STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated August 7, 1995, between FIRST
BANK SYSTEM, INC., a Delaware corporation ("Grantee"), and FIRSTIER FINANCIAL,
INC., a Nebraska 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 prior to the date hereof (the "Merger Agreement");
and
WHEREAS, as a condition and inducement to Grantee's pursuit
of the transactions contemplated by 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. 1.(a) Issuer hereby grants to Grantee an uncondi-
tional, irrevocable option (the "Option") to purchase, subject to the terms
hereof, up to 3,680,036 fully paid and nonassessable shares of the common stock,
$5.00 par value, of Issuer ("Common Stock") at a price per share equal to the
last reported sale price per share of Common Stock on the Nasdaq National Market
System on the date of the announcement of the execution of the Merger Agreement;
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 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; or
(iii) the passage of 18 months (or such longer period as provided in Section 10)
after termination of the Merger Agreement 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 18 months (or such longer period as provided in Sec-
tion 10) from the expiration of the Last Triggering Event (as defined below) but
in no event more than 24 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
-2-
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, in either case, after 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 to engage in an Acquisition Transaction;
(v) Issuer shall have willfully breached any
covenant or obligation contained in the Merger Agreement in
anticipation of engaging in an Acquisition Transaction, and
such breach would entitle Grantee to terminate the Merger
Agreement; or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall
have filed an application or notice with the Federal Reserve
Board or other federal or state bank regulatory authority,
which application or notice has been accepted for process-
ing, for approval to engage in an Acquisition Transaction.
2.(c) The term "Subsequent Triggering Event" shall
mean any of the following events or transactions occurring after the date
hereof:
-3-
(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
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.
-4-
(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.
-5-
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. Section 18a
and regulations promulgated thereunder and (y) in the event, under the Bank
Holding Company Act of 1956, 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 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 Agree-
ment, 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.
-6-
(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 under-
writer or managing underwriters, or, if none, the sole underwriter or under-
writers, 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
-7-
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, investment banking 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 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
-8-
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) 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 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
-9-
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 Ter-
mination 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 indi-
cated:
(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
-10-
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 Sub-
stitute 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 Substi-
tute 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
-11-
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 Sub-
stitute 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,
-12-
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.
-13-
(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 has 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.
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 Bank Holding Company 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.
14. 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. 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
-14-
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 l(a) hereof (as adjusted pursuant to Section l(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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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 suc-
cessors except as assignees, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided herein.
-15-
21. 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.
FIRST BANK SYSTEM, INC.
By /s/ Richard A. Zona
-----------------------------
Its Vice Chairman and
-------------------------
Chief Financial Officer
FIRSTIER FINANCIAL, INC.
By /s/ David A. Rismiller
-----------------------------
Its Chairman Pres. & CEO
-------------------------
-16-