Exhibit 99.1
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated October 3, 2000, between Firstar
Corporation, a Wisconsin corporation ("Issuer"), and U.S. Bancorp, a Delaware
corporation ("Grantee").
W I T N E S S E T H :
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WHEREAS, Grantee and Issuer have entered into an Agreement and Plan
of Merger of even date herewith (the "Merger Agreement"), which agreement has
been executed by the parties hereto immediately prior to this Stock Option
Agreement (this "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor and for Grantee's entering into the U.S.
Bancorp Option Agreement, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein 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
195,895,138 fully paid and nonassessable shares of Issuer's common stock, par
value $0.01 per share ("Common Stock"), at a price of $22.25 per share (the
"Option Price"); provided, however, that in no event shall the number of shares
of Common Stock for which this Option is exercisable exceed 19.9% of the
Issuer's issued and outstanding shares of Common Stock without giving effect to
any shares subject to or issued pursuant to the Option. The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either
(i) issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement) or (ii) redeemed, repurchased, retired
or otherwise cease to be outstanding after the date of the Agreement, the number
of shares of Common Stock subject to the Option shall be increased or decreased,
as appropriate, so that, after such issuance, such number 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.
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2. (a) The Holder (as hereinafter defined) may exercise the Option,
in whole or part, and from time to time, 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 Section 2(e)) within 90
days following such Subsequent Triggering Event. Each of the following shall be
an "Exercise Termination Event": (i) the Effective Time (as defined in the
Merger Agreement) 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 8.1(d) of the Merger Agreement (unless the breach by Issuer
giving rise to such right of termination is non-volitional); or (iii) the
passage of 12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event or is a
termination by Grantee pursuant to Section 8.1(d) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional) (provided that if an Initial Triggering Event continues or
occurs beyond such termination and prior to the passage of such 12-month period,
the Exercise Termination Event shall be 12 months from the expiration of the
Last Triggering Event but in no event more than 18 months after such
termination). The "Last Triggering Event" shall mean the last Initial Triggering
Event to expire. The term "Holder" shall mean the holder or holders of the
Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof: (i) Issuer or any of its
Subsidiaries (as defined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission (the "SEC")) (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 the board of directors of Issuer shall have recommended that the
shareholders of Issuer approve or accept any Acquisition Transaction. For
purposes of this Agreement, "Acquisition Transaction" shall mean (A) a merger or
consolidation, or any similar transaction, involving Issuer or any Issuer
Subsidiary, (B) a purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Issuer or any Issuer
Subsidiary, (C) 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 (D) any substantially similar
transaction; provided, however, that in no event shall any merger,
consolidation, purchase or similar transaction involving only the Issuer and one
or more Issuer Subsidiary or involving only any two or more of such Issuer
Subsidiaries, provided that any such transaction is not entered into in
violation of the terms of the Merger Agreement, be deemed to be an Acquisition
Transaction; (ii) 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, to engage
in an Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary, or the board of directors of Issuer shall have publicly withdrawn or
modified, or publicly announced its interest 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 in anticipation of
engaging in an Acquisition Transaction; (iii) any person other than Grantee, any
Grantee Subsidi-
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ary or any Issuer Subsidiary acting in a fiduciary capacity in
the ordinary course of its business 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); iv) any person other than Grantee or
any Grantee Subsidiary shall have made a bona fide proposal to Issuer or its
shareholders by public announcement or written communication that is or becomes
the subject of public disclosure to engage in an Acquisition Transaction; (v)
after an overture is made by a third party to Issuer or its shareholders to
engage in an Acquisition Transaction, Issuer shall have breached any covenant or
obligation contained in the Merger Agreement and such breach (A) would entitle
Grantee to terminate the Merger Agreement and (B) shall not have been cured
prior to the Notice Date (as hereinafter defined); or (vi) 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 Federal Reserve Board, or other federal or state
bank regulatory authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof: (i) the
acquisition by any person of beneficial ownership of 20% or more of the
then-outstanding Common Stock; or (ii) the occurrence of the Initial Triggering
Event described in Section 2(b)(i), except that the percentage referred to in
clause (C) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (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.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, 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 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
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in Section 2(e), the Holder shall 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.
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(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f), 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, and the Holder shall deliver to Issuer a
copy of this Agreement and a letter agreeing that the Holder will not offer to
sell or otherwise dispose of such shares in violation of applicable law or the
provisions of this Agreement.
(h) 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; 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.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under Section 2(e) and the tender of the
applicable purchase price in immediately available funds, the Holder shall be
deemed, subject to the receipt of applicable regulatory approvals, 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: (a) 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; (b)
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 per-
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formance of any of the covenants, stipulations or conditions to be observed or
performed hereunder by Issuer; (c) promptly to take all action as may from time
to time be required (including (i) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. ss. 18a and
regulations promulgated thereunder and (ii) 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 banking law, prior approval of or notice to
the Federal Reserve Board or to any state regulatory authority is necessary
before the Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such information to the
Federal Reserve Board or such state regulatory authority as they may require)
in order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (d) 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 Stock Option
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 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. 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, distributions on or in respect of the Common Stock, or the
like, the type and number of shares of Common Stock purchasable upon exercise
hereof and the Option Price shall be appropriately adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement governing any such transaction to
provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
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 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its
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reasonable best efforts to cause such registration statement to becomeeffective
and remain current in order to permit the sale or other disposition of this
Option and 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 first 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 foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or 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;
and 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 the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. 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 secondary
offering underwriting agreements for the 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
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event
(as hereinafter defined), (i) following a request of the Holder, delivered prior
to an Exercise Termination Event, 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 hereinafter defined)
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 within 90 days of such
occurrence (or such later period as provided in Section 10), Issuer 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 (A) the price per share of Common
Stock at which a tender offer or exchange offer therefor has been made, (B) the
price per share of Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (C) 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
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required repurchase of Option Shares, as the case may be, or (D) in the event of
a sale of all or a substantial portion of Issuer's assets, the sum of the price
paid in such sale for such assets and the current market value of the remaining
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 the 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 the 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. Within the latter to occur of (a) 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 and (b) the time that is
immediately prior to the occurrence of a Repurchase Event, 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, if any,
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 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 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
best efforts to obtain all required regulatory and legal approvals and to file
any required notices, in each case as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option 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 Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing.
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(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred (i) upon the consummation of any merger, consolidation or
similar transaction involving Issuer or any purchase, lease or other acquisition
of all or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) or (ii) upon the acquisition by any person of
beneficial ownership of 50% or more of the then outstanding shares of Common
Stock, provided that no such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to repurchase the
Option or Option Shares under this Section 7 shall not terminate upon the
occurrence of an Exercise Termination Event unless no Subsequent Triggering
Event shall have occurred prior to the occurrence of an Exercise Termination
Event.
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 any Grantee Subsidiary, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one any Grantee Subsidiary, to merge
into Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or any 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 (A) the
Acquiring Corporation (as hereinafter defined) or (B) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated: (i)
"Acquiring Corporation" shall mean (A) the continuing or surviving corporation
of a consolidation or merger with Issuer (if other than Issuer), (B) Issuer in a
merger in which Issuer is the continuing or surviving person, and (C) the
transferee of all or substantially all of Issuer's assets; (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; and (iv) "Average Price" shall
mean the average closing price of a share of the Substitute Common Stock for
the one year immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation, merger or sale;
provided that if 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 that 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
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of the Substitute Option in substantially the same form as this Agreement, which
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 is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(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 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 or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in Section
8(a) 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 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 right 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 certificates for
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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, in either case, 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 from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 9 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 Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five 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 Section 9(b) prohibited under applicable law or
regulation 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 obtain all required regulatory and
legal approvals, in each case as promptly as practicable, in order to accomplish
such repurchase), the Substitute Option Holder 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 the 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, or (B) to the Substitute Share Owner, a certificate for the
Substitute Common Shares it is then so prohibited from repurchasing.
10. The 90-day or six-month periods for exercise of certain rights under
Sections 2, 6, 7, 13 and 15 shall be extended: (a) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights and for the
expiration of all statutory waiting periods; (b) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such exercise;
and (c) during any period in which Grantee is precluded from exercising such
rights due to an injunction or other legal restriction, plus in each case such
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additional period as is reasonably necessary for the exercise of such rights
promptly following the obtaining of such approvals or the expiration of such
periods.
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
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
board of directors of Issuer 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 hereto, 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.
(c) Issuer has taken all action (including if required redeeming all of
the Firstar Shareholder Rights or amending or terminating the Firstar Rights
Agreement) so that the entering into of this Option Agreement, the acquisition
of shares of Common Stock hereunder and the other transactions contemplated
hereby do not and will not result in the grant of any rights to any person under
the Firstar Rights Agreement or enable or require the Rights to be exercised,
distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the 1933 Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option 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 90
days
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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 approves an application by Grantee under the
BHCA to acquire the shares of Common Stock subject to the Option, Grantee may
not assign its rights under the Option except in (a) a widely dispersed public
distribution, (b) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (c) an assignment to
a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf, or (d)
any other manner approved by the Federal Reserve Board.
14. 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 making application to list the
shares of Common Stock issuable hereunder on the New York Stock Exchange upon
official notice of issuance and 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.
15. (a) Grantee in its sole discretion may, at any time during which
Issuer would be required to repurchase the Option or any Option Shares pursuant
to Section 7, surrender the Option (together with any Option Shares issued to
and then owned by the Holder) to Issuer in exchange for a cash payment equal to
the Surrender Price (as hereinafter defined); provided, however, that Grantee
may not exercise its rights pursuant to this Section 15 if Issuer has previously
repurchased the Option (or any portion thereof) or any Option Shares pursuant to
Section 7. The "Surrender Price" shall be equal to (i) $420 million, plus (ii)
if applicable, the aggregate purchase price previously paid pursuant hereto by
Grantee with respect to any Option Shares, minus (iii) if applicable, the excess
of (A) the net cash, if any, received by Grantee pursuant to the arm's-length
sale of Option Shares (or any other securities into which such Option Shares
were converted or exchanged) to any party not affiliated with Grantee, over (B)
the purchase price paid by Grantee with respect to such Option Shares.
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 15 by surrendering for such purpose 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 surrender the Option and Option Shares, if any, in
accordance with the provisions of this Section 15 and (ii) the Surrender Price.
Within two business days after the surrender of the Option and the Option
Shares, if applicable, Issuer shall deliver or cause to be delivered to Grantee
the Surrender Price.
(c) To the extent that the Issuer is prohibited under applicable law or
regulation 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, that portion of the Surrender Price that Issuer
is not or no longer prohibited from paying, within two 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 Section
15(b) is prohibited under applicable law or regulation from paying to Grantee
the Surrender Price in full, (i) Issuer
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shall (A) use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within two business 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 and 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 Event shall be extended to a date six
months from the date on which the Exercise Termination Event 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).
(d) Grantee shall have rights substantially identical to those set forth
in Sections 15(a), 15(b) and 15 (c) with respect to the Substitute Option and
the Substitute Option Issuer during any period in which the Substitute Option
Issuer would be required to repurchase the Substitute Option pursuant to Section
9.
16. (a) Notwithstanding any other provision herein, in no event shall
Grantee's Total Profit (as defined in Section 16(c)) exceed $630 million (the
"Maximum Profit"), and, if the Total Profit would otherwise exceed such amount,
Grantee, at its sole election, shall either (i) reduce the number of shares
subject to the Option (and any Substitution Option), (ii) deliver to Issuer, or
Substitute Issuer, as the case may be, for cancellation shares of Common Stock
or Substitute Common Stock, as the case may be, previously purchased by Grantee
valued at fair market value at the time of delivery, (iii) pay cash to Issuer,
or Substitute Issuer, as the case may be, (iv) reduce the amount of the Option
Repurchase Price or Substitute Option Repurchase Price, or (v) undertake any
combination of the foregoing, so that Grantee's actually realized Total Profit
shall not exceed the Maximum Profit after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, the 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 in Section 16(d)) of
more than the Maximum Profit and, if exercise of the Option would otherwise
result in the Notional Total Profit exceeding such amount, Grantee, in its
discretion, may take any of the actions specified in Section 16(a) so that the
Notional Total Profit shall not restrict any subsequent exercise of the Option
which at such time complies with this sentence.
(c) For purposes of this Agreement, the term "Total Profit" shall mean
the aggregate amount (before taxes) of the following: (i) the excess of (A) the
net cash amounts or fair market value of any property 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, other than
any amount received by Grantee upon the repurchase of Option Shares by Issuer
pursuant to Section 7, after payment of application brokerage or sales
commissions and discounts, over (B) Grantee's aggregate purchase price for such
Option Shares (or other securities), plus (ii) all amounts received by Grantee
upon the repurchase of the Option by Issuer pursuant to Section 7, plus (iii)
all equivalent amounts with respect to the Substitute Option and any amounts
paid pursuant to Section 9.
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(d) For purposes of this Agreement, the term "Notional Total Profit"
with respect to any number of shares as to which Grantee may propose to exercise
the Option shall be the Total Profit, determined as of the date of such proposed
exercise assuming that the 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). For purposes of
this Section 16, transactions by a wholly-owned Subsidiary transferee of Grantee
in respect of the Option Shares transferred to it shall be treated as if made by
Grantee.
17. 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.
18. 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 or Substitute Option
Issuer, as the case may be, is not permitted to repurchase pursuant to Section 7
or Section 9, as the case may be, the full number of shares of Common Stock
provided in Section 1(a) (as adjusted pursuant to Section 1(b) or 5), or Issuer
or Substitute Option Issuer is not permitted to pay the full Surrender Price, it
is the express intention of Issuer (which shall be binding on the Substitute
Option Issuer) to allow the Holder to acquire or to require Issuer or the
Substitute Option Issuer, as the case may be, to repurchase such lesser number
of shares, or to pay such portion of the Surrender Price, as may be permissible,
without any amendment or modification hereof.
19. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof (except to the
extent that mandatory provisions of federal law apply).
21. 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.
22. 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.
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23. Except as otherwise expressly provided herein 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 assigns.
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
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
24. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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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.
FIRSTAR CORPORATION
By: /s/ Jerry A. Grundhofer
---------------------------------------------
Jerry A. Grundhofer
President and Chief
Executive Officer
U.S. BANCORP
By: /s/ John F. Grundhofer
---------------------------------------------
John F. Grundhofer
Chairman, President and Chief
Executive Officer
[Firstar Stock Option]
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