE ANDERS GILTVEDT
DOB: 5/19/1959 EARLY VOLUNTARY EARLY INVOLUNTARY PRE-RETIRE. Plan Anniv Date: 12/31/2003 TERMINATION TERMINATION DISABILITY CHANGE OF CONTROL DEATH Normal Retirement: 5/19/2023, Age 64 Installment Installment Installment Installment BENEFIT Payments: Monthly Installments Payable at 64 Payable at 64 Payable at 64 Payable at 64 Installment - ---------------------------------------------------------------------------------------------------------------------------------- BENEFIT ACCRUAL Based On Based On Based On Based On Based On LEVEL BALANCE Vesting Accrual Vesting Accrual Vesting Accrual Vesting Benefit Benefit PERIOD DISCOUNT ---------------------------------------------------------------------------------------------------------- ENDING RATE (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
* The purpose of this hypothetical illustration is to show the participant's annual benefit based on various termination assumptions. Actual benefits are based on the terms and provisions of the plan agreement executed between the company and participant and may differ from those shown. * IF THERE IS A CONFLICT IN ANY TERMS OR PROVISIONS BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT. Copyright(C)2003 Clark Consulting. Securities offered through Clark Salary Continuation Plan for West Securities, Inc., Coast Bank - Lake Oswego, OR a wholly owned subsidiary of Clark, 1001811 16948 137756 v5.31.04 Inc., member NASD & SIPC, 12/18/2003:13 SCP-E NB Los Angeles, CA 90071, (213) 486-6300. EX-10.20 12 v96690exv10w20.txt EXHIBIT 10.20 EXHIBIT 10.20 WEST COAST BANK SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP) EFFECTIVE DATE: AUGUST 1, 2003 THIS SERP is adopted by WEST COAST BANK (the "Bank"), WEST COAST BANCORP ("Bancorp"), its parent holding company, (collectively referred to as the "Company") and XANDRA McKEOWN (the "Executive"). ARTICLE 1 PURPOSE 1.1 DUAL PURPOSES. This Plan is intended to: (a) Assist in assuring the Executive's continued service to the Company by providing supplemental retirement benefits that are competitive with the Company's peers; and (b) Discourage the Executive from engaging in any competitive business after the Executive leaves the Company. 1.2 TOP-HAT PLAN STATUS. This is an unfunded Plan maintained primarily for the purpose of providing deferred compensation for the Executive, who is a member of a select group of management or highly compensated employees. As such, this Plan is intended to qualify as a "top hat plan" exempt from Part 2 (minimum participation and vesting standards), Part 3 (minimum funding standards) and Part 4 (fiduciary responsibility provisions) of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). The provisions of the Plan shall be interpreted and administered according to this intention. ARTICLE 2 DEFINITIONS Words and phrases appearing in this Plan with initial capitalization are defined terms that have the meanings stated below. Words appearing in the following definitions which are themselves defined terms are also indicated by initial capitalization. 2.1 ACCRUAL BALANCE means the benefit liability accrued by the Company under Article 6. 2.2 ADJUSTED ACCRUAL BALANCE means the Accrual Balance determined as of the end of the month that is on or before the date of the Executive's Termination of Employment. 2.3 BENEFICIARY means the person or persons or estate, trust or charitable organization entitled under Article 5 to receive the death benefit payable under this Plan. 2.4 BOARD means Bancorp's Board of Directors. 2.5 CHANGE IN CONTROL AGREEMENT means the "Change In Control Agreement" effective January 1, 2004, between the Executive and the Company. 2.6 COMPENSATION COMMITTEE means the Compensation and Personnel Committee of Bancorp's Board. 2.7 DISABILITY means that either the carrier of any Company-provided individual or group long-term disability insurance policy covering the Executive or the Social Security Administration has determined that the Executive is disabled. Upon the request of the Compensation Committee, the Executive will submit proof of the carrier's or the Social Security Administration's determination. 2.8 EARLY INVOLUNTARY TERMINATION means that the Company has terminated the Executive's employment before Normal Retirement Age for any reason other than: (a) Termination for Cause; (b) Disability; or (c) A Termination Event. 2.9 EARLY VOLUNTARY TERMINATION means that before Normal Retirement Age, the Executive has voluntarily terminated Executive's employment with the Company for reasons other than: (a) Disability; or (b) A Termination Event. 2.10 EFFECTIVE DATE means the date first stated above (immediately below the title of this Plan). 2.11 NORMAL RETIREMENT AGE means age 64. 2.12 NORMAL RETIREMENT DATE means the later of Normal Retirement Age or Termination of Employment. 2.13 PLAN YEAR means the calendar year, except for the first Plan Year which is a short year beginning August 1, 2003, and ending December 31, 2003. 2.14 ROE means, for any given Plan Year, the greater of: (a) Bancorp's return on equity, which shall be determined under GAAP and expressed as a percentage calculated by dividing its: (1) Annual net income before common stock dividends are paid; by (2) Average annual common shareholder equity; or (b) Bancorp's adjusted return on equity which shall be determined by calculating the percentage under subsection (a) above on an adjusted basis to address the effects of items that are required to be included or excluded by GAAP for that Plan Year, but would normally not be included or excluded from Bancorp's net income or shareholder equity. 2.15 TERMINATION EVENT means the termination of the Executive's employment under circumstances that entitle the Executive to benefits under the Change In Control Agreement. 2.16 TERMINATION FOR CAUSE OR TERMINATED FOR CAUSE means that the Company has terminated the Executive's employment for "cause" as defined in the Change In Control Agreement. 2.17 TERMINATION OF EMPLOYMENT means that the Executive's employment with the Company has terminated for any reason, voluntary or involuntary. 2.18 YEAR OF SERVICE means a Plan Year in which: (a) The Company achieved an ROE of not less than ten percent (10%); and (b) The Executive is actively at work with the Company or on a Company-approved leave of absence at the end of that year. ARTICLE 3 BENEFITS DURING LIFETIME 3.1 NORMAL RETIREMENT BENEFIT. Upon Termination of Employment on or after Normal Retirement Age for reasons other than death, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustment under subsection (c) below and forfeiture under Article 7, the Normal Retirement Benefit is the annual "Benefit Level" installment as shown in Column (1) of Schedule A to this SERP. (b) PAYMENT SCHEDULE. The Normal Retirement Benefit is payable monthly for a period of fifteen (15) years beginning on the first day of the month on or after the Executive's Normal Retirement Date. (c) BENEFIT INCREASES. (1) As of each anniversary of the Effective Date, the Compensation Committee, in its sole discretion, may increase the Normal Retirement Benefit by increasing: (A) The amount of the scheduled installment payments; (B) The length of the payment schedule; or (C) Both the amount and the length of the installment payments. (2) If the Normal Retirement Benefit is increased, Schedule A to this SERP shall be revised, including adjusting the other scheduled benefit payments accordingly. 3.2 EARLY VOLUNTARY TERMINATION BENEFIT. Upon an Early Voluntary Termination, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below and forfeiture under Article 7, the Early Voluntary Termination Benefit is the annual installment payment under a deferred 15-year term certain fixed annuity calculated as follows: (1) The present value of the annuity is the vested Adjusted Accrual Balance (with vesting determined under subsection (e) below); (2) The annuity starting date is the first day of the month on or after Normal Retirement Age; and (3) Interest is credited at an annual rate of six percent (6%) compounded monthly during both the period from the Termination of Employment to the annuity starting date and the 15-year payout period. (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Early Voluntary Termination Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Early Voluntary Termination Benefit in a lump-sum payment as follows: (1) The payment amount shall equal the Executive's vested Adjusted Accrual Balance together with interest credited at the annual rate of six percent (6%) compounded monthly until paid under paragraph (2) below. (2) The lump-sum payment will be paid to the Executive at either: (A) Normal Retirement Age; or (B) Such earlier date as the Compensation Committee, in its sole discretion, may elect. (d) BENEFIT INCREASES. The Early Voluntary Termination Benefit may be increased as follows: (1) The amount of the benefit will be adjusted for any increases in the Normal Retirement Benefit granted under Section 3.1(c)(1). (2) In its sole discretion, the Compensation Committee may, from time to time as of any anniversary of the Effective Date, separately increase the amount of the Early Voluntary Termination Benefit without increasing the Normal Retirement Benefit. (3) If the Early Voluntary Termination Benefit is adjusted or increased, Schedule A to this SERP shall be revised accordingly. (e) VESTING. The vested portion of the Executive's Adjusted Accrual Balance will be determined as follows: (1) The Executive will be thirty percent (30%) vested immediately upon the Effective Date. Beginning with the Plan Year commencing January 1, 2004, the Executive will receive an additional ten percent (10%) vesting for each Year of Service until the Executive is one hundred percent (100%) vested after completing seven (7) Years of Service. (2) In its sole discretion, the Compensation Committee may at any time and from time to time increase the Executive's vested percentage (including granting full vesting). 3.3 EARLY INVOLUNTARY TERMINATION BENEFIT. Upon an Early Involuntary Termination, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below, immediate full vesting under subsection (e) below and forfeiture under Article 7, the Early Involuntary Termination Benefit is the annual installment payment determined in the same manner as the Early Voluntary Termination Benefit under Section 3.2(a). (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Early Involuntary Termination Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Early Involuntary Termination Benefit in a lump-sum payment under the same terms and conditions that apply to a lump-sum payment of the Early Voluntary Termination Benefit (see Section 3.2(c)). (d) BENEFIT INCREASES. The Early Involuntary Termination Benefit may be separately increased under the same terms and conditions that apply to increases in the Early Voluntary Termination Benefit (see Section 3.2(d)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. 3.4 DISABILITY BENEFIT. Upon Termination of Employment before Normal Retirement Age due to Disability, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below, immediate full vesting under subsection (e) below and forfeiture under Article 7, the Disability Benefit is the annual installment payment determined in the same manner as for the Early Voluntary Termination Benefit (see Section 3.2(a)). (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Disability Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Disability Benefit in a lump-sum payment under the same terms and conditions that apply to a lump-sum payment of the Early Voluntary Termination Benefit (see Section 3.2(c)). (d) BENEFIT INCREASES. The Disability Benefit may be increased under the same terms and conditions that apply to increases in the Early Voluntary Termination Benefit (see Section 3.2(d)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. 3.5 CHANGE IN CONTROL BENEFIT. If the Executive becomes entitled to benefits under the Change in Control Agreement, the Company will pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below and forfeiture under Article 7, the Change In Control Benefit is the annual "Change of Control Installment" set forth in Column (10) of Schedule A to this SERP. (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Change In Control benefit is payable in the same manner as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Change In Control Benefit in a lump-sum payment as follows: (1) The payment will be equal to the present value of the Normal Retirement Benefit as of the date of the Executive's Termination of Employment. The present value will be determined using an annual rate of six percent (6%) interest compounded monthly. (2) The lump-sum payment will be paid to the Executive within sixty (60) days following the Executive's Termination of Employment. (d) BENEFIT INCREASES. The Change in Control Benefit may be increased in the same manner as the Normal Retirement Benefit (see Section 3.1(c)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. ARTICLE 4 DEATH BENEFITS 4.1 PRE-RETIREMENT DEATH BENEFIT. If the Executive dies before a Termination of Employment and before attaining Normal Retirement Age, the Company will pay the following benefit to the Executive's Beneficiary: (a) AMOUNT OF BENEFIT. The Pre-Retirement Death Benefit is the annual "Pre-Retirement Death Benefit Installment" as shown in Column (11) of Schedule A to this SERP. (b) PAYMENT OF BENEFIT. Unless a lump-sum payment is made under subsection (c) below, the Pre-Retirement Death Benefit is payable monthly for a period of fifteen (15) years beginning on the first day of the month following the Executive's death. (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Beneficiary or upon its own motion, to pay the Pre-Retirement Death Benefit in a lump-sum payment as follows: (1) The payment will be equal to the Normal Retirement Age Accrual Balance. (2) The lump-sum payment will be paid to the Beneficiary by the earlier of the following dates: (A) Sixty (60) days after the lump-sum payment is requested by the Beneficiary; or (B) Such other date as elected by the Compensation Committee in its sole discretion. 4.2 DEATH DURING PAYMENT OF A BENEFIT. If the Executive dies after any benefit payments have commenced under Article 3, the Company shall pay the remaining benefits to the Executive's Beneficiary either: (a) At the same time and in the same amounts they would have been paid to the Executive had the Executive survived; or (b) In the Committee's sole discretion, upon a request by the Beneficiary or upon its own motion, in a lump-sum payment. The amount of the lump-sum payment shall be determined under the provisions for calculating the alternative lump-sum payment for the particular type of benefit the Executive was receiving. If the Executive was receiving the Normal Retirement Benefit, the lump sum payment shall be the lump sum present value of the remaining payments as of the date of payment, determined using an annual rate of six percent (6%) interest compounded monthly. 4.3 DEATH BEFORE PAYMENTS COMMENCE. If the Executive is entitled to a benefit under Article 3, but dies before benefit payments begin, the Company shall pay the Executive's Beneficiary either: (a) The same benefit payments that the Executive was entitled to at the date of the Executive's death, except that the benefit payments shall commence as of the first day of the month following the Executive's death; or (b) The lump sum equivalent of those benefits as determined under Section 4.2(b). ARTICLE 5 BENEFICIARIES 5.1 DESIGNATION OF BENEFICIARY. The Executive may designate the Beneficiary or Beneficiaries (who may be designated concurrently or contingently) to receive the death benefit under the Plan under the following terms and conditions: (a) The beneficiary designation must be in a form satisfactory to the Compensation Committee and must be signed by the Executive. (b) A beneficiary designation shall be effective upon receipt by the Compensation Committee or its designee, provided it is received before the Executive's death. (c) The Executive may revoke a previous beneficiary designation without the consent of the previously designated Beneficiary. This revocation is made by filing a new beneficiary designation form with the Compensation Committee or its designee, and shall be effective upon receipt. 5.2 DIVORCE. A divorce will automatically revoke the portion of a beneficiary designation designating the former spouse as a Beneficiary. The former spouse will be a Beneficiary under this SERP only if a new beneficiary designation is filed after the date the dissolution decree is entered. 5.3 DISCLAIMERS. If a Beneficiary disclaims a death benefit, the benefit will be paid as if the Beneficiary had predeceased the Executive. 5.4 DEATH OF BENEFICIARY. If a Beneficiary who is in pay status dies before full distribution is made to the Beneficiary, the unpaid balance of the distribution will be paid to the Beneficiary's estate. 5.5 DEFAULT BENEFICIARY. If, at the time of the Executive's death, the Executive has failed to designate a Beneficiary, the Executive's beneficiary designation has become completely invalid under the provisions of this Article or there is no surviving Beneficiary, payment of the death benefit will be made in the following order of priority: (a) To the Executive's spouse, if living; (b) To the Executive's surviving children, in equal shares; or (c) To the Executive's estate. ARTICLE 6 ACCRUAL BALANCE 6.1 COMPENSATION LIABILITY. The Accrual Balance shall be equal to the financial statement compensation liability accrued by the Company (under Section 6.2) as of any applicable determination date (as defined in Section 6.3) for its payment obligation under this SERP. 6.2 ACCRUAL CALCULATION. The value of the Accrual Balance shall: (a) Be determined using Generally Accepted Accounting Principles applying APB 12 as amended by FAS 106; and (b) Equal the sum of the: (1) Principal accrual (service cost); plus (2) Interest accrual at six percent (6%) interest. 6.3 DETERMINATION DATES. The Accrual Balance shall be determined as of the last day of the month. 6.4 YEAR-END VALUES. The year-end values and Normal Retirement Age value of the Accrual Balance are listed in Column (2) of Schedule A to this SERP. 6.5 REPORTING. The Compensation Committee will report the Accrual Balance to the Executive at least annually and within a reasonable period of time not to exceed 30 days after the date of the Termination of Employment if the Executive is to be paid the Early Voluntary Termination, Early Involuntary Termination or Disability Benefit. ARTICLE 7 FORFEITURE 7.1 GROUNDS FOR FORFEITURE. (a) The Executive will forfeit any benefits payable under this Plan upon a Termination for Cause. (b) The Company shall not pay the Pre-Retirement Death Benefit under Section 4.1 under the Plan if the Executive: (1) Commits suicide within two years after the Effective Date; or (2) Dies within two years after the Effective Date and has made any material misstatement of fact on any application for life insurance that may be used by the Company to finance its obligations under the Plan. (c) The Executive will forfeit the balance of any remaining unpaid benefits under this Plan if the Executive violates the noncompetition restrictions of Section 7.2. 7.2 NONCOMPETITION RESTRICTIONS. (a) DEFINITIONS. For purposes of this section, the following terms have the meanings stated below: (1) "BANKING INSTITUTION" means any state or national bank, state or federal savings and loan association, mutual savings bank or state or federal credit union. (2) "COMPETING ACTIVITIES" mean any activities that are competitive with the business activities of Bancorp, the Bank or any of their subsidiaries as conducted at the commencement of, or during the term of, the restricted period. (3) "FINANCIAL INSTITUTION" means any banking institution (as defined in paragraph (1) above), trust company or mortgage company regardless of: (A) Its legal form of organization; or (B) Whether it is in existence or is in formation. (4) "RESTRICTED AREA" means any county in Oregon or Washington in which Bancorp, the Bank or any of their subsidiaries either: (A) Has a branch or other office at the commencement of the restricted period; or (B) Has decided to open a branch or other office during the restricted period, provided that fact has been communicated to the Executive before the Executive's Termination of Employment. (5) "RESTRICTED PERIOD" means a period of: (A) 12 months from the date of the Executive's Termination of Employment; or (B) 24 months from the date of the Executive's Termination Event if the Change in Control Benefit under Section 3.5 is payable. (6) "SUBSIDIARIES" mean any current or future subsidiary of Bancorp or the Bank, regardless of whether it is one hundred percent (100%) owned by Bancorp or the Bank. (b) RESTRICTIONS. The Executive agrees that, during the restricted period, the Executive will not, directly or indirectly: (1) Except as provided in subsection (c)(1) below, be employed by or provide services to any financial institution that engages in competing activities in the restricted area, whether as an employee, officer, director, agent, consultant, promoter or in any similar position, function or title; (2) Have any ownership or financial interest in any financial institution that engages in competing activities in the restricted area that violates the Company's then current published ethical standards on ownership interests in competing businesses; (3) Induce any employee of Bancorp, the Bank or their subsidiaries to terminate their employment with Bancorp, the Bank or their subsidiaries; (4) Hire or assist in the hiring of any employee of Bancorp, the Bank or their subsidiaries for or by any financial institution that is not affiliated with Bancorp, the Bank or their subsidiaries; or (5) Induce any person or entity (other than the Executive's relatives or entities controlled by them) to terminate or curtail its business or contractual relationships with the Bank, Bancorp or their subsidiaries. (c) EXCEPTIONS. Regardless of the restriction in subsection (b)(1) above, the Executive may be employed outside the restricted area as an employee, officer, agent, consultant or promoter of a financial institution that engages in competing activities in the restricted area, provided the Executive will not: (1) Act within the restricted area as an employee or other representative or agent of that financial institution; (2) Have any responsibilities for that financial institution's operations within the restricted area; or (3) Directly or indirectly violate the restrictions of subsection (b)(3), (4) and (5) above. (d) FORFEITURE. If the Executive breaches the restrictions under subsection (b) above, Executive will: (1) Forfeit any benefits payable under this Plan that were unpaid as of the date of the breach; and (2) Promptly repay the Company, upon demand, any payments made after the date of the breach. If the Executive does not repay that amount within 15 days after the date of the demand, the Executive will also pay interest on that amount at the rate of nine percent (9%) per annum. ARTICLE 8 CLAIMS AND APPEALS PROCEDURE 8.1 CLAIMS PROCEDURE. (a) ROUTINE PAYMENTS. The Compensation Committee may authorize distribution of payments to the Executive or the Executive's Beneficiary even though a formal claim has not been filed. (b) FORMAL CLAIMS. (1) MANDATORY PROCEDURE. Any claim that the Executive or a Beneficiary or anyone claiming on behalf of or through the Executive or a Beneficiary may make under ERISA or under any other applicable federal or state law must first be brought as a formal claim under this section. If that claim is denied, it will be subject to the claims appeal procedures of Section 8.2. (2) FORM AND CONTENT OF CLAIM. The claim shall be in any form reasonably acceptable to the Compensation Committee and must state the basis of the claim and also authorize the Compensation Committee and its designees to conduct any examinations necessary to determine the validity of the claim and take any steps necessary to facilitate the benefit payment. (3) SUBMISSIONS BY CLAIMANT. The claimant shall file the claim with the Executive Vice-President, Human Resources. The claimant may also submit written comments, documents, records and other information relating to the claim. (4) ACCESS TO INFORMATION. The claimant will be provided, upon request and free of charge, reasonable access to, and copies of, all nonconfidential or nonprivileged Company documents, records and other information relevant to the claim. (5) AUTHORIZED REPRESENTATIVE. The claimant may be represented by an individual authorized to act on behalf of the claimant. A representative's authorization to act on behalf of the claimant must be established to the Compensation Committee's reasonable satisfaction. (6) REVIEW AND RECOMMENDATION. The claim shall be reviewed by the Company's Chief Executive Officer and the Executive Vice-President, Human Resources, who shall make their recommendation to the Compensation Committee. (c) TIMELINE. The Compensation Committee shall make a determination on the claim within 90 days after the date the claimant filed it with the Executive Vice-President, Human Resources. If more time is required for a special case, the Compensation Committee may take up to an additional 90 days to render a determination, but the claimant must be notified of the need for the extension of time within the initial 90-day period. This notification will explain the special circumstances requiring the extension of time as well as the date by which a determination is expected. (d) EXPLANATION OF DENIAL. If a claim is wholly or partially denied, the Compensation Committee shall provide the claimant with a notice of the decision, written in a manner calculated to be understood by the claimant, containing the following information: (1) The specific reason or reasons for the denial and a discussion of why the specific reason or reasons apply. (2) References to the specific provisions of this Plan upon which the denial was based. (3) A description of any additional material or information necessary for the claimant to perfect the claim. (4) An explanation of the claims appeal procedures under this Plan. (e) DEEMED DENIAL. If a determination is not furnished to the claimant within 90 days of the date the claim was filed -- or 180 days if it is a special case -- the claim shall be deemed to be denied. (f) APPEAL OF DENIAL. If the claimant disagrees with the denial, the claimant's sole remedy shall be to proceed with the claims appeal procedure under Section 8.2. 8.2 CLAIMS APPEAL PROCEDURES. (a) WRITTEN REQUEST. If a claim is denied in whole or in part, the claimant or the claimant's authorized representative may submit a written request for a review of the denial, including a statement of the reasons for the review. (b) DEADLINE. This request must be filed with the Compensation Committee within 60 days after the claimant receives notice of the denial. This time limit may be extended by the Compensation Committee if an extension appears to be reasonable in view of the nature of the claim and the pertinent circumstances. (c) CONDUCT OF APPEAL. Upon receipt of such a request, the Compensation Committee shall afford the claimant an opportunity to review relevant documents and to submit issues and comments in writing. The Compensation Committee may hold a hearing or conduct an independent investigation. The Compensation Committee will consider all of the claimant's submissions, regardless of whether they were submitted or considered in the initial determination of the claim. (d) TIMELINE. A decision on the review shall be rendered by the Compensation Committee not later than 60 days after receipt of the claimant's request for the review. If more time is required for a special case, the Compensation Committee may take up to an additional 60 days to render a decision, but the claimant must be notified of the need for the extension of time within the initial 60-day period. This notification shall explain the special circumstances (such as the need to hold a hearing) which require the extension of time. (e) DECISION ON APPEAL. The decision shall be written in a manner calculated to be understood by the claimant and shall include: (1) Specific reasons for the decision; (2) Specific references to the provisions of this Plan on which the decision is based; (3) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits; and (4) A statement of the claimant's right to bring a civil action under ERISA Section 502(a), to the extent such an action is not preempted by the mandatory arbitration provision of Section 10.10. (f) DEEMED DENIAL. If the determination on the appeal is not furnished to the claimant within 60 days -- or 120 days if it is a special case -- the appeal shall be deemed to be denied. (g) EXHAUSTION OF APPEAL PROCESS REQUIRED. A claimant whose claim has been denied is required to exhaust the claims appeal procedures set forth in this section before commencing any arbitration or legal action. 8.3 DISCRETIONARY AUTHORITY; STANDARDS OF PROOF AND REVIEW; RECORD ON REVIEW. (a) The Compensation Committee is the "named fiduciary" for purposes of ERISA. This Plan confers full discretionary authority on the Compensation Committee with regard to the administration of this Plan, including the discretion to: (1) Make findings of fact and determine the sufficiency of the evidence presented regarding a claim; and (2) Interpret and construe the provisions of this Plan and related administrative documents, if any, (including words and phrases that are not defined in this Plan or those documents) and correct any defect, supply any omission or reconcile any ambiguity or inconsistency. (b) A decision by the Compensation Committee is required to be supported by substantial evidence only. That is, proof by a preponderance of the evidence, clear and convincing evidence or beyond a reasonable doubt is not required. (c) A court of law or arbitrator reviewing any decision of the Compensation Committee, including those relating to the interpretation of this Plan or a claim for benefits under this Plan, shall be required to use the arbitrary and capricious standard of review. That is, the Compensation Committee's determination may be reversed only if it was made in bad faith, is not supported by substantial evidence or is erroneous as to a question of law. (d) In conducting its review of the Compensation Committee's decision, a court or arbitrator shall be limited to the record of documents, testimony and facts presented to or actually known to the Compensation Committee at the time the decision was made. ARTICLE 9 AMENDMENT AND TERMINATION 9.1 BY MUTUAL AGREEMENT. Except as provided in Section 9.2, this Plan may be amended or terminated only by a written agreement signed by the Company and the Executive. 9.2 BY THE COMPANY. (a) Subject to the restrictions in subparagraph (b) below, the Company may unilaterally amend or terminate this Plan at any time if in the opinion of the Company's counsel or accountants, as a result of legislative, judicial or regulatory action, continuation of the Plan would: (1) Cause benefits to be taxable to the Executive before their actual receipt; or (2) Result in material financial penalties or other materially detrimental ramifications to the Company (other than the financial impact of paying the benefits). (b) Except as required by law, banking regulatory requirements or financial accounting requirements, an amendment or termination under subparagraph (a) above may not reduce: (1) The vested percentage of the Executive's Adjusted Accrual Balance; (2) The amount of the Executive's vested Adjusted Accrual Balance as determined as of the later of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved; or (3) The amount of the benefit payments that are being made if the Executive's benefits were in pay status as of the earlier of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved. (c) Except as required by law, banking regulatory requirements or financial accounting requirements, upon the termination of this Plan under subsection (a) above: (1) The Executive's Adjusted Accrual Balance and vesting credit will be frozen as of the later of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved; or (2) Interest will be credited on the Executive's frozen vested Accrual Balance at an annual rate of six percent (6%) compounded monthly; and (3) The Company may either: (A) Hold and disburse the Executive's frozen vested Accrual Balance (as adjusted under paragraph (2) above) in accordance with the otherwise applicable terms and conditions of this Plan; or (B) Disburse that amount in a lump sum at such earlier date as the Company, in its sole discretion, may elect. ARTICLE 10 GENERAL PROVISIONS 10.1 ADMINISTRATION. The Compensation Committee shall have all powers necessary or desirable to administer this Plan, including but not limited to: (a) Establishing and revising the method of accounting for the Plan; (b) Maintaining a record of benefit payments; (c) Establishing rules and prescribing any forms necessary or desirable to administer the Plan; (d) Interpreting the provisions of the Plan; and (e) Delegating to others certain aspects of the Compensation Committee's managerial and operational responsibilities, including employing advisors and delegating ministerial duties. 10.2 RECEIPT AND RELEASE FOR PAYMENTS. (a) The Compensation Committee may require the recipient of a payment, as a condition precedent to the payment, to execute a receipt and, in the case of a payment in full, a release for the payment. The receipt and the release shall be in a form satisfactory to the Compensation Committee. (b) Payment may be made by a deposit to the credit of the Executive or a Beneficiary, as applicable, in any bank or trust company. (c) Payment may be made to the individual or institution maintaining or having custody of the Executive or Beneficiary, as applicable, if the Compensation Committee receives satisfactory evidence that -- (1) A person entitled to receive any benefit under this Plan is, at the time the benefit is payable, physically, mentally or legally incompetent to receive payment and provides a valid receipt for it; (2) An individual or institution is maintaining or has custody of that person; and (3) No guardian, custodian or other representative of the estate of that person has been appointed. (d) The receipt of the recipient or a canceled check shall be a sufficient voucher for the Company. The Company is not required to obtain from the recipient an accounting for the payment. (e) If a dispute arises over a distribution, payment may be withheld until the dispute is determined by a court of competent jurisdiction or settled, to the satisfaction of the Compensation Committee, by the parties concerned. The Compensation Committee may require a hold harmless agreement on behalf of the Company and the Plan before making payment. 10.3 OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Plan is not an express or implied employment agreement. Accordingly, other than providing for certain benefits payable upon a Termination of Employment, this Plan will not affect the determination of any compensation payable by the Company to the Executive, nor will it affect the other terms of the Executive's employment with the Company. The specific arrangements referred to in this Plan are not intended to exclude or circumvent any other benefits that may be available to the Executive under the Company's employee benefit or other applicable plans, upon the Executive's Termination of Employment. 10.4 WITHHOLDING. (a) INCOME TAX. Applicable federal, state and local income tax withholding will be withheld from all payments made under this Plan. (b) FICA. To the extent allowable under applicable regulations: (1) The present value of the vested benefits under this Plan will be taken into account as FICA wages in the year they become vested; (2) Present value will be determined using reasonable actuarial equivalency factors acceptable to the Compensation Committee; (3) The employee portion of each year's FICA liability will be deducted from the Executive's other cash compensation for that year; and (4) FICA will not be deducted from any payments made under this Plan. 10.5 UNFUNDED ARRANGEMENT. (a) The Company's payment obligation under this Plan is purely contractual and is not funded or secured in any manner by any asset, pledge or encumbrance of the Company's property. (b) This Plan is not intended to create, and should not be construed as creating, any trust or trust fund. The benefits accrued under this Plan and any assets acquired by the Company to finance its payment obligations under this Plan shall not be held in a trust (other than a grantor trust of the Company), escrow or similar fiduciary capacity. (c) Any insurance policy on the Executive's life the Company may acquire to assist it in financing its obligations under this Plan is a general asset of the Company and neither the Executive nor anyone else claiming on behalf of or through the Executive shall have any right with respect to, or claim against, that policy. (d) The Executive and any Beneficiary are general unsecured creditors of the Company with respect to the payment of the benefits under this Plan. 10.6 BENEFITS NOT ASSIGNABLE. The accrued benefits under this Plan shall not be considered assets under state law or bankruptcy law of the Executive or of any Beneficiary. The Executive and any Beneficiary shall not have any right to alienate, anticipate, pledge, encumber or assign any of the benefits payable under this Plan. The Executive's or any Beneficiary's benefits shall not be subject to any claim of, or any attachment, garnishment or other legal process brought by, any of his or her creditors. 10.7 BINDING EFFECT. This Plan binds and inures to the benefit of the parties and their respective legal representatives, heirs, successors and assigns. 10.8 REORGANIZATION. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless that succeeding or continuing company, firm or person agrees to assume and discharge the obligations of the Company under this Plan. Upon the occurrence of such an event, the term "Company" as used in this Plan shall be deemed to refer to the successor or survivor company. 10.9 APPLICABLE LAW. (a) This Plan shall be construed and its validity determined according to the laws of the State of Oregon, other than its law regarding conflicts of law or choice of law, to the extent not preempted by federal law. (b) Any dispute arising out of this Plan must be brought in either Clackamas County or Multnomah County, Oregon, and the parties will submit to personal jurisdiction in either of those counties. 10.10 ARBITRATION. Any dispute or claim arising out of or brought in connection with this Plan, will, if requested by any party, be submitted to and settled by arbitration under the rules then in effect of the American Arbitration Association (or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered in arbitration will be final and will bind the parties, and a judgment on it may be entered in the highest court of the forum having jurisdiction. The arbitrator will render a written decision, naming the substantially prevailing party in the action, and, subject to Section 10.11(b), will award that party all costs and expenses incurred, including reasonable attorneys' fees. 10.11 ATTORNEYS' FEES. (a) If any breach of or default under this Plan results in either party incurring attorneys' or other fees, costs or expenses (including those incurred in an arbitration), the substantially prevailing party is entitled to recover from the non-prevailing party its reasonable legal fees, costs and expenses, including attorneys' fees and the costs of the arbitration, except as provided in subsection (b) below. (b) If the Executive is not the substantially prevailing party, the Executive shall be liable to pay the Company under subsection (a) above only if the arbitrator determines that: (1) There was no reasonable basis for the Executive's claim (or the Executive's response to the Company's claim); or (2) The Executive had engaged in unreasonable delay, failed to comply with a discovery order or otherwise acted in bad faith in the arbitration. (c) Either party shall be entitled to recover any reasonable attorneys' fees and other costs and expenses it incurs in enforcing or collecting an arbitration award. (d) If an award under this section is made to the Executive and accountants or tax counsel selected by Company with the Executive's consent (which shall not be unreasonably withheld) determine that the award is includible in Executive's gross income, the Company shall also pay the Executive a gross-up payment to offset the taxes imposed on that award, including the taxes on the gross-up payment itself. This gross-up payment shall be determined following the methodology employed in the Change in Control Agreement. 10.12 ENTIRE AGREEMENT. This Plan constitutes the entire agreement between the Company and the Executive as to its subject matter. No rights are granted to the Executive by virtue of this Plan other than those specifically set forth in this document and any amendments to it. 10.13 CONSTRUCTION. The language of this Plan was chosen jointly by the parties to express their mutual intent. No rule of construction based on which party drafted the Plan or certain of its provisions will be applied against any party. 10.14 SECTION HEADINGS. The section headings used in this Plan have been included for convenience of reference only. 10.15 COUNTERPARTS. This Plan may be executed in one or more counterparts, and all counterparts will be construed together as one Plan. 10.16 SEVERABILITY. If any provision of this Plan is, to any extent, held to be invalid or unenforceable, it will be deemed amended as necessary to conform to the applicable laws or regulations. However, if it cannot be amended without materially altering the intentions of the parties, it will be deleted and the remainder of this Plan will be enforced to the extent permitted by law. 10.17 JOINT AND SEVERAL OBLIGATION. Bancorp and Bank will be jointly and severally liable for the payment obligations under this Agreement. EXECUTIVE: COMPANY: WEST COAST BANCORP ___________________________________ By:_________________________________ Xandra McKeown Title:______________________________ Date:______________________________ Date:_______________________________ WEST COAST BANK By:_________________________________ Title:______________________________ Date:_______________________________ CLARKCONSULTING(TM) PLAN YEAR REPORTING HYPOTHETICAL TERMINATION BENEFIT SCHEDULE XANDRA MCKEOWN
DOB: 8/29/1957 EARLY VOLUNTARY EARLY INVOLUNTARY PRE-RETIRE. Plan Anniv Date: 12/31/2003 TERMINATION TERMINATION DISABILITY CHANGE OF CONTROL DEATH Normal Retirement: 8/29/2021, Age 64 Installment Installment Installment Installment BENEFIT Payments: Monthly Installments Payable at 64 Payable at 64 Payable at 64 Payable at 64 Installment - ---------------------------------------- ----------------- ----------------- ------------------ ----------------- ----------- BENEFIT ACCRUAL Based On Based On Based On Based On Based On LEVEL BALANCE Vesting Accrual Vesting Accrual Vesting Accrual Vesting Benefit Benefit PERIOD DISCOUNT ----- ------- ------- -------- ------- -------- ------- -------- ------- -------- -------- ENDING RATE (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) - ----------- -------- ------- ------- ------- -------- ------- -------- ------- -------- ------- -------- ----------- Dec 2003(1) 6% 48,650 6,248 30% 544 100% 1,812 100% 1,812 100% 48,650 48,650 Dec 2004 6% 48,650 21,894 40% 2,393 100% 5,982 100% 5,982 100% 48,650 48,650 Dec 2005 6% 48,650 38,505 50% 4,954 100% 9,909 100% 9,909 100% 48,650 48,650 Dec 2006 6% 48,650 56,140 60% 8,165 100% 13,608 100% 13,608 100% 48,650 48,650 Dec 2007 6% 48,650 74,863 70% 11,964 100% 17,092 100% 17,092 100% 48,650 48,650 Dec 2008 6% 48,650 94,741 80% 16,299 100% 20,373 100% 20,373 100% 48,650 48,650 Dec 2009 6% 48,650 115,845 90% 21,118 100% 23,464 100% 23,464 100% 48,650 48,650 Dec 2010 6% 48,650 138,251 100% 26,376 100% 26,376 100% 26,376 100% 48,650 48,650 Dec 2011 6% 48,650 162,038 100% 29,118 100% 29,118 100% 29,118 100% 48,650 48,650 Dec 2012 6% 48,650 187,293 100% 31,701 100% 31,701 100% 31,701 100% 48,650 48,650 Dec 2013 6% 48,650 214,105 100% 34,134 100% 34,134 100% 34,134 100% 48,650 48,650 Dec 2014 6% 48,650 242,572 100% 36,426 100% 36,426 100% 36,426 100% 48,650 48,650 Dec 2015 6% 48,650 272,793 100% 38,584 100% 38,584 100% 38,584 100% 48,650 48,650 Dec 2016 6% 48,650 304,879 100% 40,617 100% 40,617 100% 40,617 100% 48,650 48,650 Dec 2017 6% 48,650 338,944 100% 42,532 100% 42,532 100% 42,532 100% 48,650 48,650 Dec 2018 6% 48,650 375,110 100% 44,336 100% 44,336 100% 44,336 100% 48,650 48,650 Dec 2019 6% 48,650 413,506 100% 46,035 100% 46,035 100% 46,035 100% 48,650 48,650 Dec 2020 6% 48,650 454,271 100% 47,635 100% 47,635 100% 47,635 100% 48,650 48,650 Aug 2021 6% 48,650 482,835 100% 48,650 100% 48,650 100% 48,650 100% 48,650 48,650
August 29, 2021 Retirement; September 1, 2021 First Payment Date (1) The first line reflects 5 months of data, August 2003 to December 2003. Copyright(C)2003 Clark Consulting. Securities offered through Clark Securities, Inc., Salary Continuation Plan for West Coast Bank - Lake Oswego, OR a wholly owned subsidiary of Clark, Inc., member NASD & SIPC, 1001811 16948 137761 v5.31.04 12/18/2003:13 SCP-E NB Los Angeles, CA 90071, (213) 486-6300.

CLARKCONSULTING(TM) PLAN YEAR REPORTING HYPOTHETICAL TERMINATION BENEFIT SCHEDULE XANDRA MCKEOWN
DOB: 8/29/1957 EARLY VOLUNTARY EARLY INVOLUNTARY PRE-RETIRE. Plan Anniv Date: 12/31/2003 TERMINATION TERMINATION DISABILITY CHANGE OF CONTROL DEATH Normal Retirement: 8/29/2021, Age 64 Installment Installment Installment Installment BENEFIT Payments: Monthly Installments Payable at 64 Payable at 64 Payable at 64 Payable at 64 Installment - ---------------------------------------- ----------------- ----------------- ------------------ ----------------- ----------- BENEFIT ACCRUAL Based On Based On Based On Based On Based On LEVEL BALANCE Vesting Accrual Vesting Accrual Vesting Accrual Vesting Benefit Benefit PERIOD DISCOUNT ----- ------- ------- -------- ------- -------- ------- -------- ------- -------- -------- ENDING RATE (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) - ----------- -------- ------- ------- ------- -------- ------- -------- ------- -------- ------- -------- -----------
* The purpose of this hypothetical illustration is to show the participant's annual benefit based on various termination assumptions. Actual benefits are based on the terms and provisions of the plan agreement executed between the company and participant and may differ from those shown. * IF THERE IS A CONFLICT IN ANY TERMS OR PROVISIONS BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT. Copyright(C)2003 Clark Consulting. Securities offered through Clark Securities, Inc., Salary Continuation Plan for West Coast Bank - Lake Oswego, OR a wholly owned subsidiary of Clark, Inc., member NASD & SIPC, 1001811 16948 137761 v5.31.04 12/18/2003:13 SCP-E NB Los Angeles, CA 90071, (213) 486-6300.

EX-10.21 13 v96690exv10w21.txt EXHIBIT 10.21 EXHIBIT 10.21 WEST COAST BANK SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP) EFFECTIVE DATE: AUGUST 1, 2003 THIS SERP is adopted by WEST COAST BANK (the "Bank"), WEST COAST BANCORP ("Bancorp"), its parent holding company, (collectively referred to as the "Company") and JAMES D. BYGLAND (the "Executive"). ARTICLE 1 PURPOSE 1.1 DUAL PURPOSES. This Plan is intended to: (a) Assist in assuring the Executive's continued service to the Company by providing supplemental retirement benefits that are competitive with the Company's peers; and (b) Discourage the Executive from engaging in any competitive business after the Executive leaves the Company. 1.2 TOP-HAT PLAN STATUS. This is an unfunded Plan maintained primarily for the purpose of providing deferred compensation for the Executive, who is a member of a select group of management or highly compensated employees. As such, this Plan is intended to qualify as a "top hat plan" exempt from Part 2 (minimum participation and vesting standards), Part 3 (minimum funding standards) and Part 4 (fiduciary responsibility provisions) of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). The provisions of the Plan shall be interpreted and administered according to this intention. ARTICLE 2 DEFINITIONS Words and phrases appearing in this Plan with initial capitalization are defined terms that have the meanings stated below. Words appearing in the following definitions which are themselves defined terms are also indicated by initial capitalization. 2.1 ACCRUAL BALANCE means the benefit liability accrued by the Company under Article 6. 2.2 ADJUSTED ACCRUAL BALANCE means the Accrual Balance determined as of the end of the month that is on or before the date of the Executive's Termination of Employment. 2.3 BENEFICIARY means the person or persons or estate, trust or charitable organization entitled under Article 5 to receive the death benefit payable under this Plan. 2.4 BOARD means Bancorp's Board of Directors. 2.5 CHANGE IN CONTROL AGREEMENT means the "Change In Control Agreement" effective January 1, 2004, between the Executive and the Company. 2.6 COMPENSATION COMMITTEE means the Compensation and Personnel Committee of Bancorp's Board. 2.7 DISABILITY means that either the carrier of any Company-provided individual or group long-term disability insurance policy covering the Executive or the Social Security Administration has determined that the Executive is disabled. Upon the request of the Compensation Committee, the Executive will submit proof of the carrier's or the Social Security Administration's determination. 2.8 EARLY INVOLUNTARY TERMINATION means that the Company has terminated the Executive's employment before Normal Retirement Age for any reason other than: (a) Termination for Cause; (b) Disability; or (c) A Termination Event. 2.9 EARLY VOLUNTARY TERMINATION means that before Normal Retirement Age, the Executive has voluntarily terminated Executive's employment with the Company for reasons other than: (a) Disability; or (b) A Termination Event. 2.10 EFFECTIVE DATE means the date first stated above (immediately below the title of this Plan). 2.11 NORMAL RETIREMENT AGE means age 64. 2.12 NORMAL RETIREMENT DATE means the later of Normal Retirement Age or Termination of Employment. 2.13 PLAN YEAR means the calendar year, except for the first Plan Year which is a short year beginning August 1, 2003, and ending December 31, 2003. 2.14 ROE means, for any given Plan Year, the greater of: (a) Bancorp's return on equity, which shall be determined under GAAP and expressed as a percentage calculated by dividing its: (1) Annual net income before common stock dividends are paid; by (2) Average annual common shareholder equity; or (b) Bancorp's adjusted return on equity which shall be determined by calculating the percentage under subsection (a) above on an adjusted basis to address the effects of items that are required to be included or excluded by GAAP for that Plan Year, but would normally not be included or excluded from Bancorp's net income or shareholder equity. 2.15 TERMINATION EVENT means the termination of the Executive's employment under circumstances that entitle the Executive to benefits under the Change In Control Agreement. 2.16 TERMINATION FOR CAUSE OR TERMINATED FOR CAUSE means that the Company has terminated the Executive's employment for "cause" as defined in the Change In Control Agreement. 2.17 TERMINATION OF EMPLOYMENT means that the Executive's employment with the Company has terminated for any reason, voluntary or involuntary. 2.18 YEAR OF SERVICE means a Plan Year in which: (a) The Company achieved an ROE of not less than ten percent (10%); and (b) The Executive is actively at work with the Company or on a Company-approved leave of absence at the end of that year. ARTICLE 3 BENEFITS DURING LIFETIME 3.1 NORMAL RETIREMENT BENEFIT. Upon Termination of Employment on or after Normal Retirement Age for reasons other than death, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustment under subsection (c) below and forfeiture under Article 7, the Normal Retirement Benefit is the annual "Benefit Level" installment as shown in Column (1) of Schedule A to this SERP. (b) PAYMENT SCHEDULE. The Normal Retirement Benefit is payable monthly for a period of fifteen (15) years beginning on the first day of the month on or after the Executive's Normal Retirement Date. (c) BENEFIT INCREASES. (1) As of each anniversary of the Effective Date, the Compensation Committee, in its sole discretion, may increase the Normal Retirement Benefit by increasing: (A) The amount of the scheduled installment payments; (B) The length of the payment schedule; or (C) Both the amount and the length of the installment payments. (2) If the Normal Retirement Benefit is increased, Schedule A to this SERP shall be revised, including adjusting the other scheduled benefit payments accordingly. 3.2 EARLY VOLUNTARY TERMINATION BENEFIT. Upon an Early Voluntary Termination, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below and forfeiture under Article 7, the Early Voluntary Termination Benefit is the annual installment payment under a deferred 15-year term certain fixed annuity calculated as follows: (1) The present value of the annuity is the vested Adjusted Accrual Balance (with vesting determined under subsection (e) below); (2) The annuity starting date is the first day of the month on or after Normal Retirement Age; and (3) Interest is credited at an annual rate of six percent (6%) compounded monthly during both the period from the Termination of Employment to the annuity starting date and the 15-year payout period. (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Early Voluntary Termination Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Early Voluntary Termination Benefit in a lump-sum payment as follows: (1) The payment amount shall equal the Executive's vested Adjusted Accrual Balance together with interest credited at the annual rate of six percent (6%) compounded monthly until paid under paragraph (2) below. (2) The lump-sum payment will be paid to the Executive at either: (A) Normal Retirement Age; or (B) Such earlier date as the Compensation Committee, in its sole discretion, may elect. (d) BENEFIT INCREASES. The Early Voluntary Termination Benefit may be increased as follows: (1) The amount of the benefit will be adjusted for any increases in the Normal Retirement Benefit granted under Section 3.1(c)(1). (2) In its sole discretion, the Compensation Committee may, from time to time as of any anniversary of the Effective Date, separately increase the amount of the Early Voluntary Termination Benefit without increasing the Normal Retirement Benefit. (3) If the Early Voluntary Termination Benefit is adjusted or increased, Schedule A to this SERP shall be revised accordingly. (e) VESTING. The vested portion of the Executive's Adjusted Accrual Balance will be determined as follows: (1) The Executive will be fifty percent (50%) vested immediately upon the Effective Date. Beginning with the Plan Year commencing January 1, 2004, the Executive will receive an additional ten percent (10%) vesting for each Year of Service until the Executive is one hundred percent (100%) vested after completing five (5) Years of Service. (2) In its sole discretion, the Compensation Committee may at any time and from time to time increase the Executive's vested percentage (including granting full vesting). 3.3 EARLY INVOLUNTARY TERMINATION BENEFIT. Upon an Early Involuntary Termination, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below, immediate full vesting under subsection (e) below and forfeiture under Article 7, the Early Involuntary Termination Benefit is the annual installment payment determined in the same manner as the Early Voluntary Termination Benefit under Section 3.2(a). (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Early Involuntary Termination Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Early Involuntary Termination Benefit in a lump-sum payment under the same terms and conditions that apply to a lump-sum payment of the Early Voluntary Termination Benefit (see Section 3.2(c)). (d) BENEFIT INCREASES. The Early Involuntary Termination Benefit may be separately increased under the same terms and conditions that apply to increases in the Early Voluntary Termination Benefit (see Section 3.2(d)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. 3.4 DISABILITY BENEFIT. Upon Termination of Employment before Normal Retirement Age due to Disability, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below, immediate full vesting under subsection (e) below and forfeiture under Article 7, the Disability Benefit is the annual installment payment determined in the same manner as for the Early Voluntary Termination Benefit (see Section 3.2(a)). (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Disability Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Disability Benefit in a lump-sum payment under the same terms and conditions that apply to a lump-sum payment of the Early Voluntary Termination Benefit (see Section 3.2(c)). (d) BENEFIT INCREASES. The Disability Benefit may be increased under the same terms and conditions that apply to increases in the Early Voluntary Termination Benefit (see Section 3.2(d)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. 3.5 CHANGE IN CONTROL BENEFIT. If the Executive becomes entitled to benefits under the Change in Control Agreement, the Company will pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below and forfeiture under Article 7, the Change In Control Benefit is the annual "Change of Control Installment" set forth in Column (10) of Schedule A to this SERP. (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Change In Control benefit is payable in the same manner as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Change In Control Benefit in a lump-sum payment as follows: (1) The payment will be equal to the present value of the Normal Retirement Benefit as of the date of the Executive's Termination of Employment. The present value will be determined using an annual rate of six percent (6%) interest compounded monthly. (2) The lump-sum payment will be paid to the Executive within sixty (60) days following the Executive's Termination of Employment. (d) BENEFIT INCREASES. The Change in Control Benefit may be increased in the same manner as the Normal Retirement Benefit (see Section 3.1(c)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. ARTICLE 4 DEATH BENEFITS 4.1 PRE-RETIREMENT DEATH BENEFIT. If the Executive dies before a Termination of Employment and before attaining Normal Retirement Age, the Company will pay the following benefit to the Executive's Beneficiary: (a) AMOUNT OF BENEFIT. The Pre-Retirement Death Benefit is the annual "Pre-Retirement Death Benefit Installment" as shown in Column (11) of Schedule A to this SERP. (b) PAYMENT OF BENEFIT. Unless a lump-sum payment is made under subsection (c) below, the Pre-Retirement Death Benefit is payable monthly for a period of fifteen (15) years beginning on the first day of the month following the Executive's death. (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Beneficiary or upon its own motion, to pay the Pre-Retirement Death Benefit in a lump-sum payment as follows: (1) The payment will be equal to the Normal Retirement Age Accrual Balance. (2) The lump-sum payment will be paid to the Beneficiary by the earlier of the following dates: (A) Sixty (60) days after the lump-sum payment is requested by the Beneficiary; or (B) Such other date as elected by the Compensation Committee in its sole discretion. 4.2 DEATH DURING PAYMENT OF A BENEFIT. If the Executive dies after any benefit payments have commenced under Article 3, the Company shall pay the remaining benefits to the Executive's Beneficiary either: (a) At the same time and in the same amounts they would have been paid to the Executive had the Executive survived; or (b) In the Committee's sole discretion, upon a request by the Beneficiary or upon its own motion, in a lump-sum payment. The amount of the lump-sum payment shall be determined under the provisions for calculating the alternative lump-sum payment for the particular type of benefit the Executive was receiving. If the Executive was receiving the Normal Retirement Benefit, the lump sum payment shall be the lump sum present value of the remaining payments as of the date of payment, determined using an annual rate of six percent (6%) interest compounded monthly. 4.3 DEATH BEFORE PAYMENTS COMMENCE. If the Executive is entitled to a benefit under Article 3, but dies before benefit payments begin, the Company shall pay the Executive's Beneficiary either: (a) The same benefit payments that the Executive was entitled to at the date of the Executive's death, except that the benefit payments shall commence as of the first day of the month following the Executive's death; or (b) The lump sum equivalent of those benefits as determined under Section 4.2(b). ARTICLE 5 BENEFICIARIES 5.1 DESIGNATION OF BENEFICIARY. The Executive may designate the Beneficiary or Beneficiaries (who may be designated concurrently or contingently) to receive the death benefit under the Plan under the following terms and conditions: (a) The beneficiary designation must be in a form satisfactory to the Compensation Committee and must be signed by the Executive. (b) A beneficiary designation shall be effective upon receipt by the Compensation Committee or its designee, provided it is received before the Executive's death. (c) The Executive may revoke a previous beneficiary designation without the consent of the previously designated Beneficiary. This revocation is made by filing a new beneficiary designation form with the Compensation Committee or its designee, and shall be effective upon receipt. 5.2 DIVORCE. A divorce will automatically revoke the portion of a beneficiary designation designating the former spouse as a Beneficiary. The former spouse will be a Beneficiary under this SERP only if a new beneficiary designation is filed after the date the dissolution decree is entered. 5.3 DISCLAIMERS. If a Beneficiary disclaims a death benefit, the benefit will be paid as if the Beneficiary had predeceased the Executive. 5.4 DEATH OF BENEFICIARY. If a Beneficiary who is in pay status dies before full distribution is made to the Beneficiary, the unpaid balance of the distribution will be paid to the Beneficiary's estate. 5.5 DEFAULT BENEFICIARY. If, at the time of the Executive's death, the Executive has failed to designate a Beneficiary, the Executive's beneficiary designation has become completely invalid under the provisions of this Article or there is no surviving Beneficiary, payment of the death benefit will be made in the following order of priority: (a) To the Executive's spouse, if living; (b) To the Executive's surviving children, in equal shares; or (c) To the Executive's estate. ARTICLE 6 ACCRUAL BALANCE 6.1 COMPENSATION LIABILITY. The Accrual Balance shall be equal to the financial statement compensation liability accrued by the Company (under Section 6.2) as of any applicable determination date (as defined in Section 6.3) for its payment obligation under this SERP. 6.2 ACCRUAL CALCULATION. The value of the Accrual Balance shall: (a) Be determined using Generally Accepted Accounting Principles applying APB 12 as amended by FAS 106; and (b) Equal the sum of the: (1) Principal accrual (service cost); plus (2) Interest accrual at six percent (6%) interest. 6.3 DETERMINATION DATES. The Accrual Balance shall be determined as of the last day of the month. 6.4 YEAR-END VALUES. The year-end values and Normal Retirement Age value of the Accrual Balance are listed in Column (2) of Schedule A to this SERP. 6.5 REPORTING. The Compensation Committee will report the Accrual Balance to the Executive at least annually and within a reasonable period of time not to exceed 30 days after the date of the Termination of Employment if the Executive is to be paid the Early Voluntary Termination, Early Involuntary Termination or Disability Benefit. ARTICLE 7 FORFEITURE 7.1 GROUNDS FOR FORFEITURE. (a) The Executive will forfeit any benefits payable under this Plan upon a Termination for Cause. (b) The Company shall not pay the Pre-Retirement Death Benefit under Section 4.1 under the Plan if the Executive: (1) Commits suicide within two years after the Effective Date; or (2) Dies within two years after the Effective Date and has made any material misstatement of fact on any application for life insurance that may be used by the Company to finance its obligations under the Plan. (c) The Executive will forfeit the balance of any remaining unpaid benefits under this Plan if the Executive violates the noncompetition restrictions of Section 7.2. 7.2 NONCOMPETITION RESTRICTIONS. (a) DEFINITIONS. For purposes of this section, the following terms have the meanings stated below: (1) "BANKING INSTITUTION" means any state or national bank, state or federal savings and loan association, mutual savings bank or state or federal credit union. (2) "COMPETING ACTIVITIES" mean any activities that are competitive with the business activities of Bancorp, the Bank or any of their subsidiaries as conducted at the commencement of, or during the term of, the restricted period. (3) "FINANCIAL INSTITUTION" means any banking institution (as defined in paragraph (1) above), trust company or mortgage company regardless of: (A) Its legal form of organization; or (B) Whether it is in existence or is in formation. (4) "RESTRICTED AREA" means any county in Oregon or Washington in which Bancorp, the Bank or any of their subsidiaries either: (A) Has a branch or other office at the commencement of the restricted period; or (B) Has decided to open a branch or other office during the restricted period, provided that fact has been communicated to the Executive before the Executive's Termination of Employment. (5) "RESTRICTED PERIOD" means a period of: (A) 12 months from the date of the Executive's Termination of Employment; or (B) 24 months from the date of the Executive's Termination Event if the Change in Control Benefit under Section 3.5 is payable. (6) "SUBSIDIARIES" mean any current or future subsidiary of Bancorp or the Bank, regardless of whether it is one hundred percent (100%) owned by Bancorp or the Bank. (b) RESTRICTIONS. The Executive agrees that, during the restricted period, the Executive will not, directly or indirectly: (1) Except as provided in subsection (c)(1) below, be employed by or provide services to any financial institution that engages in competing activities in the restricted area, whether as an employee, officer, director, agent, consultant, promoter or in any similar position, function or title; (2) Have any ownership or financial interest in any financial institution that engages in competing activities in the restricted area that violates the Company's then current published ethical standards on ownership interests in competing businesses; (3) Induce any employee of Bancorp, the Bank or their subsidiaries to terminate their employment with Bancorp, the Bank or their subsidiaries; (4) Hire or assist in the hiring of any employee of Bancorp, the Bank or their subsidiaries for or by any financial institution that is not affiliated with Bancorp, the Bank or their subsidiaries; or (5) Induce any person or entity (other than the Executive's relatives or entities controlled by them) to terminate or curtail its business or contractual relationships with the Bank, Bancorp or their subsidiaries. (c) EXCEPTIONS. Regardless of the restriction in subsection (b)(1) above, the Executive may be employed outside the restricted area as an employee, officer, agent, consultant or promoter of a financial institution that engages in competing activities in the restricted area, provided the Executive will not: (1) Act within the restricted area as an employee or other representative or agent of that financial institution; (2) Have any responsibilities for that financial institution's operations within the restricted area; or (3) Directly or indirectly violate the restrictions of subsection (b)(3), (4) and (5) above. (d) FORFEITURE. If the Executive breaches the restrictions under subsection (b) above, Executive will: (1) Forfeit any benefits payable under this Plan that were unpaid as of the date of the breach; and (2) Promptly repay the Company, upon demand, any payments made after the date of the breach. If the Executive does not repay that amount within 15 days after the date of the demand, the Executive will also pay interest on that amount at the rate of nine percent (9%) per annum. ARTICLE 8 CLAIMS AND APPEALS PROCEDURE 8.1 CLAIMS PROCEDURE. (a) ROUTINE PAYMENTS. The Compensation Committee may authorize distribution of payments to the Executive or the Executive's Beneficiary even though a formal claim has not been filed. (b) FORMAL CLAIMS. (1) MANDATORY PROCEDURE. Any claim that the Executive or a Beneficiary or anyone claiming on behalf of or through the Executive or a Beneficiary may make under ERISA or under any other applicable federal or state law must first be brought as a formal claim under this section. If that claim is denied, it will be subject to the claims appeal procedures of Section 8.2. (2) FORM AND CONTENT OF CLAIM. The claim shall be in any form reasonably acceptable to the Compensation Committee and must state the basis of the claim and also authorize the Compensation Committee and its designees to conduct any examinations necessary to determine the validity of the claim and take any steps necessary to facilitate the benefit payment. (3) SUBMISSIONS BY CLAIMANT. The claimant shall file the claim with the Executive Vice-President, Human Resources. The claimant may also submit written comments, documents, records and other information relating to the claim. (4) ACCESS TO INFORMATION. The claimant will be provided, upon request and free of charge, reasonable access to, and copies of, all nonconfidential or nonprivileged Company documents, records and other information relevant to the claim. (5) AUTHORIZED REPRESENTATIVE. The claimant may be represented by an individual authorized to act on behalf of the claimant. A representative's authorization to act on behalf of the claimant must be established to the Compensation Committee's reasonable satisfaction. (6) REVIEW AND RECOMMENDATION. The claim shall be reviewed by the Company's Chief Executive Officer and the Executive Vice-President, Human Resources, who shall make their recommendation to the Compensation Committee. (c) TIMELINE. The Compensation Committee shall make a determination on the claim within 90 days after the date the claimant filed it with the Executive Vice-President, Human Resources. If more time is required for a special case, the Compensation Committee may take up to an additional 90 days to render a determination, but the claimant must be notified of the need for the extension of time within the initial 90-day period. This notification will explain the special circumstances requiring the extension of time as well as the date by which a determination is expected. (d) EXPLANATION OF DENIAL. If a claim is wholly or partially denied, the Compensation Committee shall provide the claimant with a notice of the decision, written in a manner calculated to be understood by the claimant, containing the following information: (1) The specific reason or reasons for the denial and a discussion of why the specific reason or reasons apply. (2) References to the specific provisions of this Plan upon which the denial was based. (3) A description of any additional material or information necessary for the claimant to perfect the claim. (4) An explanation of the claims appeal procedures under this Plan. (e) DEEMED DENIAL. If a determination is not furnished to the claimant within 90 days of the date the claim was filed--or 180 days if it is a special case--the claim shall be deemed to be denied. (f) APPEAL OF DENIAL. If the claimant disagrees with the denial, the claimant's sole remedy shall be to proceed with the claims appeal procedure under Section 8.2. 8.2 CLAIMS APPEAL PROCEDURES. (a) WRITTEN REQUEST. If a claim is denied in whole or in part, the claimant or the claimant's authorized representative may submit a written request for a review of the denial, including a statement of the reasons for the review. (b) DEADLINE. This request must be filed with the Compensation Committee within 60 days after the claimant receives notice of the denial. This time limit may be extended by the Compensation Committee if an extension appears to be reasonable in view of the nature of the claim and the pertinent circumstances. (c) CONDUCT OF APPEAL. Upon receipt of such a request, the Compensation Committee shall afford the claimant an opportunity to review relevant documents and to submit issues and comments in writing. The Compensation Committee may hold a hearing or conduct an independent investigation. The Compensation Committee will consider all of the claimant's submissions, regardless of whether they were submitted or considered in the initial determination of the claim. (d) TIMELINE. A decision on the review shall be rendered by the Compensation Committee not later than 60 days after receipt of the claimant's request for the review. If more time is required for a special case, the Compensation Committee may take up to an additional 60 days to render a decision, but the claimant must be notified of the need for the extension of time within the initial 60-day period. This notification shall explain the special circumstances (such as the need to hold a hearing) which require the extension of time. (e) DECISION ON APPEAL. The decision shall be written in a manner calculated to be understood by the claimant and shall include: (1) Specific reasons for the decision; (2) Specific references to the provisions of this Plan on which the decision is based; (3) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits; and (4) A statement of the claimant's right to bring a civil action under ERISA Section 502(a), to the extent such an action is not preempted by the mandatory arbitration provision of Section 10.10. (f) DEEMED DENIAL. If the determination on the appeal is not furnished to the claimant within 60 days--or 120 days if it is a special case--the appeal shall be deemed to be denied. (g) EXHAUSTION OF APPEAL PROCESS REQUIRED. A claimant whose claim has been denied is required to exhaust the claims appeal procedures set forth in this section before commencing any arbitration or legal action. 8.3 DISCRETIONARY AUTHORITY; STANDARDS OF PROOF AND REVIEW; RECORD ON REVIEW. (a) The Compensation Committee is the "named fiduciary" for purposes of ERISA. This Plan confers full discretionary authority on the Compensation Committee with regard to the administration of this Plan, including the discretion to: (1) Make findings of fact and determine the sufficiency of the evidence presented regarding a claim; and (2) Interpret and construe the provisions of this Plan and related administrative documents, if any, (including words and phrases that are not defined in this Plan or those documents) and correct any defect, supply any omission or reconcile any ambiguity or inconsistency. (b) A decision by the Compensation Committee is required to be supported by substantial evidence only. That is, proof by a preponderance of the evidence, clear and convincing evidence or beyond a reasonable doubt is not required. (c) A court of law or arbitrator reviewing any decision of the Compensation Committee, including those relating to the interpretation of this Plan or a claim for benefits under this Plan, shall be required to use the arbitrary and capricious standard of review. That is, the Compensation Committee's determination may be reversed only if it was made in bad faith, is not supported by substantial evidence or is erroneous as to a question of law. (d) In conducting its review of the Compensation Committee's decision, a court or arbitrator shall be limited to the record of documents, testimony and facts presented to or actually known to the Compensation Committee at the time the decision was made. ARTICLE 9 AMENDMENT AND TERMINATION 9.1 BY MUTUAL AGREEMENT. Except as provided in Section 9.2, this Plan may be amended or terminated only by a written agreement signed by the Company and the Executive. 9.2 BY THE COMPANY. (a) Subject to the restrictions in subparagraph (b) below, the Company may unilaterally amend or terminate this Plan at any time if in the opinion of the Company's counsel or accountants, as a result of legislative, judicial or regulatory action, continuation of the Plan would: (1) Cause benefits to be taxable to the Executive before their actual receipt; or (2) Result in material financial penalties or other materially detrimental ramifications to the Company (other than the financial impact of paying the benefits). (b) Except as required by law, banking regulatory requirements or financial accounting requirements, an amendment or termination under subparagraph (a) above may not reduce: (1) The vested percentage of the Executive's Adjusted Accrual Balance; (2) The amount of the Executive's vested Adjusted Accrual Balance as determined as of the later of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved; or (3) The amount of the benefit payments that are being made if the Executive's benefits were in pay status as of the earlier of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved. (c) Except as required by law, banking regulatory requirements or financial accounting requirements, upon the termination of this Plan under subsection (a) above: (1) The Executive's Adjusted Accrual Balance and vesting credit will be frozen as of the later of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved; or (2) Interest will be credited on the Executive's frozen vested Accrual Balance at an annual rate of six percent (6%) compounded monthly; and (3) The Company may either: (A) Hold and disburse the Executive's frozen vested Accrual Balance (as adjusted under paragraph (2) above) in accordance with the otherwise applicable terms and conditions of this Plan; or (B) Disburse that amount in a lump sum at such earlier date as the Company, in its sole discretion, may elect. ARTICLE 10 GENERAL PROVISIONS 10.1 ADMINISTRATION. The Compensation Committee shall have all powers necessary or desirable to administer this Plan, including but not limited to: (a) Establishing and revising the method of accounting for the Plan; (b) Maintaining a record of benefit payments; (c) Establishing rules and prescribing any forms necessary or desirable to administer the Plan; (d) Interpreting the provisions of the Plan; and (e) Delegating to others certain aspects of the Compensation Committee's managerial and operational responsibilities, including employing advisors and delegating ministerial duties. 10.2 RECEIPT AND RELEASE FOR PAYMENTS. (a) The Compensation Committee may require the recipient of a payment, as a condition precedent to the payment, to execute a receipt and, in the case of a payment in full, a release for the payment. The receipt and the release shall be in a form satisfactory to the Compensation Committee. (b) Payment may be made by a deposit to the credit of the Executive or a Beneficiary, as applicable, in any bank or trust company. (c) Payment may be made to the individual or institution maintaining or having custody of the Executive or Beneficiary, as applicable, if the Compensation Committee receives satisfactory evidence that-- (1) A person entitled to receive any benefit under this Plan is, at the time the benefit is payable, physically, mentally or legally incompetent to receive payment and provides a valid receipt for it; (2) An individual or institution is maintaining or has custody of that person; and (3) No guardian, custodian or other representative of the estate of that person has been appointed. (d) The receipt of the recipient or a canceled check shall be a sufficient voucher for the Company. The Company is not required to obtain from the recipient an accounting for the payment. (e) If a dispute arises over a distribution, payment may be withheld until the dispute is determined by a court of competent jurisdiction or settled, to the satisfaction of the Compensation Committee, by the parties concerned. The Compensation Committee may require a hold harmless agreement on behalf of the Company and the Plan before making payment. 10.3 OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Plan is not an express or implied employment agreement. Accordingly, other than providing for certain benefits payable upon a Termination of Employment, this Plan will not affect the determination of any compensation payable by the Company to the Executive, nor will it affect the other terms of the Executive's employment with the Company. The specific arrangements referred to in this Plan are not intended to exclude or circumvent any other benefits that may be available to the Executive under the Company's employee benefit or other applicable plans, upon the Executive's Termination of Employment. 10.4 WITHHOLDING. (a) INCOME TAX. Applicable federal, state and local income tax withholding will be withheld from all payments made under this Plan. (b) FICA. To the extent allowable under applicable regulations: (1) The present value of the vested benefits under this Plan will be taken into account as FICA wages in the year they become vested; (2) Present value will be determined using reasonable actuarial equivalency factors acceptable to the Compensation Committee; (3) The employee portion of each year's FICA liability will be deducted from the Executive's other cash compensation for that year; and (4) FICA will not be deducted from any payments made under this Plan. 10.5 UNFUNDED ARRANGEMENT. (a) The Company's payment obligation under this Plan is purely contractual and is not funded or secured in any manner by any asset, pledge or encumbrance of the Company's property. (b) This Plan is not intended to create, and should not be construed as creating, any trust or trust fund. The benefits accrued under this Plan and any assets acquired by the Company to finance its payment obligations under this Plan shall not be held in a trust (other than a grantor trust of the Company), escrow or similar fiduciary capacity. (c) Any insurance policy on the Executive's life the Company may acquire to assist it in financing its obligations under this Plan is a general asset of the Company and neither the Executive nor anyone else claiming on behalf of or through the Executive shall have any right with respect to, or claim against, that policy. (d) The Executive and any Beneficiary are general unsecured creditors of the Company with respect to the payment of the benefits under this Plan. 10.6 BENEFITS NOT ASSIGNABLE. The accrued benefits under this Plan shall not be considered assets under state law or bankruptcy law of the Executive or of any Beneficiary. The Executive and any Beneficiary shall not have any right to alienate, anticipate, pledge, encumber or assign any of the benefits payable under this Plan. The Executive's or any Beneficiary's benefits shall not be subject to any claim of, or any attachment, garnishment or other legal process brought by, any of his or her creditors. 10.7 BINDING EFFECT. This Plan binds and inures to the benefit of the parties and their respective legal representatives, heirs, successors and assigns. 10.8 REORGANIZATION. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless that succeeding or continuing company, firm or person agrees to assume and discharge the obligations of the Company under this Plan. Upon the occurrence of such an event, the term "Company" as used in this Plan shall be deemed to refer to the successor or survivor company. 10.9 APPLICABLE LAW. (a) This Plan shall be construed and its validity determined according to the laws of the State of Oregon, other than its law regarding conflicts of law or choice of law, to the extent not preempted by federal law. (b) Any dispute arising out of this Plan must be brought in either Clackamas County or Multnomah County, Oregon, and the parties will submit to personal jurisdiction in either of those counties. 10.10 ARBITRATION. Any dispute or claim arising out of or brought in connection with this Plan, will, if requested by any party, be submitted to and settled by arbitration under the rules then in effect of the American Arbitration Association (or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered in arbitration will be final and will bind the parties, and a judgment on it may be entered in the highest court of the forum having jurisdiction. The arbitrator will render a written decision, naming the substantially prevailing party in the action, and, subject to Section 10.11(b), will award that party all costs and expenses incurred, including reasonable attorneys' fees. CLARKCONSULTING(TM) PLAN YEAR REPORTING HYPOTHETICAL TERMINATION BENEFIT SCHEDULE JAMES D. BYGLAND
DOB: 1/13/1962 EARLY VOLUNTARY EARLY INVOLUNTARY PRE-RETIRE. Plan Anniv Date: 12/31/2003 TERMINATION TERMINATION DISABILITY CHANGE OF CONTROL DEATH Normal Retirement: 1/13/2026, Age 64 Installment Installment Installment Installment BENEFIT Payments: Monthly Installments Payable at 64 Payable at 64 Payable at 64 Payable at 64 Installment - ----------------------------------------------------------------------------------------------------------------------------------- BENEFIT ACCRUAL Based On Based On Based On Based On Based On LEVEL BALANCE Vesting Accrual Vesting Accrual Vesting Accrual Vesting Benefit Benefit PERIOD DISCOUNT ----- ------- ------- -------- ------- -------- ------- -------- ------- -------- -------- ENDING RATE (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) - ----------------------------------------------------------------------------------------------------------------------------------- Dec 2003(1) 6% 45,500 4,009 50% 757 100% 1,515 100% 1,515 100% 45,500 45,500 Dec 2004 6% 45,500 14,048 60% 3,000 100% 4,999 100% 4,999 100% 45,500 45,500 Dec 2005 6% 45,500 24,706 70% 5,797 100% 8,281 100% 8,281 100% 45,500 45,500 Dec 2006 6% 45,500 36,021 80% 9,098 100% 11,373 100% 11,373 100% 45,500 45,500 Dec 2007 6% 45,500 48,034 90% 12,856 100% 14,285 100% 14,285 100% 45,500 45,500 Dec 2008 6% 45,500 60,789 100% 17,027 100% 17,027 100% 17,027 100% 45,500 45,500 Dec 2009 6% 45,500 74,330 100% 19,611 100% 19,611 100% 19,611 100% 45,500 45,500 Dec 2010 6% 45,500 88,706 100% 22,044 100% 22,044 100% 22,044 100% 45,500 45,500 Dec 2011 6% 45,500 103,969 100% 24,336 100% 24,336 100% 24,336 100% 45,500 45,500 Dec 2012 6% 45,500 120,173 100% 26,495 100% 26,495 100% 26,495 100% 45,500 45,500 Dec 2013 6% 45,500 137,376 100% 28,528 100% 28,528 100% 28,528 100% 45,500 45,500 Dec 2014 6% 45,500 155,641 100% 30,443 100% 30,443 100% 30,443 100% 45,500 45,500 Dec 2015 6% 45,500 175,032 100% 32,247 100% 32,247 100% 32,247 100% 45,500 45,500 Dec 2016 6% 45,500 195,620 100% 33,947 100% 33,947 100% 33,947 100% 45,500 45,500 Dec 2017 6% 45,500 217,477 100% 35,547 100% 35,547 100% 35,547 100% 45,500 45,500 Dec 2018 6% 45,500 240,682 100% 37,055 100% 37,055 100% 37,055 100% 45,500 45,500 Dec 2019 6% 45,500 265,318 100% 38,475 100% 38,475 100% 38,475 100% 45,500 45,500 Dec 2020 6% 45,500 291,474 100% 39,812 100% 39,812 100% 39,812 100% 45,500 45,500 Dec 2021 6% 45,500 319,243 100% 41,072 100% 41,072 100% 41,072 100% 45,500 45,500 Dec 2022 6% 45,500 348,725 100% 42,258 100% 42,258 100% 42,258 100% 45,500 45,500 Dec 2023 6% 45,500 380,025 100% 43,376 100% 43,376 100% 43,376 100% 45,500 45,500 Dec 2024 6% 45,500 413,256 100% 44,428 100% 44,428 100% 44,428 100% 45,500 45,500 Dec 2025 6% 45,500 448,536 100% 45,420 100% 45,420 100% 45,420 100% 45,500 45,500 Jan 2026 6% 45,500 451,572 100% 45,500 100% 45,500 100% 45,500 100% 45,500 45,500
Copyright (C) 2003 Clark Consulting. Securities offered through Clark Securities, Inc., Salary Continuation Plan for West Coast Bank - Lake Oswego, OR a wholly owned subsidiary of Clark, Inc., member NASD & SIPC, 1001811 16948 137757 v5.31.04 12/18/2003:13 SCP-E NB Los Angeles, CA 90071, (213) 486-6300.

CLARKCONSULTING(TM) PLAN YEAR REPORTING HYPOTHETICAL TERMINATION BENEFIT SCHEDULE JAMES D. BYGLAND
DOB: 1/13/1962 EARLY VOLUNTARY EARLY INVOLUNTARY DISABILITY CHANGE OF CONTROL PRE-RETIRE. Plan Anniv Date: 12/31/2003 TERMINATION TERMINATION DEATH Normal Retirement: 1/13/2026, Age 64 Installment Installment Installment Installment BENEFIT Payments: Monthly Installments Payable at 64 Payable at 64 Payable at 64 Payable at 64 Installment - ---------------------------------------------------------------------------------------------------------------------------------- BENEFIT ACCRUAL Based On Based On Based On Based On Based On LEVEL BALANCE Vesting Accrual Vesting Accrual Vesting Accrual Vesting Benefit Benefit PERIOD DISCOUNT ------- ------- ------- -------- ------- -------- ------- -------- ------- -------- -------- ENDING RATE (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) - -----------------------------------------------------------------------------------------------------------------------------------
January 13, 2026 Retirement; February 1, 2026 First Payment Date (1) The first line reflects 5 months of data, August 2003 to December 2003. * 1 * The purpose of this hypothetical illustration is to show the participant's annual benefit based on various termination assumptions. Actual benefits are based on the terms and provisions of the plan agreement executed between the company and participant and may differ from those shown. * IF THERE IS A CONFLICT IN ANY TERMS OR PROVISIONS BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT. Copyright (C) 2003 Clark Consulting. Securities offered through Clark Securities, Inc., Salary Continuation Plan for West Coast Bank - Lake Oswego, OR a wholly owned subsidiary of Clark, Inc., member NASD & SIPC, 1001811 16948 137757 v5.31.04 12/18/2003:13 SCP-E NB Los Angeles, CA 90071, (213) 486-6300.

EX-10.22 14 v96690exv10w22.txt EXHIBIT 10.22 EXHIBIT 10.22 WEST COAST BANK SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP) EFFECTIVE DATE: AUGUST 1, 2003 THIS SERP is adopted by WEST COAST BANK (the "Bank"), WEST COAST BANCORP ("Bancorp"), its parent holding company, (collectively referred to as the "Company") and DAVID L. PRYSOCK (the "Executive"). ARTICLE 1 PURPOSE 1.1 DUAL PURPOSES. This Plan is intended to: (a) Assist in assuring the Executive's continued service to the Company by providing supplemental retirement benefits that are competitive with the Company's peers; and (b) Discourage the Executive from engaging in any competitive business after the Executive leaves the Company. 1.2 TOP-HAT PLAN STATUS. This is an unfunded Plan maintained primarily for the purpose of providing deferred compensation for the Executive, who is a member of a select group of management or highly compensated employees. As such, this Plan is intended to qualify as a "top hat plan" exempt from Part 2 (minimum participation and vesting standards), Part 3 (minimum funding standards) and Part 4 (fiduciary responsibility provisions) of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). The provisions of the Plan shall be interpreted and administered according to this intention. ARTICLE 2 DEFINITIONS Words and phrases appearing in this Plan with initial capitalization are defined terms that have the meanings stated below. Words appearing in the following definitions which are themselves defined terms are also indicated by initial capitalization. 2.1 ACCRUAL BALANCE means the benefit liability accrued by the Company under Article 6. 2.2 ADJUSTED ACCRUAL BALANCE means the Accrual Balance determined as of the end of the month that is on or before the date of the Executive's Termination of Employment. 2.3 BENEFICIARY means the person or persons or estate, trust or charitable organization entitled under Article 5 to receive the death benefit payable under this Plan. 2.4 BOARD means Bancorp's Board of Directors. 2.5 CHANGE IN CONTROL AGREEMENT means the "Change In Control Agreement" effective January 1, 2004, between the Executive and the Company. 2.6 COMPENSATION COMMITTEE means the Compensation and Personnel Committee of Bancorp's Board. 2.7 DISABILITY means that either the carrier of any Company-provided individual or group long-term disability insurance policy covering the Executive or the Social Security Administration has determined that the Executive is disabled. Upon the request of the Compensation Committee, the Executive will submit proof of the carrier's or the Social Security Administration's determination. 2.8 EARLY INVOLUNTARY TERMINATION means that the Company has terminated the Executive's employment before Normal Retirement Age for any reason other than: (a) Termination for Cause; (b) Disability; or (c) A Termination Event. 2.9 EARLY VOLUNTARY TERMINATION means that before Normal Retirement Age, the Executive has voluntarily terminated Executive's employment with the Company for reasons other than: (a) Disability; or (b) A Termination Event. 2.10 EFFECTIVE DATE means the date first stated above (immediately below the title of this Plan). 2.11 NORMAL RETIREMENT AGE means age 64. 2.12 NORMAL RETIREMENT DATE means the later of Normal Retirement Age or Termination of Employment. 2.13 PLAN YEAR means the calendar year, except for the first Plan Year which is a short year beginning August 1, 2003, and ending December 31, 2003. 2.14 ROE means, for any given Plan Year, the greater of: (a) Bancorp's return on equity, which shall be determined under GAAP and expressed as a percentage calculated by dividing its: (1) Annual net income before common stock dividends are paid; by (2) Average annual common shareholder equity; or (b) Bancorp's adjusted return on equity which shall be determined by calculating the percentage under subsection (a) above on an adjusted basis to address the effects of items that are required to be included or excluded by GAAP for that Plan Year, but would normally not be included or excluded from Bancorp's net income or shareholder equity. 2.15 TERMINATION EVENT means the termination of the Executive's employment under circumstances that entitle the Executive to benefits under the Change In Control Agreement. 2.16 TERMINATION FOR CAUSE OR TERMINATED FOR CAUSE means that the Company has terminated the Executive's employment for "cause" as defined in the Change In Control Agreement. 2.17 TERMINATION OF EMPLOYMENT means that the Executive's employment with the Company has terminated for any reason, voluntary or involuntary. 2.18 YEAR OF SERVICE means a Plan Year in which: (a) The Company achieved an ROE of not less than ten percent (10%); and (b) The Executive is actively at work with the Company or on a Company-approved leave of absence at the end of that year. ARTICLE 3 BENEFITS DURING LIFETIME 3.1 NORMAL RETIREMENT BENEFIT. Upon Termination of Employment on or after Normal Retirement Age for reasons other than death, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustment under subsection (c) below and forfeiture under Article 7, the Normal Retirement Benefit is the annual "Benefit Level" installment as shown in Column (1) of Schedule A to this SERP. (b) PAYMENT SCHEDULE. The Normal Retirement Benefit is payable monthly for a period of fifteen (15) years beginning on the first day of the month on or after the Executive's Normal Retirement Date. (c) BENEFIT INCREASES. (1) As of each anniversary of the Effective Date, the Compensation Committee, in its sole discretion, may increase the Normal Retirement Benefit by increasing: (A) The amount of the scheduled installment payments; (B) The length of the payment schedule; or (C) Both the amount and the length of the installment payments. (2) If the Normal Retirement Benefit is increased, Schedule A to this SERP shall be revised, including adjusting the other scheduled benefit payments accordingly. 3.2 EARLY VOLUNTARY TERMINATION BENEFIT. Upon an Early Voluntary Termination, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below and forfeiture under Article 7, the Early Voluntary Termination Benefit is the annual installment payment under a deferred 15-year term certain fixed annuity calculated as follows: (1) The present value of the annuity is the vested Adjusted Accrual Balance (with vesting determined under subsection (e) below); (2) The annuity starting date is the first day of the month on or after Normal Retirement Age; and (3) Interest is credited at an annual rate of six percent (6%) compounded monthly during both the period from the Termination of Employment to the annuity starting date and the 15-year payout period. (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Early Voluntary Termination Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Early Voluntary Termination Benefit in a lump-sum payment as follows: (1) The payment amount shall equal the Executive's vested Adjusted Accrual Balance together with interest credited at the annual rate of six percent (6%) compounded monthly until paid under paragraph (2) below. (2) The lump-sum payment will be paid to the Executive at either: (A) Normal Retirement Age; or (B) Such earlier date as the Compensation Committee, in its sole discretion, may elect. (d) BENEFIT INCREASES. The Early Voluntary Termination Benefit may be increased as follows: (1) The amount of the benefit will be adjusted for any increases in the Normal Retirement Benefit granted under Section 3.1(c)(1). (2) In its sole discretion, the Compensation Committee may, from time to time as of any anniversary of the Effective Date, separately increase the amount of the Early Voluntary Termination Benefit without increasing the Normal Retirement Benefit. (3) If the Early Voluntary Termination Benefit is adjusted or increased, Schedule A to this SERP shall be revised accordingly. (e) VESTING. The vested portion of the Executive's Adjusted Accrual Balance will be determined as follows: (1) The Executive will be fifty percent (50%) vested immediately upon the Effective Date. Beginning with the Plan Year commencing January 1, 2004, the Executive will receive an additional ten percent (10%) vesting for each Year of Service until the Executive is one hundred percent (100%) vested after completing five (5) Years of Service. (2) In its sole discretion, the Compensation Committee may at any time and from time to time increase the Executive's vested percentage (including granting full vesting). 3.3 EARLY INVOLUNTARY TERMINATION BENEFIT. Upon an Early Involuntary Termination, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below, immediate full vesting under subsection (e) below and forfeiture under Article 7, the Early Involuntary Termination Benefit is the annual installment payment determined in the same manner as the Early Voluntary Termination Benefit under Section 3.2(a). (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Early Involuntary Termination Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Early Involuntary Termination Benefit in a lump-sum payment under the same terms and conditions that apply to a lump-sum payment of the Early Voluntary Termination Benefit (see Section 3.2(c)). (d) BENEFIT INCREASES. The Early Involuntary Termination Benefit may be separately increased under the same terms and conditions that apply to increases in the Early Voluntary Termination Benefit (see Section 3.2(d)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. 3.4 DISABILITY BENEFIT. Upon Termination of Employment before Normal Retirement Age due to Disability, the Company shall pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below, immediate full vesting under subsection (e) below and forfeiture under Article 7, the Disability Benefit is the annual installment payment determined in the same manner as for the Early Voluntary Termination Benefit (see Section 3.2(a)). (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Company shall pay the Disability Benefit under the same payment schedule as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Disability Benefit in a lump-sum payment under the same terms and conditions that apply to a lump-sum payment of the Early Voluntary Termination Benefit (see Section 3.2(c)). (d) BENEFIT INCREASES. The Disability Benefit may be increased under the same terms and conditions that apply to increases in the Early Voluntary Termination Benefit (see Section 3.2(d)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. 3.5 CHANGE IN CONTROL BENEFIT. If the Executive becomes entitled to benefits under the Change in Control Agreement, the Company will pay the following benefit to the Executive: (a) AMOUNT OF BENEFIT. Subject to adjustments under subsection (d) below and forfeiture under Article 7, the Change In Control Benefit is the annual "Change of Control Installment" set forth in Column (10) of Schedule A to this SERP. (b) PAYMENT SCHEDULE. Unless a lump-sum payment is made under subsection (c) below, the Change In Control benefit is payable in the same manner as the Normal Retirement Benefit (see Section 3.1(b)). (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Executive or upon its own motion, to pay the Change In Control Benefit in a lump-sum payment as follows: (1) The payment will be equal to the present value of the Normal Retirement Benefit as of the date of the Executive's Termination of Employment. The present value will be determined using an annual rate of six percent (6%) interest compounded monthly. (2) The lump-sum payment will be paid to the Executive within sixty (60) days following the Executive's Termination of Employment. (d) BENEFIT INCREASES. The Change in Control Benefit may be increased in the same manner as the Normal Retirement Benefit (see Section 3.1(c)). (e) VESTING. For purposes of this section, the Executive is immediately one hundred percent (100%) vested upon the Effective Date. ARTICLE 4 DEATH BENEFITS 4.1 PRE-RETIREMENT DEATH BENEFIT. If the Executive dies before a Termination of Employment and before attaining Normal Retirement Age, the Company will pay the following benefit to the Executive's Beneficiary: (a) AMOUNT OF BENEFIT. The Pre-Retirement Death Benefit is the annual "Pre-Retirement Death Benefit Installment" as shown in Column (11) of Schedule A to this SERP. (b) PAYMENT OF BENEFIT. Unless a lump-sum payment is made under subsection (c) below, the Pre-Retirement Death Benefit is payable monthly for a period of fifteen (15) years beginning on the first day of the month following the Executive's death. (c) ALTERNATIVE LUMP-SUM PAYMENT. Instead of the installment payments under subsection (b) above, the Compensation Committee, in its sole discretion, may elect, either upon a request by the Beneficiary or upon its own motion, to pay the Pre-Retirement Death Benefit in a lump-sum payment as follows: (1) The payment will be equal to the Normal Retirement Age Accrual Balance. (2) The lump-sum payment will be paid to the Beneficiary by the earlier of the following dates: (A) Sixty (60) days after the lump-sum payment is requested by the Beneficiary; or (B) Such other date as elected by the Compensation Committee in its sole discretion. 4.2 DEATH DURING PAYMENT OF A BENEFIT. If the Executive dies after any benefit payments have commenced under Article 3, the Company shall pay the remaining benefits to the Executive's Beneficiary either: (a) At the same time and in the same amounts they would have been paid to the Executive had the Executive survived; or (b) In the Committee's sole discretion, upon a request by the Beneficiary or upon its own motion, in a lump-sum payment. The amount of the lump-sum payment shall be determined under the provisions for calculating the alternative lump-sum payment for the particular type of benefit the Executive was receiving. If the Executive was receiving the Normal Retirement Benefit, the lump sum payment shall be the lump sum present value of the remaining payments as of the date of payment, determined using an annual rate of six percent (6%) interest compounded monthly. 4.3 DEATH BEFORE PAYMENTS COMMENCE. If the Executive is entitled to a benefit under Article 3, but dies before benefit payments begin, the Company shall pay the Executive's Beneficiary either: (a) The same benefit payments that the Executive was entitled to at the date of the Executive's death, except that the benefit payments shall commence as of the first day of the month following the Executive's death; or (b) The lump sum equivalent of those benefits as determined under Section 4.2(b). ARTICLE 5 BENEFICIARIES 5.1 DESIGNATION OF BENEFICIARY. The Executive may designate the Beneficiary or Beneficiaries (who may be designated concurrently or contingently) to receive the death benefit under the Plan under the following terms and conditions: (a) The beneficiary designation must be in a form satisfactory to the Compensation Committee and must be signed by the Executive. (b) A beneficiary designation shall be effective upon receipt by the Compensation Committee or its designee, provided it is received before the Executive's death. (c) The Executive may revoke a previous beneficiary designation without the consent of the previously designated Beneficiary. This revocation is made by filing a new beneficiary designation form with the Compensation Committee or its designee, and shall be effective upon receipt. 5.2 DIVORCE. A divorce will automatically revoke the portion of a beneficiary designation designating the former spouse as a Beneficiary. The former spouse will be a Beneficiary under this SERP only if a new beneficiary designation is filed after the date the dissolution decree is entered. 5.3 DISCLAIMERS. If a Beneficiary disclaims a death benefit, the benefit will be paid as if the Beneficiary had predeceased the Executive. 5.4 DEATH OF BENEFICIARY. If a Beneficiary who is in pay status dies before full distribution is made to the Beneficiary, the unpaid balance of the distribution will be paid to the Beneficiary's estate. 5.5 DEFAULT BENEFICIARY. If, at the time of the Executive's death, the Executive has failed to designate a Beneficiary, the Executive's beneficiary designation has become completely invalid under the provisions of this Article or there is no surviving Beneficiary, payment of the death benefit will be made in the following order of priority: (a) To the Executive's spouse, if living; (b) To the Executive's surviving children, in equal shares; or (c) To the Executive's estate. ARTICLE 6 ACCRUAL BALANCE 6.1 COMPENSATION LIABILITY. The Accrual Balance shall be equal to the financial statement compensation liability accrued by the Company (under Section 6.2) as of any applicable determination date (as defined in Section 6.3) for its payment obligation under this SERP. 6.2 ACCRUAL CALCULATION. The value of the Accrual Balance shall: (a) Be determined using Generally Accepted Accounting Principles applying APB 12 as amended by FAS 106; and (b) Equal the sum of the: (1) Principal accrual (service cost); plus (2) Interest accrual at six percent (6%) interest. 6.3 DETERMINATION DATES. The Accrual Balance shall be determined as of the last day of the month. 6.4 YEAR-END VALUES. The year-end values and Normal Retirement Age value of the Accrual Balance are listed in Column (2) of Schedule A to this SERP. 6.5 REPORTING. The Compensation Committee will report the Accrual Balance to the Executive at least annually and within a reasonable period of time not to exceed 30 days after the date of the Termination of Employment if the Executive is to be paid the Early Voluntary Termination, Early Involuntary Termination or Disability Benefit. ARTICLE 7 FORFEITURE 7.1 GROUNDS FOR FORFEITURE. (a) The Executive will forfeit any benefits payable under this Plan upon a Termination for Cause. (b) The Company shall not pay the Pre-Retirement Death Benefit under Section 4.1 under the Plan if the Executive: (1) Commits suicide within two years after the Effective Date; or (2) Dies within two years after the Effective Date and has made any material misstatement of fact on any application for life insurance that may be used by the Company to finance its obligations under the Plan. (c) The Executive will forfeit the balance of any remaining unpaid benefits under this Plan if the Executive violates the noncompetition restrictions of Section 7.2. 7.2 NONCOMPETITION RESTRICTIONS. (a) DEFINITIONS. For purposes of this section, the following terms have the meanings stated below: (1) "BANKING INSTITUTION" means any state or national bank, state or federal savings and loan association, mutual savings bank or state or federal credit union. (2) "COMPETING ACTIVITIES" mean any activities that are competitive with the business activities of Bancorp, the Bank or any of their subsidiaries as conducted at the commencement of, or during the term of, the restricted period. (3) "FINANCIAL INSTITUTION" means any banking institution (as defined in paragraph (1) above), trust company or mortgage company regardless of: (A) Its legal form of organization; or (B) Whether it is in existence or is in formation. (4) "RESTRICTED AREA" means any county in Oregon or Washington in which Bancorp, the Bank or any of their subsidiaries either: (A) Has a branch or other office at the commencement of the restricted period; or (B) Has decided to open a branch or other office during the restricted period, provided that fact has been communicated to the Executive before the Executive's Termination of Employment. (5) "RESTRICTED PERIOD" means a period of: (A) 12 months from the date of the Executive's Termination of Employment; or (B) 24 months from the date of the Executive's Termination Event if the Change in Control Benefit under Section 3.5 is payable. (6) "SUBSIDIARIES" mean any current or future subsidiary of Bancorp or the Bank, regardless of whether it is one hundred percent (100%) owned by Bancorp or the Bank. (b) RESTRICTIONS. The Executive agrees that, during the restricted period, the Executive will not, directly or indirectly: (1) Except as provided in subsection (c)(1) below, be employed by or provide services to any financial institution that engages in competing activities in the restricted area, whether as an employee, officer, director, agent, consultant, promoter or in any similar position, function or title; (2) Have any ownership or financial interest in any financial institution that engages in competing activities in the restricted area that violates the Company's then current published ethical standards on ownership interests in competing businesses; (3) Induce any employee of Bancorp, the Bank or their subsidiaries to terminate their employment with Bancorp, the Bank or their subsidiaries; (4) Hire or assist in the hiring of any employee of Bancorp, the Bank or their subsidiaries for or by any financial institution that is not affiliated with Bancorp, the Bank or their subsidiaries; or (5) Induce any person or entity (other than the Executive's relatives or entities controlled by them) to terminate or curtail its business or contractual relationships with the Bank, Bancorp or their subsidiaries. (c) EXCEPTIONS. Regardless of the restriction in subsection (b)(1) above, the Executive may be employed outside the restricted area as an employee, officer, agent, consultant or promoter of a financial institution that engages in competing activities in the restricted area, provided the Executive will not: (1) Act within the restricted area as an employee or other representative or agent of that financial institution; (2) Have any responsibilities for that financial institution's operations within the restricted area; or (3) Directly or indirectly violate the restrictions of subsection (b)(3), (4) and (5) above. (d) FORFEITURE. If the Executive breaches the restrictions under subsection (b) above, Executive will: (1) Forfeit any benefits payable under this Plan that were unpaid as of the date of the breach; and (2) Promptly repay the Company, upon demand, any payments made after the date of the breach. If the Executive does not repay that amount within 15 days after the date of the demand, the Executive will also pay interest on that amount at the rate of nine percent (9%) per annum. ARTICLE 8 CLAIMS AND APPEALS PROCEDURE 8.1 CLAIMS PROCEDURE. (a) ROUTINE PAYMENTS. The Compensation Committee may authorize distribution of payments to the Executive or the Executive's Beneficiary even though a formal claim has not been filed. (b) FORMAL CLAIMS. (1) MANDATORY PROCEDURE. Any claim that the Executive or a Beneficiary or anyone claiming on behalf of or through the Executive or a Beneficiary may make under ERISA or under any other applicable federal or state law must first be brought as a formal claim under this section. If that claim is denied, it will be subject to the claims appeal procedures of Section 8.2. (2) FORM AND CONTENT OF CLAIM. The claim shall be in any form reasonably acceptable to the Compensation Committee and must state the basis of the claim and also authorize the Compensation Committee and its designees to conduct any examinations necessary to determine the validity of the claim and take any steps necessary to facilitate the benefit payment. (3) SUBMISSIONS BY CLAIMANT. The claimant shall file the claim with the Executive Vice-President, Human Resources. The claimant may also submit written comments, documents, records and other information relating to the claim. (4) ACCESS TO INFORMATION. The claimant will be provided, upon request and free of charge, reasonable access to, and copies of, all nonconfidential or nonprivileged Company documents, records and other information relevant to the claim. (5) AUTHORIZED REPRESENTATIVE. The claimant may be represented by an individual authorized to act on behalf of the claimant. A representative's authorization to act on behalf of the claimant must be established to the Compensation Committee's reasonable satisfaction. (6) REVIEW AND RECOMMENDATION. The claim shall be reviewed by the Company's Chief Executive Officer and the Executive Vice-President, Human Resources, who shall make their recommendation to the Compensation Committee. (c) TIMELINE. The Compensation Committee shall make a determination on the claim within 90 days after the date the claimant filed it with the Executive Vice-President, Human Resources. If more time is required for a special case, the Compensation Committee may take up to an additional 90 days to render a determination, but the claimant must be notified of the need for the extension of time within the initial 90-day period. This notification will explain the special circumstances requiring the extension of time as well as the date by which a determination is expected. (d) EXPLANATION OF DENIAL. If a claim is wholly or partially denied, the Compensation Committee shall provide the claimant with a notice of the decision, written in a manner calculated to be understood by the claimant, containing the following information: (1) The specific reason or reasons for the denial and a discussion of why the specific reason or reasons apply. (2) References to the specific provisions of this Plan upon which the denial was based. (3) A description of any additional material or information necessary for the claimant to perfect the claim. (4) An explanation of the claims appeal procedures under this Plan. (e) DEEMED DENIAL. If a determination is not furnished to the claimant within 90 days of the date the claim was filed--or 180 days if it is a special case--the claim shall be deemed to be denied. (f) APPEAL OF DENIAL. If the claimant disagrees with the denial, the claimant's sole remedy shall be to proceed with the claims appeal procedure under Section 8.2. 8.2 CLAIMS APPEAL PROCEDURES. (a) WRITTEN REQUEST. If a claim is denied in whole or in part, the claimant or the claimant's authorized representative may submit a written request for a review of the denial, including a statement of the reasons for the review. (b) DEADLINE. This request must be filed with the Compensation Committee within 60 days after the claimant receives notice of the denial. This time limit may be extended by the Compensation Committee if an extension appears to be reasonable in view of the nature of the claim and the pertinent circumstances. (c) CONDUCT OF APPEAL. Upon receipt of such a request, the Compensation Committee shall afford the claimant an opportunity to review relevant documents and to submit issues and comments in writing. The Compensation Committee may hold a hearing or conduct an independent investigation. The Compensation Committee will consider all of the claimant's submissions, regardless of whether they were submitted or considered in the initial determination of the claim. (d) TIMELINE. A decision on the review shall be rendered by the Compensation Committee not later than 60 days after receipt of the claimant's request for the review. If more time is required for a special case, the Compensation Committee may take up to an additional 60 days to render a decision, but the claimant must be notified of the need for the extension of time within the initial 60-day period. This notification shall explain the special circumstances (such as the need to hold a hearing) which require the extension of time. (e) DECISION ON APPEAL. The decision shall be written in a manner calculated to be understood by the claimant and shall include: (1) Specific reasons for the decision; (2) Specific references to the provisions of this Plan on which the decision is based; (3) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits; and (4) A statement of the claimant's right to bring a civil action under ERISA Section 502(a), to the extent such an action is not preempted by the mandatory arbitration provision of Section 10.10. (f) DEEMED DENIAL. If the determination on the appeal is not furnished to the claimant within 60 days--or 120 days if it is a special case--the appeal shall be deemed to be denied. (g) EXHAUSTION OF APPEAL PROCESS REQUIRED. A claimant whose claim has been denied is required to exhaust the claims appeal procedures set forth in this section before commencing any arbitration or legal action. 8.3 DISCRETIONARY AUTHORITY; STANDARDS OF PROOF AND REVIEW; RECORD ON REVIEW. (a) The Compensation Committee is the "named fiduciary" for purposes of ERISA. This Plan confers full discretionary authority on the Compensation Committee with regard to the administration of this Plan, including the discretion to: (1) Make findings of fact and determine the sufficiency of the evidence presented regarding a claim; and (2) Interpret and construe the provisions of this Plan and related administrative documents, if any, (including words and phrases that are not defined in this Plan or those documents) and correct any defect, supply any omission or reconcile any ambiguity or inconsistency. (b) A decision by the Compensation Committee is required to be supported by substantial evidence only. That is, proof by a preponderance of the evidence, clear and convincing evidence or beyond a reasonable doubt is not required. (c) A court of law or arbitrator reviewing any decision of the Compensation Committee, including those relating to the interpretation of this Plan or a claim for benefits under this Plan, shall be required to use the arbitrary and capricious standard of review. That is, the Compensation Committee's determination may be reversed only if it was made in bad faith, is not supported by substantial evidence or is erroneous as to a question of law. (d) In conducting its review of the Compensation Committee's decision, a court or arbitrator shall be limited to the record of documents, testimony and facts presented to or actually known to the Compensation Committee at the time the decision was made. ARTICLE 9 AMENDMENT AND TERMINATION 9.1 BY MUTUAL AGREEMENT. Except as provided in Section 9.2, this Plan may be amended or terminated only by a written agreement signed by the Company and the Executive. 9.2 BY THE COMPANY. (a) Subject to the restrictions in subparagraph (b) below, the Company may unilaterally amend or terminate this Plan at any time if in the opinion of the Company's counsel or accountants, as a result of legislative, judicial or regulatory action, continuation of the Plan would: (1) Cause benefits to be taxable to the Executive before their actual receipt; or (2) Result in material financial penalties or other materially detrimental ramifications to the Company (other than the financial impact of paying the benefits). (b) Except as required by law, banking regulatory requirements or financial accounting requirements, an amendment or termination under subparagraph (a) above may not reduce: (1) The vested percentage of the Executive's Adjusted Accrual Balance; (2) The amount of the Executive's vested Adjusted Accrual Balance as determined as of the later of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved; or (3) The amount of the benefit payments that are being made if the Executive's benefits were in pay status as of the earlier of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved. (c) Except as required by law, banking regulatory requirements or financial accounting requirements, upon the termination of this Plan under subsection (a) above: (1) The Executive's Adjusted Accrual Balance and vesting credit will be frozen as of the later of: (A) The effective date of the amendment or termination; or (B) The date it is adopted or approved; or (2) Interest will be credited on the Executive's frozen vested Accrual Balance at an annual rate of six percent (6%) compounded monthly; and (3) The Company may either: (A) Hold and disburse the Executive's frozen vested Accrual Balance (as adjusted under paragraph (2) above) in accordance with the otherwise applicable terms and conditions of this Plan; or (B) Disburse that amount in a lump sum at such earlier date as the Company, in its sole discretion, may elect. ARTICLE 10 GENERAL PROVISIONS 10.1 ADMINISTRATION. The Compensation Committee shall have all powers necessary or desirable to administer this Plan, including but not limited to: (a) Establishing and revising the method of accounting for the Plan; (b) Maintaining a record of benefit payments; (c) Establishing rules and prescribing any forms necessary or desirable to administer the Plan; (d) Interpreting the provisions of the Plan; and (e) Delegating to others certain aspects of the Compensation Committee's managerial and operational responsibilities, including employing advisors and delegating ministerial duties. 10.2 RECEIPT AND RELEASE FOR PAYMENTS. (a) The Compensation Committee may require the recipient of a payment, as a condition precedent to the payment, to execute a receipt and, in the case of a payment in full, a release for the payment. The receipt and the release shall be in a form satisfactory to the Compensation Committee. (b) Payment may be made by a deposit to the credit of the Executive or a Beneficiary, as applicable, in any bank or trust company. (c) Payment may be made to the individual or institution maintaining or having custody of the Executive or Beneficiary, as applicable, if the Compensation Committee receives satisfactory evidence that-- (1) A person entitled to receive any benefit under this Plan is, at the time the benefit is payable, physically, mentally or legally incompetent to receive payment and provides a valid receipt for it; (2) An individual or institution is maintaining or has custody of that person; and (3) No guardian, custodian or other representative of the estate of that person has been appointed. (d) The receipt of the recipient or a canceled check shall be a sufficient voucher for the Company. The Company is not required to obtain from the recipient an accounting for the payment. (e) If a dispute arises over a distribution, payment may be withheld until the dispute is determined by a court of competent jurisdiction or settled, to the satisfaction of the Compensation Committee, by the parties concerned. The Compensation Committee may require a hold harmless agreement on behalf of the Company and the Plan before making payment. 10.3 OTHER COMPENSATION AND TERMS OF EMPLOYMENT. This Plan is not an express or implied employment agreement. Accordingly, other than providing for certain benefits payable upon a Termination of Employment, this Plan will not affect the determination of any compensation payable by the Company to the Executive, nor will it affect the other terms of the Executive's employment with the Company. The specific arrangements referred to in this Plan are not intended to exclude or circumvent any other benefits that may be available to the Executive under the Company's employee benefit or other applicable plans, upon the Executive's Termination of Employment. 10.4 WITHHOLDING. (a) INCOME TAX. Applicable federal, state and local income tax withholding will be withheld from all payments made under this Plan. (b) FICA. To the extent allowable under applicable regulations: (1) The present value of the vested benefits under this Plan will be taken into account as FICA wages in the year they become vested; (2) Present value will be determined using reasonable actuarial equivalency factors acceptable to the Compensation Committee; (3) The employee portion of each year's FICA liability will be deducted from the Executive's other cash compensation for that year; and (4) FICA will not be deducted from any payments made under this Plan. 10.5 UNFUNDED ARRANGEMENT. (a) The Company's payment obligation under this Plan is purely contractual and is not funded or secured in any manner by any asset, pledge or encumbrance of the Company's property. (b) This Plan is not intended to create, and should not be construed as creating, any trust or trust fund. The benefits accrued under this Plan and any assets acquired by the Company to finance its payment obligations under this Plan shall not be held in a trust (other than a grantor trust of the Company), escrow or similar fiduciary capacity. (c) Any insurance policy on the Executive's life the Company may acquire to assist it in financing its obligations under this Plan is a general asset of the Company and neither the Executive nor anyone else claiming on behalf of or through the Executive shall have any right with respect to, or claim against, that policy. (d) The Executive and any Beneficiary are general unsecured creditors of the Company with respect to the payment of the benefits under this Plan. 10.6 BENEFITS NOT ASSIGNABLE. The accrued benefits under this Plan shall not be considered assets under state law or bankruptcy law of the Executive or of any Beneficiary. The Executive and any Beneficiary shall not have any right to alienate, anticipate, pledge, encumber or assign any of the benefits payable under this Plan. The Executive's or any Beneficiary's benefits shall not be subject to any claim of, or any attachment, garnishment or other legal process brought by, any of his or her creditors. 10.7 BINDING EFFECT. This Plan binds and inures to the benefit of the parties and their respective legal representatives, heirs, successors and assigns. 10.8 REORGANIZATION. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless that succeeding or continuing company, firm or person agrees to assume and discharge the obligations of the Company under this Plan. Upon the occurrence of such an event, the term "Company" as used in this Plan shall be deemed to refer to the successor or survivor company. 10.9 APPLICABLE LAW. (a) This Plan shall be construed and its validity determined according to the laws of the State of Oregon, other than its law regarding conflicts of law or choice of law, to the extent not preempted by federal law. (b) Any dispute arising out of this Plan must be brought in either Clackamas County or Multnomah County, Oregon, and the parties will submit to personal jurisdiction in either of those counties. 10.10 ARBITRATION. Any dispute or claim arising out of or brought in connection with this Plan, will, if requested by any party, be submitted to and settled by arbitration under the rules then in effect of the American Arbitration Association (or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered in arbitration will be final and will bind the parties, and a judgment on it may be entered in the highest court of the forum having jurisdiction. The arbitrator will render a written decision, naming the substantially prevailing party in the action, and, subject to Section 10.11(b), will award that party all costs and expenses incurred, including reasonable attorneys' fees. 10.11 ATTORNEYS' FEES. (a) If any breach of or default under this Plan results in either party incurring attorneys' or other fees, costs or expenses (including those incurred in an arbitration), the substantially prevailing party is entitled to recover from the non-prevailing party its reasonable legal fees, costs and expenses, including attorneys' fees and the costs of the arbitration, except as provided in subsection (b) below. (b) If the Executive is not the substantially prevailing party, the Executive shall be liable to pay the Company under subsection (a) above only if the arbitrator determines that: (1) There was no reasonable basis for the Executive's claim (or the Executive's response to the Company's claim); or (2) The Executive had engaged in unreasonable delay, failed to comply with a discovery order or otherwise acted in bad faith in the arbitration. (c) Either party shall be entitled to recover any reasonable attorneys' fees and other costs and expenses it incurs in enforcing or collecting an arbitration award. (d) If an award under this section is made to the Executive and accountants or tax counsel selected by Company with the Executive's consent (which shall not be unreasonably withheld) determine that the award is includible in Executive's gross income, the Company shall also pay the Executive a gross-up payment to offset the taxes imposed on that award, including the taxes on the gross-up payment itself. This gross-up payment shall be determined following the methodology employed in the Change in Control Agreement. 10.12 ENTIRE AGREEMENT. This Plan constitutes the entire agreement between the Company and the Executive as to its subject matter. No rights are granted to the Executive by virtue of this Plan other than those specifically set forth in this document and any amendments to it. 10.13 CONSTRUCTION. The language of this Plan was chosen jointly by the parties to express their mutual intent. No rule of construction based on which party drafted the Plan or certain of its provisions will be applied against any party. 10.14 SECTION HEADINGS. The section headings used in this Plan have been included for convenience of reference only. 10.15 COUNTERPARTS. This Plan may be executed in one or more counterparts, and all counterparts will be construed together as one Plan. 10.16 SEVERABILITY. If any provision of this Plan is, to any extent, held to be invalid or unenforceable, it will be deemed amended as necessary to conform to the applicable laws or regulations. However, if it cannot be amended without materially altering the intentions of the parties, it will be deleted and the remainder of this Plan will be enforced to the extent permitted by law. 10.17 JOINT AND SEVERAL OBLIGATION. Bancorp and Bank will be jointly and severally liable for the payment obligations under this Agreement. EXECUTIVE: COMPANY: WEST COAST BANCORP ___________________________________ By: __________________________________ David L. Prysock Title ________________________________ Date: _____________________________ Date: ________________________________ WEST COAST BANK By: __________________________________ Title: _______________________________ Date: ________________________________ 10.11 ATTORNEYS' FEES. (a) If any breach of or default under this Plan results in either party incurring attorneys' or other fees, costs or expenses (including those incurred in an arbitration), the substantially prevailing party is entitled to recover from the non-prevailing party its reasonable legal fees, costs and expenses, including attorneys' fees and the costs of the arbitration, except as provided in subsection (b) below. (b) If the Executive is not the substantially prevailing party, the Executive shall be liable to pay the Company under subsection (a) above only if the arbitrator determines that: (1) There was no reasonable basis for the Executive's claim (or the Executive's response to the Company's claim); or (2) The Executive had engaged in unreasonable delay, failed to comply with a discovery order or otherwise acted in bad faith in the arbitration. (c) Either party shall be entitled to recover any reasonable attorneys' fees and other costs and expenses it incurs in enforcing or collecting an arbitration award. (d) If an award under this section is made to the Executive and accountants or tax counsel selected by Company with the Executive's consent (which shall not be unreasonably withheld) determine that the award is includible in Executive's gross income, the Company shall also pay the Executive a gross-up payment to offset the taxes imposed on that award, including the taxes on the gross-up payment itself. This gross-up payment shall be determined following the methodology employed in the Change in Control Agreement. 10.12 ENTIRE AGREEMENT. This Plan constitutes the entire agreement between the Company and the Executive as to its subject matter. No rights are granted to the Executive by virtue of this Plan other than those specifically set forth in this document and any amendments to it. 10.13 CONSTRUCTION. The language of this Plan was chosen jointly by the parties to express their mutual intent. No rule of construction based on which party drafted the Plan or certain of its provisions will be applied against any party. 10.14 SECTION HEADINGS. The section headings used in this Plan have been included for convenience of reference only. 10.15 COUNTERPARTS. This Plan may be executed in one or more counterparts, and all counterparts will be construed together as one Plan. 10.16 SEVERABILITY. If any provision of this Plan is, to any extent, held to be invalid or unenforceable, it will be deemed amended as necessary to conform to the applicable laws or regulations. However, if it cannot be amended without materially altering the intentions of the parties, it will be deleted and the remainder of this Plan will be enforced to the extent permitted by law. 10.17 JOINT AND SEVERAL OBLIGATION. Bancorp and Bank will be jointly and severally liable for the payment obligations under this Agreement. EXECUTIVE: COMPANY: WEST COAST BANCORP ___________________________________ By: __________________________________ James D. Bygland Title ________________________________ Date: _____________________________ Date: ________________________________ WEST COAST BANK By: __________________________________ Title: _______________________________ Date: ________________________________ CLARKCONSULTING(TM) PLAN YEAR REPORTING HYPOTHETICAL TERMINATION BENEFIT SCHEDULE DAVID L. PRYSOCK
DOB: 3/6/1944 EARLY VOLUNTARY EARLY INVOLUNTARY PRE-RETIRE. PLan Anniv Date: 12/31/2003 TERMINATION TERMINATION DISABILITY CHANGE OF CONTROL DEATH Normal Retirement: 3/6/2008, Age 64 Installment Installment Installment Installment BENEFIT Payments: Monthly Installments Payable at 64 Payable at 64 Payable at 64 Payable at 64 Installment - -------------------------------------------------------------------------------------------------------------------------------- BENEFIT ACCRUAL Based On Based On Based On Based On Based On LEVEL BALANCE Vesting Accrual Vesting Accrual Vesting Accrual Vesting Benefit Benefit PERIOD DISCOUNT ---------------------------------------------------------------------------------------------------------- ENDING RATE (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) - -------------------------------------------------------------------------------------------------------------------------------- Dec 2003(1) 6% 47,250 36,751 50% 2,388 100% 4,776 100% 4,776 100% 47,250 47,250 Dec 2004 6% 47,250 128,783 60% 9,457 100% 15,762 100% 15,762 100% 47,250 47,250 Dec 2005 6% 47,250 226,492 70% 18,278 100% 26,111 100% 26,111 100% 47,250 47,250 Dec 2006 6% 47,250 330,228 80% 28,687 100% 35,858 100% 35,858 100% 47,250 47,250 Dec 2007 6% 47,250 440,362 90% 40,535 100% 45,039 100% 45,039 100% 47,250 47,250 - -------------------------------------------------------------------------------------------------------------------------------- Mar 2008 6% 47,250 468,941 100% 47,250 100% 47,250 100% 47,250 100% 47,250 47,250 - --------------------------------------------------------------------------------------------------------------------------------
MARCH 6, 2008 RETIREMENT; APRIL 1, 2008 FIRST PAYMENT DATE 1 The first line reflects 5 months of data, August 2003 to December 2003. * The purpose of this hypothetical illustration is to show the participant's annual benefit based on various termination assumptions. Actual benefits are based on the terms and provisions of the plan agreement executed between the company and participant and may differ from those shown. * IF THERE IS A CONFLICT IN ANY TERMS OR PROVISIONS BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT. Copyright(C)2003 Clark Consulting. Securities offered through Clark Securities, Inc., Salary Continuation Plan for West Coast Bank - Lake Oswego, OR a wholly owned subsidiary of Clark, Inc., member NASD & SIPC, 1001811 16948 137753 v5.31.04 12/18/2003:13 SCP-E NB Los Angeles, CA 90071, (213) 486-6300.

EX-21 15 v96690exv21.txt EXHIBIT 21 . . . Exhibit 21 SCHEDULE OF SUBSIDIARIES The following is a list of the registrant's subsidiaries at March 1, 2004.
Name of Organization State of Incorporation -------------------- ---------------------- West Coast Bank Oregon West Coast Trust Oregon Totten, Inc. Washington Centennial Funding Corp. Washington ELD Inc. Washington
EX-23 16 v96690exv23.txt EXHIBIT 23 Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 333-104835, 333-104458, 333-88382, 333-35318, 333-35208, 333-86113, 333-09721, 333-01649, 333-01651 and 033-60259 of West Coast Bancorp on Form S-8 of our report dated February 23, 2004 appearing in the Annual Report on Form 10-K of West Coast Bancorp for the year ended December 31, 2003. DELOITTE & TOUCHE LLP Portland, Oregon February 25, 2004 EX-31.1 17 v96690exv31w1.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Robert D. Sznewajs, certify that: 1. I have reviewed this Annual Report on Form 10-K of West Coast Bancorp; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most-recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Dated: February 24, 2004 /s/ Robert D. Sznewajs -------------------------------------- President and Chief Executive Officer EX-31.2 18 v96690exv31w2.txt EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Anders Giltvedt, certify that: 1. I have reviewed this Annual Report on Form 10-K of West Coast Bancorp; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most-recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Dated: February 24, 2004 /s/ Anders Giltvedt -------------------------------------- Executive Vice President and Chief Financial Officer EX-32 19 v96690exv32.txt EXHIBIT 32 Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of West Coast Bancorp (the "Company") on Form 10-K for the period ending December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Robert D. Sznewajs /s/ Anders Giltvedt - ------------------------------------- -------------------------------------- President and Chief Executive Officer Executive Vice President and Chief February 24, 2004 Financial Officer February 24, 2004 -----END PRIVACY-ENHANCED MESSAGE-----

(1)		The efficiency ratio has been computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income.

(2)		Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis.

(3)		Nonperforming assets include litigation settlement property in certain periods.

	•		Focus on profitable customer segments

	•		Improve franchise performance levels

	•		Leverage technology

	•		Expand branch distribution

	•		Maintain community and customer ownership

(1)		Yield/rate calculations have been based on more detailed information and therefore may not recompute exactly due to rounding.

(2)		Interest earned on nontaxable securities has been computed on a 35 % tax equivalent basis.

(3)		Includes balances for loans held for sale.

(4)		Includes junior subordinated debentures and mandatorily redeemable trust preferred securities with average balances of $15.1 million and $8.9 million in 2003 and 2002, respectively.

(1)		Tax-exempt income has been adjusted to a tax-equivalent basis using a 35 % tax equivalent basis.

(2)		Long-term borrowings include junior subordinated debentures and mandatorily redeemable trust preferred securities.

	•		Small business and middle market commercial lending

	•		Home equity lending

	•		Core deposit production

(1)		Yields are stated on a federal tax equivalent basis at 35%.

(2)		Does not reflect anticipated maturity from prepayments on mortgage-based and asset-based securities. Anticipated lives are significantly shorter than contractual maturities.

	—		Specific allowances for identified problem loans and portfolio segments,

	—		The formula allowance, and

	—		The unallocated allowance.

	—		Problem graded loan loss factors are obtained from historical loss experience, and other relevant factors including trends in past dues, non-accruals, and risk rating changes.

	—		Pooled loan loss factors, not individually graded loans, are based on expected net charge-offs and other factors including trends in past dues and collateral values. Pooled loans are loans and leases that are homogeneous in nature, such as consumer installment and residential mortgage loans.

	—		Existing general economic and business conditions affecting our key lending areas,

	—		Credit quality trends, including trends in nonperforming loans expected to result from existing conditions,

	—		Loan growth rates and concentrations,

	—		Specific industry conditions within portfolio segments,

	—		Recent loss experience in particular segments of the portfolio,

	—		Interest rate environment,

	—		Duration of the current business cycle, and

	—		Bank regulatory examination results and findings of our internal credit examiners.

	•		Improved sales practices by the branches and commercial teams resulting in both consumer and business core deposit growth

	•		Businesses maintaining higher balances to avoid service charges

	•		Minimal, if any, yield differences between non-insured investments and similar FDIC insured deposit products

	•		Higher escrow deposits

(1)		Equity investments have been placed in the 0-3 month category.

(2)		Repricing is based on anticipated call dates, and may vary from contractual maturities.

(3)		Repricing is based on estimated average lives.