STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement"), dated as of April 20, 1998, is
between INTERWEST BANCORP, INC. ("InterWest") and KITTITAS VALLEY BANCORP, INC.
("Kittitas").
RECITALS
Kittitas and InterWest have executed an Agreement and Plan of Merger
("Plan"), of even date with this Agreement, under which Kittitas will be merged
into InterWest and Kittitas Valley Bank, N.A., the wholly owned subsidiary of
Kittitas, will become a wholly owned subsidiary of InterWest upon completion of
the merger ("Merger") contemplated in the Plan.
By negotiating and executing the Plan and by taking actions necessary or
appropriate to effect the transactions contemplated by the Plan, InterWest has
incurred and will incur substantial direct and indirect costs (including,
without limitation, the costs of management and employee time) and will forgo
the pursuit of certain alternative investments and transactions.
AGREEMENT
THEREFORE, in consideration of the promises set forth in this Agreement and
in the Plan, the parties agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth in this
Agreement, Kittitas irrevocably grants an option ("Option") to InterWest to
purchase an aggregate of 44,418 authorized but unissued shares of Kittitas'
capital stock ("Common Stock") (which if issued, and assuming exercise of
outstanding options to acquire the Common Stock, would represent
approximately 19.9% of total stock then issued and outstanding), at a per
share price of $50 ("Option Price").
2. EXERCISE OF OPTION. Subject to the provisions of this Section 2 and of
Section 13(a) of this Agreement, this Option may be exercised by InterWest
or any transferee as set forth in Section 5 of this Agreement, in whole or
in part, at any time, or from time to time in any of the following
circumstances:
(a) Kittitas or its board of directors enters into an agreement or
recommends to Kittitas shareholders an agreement (other than the Plan)
under which any entity, person or group (collectively "Person"),
within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), would: (1) merge or consolidate
with, acquire 51% or more of the assets or liabilities of, or enter
into any similar transaction with Kittitas, or (2) purchase or
otherwise acquire (including by merger, reorganization, consolidation,
share exchange or
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any similar transaction) securities representing 10% or more of
Kittitas' voting shares;
(b) any Person (other than InterWest or any of its subsidiaries and other
than any Person owning as of the date of this Agreement 10% or more of
Kittitas' voting shares) acquires the beneficial ownership or the
right to acquire beneficial ownership of securities which, when
aggregated with other such securities owned by such Person, represents
10% or more of the voting shares of Kittitas (the term "beneficial
ownership" for purposes of this Agreement has the meaning set forth in
Section 13(d) of the Exchange Act, and the regulations promulgated
under the Exchange Act); notwithstanding the foregoing, the Option
will not be exercisable in the circumstances described above in this
subsection 2(b) if a Person acquires the beneficial ownership of
securities which, when aggregated with other such securities owned by
such Person, represents 10% or more, but less than 25%, of Kittitas'
voting shares and the transaction does not result in, and is not
presumed to constitute, "control" as defined under Section 7(j) of the
Federal Deposit Insurance Act or 12 CFR Part 225 or as determined by
the Board of Governors of the Federal Reserve;
(c) failure of the board of directors of Kittitas to recommend, or
withdrawal by the board of directors of a prior recommendation of, the
Merger to the shareholders; or
(d) failure of the shareholders to approve the Merger by the required
affirmative vote at a meeting of the shareholders, after any Person
(other than InterWest or a subsidiary of InterWest) announces publicly
or communicates, in writing, to Kittitas a proposal to (1) acquire
Kittitas (by merger, reorganization, consolidation, the purchase of
51% or more of its assets or liabilities, or any other similar
transaction), (2) purchase or otherwise acquire securities
representing 25% or more of the voting shares of Kittitas or (3)
change the composition of the board of directors of Kittitas.
It is understood and agreed that the Option will become exercisable on the
occurrence of any of the above-described circumstances even though the
circumstance occurred as a result, in part or in whole, of the board of
Kittitas complying with its fiduciary duties.
NOTWITHSTANDING THE FOREGOING, the Option may not be exercised if either
(1) any applicable and required governmental approvals have not been
obtained with respect to such exercise or if such exercise would violate
any applicable regulatory restrictions, or (2) at the time of exercise,
InterWest is failing in any material respect to perform or observe its
material covenants or conditions under the Plan, unless the reason for such
failure is that Kittitas is failing to perform or observe its covenants or
conditions under the Plan.
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3. NOTICE, TIME AND PLACE OF EXERCISE. Each time that InterWest or any
transferee wishes to exercise any portion of the Option, InterWest or such
transferee will give written notice of its intention to exercise the Option
specifying the number of shares as to which the Option is being exercised
("Option Shares") and the place and date for the closing of the exercise
(which date may not be later than ten business days from the date such
notice is mailed). If any law, regulation or other restriction will not
permit such exercise to be consummated during this ten-day period, the date
for the closing of such exercise will be within five days following the
cessation of the restriction on consummation.
4. PAYMENT AND DELIVERY OF CERTIFICATE(S). At any closing for an exercise of
the Option or any portion thereof, (a) InterWest and Kittitas will each
deliver to the other certificates as to the accuracy, as of the closing
date, of their respective representations and warranties under this
Agreement, (b) InterWest or the transferees will pay the aggregate purchase
price for the shares of Common Stock to be purchased by delivery of a
certified or bank cashier's check in immediately available funds payable to
the order of Kittitas, and (c) Kittitas will deliver to InterWest or the
transferees a certificate or certificates representing the shares so
purchased.
5. TRANSFERABILITY OF THE OPTION AND OPTION SHARES. Before the Option, or a
portion of the Option, becomes exercisable in accordance with the
provisions of Section 2 of this Agreement, neither the Option nor any
portion of the Option will be transferable. If any of the events or
circumstances set forth in Sections 2(a) through (d) above occur, InterWest
may freely transfer, subject to applicable federal and state securities
laws, the Option or any portion of the Option, or any of the Option Shares.
For purposes of this Agreement, a reorganization or consolidation of
InterWest (whether or not InterWest is the surviving entity) or an
acquisition of InterWest will not be deemed a transfer.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF KITTITAS. Kittitas represents
and warrants to InterWest as follows:
(a) DUE AUTHORIZATION. This Agreement has been duly authorized by all
necessary corporate action on the part of Kittitas, has been duly
executed by a duly authorized officer of Kittitas and constitutes a
valid and binding obligation of Kittitas. No shareholder approval by
Kittitas shareholders is required by applicable law or otherwise
before the exercise of the Option in whole or in part.
(b) OPTION SHARES. Kittitas has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue and, at all
times from the date of this Agreement to such time as the obligation
to deliver shares under this Agreement terminates, will have reserved
for issuance, at the closing(s) upon exercise of the Option, or any
portion of the Option, the Option Shares (subject to adjustment, as
provided in Section 8 below), all of which, upon issuance under this
Agreement, will be duly and validly issued, fully paid and
nonassessable, and
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will be delivered free and clear of all claims, liens, encumbrances
and security interests, including any preemptive right of any of the
shareholders of Kittitas.
(c) NO CONFLICTS. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by it will
violate or result in any violation of or be in conflict with or
constitute a default under any term of the articles of incorporation
or bylaws of Kittitas or any agreement, instrument, judgment, decree,
law, rule or order applicable to Kittitas or any subsidiary of
Kittitas or to which Kittitas or any such subsidiary is a party.
(d) NOTIFICATION OF RECORD DATE. At any time from and after the date of
this Agreement until the Option is no longer exercisable, Kittitas
will give InterWest or any transferee 30 days prior written notice
before setting the record date for determining the holders of record
of the Common Stock entitled to vote on any matter, to receive any
dividend or distribution or to participate in any rights offering or
other matters, or to receive any other benefit or right, with respect
to the Common Stock.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF INTERWEST. InterWest
represents and warrants to Kittitas as follows:
(a) DUE AUTHORIZATION. This Agreement has been duly authorized by all
necessary corporate action on the part of InterWest, has been duly
executed by a duly authorized officer of InterWest and constitutes a
valid and binding obligation of InterWest.
(b) TRANSFERS OF COMMON STOCK. No shares of Common Stock acquired upon
exercise of the Option will be transferred except in a transaction
registered or exempt from registration under any applicable securities
laws.
(c) NO CONFLICTS. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by it will
violate or result in any violation of or be in conflict with or
constitute a default under any term of the articles of incorporation
or bylaws of InterWest or any agreement, instrument, judgment, decree,
law, rule or order applicable to InterWest or any subsidiary of
InterWest or to which InterWest or any such subsidiary is a party.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change in
the Common Stock by reason of stock dividends, split-ups, mergers,
reorganizations, recapitalizations, combinations, exchanges of shares or
the like, the number and kind of shares or securities subject to the Option
and the purchase price per share of Common Stock will be appropriately
adjusted. If, before the Option terminates or is exercised, Kittitas is
acquired by another party, consolidates with or merges into another
corporation or liquidates, InterWest or any transferee will thereafter
receive, upon exercise of the Option, the securities or properties to which
a holder of the number of shares of Common
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Stock then deliverable upon the exercise thereof would have been entitled
upon such acquisition, consolidation, merger, reorganization or
liquidation, and Kittitas will take all steps in connection with such
acquisition, consolidation, merger, reorganization or liquidation as may be
necessary to assure that the provisions of this agreement will thereafter
be applicable, as nearly as reasonably may be practicable, in relation to
any securities or property thereafter deliverable upon exercise of the
Option.
9. NONASSIGNABILITY. This Agreement binds and inures to the benefit of the
parties and their successors. This Agreement is not assignable by either
party, but InterWest may transfer the Option, the Option Shares or any
portion of the Option or Option Shares in accordance with Section 5. A
merger, reorganization or consolidation of InterWest (whether or not
InterWest is the surviving entity) or an acquisition of InterWest will not
be deemed an assignment or transfer.
10. REGULATORY RESTRICTIONS. Kittitas will use its best efforts to obtain or
to cooperate with InterWest or any transferee in obtaining all necessary
regulatory consents, approvals, waivers or other action (whether
regulatory, corporate or other) to permit the acquisition of any or all
Option Shares by InterWest or any transferee.
11. REMEDIES. Kittitas agrees that if for any reason InterWest or any
transferee will have exercised its rights under this Agreement and Kittitas
will have failed to issue the Option Shares to be issued upon such exercise
or to perform its other obligations under this Agreement, unless such
action would violate any applicable law or regulation by which Kittitas is
bound, then InterWest or any transferee will be entitled to specific
performance and injunctive and other equitable relief. InterWest agrees
that if it fails to perform any of its obligations under this Agreement,
then Kittitas will be entitled to specific performance and injunctive and
other equitable relief. This provision is without prejudice to any other
rights that Kittitas or InterWest or any transferee may have against the
other party for any failure to perform its obligations under this
Agreement.
12. NO RIGHTS AS SHAREHOLDER. This Option, before it is exercised, will not
entitle its holder to any rights as a shareholder of Kittitas at law or in
equity. Specifically, this Option, before it is exercised, will not
entitle the holder to vote on any matter presented to the shareholders of
Kittitas or, except as provided in this Agreement, to any notice of any
meetings of shareholders or any other proceedings of Kittitas.
13. MISCELLANEOUS.
(a) TERMINATION. This Agreement and the Option, to the extent not
previously exercised, will terminate upon the earliest of (1) June 30,
1999; (2) the mutual agreement of the parties to this Agreement; (3)
31 days after the date on which any application for regulatory
approval for the Merger has been denied, but if before the expiration
of the 31-day period, Kittitas or InterWest is engaged in litigation
or an appeal procedure relating to an attempt to obtain approval of
the Merger, this Agreement will not terminate until the earlier of
(i) June 30, 1999, or
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(ii) 31 days after the completion of the litigation and appeal
procedure; (4) the 30th day following the termination of the Plan for
any reason other than a material noncompliance or default by InterWest
with respect to its obligations under it; or (5) the date of
termination of the Plan if the termination is due to a material
noncompliance or default by InterWest with respect to its obligations
under it; but if the Option has been exercised, in whole or in part,
before the termination of this Agreement, then the exercise will close
under Section 4 of this Agreement, even though that closing date is
after the termination of this Agreement; and if the Option is sold
before the termination of this Agreement, the Option may be exercised
by the transferee at any time within 31 days after the date of
termination even though such exercise or the closing of such exercise
occurs after the termination of this Agreement.
(b) AMENDMENTS. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written
agreement executed by the parties.
(c) SEVERABILITY OF TERMS. Any provision of this Agreement that is
invalid, illegal or unenforceable is ineffective only to the extent of
the invalidity, illegality or unenforceability without affecting in
any way the remaining provisions or rendering any other provisions of
this Agreement invalid, illegal or unenforceable. Without limiting
the generality of the foregoing, if the right of InterWest or any
transferee to exercise the Option in full for the total number of
shares of Common Stock or other securities or property issuable upon
the exercise of the Option is limited by applicable law, or otherwise,
InterWest or any transferee may, nevertheless, exercise the Option to
the fullest extent permissible.
(d) NOTICES. All notices, requests, claims, demands and other
communications under this Agreement must be in writing and must be
given (and will be deemed to have been duly received if so given) by
delivery, by cable, telecopies or telex, or by registered or certified
mail, postage prepaid, return receipt requested, to the respective
parties at the addresses below, or to such other address as either
party may furnish to the other in writing. Change of address notices
will be effective upon receipt.
If to Kittitas to:
Kittitas Valley Bancorp, Inc.
000 Xxxx 0xx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxx, President and Chief Executive
Officer
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With a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxx & XxXxxxxx, P.C.
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
If to InterWest, to:
InterWest Bancorp, Inc.
0000 Xxxx Xxxxxxx Xxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, President and Chief Executive
Officer
With a copy to:
Xxxxxxx X. Xxxxx, Esq.
Xxxxxx & Xxxx, P.C.
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000-0000
(a) GOVERNING LAW AND VENUE. The parties intend this Agreement and the
Option, in all respects, including all matters of construction,
validity and performance, to be governed by the laws of the State of
Washington, without giving effect to conflicts of law principles. Any
actions brought by either party against the other arising under this
Agreement must be filed in King County, Washington, and each party
consents to personal jurisdiction in King County.
(b) COUNTERPARTS. This Agreement may be executed in several counterparts,
including facsimile counterparts, each of which is an original, and
all of which together constitute one and the same agreement.
(c) EFFECTS OF HEADINGS. The section headings in this Agreement are for
convenience only and do not affect the meaning of its provisions.
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Dated April 20, 1998:
INTERWEST BANCORP, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------
Xxxxxxx X. Xxxxxx
Its: President
KITTITAS VALLEY BANCORP, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------
Xxxxxx X. Xxxxxxxxx
Its: President
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