STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement"), dated as of November
10, 1998, is between UNITED SECURITY BANCORPORATION ("USBN") and
BANCWEST FINANCIAL CORPORATION ("Bancwest").
RECITALS
Bancwest and USBN have executed an Agreement and Plan of Merger
("Plan"), of even date with this Agreement, under which Bancwest
will merge with and into USBN, and Bank of the West, the wholly
owned subsidiary of Bancwest, will become a wholly owned
subsidiary of USBN 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, USBN 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, Bancwest irrevocably grants an option
("Option") to USBN to purchase an aggregate of 90,502 authorized
but unissued shares of Bancwest'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
$45.00 ("Option Price").
2. Exercise of Option. Subject to the provisions of this
Section 02 and of Section 0130 of this Agreement, this Option may
be exercised by USBN or any transferee as set forth in Section 05
of this Agreement, in whole or in part, at any time, or from time
to time in any of the following circumstances:
a. Bancwest or its board of directors executes a written
agreement or recommends to Bancwest shareholders to approve or
otherwise vote in favor of 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
Bancwest, or (2) purchase or otherwise acquire (including by
merger, reorganization, consolidation, share exchange or any
similar transaction) securities representing 10% or more of
Bancwest's voting shares;
b. any Person (other than USBN or any of its subsidiaries and
other than any Person beneficially owning as of the date of
this Agreement 10% or more of Bancwest'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 Bancwest (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
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above in this subsection 20 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 Bancwest'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 Merger by the
required affirmative vote at a meeting of the shareholders, after
any Person (other than USBN or a subsidiary of USBN) announces
publicly or communicates, in writing, to Bancwest a proposal to
(1) acquire Bancwest (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
Bancwest or (3) change the composition of the board of directors
of Bancwest.
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 Bancwest 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, USBN 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 Bancwest is failing to perform or observe its covenants or
conditions under the Plan.
3. Notice, Time and Place of Exercise. Each time that USBN or
any transferee wishes to exercise any portion of the Option, USBN
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) USBN and
Bancwest 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) USBN 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 Bancwest, and (c) Bancwest will deliver to USBN or
the transferees a certificate or certificates representing the
shares so purchased.
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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 02 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 020 through 0 above occur, USBN 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 USBN (whether or not USBN is the surviving entity) or an
acquisition of USBN will not be deemed a transfer.
6. Representations, Warranties and Covenants of Bancwest.
Bancwest represents and warrants to USBN as follows:
a. Due Authorization. This Agreement has been duly authorized
by all necessary corporate action on the part of Bancwest, has
been duly executed by a duly authorized officer of Bancwest and
constitutes a valid and binding obligation of Bancwest. No
shareholder approval by Bancwest shareholders is required by
applicable law or otherwise before the exercise of the Option in
whole or in part.
b. Option Shares. Bancwest 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 08
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 Bancwest.
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 Bancwest or any agreement,
instrument, judgment, decree, law, rule or order applicable to
Bancwest or any subsidiary of Bancwest or to which Bancwest 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,
Bancwest will give USBN 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.
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7. Representations, Warranties and Covenants of USBN. USBN
represents and warrants to Bancwest as follows:
a. Due Authorization. This Agreement has been duly authorized
by all necessary corporate action on the part of USBN, has been
duly executed by a duly authorized officer of USBN and
constitutes a valid and binding obligation of USBN.
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 USBN or any agreement,
instrument, judgment, decree, law, rule or order applicable to
USBN or any subsidiary of USBN or to which USBN 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,
Bancwest is acquired by another party, consolidates with or
merges into another corporation or liquidates, USBN 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 Bancwest 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 USBN may transfer the Option,
the Option Shares or any portion of the Option or Option Shares
in accordance with Section 05. A merger, reorganization or
consolidation of USBN (whether or not USBN is the surviving
entity) or an acquisition of USBN will not be deemed an
assignment or transfer.
10. Regulatory Restrictions. Bancwest will use its best efforts
to obtain or to cooperate with USBN 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 USBN or any
transferee.
11. Remedies. Bancwest agrees that if for any reason USBN or
any transferee will have exercised its rights under this
Agreement and Bancwest 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
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would violate any applicable law or regulation by which Bancwest
is bound, then USBN or any transferee will be entitled to
specific performance and injunctive and other equitable relief.
USBN agrees that if it fails to perform any of its obligations
under this Agreement, then Bancwest will be entitled to specific
performance and injunctive and other equitable relief. This
provision is without prejudice to any other rights that Bancwest
or USBN 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 Bancwest 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 Bancwest or,
except as provided in this Agreement, to any notice of any
meetings of shareholders or any other proceedings of Bancwest.
13. Miscellaneous.
a. Termination. This Agreement and the Option, to the extent
not previously exercised, will terminate upon the earliest of (1)
December 31, 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,
Bancwest or USBN 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 later of (i) December 31,
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 USBN 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 USBN with respect to its
obligations under it; but if the Option becomes exercisable
pursuant to Section 2 of this Agreement before the termination of
this Agreement, then the exercise will promptly close under
Section 04 of this Agreement, even though that closing date is
after the termination of this Agreement; and if the Option is
transferred pursuant to Section 5 of this Agreement 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 USBN 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, USBN or any
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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 Bancwest to:
Bancwest Financial Corporation
P.O. Box 1597
Walla Walla, Washington 99362
Attn: Wes E. Colley
With a copy to:
Glen P. Garrison
Keller Rohrback LLP
1201 Third Avenue, Suite 3200
Seattle, Washington 98101-3052
If to USBN, to:
United Security Bancorporation
N. 9506 Newport Hwy
Spokane, Washington 99218
Attn: William C. Dashiell and Richard C. Emery
With a copy to:
Stephen M. Klein, Esq.
Graham & Dunn, P.C.
1420 Fifth Avenue, 33rd Floor
Seattle, WA 98101-2390
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
Spokane County, Washington, and each party consents to personal
jurisdiction in Spokane 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.
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Dated November 10, 1998:
UNITED SECURITY BANCORPORATION
By: /s/ William C. Dashiell
William C. Dashiell
Its: Chairman
By: /s/ Richard C. Emery
Richard C. Emery
Its: President and Chief Executive Officer
BANCWEST FINANCIAL CORPORATION
By: /s/ Wes E. Colley
Wes E. Colley
Its: Chairman and President
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