1
EXHIBIT 10
EXHIBIT B
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement"), dated as of February 4, 1998,
is between INTERWEST BANCORP, INC. ("InterWest") and PIONEER BANCORP, INC.
("Pioneer").
RECITALS
Pioneer and InterWest have executed an Agreement and Plan of Merger
("Plan"), of even date with this Agreement, under which Pioneer will be merged
into InterWest and Pioneer National Bank, the wholly owned subsidiary of
Pioneer, 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, Pioneer irrevocably grants an option ("Option") to InterWest
to purchase an aggregate of 85,637 authorized but unissued shares of
Pioneer's 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 issued and outstanding), at
a per share price of $39.35 ("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) Pioneer or its board of directors enters into an agreement or
recommends to Pioneer 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 Pioneer, or (2) purchase or otherwise acquire (including by
merger, reorganization, consolidation, share exchange or any
similar transaction) securities representing 10% or more of
Pioneer's voting shares;
1
2
(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 Pioneer's 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
Pioneer (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
Pioneer's 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 Pioneer 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 Pioneer a
proposal to (1) acquire Pioneer (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 Pioneer or (3) change the composition of the
board of directors of Pioneer.
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 Pioneer 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 Pioneer is failing to perform or observe its
covenants or conditions under the Plan.
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
2
3
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 Pioneer 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 Pioneer, and (c) Pioneer 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 Pioneer. Pioneer 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 Pioneer, has been
duly executed by a duly authorized officer of Pioneer and
constitutes a valid and binding obligation of Pioneer. No
shareholder approval by Pioneer shareholders is required by
applicable law or otherwise before the exercise of the Option in
whole or in part.
(b) Option Shares. Pioneer 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
will be delivered free and clear of all claims, liens,
encumbrances and security interests, including any preemptive
right of any of the shareholders of Pioneer.
3
4
(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 Pioneer or any agreement,
instrument, judgment, decree, law, rule or order applicable to
Pioneer or any subsidiary of Pioneer or to which Pioneer 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,
Pioneer 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 Pioneer 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, Pioneer 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 Stock then deliverable upon the exercise thereof would have been
entitled upon such acquisition, consolidation, merger, reorganization or
4
5
liquidation, and Pioneer 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. Pioneer 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. Pioneer agrees that if for any reason InterWest or any
transferee will have exercised its rights under this Agreement and
Pioneer 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 Pioneer 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 Pioneer will be entitled to
specific performance and injunctive and other equitable relief. This
provision is without prejudice to any other rights that Pioneer 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 Pioneer 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 Pioneer or, except as provided in this Agreement, to any notice of
any meetings of shareholders or any other proceedings of Pioneer.
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, Pioneer 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 (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
6
(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 Pioneer to:
Pioneer Bancorp, Inc.
Xxx Xxxxx
X.X. Xxx 0000
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, President and Chief
Executive Officer
6
7
With a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Pepper & Shefelman, PLLC
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
and
Xxxxxx X. Xxxxx
Velikanje, Xxxxx & Shore, P.S.
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
If to InterWest, to:
InterWest Bancorp, Inc.
0000 Xxxx Xxxxxxx Xxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx 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, 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.
7
8
Dated February 4, 1998:
INTERWEST BANCORP, INC.
By: /s/
-----------------------------------
Xxxxxxx X. Xxxxxx
Its: President
PIONEER BANCORP, INC.
By: /s/
-----------------------------------
Xxxx X. Xxxxxxxx
Its: President
8
