EXHIBIT 10M
FIRST BANK SYSTEM, INC. STOCK OPTION LOAN PROGRAM
SUMMARY OF TERMS
Pursuant to the Stock Option Loan Program adopted by the First Bank System, Inc.
("FBS") Board of Directors, beginning February 27, 1993, active employees
holding stock options ("Participants") are entitled to borrow from FBS the
amount necessary to pay the exercise price upon exercise of an FBS stock option.
Loans will be made to Participants on the following terms:
1. MAXIMUM LOAN AMOUNT. Participants may borrow up to the full exercise price
upon exercise of an FBS stock option. The loan amount will be immediately
applied to payment of the exercise price to FBS, and Participants will not
directly receive the funds prior to such payment. The loan amount shall not
include amounts intended to satisfy applicable tax withholding payments or
for any other purpose other than payment of the stock option exercise
price.
2. TERM. Participants may select the length of the term of the loan (in whole
years) up to a maximum of six years.
3. PAYMENT SCHEDULE. Subject to applicable prepayment requirements, all
principal and interest on a loan will be payable at the end of the term of
the loan. Participants may prepay a loan or any portion thereof without
penalty.
4. INTEREST RATE. The interest rate on loans will be the applicable federal
rate (determined in accordance with Section 1274(d) of the Internal Revenue
Code of 1986, as amended) on the date the loan is extended. Interest will
be compounded semi-annually and due and payable at the time the principal
is due and payable.
5. SECURITY. Participants are required to initially provide FBS with a
security interest in all of the FBS Common Stock received upon the exercise
of the loan. FBS will retain a Participant's share certificates in
connection with securing a loan, and Participants will be required to
execute a stock power in favor of FBS. In the event that a Participant
elects to deliver shares issued upon exercise to FBS to satisfy the
Participant's tax withholding responsibility, however, no security interest
will be retained in such shares. To the extent that FBS Common Stock held
as collateral has a market value exceeding 125% of the loan balance, a
Participant may request release of the excess collateral in accordance with
the other terms and conditions of the Loan Program. Payment towards
principal of $1.25, the par value of FBS Common Stock, per released share
is required in connection with the release of excess collateral. FBS
reviews collateral coverage once a year (in March) and requires that
Participants who have received releases of collateral either reduce their
loan balances or provide more collateral if coverage falls below 110% of
the loan balance. In the event of a reclassification of shares of FBS
Common Stock, an exchange of shares of FBS Common Stock for another
security, a stock split or granting of a stock dividend, or any similar
event, FBS or its successor shall retain a security interest in the
securities to which the Participant is entitled pursuant to such event. If
a Participant desires to sell shares of the capital stock held as
collateral for the security interest, the Participant must repay such
portion of the loan as is secured by such collateral (i.e., the exercise
price on such shares plus accrued interest thereon). Capital stock
constituting collateral may be released in blocks of a minimum of 100
shares (unless all of the remaining collateral constitutes less than 100
shares). Regardless of any security interest maintained by FBS in shares of
FBS Common Stock, Participants are personally liable for the entire amount
of any loan under the Loan Program.
6. TERMINATION OF EMPLOYMENT; DEATH. In the case of retirement by a
Participant, the Participant's loan may remain outstanding with the same
terms and conditions as if no termination had occurred until the end of its
term. In the event of resignation or involuntary termination, the loan must
be repaid in full within 90 days of a Participant's last day of active
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employment. In the case of the death of a Participant, the loan shall
become immediately due and payable.
7. DOCUMENTATION. In connection with loans extended under the Loan Program,
Participants will be required to complete such loan documentation as FBS
deems appropriate. Such documentation may include, without limitation, a
promissory note, a stock power and such documents as are required under
Federal Reserve Regulation G.
8. RIGHT OF OFFSET. In the event that a Participant defaults on repayment of a
loan under the Loan Program, and to the extent that the loan repayment is
not satisfied by the security interest, FBS may offset wages otherwise owed
to a Participant (subject to applicable law).
9. CERTAIN FEDERAL TAX CONSEQUENCES. The following is a discussion of general
tax principles affecting the Loan Program. The general tax principles
discussed below are subject to changes that may be brought about by
subsequent legislation or by regulations and administrative rulings, which
may be applied on a retroactive basis. Participants may be subject to state
or local income taxes and should refer to the applicable laws of those
jurisdictions. Each Participant should consult his or her own tax counsel
on questions regarding tax liability in connection with the loans. The
following discussion is not intended to address matters relating to the
award or exercise of the stock options to which loans apply. Such a
discussion is included in FBS' Prospectus relating to its 1996 Stock
Incentive Plan.
If the principal and interest payments to be made with respect to a loan
under the Loan Program are less than or equal to $250,000, the Participant
will recognize interest expense only at the time the loan is repaid or
accrued interest is repaid in cash. If the principal and interest payments
to be made with respect to a loan under the Loan Program are greater than
$250,000, the difference between the amount loaned and the amount due,
including all interest, upon maturity of the loan represents original issue
discount. In accordance with applicable provisions of the Internal Revenue
Code of 1986, as amended, the original issue discount must be recognized as
interest expense by the Participant over the life of the loan. Whenever
recognized, such interest expense is deductible for federal income tax
purposes only to the extent of investment income for the same year, all in
accordance with the rules applicable to investment interest expense found
in Section 163(d) of the Internal Revenue Code of 1986, as amended.
10. TERMINATION OF PROGRAM. The Loan Program may be terminated, or its terms
and conditions changed, at the discretion of the Board of Directors without
notice to Participants; provided, however, that outstanding loans would not
be affected by any such termination or changes.
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