SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 19, 1997
FIRST BANK SYSTEM, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-6880 41-0255900
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(State or Other Jurisdiction (Commission (IRS employer
of Incorporation) File Number) Identification No.)
First Bank Place
601 Second Avenue South, Minneapolis, Minnesota 55402-4302
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 973-1111
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Not Applicable
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(former name or former address, if changed since last report)
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Item 5. Other Events.
The Merger Agreement, the USBC Option Agreement and the FBS
Option Agreement, each as defined in the Current Report on Form
8-K filed by First Bank System, Inc. earlier today, are included
as Exhibits 2, 99.1 and 99.2 hereto, respectively, and are
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(c) Exhibits.
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2 Agreement and Plan of Merger, dated as of March 19, 1997,
by and between U.S. Bancorp and First Bank System, Inc.
99.1 Stock Option Agreement by and between First Bank System, Inc.
and U.S. Bancorp, dated as of March 20, 1997.
99.2 Stock Option Agreement by and between U.S. Bancorp
and First Bank System, Inc., dated as of March 20,
1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Date: March 20, 1997
FIRST BANK SYSTEM, INC.
(Registrant)
By: /s/ David J. Parrin
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Name: David J. Parrin
Title: Senior Vice President
and Controller
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EXHIBIT INDEX
2 Agreement and Plan of Merger, dated as of March 19, 1997, by and
between U.S. Bancorp and First Bank System, Inc.
99.1 Stock Option Agreement by and between First Bank System, Inc.
and U.S. Bancorp, dated as of March 20, 1997.
99.2 Stock Option Agreement by and between U.S. Bancorp and
First Bank System, Inc., dated as of March 20, 1997.
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[Conformed Copy]
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AGREEMENT AND PLAN OF MERGER
by and between
U.S. Bancorp
and
First Bank System, Inc.
Dated as of March 19, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I CERTAIN DEFINITIONS...................................1
1.01. Certain Definitions......................................1
ARTICLE II THE MERGER; EFFECTS OF THE MERGER....................6
2.01. The Merger...............................................6
2.02. Effective Date and Effective Time........................7
2.03. Amendment of FBS Certificate; Certificate of
Designations.............................................7
2.04. Tax Consequences.........................................8
2.05. Accounting Treatment.....................................8
ARTICLE III MERGER CONSIDERATION; EXCHANGE PROCEDURES...........8
3.01. Merger Consideration.....................................8
3.02. Rights as Stockholders; Stock Transfers..................9
3.03. Fractional Shares........................................9
3.04. Exchange Procedures......................................9
3.05. Anti-Dilution Provisions................................10
3.06. Options.................................................10
ARTICLE IV ACTIONS PENDING MERGER..............................11
4.01. Ordinary Course.........................................11
4.02. Capital Stock...........................................11
4.03. Dividends, Etc..........................................11
4.04. Compensation; Employment Agreements; Etc................12
4.05. Benefit Plans...........................................12
4.06. Acquisitions and Dispositions...........................12
4.07. Amendments..............................................12
4.08. Accounting Methods......................................13
4.09. Contracts...............................................13
4.10. Claims..................................................13
4.11. Adverse Actions.........................................13
4.12. Risk Management.........................................13
4.13. Agreements..............................................13
ARTICLE V REPRESENTATIONS AND WARRANTIES.......................13
5.01. Disclosure Schedules....................................13
5.02. Standard................................................14
5.03. Representations and Warranties..........................14
ARTICLE VI COVENANTS...........................................23
6.01. Best Efforts.............................................23
6.02. Stockholder Approvals...................................23
6.03. Registration Statement..................................24
6.04. Press Releases..........................................25
6.05. Access; Information.....................................25
6.06. Acquisition Proposals...................................25
6.07. Affiliate Agreements....................................25
6.08. Takeover Laws...........................................26
6.09. No Rights Triggered.....................................26
6.10. Shares Listed...........................................26
6.11. Regulatory Applications.................................26
6.12. Indemnification.........................................27
6.13. Severance and Benefit Plans.............................28
6.14. Accountants' Letters....................................30
6.15. Certain Director and Officer Positions..................30
6.16. Charitable Contributions................................31
6.17. Coordination of Dividends...............................31
6.18. Notification of Certain Matters.........................31
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER...........31
7.01. Stockholder Vote........................................31
7.02. Regulatory Approvals....................................32
7.03. Third Party Consents....................................32
7.04. No Injunction, Etc......................................32
7.05. Accounting Treatment....................................32
7.06. Representations, Warranties and Covenants of Parent.....32
7.07. Representations, Warranties And Covenants Of USBC.......32
7.08. Effective Registration Statement........................33
7.09. Tax Opinion.............................................33
7.10. Certificate of Designations..............................33
7.11. NYSE Listing............................................33
ARTICLE VIII TERMINATION.......................................34
8.01. Termination.............................................34
8.02. Effect of Termination and Abandonment...................35
8.03. Termination Expenses....................................35
ARTICLE IX MISCELLANEOUS.......................................35
9.01. Survival................................................35
9.02. Waiver; Amendment.......................................36
9.03. Counterparts............................................36
9.04. Governing Law...........................................36
9.05. Expenses................................................36
9.06. Notices.................................................36
9.07. Entire Understanding; No Third Party Beneficiaries......37
9.08. Interpretation..........................................37
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AGREEMENT AND PLAN OF MERGER, dated as of March 19,
1997 (this "Agreement"), by and between U.S. Bancorp, an Oregon
corporation ("USBC"), and First Bank System, Inc., a Delaware
corporation ("FBS").
WITNESSETH:
WHEREAS, the Boards of Directors of USBC and FBS have
determined that it is in the best interests of their respective
companies and their stockholders to consummate the strategic
business combination transaction provided for herein in which
USBC will, subject to the terms and conditions set forth herein,
merge (the "Merger") with and into FBS, so that FBS is the
surviving corporation in the Merger; and
WHEREAS, as a condition and inducement to FBS's
willingness to enter into this Agreement and the FBS Option
Agreement (as defined below), in no event later than 6:00 a.m.
New York City time on March 20, 1997, FBS and USBC are entering
into the USBC Stock Option Agreement (the "USBC Option
Agreement") in substantially the form attached hereto as Exhibit
A, pursuant to which USBC will grant FBS an option exercisable
upon the occurrence of certain events; and
WHEREAS, as a condition and inducement to USBC's
willingness to enter into this Agreement and the USBC Option
Agreement, in no event later than 6:00 a.m. New York City time on
March 20, 1997, FBS and USBC are entering into the FBS Stock
Option Agreement (the "FBS Option Agreement") in substantially
the form attached hereto as Exhibit B, pursuant to which FBS will
grant USBC an option exercisable upon the occurrence of certain
events; and
WHEREAS, the parties desire to make certain
representations, warranties and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and
intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01. Certain Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
"Agreement" shall have the meaning set forth in the recitals to
this Agreement.
"Board Size Amendment" shall mean the amendments to
the FBS Certificate contemplated by Section 2.03(c).
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"Certificate of Designations" shall have the meaning set forth in
Section 2.03(d).
"Change of Control Agreements" shall have the meaning set forth in
Section 6.13(c).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Compensation and Benefit Plans" shall have the meaning set forth in
Section 5.03(l).
"Confidentiality Agreement" shall mean that certain
confidentiality agreement, dated March 11, 1997, by and
between USBC and FBS.
"Costs" shall have the meaning set forth in Section 6.12(a).
"DGCL" shall have the meaning set forth in Section 2.01(b).
"Disclosure Schedule" shall have the meaning set forth in Section
5.01.
"Effective Date" shall have the meaning set forth in Section 2.02.
"Effective Time" shall have the meaning set forth in Section 2.02.
"Employee Benefit Plans" shall have the meaning set forth in
Section 6.13(a).
"Environmental Laws" shall have the meaning set forth in
Section 5.03(o).
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
5.03(l).
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations
thereunder.
"Exchange Agent" shall have the meaning set forth in Section
3.04(a).
"Exchange Fund" shall have the meaning set forth in Section 3.04(a).
"Exchange Ratio" shall have the meaning set forth in Section
3.01(a).
"FBS" shall have the meaning set forth in the recitals to this
Agreement.
"FBS Affiliate" shall have the meaning set forth in Section 6.07(a).
"FBS Board" shall mean the Board of Directors of FBS.
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"FBS Certificate" shall mean the Restated Certificate of
Incorporation of FBS.
"FBS Common Stock" shall have the meaning set forth in Section
3.01(a).
"FBS Meeting" shall have the meaning set forth in Section 6.02.
"FBS Option Agreement" shall have the meaning set
forth in the recitals to this Agreement.
"FBS Preferred Stock" shall mean FBS Series 1990A
Preferred Stock and New FBS Preferred Stock.
"FBS Series 1990A Preferred Stock" shall mean the
Adjustable Rate Cumulative Preferred Stock Series 1990A,
liquidation value $100,000 per share, of FBS.
"FBS Stock" shall mean FBS Common Stock and FBS
Preferred Stock.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of
Governors of the Federal Reserve System.
"Former USBC Directors" shall have the meaning set forth in
Section 6.15(a).
"Indemnified Party" shall have the meaning set forth in Section
6.12(a).
"Insurance Amount" shall have the meaning set forth in Section
6.12(b).
"Joint Proxy Statement" shall have the meaning set forth in Section
6.03.
"Liens" shall mean any charge, mortgage, pledge,
security interest, restriction, claim, lien, or
encumbrance.
"Material Adverse Effect" shall mean with respect to
USBC, FBS or the Surviving Corporation any effect that (i)
is material and adverse to the financial position, results
of operations or business of USBC and its Subsidiaries
taken as a whole, FBS and its Subsidiaries taken as a
whole, or the Surviving Corporation and its Subsidiaries
taken as a whole, respectively, or (ii) would materially
impair the ability of either USBC or FBS to perform its
obligations under this Agreement or otherwise materially
threaten or materially impede the consummation of the
Merger and the other transactions contemplated by this
Agreement; provided, however, that Material Adverse Effect
shall not be deemed to include the impact of (a) changes in
banking and similar laws of general applicability or
interpretations thereof by courts or governmental
authorities, (b) changes in generally accepted accounting
principles or regulatory accounting requirements applicable
to banks and their holding companies generally, (c) actions
or omissions of USBC or FBS taken with the prior written
consent of FBS or USBC, as applicable, in contemplation of
the transactions contemplated hereby, and (d) any
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modifications or changes to valuation policies and practices
in connection with the Merger or restructuring charges taken
in connection with the Merger, in each case in accordance with
generally accepted accounting principles.
"Meeting" shall have the meaning set forth in Section 6.02.
"Merger" shall have the meaning set forth in the recitals to this
Agreement and in Section 2.01(a).
"Merger Consideration" shall have the meaning set forth in
Section 2.01(a).
"Multiemployer Plans" shall have the meaning set forth in
Section 5.03(l).
"NASDAQ" shall mean The Nasdaq Stock Market, Inc.'s National Market
System.
"New Certificates" shall have the meaning set forth in Section
3.04(a).
"New FBS Preferred Stock" shall have the meaning set forth in
Section 3.01(b).
"NYSE" shall mean the New York Stock Exchange, Inc.
"OBCA" shall have the meaning set forth in Section 2.01(b).
"OCC" shall mean the Office of the Comptroller of the Currency.
"Old Certificates" shall have the meaning set forth in Section
3.04(a).
"OTS" shall mean the Office of Thrift Supervision.
"Person" or "person" shall mean any individual, bank,
corporation, partnership, association, joint-stock company,
business trust or unincorporated organization.
"Pension Plan" shall have the meaning set forth in Section 5.03(l).
"Plans" shall have the meaning set forth in Section 5.03(l).
"Previously Disclosed" by a party shall mean information set forth
in its Disclosure Schedule.
"Registration Statement" shall have the meaning set forth in
Section 6.03.
"Regulatory Authorities" shall have the meaning set forth in
Section 5.03(h).
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"Representatives" of a party shall mean such party's
directors, officers, employees, legal or financial advisors
or any representatives of such legal or financial advisors.
"Rights" shall mean, with respect to any person,
securities or obligations convertible into or exercisable
or exchangeable for, or giving any person any right to
subscribe for or acquire, or any options, calls or
commitments relating to, or any stock appreciation right or
other instrument the value of which is determined in whole
or in part by reference to the market price or value of,
shares of capital stock of such person.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section 5.03(g).
"Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations thereunder.
"Subsidiary" and "Significant Subsidiary" shall have
the meanings ascribed to them in Rule 1-02 of Regulation
S-X of the SEC.
"Surviving Corporation" shall have the meaning set forth in
Section 2.01(a).
"Takeover Laws" shall have the meaning set forth in Section 5.03(n).
"Takeover Proposal" shall mean, with respect to any
person, any tender or exchange offer, proposal for a
merger, consolidation or other business combination
involving USBC or FBS or any of their Significant
Subsidiaries, respectively, or any proposal or offer to
acquire in any manner a substantial equity interest in, or
a substantial portion of the assets or deposits of, USBC or
FBS or any of its respective Significant Subsidiaries other
than the transactions contemplated by this Agreement and,
in the case of USBC, the USBC Option Agreement, and, in the
case of FBS, the FBS Option Agreement.
"Taxes" shall mean all taxes, charges, fees, levies or
other assessments, however denominated, including, without
limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, goods and services, capital,
transfer, franchise, profits, license, withholding,
payroll, employment, employer health, excise, estimated,
severance, stamp, occupation, property or other taxes,
custom duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any
taxing authority whether arising before, on or after the
Effective Date.
"Tax Returns" shall have the meaning set forth in Section 5.03(p).
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"Treasury Shares" shall mean shares of USBC Stock held by
USBC or any of its Subsidiaries or by FBS or any of its
Subsidiaries, in each case other than in a fiduciary
capacity or as a result of debts previously contracted in
good faith.
"USBC" shall have the meaning set forth in the recitals to this
Agreement.
"USBC Affiliate" shall have the meaning set forth in Section
6.07(a).
"USBC Articles" shall mean the Restated Articles of Incorporation
of USBC.
"USBC Board" shall mean the Board of Directors of USBC.
"USBC Common Stock" shall have the meaning set forth in Section
3.01(a).
"USBC Meeting" shall have the meaning set forth in Section 6.02.
"USBC Option Agreement" shall have the meaning set
forth in the recitals to this Agreement.
"USBC Preferred Stock" shall have the meaning set forth in
Section 3.01(b).
"USBC Stock" shall mean USBC Common Stock and USBC
Preferred Stock.
"USBC Stock Option" shall have the meaning set forth in Section
3.06.
ARTICLE II
THE MERGER; EFFECTS OF THE MERGER
2.01. The Merger. (a) The Surviving Corporation. At
the Effective Time, USBC shall merge with and into FBS (the
"Merger"), the separate corporate existence of USBC shall cease
and FBS shall survive and continue to exist as a Delaware
corporation (FBS, as the surviving corporation in the Merger,
sometimes being referred to herein as the "Surviving
Corporation"). FBS may at any time prior to the Effective Time
change the method of effecting the combination with USBC
(including, without limitation, the provisions of this Article
II) if and to the extent it deems such change to be desirable,
including, without limitation, to provide for a merger of USBC
directly with or into a wholly-owned subsidiary of FBS, in which
either USBC or such subsidiary is the surviving corporation;
provided, however, that no such change shall (i) alter or change
the amount or kind of consideration to be issued to holders of
USBC Stock as provided for in this Agreement (the "Merger
Consideration"), (ii) adversely affect the tax treatment of
USBC's stockholders as a result of receiving the Merger
Consideration or (iii) materially impede or delay consummation of
the transactions contemplated by this Agreement.
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(b) Effectiveness and Effects of the Merger. Subject to the
satisfaction or waiver of the conditions set forth in Article VII
in accordance with this Agreement, the Merger shall become
effective upon the occurrence of both (i) the filing in the
office of the Secretary of State of Oregon of articles of merger
in accordance with Section 60.494 of the Oregon Business
Corporation Act (the "OBCA") and (ii) the filing in the office of
the Secretary of State of the State of Delaware of a certificate
of merger in accordance with Section 252 of the Delaware General
Corporation Law (the "DGCL"), or such later date and time as may
be set forth in such articles and certificate. The Merger shall
have the effects prescribed in the OBCA and in the DGCL.
(c) Certificate of Incorporation and By-Laws. Subject
to Section 2.03, the certificate of incorporation and by-laws of
the Surviving Corporation shall be those of FBS, as in effect
immediately prior to the Effective Time.
(d) Name. Effective immediately upon the consummation of the
Merger, the name of FBS shall be U.S. Bancorp.
2.02. Effective Date and Effective Time. Subject to
the satisfaction or waiver of the conditions as set forth in
Article VII in accordance with this Agreement, the parties shall
cause the effective date of the Merger (the "Effective Date") to
occur on (i) the third business day to occur after the last of
the conditions set forth in Sections 7.01, 7.02, 7.03 and 7.11
shall have been satisfied or waived in accordance with the terms
of this Agreement (or, at the election of FBS, on the last
business day of the month in which such day occurs) or (ii) such
other date to which the parties may agree in writing. The time on
the Effective Date when the Merger shall become effective is
referred to as the "Effective Time."
2.03. Amendment of FBS Certificate; Certificate of Designations.
(a) At the Effective Time, Article First of the FBS Certificate shall be
amended to read in its entirety as follows: "The name of this corporation
is U.S. Bancorp."
(b) At the Effective Time, the first sentence of
Article Fourth of the FBS Certificate shall be amended to read in
its entirety as follows: "The total number of shares of all
classes of stock which FBS shall have the authority to issue is
510,000,000, consisting of 10,000,000 shares of Preferred Stock
of the par value of $1.00 each and 500,000,000 shares of Common
Stock of the par value of $1.25 each."
(c) Subject to the provisions of Section 6.15(c), at
the Effective Time, (i) the first sentence of Article Sixth of
the FBS Certificate shall be amended to replace the words "nor
more than twenty-four (24)" with the words "nor more than thirty
(30)" and (ii) the final sentence of Article Sixth of the FBS
Certificate shall be amended to read in its entirety as follows:
"Notwithstanding any other provisions of this Amended Certificate
of Incorporation or the Bylaws of the Corporation (and
notwithstanding that a lesser percentage may be specified by
law), the provisions of this Article Sixth may not be amended or
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repealed (except an amendment hereto to reduce the maximum number of
directors of the Corporation to not less than the greater of (A) the number
of directors then in office and (B) twenty-four (24)) unless such
action is approved by the affirmative vote of the holders of not
less than eighty percent (80%) of the voting power of all of the
outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, considered for
purposes of this Article Sixth as a single class."
(d) At or prior to the Effective Time, FBS shall file
a certificate of designations pursuant to Section 151 of the DGCL
fixing the preferences, limitations and relative rights of the
New FBS Preferred Stock, shares of which are to be issued in the
Merger pursuant to Section 3.01(b), in a form mutually acceptable
to FBS and USBC (the "Certificate of Designations").
2.04. Tax Consequences. It is intended that the Merger shall
qualify as a reorganization under Section 368(a) of the Code.
2.05. Accounting Treatment. It is intended that the Merger shall
be accounted for as a "pooling of interests" under generally accepted
accounting principles.
ARTICLE III
MERGER CONSIDERATION; EXCHANGE PROCEDURES
3.01. Merger Consideration. Subject to the provisions of
this Agreement, at the Effective Time, automatically by virtue of the
Merger and without any action on the part of any party or stockholder:
(a) Outstanding USBC Common Stock. Each share,
excluding Treasury Shares, of the common stock, par value $5.00
per share, of USBC (the "USBC Common Stock"), issued and
outstanding immediately prior to the Effective Time shall become
and be converted into the right to receive 0.755 shares (subject
to possible adjustment as set forth in Section 3.05, the
"Exchange Ratio") of the common stock, par value $1.25 per share,
of FBS ("FBS Common Stock").
(b) Outstanding USBC Preferred Stock. Each share of
USBC 8 1/8% Cumulative Preferred Stock, Series A, without par
value, liquidation preference $25 per share (the "USBC Preferred
Stock"), excluding any Treasury Shares, issued and outstanding
immediately prior to the Effective Time, shall become and be
converted into one share of a new series of preferred stock of
FBS ("New FBS Preferred Stock") having terms (to be set forth in
the Certificate of Designations) substantially identical to those
of the USBC Preferred Stock.
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(c) Outstanding FBS Common Stock. Each share of FBS
Common Stock issued and outstanding immediately prior to the Effective
Time shall be unchanged and shall remain issued and outstanding as
common stock of the Surviving Corporation.
(d) Treasury Shares. Each of the shares of USBC Stock
held as Treasury Shares immediately prior to the Effective Time
shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.02. Rights as Stockholders; Stock Transfers. At the
Effective Time, holders of USBC Stock shall cease to be, and
shall have no rights as, stockholders of USBC, other than to
receive any dividend or other distribution with respect to such
USBC Stock with a record date occurring prior to the Effective
Time and the consideration provided under this Article III. After
the Effective Time, there shall be no transfers on the stock
transfer books of USBC or the Surviving Corporation of shares of
USBC Stock.
3.03. Fractional Shares. Notwithstanding any other
provision hereof, no fractional shares of FBS Common Stock and no
certificates or scrip therefor, or other evidence of ownership
thereof, will be issued in the Merger; instead, FBS shall pay to
each holder of USBC Common Stock who would otherwise be entitled
to a fractional share of FBS Common Stock (after taking into
account all Old Certificates delivered by such holder) an amount
in cash (without interest) determined by multiplying such
fraction by the average of the last sale prices of FBS Common
Stock, as reported by the NYSE Composite Transactions Reporting
System (as reported in The Wall Street Journal or, if not
reported therein, in another authoritative source), for the five
NYSE trading days immediately preceding the Effective Date.
3.04. Exchange Procedures. (a) At or prior to the
Effective Time, FBS shall deposit, or shall cause to be
deposited, with a bank or trust company which may be a Subsidiary
of FBS (the "Exchange Agent"), for the benefit of the holders of
certificates formerly representing shares of USBC Common Stock
("Old Certificates"), for exchange in accordance with this
Article III, certificates representing the shares of FBS Common
Stock ("New Certificates") and an estimated amount of cash (such
cash and New Certificates, together with any dividends or
distributions with a record date occurring after the Effective
Date with respect thereto (without any interest on any such cash,
dividends or distributions), being hereinafter referred to as the
"Exchange Fund") to be paid pursuant to this Article III in
exchange for outstanding shares of USBC Common Stock.
Certificates evidencing shares of USBC Preferred Stock will
remain outstanding and will represent the shares of New FBS
Preferred Stock into which such shares of USBC Preferred Stock
are converted on the Effective Date.
(b) As promptly as practicable after the Effective
Date, FBS shall send or cause to be sent to each former holder of
record of shares (other than Treasury Shares) of USBC Common
Stock immediately prior to the Effective Time transmittal
materials for use in exchanging such stockholder's Old
Certificates for the consideration set forth in this
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Article III. FBS shall cause the New Certificates into which
shares of a stockholder's USBC Common Stock are converted on the
Effective Date and/or any check in respect of any fractional
share interests or dividends or distributions which such person
shall be entitled to receive to be delivered to such stockholder
upon delivery to the Exchange Agent of Old Certificates
representing such shares of USBC Common Stock (or indemnity
reasonably satisfactory to FBS and the Exchange Agent, if any of
such certificates are lost, stolen or destroyed) owned by such
stockholder. No interest will be paid on any such cash to be paid
in lieu of fractional share interests or in respect of dividends
or distributions which any such person shall be entitled to
receive pursuant to this Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to any former
holder of USBC Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property,
escheat or similar laws.
(d) No dividends or other distributions with respect
to FBS Common Stock with a record date occurring after the
Effective Time shall be paid to the holder of any unsurrendered
Old Certificate representing shares of USBC Common Stock
converted in the Merger into the right to receive shares of such
FBS Common Stock until the holder thereof shall be entitled to
receive New Certificates in exchange therefor in accordance with
this Article III, and no such shares of FBS Common Stock shall be
eligible to vote until the holder of Old Certificates is entitled
to receive New Certificates in accordance with this Article III.
After becoming so entitled in accordance with this Article III,
the record holder thereof also shall be entitled to receive any
such dividends or other distributions, without any interest
thereon, which theretofore had become payable with respect to
shares of FBS Common Stock such holder had the right to receive
upon surrender of the Old Certificate.
(e) Any portion of the Exchange Fund that remains
unclaimed by the stockholders of USBC for twelve months after the
Effective Time shall be paid to FBS. Any stockholders of USBC who
have not theretofore complied with this Article III shall
thereafter look only to FBS for payment of the shares of FBS
Common Stock, cash in lieu of any fractional shares and unpaid
dividends and distributions on the FBS Common Stock deliverable
in respect of each share of USBC Common Stock such stockholder
holds as determined pursuant to this Agreement, in each case,
without any interest thereon.
3.05. Anti-Dilution Provisions. In the event FBS
changes (or establishes a record date for changing) the number of
shares of FBS Common Stock issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend,
recapitalization or similar transaction with respect to the
outstanding FBS Common Stock and the record date therefor shall
be prior to the Effective Date, the Exchange Ratio shall be
proportionately adjusted.
3.06. Options. At the Effective Time, all employee and
director stock options to purchase shares of USBC Common Stock
(each, a "USBC Stock Option"), which are then outstanding and
unexercised, shall cease to represent a right to acquire shares
of USBC Common Stock and shall be converted automatically into
options to purchase shares of FBS Common Stock, and FBS shall
assume each such USBC Stock Option subject to the terms thereof,
including but not limited to the accelerated vesting of such
options which shall occur in connection with and by virtue of the
Merger as and to the extent required by the plans and agreements
governing such USBC Stock Options; provided, however, that from
and after the Effective Time, (i) the number of shares of FBS
Common Stock purchasable upon exercise of such USBC Stock Option
shall be equal to the number of shares of USBC Common Stock that
were purchasable under such USBC Stock Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, and
rounding to the nearest whole share, and (ii) the per share
exercise price under each such USBC Stock Option shall be
adjusted by dividing the per share exercise price of each such
USBC Stock Option by the Exchange Ratio, and rounding down to the
nearest cent. The terms of each USBC Stock Option shall, in
accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction with respect to FBS
Common Stock on or subsequent to the Effective Date.
Notwithstanding the foregoing, each USBC Stock Option which is
intended to be an "incentive stock option" (as defined in Section
422 of the Code) shall be adjusted in accordance with the
requirements of Section 424 of the Code. Accordingly, with
respect to any incentive stock options, fractional shares shall
be rounded down to the nearest whole number of shares and where
necessary the per share exercise price shall be rounded down to
the nearest cent.
ARTICLE IV
ACTIONS PENDING MERGER
From the date hereof until the Effective Time, except
as expressly contemplated by this Agreement, the FBS Option
Agreement or the USBC Option Agreement, (i) without the prior
written consent of FBS, USBC will not, and will cause each of its
Subsidiaries not to, and (ii) without the prior written consent
of USBC (which consent shall not be unreasonably withheld or
delayed) FBS will not, and will cause each of its Subsidiaries
not to:
4.01. Ordinary Course. Conduct the business of it and
its Subsidiaries other than in the ordinary and usual course or,
to the extent consistent therewith, fail to use reasonable
efforts to preserve intact their business organizations and
assets and maintain their rights, franchises and existing
relations with customers, suppliers, employees and business
associates, or take any action that would adversely affect its
ability to perform any of its material obligations under this
Agreement.
4.02. Capital Stock. In the case of USBC, other than
pursuant to Rights Previously Disclosed and outstanding on the
date hereof, (i) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares
of capital stock or any Rights, (ii) enter into any agreement
with respect to the foregoing, or (iii) permit any additional
shares of capital stock to become subject to new grants of
employee or director stock options, other Rights or similar
stock-based employee rights. Without limiting the foregoing, USBC
will not issue or agree to issue any shares of capital stock or
Rights under USBC's 1997 Amended and Restated Non-Employee
Director Stock Incentive and Deferral Plan or USBC's 1997
Employee Stock Purchase Plan.
4.03. Dividends, Etc. (a) Subject to the provisions of
Section 6.17, make, declare, pay or set aside for payment any
dividend (other than (i) in the case of USBC, (A) quarterly cash
dividends on USBC Common Stock in an amount not to exceed $0.31
per share paid with record and payment dates consistent with past
practice, (B) dividends payable on USBC Preferred Stock at a rate
not exceeding the rate provided for in the terms thereof, and (C)
dividends from 99% owned Subsidiaries to USBC or another 99%
owned Subsidiary of USBC, as applicable, and (ii) in the case of
FBS, quarterly cash dividends on FBS Common Stock not in excess
of $0.465 per share (paid with record and payment dates
consistent with past practice) and dividends from Subsidiaries to
FBS or another Subsidiary of FBS, as applicable) on or in respect
of, or declare or make any distribution on any shares of its
capital stock or (b) except to the extent required to do so under
its existing Compensation and Benefit Plans, directly or
indirectly adjust, split, combine, redeem, reclassify, purchase
or otherwise acquire, any shares of its capital stock other than
as Previously Disclosed.
4.04. Compensation; Employment Agreements; Etc. In the
case of USBC and its Subsidiaries, enter into or amend any
written employment, consulting, severance or similar agreements
or arrangements with any of its directors, officers or employees,
or grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except (i) for
normal individual increases in compensation to employees in the
ordinary course of business consistent with past practice, (ii)
for other changes as are provided for herein or as may be
required by law, (iii) to satisfy contractual obligations
existing as of the date hereof and, if material, Previously
Disclosed, or (iv) for additional grants of awards to newly hired
employees consistent with past practice.
4.05. Benefit Plans. In the case of USBC and its
Subsidiaries, enter into or amend (except (i) as may be required
by applicable law or (ii) to satisfy contractual obligations
existing as of the date hereof and, if material, Previously
Disclosed) any pension, retirement, stock option, stock purchase,
savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or
other employees, including without limitation taking any action
that accelerates the vesting or exercise of any benefits payable
thereunder.
4.06. Acquisitions and Dispositions. In the case of
USBC, except as Previously Disclosed, sell, transfer, mortgage,
encumber or otherwise dispose of or discontinue any portion of
its assets, business or properties, which is material to it and
its Subsidiaries taken as a whole, or acquire (other than by way
of foreclosures or acquisitions of control in a bona fide
fiduciary capacity or in satisfaction of debts previously
contracted in good faith, in each case in the ordinary and usual
course of business consistent with past practice) all or any
portion of, the assets, business or properties of any other
entity which is material to it and its Subsidiaries taken as a
whole. FBS will not, and will cause its Subsidiaries not to, make
any acquisition or take any other action which would materially
adversely affect its ability to consummate the transactions
contemplated by this Agreement.
4.07. Amendments. In the case of USBC, amend the USBC
Articles or its by-laws.
4.08. Accounting Methods. Implement or adopt any change
in its accounting principles, practices or methods, other than as
may be required by generally accepted accounting principles.
4.09. Contracts. In the case of USBC and its
Subsidiaries, except in the ordinary course of business
consistent with past practice, enter into or terminate any
material contract, agreement or lease, or amend or modify in a
material respect any of its existing material contracts,
agreements or leases.
4.10. Claims. In the case of USBC and its Subsidiaries,
except in the ordinary course of business consistent with past practice,
settle any claim, action or proceeding involving money damages that is
material to it and its Subsidiaries, taken as a whole.
4.11. Adverse Actions. (a) Take any action while
knowing that such action would, or is reasonably likely to,
prevent or impede the Merger from qualifying (i) for
"pooling-of-interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368(a) of the Code;
or (b) knowingly take any action that is intended or is
reasonably likely to result in (i) any of its representations and
warranties set forth in this Agreement being or becoming untrue
in any material respect at any time at or prior to the Effective
Time, (ii) any of the conditions to the Merger set forth in
Article VII not being satisfied or (iii) a material violation of
any provision of this Agreement except, in each case, as may be
required by applicable law; provided, however, that nothing
contained herein shall limit the ability of FBS or USBC to
exercise its rights under the USBC Option Agreement or the FBS
Option Agreement, as the case may be.
4.12. Risk Management. Except as required by
applicable law or regulation, (a) implement or adopt any material
change in its interest rate risk management policies, procedures
or practices; (b) fail to follow its existing policies or
practices with respect to managing its exposure to interest rate
risk; or (c) fail to use commercially reasonable means to avoid
any material increase in its aggregate exposure to interest rate
risk.
4.13. Agreements. Agree or commit to do anything prohibited
by Sections 4.01 through 4.12.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Disclosure Schedules. On or prior to the date
hereof, FBS has delivered to USBC and USBC has delivered to FBS a
schedule (respectively, its "Disclosure Schedule") setting forth,
among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception to
one or more representations or warranties contained in Section
5.03 or to one or more of its covenants contained in Article IV;
provided, that (i) no such item is required to be set forth in a
Disclosure Schedule as an exception to a representation or
warranty if its absence is not reasonably likely to result in the
related representation or warranty being deemed untrue or
incorrect under the standard established by Section 5.02, and
(ii) the mere inclusion of an item in a Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an
admission by a party that such item represents a material
exception or fact, event or circumstance or that such item is
reasonably likely to result in a Material Adverse Effect.
5.02. Standard. No representation or warranty of FBS
or USBC contained in Section 5.03 shall be deemed untrue or
incorrect, and no party hereto shall be deemed to have breached a
representation or warranty, as a consequence of the existence of
any fact, event or circumstance unless such fact, circumstance or
event, individually or taken together with all other facts,
events or circumstances inconsistent with any representation or
warranty contained in Section 5.03 has had or is reasonably
likely to have a Material Adverse Effect.
5.03. Representations and Warranties. Subject to
Sections 5.01 and 5.02 and except as Previously Disclosed in a
paragraph of its Disclosure Schedule corresponding to the
relevant paragraph below, USBC hereby represents and warrants to
FBS, and FBS hereby represents and warrants to USBC as follows:
(a) Organization, Standing and Authority. Such party
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization.
Such party is duly qualified to do business and is in good
standing in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or
assets or the conduct of its business requires it to be so
qualified. It has in effect all federal, state, local, and
foreign governmental authorizations necessary for it to own or
lease its properties and assets and to carry on its business as
it is now conducted.
(b) Shares. (i) As of the date hereof, the authorized
capital stock of USBC consists solely of (A) 250,000,000 shares
of USBC Common Stock, of which 148,058,414 shares were
outstanding as of March 11, 1997 and (B) 50,000,000 shares of
preferred stock, of which 6,000,000 shares have been designated
as USBC Preferred Stock, all of which 6,000,000 shares were
outstanding as of March 11, 1997. As of the date hereof, the
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authorized capital stock of FBS consists solely of (X)
200,000,000 shares of FBS Common Stock, of which 133,422,201
shares were outstanding as of March 3, 1997 and (Y) 10,000,000
shares of preferred stock, of which 12,750 shares have been
designated as FBS Series 1990A Preferred Stock, of which no
shares are outstanding as of the date hereof. As of March 3,
1997, no shares of USBC Common Stock and 8,325,537 shares of FBS
Common Stock were held in treasury by USBC and FBS, respectively.
The outstanding shares of such party's capital stock have been
duly authorized and are validly issued and outstanding, fully
paid and nonassessable, and subject to no preemptive rights (and
were not issued in violation of any preemptive rights). As of the
date hereof, except as set forth in its Disclosure Schedule
pursuant to Section 5.03(b)(ii), there are no shares of such
party's capital stock authorized and reserved for issuance, such
party does not have any Rights issued or outstanding with respect
to its capital stock, and such party does not have any commitment
to authorize, issue or sell any such shares or Rights, except
pursuant to this Agreement, the USBC Option Agreement or the FBS
Option Agreement, as the case may be. Since December 31, 1996,
such party has issued no shares of its capital stock or Rights or
reserved any shares for such purposes except pursuant to plans or
commitments Previously Disclosed.
(ii) The number of shares of USBC Common Stock which
are issuable and reserved for issuance upon exercise of USBC
Stock Options as of the date hereof are Previously Disclosed in
USBC's Disclosure Schedule, and the number of shares of FBS
Common Stock which are issuable and reserved for issuance upon
exercise of any employee or director stock options to purchase
shares of FBS Common Stock, and the number and terms of any
Rights, as of February 28, 1997 are Previously Disclosed in FBS's
Disclosure Schedule.
(iii) In the case of the representations and
warranties of FBS, the shares of FBS Stock to be issued in
exchange for shares of USBC Stock in the Merger, when issued in
accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable.
(c) Subsidiaries. (i) (A) Such party has Previously
Disclosed a list of all of its Subsidiaries together with the
jurisdiction of organization of each such Subsidiary, (B) it
owns, directly or indirectly, at least 99% of the issued and
outstanding capital stock of each of its Significant
Subsidiaries, (C) no equity securities of any of its Significant
Subsidiaries are or may become required to be issued (other than
to it or its Subsidiaries) by reason of any Rights, (D) there are
no contracts, commitments, understandings or arrangements by
which any of such Significant Subsidiaries is or may be bound to
sell or otherwise transfer any shares of the capital stock of any
such Significant Subsidiaries (other than to it or its
Subsidiaries), (E) there are no contracts, commitments,
understandings, or arrangements relating to its rights to vote or
to dispose of such shares (other than to it or its Subsidiaries),
and (F) all of the shares of capital stock of each such
Significant Subsidiary held by it or its Subsidiaries are fully
paid and (except pursuant to 12 U.S.C. Sec. 55 or equivalent state
statutes in the case of bank Subsidiaries) nonassessable and are
owned by it or its Subsidiaries free and clear of any Liens.
(ii) In the case of the representations and warranties
of USBC, USBC does not own (other than in a bona fide fiduciary
capacity or in satisfaction of a debt previously contracted)
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beneficially, directly or indirectly, any shares of any equity
securities or similar interests of any person, or any
interest in a partnership or joint venture of any kind other than
its Subsidiaries.
(iii) Each of such party's Significant Subsidiaries
has been duly organized and is validly existing in good standing
under the laws of the jurisdiction of its organization, and is
duly qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified. Each of
such Significant Subsidiaries has in effect all federal, state,
local, and foreign governmental authorizations necessary for it
to own or lease its properties and assets and to carry on its
business as it is now conducted.
(d) Corporate Power. Such party and each of its
Significant Subsidiaries has the corporate power and authority to
carry on its business as it is now being conducted and to own all
its properties and assets; and it has the corporate power and
authority to execute, deliver and perform its obligations under
this Agreement and, in the case of FBS, the FBS Option Agreement,
and, in the case of USBC, the USBC Option Agreement, and to
consummate the transactions contemplated hereby and thereby.
(e) Corporate Authority. (i) In the case of the
representations and warranties of USBC, (A) subject in the case
of this Agreement to receipt of the requisite approval and
adoption of this Agreement (subject to Section 8.03) and the
Merger by the holders of a majority of the outstanding shares of
USBC Common Stock entitled to vote thereon, this Agreement, the
USBC Option Agreement and the transactions contemplated hereby
and thereby have been authorized by all necessary corporate
action of USBC and the USBC Board prior to the date hereof and
(B) this Agreement and the USBC Option Agreement are legal, valid
and binding agreements of USBC, enforceable in accordance with
their respective terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by
general equity principles).
(ii) In the case of the representations and warranties
of FBS, (A) subject in the case of this Agreement (subject to
Section 8.03) to (1) receipt of the requisite approval and
adoption of this Agreement and the Merger by the holders of a
majority of the outstanding shares of FBS Common Stock entitled
to vote thereon and (2) subject to Section 6.15(c), receipt of
the requisite approval of the Board Size Amendment by the holders
of at least 80% of the outstanding shares of FBS Common Stock
entitled to vote thereon, this Agreement and the FBS Option
Agreement and the transactions contemplated hereby and thereby
have been authorized by all necessary corporate action of FBS and
the FBS Board and (B) this Agreement and the FBS Option Agreement
are legal, valid and binding agreements of FBS, enforceable in
accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles).
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(f) No Defaults. Subject to receipt of the regulatory
approvals, and expiration of the waiting periods, referred to in
Section 5.03(r) and required filings under federal and state securities
laws, the execution, delivery and performance of this Agreement
and, in the case of FBS, the FBS Option Agreement, and, in the
case of USBC, the USBC Option Agreement, and the consummation of
the transactions contemplated hereby and thereby by it do not and
will not (i) constitute a breach or violation of, or a default
under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or
instrument of it or of any of its Subsidiaries or to which it or
any of its Subsidiaries or properties is subject or bound, (ii)
constitute a breach or violation of, or a default under, its
articles or certificate of incorporation or by-laws, or (iii)
require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument.
(g) Financial Reports and SEC Documents. (i) Its
Annual Reports on Form 10- K for the fiscal years ended December
31, 1995 and 1996, and all other reports, registration
statements, definitive proxy statements or information statements
filed or to be filed by it or any of its Subsidiaries subsequent
to December 31, 1995 under the Securities Act, or under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form filed,
or to be filed (collectively, its "SEC Documents"), with the SEC,
as of the date filed (A) complied or will comply in all material
respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and (B)
did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; and
each of the balance sheets contained in or incorporated by
reference into any such SEC Document (including the related notes
and schedules thereto) fairly presents and will fairly present
the financial position of the entity or entities to which it
relates as of its date, and each of the statements of income and
changes in stockholders' equity and cash flows or equivalent
statements in such SEC Documents (including any related notes and
schedules thereto) fairly presents and will fairly present the
results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of the entity or
entities to which it relates for the periods to which they
relate, in each case in accordance with generally accepted
accounting principles consistently applied during the periods
involved, except in each case as may be noted therein, subject to
normal year-end audit adjustments in the case of unaudited
statements.
(ii) Since December 31, 1996, it has not incurred any
liability other than in the ordinary course of business
consistent with past practice.
(h) Litigation; Regulatory Action. (i) No litigation,
claim or other proceeding before any court or governmental agency is
pending against it or any of its Subsidiaries and, to the best of its
knowledge, no such litigation, claim or other proceeding has been
threatened.
(ii) Neither it nor any of its Subsidiaries or
properties is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, or
extraordinary supervisory letter from, any
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federal or state governmental agency or authority charged with
the supervision or regulation of financial institutions or
issuers of securities or engaged in the insurance of deposits
(including, without limitation, the OCC, the Federal Reserve
Board, the FDIC and the OTS) or the supervision or regulation of
it or any of its Subsidiaries (collectively, the "Regulatory
Authorities").
(iii) Neither it nor any of its Subsidiaries has been
advised by any Regulatory Authority that such Regulatory
Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(i) Compliance with Laws. It and each of its Subsidiaries:
(i) in the conduct of its business, is in compliance
with all applicable federal, state, local and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit
Opportunity Act, the Fair Housing Act, the Community Reinvestment
Act, the Home Mortgage Disclosure Act and all other applicable
fair lending laws and other laws relating to discriminatory
business practices;
(ii) has all permits, licenses, authorizations, orders
and approvals of, and has made all filings, applications and
registrations with, all Regulatory Authorities that are required
in order to permit them to conduct their businesses substantially
as presently conducted; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect
and, to the best of its knowledge, no suspension or cancellation
of any of them is threatened; and
(iii) has received, since December 31, 1995, no
notification or communication from any Regulatory Authority (A)
asserting that it or any of its Subsidiaries is not in compliance
with any of the statutes, regulations, or ordinances which such
Regulatory Authority enforces, (B) threatening to revoke any
license, franchise, permit, or governmental authorization, (C)
threatening or contemplating revocation or limitation of, or
which would have the effect of revoking or limiting, federal
deposit insurance (nor, to its knowledge, do any grounds for any
of the foregoing exist) or (D) failing to approve any proposed
acquisition, or stating its intention not to approve acquisitions
proposed to be effected by it within a certain time period or
indefinitely.
(j) Material Contracts; Defaults. Except for those
agreements and other documents filed as exhibits to its SEC
Documents, neither it nor any of its Subsidiaries is a party to,
bound by or subject to any agreement, contract, arrangement,
commitment or understanding (whether written or oral) (i) that is
a "material contract" within the meaning of Item 601(b)(10) of
the SEC's Regulation S-K or (ii) that materially restricts the
conduct of business by it or any of its Subsidiaries. Neither it
nor any of its Subsidiaries is in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or
other instrument to which it is a party, by which its respective
assets, business, or operations may be bound or affected,
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or under which it or its respective assets, business, or operations
receives benefits, and there has not occurred any event that, with
the lapse of time or the giving of notice or both, would constitute
such a default.
(k) No Brokers. No action has been taken by it that
would give rise to any valid claim against any party hereto for a
brokerage commission, finder's fee or other like payment with
respect to the transactions contemplated by this Agreement,
excluding, in the case of USBC, a fee to be paid to Credit Suisse
First Boston Corporation, and, in the case of FBS, fees to be
paid to Merrill Lynch & Co. and Goldman, Sachs & Co., which, in
each case, has been heretofore disclosed to the other party.
(l) Employee Benefit Plans. (i) In the case of the
representations and warranties of USBC, USBC's Disclosure
Schedule contains a complete list of all bonus, vacation,
deferred compensation, pension, retirement, profit-sharing,
thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock appreciation and stock option
plans, all employment or severance contracts, all medical,
dental, disability, severance, health and life plans, all other
employee benefit and fringe benefit plans, contracts or
arrangements and any "change of control" or similar provisions in
any plan, contract or arrangement maintained or contributed to by
it or any of its Subsidiaries for the benefit of officers, former
officers, employees, former employees, directors, former
directors, or the beneficiaries of any of the foregoing
(collectively, "Compensation and Benefit Plans").
(ii) In the case of the representations and warranties
of USBC, true and complete copies of USBC's Compensation and
Benefit Plans, including, but not limited to, any trust
instruments and/or insurance contracts, if any, forming a part
thereof, and all amendments thereto have been supplied or made
available to FBS.
(iii) Each of its Compensation and Benefit Plans has
been administered in accordance with the terms thereof. All
"employee benefit plans" within the meaning of Section 3(3) of
ERISA, other than "multiemployer plans" within the meaning of
Section 3(37) of ERISA ("Multiemployer Plans"), covering
employees or former employees of it and its Subsidiaries (its
"Plans"), to the extent subject to ERISA, are in material
compliance with ERISA, the Code, the Age Discrimination in
Employment Act and other applicable laws. Each Compensation and
Benefit Plan of it or its Subsidiaries which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA
("Pension Plan") and which is
intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal
Revenue Service, and it is not aware of any circumstances
reasonably likely to result in the revocation or denial of any
such favorable determination letter. There is no pending or, to
its knowledge, threatened litigation or governmental audit,
examination or investigation relating to the Plans.
(iv) No liability under Title IV of ERISA has been or
is expected to be incurred by it or any of its Subsidiaries with
respect to any ongoing, frozen or terminated "single- employer
plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one
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employer with it under Section 4001(a)(14) of ERISA or Section
414 of the Code (an "ERISA Affiliate"). Neither it nor any of its
Subsidiaries nor any ERISA Affiliate of it or any of its
Subsidiaries presently contributes to a Multiemployer Plan or a
multiple employer plan (as described in Section 4064(a) of
ERISA), nor have they contributed to such a plan within this
calendar year and the preceding five calendar years. No notice of
a "reportable event," within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Pension Plan of it or any
of its Subsidiaries or by any ERISA Affiliate within the past 12
months.
(v) All contributions, premiums and payments required
to have been made under the terms of any Compensation and Benefit
Plan of it or any of its Subsidiaries have been made. Neither any
Pension Plan of it or any of its Subsidiaries nor any
single-employer plan of an ERISA Affiliate of it or any of its
Subsidiaries has an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA. Neither it nor any of its Subsidiaries has
provided, or is required to provide, security to any Pension Plan
or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(vi) Under each Pension Plan of it or any of its
Subsidiaries which is a single- employer plan, as of the last day
of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA
(as determined on the basis of the actuarial assumptions
contained in the Pension Plan's most recent actuarial valuation)
did not exceed the then current value of the assets of such
Pension Plan, and there has been no adverse change in the
financial condition of such Pension Plan (with respect to either
assets or benefits) since the last day of the most recent plan
year.
(vii) Neither it nor any of its Subsidiaries has any
obligations under any Compensation and Benefit Plans to provide
benefits, including death or medical benefits, with respect to
employees of it or its Subsidiaries beyond their retirement or
other termination of service other than (A) coverage mandated by
Part 6 of Title I of ERISA or Section 4980B of the Code, (B)
retirement or death benefits under any employee pension benefit
plan (as defined under Section 3(2) of ERISA), (C) disability
benefits under any employee welfare plan that have been fully
provided for by insurance or otherwise, or (D) benefits in the
nature of severance pay.
(viii) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (A) result in any payment (including, without
limitation, severance, unemployment compensation, golden
parachute or otherwise) becoming due to any current or former
director or employee of it or any of its Subsidiaries under any
Compensation and Benefit Plan or otherwise from it or any of its
Subsidiaries, (B) increase any benefits otherwise payable under
any Compensation and Benefit Plan or (C) result in any
acceleration of the time of payment or vesting of any such
benefit.
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(m) Labor Matters. Neither it nor any of its Subsidiaries
is a party to or is bound by any collective bargaining agreement,
contract or other agreement or understanding with a labor union
or labor organization, nor is it or any of its Subsidiaries the
subject of a proceeding asserting that it or any such
Subsidiaries has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel
it or such Subsidiaries to bargain with any labor organization as
to wages and conditions of employment, nor is there any strike or
other labor dispute involving it or any of its Subsidiaries
pending or, to its knowledge, threatened, nor is it aware of any
activity involving it or its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other
organizational activity.
(n) Takeover Laws; Article IX of USBC Articles;
Article Eighth of FBS Certificate. It has taken all action
required to be taken by it in order to exempt this Agreement and,
in the case of FBS, the FBS Option Agreement, and, in the case of
USBC, the USBC Option Agreement, and the transactions
contemplated hereby and thereby from, and this Agreement and, in
the case of FBS, the FBS Option Agreement, and, in the case of
USBC, the USBC Option Agreement, and the transactions
contemplated hereby and thereby are exempt from, the requirements
of any "moratorium", "control share", "fair price" or other
antitakeover laws and regulations of any state (collectively,
"Takeover Laws"), including, without limitation (i) the State of
Delaware in the case of the representations and warranties of
FBS, including Section 203 of the DGCL, and (ii) the State of
Oregon in the case of the representations and warranties of USBC,
including Sections 60.801-60.816 and 60.825-60.845 of the OBCA.
In the case of the representations and warranties of USBC, the
transactions contemplated by this Agreement and the USBC Option
Agreement have been duly approved by the USBC Board for purposes
of Article IX of the USBC Articles. In the case of the
representations and warranties of FBS, the transactions
contemplated by this Agreement and the FBS Option Agreement have
been duly approved by the FBS Board for purposes of the Article
Eighth of the FBS Certificate.
(o) Environmental Matters. (i) As used in this
Agreement, "Environmental Laws" means all applicable local, state
and federal environmental, health and safety laws and
regulations, including, without limitation, the Resource
Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation, and Liability Act, the Clean Water Act,
the Federal Clean Air Act, and the Occupational Safety and Health
Act, each as amended,
regulations promulgated thereunder, and state counterparts.
(ii) Neither the conduct nor operation of such party
or its Subsidiaries nor any condition of any property presently
or previously owned, leased or operated by any of them violates
or violated Environmental Laws and no condition has existed or
event has occurred with respect to any of them or any such
property that, with notice or the passage of time, or both, is
reasonably likely to result in liability under Environmental
Laws. Neither such party nor any of its Subsidiaries has received
any notice from any person or entity that it or its Subsidiaries
or the operation or condition of any property ever owned, leased,
operated, held as collateral or held as a fiduciary by any of
them are or were in violation of or otherwise are alleged to have
liability under any Environmental Law, including, but not limited to,
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responsibility (or potential responsibility) for the cleanup or
other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on, beneath, or
originating from any such property.
(p) Tax Matters. (i)(A) All returns, declarations,
reports, estimates, information returns and statements required
to be filed on or before the Effective Date under federal, state,
local or any foreign tax laws ("Tax Returns") with respect to it
or any of its Subsidiaries, have been or will be timely filed, or
requests for extensions have been timely filed and have not
expired; (B) all material Tax Returns filed by it are complete
and accurate; (C) all Taxes shown to be due and payable (without
regard to whether such Taxes have been assessed) on such Tax
Returns have been paid or adequate reserves have been established
for the payment of such Taxes; and (D) no material (1) audit or
examination or (2) refund litigation with respect to any Tax
Return is pending.
(ii) It has no reason to believe that any conditions
exist that might prevent or impede the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the
Code.
(q) Accounting Treatment; Tax Treatment. As of the
date hereof, it is aware of no reason why the Merger will fail to
qualify (i) for pooling-of-interests accounting treatment or (ii)
as a reorganization under Section 368(a) of the Code.
(r) Regulatory Approvals. No consents or approvals of,
or filings or registrations with, any court, administrative
agency or commission or other governmental authority or
instrumentality or with any third party are necessary to
consummate the Merger except for (i) the filing of applications
and notices, as applicable, with the Federal Reserve Board and,
to the extent necessary, the OCC and the bank regulatory
authorities of the States in which USBC and its Subsidiaries
operate; (ii) approval of (A) the listing on the NYSE of the FBS
Common Stock to be issued in the Merger and (B) the listing on
the NYSE or the quotation on NASDAQ of the New FBS Preferred
Stock to be issued in the Merger; (iii) the filing with the SEC
of the Joint Proxy Statement in definitive form and the filing
and declaration of effectiveness of the Registration Statement;
(iv) the filing of (A) a certificate of merger with the Secretary
of State of the State of Delaware pursuant to the DGCL and (B)
articles of merger with the Secretary of State of the State of
Oregon pursuant to the OBCA; (v) such filings as are required to
be made or approvals as are required to be obtained under the
securities or "Blue Sky" laws of various states in connection
with the issuance of FBS Stock in the Merger; (vi) receipt of the
approvals set forth in Section 7.01; and (vii) the consents and
approvals set forth in paragraph 5.03(r) of USBC's Disclosure
Schedule. As of the date hereof, neither of USBC nor FBS is aware
of any reason why the approvals of such regulatory authorities
will not be received without the imposition of a condition or
requirement described in the second sentence of Section 7.02.
(s) Fairness Opinions. In the case of the representations
and warranties of USBC, on or before the date hereof, Credit Suisse
First Boston Corporation has delivered an opinion to the USBC Board that
the Exchange Ratio is fair, from a financial point of view, to
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the holders of USBC Common Stock. In the case of the
representations and warranties of FBS, on or before the date
hereof, Merrill Lynch & Co. has delivered an opinion to the FBS
Board that the Exchange Ratio is fair, from a financial point of
view, to the holders of FBS Common Stock.
(t) Risk Management Instruments. All interest rate
swaps, caps, floors and option agreements and other interest rate
risk management arrangements, whether entered into for its own
account, or for the account of one or more of its Subsidiaries or
their customers, were entered into (i) in accordance with prudent
banking practices and all applicable laws, rules, regulations and
regulatory policies and (ii) with counterparties believed to be
financially responsible at the time; and each of them constitutes
the valid and legally binding obligation of it or one of its
Subsidiaries, enforceable in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles), and are in
full force and effect. Neither it nor its Subsidiaries, nor to
its knowledge any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.
(u) USBC Name. In the case of the representations and
warranties of USBC, USBC has the right to use the U.S. Bancorp
name in each state of the United States, free and clear of any
Liens, and no other person has the right to use such name in any
such state.
(v) No Material Adverse Effect. Since December 31, 1996, (i)
it and its Subsidiaries have conducted their respective businesses in the
ordinary and usual course consistent with past practice (excluding the
incurrence of expenses related to this Agreement and the transactions
contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or taken together with all
other facts, circumstances and events (described in any paragraph
of Section 5.03 or otherwise), is reasonably likely to have a
Material Adverse Effect with respect to it.
ARTICLE VI
COVENANTS
USBC hereby covenants to and agrees with FBS, and FBS
hereby covenants to and agrees with USBC, that:
6.01. Best Efforts. Subject to the terms and
conditions of this Agreement, it shall use its best efforts in
good faith to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or desirable,
or advisable under applicable laws, so as to permit consummation
of the Merger as promptly as practicable and otherwise to enable
consummation of the transactions contemplated hereby and shall
cooperate fully with the other party hereto to that end.
6.02. Stockholder Approvals. Each of them shall take,
in accordance with applicable law, applicable stock exchange or
NASDAQ rules and its respective articles or certificate of
incorporation and by-laws, all action necessary to convene,
respectively, (i) an appropriate meeting of stockholders of FBS
to consider and vote upon (A) the approval and adoption of this
Agreement and the Merger (including the issuance of the shares of
FBS Common Stock to be issued in the Merger pursuant to this
Agreement) and (B) the Board Size Amendment and (C) any other
matters required to be approved by FBS stockholders for
consummation of the Merger (including any adjournment or
postponement, the "FBS Meeting"), and (ii) an appropriate meeting
of stockholders of USBC to consider and vote upon the approval
and adoption of this Agreement and the Merger and any other
matters required to be approved by USBC's stockholders for
consummation of the Merger (including any adjournment or
postponement, the "USBC Meeting"; and each of the FBS Meeting and
the USBC Meeting, a "Meeting"), respectively, as promptly as
practicable after the Registration Statement is declared
effective. The FBS Board and the USBC Board shall recommend such
approval, and each of FBS and USBC shall take all reasonable
lawful action to solicit such approval by its respective
stockholders.
6.03. Registration Statement. (a) Each of FBS and USBC
agrees to cooperate in the preparation of a registration
statement on Form S-4 (the "Registration Statement") to be filed
by FBS with the SEC in connection with the issuance of FBS Stock
in the Merger (including the joint proxy statement and prospectus
and other proxy solicitation materials of FBS and USBC
constituting a part thereof (the "Joint Proxy Statement") and all
related documents). Provided the other party has cooperated as
required above, each party agrees to file the Joint Proxy
Statement in preliminary form with the SEC as promptly as
reasonably practicable, and FBS agrees to file the Registration
Statement with the SEC as soon as reasonably practicable after
any SEC comments with respect to the preliminary Joint Proxy
Statement are resolved. Each of USBC and FBS agrees to use all
reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as
reasonably practicable after filing thereof. FBS also agrees to
use all reasonable efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. USBC
agrees to furnish to FBS all information concerning USBC, its
Subsidiaries, officers, directors and stockholders as may be
reasonably requested in connection with the foregoing.
(b) Each of USBC and FBS agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be
supplied by it for inclusion or incorporation by reference in (i)
the Registration Statement will, at the time the Registration
Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Joint Proxy Statement and
any amendment or supplement thereto will, at the date of mailing
to stockholders and at the times of the FBS Meeting and the USBC
Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or any
statement which, in the light of the circumstances under which
such statement is made, will be false or misleading with respect
to any material fact, or which will omit to state any material
fact necessary in order to make the statements
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therein not false or misleading or necessary to correct any
statement in any earlier statement in the Joint Proxy Statement
or any amendment or supplement thereto. Each of USBC and FBS
further agrees that if it shall become aware prior to the
Effective Date of any information furnished by it that would
cause any of the statements in the Joint Proxy Statement to be
false or misleading with respect to any material fact, or to omit
to state any material fact necessary to make the statements
therein not false or misleading, to promptly inform the other
party thereof and to take the necessary steps to correct the
Joint Proxy Statement.
(c) In the case of FBS, FBS will advise USBC, promptly
after FBS receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order or
the suspension of the qualification of the FBS Stock for offering
or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for
the amendment or supplement of the Registration Statement or for
additional information.
6.04. Press Releases. It will not, without the prior
approval of the other party, issue any press release or written
statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable
law or regulation or NYSE rules.
6.05. Access; Information. (a) Upon reasonable notice
and subject to applicable laws relating to the exchange of
information, it shall afford the other party and the other
party's officers, employees, counsel, accountants and other
authorized representatives, access, during normal business hours
throughout the period prior to the Effective Date, to all of its
properties, books, contracts, commitments and records and, during
such period, it shall furnish promptly to such other party (i) a
copy of each material report, schedule and other document filed
by it pursuant to the requirements of federal or state securities
or banking laws, and (ii) all other information concerning the
business, properties and personnel of it as the other may
reasonably request.
(b) It will not use any information obtained pursuant
to this Section 6.05 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement
and, if this Agreement is terminated, will hold all information
and documents obtained pursuant to this paragraph in confidence
(as provided in, and subject to the provisions of, the
Confidentiality Agreement). No investigation by either party of
the business and affairs of the other shall affect or be deemed
to modify or waive any representation, warranty, covenant or
agreement in this Agreement, or the conditions to either party's
obligation to consummate the transactions contemplated by this
Agreement.
6.06. Acquisition Proposals. It shall not, and shall
cause its Subsidiaries and its and its Subsidiaries' officers,
directors, agents, advisors and affiliates not to, solicit or
encourage inquiries or proposals with respect to, or engage in
any negotiations concerning, or provide any confidential
information to, or have any discussions with, any person relating
to, any Takeover Proposal. It shall immediately cease and cause
to be terminated any activities, discussions or negotiations
conducted prior to the date of this Agreement with any parties
other than FBS or USBC, as applicable, with respect to any of the
foregoing. It shall promptly (within 24 hours) advise the other
party following the receipt by it of any Takeover Proposal and
the substance thereof (including the identity of the person
making such Takeover Proposal), and advise the other party of any
developments with respect to such Takeover Proposal immediately
upon the occurrence thereof.
6.07. Affiliate Agreements. (a) Not later than the
15th day prior to the mailing of the Joint Proxy Statement, (i)
FBS shall deliver to USBC, a schedule of each person that, to the
best of its knowledge, is or is reasonably likely to be, as of
the date of the FBS Meeting, deemed to be an "affiliate" of it
(each, an "FBS Affiliate") as that term is used in SEC Accounting
Series Releases 130 and 135; and (ii) USBC shall deliver to FBS,
a schedule of each person that, to the best of its knowledge, is
or is reasonably likely to be, as of the date of the USBC
Meeting, deemed to be an "affiliate" of it (each, a "USBC
Affiliate") as that term is used in Rule 145 under the Securities
Act or SEC Accounting Series Releases 130 and 135.
(b) Each of USBC and FBS shall use its respective
reasonable best efforts to cause each person who may be deemed to
be a USBC Affiliate or an FBS Affiliate, as the case may be, to
execute and deliver to USBC and FBS on or before the date of
mailing of the Joint Proxy Statement an agreement in the form
attached hereto as Exhibit C or Exhibit D, respectively.
6.08. Takeover Laws. No party shall take any action
that would cause the transactions contemplated by this Agreement
and, in the case of FBS, the FBS Option Agreement, and, in the
case of USBC, the USBC Option Agreement, to be subject to
requirements imposed by any Takeover Law and each of them shall
take all necessary steps within its control to exempt (or ensure
the continued exemption of) the transactions contemplated by this
Agreement and, in the case of FBS, the FBS Option Agreement, and,
in the case of USBC, the USBC Option Agreement, from, or if
necessary challenge the validity or applicability of, any
applicable Takeover Law, as now or hereafter in effect,
including, without limitation, Section 203 of the DGCL, Sections
60.801-60.816 and 60.825-60.845 of the OBCA, or any other
Takeover Laws that purport to apply to this Agreement, the USBC
Option Agreement, the FBS Option Agreement or the transactions
contemplated hereby or thereby.
6.09. No Rights Triggered. Each of USBC and FBS shall
take all reasonable steps necessary to ensure that the entering
into of this Agreement and, in the case of FBS, the FBS Option
Agreement, and, in the case of USBC, the USBC Option Agreement,
and the consummation of the transactions contemplated hereby and
thereby and any other action or combination of actions, or any
other transactions contemplated hereby and thereby, do not and
will not result in the grant of any rights to any person (i)
under its articles or certificate of incorporation or by-laws or
(ii) under any material agreement to which it or any of its
Subsidiaries is a party (except as expressly contemplated by (A)
the mandatory provisions under its stock option plans or (B) the
FBS Option Agreement or the USBC Option Agreement, as
applicable).
6.10. Shares Listed. In the case of FBS, FBS shall use
its best efforts to (i) list, prior to the Effective Date, on the
NYSE, subject to official notice of issuance, the shares of FBS
Common Stock to be issued to the holders of USBC Common Stock in
the Merger and (ii) if the USBC Preferred Stock is quoted on
NASDAQ immediately prior to the Effective Time, prior to the
Effective Date, either (at FBS's discretion) list on the NYSE,
subject to official notice of issuance, or provide for the
quotation on NASDAQ of the shares of New FBS Preferred Stock to
be issued to the holders of USBC Preferred Stock in the Merger.
6.11. Regulatory Applications. (a) FBS and USBC and
their respective Subsidiaries shall cooperate and use their
respective reasonable best efforts (i) to prepare all
documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties and
Regulatory Authorities necessary to consummate the transactions
contemplated by this Agreement, including, without limitation,
any such approvals or authorizations required by the Federal
Reserve Board, the OCC and, to the extent necessary, the
regulatory authorities of the States in which USBC and its
Subsidiaries operate, and (ii) to cause the Merger to be
consummated as expeditiously as reasonably practicable. Provided
USBC has cooperated as required above, FBS agrees to file the
requisite applications to be filed by it with the Federal
Reserve, the OCC and, to the extent necessary, the regulatory
authorities of the States in which USBC and its Subsidiaries
operate, as promptly as reasonably practicable. Each of FBS and
USBC shall have the right to review in advance, and to the extent
practicable each will consult with the other, in each case
subject to applicable laws relating to the exchange of
information, with respect to, all material written information
submitted to any third party or any Regulatory Authority in
connection with the transactions contemplated by this Agreement.
In exercising the foregoing right, each of the parties hereto
agrees to act reasonably and as promptly as practicable. Each
party hereto agrees that it will consult with the other party
hereto with respect to the obtaining of all material permits,
consents, approvals and authorizations of all third parties and
Regulatory Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will
keep the other party apprised of the status of material matters
relating to completion of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the
other party with all information concerning itself, its
Subsidiaries, directors, officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection
with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or
Regulatory Authority.
6.12. Indemnification. (a) Following the Effective
Date and without limitation as to time, FBS shall indemnify,
defend and hold harmless the present and former directors and
officers of USBC and its Subsidiaries (each, an "Indemnified
Party") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with
any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of
actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by
this Agreement) to the fullest extent that USBC is permitted to
indemnify its directors and officers under the laws of the State
of Oregon, the USBC Articles and USBC's by-laws as in effect on
the date hereof (and FBS shall also advance expenses (including
expenses constituting Costs described in Section 6.12(e)) as
incurred to the fullest extent permitted under applicable law;
provided that any determination required to be made with respect
to whether an officer's or director's conduct complies with the
standards set forth under Oregon law, the USBC Articles and
USBC's by-laws shall be made by independent counsel (which shall
not be counsel that provides material services to FBS) selected
by FBS and reasonably acceptable to such officer or director; and
provided, further, that in the absence of applicable Oregon
judicial precedent to the contrary, such counsel, in making such
determination, shall presume such officer's or director's conduct
complied with such standard and FBS shall have the burden to
demonstrate that such officer's or director's conduct failed to
comply with such standard.
(b) For a period of three years from the Effective
Time, FBS shall use its best efforts to provide that portion of
director's and officer's liability insurance that serves to
reimburse the present and former officers and directors of USBC
or any of its Subsidiaries (determined as of the Effective Time)
(as opposed to USBC) with respect to claims against such
directors and officers arising from facts or events which
occurred before the Effective Time, which insurance shall contain
at least the same coverage and amounts, and contain terms and
conditions no less advantageous, as that coverage currently
provided by USBC; provided, however, that in no event shall FBS
be required to expend more than 200 percent of the current amount
expended by USBC (the "Insurance Amount") to maintain or procure
such directors and officers insurance coverage; provided,
further, that if FBS is unable to maintain or obtain the
insurance called for by this Section 6.12(b), FBS shall use its
reasonable best efforts to obtain as much comparable insurance as
is available for the Insurance Amount; provided, further, that
officers and directors of USBC or any Subsidiary may be required
to make application and provide customary representations and
warranties to FBS's insurance carrier for the purpose of
obtaining such insurance; and provided, further, that such
coverage will have a single aggregate for such three-year period
in an amount not less than the annual aggregate of such coverage
currently provided by USBC.
(c) Any Indemnified Party wishing to claim
indemnification under Section 6.12(a), upon learning of any
claim, action, suit, proceeding or investigation described above,
shall promptly notify FBS thereof; provided that the failure so
to notify shall not affect the obligations of FBS under Section
6.12(a) unless and to the extent such failure materially
increases FBS's liability under such subsection (a).
(d) If FBS or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be
the continuing or surviving entity of such consolidation or
merger or shall transfer all or substantially all of its assets
to any entity, then and in each
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case, proper provision shall be made so that the successors and
assigns of FBS shall assume the obligations set forth in this
Section 6.12.
(e) FBS shall pay all reasonable Costs, including
attorneys' fees, that may be incurred by any Indemnified Party in
enforcing the indemnity and other obligations provided for in
this Section 6.12. The rights of each Indemnified Party hereunder
shall be in addition to any other rights such Indemnified Party
may have under applicable law.
6.13. Severance and Benefit Plans. (a) Until the
transition to FBS's benefit plans as set forth below, FBS shall
cause the Surviving Corporation and its Subsidiaries to provide
employees of USBC and its Subsidiaries who become employees of
the Surviving Corporation and its Subsidiaries with compensation
and employee benefit plans, programs, arrangements and other
perquisites (including, but not limited to, "employee benefit
plans" within the meaning of section 3(3) of ERISA) ("Employee
Benefit Plans") that are, in the aggregate, substantially the
same as the compensation and Employee Benefit Plans provided to
such individuals by USBC immediately prior to the Effective Date.
Within two years following the Effective Time, FBS shall cause
the Surviving Corporation and its Subsidiaries to provide USBC
employees who are employees thereof with compensation and
Employee Benefit Plans that are substantially the same as the
compensation and Employee Benefit Plans provided to similarly
situated employees of the Surviving Corporation or its
Subsidiaries who were not employees of USBC; provided, however,
FBS shall cause the Surviving Corporation and its Subsidiaries to
take into account any co-payments or deductibles under USBC's
health plans, as disclosed in USBC's Disclosure Schedule, and,
with respect to any person covered by USBC's health plans, not
impose any pre-existing condition exclusion to exclude from
coverage any condition covered under USBC's health plans, as
disclosed in USBC's Disclosure Schedule. For the purpose of
determining eligibility to participate in Employee Benefit Plans,
eligibility for benefit forms and subsidies and the vesting of
benefits under such Employee Benefit Plans (including, but not
limited to, any pension, severance, 401(k), vacation and sick
pay), and for purposes of accrual of benefits under any
severance, sick leave, vacation and other similar Employee
Benefit Plans, FBS shall give effect to years of service (and for
purposes of qualified and nonqualified pension plans, prior
earnings) with USBC or its Subsidiaries, as the case may be, as
if they were with FBS or its Subsidiaries.
(b) Notwithstanding the foregoing, FBS shall, and shall
cause its Subsidiaries to, honor in accordance with their terms
all benefits (including retiree benefits, if any) that were
vested as of the Effective Time under USBC's Employee Benefit
Plans or under other contracts, arrangements, commitments or
understandings described in USBC's Disclosure Schedule.
(c) Individuals who are employees of USBC or any of its
Subsidiaries (other than persons who have individual written
employment agreements or change of control agreements with USBC
or its Subsidiaries as specified in paragraph 6.13(c) of USBC's
Disclosure Schedule (the "Change of Control Agreements"))
immediately prior to the Effective Time and whose employment is
terminated within two years after the Effective Time shall be
entitled to receive cash severance benefits in an amount equal to
the greater of (i) the amount of cash
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severance benefits, if any, to which they would have been
entitled under USBC's Employee Benefit Plans as in effect
immediately prior to the Effective Time and (ii) the amount of
cash severance benefits, if any, to which they would have been
entitled under FBS's Employee Benefit Plans if they had been
employees of FBS (and not been employees of USBC) immediately
prior to the Effective Time and through the time of such
termination; provided, that payment of this amount shall be in
complete settlement of any amounts to which such employees would
have been entitled under USBC's Employee Benefit Plans and FBS's
Employee Benefit Plans. In computing the benefits payable
pursuant to this Section 6.13(c), service with USBC and its
Subsidiaries shall be treated as service with FBS and its
Subsidiaries. For purposes of clause (ii) of the first sentence
of this Section 6.13(c), (x) prior to the Effective Time USBC and
FBS shall negotiate in good faith and mutually determine how to
allocate different categories and levels of USBC employees among
FBS's existing employment categories and levels, (y) severance
payments shall be made using such procedures, and payable at such
times, as reasonably determined by FBS in consultation with USBC,
which procedures and times need not be identical to those
provided for in either USBC's existing severance plans or in
FBS's existing severance plans but in no way will such procedures
have a material adverse impact on the rights of any such USBC
employee, and (z) the events giving rise to entitlement to cash
severance benefits shall be based on the occurrence of a "Partial
Change of Control" (and not a "Change of Control") within the
meaning of FBS's severance plans. The Change of Control
Agreements (other than the agreements of Messers Cameron,
Sznewajs and Duim, who are separately entering into agreements
with FBS) shall remain in full force and effect except that FBS
agrees that any of such agreements providing for severance
benefits of two-times base salary and bonus and two years of
benefits continuation and pension credit shall, at the Effective
Time, be deemed amended to provide severance benefits of three
times base salary and bonus, three years of benefits continuation
and five years of pension credit.
(d) Nothing in this Section 6.13 shall be interpreted as
preventing FBS or its Subsidiaries from amending, modifying or
terminating any Employee Benefit Plans or other contracts
arrangements, commitments or understandings, in accordance with
their terms and applicable law.
(e) It is the express understanding and intention of USBC
and FBS that no employee of USBC or FBS or other person shall be
deemed to be a third party beneficiary, or have or acquire any
right to enforce the provisions of this Section 6.13, and that
nothing in this Agreement shall be deemed to constitute an
Employee Benefit Plan or an amendment to an Employee Benefit
Plan.
6.14. Accountants' Letters. Each of USBC and FBS shall
use its best efforts to cause to be delivered to the other party,
and such other party's directors and officers who sign the
Registration Statement, a letter of Deloitte & Touche LLP and
Ernst & Young LLP, respectively, independent auditors, dated (i)
the date on which the Registration Statement shall become
effective and (ii) a date shortly prior to the Effective Date,
and addressed to such other party, and such directors and
officers, in form and substance customary for "comfort" letters
delivered by independent accountants in accordance with Statement
of Accounting Standards No. 72.
6.15. Certain Director and Officer Positions. (a)
Subject to Section 6.15(c), FBS agrees to cause all of the
members of the USBC Board on the date hereof who are still
members of the USBC Board immediately prior to the Effective Time
and willing so to serve ("Former USBC Directors") to be elected
or appointed as directors of FBS at, or as promptly as
practicable after, the Effective Time (such appointment or
election of Former USBC Directors to be as evenly distributed as
possible among the classes of FBS directors). It is the intention
of the parties that the size of the board of directors of the
Surviving Corporation be substantially reduced as of the first
annual meeting of stockholders of the Surviving Corporation
following the Effective Time but that, in connection with such
reduction, and thereafter until at least the third annual meeting
of stockholders of the Surviving Corporation following the
Effective Time, the Former USBC Directors constitute in the
aggregate between 40% and 45% of the total number of directors of
the Surviving Corporation then in office.
(b) At the Effective Time,(i) Gerry B. Cameron shall
be Chairman of the FBS Board for a term extending through
December 31, 1998 and John F. Grundhofer shall continue to be
President and Chief Executive Officer of FBS and (ii) Gary T.
Duim and Robert D. Sznewajs shall each be a Vice Chairman of FBS.
(c) FBS shall use all reasonable efforts to solicit
the affirmative vote of the holders of at least 80% of the
outstanding FBS Common Stock entitled to vote thereon at the FBS
Meeting with respect to approval of the Board Size Amendment. In
the event such approval is not obtained at the FBS Meeting, the
parties agree that, notwithstanding the provisions of Section
6.15(a), FBS shall appoint or elect to the FBS Board the maximum
number of Former USBC Directors (and in no event fewer than 10
Former USBC Directors) as would result in there being 24 FBS
directors and FBS agrees to appoint the remaining Former USBC
Director (as selected by the Chief Executive Officer of USBC) as
an advisory director of the FBS Board entitled to fully
participate at all FBS Board meetings to the fullest extent
permitted by applicable law. FBS shall provide the advisory
director with compensation, benefits and indemnification as if
such person were a full member of the FBS Board. The parties
agree that the Merger shall not be conditioned upon approval of
the Board Size Amendment, and if such approval is not obtained at
the FBS Meeting, the FBS Certificate as amended at the Effective
Time, shall not include the Board Size Amendment.
6.16. Charitable Contributions. Following the Effective
Date, FBS shall maintain the aggregate level of charitable contributions
historically maintained by USBC in USBC markets.
6.17. Coordination of Dividends. Until the Effective
Time, USBC and FBS shall coordinate with the other the
declaration of any dividends or other distributions with respect
to the USBC Common Stock and the FBS Common Stock and the record
dates and payment dates relating thereto, it being the intention
of the parties that holders of shares of USBC Common Stock or FBS
Common Stock shall not receive more than one dividend, or fail to
receive one dividend, for any single calendar quarter on their
shares of USBC Common Stock (including any shares of FBS Common
Stock received in exchange therefor in the Merger) or FBS Common
Stock, as the case may be.
6.18. Notification of Certain Matters. Each of USBC
and FBS shall give prompt notice to the other of any fact, event
or circumstance known to it that (i) is reasonably likely,
individually or taken together with all other facts, events and
circumstances known to it, to result in any Material Adverse
Effect with respect to it or (ii) would cause or constitute a
material breach of any of its representations, warranties,
covenants or agreements contained herein.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of each of the parties to consummate
the Merger is conditioned upon the satisfaction at or prior to
the Effective Time of each of the following:
7.01. Stockholder Vote. Approval and adoption of this
Agreement (subject to Section 8.03) and the Merger by the
requisite vote of the stockholders of USBC and approval and
adoption of this Agreement (subject to Section 8.03) and the
Merger (including the issuance of shares of FBS Common Stock to
be issued in the Merger pursuant to this Agreement) by the
requisite vote of the stockholders of FBS.
7.02. Regulatory Approvals. All regulatory approvals
required to consummate the transactions contemplated hereby,
including, without limitation, those specified in Section
5.03(r), shall have been obtained and shall remain in full force
and effect and all statutory waiting periods in respect thereof
shall have expired and no such approvals shall contain any
conditions or restrictions which either the FBS Board or the USBC
Board reasonably determines in good faith would, following the
Effective Time, have a Material Adverse Effect on the Surviving
Corporation and its Subsidiaries taken as a whole.
7.03. Third Party Consents. All consents or approvals
of all persons (other than Regulatory Authorities) required for
the consummation of the Merger shall have been obtained and shall
be in full force and effect, unless the failure to obtain any
such consent or approval is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
USBC or FBS.
7.04. No Injunction, Etc. No order, decree or
injunction of any court or agency of competent jurisdiction shall
be in effect, and no law, statute or regulation shall have been
enacted or adopted, that enjoins, prohibits or makes illegal the
consummation of any of the transactions contemplated hereby.
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7.05. Accounting Treatment. In the case of FBS's obligations,
FBS shall have received from Ernst & Young LLP, independent auditors
for FBS, letters, dated the date of or shortly prior to each of
the mailing date of the Joint Proxy Statement and the Effective
Date, stating its opinion that the Merger shall qualify for
pooling-of-interests accounting treatment.
7.06. Representations, Warranties and Covenants of
FBS. In the case of USBC's obligations: (a) each of the
representations and warranties contained herein of FBS shall be
true and correct as of the date of this Agreement and upon the
Effective Date with the same effect as though all such
representations and warranties had been made on the Effective
Date, except for any such representations and warranties made as
of a specified date, which shall be true and correct as of such
date, in each case subject to the standard set forth in Section
5.02, (b) each and all of the agreements and covenants of FBS to
be performed and complied with pursuant to this Agreement on or
prior to the Effective Date shall have been duly performed and
complied with in all respects (except to the extent that any
failure so to comply would not be reasonably likely, individually
or in the aggregate, to result in a Material Adverse Effect with
respect to FBS), and (c) USBC shall have received a certificate
signed by the Chief Financial Officer of FBS, dated the Effective
Date, to the effect set forth in clauses (a) and (b) of this
Section 7.06.
7.07. Representations, Warranties And Covenants Of
USBC. In the case of FBS's obligations: (a) each of the
representations and warranties contained herein of USBC shall be
true and correct as of the date of this Agreement and upon the
Effective Date with the same effect as though all such
representations and warranties had been made on the Effective
Date, except for any such representations and warranties made as
of a specified date, which shall be true and correct as of such
date, in each case subject to the standard set forth in Section
5.02, (b) each and all of the agreements and covenants of USBC to
be performed and complied with pursuant to this Agreement on or
prior to the Effective Date shall have been duly performed and
complied with in all respects (except to the extent that any
failure so to comply would not be reasonably likely, individually
or in the aggregate, to result in a Material Adverse Effect with
respect to USBC), and (c) FBS shall have received a certificate
signed by the Chief Financial Officer of USBC, dated the
Effective Date, to the effect set forth in clauses (a) and (b) of
this Section 7.07.
7.08. Effective Registration Statement. The
Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall
have been initiated or threatened by the SEC or any other
Regulatory Authority.
7.09. Tax Opinion. USBC shall have received an opinion
from Wachtell, Lipton, Rosen & Katz, and FBS shall have received
an opinion from Cleary, Gottlieb, Steen & Hamilton, tax counsel
to USBC and FBS, respectively, each dated as of the Effective
Time, substantially to the effect that, on the basis of the
facts, representations and assumptions set forth in such opinions
which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a)
of the Code and that accordingly:
(i) No gain or loss will be recognized by FBS or USBC as a
result of the Merger;
(ii) No gain or loss will be recognized by the
stockholders of USBC who exchange their USBC Stock solely
for FBS Stock pursuant to the Merger (except with respect
to cash received in lieu of a fractional share interest in
FBS Stock); and
(iii) The tax basis of the FBS Stock received by
stockholders who exchange all of their USBC Stock solely
for FBS Stock in the Merger will be the same as the tax
basis of the USBC Stock surrendered in exchange therefor.
In rendering such opinion, such counsel may require
and rely upon representations and covenants including those
contained in certificates of officers of FBS, USBC and others.
7.10. Certificate of Designations. The Certificate of
Designations shall have been filed in accordance with Section 151 of
the DGCL.
7.11. NYSE Listing. The shares of FBS Common Stock
issuable pursuant to this Agreement shall have been approved for
listing on the NYSE, subject to official notice of issuance, and,
subject to Section 6.10, the shares of New FBS Preferred Stock
issuable pursuant to this Agreement shall either have been
approved for listing on the NYSE or approved for trading on
NASDAQ, in either case subject to official notice of issuance.
It is specifically provided, however, that a failure
to satisfy any of the conditions set forth in Sections 7.05 and
7.07 shall only constitute conditions if asserted by FBS, and a
failure to satisfy any of the conditions set forth in Section
7.06 shall only constitute conditions if asserted by USBC.
ARTICLE VIII
TERMINATION
8.01. Termination. This Agreement may be terminated, and
the Merger may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time,
by the mutual consent of FBS and USBC, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
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(b) Breach. At any time prior to the Effective Time, by
FBS or USBC, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event of
either: (i) a breach by the other party of any representation or
warranty contained herein (subject to the standard set forth in
Section 5.02), which breach cannot be or has not been cured
within 30 days after the giving of written notice to the
breaching party of such breach; or (ii) a breach by the other
party of any of the covenants or agreements contained herein,
which breach cannot be or has not been cured within 30 days after
the giving of written notice to the breaching party of such
breach and which breach would be reasonably likely, individually
or in the aggregate, to result in a Material Adverse Effect with
respect to the breaching party.
(c) Delay. At any time prior to the Effective Time, by
FBS or USBC, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event that
the Merger is not consummated by March 31, 1998, except to the
extent that the failure of the Merger then to be consummated
arises out of or results from the knowing action or inaction of
the party seeking to terminate pursuant to this Section 8.01(c).
(d) No Approval. By USBC or FBS, if its Board of
Directors so determines by a vote of a majority of the members of
its entire Board, in the event (i) the approval of the Federal
Reserve Board or any other Regulatory Authority required for
consummation of the Merger and the other transactions
contemplated by the Merger shall have been denied by final
nonappealable action of such Regulatory Authority or (ii) any
stockholder approval required by Section 7.01 herein is not
obtained at the USBC Meeting or the FBS Meeting.
(e) Failure to Recommend, Etc. At any time prior to
the USBC Meeting, by FBS if the USBC Board shall have failed to
make its recommendation referred to in Section 6.02, withdrawn
such recommendation or modified or changed such recommendation in
a manner adverse to the interests of FBS; or at any time prior to
the FBS Meeting, by USBC if the FBS Board shall have failed to
make its recommendation referred to in Section 6.02, withdrawn
such recommendation or modified or changed such recommendation in
a manner adverse to the interests of USBC.
(f) Stock Option Agreements. (i) By FBS, at any time
after 6:00 a.m. New York City time on March 20, 1997, if the USBC
Option Agreement shall not have been executed and delivered by
USBC to FBS prior to such termination or (ii) by USBC, at any
time after 6:00 a.m. New York City time on March 20, 1997, if the
FBS Option Agreement shall not have been executed and delivered
by FBS to USBC prior to such termination.
8.02. Effect of Termination and Abandonment. In the
event of termination of this Agreement and the abandonment of the
Merger pursuant to this Article VIII, no party to this Agreement
shall have any liability or further obligation to any other party
hereunder except (i) as set forth in Sections 8.03 and 9.01 and
(ii) that termination will not relieve a breaching party from
liability for any willful breach of this Agreement giving rise to
such termination; provided, however, that any termination shall
not affect the USBC Option Agreement or the FBS Option Agreement.
8.03. Termination Expenses. (a) In the event of
termination of this Agreement and the abandonment of the Merger
at any time (i) by FBS pursuant to Sections 8.01(b), 8.01(e) or
8.01(f)(i) or (ii) by USBC or FBS pursuant to Section 8.01(d)(ii)
as a result of the failure to receive the stockholder approval at
the USBC Meeting contemplated by Section 7.01, and in order to
compensate FBS for the expenses associated with the negotiation
of this Agreement and the other matters contemplated hereby, USBC
shall, within one business day following such termination, pay
FBS a fee of $20,000,000 in immediately available funds. FBS's
right to receive such fee, and ability to enforce the provisions
of this Section 8.03(a), shall not be subject to approval by the
stockholders of USBC or FBS.
(b) In the event of termination of this Agreement and
the abandonment of the Merger at any time (i) by USBC pursuant to
Sections 8.01(b), 8.01(e) or 8.01(f)(ii) or (ii) by FBS or USBC
pursuant to Section 8.01(d)(ii) as a result of the failure to
receive the stockholder approval at the FBS Meeting contemplated
by Section 7.01, and in order to compensate USBC for the expenses
associated with the negotiation of this Agreement and the other
matters contemplated hereby, FBS shall, within one business day
following such termination, pay USBC a fee of $20,000,000 in
immediately available funds. USBC's right to receive such fee,
and ability to enforce the provisions of this Section 8.03(b),
shall not be subject to approval by the stockholders of FBS or
USBC.
ARTICLE IX
MISCELLANEOUS
9.01. Survival. All representations, warranties,
agreements and covenants contained in this Agreement shall not
survive the Effective Time or termination of this Agreement if
this Agreement is terminated prior to the Effective Time;
provided, however, if the Effective Time occurs, the agreements
of the parties in Sections 6.12, 6.13, 6.15 and Article IX and in
the Confidentiality Agreement shall survive the Effective Time,
and if this Agreement is terminated prior to the Effective Time,
the agreements of the parties in Sections 6.05(b), 8.02, 8.03 and
Article IX and in the Confidentiality Agreement shall survive
such termination.
9.02. Waiver; Amendment. Prior to the Effective Time,
any provision of this Agreement may be (i) waived by the party
benefited by the provision, or (ii) amended or modified at any
time, by an agreement in writing between the parties hereto
approved by their respective Boards of Directors and executed in
the same manner as this Agreement, except that, after the USBC
Meeting the consideration to be received by the stockholders of
USBC for each share of USBC Stock shall not thereby be decreased.
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<PAGE>
9.03. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to constitute
an original.
9.04. Governing Law. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of
New York, without regard to the conflict of law principles
thereof (except to the extent that mandatory provisions of
Federal law or of the corporation laws of the State of Oregon
with respect to USBC or of the State of Delaware with respect to
FBS are applicable).
9.05. Expenses. Subject to Section 8.03, each party
hereto will bear all expenses incurred by it in connection with
this Agreement and the transactions contemplated hereby, except
that printing expenses and SEC registration fees shall be shared
equally between USBC and FBS.
9.06. Notices. All notices, requests and other
communications hereunder to a party shall be in writing and shall
be deemed given if personally delivered, telecopied (with
confirmation) or mailed by registered or certified mail (return
receipt requested) to such party at its address set forth below
or such other address as such party may specify by notice to the
parties hereto.
If to USBC, to:
U.S. Bancorp
111 S.W. Fifth Avenue, T-31
Portland, Oregon 97204
Attention: Dwight V. Board, Esq.
Fax: (503) 275-3706
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
Fax: (212) 403-2000
26
<PAGE>
If to FBS, to:
First Bank System, Inc.
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Lee R. Mitau, Esq.
Fax: (612) 973-4333
With copies to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Victor I. Lewkow, Esq.
Fax: (212) 225-3999
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: H. Rodgin Cohen, Esq.
Fax: (212) 558-3588
9.07. Entire Understanding; No Third Party
Beneficiaries. This Agreement, the USBC Option Agreement, the FBS
Option Agreement and the Confidentiality Agreement represent the
entire understanding of the parties hereto with reference to the
transactions contemplated hereby and thereby and this Agreement
supersedes any and all other oral or written agreements (other
than the USBC Option Agreement, the FBS Option Agreement and the
Confidentiality Agreement) heretofore made. Except for Sections
6.12 and 6.15, nothing in this Agreement expressed or implied, is
intended to confer upon any person, other than the parties hereto
or their respective successors, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
9.08. Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference
shall be to a Section of, or Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to
require USBC, FBS or any of their respective Subsidiaries or
affiliates to take any action which would violate applicable law
(whether statutory or common law), rule or regulation.
27
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed in counterparts by their duly
authorized officers, all as of the day and year first above
written.
U.S. BANCORP
By: /s/ Gerry B. Cameron
------------------------------
Name: Gerry B. Cameron
Title: Chairman of the Board,
Chief Executive Officer
and President
FIRST BANK SYSTEM, INC.
By: /s/ John F. Grundhofer
------------------------------
Name: John F. Grundhofer
Title: Chairman, President and
Chief Executive Officer
30
<PAGE>
[Conformed Copy]
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 20, 1997,
between FIRST BANK SYSTEM, INC., a Delaware corporation
("Grantee"), and U.S. BANCORP., an Oregon 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
date 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 29,463,624
fully paid and nonassessable shares of the common stock, $5.00
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 NASDAQ National Market System 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,
<PAGE>
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 the Grantee shall have voted
and failed to approve and adopt 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 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
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<PAGE>
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,
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 (except that in the case of the Trust Group of Issuer
in its fiduciary capacity for various beneficiaries,
including participants in Issuer's Employee Investment Plan
(the "Trust Group"), such percentage shall be 15%) and (b)
"Subsidiary" shall have the meaning set forth in Rule 12b-2
under the 1934 Act;
(ii) Any person other than the Trust Group,
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 or the Trust Group shall have acquired 15% 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 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;
(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
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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 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
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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 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
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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 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.
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<PAGE>
(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 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
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<PAGE>
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 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
8
<PAGE>
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 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
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(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, or engage in a plan of exchange with any
person, other than Grantee or a Grantee Subsidiary and Issuer
shall not be the continuing or surviving corporation of such
consolidation or merger or the acquiror in such plan of exchange,
(ii) to permit any person, other than Grantee or a Grantee
Subsidiary, to merge into Issuer or be acquired by Issuer in a
plan of exchange and Issuer shall be the continuing or surviving
or acquiring corporation, but, in connection with such merger or
plan of exchange, 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 or
plan of exchange 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:
(i) "Acquiring Corporation" shall mean (i)
the continuing or surviving person of a consolidation or
merger with Issuer (if other than Issuer), (ii) the
acquiring person in a plan of exchange in which Issuer is
acquired, (iii) Issuer in a merger or plan of exchange in
which Issuer is the continuing or surviving or acquiring
person, and (iv) 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.
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(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 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
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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 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
12
<PAGE>
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 of
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 execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof 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
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<PAGE>
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.
(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).
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<PAGE>
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.
(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.
15
<PAGE>
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 (except to the
extent that mandatory provisions of Federal law or of the
corporation law of the State of Oregon 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.
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<PAGE>
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.
FIRST BANK SYSTEM, INC.
By: /s/ John F. Grundhofer
-----------------------------
Name: John F. Grundhofer
Title: Chairman, President
and Chief Executive Officer
U.S. BANCORP
By: /s/ Gerry B. Cameron
-----------------------------
Name: Gerry B. Cameron
Title: Chairman of the Board,
Chief Executive Officer
and President
17
<PAGE>
[Conformed 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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
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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
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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
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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
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<PAGE>
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:
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<PAGE>
(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
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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
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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
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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.
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(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.
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(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
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(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.
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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.
U.S. BANCORP
By: /s/ Gerry B. Cameron
Name: Gerry B. Cameron
Title: Chairman of the Board, Chief
Executive Officer and President
FIRST BANK SYSTEM, INC.
By: /s/ John F. Grundhofer
Name: John F. Grundhofer
Title: Chairman, President and
Chief Executive Officer
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