STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated July 21, 1994
between FIRST BANK SYSTEM, INC., a Delaware corporation
("Grantee"), and METROPOLITAN FINANCIAL CORPORATION, a
Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an
Agreement of Merger and Consolidation of even date herewith
(the "Merger Agreement"), which agreement has been executed
by the parties hereto immediately prior to this Agreement;
and
WHEREAS, as a condition and inducement to
Grantee's entering into the Merger Agreement and in
consideration therefor, Issuer has agreed to grant Grantee
the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing
and the mutual covenants and agreements set forth herein
and in the Merger Agreement, the parties hereto agree as
follows:
1. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to
purchase, subject to the terms hereof, up to 6,209,304
fully paid and nonassessable shares of the common stock,
$.01 par value, of Issuer ("Common Stock") at a price of
$24.66 per share; provided, however, that in the event
Issuer issues or agrees to issue any shares of Common Stock
at a price less than $24.66 per share (as adjusted pursuant
to subsection (b) of Section 5) other than in connection
with the options, rights or plans disclosed on Schedule 3.3
to 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 are 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), the number of shares of Common Stock
subject to the Option shall be increased so that, after
such issuance, it 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 (e) of this Section 2)
within 12 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 Date 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; (iii) termination of the Merger
Agreement either (a) pursuant to Section 7.1(e) thereof, or
(b) by Grantee solely as a result of failure of one or more
of the conditions set forth in Sections 6.1(a), 6.1(b),
6.1(c), 6.1(g), 6.3(e), 6.3(h), 6.3(i) or 6.3(k) or
pursuant to Section 7.1(c) (as a result of failure of
Grantee's shareholders to approve the Merger) or Section
7.1(d) (as a result of failure to consummate the Merger on
or before the date specified therein) if neither Issuer nor
any of its affiliates, officers, directors, employees or
agents shall have taken any actions that have contributed
in any way, either directly or indirectly, to any such
failure; or (iv) the passage of 12 months (or such longer
period as provided in Section 10) after termination of the
Merger Agreement (other than any termination of the Merger
Agreement covered by the immediately preceding clause
(iii)) if such termination follows the occurrence of an
Initial Triggering Event (provided that if an Initial
Triggering Event continues or occurs beyond such
termination, the Exercise Termination Event shall be 12
months (or such longer period as provided in Section 10)
from the expiration of the Last Triggering Event but in no
event more than 18 months (or such longer period as
provided in Section 10) after such termination). The
"Last Triggering Event" shall mean the last Initial
Triggering Event to occur. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event"
shall mean any of the following events or transactions
occurring after the date hereof:
(i) Issuer or any of its
Subsidiaries (as 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 (the "1934 Act"),
and the rules and regulations thereunder) other
than Grantee or any of its Subsidiaries (each a
"Grantee Subsidiary") or the Board of Directors
of Issuer shall have recommended that the
shareholders of Issuer approve or accept any
Acquisition Transaction 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, (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 the Issuer shall
not have approved the transactions contemplated
by the Merger Agreement at the meeting held for
that purpose or any adjournment thereof, or such
meeting shall not have been held or shall have
been cancelled prior to termination of the Merger
Agreement, or Issuer's Board of Directors shall
have withdrawn or modified (or publicly announced
its intention to withdraw or modify or interest
in withdrawing or modifying) 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 or interest in
authorizing, recommending or proposing) an
agreement to engage in an Acquisition Transaction
with any person other than Grantee or a Grantee
Subsidiary;
(iv) Any person other than Grantee or any
Grantee Subsidiary shall have made a bona fide
proposal to Issuer or its shareholders by public
announcement or written communication that is or
becomes the subject of public disclosure to
engage in an Acquisition Transaction;
(v) Issuer shall have breached any
covenant or obligation contained in the Merger
Agreement and such breach would entitle Grantee
to terminate the Merger Agreement;
(vi) Any person other than Grantee or any
Grantee Subsidiary, other than in connection with
a transaction to which Grantee has given its
prior written consent, shall have filed an
application or notice with the Federal Reserve
Board, the Office of Thrift Supervision ("OTS")
or other federal or state bank regulatory
authority, which application or notice has been
accepted for processing, for approval to engage
in an Acquisition Transaction; or
(vii) Issuer shall have terminated the
Merger Agreement pursuant to Section 7.1(b) by
reason of the failure of Issuer's condition set
forth in Section 6.2(g) or pursuant to Section
7.1(f).
(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 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) shall be 20%.
(d) 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.
(e) In the event the Holder is entitled to and
wishes to exercise the Option, it shall send to Issuer a
written notice (the date of which being herein referred to
as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii)
a place and date not earlier than three business days nor
later than 60 business days from the Notice Date for the
closing of such purchase (the "Closing Date"); provided
that if prior notification to or approval of the Federal
Reserve Board, the OTS or any other regulatory agency is
required in connection with such purchase, the Holder shall
promptly file the required notice or application for
approval, shall promptly notify the 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.
(f) At the closing referred to in subsection (e)
of this Section 2, the Holder shall pay to Issuer the
aggregate purchase price for the shares of Common Stock
purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank
account designated by Issuer, provided that failure or
refusal of Issuer to designate such a bank account shall
not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the
delivery of immediately available funds as provided in
subsection (f) 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.
(h) Certificates for Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend
that shall read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without
charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933 (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 satisfactory to Issuer,
to the effect that such legend is not required for purposes
of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and
(ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of
the written notice of exercise of the Option provided for
under subsection (e) 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 premerger
notification, reporting and waiting period requirements
specified in 15 U.S.C. 18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended, or the Home Owners Loan
Act, as amended, or any state or other federal banking law,
prior approval of or notice to the Federal Reserve Board,
the OTS 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, the OTS 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 the 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 shall be subject to
adjustment from time to time as provided in this Section 5.
(a) In the event of any change in 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 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 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 best efforts to cause such
registration statement first to become effective and then
to remain effective for such period not in excess of 180
days from the day such registration statement first becomes
effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions.
Grantee shall have the right to demand two such
registrations. The Issuer shall bear the costs of such
registrations (including, but not limited to, attorneys'
fees, printing costs and filing fees). 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 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 the 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. 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.
7. (a) Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise
Termination Event, (i) at the request of the Holder,
delivered within 12 months of such occurrence (or such
later period as provided in Section 10), Issuer shall
repurchase the Option from the Holder at a price (the
"Option Repurchase Price") equal to (x) 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 plus (y) Grantee's
Out-of-Pocket Expenses (as defined below) (to the extent
not previously reimbursed), and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"),
delivered within 12 months of such occurrence (or such
later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner
as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to (x) the market/offer price
multiplied by the number of Option Shares so designated
plus (y) Grantee's Out-of-Pocket Expenses (to the extent
not previously reimbursed). The term "Out-of-Pocket
Expenses" shall mean Grantee's reasonable out-of-pocket
expenses incurred in connection with the transactions
contemplated by the Merger Agreement, including without
limitation legal, accounting and consulting fees. 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 price paid in such sale for such assets or
deposits and the current market value of the remaining
assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the
Owner, as the case may be, 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.
(b) 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 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 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 Purchase Price or the Option Share Repurchase
Price that Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Holder, a
new 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, 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.
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 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
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 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 corporation
of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in
which Issuer is the continuing or surviving
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 is
then exercisable, divided by the Average Price. The
exercise price of the Substitute Option per share of
Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock for which the
Option is then exercisable and the denominator of which
shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the
foregoing paragraphs, shall the Substitute Option be
exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option
would be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise but
for this clause (e), the issuer of the Substitute Option
(the "Substitute Option Issuer") shall make a cash
payment to Holder equal to the excess of (i) the value of
the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in
this clause (e). This difference in value shall be
determined by a nationally recognized investment banking
firm selected by the Holder.
(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 (x) 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
plus (y) Grantee's Out-of-Pocket Expenses (to the extent
not previously reimbursed), 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
(x) the Highest Closing Price multiplied by the number of
Substitute Shares so designated plus (y) Grantee's Out-of-
Pocket Expenses (to the extent not previously reimbursed).
The term "Highest Closing Price" shall mean the highest
closing price for shares of Substitute Common Stock within
the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required
repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the
Substitute Share Owner, as the case may be, may exercise
its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by
surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement,
a copy of this Agreement) and certificates for 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 Share
Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after
the date on which the Substitute Option Issuer is no longer
so prohibited; provided, however, that if the Substitute
Option Issuer is at any time after delivery of a notice of
repurchase pursuant to 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 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, 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, 12-month or 18-month periods for
exercise of certain rights under Sections 2, 6, 7, 9 and 12
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 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 Board of Directors
of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered
by Issuer. This Agreement is the valid and legally binding
obligation of 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 12 months
following such Subsequent Triggering Event (or such later
period as provided in Section 10); provided, however, that
until the date 30 days following the date on which the
Federal Reserve Board and OTS have approved applications 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 and OTS.
13. If the Grantee has been paid the termination
fee provided for in the Merger Agreement (the "Termination
Fee") and at any time receives any Net Realized Cash (as
defined below) under this Agreement, then Grantee shall be
obligated, as provided in this Section 13, to reimburse
such Termination Fee, but only up to the amount of Net
Realized Cash received by the Grantee. The term "Net
Realized Cash" shall mean: (i) any cash proceeds received
on sale or other disposition of Option Shares (or on sale
or other disposition of other consideration received in
exchange for such Option Shares), net of all related
commissions, fees, underwriting discounts, costs and
expenses; (ii) any Option Repurchase Price paid pursuant to
Section 7 hereof; and (iii) any cash proceeds received in
exchange for sale or other disposition of the Option (or
upon sale or other disposition of other consideration
received in exchange for such Option), net of all related
commissions, fees, underwriting discounts, costs and
expenses. If the Grantee becomes obligated to reimburse
all or any part of the Termination Fee under this Section
13, Grantee shall do so as soon as practicable upon receipt
of the Net Realized Cash, by wire transfer of immediately
available funds to a bank account designated by Issuer. In
no event shall the aggregate amount payable by Grantee
under this Section 13 exceed the lesser of (x) the amount
of Termination Fee previously received by Grantee and (y)
the amount of Net Realized Cash received by Grantee under
this Agreement.
14. Each of Grantee and Issuer will use its best
efforts to make all filings with, and to obtain consents
of, all third parties and governmental authorities
necessary to the consummation of the transactions
contemplated by this Agreement, including without
limitation applying to the Federal Reserve Board under the
Bank Holding Company Act and the OTS under the Home Owners
Loan Act for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to
state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time,
if ever, as it deems appropriate to do so.
15. 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.
16. 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 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.
17. 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.
18. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Minnesota, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws
thereof.
19. 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.
20. 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.
21. Except as otherwise expressly provided
herein or in the Merger Agreement, this Agreement contain
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.
22. Capitalized terms used in this Agreement and
not defined herein shall have the meanings assigned thereto
in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has
caused this Agreement to be executed on its behalf by its
officers thereunto duly authorized, all of the date first
above written.
METROPOLITAN FINANCIAL
CORPORATION
By Norman M. Jones
Its Chairman of the
Board and Chief
Executive Officer
FIRST BANK SYSTEM, INC.
By John F. Grundhofer
Its Chairman, President
and Chief Executive
Officer