Exhibit 99.2
[Execution Copy]
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 20, 1997,
between U.S. BANCORP an Oregon corporation ("Grantee"), and FIRST
BANK SYSTEM, INC., a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, on March 19, 1997, Grantee and Issuer entered
into an Agreement and Plan of Merger (the "Merger Agreement");
WHEREAS, as a condition and inducement to Grantee's
execution of the Merger Agreement and pursuit of the transactions
contemplated thereby and in consideration therefor and in
consideration of the grant of the Reciprocal Option (as
hereinafter defined), Issuer has agreed to grant Grantee the
Option (as hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved
the grant of the Option and the Merger Agreement prior to the
execution hereof;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements set forth herein, in the
Reciprocal Option and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase,
subject to the terms hereof, up to an aggregate of 26,551,018
fully paid and nonassessable shares of the common stock, $1.25
par value per share, of Issuer ("Common Stock") at a price per
share equal to the last reported sale price per share of Common
Stock as reported on the consolidated tape for New York Stock
Exchange, Inc. issues on March 18, 1997; provided, however, that
in the event Issuer issues or agrees to issue any shares of
Common Stock at a price less than such last reported sale price
per share (as adjusted pursuant to subsection (b) of Section 5)
other than as permitted by the Merger Agreement, such price shall
be equal to such lesser price (such price, as adjusted if
applicable, the "Option Price"); provided, further, that in no
event shall the number of shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price is
subject to adjustment as herein set forth.
(b) In the event that any additional shares of
Common Stock are issued or otherwise become outstanding after the
date of this Agreement (other than pursuant to this Agreement and
other than pursuant to an event described in Section 5(a)
hereof), the number of shares of Common Stock subject to the
Option shall be increased so that, after such
issuance, such number together with any shares of Common Stock
previously issued pursuant hereto, 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 Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may
exercise the Option, in whole or part, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a
Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in
subsection (f) of this Section 2) within six (6) months following
such Subsequent Triggering Event (or such later period as
provided in Section 10). Each of the following shall be an
Exercise Termination Event: (i) the Effective Time of the Merger;
(ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event except a termination by
Grantee pursuant to Section 8.01(b) of the Merger Agreement; or
(iii) the passage of eighteen (18) months (or such longer period
as provided in Section 10) after termination of the Merger
Agreement if such termination is concurrent with or follows the
occurrence of an Initial Triggering Event or is a termination
pursuant to Section 8.01(b) of the Merger Agreement; (iv) the
date on which the shareholders of Grantee shall have voted and
failed to approve the Merger Agreement and the Merger (unless (A)
Issuer shall then be in material breach of its covenants or
agreements contained in the Merger Agreement or (B) on or prior
to such date, the shareholders of Issuer shall have also voted
and failed to approve and adopt the Merger Agreement and the
Merger); or (v) the date on which the Reciprocal Option shall
have become exercisable in accordance with its terms if it shall
become exercisable prior to a Subsequent Triggering Event. The
term "Holder" shall mean the holder or holders of the Option.
Notwithstanding anything to the contrary contained herein, (i)
the Option may not be exercised at any time when Grantee shall be
in material breach of any of its covenants or agreements
contained in the Merger Agreement such that Issuer shall be
entitled to terminate the Merger Agreement pursuant to Section
8.01(b) thereof and (ii) this Agreement shall automatically
terminate upon the termination of the Merger Agreement by Issuer
pursuant to Section 8.01(b) thereof as a result of the material
breach by Grantee of its covenants or agreements contained in the
Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of
the following events or transactions occurring on or after the
date hereof:
(i) Issuer or any of its Subsidiaries (as
hereinafter defined) (each an "Issuer Subsidiary"), without
having received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the
term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the rules and regulations thereunder) other than
Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or
2
the Board of Directors of Issuer (the "Issuer Board") shall
have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction other than as contemplated
by the Merger Agreement or this Agreement. For purposes of
this Agreement, (a) "Acquisition Transaction" shall mean (x)
a merger or consolidation, or any similar transaction,
involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) of Issuer (other than
mergers, consolidations or similar transactions involving
solely Issuer and/or one or more wholly-owned Issuer
Subsidiaries and other than a merger or consolidation as to
which the common shareholders of Issuer immediately prior
thereto in the aggregate own at least 60% of the common stock
of the publicly held surviving or successor parent
corporation immediately following consummation thereof,
provided, any such transaction is not entered into in
violation of the terms of the Merger Agreement), (y) a
purchase, lease or other acquisition of all or substantially
all of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the
voting power of Issuer or any Significant Subsidiary of
Issuer, and (b) "Subsidiary" shall have the meaning set forth
in Rule 12b-2 under the 1934 Act;
(ii) Any person other than Grantee or any
Grantee Subsidiary shall have acquired beneficial ownership
or the right to acquire beneficial ownership of 10% or more
of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Agreement having
the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have
voted and failed to approve and adopt the Merger Agreement
and the Merger at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such
meeting shall not have been held in violation of the Merger
Agreement or shall have been cancelled prior to termination
of the Merger Agreement if, prior to such meeting (or if such
meeting shall not have been held or shall have been
cancelled, prior to such termination), it shall have been
publicly announced that any person (other than Grantee or any
of its Subsidiaries) shall have made, or disclosed an
intention to make, a proposal to engage in an Acquisition
Transaction;
(iv) The Issuer Board shall have withdrawn
or modified (or publicly announced its intention to withdraw
or modify) in any manner adverse to Grantee its
recommendation that the shareholders of Issuer approve the
transactions contemplated by the Merger Agreement, or Issuer
or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended,
proposed (or publicly announced its intention to authorize,
recommend or propose) an agreement to engage in an
Acquisition Transaction with any person other than Grantee or
a Grantee Subsidiary;
3
(v) Any person other than Grantee or any Grantee
Subsidiary shall have made a proposal to Issuer or its shareholders to
engage in an Acquisition Transaction and such proposal shall
have been publicly announced;
(vi) Any person other than Grantee or any
Grantee Subsidiary shall have filed with the SEC a
registration statement with respect to a potential exchange
offer that would constitute an Acquisition Transaction (or
filed a preliminary proxy statement with the SEC with respect
to a potential vote by its shareholders to approve the
issuance of shares to be offered in such an exchange offer);
(vii) Issuer shall have willfully breached
any covenant or obligation contained in the Merger Agreement
in anticipation of engaging in an Acquisition Transaction,
and following such breach Grantee would be entitled to
terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(viii) Any person other than Grantee or any
Grantee Subsidiary, other than in connection with a
transaction to which Grantee has given its prior written
consent, shall have filed an application or notice with the
Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") or other federal or state bank
regulatory or antitrust authority, which application or
notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean
any of the following events or transactions occurring after the
date hereof:
(i) The acquisition by any person (other
than Grantee or any Grantee Subsidiary) of beneficial
ownership of 20% or more of the then outstanding Common
Stock; or
(ii) The occurrence of the Initial
Triggering Event described in clause (i) of subsection (b) of
this Section 2, except that the percentage referred to in
clause (z) of the second sentence thereof shall be 20%.
(d) The term "Reciprocal Option" shall mean the option
granted pursuant to the option agreement dated the date hereof
between the Grantee, as issuer of such option, and Issuer, as
grantee of such option.
(e) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event or Subsequent
Triggering Event (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be
a condition to the right of the Holder to exercise the Option.
(f) In the event the Holder is entitled to and wishes
to exercise the Option (or any portion thereof), it shall send to
Issuer a written notice (the date of which being herein referred
to as the "Notice Date") specifying (i) the total number of
shares it will purchase
4
pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing
Date"); provided, that if prior notification to or approval of
the Federal Reserve Board or any other regulatory or antitrust
agency is required in connection with such purchase, the Holder
shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, 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.
(g) At the closing referred to in subsection (f) of
this Section 2, the Holder shall (i) pay to Issuer 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 Issuer, provided
that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option
and (ii) present and surrender this Agreement to Issuer at its
principal executive offices.
(h) At such closing, simultaneously with the delivery
of immediately available funds as provided in subsection (g) of
this Section 2, Issuer 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 should be exercised in
part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
hereunder.
(i) Certificates for Common Stock delivered at a
closing hereunder 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
Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without
charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as amended
(the "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 Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the 1933 Act;
(ii) the reference to the provisions of 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 the opinion of Counsel to
5
the Holder; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and
(ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(j) Upon the giving by the Holder to Issuer of
the written notice of exercise of the Option provided for under
subsection (f) of this Section 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 Issuer shall then be closed or
that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. Issuer
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 under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
3. Issuer agrees: (i) that 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; (ii) that
it will 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 hereunder by Issuer; (iii) promptly
to take all action as may from time to time be required
(including (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified
in 15 U.S.C. Section 18a and regulations promulgated thereunder
and (y) in the event, under the Bank Holding Company Act of 1956,
as amended (the "BHCA"), or the Change in Bank Control Act of
1978, as amended, or any state or other federal banking law,
prior approval of or notice to the Federal Reserve Board or to
any state or other federal 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 or
other federal regulatory authority as they may require) in order
to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, 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 herein, in the aggregate the same number of shares of
Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Agreements and related
Options for which this Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the
6
case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer 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 Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of
shares of Common Stock that are purchasable upon exercise of the
Option pursuant to Section 1 of this Agreement, 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 provided in this Section 5.
(a) In the event of any change in, or
distributions in respect of, the 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 so that, in the event that any
additional shares of Common Stock are to be issued or otherwise
become outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of shares of
Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with shares
of Common Stock previously issued pursuant to the exercise of
the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), it equals 19.9% of the number of
shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock
purchasable upon exercise hereof is adjusted as provided in this
Section 5, 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.
6. Upon the occurrence of a Subsequent Triggering
Event that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee delivered within twelve (12)
months (or such later period as provided in Section 10) 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 hereto),
promptly prepare, file and keep current a registration statement
under the 1933 Act covering any shares issued and issuable
pursuant to this Option and shall use its reasonable best efforts
to cause such registration statement to become effective and
remain current in order to permit the sale or other 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 Grantee. Issuer will use its
reasonable best efforts to cause such registration statement
promptly to become effective and then to remain effective for
such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such
registrations. The Issuer shall bear the costs
7
of such registrations (including, but not limited to, Issuer's
attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees
and disbursements of Grantee's counsel related thereto). The
foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above,
Issuer is in registration with respect to an underwritten public
offering by Issuer 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 Shares would
interfere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to
be covered in the registration statement contemplated hereby 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
Issuer in the aggregate; and provided further, however, that if
such reduction occurs, then Issuer shall file a registration
statement for the balance as promptly as practicable thereafter
as to which no reduction pursuant to this Section 6 shall be
permitted or occur and the Holder shall thereafter be entitled to
one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be
increased to twenty-four (24) months. Each such Holder shall
provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If
requested by any such Holder in connection with such
registration, Issuer 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 Issuer. Upon receiving any
request under this Section 6 from any Holder, Issuer agrees to
send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each
case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no
event shall the number of registrations that Issuer is obligated
to effect be increased by reason of the fact that there shall be
more than one Holder as a result of any assignment or division of
this Agreement.
7. (a) At any time after the occurrence of a
Repurchase Event (as defined below) (i) at the request of the
Holder, delivered prior to an Exercise Termination Event (or such
later period as provided in Section 10), Issuer (or any successor
thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A)
the market/offer price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option
may then be exercised and (ii) at the request of the owner of
Option Shares from time to time (the "Owner"), delivered prior to
an Exercise Termination Event (or such later period as provided
in Section 10), Issuer (or any successor thereto) 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 market/offer price multiplied by the number
of Option Shares so designated. The term "market/offer price"
shall mean the highest of (i) the price per share of Common Stock
at which a tender or exchange offer therefor has been made, (ii)
the price per share of Common
8
Stock to be paid by any third party pursuant to an agreement with
Issuer, (iii) the highest closing price for shares of Common
Stock within 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, or (iv) in the event of a sale of all
or substantially all of Issuer's assets or deposits, the sum of
the net price paid in such sale for such assets or deposits and
the current market value of the remaining net assets of Issuer as
determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to Issuer, divided by the number of shares
of Common Stock of Issuer 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 reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be,
may exercise its right to require Issuer to repurchase the Option
and any Option Shares pursuant to this Section 7 by surrendering
for such purpose to Issuer, 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 Issuer
to repurchase this Option and/or the Option Shares in accordance
with the provisions of this Section 7. 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, Issuer 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
Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that Issuer 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, Issuer 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 Issuer is no longer so prohibited; provided,
however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 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 Issuer hereby undertakes to use its reasonable 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 or Owner may revoke
its notice of repurchase of the Option and/or the Option Shares
whether in whole or to the extent of the prohibition, whereupon,
in the latter case, Issuer shall promptly (i) deliver to the
Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as
9
appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered 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
(B) to the Owner, a certificate for the Option Shares it is then
so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this subsection (c), or shall
be scheduled to occur at any time before the expiration of a
period ending on the thirtieth day after such date, the Holder
shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase
Event" shall be deemed to have occurred upon the occurrence of
any of the following events or transactions after the date
hereof:
(i) the acquisition by any person (other
than Grantee or any Grantee Subsidiary) of beneficial
ownership of 50% or more of the then outstanding Common
Stock; or
(ii) the consummation of any Acquisition
Transaction described in Section 2(b)(i) hereof, except that
the percentage referred to in clause (z) shall be 50%.
8. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or
a Grantee Subsidiary and Issuer shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to
merge into Issuer and Issuer shall be the continuing or surviving
or acquiring 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 or
acquiring company, or (iii) to sell or otherwise transfer all or
substantially all of its or any Significant Subsidiary's assets
or deposits to any person, other than Grantee or a Grantee
Subsidiary, 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 herein, be converted into, or
exchanged for, an option (the "Substitute Option"), at the
election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
10
(i) "Acquiring Corporation" shall mean (i) the
continuing or surviving person of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a merger in
which Issuer is the continuing or surviving or acquiring
person, and (iii) the transferee of all or substantially
all of Issuer's assets or deposits (or the assets or
deposits of a Significant Subsidiary of Issuer).
(ii) "Substitute Common Stock" shall mean
the common stock issued by the issuer of the Substitute
Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/
offer price, as defined in Section 7.
(iv) "Average Price" shall mean the average
closing price of a share of the Substitute Common Stock for
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 Issuer 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 Issuer or by
any company which controls or is controlled by such person,
as the Holder may elect.
(c) 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 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 or Holders of the Substitute Option in substantially
the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) 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 was exercisable immediately
prior to the event described in the first sentence of Section
8(a), 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 was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the
denominator of which shall be the number of shares of Substitute
Common Stock for which the Substitute Option is exercisable.
(e) 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 prior to exercise
but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder
equal to the excess of (i) the
11
value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this
clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the
Holder.
(f) Issuer shall not enter into any transaction
described in subsection (a) of this Section 8 unless the
Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute
Option (the "Substitute Option Holder"), the issuer of the
Substitute Option (the "Substitute Option Issuer") shall
repurchase the Substitute Option from the Substitute Option
Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as
hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then
be exercised, and at the request of the owner (the "Substitute
Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute
Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The
term "Highest Closing Price" shall mean the highest closing price
for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives
notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of
the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the
Substitute Share Owner, as the case may be, may exercise its
respective rights to require the Substitute Option Issuer to
repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to
the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such
an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share
Owner, as the case may be, elects to require the Substitute
Option Issuer to repurchase the Substitute Option and/or the
Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within
five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the
receipt of such notice or notices relating thereto, the
Substitute Option Issuer shall deliver or cause to be delivered
to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable
law and regulation from so delivering.
(c) To the extent that the Substitute Option
Issuer is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from repurchasing the
Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option
12
Issuer shall immediately so notify the Substitute Option Holder
and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Option Repurchase Price and/or the
Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer
so prohibited; provided, however, that if the Substitute Option
Issuer is at any time after delivery of a notice of repurchase
pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the
Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to receive all required
regulatory and legal approvals as promptly as practicable in
order to accomplish such repurchase), the Substitute Option
Holder and/or Substitute Share Owner may revoke its notice of
repurchase of the Substitute Option or the Substitute Shares
either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase
Price or the Substitute Share Repurchase Price that the
Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option
Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the
Substitute Common Stock obtained by multiplying the number of
shares of the Substitute Common Stock for which the surrendered
Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the
Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the
denominator of which is the Substitute Option Repurchase Price,
and/or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by the Substitute Option
Issuer described in the first sentence of this subsection (c), or
shall be scheduled to occur at any time before the expiration of
a period ending on the thirtieth day after such date, the
Substitute Option Holder shall nevertheless have the right to
exercise the Substitute Option until the expiration of such
30-day period.
10. The 30-day, 6-month, 12-month, 18-month or
24-month periods for exercise of certain rights under Sections 2,
6, 7, 9, 12 and 15 shall be extended: (i) to the extent necessary
to obtain all regulatory approvals for the exercise of such
rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using
commercially reasonable efforts to obtain such regulatory
approvals), and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The
13
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly
authorized by the Issuer Board and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and at
all times from the date hereof 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 hereunder, and
all such shares, upon issuance pursuant thereto, will be duly
authorized, validly issued, fully paid, nonassessable, and will
be delivered free and clear of all claims, liens, encumbrance and
security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created
hereunder 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 prior to an Exercise
Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations
hereunder within twelve (12) months following such Subsequent
Triggering Event (or such later period as provided in Section
10); provided, however, that until the date 15 days following the
date on which the Federal Reserve Board has approved an
application by Grantee to acquire the shares of Common Stock
subject to the Option, Grantee may not assign its rights under
the Option except in (i) a widely dispersed public distribution,
(ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii)
an assignment to a single party (e.g,, a broker or investment
banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner
approved by the Federal Reserve Board.
13. Each of Grantee and Issuer 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, applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common
Stock issuable hereunder until such time, if ever, as it deems
appropriate to do so.
14. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as
hereinafter defined) exceed $300 million and, if it otherwise
would exceed such amount, the Grantee, at its sole election,
shall either (a) reduce the number of shares of Common Stock
subject to this Option, (b) deliver to Issuer for cancellation
Option Shares previously purchased by Grantee, (c) pay cash to
Issuer, or (d) any combination thereof, so that Grantee's
actually realized Total Profit shall not exceed $300 million
after taking into account the foregoing actions.
14
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of shares as would,
as of the date of exercise, result in a Notional Total Profit (as
defined below) of more than $ 300 million; provided that nothing
in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall
mean the aggregate amount (before taxes) of the following: (i)
the amount received by Grantee pursuant to Issuer's repurchase of
the Option (or any portion thereof) pursuant to Section 7, (ii)
(x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares pursuant to Section 7, less (y) the
Grantee's purchase price for such Option Shares, (iii) (x) the
net cash amounts received by Grantee pursuant to the sale of
Option Shares (or any other securities into which such Option
Shares are converted or exchanged) to any unaffiliated party,
less (y) the Grantee's purchase price of such Option Shares, (iv)
any amounts received by Grantee on the transfer of the Option (or
any portion thereof) to any unaffiliated party, and (v) any
amount equivalent to the foregoing with respect to the Substitute
Option.
(d) As used herein, the term "Notional Total
Profit" with respect to any number of shares as to which Grantee
may propose to exercise this Option shall be the Total Profit
determined as of the date of such proposed exercise assuming that
this Option were exercised on such date for such number of shares
and assuming that such shares, together with all other Option
Shares held by Grantee and its affiliates as of such date, were
sold for cash at the closing market price for the Common Stock as
of the close of business on the preceding trading day (less
customary brokerage commissions).
15. (a) Grantee may, at any time following a
Repurchase Event and prior to the occurrence of an Exercise
Termination Event (or such later period as provided in Section
10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a
cash fee equal to the Surrender Price; provided, however, that
Grantee may not exercise its rights pursuant to this Section 15
if Issuer has repurchased the Option (or any portion thereof) or
any Option Shares pursuant to Section 7. The "Surrender Price"
shall be equal to $200 million (i) plus, if applicable, Grantee's
purchase price with respect to any Option Shares and (ii) minus,
if applicable, the excess of (B) the net cash amounts, if any,
received by Grantee pursuant to the arms' length sale of Option
Shares (or any other securities into which such Option Shares
were converted or exchanged) to any unaffiliated party, over (B)
Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the
Option and any Option Shares pursuant to this Section 15 by
surrendering to Issuer, at its principal office, a copy of this
Agreement together with certificates for Option Shares, if any,
accompanied by a written notice stating (i) that Grantee elects
to relinquish the Option and Option Shares, if any, in accordance
with the provisions of this Section 15 and (ii) the Surrender
Price. The Surrender Price shall be payable in immediately
available funds on or before the second business day following
receipt of such notice by Issuer.
15
(c) To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy,
from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver or cause to
be delivered, from time to time, to Grantee, the portion of the
Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any
time after delivery of a notice of surrender pursuant to
paragraph (b) of this Section 15 is prohibited under applicable
law or regulation, or as a consequence of administrative policy,
from paying to Grantee the Surrender Price in full, (i) Issuer
shall (A) use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices
as promptly as practicable in order to make such payments, (B)
within five days of the submission or receipt of any documents
relating to any such regulatory and legal approvals, provide
Grantee with copies of the same, and (c) keep Grantee advised of
both the status of any such request for regulatory and legal
approvals, as well as any discussions with any relevant
regulatory or other third party reasonably related to the same
and (ii) Grantee may revoke such notice of surrender by delivery
of a notice of revocation to Issuer and, upon delivery of such
notice of revocation, the Exercise Termination Date shall be
extended to a date six months from the date on which the Exercise
Termination Date would have occurred if not for the provisions of
this Section 15(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to
this Section 15).
16. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either
party hereto and that the obligations of the parties hereto shall
be enforceable by either party hereto through injunctive or other
equitable relief.
17. 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 Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in
Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Issuer to allow
the Holder to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible, without any
amendment or modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by fax, telecopy, or by registered or
certified mail (postage prepaid, return receipt requested) at the
respective addresses of the parties set forth in the Merger
Agreement.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard
to the conflict of law principles thereof
16
(except to the extent that mandatory provisions of Federal law or
of the corporation law of the State of Delaware are applicable).
20. 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.
21. Except as otherwise expressly provided herein,
each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers, accountants
and counsel.
22. Except as otherwise expressly provided herein, in
the Reciprocal Option or in the Merger Agreement, this Agreement
contains the entire agreement between the parties with respect to
the transactions contemplated hereunder 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 hereto and their
respective successors and permitted assignees. Nothing in this
Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective
successors except as assignees, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as
expressly provided herein.
23. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the
Merger Agreement.
17
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.
U.S. BANCORP
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: Chairman of the Board, Chief
Executive Officer and President
FIRST BANK SYSTEM, INC.
By: /s/ Xxxx X. Xxxxxxxxxx
Name: Xxxx X. Xxxxxxxxxx
Title: Chairman, President and
Chief Executive Officer
