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EXHIBIT 10
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STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Agreement"), dated as of February 15, 1996,
between WEST COAST BANCORP ("WCB"), an Oregon corporation, and VANCOUVER BANCORP
("VB"), a Washington corporation.
RECITALS
A. WCB, VB, and HB Corporation ("HB") are signing and delivering a Plan
and Agreement of Reorganization and Merger ("Merger Agreement") dated
as of February 15, 1996, concurrently with this Agreement.
B. As a condition to and in consideration of WCB's signing of the Merger
Agreement, VB has agreed to grant WCB the Option described in this
Agreement.
AGREEMENT
In consideration of the mutual promises set forth in this Agreement and
in the Merger Agreement, the parties agree as follows:
1. GRANT OF OPTION. VB grants to WCB an irrevocable option ("Option") to
purchase, subject to the terms of this Agreement, up to 28,144 fully
paid and nonassessable shares of VB Common Stock, no par value ("Common
Stock") (which represents 19.9% of VB's total stock issued and
outstanding), at a price of $64 per share; but if VB issues or agrees
to issue any shares of Common Stock (other than as permitted under the
Merger Agreement or in accordance with existing stock options) at a
price less than $64 per share (as adjusted in accordance with
Subsection 6.3), such price shall be equal to such lesser price (such
price, as adjusted if applicable, the "Option Price"). The number of
shares of Common Stock that may be received upon the exercise of the
Option and the Option Price are subject to adjustment as set forth in
this Agreement.
2. EXERCISE OF OPTION.
2.1 Exercise of Option. The Holder (defined below) may exercise the
Option, in whole or part, if, but only if, both an Initial
Triggering Event (defined below) and a Subsequent Triggering
Event (defined below) shall have occurred before the occurrence
of an Exercise Termination Event (defined below); provided that
the Holder shall have sent the written notice of such exercise
(as provided in Subsection 2.2) within 30 days following such
Subsequent Triggering Event (or such longer period as provided
in Section 10). This Option shall not be exercisable: (a)
during any period in which WCB is
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failing in any material respect to perform its obligations or
observe its covenants under the Merger Agreement, unless the
reason for such failure is that VB is failing in any material
respect to perform its obligations or observe its covenants
under the Merger Agreement; (b) if any governmental approvals
required for the issuance of the shares of Common Stock to be
purchased shall not have been obtained or if such issuance
would violate applicable laws or regulations.
2.2 Notice. In the event the Holder is entitled to and
wishes to exercise the Option, it shall send to VB a written
notice (the date of which is referred to in this Agreement as
the "Notice Date") specifying (a) the total number of shares it
will purchase pursuant to such exercise and (b) a place and a
date not earlier than three business days nor later than 30
business days from the Notice Date, for the closing of such
purchase (the "Closing Date"); provided that if the
closing of the purchase and sale pursuant to the Option cannot
be consummated by reason of any applicable judgment, decree,
order, law or regulation, the period of time that otherwise
would run pursuant to this sentence shall run instead from the
date on which such restriction on consummation has expired or
been terminated; and provided further that if prior
notification to or approval of the Board of Governors of the
Federal Reserve System ("Federal Reserve Board") or any other
regulatory agency is required in connection with such purchase,
the Holder shall promptly file the required notice or
application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated
or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option
shall be deemed to occur on the Notice Date relating thereto.
2.3 Payment. At the closing referred to in Subsection 2.2, the
Holder shall pay to VB the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of
the Option in immediately available funds by wire transfer to a
bank account designated by VB, provided that failure or refusal
of VB to designate such an account shall not preclude the
Holder from exercising the Option. At such closing,
simultaneously with the delivery of immediately available funds
as provided in this Subsection 2.3, VB shall deliver to the
Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the
Option is exercised in part only, a new Option evidencing the
rights of the Holder thereof to purchase the balance of the
shares purchasable under this
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Agreement and the Holder shall deliver to VB a copy of this
Agreement and a letter agreeing that the Holder will not offer
to sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
2.4 Legend. Certificates for Common Stock delivered at a
closing under this Agreement may be endorsed with a restrictive
legend that shall read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and VB
and to resale restrictions arising under the
Securities Act of 1933, as amended, and applicable
state securities laws. A copy of such agreement is on
file at the principal office of VB and will be
provided to the holder hereof without charge upon
receipt by VB of a written request therefor."
It is understood and agreed that: (a) the reference to the
resale restrictions of the Securities Act of 1933, as amended
("1933 Act"), in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the
Holder shall have delivered to VB a copy of a letter from the
staff of the Securities and Exchange Commission ("SEC"), or an
opinion of counsel, in form and substance satisfactory to VB,
to the effect that such legend is not required for purposes of
the 1933 Act; and (b) the reference to the provisions to this
Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions
of this Agreement and under circumstances that do not require
the retention of such reference. In addition, such certificates
shall bear any other legend as may be required by law.
2.5 Delivery. Upon the giving by the Holder to VB of the
written notice of exercise of the Option provided for under
Subsection 2.2 and the tender of the applicable purchase price
in immediately available funds, the Holder shall be deemed to
be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer
books of VB shall then be closed or that certificates
representing such shares of Common Stock shall not then be
actually delivered to the Holder. VB shall pay all expenses,
and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates
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under this Subsection 2.5 in the name of the Holder or its
assignee or transferee.
3. CERTAIN DEFINITIONS.
3.1 Exercise Termination Event. An "Exercise Termination
Event" is the earliest to occur of the following: (a) the
Effective Date of the Merger; (b) termination of the Merger
Agreement in accordance with the provisions thereof if such
termination occurs before the occurrence of an Initial
Triggering Event, except a termination by WCB pursuant to
Subsection 7.2.2 of the Merger Agreement; (c) the passage of 12
months after termination of the Merger Agreement if such
termination follows either the occurrence of an Initial
Triggering Event or a termination by WCB pursuant to Subsection
7.2.2 of the Merger Agreement; provided that if an
Initial Triggering Event continues or occurs beyond such
termination, the Exercise Termination Event shall be 12 months
from the expiration of the Last Triggering Event but in no
event more than 18 months after such termination; (d) the
second anniversary of the date of this Agreement; or (e) the
exercise by WCB of its right to terminate the Merger Agreement
pursuant to Subsection 7.2.3 thereof. The "Last Triggering
Event" means the last Initial Triggering Event to occur.
3.2 Holder. The term "Holder" means the person or persons holding
the Option in accordance with the terms of Section 12.
3.3 Initial Triggering Event. The term "Initial Triggering
Event" means any of the following events or transactions
occurring after the date of this Agreement:
a. VB or any of its Subsidiaries (each a "VB
Subsidiary"), without having received WCB's prior
written consent, shall have engaged in or entered into
an agreement to engage in an Acquisition Transaction
(defined below) with any person (the term "person" for
purposes of this Agreement having the meaning assigned
in Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934, as amended ("1934 Act"), and the
rules and regulations thereunder) other than VB, any
VB Subsidiary, WCB or any of its subsidiaries (each a
"WCB Subsidiary") or VB's board of directors shall
have recommended that the shareholders of VB approve
or accept any Acquisition Transaction other than as
contemplated by the Merger Agreement. For purposes of
this Agreement, "Acquisition Transaction" shall mean
(1) a merger, consolidation or any similar transaction
involving VB or any Significant Subsidiary (as defined
in Rule 1-02 of Regulation
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S-X promulgated by the SEC) of VB, (2) a purchase,
lease or other acquisition of all or substantially all
of the assets of VB or any Significant Subsidiary of
VB, (3) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or
otherwise) of securities representing 15% or more of
the voting power of VB or any Significant Subsidiary
of VB, or (4) any substantially similar transaction;
b. (1) Any person other than WCB, any WCB Subsidiary, any
VB Subsidiary acting in a fiduciary capacity in the
ordinary course of such VB Subsidiary's business, any
employee benefit plan or employee stock ownership plan
of VB or any VB Subsidiary, or any person organized,
appointed or established by VB or any VB Subsidiary
for or pursuant to the provisions of any such plan,
alone or together with such person's affiliates and
associates (as the terms "affiliate" and "associate"
are defined in Rule 12b-2 under the 1934 Act), shall
have acquired beneficial ownership or the right to
acquire beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Agreement
having the meaning assigned in Section 13(d) of the
1934 Act, and the rules and regulations thereunder),
or (2) any group (as the term "group" is defined in
Section 13(d)(3) of the 1934 Act), other than a group
of which WCB, any WCB Subsidiary, any VB Subsidiary
acting in a fiduciary capacity in the ordinary course
of such VB Subsidiary's business, any employee benefit
plan or employee stock ownership plan of VB or any VB
Subsidiary, or any person organized, appointed or
established by VB or any VB Subsidiary for or pursuant
to the terms of any such plan is a member, shall have
been formed that beneficially owns 15% or more of the
Common Stock then outstanding; provided, however, that
notwithstanding this Subsection 3.3.b, (i) any
purchase or purchases of less than 1% in the aggregate
of the VB outstanding shares or (ii) any exercise of
existing VB stock options, will not be a "Triggering
Event."
c. Any person other than WCB or any WCB Subsidiary shall
have made a bona fide proposal to VB or its
shareholders by public announcement or written
communication that becomes the subject of public
disclosure to engage in an Acquisition Transaction;
d. After a proposal is made by a third party to VB or its
shareholders to engage in an Acquisition Transaction,
VB shall have breached any covenant or
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obligation contained in the Merger Agreement and such
breach: (1) would entitle WCB to terminate the Merger
Agreement (without regard for any cure periods, if
any, provided therein unless such cure is promptly
effected without jeopardizing consummation of the
merger pursuant to the terms of the Merger Agreement)
and (2) shall not have been cured prior to the Notice
Date; or
e. Any person other than WCB or any WCB Subsidiary, other
than in connection with a transaction to which WCB has
given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board,
or other federal or state bank regulatory authority,
which application or notice has been accepted for
processing, for approval to engage in an Acquisition
Transaction.
3.4 Subsequent Triggering Event. The term "Subsequent
Triggering Event" means either of the following events or
transactions occurring after the date of this Agreement (it
being understood that the occurrence of either such event would
also constitute an Initial Triggering Event):
a. The acquisition by any person, alone or together with
such person's affiliates and associates, or any group,
subject to the same exceptions as those set forth in
Subsections 3.3.b.(1) and 3.3.b.(2), of beneficial
ownership of 25% or more of the then outstanding
Common Stock; or
b. The occurrence of an Initial Triggering Event
described in Subsection 3.3.a, except that the
percentage referred to in clause (3) shall be 25%.
3.5 Triggering Event and Notice. VB shall notify WCB
promptly in writing of the occurrence of any Initial Triggering
Event or Subsequent Triggering Event (collectively, a
"Triggering Event"), it being understood that the giving of
such notice by VB shall not be a condition to the right of the
Holder to exercise the Option.
4. COVENANTS OF VB. VB agrees that: (a) it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised
without additional authorization of Common Stock after giving effect to
all other options, warrants, convertible securities and other rights to
purchase Common Stock; (b) it shall not by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed by VB
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under this Agreement; (c) it shall promptly take all action as may from
time to time be required (including (1) complying with all premerger
notification, reporting and waiting period requirements specified in 15
U.S.C. Section 18a and regulations promulgated thereunder and (2) if,
under the Bank Holding Company Act of 1956, as amended, or the Change
in Bank Control Act of 1978, as amended, or any state banking law,
prior approval of or notice to the Federal Reserve Board or to any
state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal
Reserve Board or such state regulatory authority as they may require)
in order to permit the Holder to exercise the Option and VB duly and
effectively to issue shares of Common Stock in accordance with this
Agreement; and (d) it shall promptly take all action provided in this
Agreement to protect the rights of the Holder against dilution.
5. EXCHANGE OF OPTION. This Agreement (and the Option granted by this
Agreement) are exchangeable, without expense, at the option of the
Holder, upon presentation and surrender of this Agreement at VB's
principal office, for other Agreements providing for Options of
different denominations entitling the Holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth in
this Agreement, in the aggregate, the same number of shares of Common
Stock purchasable under this Agreement. The terms "Agreement" and
"Option" as used in this Agreement include any Stock Option Agreements
and related Options for which this Agreement (and the Option granted by
this Agreement) may be exchanged. Upon receipt by VB of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or
destruction) of, reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, VB will
execute and deliver a new Agreement of like tenor and date. Any such
new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of VB, whether or not the Agreement
so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
6. ANTI-DILUTION ADJUSTMENTS. The number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall
be subject to adjustment from time to time as follows:
6.1 In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the
type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted, and proper
provision shall be made in the agreements governing such
transaction so that WCB shall receive upon exercise of the
Option the number
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and class of shares, other securities, property or cash that
WCB would have received in respect of the Common Stock subject
to the Option if the Option had been exercised and the Common
Stock subject to the Option had been issued to WCB immediately
prior to such event or the record date therefor, as applicable.
6.2 In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this
Agreement (other than as described in Section 6.1 or pursuant
to this Agreement), including, without limitation, pursuant to
stock option plans and in connection with acquisitions and
other transactions permitted by the Merger Agreement, the
number of shares of Common Stock subject to the Option shall be
increased so that, after such issuance, it equals 19.9% of the
number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant
to the Option. Nothing contained in this Agreement shall be
deemed to authorize VB or WCB to breach any provision of the
Merger Agreement.
6.3 Subject to the following sentence, whenever the number of
shares of Common Stock purchasable upon exercise hereof is
adjusted as provided in this Section 6, the Option Price shall
be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of
Common Stock purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of
Common Stock purchasable after the adjustment. The foregoing
adjustment to the Option Price shall not apply to adjustments
in the number of shares of Common Stock issuable under this
Option caused by an issuance of additional shares of Common
Stock for consideration pursuant to an agreement entered into
before the date of this Agreement.
6.4 In no event shall the aggregate number of shares for which this
Option is exercisable (including pursuant to all adjustments as
provided for in this Agreement) exceed 19.9% of VB's
outstanding Common Stock prior to exercise.
7. REGISTRATION RIGHTS. Upon the occurrence of a Subsequent Triggering
Event that occurs before an Exercise Termination Event, VB shall, at
the request of WCB delivered within 30 days of such Subsequent
Triggering Event (whether on its own behalf or on behalf of any
subsequent Holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant to this Agreement), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act
covering the Option and any shares issued and issuable pursuant to this
Option and shall use its best efforts to cause such registration
statement to become effective and remain current in order to permit the
sale or other
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disposition of any shares of Common Stock issued upon total or partial
exercise of this Option ("Option Shares") in accordance with any plan
of disposition requested by WCB. VB will use its best efforts to cause
such registration statement first to become effective and then to
remain effective for such period not in excess of 180 days from later
of (i) the date of the closing under this Agreement or (ii) the date
such registration statement first becomes effective, or such shorter
time as may be reasonably necessary to effect such sales or other
dispositions. WCB shall have the right to demand two such
registrations. The obligations of VB under this Agreement to file a
registration statement and to maintain its effectiveness may be
suspended for one or more periods of time that do not exceed 60 days in
the aggregate if VB's board of directors shall have determined that the
filing of such registration statement or the maintenance of its
effectiveness would require disclosure of nonpublic information that
would materially and adversely affect VB. The foregoing
notwithstanding, if at the time of any request by WCB for registration
of the Option and/or the Option Shares as provided above, VB is in
registration with respect to an underwritten public offering of shares
of Common Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter
or underwriters, of such offering the inclusion of the Option and/or
Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by VB, the number of Option Shares which
in either case are to be covered in the registration statement
contemplated by this Agreement may be reduced; provided, however, that
after any such required reduction the number of Option Shares to be
included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the
Holder and VB in the aggregate; and provided further, however, that if
such reduction occurs, then VB shall file a registration statement for
the balance as promptly as practical and no reduction shall thereafter
occur. Each Holder whose Option and/or Option Shares are registered
under this Agreement shall provide all information reasonably requested
by VB for inclusion in any registration statement to be filed under
this Agreement. If requested by any such Holder in connection with such
registration, VB shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such
underwriting agreements for the VB. Upon receiving any request under
this Section 7 from any Holder, VB agrees to send a copy thereof to any
other person known to VB to be entitled to registration rights under
this Section 7, in each case by promptly mailing the said postage
prepaid, to the address of record of the persons entitled to receive
such copies.
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8. REPURCHASE OF OPTION OR OPTION SHARES.
8.1 Repurchase of Option or Option Shares. Upon the occurrence of a
Subsequent Triggering Event that occurs prior to an Exercise
Termination Event, (a) at the request of the Holder, delivered
within 30 days of such occurrence (or such longer period as
provided in Section 10), VB shall repurchase the Option from
the Holder at a price (the "Option Repurchase Price") equal to
the product of the excess of (i) the Market/Offer Price (as
defined below) over (ii) the Option Price, multiplied by the
number of shares for which this Option may then be exercised,
and (b) at the request of the owner of Option Shares from time
to time (the "Owner"), delivered within 30 days of such
occurrence (or such later period as provided in Section 10), VB
shall repurchase such number of the Option Shares from the
Owner as the Owner shall designate at a price (the "Option
Share Repurchase Price") equal to the product of the
Market/Offer Price multiplied by the number of Option Shares so
designated. The term "Market/Offer Price" means the highest of
the following amounts with respect to the six-month period
immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of
the required repurchase of Option Shares, as the case may be
(a) the price per share of Common Stock at which a tender offer
or exchange offer therefor has been made; (b) the price per
share of Common Stock paid by any third party or to be paid
pursuant to an agreement with VB entered into during the
period; (c) the highest closing price for shares of Common
Stock reported in the principal market for such shares within
the period; or (d) in the event of a sale of all or
substantially all of VB's assets, the sum of the price paid in
such sale for such assets and the current market value of the
remaining assets of VB as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as
the case may be, and VB divided by the number of shares of
Common Stock of VB outstanding at the time of such sale. In
determining the Market/Offer Price, the value of consideration
other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the
case may be, and VB. Notwithstanding the foregoing, if the same
person who has participated in a Triggering Event has entered,
or after such Triggering Event has occurred enters, into any
agreement or understanding with WCB relating to WCB's rights
under this Option or with respect to the Option Shares or
directly or indirectly relating to VB, WCB shall,
notwithstanding the terms of such agreement or understanding,
at any time upon the occurrence of a Subsequent Triggering
Event of the type set forth in Subsection 3.4.a without VB's
approval, recommendation or consent, promptly request that VB
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repurchase the Option and any Option Shares held by WCB as
provided in this Section 8 and VB shall do so.
8.2 Holder Election. The Holder and/or the Owner, as the
case may be, may exercise its right to require VB to repurchase
the Option and any Option Shares pursuant to this Section 8 by
surrendering for such purpose to VB, at its principal office, a
copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to
require VB to repurchase this option and/or the Option Shares
in accordance with the provisions of this Section 8. As
promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or
notices relating thereto, VB shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to
the Owner the Option Share Repurchase Price therefor or the
portion thereof that VB is not then prohibited under applicable
law and regulation from so delivering.
8.3 Prohibitions of Law. To the extent that VB is prohibited under
applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Option and/or the
Option Shares in full, VB shall immediately so notify the
Holder and/or the owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner,
as appropriate, the portion of the Option Repurchase Price and
the Option Share Repurchase Price, respectively, that it is no
longer prohibited from delivering, within five business days
after the date on which VB is no longer so prohibited;
provided, however, that if VB at any time after delivery of a
notice of repurchase pursuant to Subsection 8.2 is prohibited
under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and VB
hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to
accomplish such repurchase), the Holder and/or Owner may revoke
its notice of repurchase of the Option or the Option Shares
either in whole or to the extent of the prohibition, whereupon,
in the latter case, VB shall promptly (a) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option
Purchase Price or the Option Share Repurchase Price that VB is
not prohibited from delivering; and (b) deliver as appropriate,
(1) to the Holder, a new Stock Option Agreement evidencing the
right of the Holder to purchase that number of shares of Common
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Stock obtained by multiplying the number of shares of Common
Stock for which the surrendered Stock Option Agreement was
exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Option Repurchase
Price less the portion thereof theretofore delivered to the
Holder and the denominator of which is the Option Repurchase
Price, and/or (2) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing, and VB shall
have no further obligation to purchase such Option or Option
Shares.
9. ISSUANCE OF SUBSTITUTE OPTION UPON CERTAIN MERGERS, ETC.
9.1 Issuance of Substitute Option. In the event that before an
Exercise Termination Event, VB shall enter into an agreement
(a) to consolidate with or merge into any person, other than
WCB or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger; (b)
to permit any person, other than WCB or one of its
Subsidiaries, to merge into VB and VB shall be the continuing
or surviving corporation, but, in connection with such merger,
the then outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other
person or cash or any other property or the then outstanding
shares of Common Stock shall after such merger represent less
than 50% of the outstanding shares and share equivalents of the
merged company; or (c) to sell or otherwise transfer all or
substantially all of its assets to any person, other than WCB
or one of its Subsidiaries then, and in each such case, the
agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of
any such transaction and upon the terms and conditions set
forth in this Agreement, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the
Holder, of either (1) the Acquiring Corporation (as defined
below), (2) any person that controls the Acquiring Corporation,
or (3) in the case of a merger described in clause (b) of this
Subsection 9.1, VB.
9.2 Definitions. The following terms have the meanings indicated:
a. "Acquiring Corporation" means (1) the continuing or
surviving corporation of a consolidation or merger
with VB (if other than VB); (2) VB in a merger in
which VB is the continuing or surviving person; and
(3) the transferee of all or substantially all of VB's
assets.
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b. "Substitute Common Stock" means the common stock of
the issuer of the Substitute Option upon exercise of
the Substitute Option.
c. "Assigned Value" means the Market/Offer Price, as
defined in Section 8; provided,
however, that in the event a sale of all or
substantially all of VB's assets, the Assigned Value
shall be the sum of the price paid in such sale for
such assets and the current market value of the
remaining assets of VB as determined by a nationally
recognized investment banking firm selected by Holder,
divided by the number of shares of Common Stock of VB
outstanding at the time of such sale.
d. "Average Price" means the average closing price of a
share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or
sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock
on the day preceding such consolidation, merger or
sale; provided that if VB is the issuer of the
Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the
person merging into VB or by any company which
controls or is controlled by such person, as the
Holder may elect.
9.3 Exercise of Substitute Option. The Substitute Option shall be
exercisable for such number of shares of Substitute Common
Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price
of the Substitute Option per share of Substitute Common Stock
shall then be equal to the Option Price multiplied by a
fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and
the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is
exercisable.
9.4 Terms of Substitute Option. The Substitute Option shall have
the same terms as the Option, provided, that if the terms of
the Substitute Option cannot, for legal reasons, be the same as
the Option, such terms (including, without limitation, those
relating to repurchase of the Option and the Option Shares)
shall be as similar as possible and in no event less
advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder of the
Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
The number of shares issuable and the exercise price under the
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Substitute Option shall be subject to adjustment in the manner
provided in Sections 6.1 and 6.3 of this Agreement, but,
notwithstanding the foregoing, adjustments to the number of
shares issuable and the exercise price per share resulting from
the application of Section 6.2, and the price adjustment
provided for in the first sentence of Section 1, shall not
apply to such Substitute Option.
9.5 Limitation on Exercise of Substitute Option. In no event,
pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise
of the Substitute Option. In the event that the Substitute
Option would be exercisable for more than 19.9% of the shares
of Substitute Common Stock outstanding before exercise but for
this Subsection 9.5, the issuer of the Substitute Option (the
"Substitute Option VB") shall make a cash payment to the Holder
equal to the excess of (a) the value of the Substitute Option
without giving effect to the limitation in this clause 9.5 over
(b) the value of the Substitute Option after giving effect to
the limitation in this Subsection 9.5. This difference in value
shall be determined by a nationally recognized investment
banking firm selected by the Holder.
9.6 Assumption of Agreement. VB shall not enter into any
transaction described in Subsection 9.1 unless the Acquiring
Corporation and any person that controls the Acquiring
Corporation assumes in writing all the obligations of VB under
this Agreement.
10. EXTENSION OF TIME PERIOD. The 30-day periods for exercise of certain
rights under Sections 2, 7, 8, and 12 shall be extended so that each
such period expires 30 days after all regulatory approvals required for
the exercise of such rights have been obtained and all statutory
waiting periods have expired; and shall be further extended to the
extent necessary to avoid liability under Section 16(b) of the 1934 Act
by reason of such exercise. No such extensions shall extend the period
for the Holder to exercise the Option to a date more than 2 years after
the date of this Agreement.
11. VB'S REPRESENTATIONS AND WARRANTIES. VB represents and warrants to WCB
as follows:
11.1 Authority. VB has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly and
validly authorized by VB's board of directors and no other
corporate proceedings on
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the part of VB are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by VB. This
Agreement is the valid and legally binding obligation of VB.
11.2 Corporate Action. VB has taken all necessary corporate action
to authorize and reserve and to permit it to issue, and at all
times from the date of this Agreement through the termination
of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that
number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time and from time to time
issuable under this Agreement, and all such shares, upon
issuance pursuant to this Agreement will be duly authorized,
validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrances and
security interests and not subject to any preemptive rights.
12. ASSIGNMENT. Neither of the parties may assign any of its rights or
obligations under this Agreement or the Option created under this
Agreement to any other person, without the express written consent of
the other party, except that in the event a Subsequent Triggering Event
shall have occurred before an Exercise Termination Event, WCB, subject
to the express provisions of this Agreement, may assign in whole or in
part its rights and obligations under this Agreement within 30 days
following such Subsequent Triggering Event (or such longer period as
provided in Section 10); the date 30 days following the date on which
the Federal Reserve Board approves an application by WCB under the Bank
Holding Company Act to acquire the shares of Common Stock subject to
the Option, WCB may not assign its rights under the Option except in
(a) a widely dispersed public distribution; (b) a private placement in
which no one party acquires the right to purchase in excess of 2% of
the voting shares of VB; (c) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a widely
dispersed public distribution on WCB's behalf; or (d) any other manner
approved by the Federal Reserve Board. Any assignment by WCB shall be
made only in compliance with federal and applicable state securities
laws.
13. BEST EFFORTS. Each of WCB and VB will use its best efforts to make all
filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including without
limitation making application to list the shares of Common Stock
issuable under this Agreement on any securities exchange on which the
Common Stock is then traded and applying to the Federal Reserve Board
under the Bank Holding Company Act for approval to acquire the shares
issuable under this Agreement, but WCB shall not be obligated to apply
to state banking authorities for approval to acquire
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the shares of Common Stock issuable under this Agreement until such
time, if ever, as it deems appropriate to do so.
14. TERMINATION OF OPTION. Notwithstanding anything to the contrary in this
Agreement, in the event that the Holder or Owner or any Related Person
(as defined below) thereof is a person making an offer or proposal to
engage in an Acquisition Transaction (other than the transaction
contemplated by the Merger Agreement), then (a) in the case of a Holder
or any Related Person thereof, the Option held by it shall immediately
terminate and be of no further force or effect, and (b) in the case of
an Owner or any Related Person thereof, the Option Shares held by it
shall be immediately repurchasable by VB at the Option Price. A
"Related Person" of a Holder or Owner means any "affiliate" (as defined
in Rule 12b-2 of the rules and regulations under the 0000 Xxx) of the
Holder or Owner and any person that is the beneficial owner of 25% or
more of the voting power of the Holder or Owner, as the case may be.
15. EQUITABLE RELIEF. The parties to this Agreement acknowledge that
damages would be an inadequate remedy for a breach of this Agreement by
either party and that the obligations of the parties shall be
enforceable by either party through injunctive or other equitable
relief.
16. ENFORCEABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated. If
for any reason such court or regulatory agency determines that the
Holder is not permitted to acquire, or VB is not permitted to
repurchase pursuant to Section 8, the full number of shares of Common
Stock provided in Section 1 (as adjusted pursuant to Section 6), it is
the express intention of VB to allow the Holder to acquire or to
require VB to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be deemed to have been duly
given when delivered in person, by cable, telegram, telecopy or telex,
or by registered or certified mail (postage prepaid, return receipt
requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Washington, regardless of the
laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
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19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
20. EXPENSES. Except as otherwise expressly provided in this Agreement,
each of the parties shall bear and pay all costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
under this Agreement, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
21. ENTIRE AGREEMENT. Except as otherwise expressly provided in this
Agreement or in the Merger Agreement, this Agreement contains the
entire agreement between the parties with respect to the transactions
contemplated under this Agreement and supersedes all prior arrangements
or understandings with respect thereof, written or oral. The terms and
conditions of this Agreement shall inure to the benefit of and be
binding upon the parties and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended
to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except
as expressly provided in this Agreement.
22. MISCELLANEOUS. Capitalized terms used in this Agreement and not defined
in this Agreement shall have the meanings assigned to them in the
Merger Agreement. Section and Subsection headings are for convenience
and reference only and shall not affect the meaning or construction of
this Agreement. Except as otherwise provided in this Agreement,
Sections and Subsections refer to Sections and Subsections of this
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
WEST COAST BANCORP
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------
Co-President and Chief
Executive Officer
VANCOUVER BANCORP
By: /s/ Xxx X. Xxxxxxxx
-------------------------
President
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