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EXHIBIT 10
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement"), dated as of January 15, 1998,
is between INTERWEST BANCORP, INC. ("InterWest") and PACIFIC NORTHWEST BANK
("PNB").
RECITALS
PNB and InterWest have executed a Plan and Agreement of Reorganization
("Plan"), of even date with this Agreement, under which PNB will become a wholly
owned subsidiary of InterWest upon completion of the reorganization
("Reorganization") 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:
X. Xxxxx of Option. Subject to the terms and conditions set forth in this
Agreement, PNB irrevocably grants an option ("Option") to InterWest to
purchase an aggregate of 107,855 authorized but unissued shares of PNB'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 $85 ("Option Price").
II. 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. PNB or its board of directors enters into an agreement or
recommends to PNB 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 PNB, or (2)
purchase or otherwise acquire (including by merger,
reorganization, consolidation, share exchange or any similar
transaction) securities representing 10% or more of PNB's voting
shares of PNB;
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 PNB's voting shares) acquires the beneficial ownership
or the right to acquire beneficial
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ownership of securities which, when aggregated with other such
securities owned by such Person, represents 10% or more of the
voting shares of PNB (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 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
PNB'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 303.4; or
C. failure of the shareholders to approve the Reorganization 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 PNB a proposal
to (1) acquire PNB (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 PNB or (3) change
the composition of the board of directors of PNB.
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 PNB 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 PNB is failing to perform or observe its covenants
or conditions under the Plan.
III. 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.
IV. Payment and Delivery of Certificate(s). At any closing for an exercise
of the Option or any portion thereof, (a) InterWest and PNB will each
deliver to the other certificates as to the accuracy, as of the closing
date, of their respective representations and warranties
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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 PNB, and (c) PNB will deliver to
InterWest or the transferees a certificate or certificates representing
the shares so purchased.
V. 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 (c) 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.
VI. Representations, Warranties and Covenants of PNB. PNB 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 PNB, has been duly
executed by a duly authorized officer of PNB and constitutes a
valid and binding obligation of PNB. No shareholder approval by
PNB shareholders is required by applicable law or otherwise before
the exercise of the Option in whole or in part.
B. Option Shares. PNB 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 PNB.
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 PNB or any agreement, instrument,
judgment, decree, law, rule or order applicable to PNB or any
subsidiary of PNB or to which PNB 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, PNB
will give InterWest or
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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.
VII. Representations, Warranties and Covenants of InterWest. InterWest
represents and warrants to PNB 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
certificate 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.
VIII. 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, PNB 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 liquidation,
and PNB 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.
IX. 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
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(whether or not InterWest is the surviving entity) or an acquisition of
InterWest will not be deemed an assignment or transfer.
X. Regulatory Restrictions. PNB 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.
XI. Remedies. PNB agrees that if for any reason InterWest or any transferee
will have exercised its rights under this Agreement and PNB 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 PNB 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 PNB will be entitled to specific performance and injunctive and
other equitable relief. This provision is without prejudice to any other
rights that PNB or InterWest or any transferee may have against the
other party for any failure to perform its obligations under this
Agreement.
XII. No Rights as Shareholder. This Option, before it is exercised, will not
entitle its holder to any rights as a shareholder of PNB 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 PNB or, except as provided in this Agreement, to any notice of any
meetings of shareholders or any other proceedings of PNB.
XIII. 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 Reorganization has been denied, but if
before the expiration of the 31-day period, PNB or InterWest is
engaged in litigation or an appeal procedure relating to an
attempt to obtain approval of the Reorganization, 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) 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
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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 PNB to:
Pacific Northwest Bank
0000 0xx Xxxxxx
Xxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxx, Chairman, Chief Executive
Officer, and President
With a copy to:
Xxxx X. Xxxxxxxx
Xxxxxx Xxxxxxxx L.L.P
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
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If to InterWest, to:
InterWest Bancorp, Inc.
0000 Xxxx Xxxxxxx Xxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxx, President
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 jurisdication 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.
Dated January 15, 1998:
INTERWEST BANCORP, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Its: President
PACIFIC NORTHWEST BANK
By: /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
Its: President
