<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1996.
REGISTRATION NO. 33-64575
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 4
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
WELLS FARGO & COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 6021 13-2553920
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification
organization) Code Number)
420 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94163
(415) 477-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
GUY ROUNSAVILLE, JR.
EXECUTIVE VICE PRESIDENT, CHIEF COUNSEL AND SECRETARY
WELLS FARGO & COMPANY
420 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94163
(415) 477-1000
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
--------------
COPIES TO:
ALAN J. SINSHEIMER FRED B. WHITE, III
SULLIVAN & CROMWELL SKADDEN, ARPS, SLATE, MEAGHER & FLOM
125 BROAD STREET 919 THIRD AVENUE
NEW YORK, NEW YORK 10004 NEW YORK, NEW YORK 10022
(212) 558-4000 (212) 735-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AT THE
EFFECTIVE TIME AS DESCRIBED IN THE ATTACHED JOINT PROXY STATEMENT/PROSPECTUS.
--------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
WELLS FARGO & COMPANY
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................... Facing Page of
Registration Statement;
Outside Front Cover Page
of Joint Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus.............................. Available Information;
Incorporation of Certain
Information by
Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.................... Summary
4. Terms of the Transaction.......................... Summary; The Merger;
Incorporation of Certain
Information by
Reference; Comparison of
Rights of Holders of
First Interstate Common
Stock and Wells Fargo
Common Stock; Market
Prices and Dividends;
Description of Wells
Fargo Capital Stock
5. Pro Forma Financial Information................... Pro Forma Combined
Financial Data
6. Material Contacts with the Company Being
Acquired......................................... The Merger
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters..................................... *
8. Interests of Named Experts and Counsel............ Validity of Wells Fargo
Common Stock; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... *
10. Information with Respect to S-3 Registrants....... Available Information;
Incorporation of Certain
Information by Reference
11. Incorporation of Certain Information
by Reference..................................... Available Information;
Incorporation of Certain
Information by
Reference; Description
of Wells Fargo Capital
Stock
12. Information with Respect to S-2 or
S-3 Registrants.................................. *
13. Incorporation of Certain Information
by Reference..................................... *
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants...................... *
15. Information with Respect to S-3 Companies......... Available Information;
Incorporation of Certain
Information by Reference
16. Information with Respect to S-2 or
S-3 Companies.................................... *
17. Information with Respect to Companies Other
than S-2 or S-3 Companies........................ *
18. Information if Proxies, Consents or Authorizations
are to be Solicited.............................. Outside Front Cover
Page; Incorporation of
Certain Information by
Reference; Summary;
Information Concerning
the Wells Fargo Special
Meeting; Information
Concerning the First
Interstate Special
Meeting; The Merger;
Stockholder Proposals;
Management and
Additional Information
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer.. *
</TABLE>
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*Indicates that Item is not applicable or answer is in the negative.
<PAGE>
[LOGO OF WELLS FARGO & COMPANY APPEARS HERE]
February 27, 1996
To Our Stockholders:
A special meeting (the "Wells Fargo Special Meeting") of stockholders of
Wells Fargo & Company ("Wells Fargo") has been scheduled for March 28, 1996 at
2:00 p.m. in the Penthouse at Wells Fargo's headquarters, 420 Montgomery
Street, San Francisco, California. The accompanying Notice of the Wells Fargo
Special Meeting, Joint Proxy Statement/Prospectus and Proxy Card set forth the
formal business to be transacted at the Wells Fargo Special Meeting. I
encourage you to review these materials and to attend the Wells Fargo Special
Meeting.
At the Wells Fargo Special Meeting, holders of the common stock, par value
$5.00 per share (the "Wells Fargo Common Stock"), of Wells Fargo are being
asked to consider and vote upon a proposal (the "Wells Fargo Proposal") to
adopt the Agreement and Plan of Merger (the "Merger Agreement"), dated as of
January 23, 1996, by and between Wells Fargo and First Interstate Bancorp
("First Interstate"), as amended, providing for the merger (the "Merger") of
First Interstate with and into Wells Fargo, and to approve the transactions
contemplated thereby. In the Merger, each outstanding share of common stock of
First Interstate will be converted into the right to receive two-thirds ( 2/3)
of a share (the "Exchange Ratio") of Wells Fargo Common Stock (with cash paid
in lieu of fractional shares) and each share of preferred stock of First
Interstate will be converted into the right to receive one newly issued share
of a corresponding series of preferred stock of Wells Fargo with terms
substantially the same as those of the series of First Interstate preferred
stock being converted.
Consummation of the Merger is subject to certain conditions, including, but
not limited to, obtaining the requisite vote of the stockholders of both Wells
Fargo and First Interstate and the approval of the Merger by various
regulatory agencies.
THE WELLS FARGO BOARD OF DIRECTORS (WITH ONE DIRECTOR ABSENT) HAS
UNANIMOUSLY CONCLUDED THAT THE MERGER IS IN THE BEST INTERESTS OF WELLS FARGO
AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE WELLS
FARGO PROPOSAL. Wells Fargo's financial advisors, CS First Boston Corporation
and Montgomery Securities, have each rendered written opinions dated the date
hereof to the Wells Fargo Board of Directors to the effect that, as of the
date hereof and based upon and subject to certain matters stated in such
opinions, the Exchange Ratio is fair to Wells Fargo from a financial point of
view.
If the accompanying Proxy Card is executed properly and returned to Wells
Fargo in time to be voted at the Wells Fargo Special Meeting, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. Executed but unmarked proxies will be voted for approval of the Wells
Fargo Proposal. The presence of a stockholder at the Wells Fargo Special
Meeting will not automatically revoke such stockholder's proxy. A stockholder
may, however, revoke a proxy at any time prior to its exercise by filing a
written notice of
<PAGE>
revocation with or delivering a duly executed proxy bearing a later date to
Guy Rounsaville, Jr., Secretary, Wells Fargo & Company, 420 Montgomery Street,
San Francisco, California 94163 or by attending the Wells Fargo Special
Meeting and voting in person.
Approval of the Wells Fargo Proposal requires the affirmative vote of the
holders of a majority of the outstanding shares of Wells Fargo Common Stock.
Accordingly, it is very important that your shares be represented at the Wells
Fargo Special Meeting. I urge you to vote FOR the Wells Fargo Proposal and to
sign, date and return the accompanying Proxy Card as soon as possible, even if
you plan to attend the Wells Fargo Special Meeting. This procedure will not
prevent you from voting in person, but will ensure that your vote is counted
if you are unable to attend.
Very truly yours,
/s/Paul Hazen
Paul Hazen
Chairman of the Board
and Chief Executive Officer
YOUR VOTE IS IMPORTANT
WE ENCOURAGE YOU TO SIGN, DATE AND PROMPTLY RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE WELLS FARGO
SPECIAL MEETING.
<PAGE>
WELLS FARGO & COMPANY
420 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94163
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
MARCH 28, 1996
To the Stockholders of Wells Fargo & Company:
A special meeting (including any adjournments or reschedulings thereof, the
"Wells Fargo Special Meeting") of stockholders of Wells Fargo & Company, a
Delaware corporation ("Wells Fargo"), will be held on March 28, 1996, at
2:00 p.m., in the Penthouse at Wells Fargo's headquarters, 420 Montgomery
Street, San Francisco, California. A Proxy Card and Joint Proxy
Statement/Prospectus for the Wells Fargo Special Meeting are enclosed.
The Wells Fargo Special Meeting is for the purpose of considering and voting
upon a proposal (the "Wells Fargo Proposal") to:
Adopt the Agreement and Plan of Merger (the "Merger Agreement"), dated as
of January 23, 1996, by and between Wells Fargo and First Interstate
Bancorp, a Delaware corporation ("First Interstate"), as amended, providing
for the merger (the "Merger") of First Interstate with and into Wells
Fargo, and approve the transactions contemplated thereby, including the
Merger and the issuance of shares of common and preferred stock pursuant to
the Merger. A copy of the Merger Agreement is attached as Appendix A to the
accompanying Joint Proxy Statement/Prospectus.
No other business will be transacted at the Wells Fargo Special Meeting other
than possible adjournments or reschedulings thereof.
THE WELLS FARGO BOARD OF DIRECTORS (WITH ONE DIRECTOR ABSENT) HAS UNANIMOUSLY
CONCLUDED THAT THE MERGER IS IN THE BEST INTERESTS OF WELLS FARGO AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE WELLS FARGO
PROPOSAL.
The Board of Directors of Wells Fargo has fixed the close of business on
February 16, 1996 as the record date for determination of the stockholders of
Wells Fargo entitled to notice of and to vote at the Wells Fargo Special
Meeting. Copies of the Joint Proxy Statement/Prospectus are being furnished to
holders of Wells Fargo preferred stock and depositary shares for informational
purposes only and such holders are not entitled to and are not being requested
to vote at the Wells Fargo Special Meeting
It is very important that your shares be represented at the Wells Fargo
Special Meeting. You are urged to complete and sign the accompanying Proxy
Card, which is solicited by the Board of Directors of Wells Fargo, and to mail
it promptly in the enclosed envelope. All proxies are important, so please
complete each Proxy Card sent to you and return it in the envelope provided.
/s/ Guy Rounsaville, Jr.
GUY ROUNSAVILLE, JR.
Secretary
February 27, 1996
<PAGE>
[LOGO OF FIRST INTERSTATE BANCORP APPEARS HERE]
633 WEST FIFTH STREET, LOS ANGELES, CALIFORNIA 90071
February 27, 1996
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of
First Interstate Bancorp ("First Interstate") to be held on March 28, 1996 at
The Sheraton Grande Hotel, 333 South Figueroa Street, Los Angeles, California,
at 8:00 a.m. local time (the "First Interstate Special Meeting").
At the First Interstate Special Meeting, holders of common stock, par value
$2.00 per share (the "First Interstate Common Stock"), of First Interstate
will be asked to consider and vote upon a proposal (the "First Interstate
Proposal") to adopt the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of January 23, 1996, by and between Wells Fargo & Company ("Wells
Fargo") and First Interstate, as amended, providing for the merger (the
"Merger") of First Interstate with and into Wells Fargo, and to approve the
transactions contemplated thereby. In the Merger, each outstanding share of
First Interstate Common Stock will be converted into the right to receive two-
thirds ( 2/3) of a share (the "Exchange Ratio") of Wells Fargo Common Stock
(with cash paid in lieu of fractional shares) and each outstanding share of
preferred stock of First Interstate will be converted into the right to
receive one newly issued share of a corresponding series of preferred stock of
Wells Fargo with terms substantially the same as those of the series of First
Interstate preferred stock being converted.
THE FIRST INTERSTATE BOARD OF DIRECTORS (WITH ONE DIRECTOR ABSENT) HAS
UNANIMOUSLY CONCLUDED THAT THE MERGER IS IN THE BEST INTERESTS OF FIRST
INTERSTATE AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE FIRST INTERSTATE PROPOSAL. Each of Goldman, Sachs & Co. and Morgan Stanley
& Co. Incorporated, First Interstate's financial advisors, has delivered its
opinion, dated the date hereof, to the First Interstate Board of Directors
that the Exchange Ratio is fair or, in the case of Morgan Stanley's opinion,
fair from a financial point of view, to the holders of First Interstate Common
Stock.
Consummation of the Merger is subject to certain conditions, including, but
not limited to, obtaining the requisite vote of the stockholders of both First
Interstate and Wells Fargo and the approval of the Merger by various
regulatory agencies.
The enclosed Notice of Special Meeting and Joint Proxy Statement/Prospectus
provide specific information regarding the Merger and the First Interstate
Special Meeting. Please read these materials carefully.
It is very important that your shares are represented at the First
Interstate Special Meeting, whether or not you plan to attend in person. The
affirmative vote of the holders of a majority of the votes that may be cast by
all First Interstate stockholders entitled to vote at the First Interstate
Special Meeting is required for approval of the Merger Agreement. A failure to
vote for approval of the Merger Agreement will have the same effect as a vote
against the Merger Agreement. Therefore, I urge you to execute, date and
return the enclosed proxy card in the enclosed postage-paid envelope as soon
as possible to assure that your shares will be voted at the First Interstate
Special Meeting. YOU SHOULD NOT SEND IN CERTIFICATES FOR YOUR FIRST INTERSTATE
SHARES AT THIS TIME.
On behalf of the Board of Directors, I thank you for your support, and again
urge you to vote FOR approval of the Merger.
Very truly yours,
/s/ William E. B. Siart
William E. B. Siart
Chairman and Chief Executive Officer
<PAGE>
[LOGO OF FIRST INTERSTATE BANCORP APPEARS HERE]
633 WEST FIFTH STREET, LOS ANGELES, CALIFORNIA 90071
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 28, 1996
----------------
NOTICE IS HEREBY GIVEN that a special meeting (including any adjournments or
postponements thereof, the "First Interstate Special Meeting") of stockholders
of First Interstate Bancorp, a Delaware corporation ("First Interstate"), will
be held on March 28, 1996, at The Sheraton Grande Hotel, 333 South Figueroa
Street, Los Angeles, California, at 8:00 a.m. local time. A Proxy Card and
Joint Proxy Statement/Prospectus for the First Interstate Special Meeting are
enclosed. The First Interstate Special Meeting is for the purpose of
considering and voting upon a proposal (the "First Interstate Proposal") to:
Adopt the Agreement and Plan of Merger (the "Merger Agreement"), dated as
of January 23, 1996, by and between Wells Fargo & Company, a Delaware
corporation ("Wells Fargo"), and First Interstate, as amended, providing
for the merger (the "Merger") of First Interstate with and into Wells
Fargo, and approve the transactions contemplated thereby, including the
Merger. A copy of the Merger Agreement is attached as Appendix A to the
accompanying Joint Proxy Statement/Prospectus.
No other business will be transacted at the First Interstate Special Meeting
other than possible adjournments or postponements thereof.
The Board has fixed the close of business on February 16, 1996 as the record
date for determination of the stockholders entitled to notice of and to vote
at the First Interstate Special Meeting. A list of stockholders of record on
such record date will be available for examination by any stockholder for
purposes germane to the First Interstate Special Meeting at First Interstate's
headquarters located at 633 West Fifth Street, Los Angeles, California during
ordinary business hours for a period of at least 10 days prior to the First
Interstate Special Meeting and at the First Interstate Special Meeting.
THE FIRST INTERSTATE BOARD OF DIRECTORS (WITH ONE DIRECTOR ABSENT) HAS
UNANIMOUSLY CONCLUDED THAT THE MERGER IS IN THE BEST INTERESTS OF FIRST
INTERSTATE AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE FIRST INTERSTATE PROPOSAL.
Your vote is important regardless of the number of shares you own. Each
holder of common stock, par value $2.00 per share (the "First Interstate
Common Stock"), of First Interstate, even if he or she now plans to attend the
First Interstate Special Meeting, is requested to sign, date and return the
enclosed Proxy Card without delay in the enclosed postage-paid envelope. You
may revoke your proxy at any time prior to its exercise. Any holder of First
Interstate Common Stock present at the First Interstate Special Meeting may
revoke his or her proxy and vote personally on each matter brought before the
First Interstate Special Meeting.
Copies of the Joint Proxy Statement/Prospectus are being furnished to
holders of First Interstate preferred stock and First Interstate depositary
shares for informational purposes only and such holders are not entitled to
and are not being requested to vote at the First Interstate Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Edward S. Garlock
Edward S. Garlock
Secretary
Los Angeles, California
February 27, 1996
IMPORTANT: PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. YOU SHOULD NOT FORWARD SHARE CERTIFICATES AT THIS TIME.
<PAGE>
DATED FEBRUARY 27, 1996
JOINT PROXY STATEMENT
OF
WELLS FARGO & COMPANY
AND
FIRST INTERSTATE BANCORP
----------------
PROSPECTUS
OF
WELLS FARGO & COMPANY
----------------
This Joint Proxy Statement/Prospectus (this "Joint Proxy
Statement/Prospectus") is being furnished to stockholders of Wells Fargo &
Company, a Delaware corporation ("Wells Fargo"), in connection with the
solicitation of proxies by the Board of Directors of Wells Fargo (the "Wells
Fargo Board") for use at the special meeting of stockholders of Wells Fargo
(including any adjournments or reschedulings thereof, the "Wells Fargo Special
Meeting") to be held on March 28, 1996, at 2:00 p.m., in the Penthouse at the
Wells Fargo headquarters, 420 Montgomery Street, San Francisco, California. At
the Wells Fargo Special Meeting, holders of the common stock, par value $5.00
per share (the "Wells Fargo Common Stock"), of Wells Fargo are being asked to
consider and vote upon a proposal (the "Wells Fargo Proposal") to adopt the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of January 23,
1996, by and between Wells Fargo and First Interstate Bancorp, a Delaware
corporation ("First Interstate"), as amended as of February 23, 1996,
providing for the merger (the "Merger") of First Interstate with and into
Wells Fargo, and to approve the transactions contemplated thereby, including
the Merger and the issuance of shares of common and preferred stock pursuant
to the Merger. A copy of the Merger Agreement is attached as Appendix A and is
incorporated herein by reference.
This Joint Proxy Statement/Prospectus also is being furnished to
stockholders of First Interstate in connection with the solicitation of
proxies by the Board of Directors of First Interstate (the "First Interstate
Board") for use at the special meeting of stockholders of First Interstate
(including any adjournments or postponements thereof, the "First Interstate
Special Meeting") to be held on March 28, 1996, at 8:00 a.m., at The Sheraton
Grande Hotel, 333 South Figueroa Street, Los Angeles, California. At the First
Interstate Special Meeting, holders of the common stock, par value $2.00 per
share (the "First Interstate Common Stock"), of First Interstate will be asked
to consider and vote upon a proposal (the "First Interstate Proposal") to
adopt the Merger Agreement and approve the transactions contemplated thereby,
including the Merger.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of Wells
Fargo with respect to the Wells Fargo Common Stock issuable to holders of
First Interstate Common Stock upon consummation of the Merger. Copies of this
Joint Proxy Statement/Prospectus also are being furnished to the holders of
the Wells Fargo Preferred Stock, the Wells Fargo Depositary Shares, the First
Interstate Preferred Stock and the First Interstate Depositary Shares (each as
defined herein) for informational purposes, but proxies are not being
solicited from such holders and such holders are not entitled, and are not
being asked, to vote at the Wells Fargo Special Meeting or the First
Interstate Special Meeting.
----------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BYTHE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS FEBRUARY 27, 1996.
<PAGE>
(continued from previous page)
At the effective time of the Merger (the "Effective Time"), (i) each
outstanding share of First Interstate Common Stock, other than shares held in
First Interstate's treasury or directly or indirectly by Wells Fargo or its
subsidiaries or by First Interstate or its subsidiaries (except in both cases
for shares ("Trust/DPC Shares") held for others in trust or in a fiduciary or
custodial capacity or in respect of a debt previously contracted) will be
converted into the right to receive two-thirds ( 2/3) of a share of Wells
Fargo Common Stock (the "Exchange Ratio"), with cash being paid in lieu of
fractional shares, (ii) each outstanding share of First Interstate 9.875%
preferred stock, Series F, $200 liquidation preference per share ("First
Interstate 9.875% Preferred Stock"), will be converted into the right to
receive one share of Wells Fargo 9.875% preferred stock, Series F, liquidation
preference $200 per share ("New Wells Fargo 9.875% Preferred Stock") and (iii)
each outstanding share of First Interstate 9.0% preferred stock, Series G,
$200 liquidation preference per share ("First Interstate 9.0% Preferred Stock"
and, collectively with the First Interstate 9.875% Preferred Stock, "First
Interstate Preferred Stock"; the First Interstate Common Stock and the First
Interstate Preferred Stock are collectively referred to herein as the "First
Interstate Capital Stock"), will be converted into the right to receive one
share of Wells Fargo 9.0% preferred stock, Series G, liquidation preference
$200 per share ("New Wells Fargo 9.0% Preferred Stock" and, collectively with
the New Wells Fargo 9.875% Preferred Stock, the "New Wells Fargo Preferred
Stock"; the Wells Fargo Common Stock, the Wells Fargo Preferred Stock (as
defined herein) and the New Wells Fargo Preferred Stock are collectively
referred to herein as the "Wells Fargo Capital Stock"). The terms,
designations, preferences, limitations, privileges and rights of the
respective series of New Wells Fargo Preferred Stock will be substantially the
same as those of the corresponding series of First Interstate Preferred Stock.
As in the case of the First Interstate Preferred Stock, each share of New
Wells Fargo Preferred Stock will be represented by depositary shares (the "New
Wells Fargo Depositary Shares"), each representing a one-eighth interest in a
share of New Wells Fargo Preferred Stock.
The Wells Fargo Common Stock, depositary shares ("Wells Fargo Depositary
Shares") representing the Wells Fargo Preferred Stock (except Wells Fargo
Series B Preferred Stock (as defined herein)), Wells Fargo Series B Preferred
Stock, First Interstate Common Stock and depositary shares ("First Interstate
Depositary Shares") representing the First Interstate Preferred Stock are
listed on the New York Stock Exchange (the "NYSE"). The last reported sales
prices of Wells Fargo Common Stock (NYSE Symbol: "WFC") and First Interstate
Common Stock (NYSE Symbol: "I") on the NYSE Composite Tape on February 23,
1996 were $252.13 and $165.75 per share, respectively. Based on such sale
price of the Wells Fargo Common Stock, the Exchange Ratio would result in an
implied market value per share for the First Interstate Common Stock of
$168.08. Because the Exchange Ratio is fixed at two-thirds, a change in the
market price of the Wells Fargo Common Stock before the Effective Time will
affect the implied market value of the Wells Fargo Common Stock to be received
in the Merger in exchange for the First Interstate Common Stock. THERE CAN BE
NO ASSURANCE AS TO THE MARKET PRICE PER SHARE OF THE WELLS FARGO COMMON STOCK
AT ANY TIME PRIOR TO, AT OR AFTER THE EFFECTIVE TIME. Stockholders are urged
to obtain current market quotations.
All references to the First Interstate Common Stock in this Joint Proxy
Statement/Prospectus include the associated Rights (as defined herein) to
purchase First Interstate Common Stock issued pursuant to the Rights Agreement
(as defined herein).
This Joint Proxy Statement/Prospectus and the accompanying forms of proxies
for the Wells Fargo Special Meeting and the First Interstate Special Meeting
(collectively with the Wells Fargo Special Meeting, the "Special Meetings")
are first being mailed to the stockholders of Wells Fargo and First Interstate
on or about February 28, 1996.
2
<PAGE>
AVAILABLE INFORMATION
Wells Fargo and First Interstate are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
The reports, proxy statements and other information filed by Wells Fargo and
First Interstate with the Commission may be inspected and copied at the
Commission's public reference room located at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the public reference
facilities in the Commission's regional offices located at: 7 World Trade
Center, 13th Floor, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 400, Chicago, Illinois 60661. Copies of such material
may be obtained at prescribed rates by writing to the Securities and Exchange
Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549. The shares of Wells Fargo Common Stock and First Interstate Common
Stock are listed on the NYSE and the Pacific Stock Exchange (the "PSE"). The
periodic reports, proxy statements and other information filed by Wells Fargo
and First Interstate with the Commission may be inspected at the offices of
the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005
and at the offices of the Pacific Stock Exchange, 301 Pine Street, San
Francisco, California 94104.
This Joint Proxy Statement/Prospectus is included as part of a registration
statement on Form S-4 (together with all amendments and exhibits thereto,
including documents and information incorporated by reference, the
"Registration Statement") filed with the Commission by Wells Fargo, relating
to the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of up to 54,175,262 shares of Wells Fargo Common Stock.
This Joint Proxy Statement/Prospectus does not contain all of the information
set forth in the Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission, and to which
portions reference is hereby made for further information with respect to
Wells Fargo, First Interstate and the Wells Fargo Common Stock offered hereby.
Statements contained herein concerning any documents are not necessarily
complete and, in each instance, reference is made to the copies of such
documents filed as exhibits to the Registration Statement. Each such statement
is qualified in its entirety by such reference.
3
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. IN THE CASE OF DOCUMENTS RELATING
TO WELLS FARGO, SUCH DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO
SECRETARY, WELLS FARGO & COMPANY, 420 MONTGOMERY STREET, SAN FRANCISCO,
CALIFORNIA 94163. TELEPHONE REQUESTS MAY BE DIRECTED TO THE CORPORATE
SECRETARY'S DEPARTMENT AT (415) 396-4386. IN THE CASE OF DOCUMENTS RELATING TO
FIRST INTERSTATE, SUCH DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO
DAVID S. BELLES, EXECUTIVE VICE PRESIDENT AND CONTROLLER, FIRST INTERSTATE
BANCORP, P.O. BOX 29791, PHOENIX, ARIZONA 85038-9791. TELEPHONE REQUESTS MAY
BE DIRECTED TO (602) 949-4019. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH
DOCUMENTS, ANY REQUEST FOR DOCUMENTS SHOULD BE SUBMITTED NOT LATER THAN FIVE
BUSINESS DAYS PRIOR TO THE RESPECTIVE DATES OF THE WELLS FARGO SPECIAL MEETING
AND THE FIRST INTERSTATE SPECIAL MEETING.
The following documents filed with the Commission by Wells Fargo (File No.
1-6214) are incorporated herein by reference: (a) Wells Fargo's Annual Report
on Form 10-K for the year ended December 31, 1994 (the "1994 Wells Fargo 10-
K"); (b) the portions of Wells Fargo's Proxy Statement for the Annual Meeting
of Stockholders held on April 18, 1995 that have been incorporated by
reference in the 1994 Wells Fargo 10-K; (c) Wells Fargo's Quarterly Reports on
Form 10-Q for the periods ended March 31, 1995, June 30, 1995 and September
30, 1995; (d) Wells Fargo's Current Reports on Form 8-K dated January 17,
1995, April 18, 1995, June 21, 1995, July 18, 1995, October 17, 1995, October
18, 1995, October 23, 1995, January 16, 1996, January 24, 1996 and January 31,
1996; and (e) the description of Wells Fargo Common Stock contained in Wells
Fargo's Registration Statement on Form 8-B filed with the Commission June 17,
1987, and any amendment or report filed for the purpose of updating such
description filed on or after the date of this Joint Proxy
Statement/Prospectus to and including the Closing Date (as defined herein).
The following documents filed with the Commission by First Interstate (File
No. 1-4114) are incorporated herein by reference: (a) First Interstate's
Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994
First Interstate 10-K"); (b) the portions of First Interstate's Proxy
Statement for the Annual Meeting of Stockholders held on April 28, 1995 that
have been incorporated by reference in the 1994 First Interstate 10-K; (c)
First Interstate's Quarterly Reports on Form 10-Q for the periods ended March
31, 1995, June 30, 1995 and September 30, 1995; (d) First Interstate's Current
Reports on Form 8-K or 8-K/A dated February 17, 1995, March 24, 1995, May 1,
1995, May 26, 1995, November 9, 1995, November 15, 1995 and January 30, 1996;
(e) the description of First Interstate Common Stock contained in the First
Interstate Registration Statement on Form 10/A dated August 3, 1993, and any
amendment or report filed for the purpose of updating such description filed
subsequent to the date of this Joint Proxy Statement/Prospectus and prior to
the termination of the offering described herein; and (f) the description of
the common stock purchase rights contained in Item 1 of the First Interstate
Registration Statement on Form 8-A dated November 23, 1988, as amended by that
Form 8-A/A dated November 15, 1995, and any amendment or report updating such
description filed on or after the date of this Joint Proxy
Statement/Prospectus to and including the Closing Date.
All documents filed by either Wells Fargo or First Interstate pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to its Special Meeting shall be deemed to be incorporated
herein by reference and to be a part hereof from the date of such filing. Any
statement contained herein or in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein or in any
other subsequently filed document which also is, or is deemed to be,
incorporated herein by reference modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part hereof, except as so modified or superseded.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION IN CONNECTION WITH THE MERGER OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY WELLS FARGO OR FIRST INTERSTATE. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS SHALL UNDER NO
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF WELLS FARGO OR FIRST INTERSTATE SINCE THE DATE AS OF WHICH
INFORMATION IS FURNISHED OR THE DATE HEREOF.
WELLS FARGO HAS SUPPLIED ALL INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS RELATING TO WELLS FARGO AND ITS SUBSIDIARIES, AND FIRST
INTERSTATE HAS SUPPLIED ALL INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS RELATING TO FIRST INTERSTATE AND ITS SUBSIDIARIES.
FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS.
THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING
STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
BUSINESS OF WELLS FARGO FOLLOWING THE CONSUMMATION OF THE MERGER, INCLUDING
STATEMENTS RELATING TO: (A) THE COST SAVINGS THAT WILL BE REALIZED FROM THE
MERGER AND THE POTENTIAL REVENUE LOSSES ASSOCIATED THEREWITH (SEE "THE
MERGER--REASONS OF WELLS FARGO FOR THE MERGER; RECOMMENDATION OF THE WELLS
FARGO BOARD OF DIRECTORS" AND "--REASONS OF FIRST INTERSTATE FOR THE MERGER;
RECOMMENDATION OF THE FIRST INTERSTATE BOARD OF DIRECTORS"); (B) THE EFFECT ON
REVENUES OF DIVESTITURES REQUIRED BY REGULATORY AUTHORITIES AS A CONDITION TO
APPROVAL OF THE MERGER AS WELL AS OF CONSOLIDATION OF RETAIL BRANCHES AND
OTHER OPERATIONS PLANNED TO BE IMPLEMENTED BY WELLS FARGO (SEE "THE MERGER--
REGULATORY APPROVALS" AND "PRO FORMA COMBINED FINANCIAL INFORMATION"); AND (C)
THE RESTRUCTURING CHARGES EXPECTED TO BE INCURRED IN CONNECTION WITH THE
MERGER (SEE "PRO FORMA COMBINED FINANCIAL INFORMATION"). THESE FORWARD LOOKING
STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD
LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1)
EXPECTED COST SAVINGS FROM THE MERGER CANNOT BE FULLY REALIZED; (2) DEPOSIT
ATTRITION, CUSTOMER LOSS OR REVENUE LOSS FOLLOWING THE MERGER IS GREATER THAN
EXPECTED; (3) RETAIL BANKING CUSTOMERS DO NOT REACT POSITIVELY TO WELLS
FARGO'S IMPLEMENTATION OF INNOVATIVE DELIVERY CHANNELS WITH A GREATER FOCUS ON
NONTRADITIONAL BRANCHES, SUCH AS SUPERMARKET BRANCHES, BANKING CENTERS AND
ONLINE, TELEPHONE AND OTHER AUTOMATED BANKING SERVICES; (4) COMPETITIVE
PRESSURE IN THE BANKING INDUSTRY INCREASES SIGNIFICANTLY; (5) COSTS OR
DIFFICULTIES RELATED TO THE INTEGRATION OF THE BUSINESSES OF WELLS FARGO AND
FIRST INTERSTATE ARE GREATER THAN EXPECTED; (6) CHANGES IN THE INTEREST RATE
ENVIRONMENT REDUCE MARGINS; AND (7) GENERAL ECONOMIC CONDITIONS, EITHER
NATIONALLY OR IN THE STATES IN WHICH THE COMBINED COMPANY WILL BE DOING
BUSINESS, ARE LESS FAVORABLE THAN EXPECTED. FURTHER INFORMATION ON OTHER
FACTORS WHICH COULD AFFECT THE FINANCIAL RESULTS OF WELLS FARGO AFTER THE
MERGER IS INCLUDED IN THE COMMISSION FILINGS INCORPORATED BY REFERENCE HEREIN.
5
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information..................................................... 3
Incorporation of Certain Information by Reference........................ 4
Summary................................................................... 7
Information Concerning the Wells Fargo Special Meeting.................... 20
General................................................................. 20
Solicitation, Voting and Revocability of Proxies........................ 20
Information Concerning the First Interstate Special Meeting............... 22
General................................................................. 22
Solicitation, Voting and Revocability of Proxies........................ 22
The Merger................................................................ 24
Effects of the Merger.................................................... 24
Effective Time........................................................... 24
Background of the Merger................................................. 25
Reasons of Wells Fargo for the Merger; Recommendation of the Wells Fargo
Board of Directors...................................................... 30
Reasons of First Interstate for the Merger; Recommendation of the First
Interstate Board of Directors........................................... 33
Opinions of Wells Fargo Financial Advisors............................... 36
Opinions of First Interstate Financial Advisors.......................... 45
Certain Litigation....................................................... 53
Conversion of First Interstate Capital Stock............................. 54
Exchange of Certificates and Depositary Receipts; Fractional Shares...... 55
Representations and Warranties........................................... 57
Conduct of Business Pending the Merger and Other Agreements.............. 57
Conditions to the Consummation of the Merger............................. 59
Regulatory Approvals..................................................... 61
Termination of the Merger Agreement; Fee Agreements...................... 64
Accounting Treatment..................................................... 66
Appraisal Rights......................................................... 66
Extension, Waiver and Amendment of the Merger Agreement.................. 66
Board of Directors and Headquarters of Wells Fargo Following the Merger.. 66
Interests of Certain Persons in the Merger............................... 66
Certain Federal Income Tax Consequences.................................. 70
Stock Exchange Listing of Wells Fargo Common Stock and New Wells Fargo
Depositary Shares....................................................... 72
Resale of Wells Fargo Capital Stock Received by First Interstate
Stockholders............................................................ 72
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Wells Fargo Dividend Reinvestment and Common Stock Purchase and Share
Custody Plan............................................................ 72
Expenses................................................................. 73
Comparison of Rights of Holders of First Interstate Common Stock and Wells
Fargo Common Stock....................................................... 74
Dividends................................................................ 76
Market Prices and Dividends............................................... 77
Wells Fargo.............................................................. 77
First Interstate......................................................... 78
Business of Wells Fargo................................................... 79
Business of First Interstate.............................................. 80
Pro Forma Combined Financial Information.................................. 81
Description of Wells Fargo Capital Stock.................................. 90
Wells Fargo Common Stock................................................. 90
Repurchases of Wells Fargo Common Stock.................................. 90
Wells Fargo Preferred Stock.............................................. 90
New Wells Fargo Preferred Stock.......................................... 92
New Wells Fargo 9.875% Preferred Stock................................... 92
New Wells Fargo 9.0% Preferred Stock..................................... 96
New Wells Fargo Depositary Shares........................................ 97
Certain Regulatory Considerations........................................ 100
Validity of Wells Fargo Common Stock...................................... 105
Experts................................................................... 105
Independent Public Accountants............................................ 105
Stockholder Proposals..................................................... 105
Management and Additional Information..................................... 105
Appendix A--Agreement and Plan of Merger.................................. A-i
Appendix B--Termination Fee Agreement, dated as of January 23, 1996,
between Wells Fargo & Company and First Interstate Bancorp............... B-1
Appendix C--Termination Fee Agreement, dated as of January 23, 1996,
between First Interstate Bancorp and Wells Fargo & Company............... C-1
Appendix D--Settlement Agreement, dated as of January 23, 1996............ D-1
Appendix E-- Opinion of CS First Boston Corporation....................... E-1
Appendix F--Opinion of Montgomery Securities.............................. F-1
Appendix G--Opinion of Goldman, Sachs & Co. .............................. G-1
Appendix H--Opinion of Morgan Stanley & Co. Incorporated.................. H-1
Appendix I--First Interstate Earnings Announcement........................ I-1
</TABLE>
6
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SUMMARY
The information below is qualified in its entirety by the more detailed
information appearing elsewhere in this Joint Proxy Statement/Prospectus,
including the documents incorporated in this Joint Proxy Statement/Prospectus
by reference. As used in this Joint Proxy Statement/Prospectus, the term "Wells
Fargo" refers to Wells Fargo & Company and, unless the context otherwise
requires, its subsidiaries, and the term "First Interstate" refers to First
Interstate Bancorp and, unless the context otherwise requires, its
subsidiaries. The term "Surviving Corporation" is sometimes used herein to
refer to Wells Fargo following consummation of the Merger.
THE PARTIES TO THE MERGER
Wells Fargo & Company
Wells Fargo is a bank holding company incorporated in the State of Delaware
and registered under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). Based on total consolidated assets at December 31, 1995, it was the
17th largest bank holding company in the United States, having total assets of
$50.3 billion and total deposits of $39.0 billion.
Wells Fargo's principal subsidiary is Wells Fargo Bank, N.A., which is the
9th largest bank in the United States (as of September 30, 1995) and is the
successor to the banking portion of the business founded by Henry Wells and
William G. Fargo in 1852. Today, Wells Fargo operates one of the largest
banking businesses in the United States. The bank provides a broad range of
financial products and services through electronic and traditional channels.
Customers can access accounts electronically seven days a week, 24 hours a day.
Besides serving as banker to millions of California households, Wells Fargo
provides a full range of banking and financial services to commercial,
corporate, real estate and small business customers across the nation. Its
primary lines of business are summarized under "Business of Wells Fargo."
Wells Fargo has its principal executive offices at 420 Montgomery Street, San
Francisco, California 94163, telephone number (415) 477-1000.
First Interstate Bancorp
First Interstate is a bank holding company incorporated in the State of
Delaware, registered under the BHCA and headquartered in Los Angeles,
California. At December 31, 1995, First Interstate, through its 16 subsidiary
banks, operated approximately 1,150 banking offices in California, Arizona,
Oregon, Texas, Washington, Nevada, Colorado, Idaho, Utah, Wyoming, Montana, New
Mexico and Alaska. Through its subsidiaries, First Interstate provides
commercial and consumer banking services, trust services and other banking-
related financial services and products, including asset-based commercial
financing, asset management and investment counseling, bank card operations,
mortgage banking, venture capital and investment products. At December 31,
1995, First Interstate and its consolidated subsidiaries had consolidated
assets of $58.1 billion and consolidated deposits of $50.2 billion. At that
date, First Interstate was the 15th largest bank holding company in the United
States ranked by total assets. Certain information regarding its business is
summarized under "Business of First Interstate."
First Interstate has its principal executive offices at 633 West Fifth
Street, Los Angeles, California 90071, telephone number (213) 614-3001.
EFFECTS OF THE MERGER
Subject to the terms and conditions of the Merger Agreement, at the Effective
Time, First Interstate will merge with and into Wells Fargo. Wells Fargo will
be the surviving corporation in the Merger, and will continue its corporate
existence under the General Corporation Law of the State of Delaware (the
"DGCL") under the same name. At the Effective Time, the separate corporate
existence of First Interstate will terminate. Wells Fargo's Restated
Certificate of Incorporation (the "Wells Fargo Certificate") and Wells Fargo's
By-Laws (the "Wells Fargo By-Laws") as in effect at the Effective Time will be
the certificate of incorporation and bylaws, respectively, of the Surviving
Corporation.
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<PAGE>
For information on how First Interstate stockholders will be able to exchange
certificates representing shares of First Interstate Common Stock and
depositary receipts (the "First Interstate Depositary Receipts") evidencing
First Interstate Depositary Shares for certificates representing the shares of
Wells Fargo Common Stock and depositary receipts (the "New Wells Fargo
Depositary Receipts") evidencing New Wells Fargo Depositary Shares to be issued
to them in the Merger, see "The Merger--Exchange of Certificates and Depositary
Receipts; Fractional Shares." First Interstate stockholders should not send in
their certificates at this time.
EFFECTIVE TIME
The Effective Time will be set forth in the Certificate of Merger that will
be filed with the Secretary of State of the State of Delaware on a date (the
"Closing Date") to be specified by the parties, which date will be on the first
day of the month following the month in which the latest to occur of the
conditions set forth in Section 7.1 of the Merger Agreement is satisfied or
waived (subject to applicable law). See "The Merger--Effective Time."
CONVERSION OF FIRST INTERSTATE CAPITAL STOCK
At the Effective Time, (i) each outstanding share of First Interstate Common
Stock, other than shares held in First Interstate's treasury or directly or
indirectly by Wells Fargo or its subsidiaries or by First Interstate or its
subsidiaries (except, in both cases, for Trust/DPC Shares), will be converted
into the right to receive two-thirds ( 2/3) of a share (the Exchange Ratio) of
Wells Fargo Common Stock, with cash being paid in lieu of fractional shares,
(ii) each outstanding share of First Interstate 9.875% Preferred Stock will be
converted into the right to receive one share of New Wells Fargo 9.875%
Preferred Stock and (iii) each outstanding share of First Interstate 9.0%
Preferred Stock will be converted into the right to receive one share of New
Wells Fargo 9.0% Preferred Stock. The terms, designations, preferences,
limitations, privileges and rights of the respective series of New Wells Fargo
Preferred Stock will be substantially the same as those of the corresponding
series of First Interstate Preferred Stock. See "The Merger--Conversion of
First Interstate Capital Stock."
At the Effective Time, each option to purchase shares of First Interstate
Common Stock (each a "First Interstate Stock Option") issued by First
Interstate pursuant to any of its employee or director stock option programs
(each a "First Interstate Stock Plan") that is outstanding and unexercised
immediately prior to the Effective Time will be converted automatically into an
option to purchase shares of Wells Fargo Common Stock (each a "Wells Fargo
Option"). The number of shares of Wells Fargo Common Stock subject to the Wells
Fargo Option will be equal to the product of the number of shares of First
Interstate Common Stock underlying the First Interstate Stock Option multiplied
by the Exchange Ratio and rounded down to the nearest share, and the exercise
price per share of Wells Fargo Common Stock subject to the Wells Fargo Option
will be equal to the exercise price per share of First Interstate Common Stock
underlying the First Interstate Stock Option divided by the Exchange Ratio and
rounded up to the nearest cent. See "The Merger--Conversion of First Interstate
Capital Stock."
THE SPECIAL MEETINGS
Wells Fargo Special Meeting. The Wells Fargo Special Meeting will be held on
March 28, 1996 at 2:00 p.m., in the Penthouse at the Wells Fargo headquarters,
420 Montgomery Street, San Francisco, California. Only holders of record of
Wells Fargo Common Stock at the close of business on February 16, 1996 (the
"Record Date") will be entitled to vote at the Wells Fargo Special Meeting. At
the close of business on the Record Date, 46,994,234 shares of Wells Fargo
Common Stock were issued and outstanding. Each share of Wells Fargo Common
Stock is entitled to one vote on the Wells Fargo Proposal. See "Information
Concerning the Wells Fargo Special Meeting."
8
<PAGE>
First Interstate Special Meeting. The First Interstate Special Meeting will
be held on March 28, 1996, at 8:00 a.m. at The Sheraton Grande Hotel, 333 South
Figueroa Street, Los Angeles, California. Only holders of record of First
Interstate Common Stock at the close of business on the Record Date will be
entitled to vote at the First Interstate Special Meeting. At the close of
business on the Record Date, 76,354,178 shares of First Interstate Common Stock
were issued and outstanding. Each share of First Interstate Common Stock is
entitled to one vote on the First Interstate Proposal. See "Information
Concerning the First Interstate Special Meeting."
VOTES REQUIRED
Wells Fargo Vote Required. Under Delaware law, the affirmative vote of the
holders of at least a majority of the total number of outstanding shares of
Wells Fargo Common Stock entitled to vote at the Wells Fargo Special Meeting is
required to approve the Wells Fargo Proposal. Approval of the Wells Fargo
Proposal by the requisite vote of the holders of the Wells Fargo Common Stock
is a condition to the consummation of the Merger. Holders of Wells Fargo
Preferred Stock are not entitled to and are not being requested to vote at the
Wells Fargo Special Meeting.
It is expected that all of the 533,850 shares of Wells Fargo Common Stock
(excluding shares subject to stock options) beneficially owned by directors and
executive officers of Wells Fargo and their affiliates at the close of business
on the Record Date (1.1% of the total number of outstanding shares of Wells
Fargo Common Stock at such date) will be voted for approval of the Wells Fargo
Proposal. See "Information Concerning the Wells Fargo Special Meeting."
First Interstate Vote Required. Under Delaware law, the affirmative vote of
the holders of at least a majority of the total number of outstanding shares of
First Interstate Common Stock entitled to vote at the First Interstate Special
Meeting is required to approve the First Interstate Proposal. Approval of the
First Interstate Proposal by the requisite vote of the holders of the First
Interstate Common Stock is a condition to the consummation of the Merger.
Holders of First Interstate Preferred Stock and First Interstate Depositary
Shares are not entitled to and are not being requested to vote at the First
Interstate Special Meeting.
It is expected that all of the 326,581 shares of First Interstate Common
Stock (excluding shares subject to stock options) beneficially owned by
directors and executive officers of First Interstate and their affiliates at
the close of business on the Record Date (.43% of the total number of
outstanding shares of First Interstate Common Stock at such date) will be voted
for approval of the First Interstate Proposal. See "Information Concerning the
First Interstate Special Meeting."
BACKGROUND OF THE MERGER
For information concerning the background of the Merger, see "The Merger--
Background of the Merger."
RECOMMENDATION OF THE WELLS FARGO BOARD
THE WELLS FARGO BOARD (WITH ONE DIRECTOR ABSENT) HAS UNANIMOUSLY CONCLUDED
THAT THE MERGER IS IN THE BEST INTERESTS OF WELLS FARGO AND ITS STOCKHOLDERS
AND UNANIMOUSLY RECOMMENDS THAT THE WELLS FARGO STOCKHOLDERS VOTE FOR THE WELLS
FARGO PROPOSAL.
9
<PAGE>
For a discussion of the factors considered by the Wells Fargo Board in
reaching its decisions to approve the Merger and recommend that stockholders
vote FOR the Wells Fargo Proposal, see "The Merger--Reasons of Wells Fargo for
the Merger; Recommendation of the Wells Fargo Board of Directors."
RECOMMENDATION OF THE FIRST INTERSTATE BOARD
THE FIRST INTERSTATE BOARD (WITH ONE DIRECTOR ABSENT) HAS UNANIMOUSLY
CONCLUDED THAT THE MERGER IS IN THE BEST INTERESTS OF FIRST INTERSTATE AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE FIRST INTERSTATE STOCKHOLDERS
VOTE FOR THE FIRST INTERSTATE PROPOSAL.
For a discussion of the factors considered by the First Interstate Board in
reaching its decisions to approve the Merger and recommend that stockholders
vote FOR the First Interstate Proposal, see "The Merger--Reasons of First
Interstate for the Merger; Recommendation of the First Interstate Board of
Directors."
OPINIONS OF WELLS FARGO FINANCIAL ADVISORS
Wells Fargo's financial advisors, CS First Boston Corporation ("CS First
Boston") and Montgomery Securities ("Montgomery" and, together with CS First
Boston, the "Wells Fargo Financial Advisors"), have each rendered an opinion,
dated January 23, 1996, to the Wells Fargo Board to the effect that, as of such
date and based upon and subject to certain matters stated in such opinions, the
Exchange Ratio was fair from a financial point of view to Wells Fargo. CS First
Boston and Montgomery have each confirmed such opinions by delivery of written
opinions dated the date of this Joint Proxy Statement/Prospectus. Copies of the
opinions of CS First Boston and Montgomery dated the date of this Joint Proxy
Statement/Prospectus are attached hereto as Appendices E and F, respectively,
and should be read carefully in their entirety with respect to the assumptions
made, matters considered and limitations on the reviews undertaken in
connection with such opinions. The opinions of CS First Boston and Montgomery
are directed only to the fairness of the Exchange Ratio from a financial point
of view to Wells Fargo, do not address any other aspect of the proposed Merger
or any related transaction and do not constitute a recommendation to any
stockholder as to how such stockholder should vote at the Wells Fargo Special
Meeting.
OPINIONS OF FIRST INTERSTATE FINANCIAL ADVISORS
First Interstate's financial advisors, Goldman, Sachs & Co. ("Goldman Sachs")
and Morgan Stanley & Co. Incorporated ("Morgan Stanley" and, together with
Goldman Sachs, the "First Interstate Financial Advisors"), have each rendered
an opinion, dated January 23, 1996, to the First Interstate Board that the
Exchange Ratio is fair or, in the case of Morgan Stanley's opinion, fair from a
financial point of view to the holders of First Interstate Common Stock.
Goldman Sachs and Morgan Stanley have each confirmed such opinions by delivery
of written opinions dated the date of this Joint Proxy Statement/Prospectus.
Copies of the opinions of Goldman Sachs and Morgan Stanley dated the date of
this Joint Proxy Statement/Prospectus are attached hereto as Appendices G and
H, respectively. Each opinion should be read in its entirety with respect to
the assumptions made, other matters considered and limitations on the reviews
undertaken in connection with such opinion. The opinions of Goldman Sachs and
Morgan Stanley are directed only to the fairness of the Exchange Ratio or, in
the case of Morgan Stanley, the fairness of the Exchange Ratio from a financial
point of view, to First Interstate stockholders, do not address any other
aspect of the proposed Merger or any related transaction and do not constitute
a recommendation to any stockholder as to how such stockholder should vote at
the First Interstate Special Meeting.
BUSINESS PENDING CONSUMMATION OF THE MERGER
Pursuant to the Merger Agreement, each of Wells Fargo and First Interstate
has made certain covenants relating to the conduct of its business pending
consummation of the Merger. Among other things, each has agreed (except as
otherwise contemplated by or disclosed in connection with the Merger Agreement)
to conduct its business in the usual, regular and ordinary course. In addition,
each has agreed (except as otherwise contemplated by or disclosed in connection
with the Merger Agreement) not to, among other things, (i) declare or pay
dividends in a manner inconsistent with past practice or redeem or otherwise
acquire shares of its capital stock or issue additional shares of its capital
stock; (ii) dispose of any of its material properties or assets or make any
material acquisition other than in the ordinary course consistent with its past
practices; (iii) enter into, amend or terminate any material contract or
agreement; or (iv) increase in any material respect the compensation or
10
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fringe benefits of any of its employees or enter into or modify any employee
benefit plans or employment agreements except in the ordinary course of
business consistent with past practice. See "The Merger--Conduct of Business
Pending the Merger and Other Agreements."
REGULATORY APPROVALS
Under the Merger Agreement, the obligations of both Wells Fargo and First
Interstate are conditioned upon, among other things, all regulatory approvals
required to consummate the Merger (the "Requisite Regulatory Approvals") having
been obtained and remaining in full force and effect, all statutory waiting
periods in respect thereof having expired and no such approval having imposed a
Burdensome Condition (as defined herein). See "The Merger--Conditions to the
Consummation of the Merger."
Each of Wells Fargo and First Interstate will use its reasonable best efforts
to obtain the Requisite Regulatory Approvals, which include approvals from the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
and various state and foreign regulatory authorities. As described under "The
Merger--Regulatory Approvals," applications and notices seeking Requisite
Regulatory Approvals have been filed. The Merger cannot proceed in the absence
of the Requisite Regulatory Approvals. Although no assurances can be given,
Wells Fargo and First Interstate currently anticipate that they will receive
all Requisite Regulatory Approvals and that no such approval will impose a
Burdensome Condition.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject, among other things, to (i) approval of
the Wells Fargo Proposal by the requisite affirmative vote of the holders of
the outstanding Wells Fargo Common Stock, (ii) approval of the First Interstate
Proposal by the requisite affirmative vote of the holders of the outstanding
First Interstate Common Stock, (iii) the shares of Wells Fargo Common Stock and
the New Wells Fargo Depositary Shares to be issued to First Interstate
stockholders upon consummation of the Merger having been authorized for listing
on the NYSE, subject to official notice of issuance, (iv) receipt of the
Requisite Regulatory Approvals without the imposition of any Burdensome
Condition, (v) no court or agency having taken any action, nor any law or
regulation having been enacted, which prohibits or makes illegal the
consummation of the Merger, (vi) receipt by Wells Fargo and First Interstate of
opinions of their respective counsel as to the tax-free nature of the Merger
for federal income tax purposes, and (vii) certain other closing conditions.
There can be no assurance as to when or if such conditions will be satisfied
(or, where permissible, waived) or that the Merger will be consummated. See
"The Merger--Conditions to the Consummation of the Merger" and "--Regulatory
Approvals."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated by mutual agreement of the Wells Fargo
Board and the First Interstate Board. The Merger Agreement also may be
terminated by either the Wells Fargo Board or the First Interstate Board if (i)
a governmental authority finally has denied an application with respect to any
of the Requisite Regulatory Approvals, (ii) the Merger does not occur on or
before December 31, 1996, provided that the failure of the Merger to occur by
such date is not caused by a breach of the Merger Agreement by the party
seeking such termination, (iii) the other party commits a breach of any of
certain representations, warranties, covenants or agreements in the Merger
Agreement that cannot be or has not been cured within 30 days of notice of such
breach, (iv) the requisite approval of either the Wells Fargo stockholders or
the First Interstate stockholders is not obtained at their respective Special
Meetings, (v) prior to the receipt of the requisite approval of the terminating
party's stockholders, there is an outstanding proposal by a third party to
merge with or acquire a substantial equity interest in, or a substantial
portion of the assets of, the terminating party and the Board of Directors of
the terminating party determines that termination of the Merger Agreement is
necessary in the exercise of its fiduciary duties, (vi) the Board of Directors
of either party reasonably determines in good faith that any of the Requisite
Regulatory Approvals contains a Burdensome Condition or (vii) the Board of
Directors of the other party shall have withdrawn or adversely modifies its
recommendation of the matters to be voted on at such other party's Special
Meeting. See "The Merger--Termination of the Merger Agreement; Fee Agreements."
11
<PAGE>
As an inducement and condition to Wells Fargo's willingness to enter into the
Merger Agreement, First Interstate (as payor) entered into a termination fee
agreement with Wells Fargo (as recipient), dated as of January 23, 1996 (the
"First Interstate Fee Agreement"), and as an inducement and condition to First
Interstate's willingness to enter into the Merger Agreement, Wells Fargo (as
payor) entered into a termination fee agreement with First Interstate (as
recipient), dated as of January 23, 1996 (the "Wells Fargo Fee Agreement" and,
together with the First Interstate Fee Agreement, the "Fee Agreements"). The
Fee Agreements are set forth in Appendices B and C to this Joint Proxy
Statement/Prospectus.
First Interstate (pursuant to the First Interstate Fee Agreement) and Wells
Fargo (pursuant to the Wells Fargo Fee Agreement) each agreed to pay (as
"Payor") the other party (as "Recipient") a cash fee of $50 million (the "First
Trigger Fee") in the event certain First Trigger Events (as defined herein)
occur prior to or concurrently with the termination of the Merger Agreement,
except where a Nullifying Event (as defined herein) has occurred and is
continuing at such time. Under the Fee Agreements, a First Trigger Event would
include, among other things, the failure of the stockholders of either party to
adopt the Merger Agreement at the Special Meetings following the public
announcement of an Acquisition Proposal (as defined herein) for such party.
Pursuant to the Fee Agreements, First Interstate and Wells Fargo each also
agreed, subject to certain conditions, to pay the other party an additional
$150 million cash fee (less the amount of the First Trigger Fee already paid)
if (i) the Merger Agreement is terminated, (ii) prior to or concurrently with
such termination a First Trigger Event shall have occurred and (iii) prior to,
concurrently with or within 18 months following such termination an Acquisition
Event (as defined herein) shall have occurred, unless a Nullifying Event shall
have occurred and be continuing at the time the Merger Agreement is terminated.
See "The Merger--Termination of the Merger Agreement; Fee Agreements" and
Appendices B and C to this Joint Proxy Statement/Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and
that, accordingly, for federal income tax purposes no gain or loss will be
recognized by either First Interstate or Wells Fargo as a result of the Merger.
The obligations of First Interstate and Wells Fargo to consummate the Merger
are conditioned upon the receipt by First Interstate and Wells Fargo of
opinions of Skadden, Arps, Slate, Meagher & Flom and Sullivan & Cromwell,
respectively, substantially to the effect that First Interstate's stockholders
will not recognize gain or loss upon the receipt solely of Wells Fargo Common
Stock or New Wells Fargo Preferred Stock in exchange for First Interstate
Common Stock or First Interstate Preferred Stock, respectively, except with
respect to any cash received in lieu of a fractional share interest in Wells
Fargo Common Stock. If such opinions are not received, the Merger will not be
consummated unless the conditions requiring their receipt are waived and the
approvals of the Wells Fargo and First Interstate stockholders are resolicited
by means of an updated Joint Proxy Statement/Prospectus. Wells Fargo and First
Interstate currently anticipate that such opinions will be delivered and that
neither Wells Fargo nor First Interstate will waive the conditions requiring
receipt of such opinions.
All stockholders should carefully read the discussion of the material federal
income tax consequences of the Merger under "The Merger--Certain Federal Income
Tax Consequences" and are urged to consult with their own tax advisors as to
the federal, state, local and foreign tax consequences in their particular
circumstances.
ACCOUNTING TREATMENT
Upon consummation of the Merger, Wells Fargo will account for the acquisition
of First Interstate using the purchase method of accounting. Accordingly, the
consideration to be paid in the Merger will be allocated to assets acquired and
liabilities assumed based on their estimated fair values at the consummation
date. Income (or loss) of First Interstate prior to the consummation date will
not be included in income of the combined company.
12
<PAGE>
APPRAISAL RIGHTS
Under the DGCL, holders of First Interstate Common Stock, First Interstate
Preferred Stock (including the holders of First Interstate Depositary Shares),
Wells Fargo Common Stock and Wells Fargo Preferred Stock (including the holders
of Wells Fargo Depositary Shares) will have no appraisal rights in connection
with the Merger Agreement and the consummation of the transactions contemplated
thereby. See "The Merger--Appraisal Rights."
MARKETS AND MARKET PRICES
The Wells Fargo Common Stock is listed on the NYSE and the PSE under the
symbol "WFC" and the First Interstate Common Stock is listed on the NYSE and
the PSE under the symbol "I." The following table sets forth the closing price
per share of Wells Fargo Common Stock and the closing price per share of First
Interstate Common Stock, each as reported on the NYSE Composite Tape, and the
"equivalent per share price" (as defined below) of First Interstate Common
Stock as of: (i) January 19, 1996, the last trading day before January 21,
1996, the day on which Wells Fargo and First Interstate reached agreement on
the Exchange Ratio to be included in the Merger Agreement, the other terms of
which the parties were working to finalize, (ii) January 23, 1996, the last
trading day before Wells Fargo and First Interstate announced the execution of
the Merger Agreement, and (iii) February 23, 1996, the last practicable date
prior to the date of this Joint Proxy Statement/Prospectus. The "equivalent per
share price" of First Interstate Common Stock as of any date equals the closing
price per share of Wells Fargo Common Stock on such date multiplied by the
Exchange Ratio. See "The Merger -- Conversion of First Interstate Capital
Stock."
<TABLE>
<CAPTION>
WELLS FARGO FIRST INTERSTATE EQUIVALENT PER
MARKET PRICE PER SHARE AS OF COMMON STOCK COMMON STOCK SHARE PRICE
---------------------------- ------------ ---------------- --------------
<S> <C> <C> <C>
January 19, 1996........... $217.25 $138.88 $144.83
January 23, 1996........... $228.50 $147.00 $152.33
February 23, 1996.......... $252.13 $165.75 $168.08
</TABLE>
Because the Exchange Ratio is fixed at two-thirds, a change in the market
price of Wells Fargo Common Stock before the Effective Time will affect the
implied market value of the Wells Fargo Common Stock to be received in the
Merger in exchange for the First Interstate Common Stock. THERE CAN BE NO
ASSURANCE AS TO THE MARKET PRICE OF THE WELLS FARGO COMMON STOCK AT ANY TIME
BEFORE, AT OR AFTER THE EFFECTIVE TIME. STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR WELLS FARGO COMMON STOCK AND FIRST INTERSTATE
COMMON STOCK. SEE "THE MERGER -- CONVERSION OF FIRST INTERSTATE CAPITAL STOCK."
Following the Merger, the First Interstate Common Stock and the First
Interstate Depositary Shares will no longer exist and, as a result, will no
longer be listed on the NYSE. The Wells Fargo Common Stock issued in connection
with the Merger and the New Wells Fargo Depositary Shares are expected to be
listed on the NYSE.
COMPARISON OF RIGHTS OF HOLDERS OF FIRST INTERSTATE COMMON STOCK AND WELLS
FARGO COMMON STOCK
Upon consummation of the Merger, stockholders of First Interstate will become
stockholders of Wells Fargo. As each of First Interstate and Wells Fargo is
organized under the laws of Delaware, differences in the rights of holders of
Wells Fargo Common Stock and First Interstate Common Stock arise solely from
various provisions of the certificate of incorporation and by-laws of each of
First Interstate and Wells Fargo, and from the Rights Agreement, dated November
21, 1988 (the "Rights Agreement"), between First Interstate and First
Interstate Bank of California, as successor Rights Agent (Wells Fargo having no
similar agreement in effect). For a discussion of certain similarities and all
the material differences between the rights of holders of First Interstate
Common Stock and the rights of holders of Wells Fargo Common Stock, see "The
Merger --Comparison of Rights of Holders of First Interstate Common Stock and
Wells Fargo Common Stock."
DESCRIPTION OF WELLS FARGO CAPITAL STOCK
The authorized capital stock of Wells Fargo consists of 150,000,000 shares of
Wells Fargo Common Stock, par value $5.00 per share, and 25,000,000 shares of
preferred stock, par value $5.00 per share. As of December 31, 1995, there were
46,973,319 shares of Wells Fargo Common Stock, 1,500,000 shares of Adjustable
Rate
13
<PAGE>
Cumulative Preferred Stock, Series B, 477,500 shares of 9% Preferred Stock,
Series C, and 350,000 shares of 8 7/8% Preferred Stock, Series D, issued and
outstanding.
Holders of shares of Wells Fargo Common Stock are entitled to one vote per
share for each share held. Subject to the rights of holders of shares of Wells
Fargo's outstanding preferred stock, holders of shares of Wells Fargo Common
Stock have equal rights to participate in dividends when declared and, in the
event of liquidation, in the net assets of Wells Fargo available for
distribution to stockholders. Wells Fargo may not declare any dividends on the
Wells Fargo Common Stock unless full preferential amounts to which holders of
Wells Fargo's preferred stock are entitled have been paid or declared and set
apart for payment. Wells Fargo is also subject to certain contractual and
regulatory restrictions on the payment of dividends.
For additional information concerning the capital stock of Wells Fargo, see
"Description of Wells Fargo Capital Stock."
14
<PAGE>
CAPITALIZATION OF WELLS FARGO
The following table sets forth the capitalization of Wells Fargo and its
subsidiaries as of December 31, 1995 and as adjusted to give effect to (a) the
exchange of 75,929,295 shares of First Interstate Common Stock for shares of
Wells Fargo Common Stock in the Merger, assuming that none of First
Interstate's outstanding stock options are exercised prior to the Effective
Time, (b) the estimated fair value of First Interstate's senior and
subordinated debt, and (c) the conversion of First Interstate Preferred Stock
into New Wells Fargo Preferred Stock pursuant to the Merger.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------
HISTORICAL ADJUSTED
---------- --------
<S> <C> <C>
(IN MILLIONS)
SENIOR AND SUBORDINATED DEBT
Floating Rate Subordinated Note Due 2000................. $ 118 $ 118
8.20% Notes Due 1996..................................... 200 200
Fixed Rate Medium-Term Notes............................. 25 25
Floating Rate Medium Term Notes.......................... 1,478 1,478
8.75% Subordinated Notes Due 2002........................ 199 199
8.375% Subordinated Notes Due 2002....................... 149 149
6.875% Subordinated Notes Due 2003....................... 150 150
6.125% Subordinated Notes Due 2003....................... 249 249
Floating Rate Subordinated Notes Due 1997................ 101 101
Floating Rate Subordinated Euro Notes Due 1997........... 100 100
Floating Rate Subordinated Capital Notes Due 1998........ 200 200
Senior and subordinated debt of First Interstate ........ 1,355
Estimated fair value adjustment to debt of First Inter-
state .................................................. (9)
Other.................................................... 80 80
------ -------
TOTAL SENIOR AND SUBORDINATED DEBT......................... 3,049 4,395
------ -------
STOCKHOLDERS' EQUITY
Preferred Stock
Cumulative adjustable rate preferred stock............... 75 75
Cumulative perpetual preferred stock(1).................. 414 764
------ -------
Total preferred stockholders' equity....................... 489 839
------ -------
Common Stock
Common stock, par value $5 per share; authorized
150,000,000 shares;
issued and outstanding 46,973,319 shares (historical)
and 97,592,849 (adjusted)............................... 235 488
Additional paid-in capital............................... 1,135 11,879
Retained earnings........................................ 2,174 2,174
Other.................................................... 22 22
------ -------
Total common stockholders' equity.......................... 3,566 14,563
------ -------
TOTAL STOCKHOLDERS' EQUITY................................. 4,055 15,402
------ -------
TOTAL CAPITALIZATION....................................... $7,104 $19,797
====== =======
</TABLE>
- --------
(1) The adjusted amount reflects $350 million of First Interstate Preferred
Stock that will be converted into New Wells Fargo Preferred Stock pursuant
to the Merger.
15
<PAGE>
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following table sets forth certain historical, pro forma combined and pro
forma equivalent per share financial information for the common stock of Wells
Fargo and of First Interstate. The pro forma amounts included in the table
assume completion of the Merger and are based on the purchase method of
accounting, a preliminary determination and allocation of the total purchase
price and the assumptions described under "Pro Forma Combined Financial
Information." This information should be read in conjunction with and is
qualified in its entirety by reference to the consolidated financial statements
(however, statements of cash flows and notes to financial statements are not
yet available) of Wells Fargo and First Interstate included in the documents
described under "Incorporation of Certain Information by Reference," First
Interstate's earnings announcement, dated January 16, 1996 (the "First
Interstate Earnings Announcement"), attached as Appendix I hereto, and the pro
forma combined financial statements and accompanying discussion and notes set
forth under "Pro Forma Combined Financial Information." The pro forma amounts
in the table below are presented for informational purposes and are not
necessarily indicative of the financial position or the results of operations
of the combined company that actually would have occurred had the Merger been
consummated as of the dates or for the periods presented. The pro forma amounts
are also not necessarily indicative of the future financial position or future
results of operations of the combined company. In particular, Wells Fargo
expects to achieve significant operating cost savings as a result of the
Merger. See "The Merger--Reasons of Wells Fargo for the Merger; Recommendation
of the Wells Fargo Board of Directors." No adjustment has been included in the
pro forma amounts for the anticipated operating cost savings.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
WELLS FARGO COMMON STOCK
EARNINGS PER COMMON SHARE:
Historical............................................... $ 20.37
Pro forma combined....................................... 14.87
DIVIDENDS DECLARED PER COMMON SHARE:
Historical............................................... $ 4.60
Pro forma combined(1).................................... 4.60
BOOK VALUE PER COMMON SHARE (AT PERIOD END):
Historical............................................... $ 75.93
Pro forma combined(2).................................... 149.22
FIRST INTERSTATE COMMON STOCK
EARNINGS PER COMMON SHARE:
Historical............................................... $ 11.02
Pro forma equivalent(3).................................. 9.91
DIVIDENDS DECLARED PER COMMON SHARE:
Historical............................................... $ 3.10
Pro forma equivalent(3).................................. 3.07
BOOK VALUE PER COMMON SHARE (AT PERIOD END):
Historical............................................... $ 50.10
Pro forma equivalent(3).................................. 99.48
</TABLE>
- --------
(1) Amounts represent historical dividends per common share. For a discussion
of Wells Fargo's current and future dividend policy, see "Market Prices and
Dividends--Wells Fargo."
(2) Amount is calculated by dividing total pro forma common stockholders'
equity by the sum of total outstanding shares of Wells Fargo Common Stock
plus new shares of Wells Fargo Common Stock to be issued in the Merger
(based on the number of shares of First Interstate Common Stock outstanding
at period end).
(3) Amounts are calculated by multiplying Wells Fargo's pro forma combined
amounts by the Exchange Ratio of two-thirds.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF WELLS FARGO
The selected consolidated financial data of Wells Fargo set forth below have
been derived from the consolidated financial statements of Wells Fargo for each
of the years in the five-year period ended December 31, 1995. However, the
consolidated financial statements for the year ended December 31, 1995 exclude
a statement of cash flows and notes to financial statements, which are not yet
available. The selected consolidated financial data set forth below should be
read in conjunction with and is qualified in its entirety by reference to the
financial statements and accompanying notes contained in the 1994 Wells Fargo
10-K and Wells Fargo's Current Report on Form 8-K dated January 16, 1996, which
are incorporated by reference herein. See "Incorporation of Certain Information
by Reference."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE
DATA AND PERCENTAGES)
CONSOLIDATED SUMMARY OF INCOME
Net interest income.......... $ 2,654 $ 2,610 $ 2,657 $ 2,691 $ 2,520
Provision for loan losses.... -- 200 550 1,215 1,335
Noninterest income........... 1,324 1,200 1,093 1,059 889
Noninterest expense.......... 2,201 2,156 2,162 2,035 2,020
Net income................... 1,032 841 612 283 21
PER COMMON SHARE
Net income................... $ 20.37 $ 14.78 $ 10.10 $ 4.44 $ 0.04
Dividends declared........... 4.60 4.00 2.25 1.50 3.50
AVERAGE COMMON SHARES
OUTSTANDING.................. 48.6 53.9 55.6 52.9 51.8
CONSOLIDATED PERIOD-END
BALANCE SHEET DATA
Investment securities........ $ 8,920 $11,608 $13,058 $ 9,338 $ 3,833
Loans........................ 35,582 36,347 33,099 36,903 44,099
Assets....................... 50,316 53,374 52,513 52,537 53,547
Deposits..................... 38,982 42,332 41,644 42,244 43,719
Senior and subordinated
debt........................ 3,049 2,853 4,221 4,040 4,220
Stockholders' equity......... 4,055 3,911 4,315 3,809 3,271
CONSOLIDATED AVERAGE BALANCE
SHEET DATA
Loans........................ $34,508 $34,039 $34,304 $40,406 $46,736
Assets....................... 50,767 51,849 51,110 52,497 55,022
Deposits..................... 38,780 40,821 40,727 42,266 42,642
NET INTEREST MARGIN(1)........ 5.80% 5.55% 5.74% 5.70% 5.18%
CONSOLIDATED PROFITABILITY
RATIOS
Net income to average total
assets (ROA)................ 2.03% 1.62% 1.20% 0.54% 0.04%
Net income applicable to
common stock to average
common stockholders' equity
(ROE)....................... 29.70 22.41 16.74 7.93 0.07
CONSOLIDATED PERIOD-END
CAPITAL RATIOS(2)
Common stockholders' equity
to assets................... 7.09% 6.41% 7.00% 6.03% 5.24%
Stockholders' equity to
assets...................... 8.06 7.33 8.22 7.25 6.11
CONSOLIDATED PERIOD-END LOAN
DATA
Allowance for loan losses.... $ 1,794 $ 2,082 $ 2,122 $ 2,067 $ 1,646
Allowance for loan losses as
a percentage of total
loans....................... 5.04% 5.73% 6.41% 5.60% 3.73%
Nonaccrual and restructured
loans....................... $ 552 $ 582 $ 1,200 $ 2,142 $ 1,981
Nonaccrual and restructured
loans as a percentage of
total loans................. 1.6% 1.6% 3.6% 5.8% 4.5%
CONSOLIDATED LOAN CHARGE-OFF
DATA
Net loan charge-offs......... $ 288 $ 240 $ 495 $ 798 $ 572
Net loan charge-offs as a
percentage of average total
loans....................... 0.83% 0.70% 1.44% 1.97% 1.22%
</TABLE>
- --------
(1) Net interest margin is defined as net interest income on a taxable-
equivalent basis divided by average total earning assets.
(2) Based on current Federal Reserve Board capital adequacy guidelines, Wells
Fargo's total risk-based capital ratio was 12.46%, 13.16%, 15.12%, 13.15%
and 10.19% at December 31, 1995, 1994, 1993, 1992 and 1991, respectively.
Wells Fargo's Tier 1 risk-based capital ratio was 8.81%, 9.09%, 10.48%,
8.22% and 5.78% at December 31, 1995, 1994, 1993, 1992 and 1991,
respectively. See "Description of Wells Fargo Capital Stock -- Certain
Regulatory Considerations."
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF FIRST INTERSTATE
The selected consolidated financial data of First Interstate set forth below
have been derived from the consolidated financial statements of First
Interstate for each of the years in the five-year period ended December 31,
1995. However, the consolidated financial statements for the year ended
December 31, 1995 exclude a statement of cash flows and notes to financial
statements, which are not yet available. The selected consolidated financial
data set forth below should be read in conjunction with and is qualified in its
entirety by reference to the financial statements and accompanying notes
contained in the 1994 First Interstate 10-K, which is incorporated by reference
herein, and the First Interstate Earnings Announcement attached as Appendix I
hereto. See "Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE
DATA AND PERCENTAGES)
CONSOLIDATED SUMMARY OF INCOME
Net interest income............. $ 2,537 $ 2,327 $ 2,072 $ 2,015 $ 2,092
Provision for loan losses....... -- -- 113 314 810
Noninterest income.............. 1,119 1,054 954 912 1,184
Noninterest expense............. 2,213 2,197 2,032 2,209 2,732
Income (loss) before
extraordinary items and
cumulative effect of accounting
changes........................ 885 734 562 282 (288)
Extraordinary items............. -- -- (25) -- --
Cumulative effect of accounting
changes........................ -- -- 200 -- --
Net income (loss)............... 885 734 737 282 (288)
PER COMMON SHARE
Income (loss) before
extraordinary items and
cumulative effect of accounting
changes........................ $ 11.02 $ 8.71 $ 6.68 $ 3.23 $ (5.24)
Net income (loss)............... 11.02 8.71 8.96 3.23 (5.24)
Dividends declared.............. 3.10 2.75 1.60 1.20 1.80
AVERAGE COMMON SHARES
OUTSTANDING(1).................. 77.9 80.5 77.2 69.5 62.5
CONSOLIDATED PERIOD-END BALANCE
SHEET DATA
Investment securities(2)........ $ 9,098 $13,851 $16,542 $13,913 $ 8,496
Loans........................... 36,673 33,222 25,988 24,201 28,182
Assets.......................... 58,071 55,813 51,461 50,863 48,922
Deposits........................ 50,185 48,427 44,701 43,675 41,433
Senior and subordinated debt.... 1,355 1,388 1,533 2,702 3,108
Stockholders' equity............ 4,154 3,436 3,548 3,251 2,639
CONSOLIDATED AVERAGE BALANCE
SHEET DATA
Loans........................... $35,235 $28,644 $24,128 $25,694 $30,691
Assets.......................... 55,562 52,979 49,319 49,031 49,126
Deposits........................ 47,909 46,313 42,540 41,196 41,051
NET INTEREST MARGIN(3)........... 5.43% 5.14% 4.91% 4.89% 5.04%
CONSOLIDATED PROFITABILITY RATIOS
Net income (loss) to average
total assets (ROA)............. 1.59% 1.38% 1.49% 0.57% (0.59)%
Net income (loss) applicable to
common stock to average common
stockholders' equity (ROE)..... 24.57 21.56 23.24 9.63 (13.96)
CONSOLIDATED PERIOD-END CAPITAL
RATIOS(4)(5)
Common stockholders' equity to
assets......................... 6.55% 5.53% 6.21% 5.18% 4.18%
Stockholders' equity to assets.. 7.15 6.16 6.89 6.39 5.39
CONSOLIDATED PERIOD-END LOAN DATA
Allowance for loan losses....... $ 804 $ 934 $ 1,001 $ 1,068 $ 1,273
Allowance for loan losses as a
percentage of total loans...... 2.19% 2.81% 3.85% 4.41% 4.52%
Nonaccrual and restructured
loans.......................... $ 171 $ 186 $ 227 $ 578 $ 1,095
Nonaccrual and restructured
loans as a percentage of total
loans.......................... 0.5% 0.6% 0.9% 2.4% 3.9%
CONSOLIDATED LOAN CHARGE-OFF DATA
Net loan charge-offs............ $ 155 $ 133 $ 218 $ 460 $ 547
Net loan charge-offs as a
percentage of average total
loans.......................... 0.44% 0.46% 0.90% 1.79% 1.78%
</TABLE>
- --------
(1) Includes dilutive effect of outstanding stock options (as determined by
application of the treasury stock method).
(2) Includes Federal Reserve Bank stock of $81 million, $80 million, $81
million, $82 million and $70 million at December 31, 1995, 1994, 1993, 1992
and 1991, respectively.
(3) Net interest margin is defined as net interest income on a taxable-
equivalent basis divided by average total earning assets.
(4) Based on current Federal Reserve Board capital adequacy guidelines, First
Interstate's total risk-based capital ratio was 10.52%, 10.22%, 13.08%,
13.87% and 10.61% at December 31, 1995, 1994, 1993, 1992 and 1991,
respectively. First Interstate's Tier 1 risk-based capital ratio was 7.61%,
7.20%, 9.88%, 9.40% and 6.28% at December 31, 1995, 1994, 1993, 1992 and
1991, respectively.
(5) Calculated using period-end data derived from the information incorporated
by reference to provide information comparable to that of Wells Fargo. This
information is disclosed by First Interstate in the 1994 First Interstate
10-K and the First Interstate Earnings Announcement using average balances.
18
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth certain selected historical financial data for
Wells Fargo and First Interstate and selected pro forma combined financial
data. The pro forma amounts included in the table below assume completion of
the Merger and are based on the purchase method of accounting, a preliminary
determination and allocation of the total purchase price and the assumptions
described under "Pro Forma Combined Financial Information." The information
should be read in conjunction with and is qualified in its entirety by
reference to the consolidated financial statements (however, statements of cash
flows and notes to financial statements are not yet available) of Wells Fargo
and First Interstate included in the documents described under "Incorporation
of Certain Information by Reference," the First Interstate Earnings
Announcement, attached as Appendix I hereto, and the pro forma combined
financial statements and accompanying discussion and notes set forth under "Pro
Forma Combined Financial Information." The pro forma amounts in the table below
are presented for informational purposes and are not necessarily indicative of
the financial position or the results of operations of the combined company
that actually would have occurred had the Merger been consummated as of the
dates or for the periods presented. The pro forma amounts are also not
necessarily indicative of the future financial position or future results of
operations of the Surviving Corporation. In particular, Wells Fargo expects to
achieve significant operating cost savings as a result of the Merger. See "The
Merger--Reasons of Wells Fargo for the Merger; Recommendation of the Wells
Fargo Board of Directors." No adjustment has been included in the pro forma
amounts for anticipated operating cost savings.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
--------------------------------------
HISTORICAL
----------------------------
PRO FORMA
WELLS FARGO FIRST INTERSTATE COMBINED
----------- ---------------- ---------
<S> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE DATA)
CONSOLIDATED SUMMARY OF INCOME
Net interest income..................... $2,654 $2,537 $5,186
Provision for loan losses............... -- -- --
Noninterest income...................... 1,324 1,119 2,443
Noninterest expense..................... 2,201 2,213 4,898
Net income.............................. 1,032 885 1,549
PER COMMON SHARE
Net income.............................. $20.37 $11.02 $14.87
Dividends declared...................... 4.60 3.10 4.60
AVERAGE COMMON SHARES OUTSTANDING......... 48.6 77.9(1) 99.1
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------
HISTORICAL
----------------------------
PRO FORMA
WELLS FARGO FIRST INTERSTATE COMBINED
----------- ---------------- ---------
<S> <C> <C> <C>
(IN MILLIONS)
CONSOLIDATED PERIOD-END BALANCE SHEET
DATA
Investment securities................ $ 8,920 $ 9,017(2) $ 17,910
Loans................................ 35,582 36,673 72,360
Assets............................... 50,316 58,071 116,061
Deposits............................. 38,982 50,185 89,202
Senior and subordinated debt......... 3,049 1,355 4,395
Stockholders' equity................. 4,055 4,154 15,402
</TABLE>
- --------
(1) Includes dilutive effect of outstanding stock options (as determined by
application of the treasury stock method) for 2.2 million shares of First
Interstate Common Stock.
(2) Federal Reserve Bank stock of $81 million has been reclassified from
investment securities to other assets to be consistent with Wells Fargo's
classifications.
19
<PAGE>
INFORMATION CONCERNING THE WELLS FARGO SPECIAL MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of Wells
Fargo Common Stock as part of the solicitation of proxies by the Wells Fargo
Board for use at the Wells Fargo Special Meeting to be held on March 28, 1996
at 2:00 p.m., in the Penthouse at the Wells Fargo headquarters, 420 Montgomery
Street, San Francisco, California, including any adjournments or reschedulings
thereof. This Joint Proxy Statement/Prospectus and the accompanying Proxy Card
are first being mailed to stockholders of Wells Fargo on or about February 28,
1996.
The purpose of the Wells Fargo Special Meeting is to consider and vote upon
the Wells Fargo Proposal to adopt the Merger Agreement and to approve the
transactions contemplated thereby, including the Merger and the issuance of
shares of Wells Fargo Common Stock and New Wells Fargo Preferred Stock
pursuant to the Merger. No other business will be transacted at the Wells
Fargo Special Meeting other than possible adjournments or reschedulings
thereof.
Based on the number of shares of First Interstate Common Stock outstanding
on the Record Date, consummation of the Merger would result in the issuance of
50,902,719 shares of Wells Fargo Common Stock to persons other than Wells
Fargo (approximately 52.00% of the total number of shares of Wells Fargo
Common Stock that would be outstanding after giving effect to such issuance
based upon the number of shares of Wells Fargo Common Stock outstanding on the
Record Date). Based on the total number of shares and options to acquire
shares of First Interstate Common Stock outstanding on the Record Date, a
maximum aggregate of 52,922,440 shares of Wells Fargo Common Stock could be
issued to persons other than Wells Fargo in the Merger (approximately 52.97%
of the total number of shares of Wells Fargo Common Stock that would be
outstanding after giving effect to such issuance based upon the number of
shares of Wells Fargo Common Stock outstanding on the Record Date).
The Merger is subject to a number of conditions, including the receipt of
required regulatory and stockholder approvals. See "The Merger--Conditions to
the Consummation of the Merger" and "--Regulatory Approvals."
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The Wells Fargo Board has fixed the close of business on February 16, 1996
(the Record Date) as the record date for the determination of the stockholders
of Wells Fargo entitled to notice of and to vote at the Wells Fargo Special
Meeting. Only holders of record of shares of Wells Fargo Common Stock at the
close of business on the Record Date will be entitled to vote on each matter
properly presented at the Wells Fargo Special Meeting. On the Record Date,
46,994,234 shares of Wells Fargo Common Stock were issued and outstanding.
Votes may be cast in person or by proxy, and each share of Wells Fargo Common
Stock entitles its holder to one vote. While holders of Wells Fargo Preferred
Stock and Wells Fargo Depositary Shares are being furnished with copies of the
Joint Proxy Statement/Prospectus for informational purposes, such holders are
not entitled to and are not being requested to vote at the Wells Fargo Special
Meeting.
Pursuant to the Wells Fargo By-Laws and in accordance with the DGCL, the
presence of the holders of a majority of the shares of Wells Fargo Common
Stock issued and outstanding, in person or by proxy, and entitled to vote at
the Wells Fargo Special Meeting is required for and shall constitute a quorum
for the transaction of business at the Wells Fargo Special Meeting. For such
purpose, abstentions and broker non-votes will be counted in establishing the
quorum. A majority of the shares of Wells Fargo Common Stock present at the
Wells Fargo Special Meeting, in person or by proxy, whether or not
constituting a quorum, may vote to, or the Wells Fargo Board in its discretion
may, adjourn the Wells Fargo Special Meeting from time to time without further
notice, including for the purpose of soliciting additional proxies. Proxies
containing a vote against the Wells Fargo Proposal will not be used to vote in
favor of any such adjournment. Under the DGCL, the affirmative vote of the
holders of at least a majority of the total number of outstanding shares of
Wells Fargo Common Stock entitled to vote at the Wells Fargo Special Meeting
is required to approve the Wells Fargo Proposal. An abstention and a broker
non-vote would thus have the same effect as a vote against the Wells Fargo
Proposal.
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Only stockholders of record on the Record Date are eligible to give their
proxies. Therefore, stockholders owning shares held in the name of a brokerage
firm, bank, or other institution should sign, date and return their proxy
cards to such brokerage firm, bank or other institution in the envelope
provided by that firm. In addition, under the rules of the NYSE, brokers who
hold shares in street name for customers who are the beneficial owners of such
shares are prohibited from giving a proxy to vote shares held for such
customers on the approval of the Wells Fargo Proposal without specific
instructions from such customers. Given that the DGCL requires the affirmative
vote of the holders of a majority of the outstanding shares of Wells Fargo
Common Stock entitled to vote at the Wells Fargo Special Meeting in order to
approve the Wells Fargo Proposal, the failure of such customers to provide
specific instructions with respect to their shares of Wells Fargo Common Stock
to their broker will have the effect of a vote against the approval of the
Wells Fargo Proposal. Failure to return a properly executed proxy card or to
vote at the Wells Fargo Special Meeting will have the same effect as a vote
against the Wells Fargo Proposal.
Proxies in the accompanying form which are properly executed and returned to
Wells Fargo will be voted at the Wells Fargo Special Meeting in accordance
with the stockholders' instructions contained in such proxies and, at the
discretion of the proxy holders, on such other matters as may properly come
before the meeting. If a stockholder returns a proxy card that is signed,
dated and not marked, that stockholder will be deemed to have voted for the
Wells Fargo Proposal. An executed proxy may be revoked at any time prior to
its exercise by submitting another proxy with a later date, by appearing in
person at the Wells Fargo Special Meeting, notifying the Secretary and voting
or by sending a written, signed and dated revocation which clearly identifies
the proxy being revoked to the principal executive offices of Wells Fargo at
420 Montgomery Street, San Francisco, California 94163, Attention: Guy
Rounsaville, Jr., Secretary. A revocation may be in any written form validly
signed by the record holder as long as it clearly states that the proxy
previously given is no longer effective. In addition, stockholders whose
shares of Wells Fargo Common Stock are not registered in their own name will
need additional documentation from the record holder of such shares to vote in
person at the Wells Fargo Special Meeting.
Proxies will be solicited by mail, telephone, telegraph, telex, telecopier
and advertisement and in person. Solicitation may be made in the same manner
by directors, officers and other representatives of Wells Fargo who will not
be specially compensated for such activities, but who may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. In
addition, proxies may be solicited in the foregoing manner by directors,
officers, employees and representatives of First Interstate, who will be
compensated as set forth under "Information Concerning the First Interstate
Special Meeting."
Banks, brokerage houses and other custodians, nominees and fiduciaries will
be requested to forward the solicitation materials to the beneficial owners of
Wells Fargo Common Stock for which they hold of record, and Wells Fargo will
reimburse them for their reasonable out-of-pocket expenses.
In addition, Wells Fargo has retained D.F. King & Co., Inc. (""D.F. King'')
to assist and to provide advisory services in connection with this proxy
solicitation for which D.F. King will be paid a fee estimated not to exceed
$200,000 for such services, and will be reimbursed for reasonable out-of-
pocket expenses. Wells Fargo will indemnify D.F. King against certain
liabilities and expenses in connection with the proxy solicitation, including
liabilities under the federal securities laws.
The expenses related to the proxy solicitation for the Wells Fargo Special
Meeting will be borne by Wells Fargo, except that the cost of preparing and
mailing this Joint Proxy Statement/Prospectus will be borne equally by Wells
Fargo and First Interstate.
It is expected that all of the 533,850 shares of Wells Fargo Common Stock
(excluding shares issuable upon exercise of stock options) beneficially owned
by directors and executive officers of Wells Fargo and their affiliates as of
the Record Date (1.1% of the total number of outstanding shares of Wells Fargo
Common Stock at such date) will be voted for approval of the Wells Fargo
Proposal.
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INFORMATION CONCERNING THE FIRST INTERSTATE SPECIAL MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of First
Interstate Common Stock as part of the solicitation of proxies by the First
Interstate Board for use at the First Interstate Special Meeting to be held on
March 28, 1996, at 8:00 a.m. at The Sheraton Grande Hotel, 333 South Figueroa
Street, Los Angeles, California and at any adjournments or postponements
thereof. This Joint Proxy Statement/Prospectus, and the accompanying Proxy
Card, are being first mailed to stockholders of First Interstate on or about
February 28, 1996.
The purpose of the First Interstate Special Meeting is to consider and vote
upon the First Interstate Proposal to adopt the Merger Agreement and to
approve the transactions contemplated thereby, including the Merger. No other
business will be transacted at the First Interstate Special Meeting other than
possible adjournments or postponements thereof.
The Merger is subject to a number of conditions, including the receipt of
required regulatory and stockholder approvals. See "The Merger--Conditions to
Consummation of the Merger" and "--Regulatory Approvals."
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The First Interstate Board has also fixed the close of business on February
16, 1996 as the Record Date for the determination of the stockholders of First
Interstate entitled to notice of and to vote at the First Interstate Special
Meeting, including any adjournments or postponements thereof. Only holders of
record of shares of First Interstate Common Stock at the close of business on
the Record Date will be entitled to vote on each matter properly presented at
the First Interstate Special Meeting. On the Record Date, 76,354,178 shares of
First Interstate Common Stock were issued and outstanding. Votes may be cast
in person or by proxy, and each share of First Interstate Common Stock
entitles its holder to one vote. While holders of First Interstate Preferred
Stock and First Interstate Depositary Shares are being furnished with copies
of the Joint Proxy Statement/Prospectus for informational purposes, such
holders are not entitled to and are not being requested to vote at the First
Interstate Special Meeting.
Pursuant to the By-Laws of First Interstate (the "First Interstate By-Laws")
and in accordance with the DGCL, the presence of the holders of a majority of
the shares of First Interstate Common Stock issued and outstanding, in person
or by proxy, and entitled to vote at the First Interstate Special Meeting is
required for and shall constitute a quorum for the transaction of business at
the First Interstate Special Meeting. For such purpose, abstentions and broker
non-votes will be counted in establishing the quorum. A majority of the shares
of First Interstate Common Stock present at the First Interstate Special
Meeting, in person or by proxy, whether or not constituting a quorum, may vote
to, or the First Interstate Board in its discretion may, adjourn the First
Interstate Special Meeting from time to time without further notice, including
for the purpose of soliciting additional proxies. Proxies containing a vote
against the First Interstate Proposal will not be used to vote in favor of any
such adjournment. Under the DGCL, the affirmative vote of the holders of at
least a majority of the total number of outstanding shares of First Interstate
Common Stock entitled to vote at the First Interstate Special Meeting is
required to approve the First Interstate Proposal. An abstention and a broker
non-vote would thus have the same effect as a vote against the First
Interstate Proposal.
Only stockholders of record on the Record Date are eligible to give their
proxies. Therefore, stockholders owning shares held in the name of a brokerage
firm, bank, or other institution should sign, date and return their proxy
cards to such brokerage firm, bank or other institution in the envelope
provided by that firm. In addition, under the rules of the NYSE, brokers who
hold shares in street name for customers who are the beneficial owners of such
shares are prohibited from giving a proxy to vote shares held for such
customers on the approval of the First Interstate Proposal without specific
instructions from such customers. Given that the DGCL requires the affirmative
vote of the holders of a majority of the outstanding shares of First
Interstate Common Stock entitled to vote at the First Interstate Special
Meeting in order to approve the First Interstate Proposal, the failure of such
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customers to provide specific instructions with respect to their shares of
First Interstate Common Stock to their broker will have the effect of a vote
against the approval of the First Interstate Proposal. Failure to return a
properly executed proxy card or to vote at the First Interstate Special
Meeting will have the same effect as a vote against the First Interstate
Proposal.
Proxies in the accompanying form which are properly executed and returned to
First Interstate will be voted at the First Interstate Special Meeting in
accordance with the stockholders' instructions contained in such proxies and,
at the discretion of the proxy holders, on such other matters as may properly
come before the meeting. If a stockholder returns a proxy card that is signed,
dated and not marked, that stockholder will be deemed to have voted for the
First Interstate Proposal. An executed proxy may be revoked at any time prior
to its exercise by submitting another proxy with a later date, by appearing in
person at the First Interstate Special Meeting, notifying the Secretary and
voting or by sending a written, signed and dated revocation which clearly
identifies the proxy being revoked to the principal executive offices of First
Interstate at 633 West Fifth Street, TC 7-10, Los Angeles, California 90071,
Attention: Edward S. Garlock, Secretary of First Interstate. A revocation may
be in any written form validly signed by the record holder as long as it
clearly states that the proxy previously given is no longer effective. In
addition, stockholders whose shares of First Interstate Common Stock are not
registered in their own name will need additional documentation from the
record holder of such shares to vote in person at the First Interstate Special
Meeting.
Proxies will be solicited by mail, telephone, telegraph, telex, telecopier
and advertisement and in person. Solicitation may be made in the same manner
by directors, officers and other representatives of First Interstate who will
not be specially compensated for such activities, but who may be reimbursed
for reasonable out-of-pocket expenses in connection with such solicitation. In
addition, proxies may be solicited in the foregoing manner by directors,
officers, employees and representatives of Wells Fargo, who will be
compensated as set forth under "Information Concerning the Wells Fargo Special
Meeting."
Banks, brokerage houses and other custodians, nominees and fiduciaries will
be requested to forward the solicitation materials to the beneficial owners of
First Interstate Common Stock for which they hold of record, and First
Interstate will reimburse them for their reasonable out-of-pocket expenses.
In addition, First Interstate has retained Georgeson & Co., Inc.
("Georgeson") to assist First Interstate in connection with its communications
with its stockholders with respect to, and to provide other services to First
Interstate in connection with, the Merger. Georgeson will receive reasonable
and customary compensation for its services and reimbursement of out-of-pocket
expenses in connection therewith. First Interstate has agreed to indemnify
Georgeson against certain liabilities arising out of or in connection with its
engagement.
The expenses related to the proxy solicitation for the First Interstate
Special Meeting will be borne by First Interstate, except that the cost of
preparing and mailing this Joint Proxy Statement/Prospectus will be borne
equally by Wells Fargo and First Interstate.
It is expected that all of the 326,581 shares of First Interstate Common
Stock (excluding shares subject to stock options) beneficially owned by
directors and executive officers of First Interstate and their affiliates as
of the Record Date (.43% of the total number of outstanding shares of First
Interstate Common Stock at such date) will be voted for approval of the First
Interstate Proposal.
STOCKHOLDERS OF FIRST INTERSTATE ARE INSTRUCTED NOT TO SEND IN THE
INSTRUMENTS REPRESENTING THEIR SECURITIES WITH THEIR PROXY CARDS. IF THE
MERGER IS CONSUMMATED, STOCKHOLDERS OF FIRST INTERSTATE WILL RECEIVE
INSTRUCTIONS REGARDING THE PROPER PROCEDURES FOR THE EXCHANGE OF SUCH
INSTRUMENTS. SEE "THE MERGER--EXCHANGE OF CERTIFICATES AND DEPOSITARY
RECEIPTS; FRACTIONAL SHARES."
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THE MERGER
The following information relating to the Merger is qualified in its
entirety by reference to the other information contained elsewhere in this
Joint Proxy Statement/Prospectus, including the Appendices hereto, and the
documents incorporated herein by reference. A copy of the Merger Agreement
(excluding the exhibits and schedules thereto) is set forth in Appendix A to
this Joint Proxy Statement/Prospectus and reference is made thereto for the
complete terms of the Merger. Stockholders are urged to read the Merger
Agreement and each of the other appendices hereto carefully.
EFFECTS OF THE MERGER
Subject to the terms and conditions of the Merger Agreement, at the
effective time of the Merger (the Effective Time), First Interstate will merge
with and into Wells Fargo. Wells Fargo will be the surviving corporation in
the Merger, and will continue its corporate existence under the DGCL under the
same name. At the Effective Time, the separate corporate existence of First
Interstate will terminate. The Wells Fargo Certificate and the Wells Fargo By-
Laws as in effect immediately prior to the Effective Time will be the
certificate of incorporation and bylaws, respectively, of the Surviving
Corporation.
At the Effective Time, (i) each outstanding share of First Interstate Common
Stock, other than shares held in First Interstate's treasury or directly or
indirectly by Wells Fargo or its subsidiaries or by First Interstate or its
subsidiaries (except, in both cases, for Trust/DPC Shares), will be converted
into the right to receive two-thirds ( 2/3) of a share of Wells Fargo Common
Stock, with cash being paid in lieu of fractional shares, (ii) each
outstanding share of First Interstate 9.875% Preferred Stock will be converted
into the right to receive one share of New Wells Fargo 9.875% Preferred Stock
and (iii) each outstanding share of First Interstate 9.0% Preferred Stock will
be converted into the right to receive one share of New Wells Fargo 9.0%
Preferred Stock. The terms, designations, preferences, limitations, privileges
and rights of the respective series of New Wells Fargo Preferred Stock will be
substantially the same as those of the corresponding series of First
Interstate Preferred Stock.
For information on how First Interstate stockholders will be able to
exchange certificates representing shares of First Interstate Common Stock and
First Interstate Depositary Receipts evidencing First Interstate Depositary
Shares for certificates representing the shares of Wells Fargo Common Stock
and New Wells Fargo Depositary Receipts evidencing New Wells Fargo Depositary
Shares to be issued to them in the Merger, see "--Exchange of Certificates and
Depositary Receipts; Fractional Shares."
EFFECTIVE TIME
The Effective Time will be set forth in the Certificate of Merger that will
be filed with the Secretary of State of the State of Delaware on the Closing
Date, which Closing Date will be on the first day of the month following the
month in which the latest to occur of the conditions set forth in Section 7.1
of the Merger Agreement is satisfied or waived (subject to applicable law).
Consummation of the Merger, however, could be delayed, for a number of
reasons, including delays in obtaining the Requisite Regulatory Approvals.
There can be no assurances as to (i) if or when such approvals will be
obtained or that, if obtained, such approvals will satisfy the conditions to
consummation of the Merger set forth in the Merger Agreement or (ii) whether
all of the other conditions precedent to the Merger will be satisfied or
waived by the party permitted to do so. If the Merger is not effected on or
before December 31, 1996, the Merger Agreement may be terminated by either
Wells Fargo or First Interstate, unless the failure to effect the Merger by
such date is due to the failure of the party seeking to terminate the Merger
Agreement to perform or observe the covenants and agreements of such party set
forth therein. See "--Conditions to Consummation of the Merger," "--Regulatory
Approvals" and "--Termination of the Merger Agreement; Fee Agreements."
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BACKGROUND OF THE MERGER
On a number of occasions during the past several years, Wells Fargo and
First Interstate have informally discussed the possibility of a merger of the
two companies. Following several meetings between the then Chief Executive
Officers of Wells Fargo and First Interstate, on February 11, 1994, Wells
Fargo submitted to First Interstate for its consideration a tax-free merger
proposal. After considering that proposal, the First Interstate Board
determined to implement strategies aimed at enhancing stockholder value as an
independent company rather than pursuing a merger with Wells Fargo at that
time.
During the remainder of 1994 and the first three quarters of 1995, First
Interstate implemented these strategies. Throughout this period, the First
Interstate Board also considered possible alternative strategies for enhancing
stockholder value. These included the alternative of remaining independent, as
well as the alternative of seeking a strategic partnership with either a
larger or similar-sized bank holding company with similar strategic focus and
business strengths complementary to and compatible with those of First
Interstate. With respect to potential strategic partnerships, the First
Interstate Board continued to consider the possibility of a transaction with
Wells Fargo, as well as the possibility of a strategic partnership with one of
several other companies, including First Bank System, Inc., a Delaware
corporation ("FBS"). As the pace of consolidation in the banking industry
continued to increase during the first half of 1995, William Siart, the
Chairman and Chief Executive Officer of First Interstate, initiated a series
of discussions to enable the First Interstate Board to continue its ongoing
review of the appropriate strategic direction for First Interstate in light of
the significant changes affecting the industry. The first such discussion was
held at the July 17, 1995 meeting of the First Interstate Board.
On September 7, 1995, Paul Hazen, Chairman and Chief Executive Officer of
Wells Fargo, met with Mr. Siart to discuss the possibility of a merger of the
two companies. No conclusions were reached, but Mr. Siart indicated that the
First Interstate Board had previously commenced a process for reviewing the
strategic alternatives available to First Interstate and, accordingly, First
Interstate would probably not be prepared to consider a merger until such
process was complete.
As part of this process, the First Interstate Board met on October 17, 1995
and reviewed possible strategic partnerships with five large bank holding
companies, including Wells Fargo and FBS. Later that afternoon, Mr. Hazen
telephoned Mr. Siart to inform him that Wells Fargo intended to deliver a
letter containing a new merger proposal (the "Original Proposal") to First
Interstate and that Mr. Hazen would like to meet with Mr. Siart later that day
to deliver the letter in person and to discuss the proposal. Mr. Siart asked
for some time to consider the request, but called Mr. Hazen back shortly
thereafter to say that he saw no reason for the two of them to meet. Wells
Fargo's letter was then delivered to First Interstate.
On October 18, 1995, First Interstate and, shortly thereafter, Wells Fargo
publicly announced that Wells Fargo had made its Original Proposal to First
Interstate for a tax-free merger in which First Interstate's stockholders
would receive 0.625 of a share of Wells Fargo Common Stock for each share of
First Interstate Common Stock. Later that day, three large regional bank
holding companies (each of which had been considered as a potential strategic
partner at the previous day's First Interstate Board meeting), including FBS,
contacted First Interstate to express an interest in initiating discussions to
assess the merits of a strategic partnership. Mr. Siart contacted all of the
members of the First Interstate Board to discuss the Original Proposal, the
need to accelerate the First Interstate Board's process for reviewing
strategic alternatives and the inquiries received from those three regional
bank holding companies.
First Interstate's senior management, together with First Interstate's
financial advisors, Goldman, Sachs & Co. ("Goldman Sachs") and Morgan Stanley
& Co. Incorporated ("Morgan Stanley," and together with Goldman Sachs, the
"First Interstate Financial Advisors"), at the direction of the First
Interstate Board, then engaged in preliminary discussions concerning potential
strategic partnerships with the three large regional bank holding companies
that had contacted Mr. Siart on October 18. First Interstate's management and
the First Interstate Financial Advisors also continued to explore the values
to stockholders that could be potentially
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achieved at that time if First Interstate (i) chose to remain independent
rather than pursue a strategic partnership or (ii) pursued a transaction with
Wells Fargo. After discussion of the information presented, the First
Interstate Board instructed its management and advisors to continue to explore
strategic partnerships with the four bank holding companies and the option of
First Interstate's remaining independent, with a view to seeking the best
available alternative for First Interstate's stockholders.
The First Interstate Board met to consider the Original Proposal on October
25, 1995. At this meeting, First Interstate's management and the First
Interstate Financial Advisors reviewed with the First Interstate Board the
status of the preliminary discussions with the three large regional bank
holding companies as well as the Original Proposal. All of the potential
transactions involved stock-for-stock mergers. After discussion, the First
Interstate Board concluded, based on information that was then currently
available, that two of the bank holding companies, Wells Fargo and FBS,
appeared to offer more promising options for First Interstate and its
stockholders than either of the two other bank holding companies. That
determination was based upon the First Interstate Board's perception of the
relative economic values of the respective proposals to First Interstate's
stockholders, which economic value was determined based upon a review of (i)
the respective strategies, businesses, operations, earnings and financial
condition of the four potential strategic partners on both a historical and a
prospective basis, (ii) the degree to which each potential partner's corporate
philosophies and strategies were compatible with and complementary to those of
First Interstate, and (iii) the possible market value of the transaction to
First Interstate's stockholders on a per share equivalent basis based upon
recent trading values for each potential strategic partner's common stock and
the possible future trading values of such common stock.
On October 26, 1995, Mr. Siart and Mr. Hazen met to discuss the possibility
of pursuing a merger of First Interstate and Wells Fargo. Mr. Siart stated his
desire to learn more about the Original Proposal. At this meeting, Mr. Hazen
discussed Wells Fargo's reasons for publicly announcing its unsolicited
proposal. Messrs. Siart and Hazen also discussed the possible advantages of a
combination of First Interstate and Wells Fargo, with particular attention
being paid to the cost savings and operating efficiencies that could be
achieved in a merger. At that meeting, Mr. Siart and Mr. Hazen agreed that a
merger of First Interstate and Wells Fargo could enhance stockholder value for
both companies. Mr. Hazen explained the estimates of cost savings and
reductions in revenue being used by Wells Fargo. Mr. Hazen also offered to have
the individuals at Wells Fargo who had prepared those estimates meet with their
counterparts at First Interstate in order to discuss potential cost savings and
reductions in revenue if there were any questions about Wells Fargo's
estimates, but Mr. Siart declined. Mr. Siart and Mr. Hazen were later joined
for part of this meeting by George Roberts of Kohlberg Kravis Roberts & Co.,
First Interstate's largest stockholder at that time, and Warren Buffett of
Berkshire Hathaway Inc., Wells Fargo's largest stockholder. Mr. Buffett
expressed his view that an exchange ratio of 0.625 was fair, and Mr. Roberts
and Mr. Siart expressed their view that such a ratio was inadequate. Mr. Hazen
then discussed the possibility of raising the exchange ratio in Wells Fargo's
proposal to 0.65 of a share of Wells Fargo Common Stock for each share of First
Interstate Common Stock. Mr. Roberts indicated that he believed that an
exchange ratio of 0.65 was still inadequate and indicated that it would take an
exchange ratio of 0.70 to reach agreement at that time. Mr. Hazen stated that
Wells Fargo was unwilling to raise its bid any further at that time.
On October 30, 1995, the First Interstate Board met to review the discussions
that had been held with Wells Fargo and the three other potential strategic
partners. Mr. Siart reported that FBS had indicated that it would consider
increasing its exchange ratio from the range of 2.3 to 2.4 shares of common
stock, par value $1.25 per share ("FBS Common Stock"), of FBS for each share of
First Interstate Common Stock, which it had previously suggested, to 2.5 shares
of FBS Common Stock for each share of First Interstate Common Stock. First
Interstate management and the First Interstate Financial Advisors also
discussed their views as to the values which could be achieved if First
Interstate were to remain independent, and the risks associated with this
strategy. At the conclusion of this meeting, the First Interstate Board
determined to continue to explore a merger with each of Wells Fargo and FBS,
discussions with the other prospective strategic partners were deferred, and,
due to the course of discussions with Wells Fargo and FBS, such other
discussions were not thereafter pursued.
With respect to Wells Fargo, it was the sense of the First Interstate Board
that Mr. Siart should determine if Wells Fargo would consider increasing the
exchange ratio above 0.65. The First Interstate Board believed such
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an increase was warranted in order to justify the pursuit of further
discussions with Wells Fargo concerning a potential merger due to the risks
and uncertainties it believed were associated with such a transaction.
Messrs. Siart and Hazen met again on October 31, 1995. At this meeting, Mr.
Siart informed Mr. Hazen that the First Interstate Board had been fully
informed of all of the matters discussed at their October 26 meeting and was
considering carefully all of the advantages and disadvantages of a potential
merger with Wells Fargo, as well as the advantages and disadvantages
associated with the other strategic alternatives available to First
Interstate. Discussions concerning potential cost savings, operating
efficiencies and revenue losses also took place. Mr. Siart then stated that he
believed an increase in the exchange ratio to 0.68 would be appropriate. Mr.
Hazen replied that he believed that an exchange ratio of 0.65 was fair to the
stockholders of First Interstate and Wells Fargo.
On November 1, 1995, Messrs. Siart and Hazen talked again, this time by
telephone, but made no further progress towards an agreement.
On November 2, 1995, Mr. Siart met with John Grundhofer, the Chairman and
Chief Executive Officer of FBS, and Richard Zona, the Chief Financial Officer
of FBS. At this meeting, FBS increased the exchange ratio it was prepared
(subject to the approval of the FBS Board) to offer to First Interstate's
stockholders to 2.6 from the previous indication of 2.5 shares of FBS Common
Stock for each share of First Interstate Common Stock, and First Interstate
and FBS continued their discussions concerning a potential merger. A number of
the significant business terms relating to a merger transaction were
discussed. Mr. Siart reported these developments to the members of the First
Interstate Board later that day. On November 3, 1995, the First Interstate
Board met to consider the potential merger with FBS and the results of Mr.
Siart's conversations with Mr. Hazen. This meeting included an executive
session of all of First Interstate's outside directors (other than Edward
Carson, the former Chairman and Chief Executive Officer of First Interstate),
who discussed the matters under consideration with their special outside
counsel. During this period, negotiations between the legal and financial
advisors of First Interstate and FBS began concerning the terms of definitive
transaction agreements.
On November 5, 1995, the First Interstate Board met again to consider both
the potential merger with FBS and Wells Fargo's merger proposal. At this
meeting, the management of First Interstate, as well as First Interstate's
legal and financial advisors, made presentations regarding their due diligence
findings concerning FBS, the strategic alternatives other than the potential
FBS merger available to First Interstate (including a merger with Wells Fargo
assuming for purposes of such presentations that Wells Fargo would increase
its proposed exchange ratio to 0.65), the terms of the definitive agreements
negotiated between First Interstate and FBS, the fairness opinions of each of
Goldman Sachs and Morgan Stanley concerning the exchange ratio for the
potential merger, and the judgments of both of the First Interstate Financial
Advisors expressed orally in discussions with the First Interstate Board that
the financial terms of the Reciprocal Stock Option Agreements and the
Reciprocal Fee Letters (each as defined herein) were within the normal range
and consistent with comparable transactions. Another executive session of all
of First Interstate's outside directors (other than Mr. Carson) was also held,
with the outside directors consulting with both their special counsel and the
First Interstate Financial Advisors. Based upon its consideration of those
presentations and other factors more fully described herein, the First
Interstate Board approved and authorized the execution and delivery of, and
First Interstate entered into, the Agreement and Plan of Merger, dated as of
November 5, 1995 (the "FIB/FBS Merger Agreement"), by and among First
Interstate, FBS and Eleven Acquisition Corp., a subsidiary of FBS ("FBS Sub"),
pursuant to which FBS Sub and First Interstate would merge (the "FIB/FBS
Merger") and each share of First Interstate Common Stock would be converted
into the right to receive 2.6 shares of FBS Common Stock.
The FIB/FBS Merger was publicly announced on November 6, 1995.
In connection with the execution and delivery of the FIB/FBS Merger
Agreement, FBS and First Interstate executed reciprocal fee letters providing
for the payment of "break-up" fees in certain circumstances (the "Reciprocal
Fee Letters") and reciprocal stock option agreements providing for the grant
of options to purchase
27
<PAGE>
each other's common stock in certain circumstances (the "Reciprocal Stock
Option Agreements"). Under its terms, the First Interstate Board was permitted
to terminate the FIB/FBS Merger Agreement in a number of circumstances,
including if there existed a Takeover Proposal (as defined therein) for First
Interstate and the First Interstate Board reasonably determined in good faith
that termination was necessary in the exercise of its fiduciary duties under
applicable laws (the circumstance pursuant to which the FIB/FBS Merger
Agreement was subsequently terminated on January 23, 1996).
On November 13, 1995, Wells Fargo announced its intention to offer to
exchange two-thirds of a share of Wells Fargo Common Stock for each share of
First Interstate Common Stock (the "Exchange Offer"). In a publicly released
letter setting forth such offer, Mr. Hazen again stated that Wells Fargo would
be prepared to enter into a merger agreement with First Interstate providing
for the same consideration as the Exchange Offer.
Also on November 13, 1995, Wells Fargo announced that it had filed an action
in Delaware Chancery Court seeking, among other things, to enjoin the
consummation of the FIB/FBS Merger (for a description of this action and
actions brought by First Interstate and FBS against Wells Fargo in connection
with the FIB/FBS Merger and the Exchange Offer, see "--Certain Litigation"),
and stated that it anticipated filing (a) preliminary proxy solicitation
materials with the Commission for use in soliciting proxies from stockholders
of First Interstate against approval of the FIB/FBS Merger and (b) preliminary
consent solicitation materials with the Commission for use in soliciting
written consents from stockholders of First Interstate to replace the current
members of the First Interstate Board with nominees who would be committed to
removing any obstacles to the merger of First Interstate with Wells Fargo.
Also, on November 13, 1995, Wells Fargo filed applications and notices in
draft form with the Federal Reserve Bank of San Francisco (the "FRB-SF")
seeking approval of, among other things, the Merger. See "The Merger--
Regulatory Approvals."
On November 19, 1995, the First Interstate Board met to consider both the
Exchange Offer and the FIB/FBS Merger. At this meeting, following an executive
session of all of First Interstate's outside directors (other than Mr. Carson)
with their special counsel, the management of First Interstate, as well as
First Interstate's legal and financial advisors and the outside directors'
special counsel, reviewed, among other things, the analyses which had been
presented to the First Interstate Board at its November 5, 1995 meeting, with
these analyses updated where appropriate to reflect the increase in Wells
Fargo's indicated maximum exchange ratio from 0.65 to two-thirds of a share of
Wells Fargo Common Stock for each share of First Interstate Common Stock. At
its November 19 meeting, the First Interstate Board determined to recommend
that First Interstate stockholders reject the Exchange Offer and not tender
their shares of First Interstate Common Stock pursuant to the Exchange Offer.
On November 20, 1995, a Schedule 14D-9 of First Interstate (the "First
Interstate Schedule 14D-9") was filed with the Commission stating, among other
things, that the First Interstate Board was committed to completing the
FIB/FBS Merger and recommending that First Interstate's stockholders not
tender their shares of First Interstate Common Stock in the Exchange Offer.
Subsequent to these announcements and events, each of First Interstate, FBS
and Wells Fargo publicly expressed its respective views concerning the
relative merits of the FIB/FBS Merger and the Exchange Offer. Various
financial analysts who followed either the banking industry generally or one
or more of the three companies also publicly expressed their opinions
concerning the relative risks and rewards of the two transactions and the
competing views on these matters being expressed by the three companies.
On January 16, 1996, the First Interstate Board met to consider both the
FIB/FBS Merger and the Exchange Offer. At this meeting, the management of
First Interstate, as well as First Interstate's legal and financial advisors
and the outside directors' special counsel, reviewed, among other things,
information concerning the market values of the FBS Common Stock and the Wells
Fargo Common Stock during the period subsequent to November 20, 1995,
information contained in Wells Fargo's public filings concerning Wells Fargo's
expectations for the combined company and its future operating strategies, and
the views expressed by financial analysts and other market participants
regarding the relative risks and rewards of the two competing transactions.
The First Interstate Board also considered analyses by management and by First
Interstate's proxy solicitation firm
28
<PAGE>
concerning the likelihood that the FIB/FBS Merger would be approved by the
requisite vote of First Interstate's stockholders. Following the meeting of
the First Interstate Board, Messrs. Siart and Grundhofer discussed the status
of the FIB/FBS Merger.
On January 19, 1996, the First Interstate Board met to consider again both
the FIB/FBS Merger and the Exchange Offer. At this meeting, the management of
First Interstate, as well as First Interstate's legal and financial advisors
and the outside directors' special counsel, again reviewed the matters which
had been discussed at the January 16, 1996 meeting of the First Interstate
Board, as well as updates of the analyses which had been presented to the
Board at its November 5, 1995 and November 19, 1995 meetings. Mr. Siart also
reviewed the conversations he had held with Mr. Grundhofer earlier that week
regarding the status of the FIB/FBS Merger. The First Interstate Board was
also advised that on the previous day, the Commission had taken the position
that if the FIB/FBS Merger were consummated and were to be accounted for as a
pooling of interests, the combined entity would be required by the Commission
(subject to certain limited exceptions) to suspend the stock repurchase
program then being implemented by FBS for a period of two years following such
consummation. They were also advised that the management of each company,
after consulting with Ernst & Young LLP, the independent accountants to each
of First Interstate and FBS, had determined that up to a maximum of
approximately 1.75 million shares of First Interstate Common Stock would have
to be reissued prior to the consummation of the FIB/FBS Merger in order for
the FIB/FBS Merger to qualify for pooling-of-interests accounting treatment.
First Interstate management and the First Interstate Financial Advisors
reviewed the potential impact of the suspension of repurchases and the
reissuance of First Interstate Common Stock on the projected financial
condition and results of operations of a combined FBS/First Interstate entity.
After considering these matters, the First Interstate Board determined to
exercise its right under the FIB/FBS Merger Agreement to authorize management
and First Interstate's legal and financial advisors to provide Wells Fargo
with nonpublic information concerning First Interstate and to participate in
discussions and negotiations with Wells Fargo concerning the possibility of a
merger of the two companies. Mr. Siart contacted Mr. Grundhofer to inform him
of such determination in accordance with the FIB/FBS Merger Agreement and
later that evening contacted Mr. Hazen to inform him of such determination.
On January 20, 1996, Messrs. Siart and Hazen met and discussed a possible
transaction. On January 21, 1996, Mr. Siart briefed the First Interstate Board
on the status of his conversations with Mr. Grundhofer and Mr. Hazen, and the
First Interstate Board authorized Mr. Siart to continue discussions with Wells
Fargo regarding a possible merger at the mutually agreeable exchange ratio of
two-thirds of a share of Wells Fargo Common Stock for each share of First
Interstate Common Stock. Later that day, Mr. Siart called Mr. Hazen to advise
him of the determination of the First Interstate Board, and discussions with
the legal advisors of Wells Fargo and First Interstate began concerning the
terms of definitive transaction agreements. On January 22, 1996, First
Interstate publicly announced that such discussions had commenced. On January
22 and 23, 1996, such discussions continued, and in addition representatives
of Wells Fargo and First Interstate and their respective financial advisors
exchanged and discussed certain nonpublic information concerning the two
companies.
On January 23, 1996, the Wells Fargo Board met to consider the potential
merger with First Interstate. At this meeting, the management of Wells Fargo,
as well as Wells Fargo's legal and financial advisors, made presentations
regarding their due diligence findings concerning First Interstate, the terms
of the definitive agreements discussed by Wells Fargo and First Interstate and
the settlement agreement among Wells Fargo, First Interstate, FBS and FBS Sub
(the "Settlement Agreement"), and CS First Boston and Montgomery each rendered
an oral opinion (subsequently confirmed in writing) to the Wells Fargo Board
to the effect that, as of such date and based upon and subject to certain
matters stated in such opinions, the Exchange Ratio was fair to Wells Fargo
from a financial point of view. Based upon its consideration of those
presentations and the presentations previously made at the meetings of the
Wells Fargo Board at which the Original Proposal and the Exchange Offer were
approved, as well as other factors more fully described below, the Wells Fargo
Board unanimously approved and authorized the execution and delivery of the
Merger Agreement, the Fee Agreements and the Agreement, dated January 23, 1996
(the "Settlement Agreement"), by and among Wells Fargo, First Interstate, FBS
and Eleven Acquisition Corp., a Delaware corporation.
29
<PAGE>
On January 23, 1996, the First Interstate Board met to consider both the
possible termination of the FIB/FBS Merger Agreement and the potential merger
with Wells Fargo. At this meeting, the management of First Interstate, as well
as First Interstate's legal and financial advisors, made presentations
regarding their due diligence findings concerning Wells Fargo, the terms of
the definitive agreements discussed by Wells Fargo and First Interstate and
the Settlement Agreement and the fairness opinions of each of Goldman Sachs
and Morgan Stanley with respect to the Exchange Ratio for the potential merger
with Wells Fargo. Based upon its consideration of those presentations and
other factors more fully described below, the First Interstate Board
unanimously approved and authorized (with one director absent) the execution
and delivery of the Merger Agreement, the Fee Agreements and the Settlement
Agreement.
The Settlement Agreement was entered into on January 23, 1996 in connection
with the execution of the Merger Agreement and the termination of the FIB/FBS
Merger Agreement. Pursuant to the Settlement Agreement: (i) the FIB/FBS Merger
Agreement, and the reciprocal stock option agreement and the reciprocal fee
letter in favor of First Interstate, were terminated; (ii) the parties
executed releases with respect to all litigation brought against each other in
connection with the FIB/FBS Merger Agreement and the Exchange Offer and agreed
to promptly dismiss with prejudice all claims brought in connection with such
litigation; (iii) in satisfaction of its obligations under the Reciprocal
Stock Option Agreement and Reciprocal Fee Letter in favor of FBS, First
Interstate agreed to pay FBS $125,000,000 upon execution of the Settlement
Agreement and $75,000,000 upon consummation of the Merger (such Reciprocal
Stock Option Agreement was terminated upon the payment of the $125,000,000 and
such Reciprocal Fee Letter will terminate upon the payment of the
$75,000,000); (iv) each party agreed to withdraw any protest or opposition
which it had filed against any other party's applications relating to an
acquisition of First Interstate to the Federal Reserve Board or any other bank
regulatory agency, and FBS agreed to withdraw each such application filed by
it and to withdraw, or amend to be inapplicable to any merger or acquisition
of First Interstate, its Registration Statement on Form S-4 filed with the
Commission on November 21, 1995, as amended on December 29, 1995.
The execution of the Merger Agreement, the Fee Agreements and the Settlement
Agreement, as well as termination of the FIB/FBS Merger Agreement, were
publicly announced on January 24, 1996.
REASONS OF WELLS FARGO FOR THE MERGER; RECOMMENDATION OF THE WELLS FARGO BOARD
OF DIRECTORS
The Wells Fargo Board (with one director absent) has unanimously concluded
that the Merger is in the best interests of Wells Fargo and its stockholders
and unanimously recommends that Wells Fargo stockholders vote FOR the Wells
Fargo Proposal. The Wells Fargo Board believes that the proposed Merger will
create a strong retail bank franchise with the financial and managerial
resources to compete effectively in the rapidly changing and consolidating
marketplace for banking and financial services. The Wells Fargo Board further
believes that the combined Wells Fargo/First Interstate entity will have even
greater financial strength, flexibility, breadth of services, operational
efficiencies, profitability and potential for growth than Wells Fargo would
have on its own.
With the proposed combination with First Interstate, Wells Fargo will
solidify its position in California with deposits of approximately $58
billion. Additionally, through the presence of First Interstate in other
western states, the new company will rank number one, two, or three in terms
of deposits in four states (California, Oregon, Arizona and Nevada). The
population of California (approximately 31 million), coupled with the
population of First Interstate's territory outside California (approximately
43 million), represent 28% of the country's population and the states
represented are some of the fastest growing in the country. The combination of
Wells Fargo and First Interstate would benefit not only from the current
economic turnaround of California but also from the above average growth of
the other western states in which the combined entity would be doing business.
In addition, the Wells Fargo Board has concluded that the Merger presents
significant opportunities for net cost savings and operating efficiencies
because of, among other things, the high degree of geographic and operational
overlap between the two companies.
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<PAGE>
Assuming that all cost savings measures and operating efficiencies are
implemented (which are expected to require an 18-month phase-in period
following the consummation of the Merger), Wells Fargo believes that the
annual cost to Wells Fargo to operate First Interstate as part of a combined
entity would be approximately $1.2 billion. Wells Fargo based that figure on a
business line analysis of First Interstate. The unit heads of Wells Fargo's
business lines (in each case an executive vice president) requested that
members of their staffs look at the corresponding business lines at First
Interstate in order to estimate at what cost such business lines could be
operated as a part of Wells Fargo, while keeping the First Interstate
attributable revenues constant (the circumstances where maintaining constant
revenue was not optimal gave rise to Wells Fargo's provision for the $100
million in potential revenue reductions that are described below). Wells
Fargo's management also used its general knowledge of the marketplace in which
Wells Fargo and First Interstate compete. With respect to each cost, Wells
Fargo not only looked at First Interstate's direct costs, but also estimated
the expense of any incremental indirect costs, such as changes in shared
resources and facilities to be required by business line. Wells Fargo has
reviewed its analysis in light of information on First Interstate's expenses
provided by First Interstate and, following such review, continues to believe
its analysis is reasonable. The table below presents Wells Fargo management's
estimate of the cost to operate First Interstate as part of a combined entity,
with detail by category of expense.
<TABLE>
<CAPTION>
COST
(IN MILLIONS)
-------------
<S> <C>
Staff/Executive........................................... $ 13
Data Processing........................................... 104
Operations................................................ 316
Occupancy/Furniture & Equipment........................... 224
Business Lines
Retail.................................................. 394
Payment Systems......................................... 26
Commercial Lending...................................... 76
Trust and Investment Management......................... 50
------
Total................................................... $1,203
======
</TABLE>
Based on Wells Fargo's estimates, the difference between the assumed $2.02
billion annual adjusted noninterest expense of First Interstate on a stand-
alone basis (i.e., $2,216 million in annualized noninterest expense of First
Interstate for the quarter ended June 30, 1995, adjusted to exclude $17
million in annualized restructuring charges and $60 million in annualized
amortization of intangibles for such quarter and to reflect (i) a $90 million
reduction in FDIC expense expected in 1996 and (ii) a $28 million reduction in
other expenses expected in 1996 as a result of First Interstate's recently
announced mortgage alliance) and the expected $1.2 billion cost to operate
First Interstate as part of a combined entity represents approximately $800
million in annual cost savings. Wells Fargo's management anticipates that this
level of cost savings would be achievable within 18 months of the consummation
of the Merger. There can, however, be no assurance that any specific level of
cost savings will be achieved or that such cost savings will be achieved
within the time period contemplated.
The anticipated cost savings are expected to result from (i) the significant
overlap which exists between Wells Fargo's operations and those of First
Interstate in California, (ii) the proximity of Wells Fargo's operations in
California and those of First Interstate in neighboring states, (iii) the
greater level of efficiency with which Wells Fargo runs its franchise when
compared to First Interstate (for the quarter ended December 31, 1995, First
Interstate's efficiency ratio--calculated as noninterest expense, excluding
restructuring and merger expenses, divided by the sum of net interest income
(tax-equivalent basis) and noninterest income--was 57.7% while Wells Fargo's
efficiency ratio was 51.1%), and (iv) economies of scale.
The following list consists of principal areas in which Wells Fargo believes
material cost savings can be achieved, along with an approximation of the
percentage of the aggregate cost savings which are estimated to be
attributable to each area (such percentages are based on Wells Fargo's
estimates of cost to operate and First Interstate's annualized adjusted
noninterest expense for the quarter ended June 30, 1995, which Wells Fargo
continues to believe to be reasonable after review of information provided by
First Interstate): (a) Staff/Executive
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<PAGE>
(approximately 16% of cost savings): Elimination of redundant executive
management and central staff net of increases in such areas as audit and loan
examination; (b) Data Processing and Operations (approximately 23% of cost
savings): Consolidation of data centers and telecommunications network; (c)
Occupancy/Furniture & Equipment (approximately 17% of cost savings):
Reductions of occupancy, furniture, and equipment by closing branches and
reducing non-branch administrative space consistent with reductions in lines
of business; (d) Retail (approximately 29% of cost savings): Consolidation of
the equivalent of 85% of First Interstate's California branches by closing
both First Interstate and Wells Fargo branches and elimination of redundant
product management, regional branch management and staff (substantial branch
closures are possible due to the expansion in California of Wells Fargo's
supermarket branches and banking centers; at the end of 1994, Wells Fargo had
approximately 600 retail locations in California; this increased to
approximately 1,000 at the end of 1995 and is expected to grow to 1,100 by the
end of 1996; Wells Fargo has opened supermarket branches and banking centers
while at the same time closing traditional bank branches and enhancing
telephone and on-line banking services); (e) Payment Systems (approximately 3%
of cost savings): Consolidation of credit card management and staff into Wells
Fargo Bank (Arizona), N.A. and consolidation of cash management business into
that of Wells Fargo; (f) Commercial Lending (approximately 9% of cost
savings): Consolidation of all of First Interstate's commercial banking
offices in California into Wells Fargo's regional commercial banking centers,
retention of only the out-of-state offices in large markets and elimination of
redundant management; and (g) Trust and Investment Management (approximately
3% of cost savings): Consolidation of First Interstate's trust/private banking
offices within California and all of First Interstate's mutual funds into
Wells Fargo's mutual funds, together with elimination of redundant trust and
investment management functions.
Assuming implementation of the cost savings measures and operating
efficiencies as described above, Wells Fargo's management has estimated a
potential revenue loss of $100 million as a result of combining the two
companies. The estimated $100 million in potential revenue loss is expected to
occur principally in commercial lending, retail and trust. Revenue decreases
in these areas are expected to result, respectively, from (i) anticipated loan
run-offs; (ii) deposit attrition; and (iii) account attrition. Management from
each of Wells Fargo's business units estimated potential revenue losses as a
part of the same process by which the cost to operate First Interstate
described above was estimated. Potential revenue losses were estimated based
on expected results one year after consummation of the Merger.
In the course of its deliberations considering the proposed Merger, the
Wells Fargo Board reviewed and considered a number of relevant factors with
management and Wells Fargo's legal counsel and Financial Advisors. In
particular, the Wells Fargo Board considered, among other things, the
following factors:
(i) Information concerning Wells Fargo's and First Interstate's
respective business operations, financial performance and condition,
capital levels, results of operations and properties;
(ii) Information relating to (1) the possibility of achieving the cost
savings and operating efficiencies discussed in detail above as a result of
the consummation of the Merger, (2) the accounting treatment of the Merger,
including the fact that the use of purchase accounting would result in
goodwill that would affect reported earnings, but not cash earnings, while
the use of pooling-of-interests accounting would affect Wells Fargo's
ability to make share repurchases, which led the Wells Fargo Board to
conclude that because the ability to repurchase shares was an important
means of providing value to stockholders, purchase accounting was
preferable, (3) the continuation of the current Wells Fargo stock
repurchase program following consummation of the Merger using available
cash earnings after dividends, (4) how financial analysts would view the
earnings to be generated by the Merger (the Wells Fargo Board discussed and
considered that the goodwill that would result from the Merger using
purchase accounting would affect reported earnings but concluded that,
though banking analysts traditionally focus on reported earnings, such
analysts would recognize that cash earnings should be the more important
measure of the value of Wells Fargo), (5) current industry, economic and
market conditions and trends, including the likelihood of continuing
consolidation and increasing competition in the banking and financial
services industries (and the corresponding decrease in the number of
suitable merger partners for either Wells Fargo or First Interstate), the
growing importance of financial resources, market position and economies of
scale to a banking institution's ability to compete successfully in this
changing environment, and the increasing costs of technology, (6) the terms
of the
32
<PAGE>
proposed Merger compared with recent acquisitions in the banking industry
(including comparison of the data presented under "--Opinions of Wells
Fargo Financial Advisors--Opinion of CS First Boston--Comparable
Transactions Analysis" and "--Opinions of Wells Fargo Financial Advisors--
Opinion of Montgomery--Analysis of Selected Comparable Merger Transactions"
and the possibility of achieving the cost savings and operating
efficiencies discussed in detail above), (7) the ranking of the combined
company among its peers in terms of various significant measurements
(including, among others, total assets, return on average assets, return on
equity, efficiency ratio, intangible assets to total assets, intangible
assets to total equity, amortization expense to earnings, loan loss
reserves to total loans, and nonperforming asset ratio), (8) an overview of
First Interstate's financial condition and its market position in the
various states in which it operates, (9) market reactions to the Exchange
Offer (in particular the fact that the price of the Wells Fargo Common
Stock increased 7.2% during the trading day following the announcement of
the Original Proposal) and potential market reactions to the proposed
Merger which the Wells Fargo Board believed would be similar to the
positive market reactions to the announcement of the Original Proposal,
(10) a comparison of reported and cash earnings accretion/dilution to a
pre-Merger base case based upon analysts' stand-alone earnings estimates
for Wells Fargo and First Interstate and normalized loan loss provisions,
assuming the Merger will be accounted for as a purchase, and taking into
account management's net cost savings estimates and continued share
repurchases using cash earnings (after payment of dividends) for such
repurchases and (11) implied per share values of Wells Fargo, First
Interstate and the combined company;
(iii) The financial presentations of the Wells Fargo Financial Advisors
on October 17, 1995 and the oral opinions of such Wells Fargo Financial
Advisors delivered to the Wells Fargo Board on such date to the effect
that, as of such date and based upon and subject to certain matters stated
in such opinions, the then proposed exchange ratio of 0.625 was fair to
Wells Fargo from a financial point of view, and the oral opinions of the
Wells Fargo Financial Advisors delivered to the Wells Fargo Board on
November 9, 1995 to the effect that, as of such date and based upon and
subject to certain matters, the Exchange Ratio (i.e., two-thirds) was fair
to Wells Fargo from a financial point of view. The Wells Fargo Financial
Advisors confirmed the latter opinions (i) orally during the Wells Fargo
Board meeting on January 23, 1996 and (ii) by delivery of written opinions
dated January 23, 1996 and the date of this Joint Proxy
Statement/Prospectus (see "Opinions of Wells Fargo Financial Advisors--
Opinion of CS First Boston" and "Opinions of Wells Fargo Financial
Advisors--Opinion of Montgomery"). In considering the financial
presentations and opinions of the Wells Fargo Financial Advisors, the Wells
Fargo Board reviewed the methodology and the appropriateness of the
assumptions used by the Wells Fargo Financial Advisors; and
(iv) With the assistance of Wells Fargo's legal counsel, the regulatory
review process relating to the Merger and the likelihood of obtaining
required regulatory approvals.
The foregoing discussion of the information and factors considered by the
Wells Fargo Board is not intended to be exhaustive but is believed to include
all material factors considered by the Wells Fargo Board. In view of the
variety of factors considered in connection with its evaluation of the
proposed Merger, the Wells Fargo Board did not find it practicable to and did
not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of
the Wells Fargo Board may have given different weights to different factors.
THE WELLS FARGO BOARD OF DIRECTORS (WITH ONE DIRECTOR ABSENT) HAS
UNANIMOUSLY CONCLUDED THAT THE MERGER IS IN THE BEST INTERESTS OF WELLS FARGO
AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE WELLS
FARGO PROPOSAL.
REASONS OF FIRST INTERSTATE FOR THE MERGER; RECOMMENDATION OF THE FIRST
INTERSTATE BOARD OF DIRECTORS
The First Interstate Board of Directors (with one director absent) has
unanimously concluded that the Merger is in the best interests of First
Interstate and its stockholders and unanimously recommends that First
Interstate stockholders vote FOR the First Interstate Proposal. In reaching
its determination to approve and adopt
33
<PAGE>
the Merger Agreement and in determining to terminate the FIB/FBS Merger
Agreement, the First Interstate Board considered the following factors, which,
together, constitute all of the material factors considered by the First
Interstate Board:
(i) the equivalent per share prices of the common stock to be received by
First Interstate stockholders pursuant to the Merger and the FIB/FBS
Merger. The First Interstate Board noted that while on November 14, 1995,
the indicated value of the per share price of the shares to be received in
the Exchange Offer was only $1.65 higher than the shares to be received in
the FIB/FBS Merger, thereafter the disparity between such indicated value
of the per share prices had increased to as much as $19.35. This increase
had occurred after each of First Interstate, Wells Fargo and FBS, as well
as various financial analysts who followed either the banking industry
generally or one or more of the three companies, had widely disseminated
their respective views concerning the relative merits of each proposed
transaction and the market had had time to evaluate such information. In
addition, while the size of the disparity fluctuated, the overall trend was
for it to increase, and the mean disparity during the period from November
14, 1995 to January 19, 1996 was $11.49;
(ii) the fact that following the announcement of the Exchange Offer and
the dissemination of the information described in paragraph (i) above, the
market value of the Wells Fargo Common Stock had increased and the market
price of the FBS Common Stock had declined;
(iii) the First Interstate Board's belief that it was highly unlikely
that the FIB/FBS Merger would be approved by the requisite vote of First
Interstate stockholders;
(iv) the fact that FBS had advised First Interstate that it did not
anticipate increasing its proposed exchange ratio;
(v) the First Interstate Board's belief that it was highly likely that
First Interstate's stockholders would support Wells Fargo's efforts to
consummate a non-negotiated acquisition of First Interstate and that it was
preferable, and would better serve the interests of First Interstate's
stockholders, for the acquisition to be effected on the basis of negotiated
agreements;
(vi) on January 18, 1996, the staff of the Commission had taken the
position that if the FIB/FBS Merger were consummated and were to be
accounted for as a pooling-of-interests (which accounting treatment was a
condition to consummation of the FIB/FBS Merger), the combined company
would be required by the Commission (subject to certain limited exceptions)
to suspend the repurchase program then being implemented by FBS for a
period of two years following such consummation. Such suspension could
adversely affect the results of operations of the combined company,
particularly relative to the per share results of operations of the
combined company previously projected, and accordingly could negatively
impact the future market value of its common stock;
(vii) the First Interstate Board's familiarity with and review of First
Interstate's business, operations, financial condition and earnings on both
a historical and a prospective basis. Among other things, the First
Interstate Board reviewed the Wall Street consensus earnings estimates (see
"--Opinions of First Interstate Financial Advisors--Presentations by First
Interstate Financial Advisors--Summary Comparison of Potential Merger
Alternatives" below) for 1996, which are $10.99 and are consistent with
First Interstate management's earnings outlook for 1996, and reviewed
earnings estimates of First Interstate's management for 1997 and 1998 of
$12.53 and $14.31, respectively;
(viii) the First Interstate Board's review, based in part on
presentations by the First Interstate Financial Advisors and First
Interstate management, of (a) the strategy, business, operations, earnings
and financial condition of Wells Fargo on both a historical and a
prospective basis and (b) the historical market price of Wells Fargo Common
Stock. The First Interstate Board noted that, subsequent to the Board's
rejection of the Exchange Offer, Wells Fargo had announced 1995 results of
operations which exceeded the 1995 earnings per share consensus estimates
previously published for Wells Fargo and that the 1996, 1997 and 1998
earnings per share consensus estimates for Wells Fargo had also all
increased. In addition, the First Interstate Board noted that the
marketplace had as a general matter enthusiastically endorsed the proposed
operating strategies for the combined company that Wells Fargo had
described in public statements and
34
<PAGE>
filings, including those relating to analyst presentations held in December
of 1995. The First Interstate Board recognized that these strategies were
very different from those of First Interstate, and that a merger with Wells
Fargo would create a company with significantly different characteristics
than both First Interstate currently and a combined First Interstate/FBS.
While the First Interstate Board believed that Wells Fargo's strategies
were not without risk, it also believed that both Wells Fargo and its
senior management team were highly regarded and that stockholder value at
the combined company could be enhanced significantly if Wells Fargo's
proposed future operating strategies were implemented successfully;
(ix) the First Interstate Board's review, based in part on presentations
by the First Interstate Financial Advisors and First Interstate management,
of (a) the strategy, business, operations, earnings and financial condition
of FBS on both a historical and a prospective basis and (b) the historical
market price of the FBS Common Stock. Among other things, the First
Interstate Board reviewed the prospective 1996, 1997 and 1998 earnings per
share estimates of $4.60, $5.15 and $5.75, respectively, for FBS, as
provided by FBS management, which, in the case of 1996 and 1997 estimates,
were consistent with Wall Street consensus estimates (there being no
consensus estimates available for 1998). The Board also noted that although
such consensus estimates for 1996 and 1997 had increased since its November
19, 1995 meeting, such estimates could be revised downward if FBS merged
with First Interstate as a result of the matters described in paragraph
(vi) above;
(x) the First Interstate Board's assessment, with the assistance of
counsel, concerning the relative likelihood that each of Wells Fargo and
FBS would obtain all required regulatory approvals for a transaction with
First Interstate. In this regard, the First Interstate Board determined
that it was likely that each of Wells Fargo and FBS would ultimately
receive all such approvals. In addition, the First Interstate Board
determined that subsequent to November 19, 1995, Wells Fargo had taken
appropriate steps that, when combined with an increase in the time
previously expected for FBS to consummate the FIB/FBS Merger, made it
likely that Wells Fargo could obtain all such approvals within a time frame
substantially similar to that anticipated for the FIB/FBS Merger. The First
Interstate Board also noted certain provisions of the proposed Merger
Agreement and the First Interstate Fee Agreement which it believed
protected the interests of First Interstate's stockholders in the event
that a condition or requirement (including a requirement of divestitures)
imposed by an appropriate governmental entity granting the regulatory
approvals required for the Merger would, in the reasonable good faith
determination of the First Interstate Board, so materially adversely impact
the economic or business benefits of the transactions contemplated by the
Merger Agreement to First Interstate and its stockholders as to render
inadvisable the consummation of the Merger;
(xi) the financial presentations of the First Interstate Financial
Advisors (including the assumptions and methodologies underlying their
analyses and presentations of pro forma financial information with respect
to both the Merger and a merger of First Interstate and FBS) and (a) the
January 23, 1996 opinion of Goldman Sachs that as of the date of such
opinion the Exchange Ratio is fair to the stockholders of First Interstate
and (b) the January 23, 1996 opinion of Morgan Stanley that, as of the date
of such opinion, the Exchange Ratio, was fair from a financial point of
view to the stockholders of First Interstate. See "--Opinions of First
Interstate Financial Advisors."
(xii) the current and prospective economic, regulatory and competitive
environment facing financial institutions, including First Interstate,
Wells Fargo and FBS. Noted, in particular, were some of the factors that
the First Interstate Board believed were characteristic of the
unprecedented consolidation currently underway in the banking industry.
These include the drive for greater efficiency and resulting lower cost
operations, the ability to take advantage of synergies offered by
consolidation to better meet regulatory burdens, and the potential for
increased revenue growth based on broader product mix, greater distribution
network and increased resources for product design and development. In the
view of the First Interstate Board, these factors also militate against
remaining independent and substantially support the conclusions that
greater geographic and product diversification will result in an entity
better equipped to compete in a rapidly consolidating financial service
industry; and
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(xiii) the following additional factors which contributed to the First
Interstate Board's conclusion that the Merger is in the best interests of
First Interstate and its stockholders:
(A) The First Interstate Board recognized that the combination of
Wells Fargo and First Interstate would be likely to possess the
financial resources necessary to compete more effectively in the
rapidly changing marketplace for banking and financial services;
(B) the expectation that the Merger will generally be a tax-free
transaction to First Interstate and its stockholders; and
(C) the terms of the Merger Agreement and the Fee Agreements, which
were generally reciprocal in nature, and certain other information
regarding the Merger, including the terms and structure of the Merger
and the proposed arrangements with respect to the board and dual
headquarters of the combined institution.
The foregoing discussion of the information and factors considered by the
First Interstate Board is not intended to be exhaustive but includes all
material factors considered by the First Interstate Board. In reaching its
determination to approve and recommend the Merger and to terminate the FIB/FBS
Merger Agreement, the First Interstate Board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors. However, the First Interstate
Board took particular note of the matters described in paragraphs (i)-(vi) in
reaching their determinations. Throughout its deliberations, the First
Interstate Board received the advice of the First Interstate Financial Advisors
and representatives of Skadden, Arps, Slate, Meagher & Flom, the firm retained
to serve as special counsel to First Interstate, and Irell & Manella, the firm
retained by the outside directors of First Interstate to serve as their special
counsel.
THE FIRST INTERSTATE BOARD OF DIRECTORS (WITH ONE DIRECTOR ABSENT) HAS
UNANIMOUSLY CONCLUDED THAT THE MERGER IS IN THE BEST INTERESTS OF FIRST
INTERSTATE AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE FIRST INTERSTATE PROPOSAL.
OPINIONS OF WELLS FARGO FINANCIAL ADVISORS
Opinion of CS First Boston
CS First Boston has acted as financial advisor to Wells Fargo in connection
with the Merger. CS First Boston was selected by Wells Fargo based on CS First
Boston's experience, expertise and familiarity with Wells Fargo and its
business. CS First Boston is an internationally recognized investment banking
firm and is regularly engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes.
In connection with CS First Boston's engagement, Wells Fargo requested that
CS First Boston evaluate the fairness, from a financial point of view, to Wells
Fargo of the consideration to be paid by Wells Fargo in connection with the
proposed Merger. At a meeting of the Wells Fargo Board held on October 17,
1995, CS First Boston made a presentation to the Wells Fargo Board in which CS
First Boston analyzed an exchange ratio of up to 0.666 and rendered to the
Wells Fargo Board an oral opinion to the effect that, as of such date and based
upon and subject to certain matters, the then proposed exchange ratio of 0.625
was fair to Wells Fargo from a financial point of view. At a meeting of the
Wells Fargo Board held on November 9, 1995 at which the Wells Fargo Board
approved the Exchange Offer (at an exchange ratio of two-thirds), CS First
Boston rendered to the Wells Fargo Board an oral opinion to the effect that, as
of such date and based upon and subject to certain matters stated in such
opinion, the Exchange Ratio (i.e., two-thirds) was fair to Wells Fargo from a
financial point of view. CS First Boston confirmed the latter opinion (i)
orally during the Wells Fargo Board meeting on January 23, 1996, at which the
Wells Fargo Board unanimously approved and authorized the execution and
delivery of the Merger Agreement, and (ii) by delivery of a written opinion
dated January 23, 1996. CS First
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Boston has confirmed its opinion dated January 23, 1996 by delivery of a
written opinion dated the date of this Joint Proxy Statement/Prospectus. In
connection with its opinions of November 9, 1995, January 23, 1996 and dated
the date of this Joint Proxy Statement/Prospectus, CS First Boston updated
certain of its analyses, as necessary, and reviewed the assumptions on which
such analyses were based and the factors considered in connection therewith.
In arriving at its opinion dated the date of this Joint Proxy
Statement/Prospectus, CS First Boston reviewed the Merger Agreement and
certain related documents, this Joint Proxy Statement/Prospectus and certain
publicly available business and financial information relating to Wells Fargo
and First Interstate. CS First Boston also reviewed certain other information,
including financial forecasts, provided to CS First Boston by Wells Fargo and
First Interstate and met with the respective managements of Wells Fargo and
First Interstate to discuss the businesses and prospects of Wells Fargo and
First Interstate. CS First Boston also considered certain financial and stock
market data of Wells Fargo and First Interstate and compared such data with
similar data for other publicly held companies in businesses similar to those
of Wells Fargo and First Interstate and considered, to the extent publicly
available, the financial terms of certain other business combinations and
other transactions which have recently been effected. CS First Boston also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria that CS First
Boston deemed relevant.
In connection with its review, CS First Boston did not assume any
responsibility for independent verification of any of the information provided
to or otherwise reviewed by CS First Boston and relied upon its being complete
and accurate in all material respects. With respect to the financial forecasts
reviewed, CS First Boston assumed that such forecasts were reasonably prepared
on bases reflecting the best currently available estimates and judgments of
the managements of Wells Fargo and First Interstate as to the future financial
performance of Wells Fargo and First Interstate and the cost savings and other
potential synergies (including the amount, timing and achievability thereof)
anticipated to result from the Merger. CS First Boston also assumed, with the
consent of the Wells Fargo Board, that off-balance-sheet activities of Wells
Fargo and First Interstate, including derivatives and other similar financial
instruments, will not materially and adversely affect the future financial
position and results of operations of Wells Fargo or First Interstate. CS
First Boston did not review individual credit files or make an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Wells Fargo or First Interstate, nor was CS First Boston furnished with any
such evaluations or appraisals, including loan or lease portfolios or the
allowances for losses with respect thereto, and assumed, with the consent of
the Wells Fargo Board, that such allowances for Wells Fargo and First
Interstate are in the aggregate adequate to cover such losses. CS First Boston
also assumed, with the consent of the Wells Fargo Board, that in the course of
obtaining the necessary regulatory and third party consents for the Merger, no
restriction will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger or the transactions contemplated thereby.
CS First Boston's opinion was necessarily based on information available to it
and financial, stock market and other conditions as they existed and could be
evaluated on the date of its opinion. CS First Boston expressed no opinion as
to what the value of the Wells Fargo Common Stock actually would be when
issued to First Interstate's stockholders pursuant to the Merger or the prices
at which such Wells Fargo Common Stock would trade subsequent to the Merger.
Although CS First Boston evaluated the Exchange Ratio from a financial point
of view, CS First Boston was not requested to, and did not, recommend the
specific consideration payable in the proposed Merger. No other limitations
were imposed by Wells Fargo on CS First Boston with respect to the
investigations made or procedures followed by CS First Boston in rendering its
opinion.
THE FULL TEXT OF CS FIRST BOSTON'S WRITTEN OPINION TO THE WELLS FARGO BOARD
DATED THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN,
IS ATTACHED AS APPENDIX E TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. HOLDERS OF WELLS FARGO COMMON STOCK ARE
URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. CS FIRST BOSTON'S
OPINIONS ARE DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A
FINANCIAL POINT OF VIEW TO WELLS FARGO, DO NOT ADDRESS ANY OTHER ASPECT OF THE
PROPOSED MERGER OR ANY RELATED TRANSACTION AND DO NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE
AT THE WELLS FARGO SPECIAL MEETING. THE SUMMARY OF THE OPINION
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OF CS FIRST BOSTON SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In preparing its opinion for the Wells Fargo Board, CS First Boston performed
a variety of financial and comparative analyses, including those described
below performed by CS First Boston in connection with its presentation to the
Wells Fargo Board on October 17, 1995. The summary of CS First Boston's
analyses set forth below does not purport to be a complete description of the
analyses underlying CS First Boston's opinion. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to
the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to summary description. In arriving
at its opinion, CS First Boston made qualitative judgments as to the
significance and relevance of each analysis and factor considered by it.
Accordingly, CS First Boston believes that its analyses must be considered as a
whole and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create a misleading or incomplete
view of the processes underlying such analyses and its opinion. In its
analyses, CS First Boston made numerous assumptions with respect to Wells
Fargo, First Interstate, industry performance, regulatory, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of Wells Fargo and First Interstate. No company, transaction
or business used in such analyses as a comparison is identical to Wells Fargo,
First Interstate or the Merger, nor is an evaluation of the results of such
analyses entirely mathematical; rather, it involves complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed. The estimates
contained in such analyses and the valuations resulting from any particular
analysis are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than those suggested by such analyses. In addition, analyses relating to the
value of businesses or securities do not purport to be appraisals or to reflect
the prices at which businesses or securities actually may be sold. Accordingly,
because such estimates are inherently subject to substantial uncertainty, none
of Wells Fargo, First Interstate, CS First Boston or any other person assumes
responsibility for their accuracy. As described above, CS First Boston's
opinion and financial analyses were only one of many factors considered by the
Wells Fargo Board in its evaluation of the Merger and should not be viewed as
determinative of the views of Wells Fargo's Board or management with respect to
the Exchange Ratio or the proposed Merger.
The following is a summary of the material analyses performed by CS First
Boston in connection with its opinion and financial presentation made to the
Wells Fargo Board on October 17, 1995:
Introduction. CS First Boston calculated the price per share, premium to
market, price to estimated September 30, 1995 book value and tangible book
value, and price to estimated fiscal 1995 and 1996 earnings per share ("EPS")
for First Interstate implied by the Exchange Ratio. Using closing stock prices
for Wells Fargo Common Stock and First Interstate Common Stock on October 13,
1995, the proposed Exchange Ratio implied a price per share for First
Interstate Common Stock of $138.36, a premium to market of 31%, a price to
estimated book value and tangible book value of 2.9x and 3.7x, respectively,
and a price to estimated fiscal 1995 and 1996 EPS of 12.6x and 12.3x,
respectively. EPS estimates for First Interstate were based on consensus
estimates, as of October 13, 1995, published by First Call, a data service
which monitors and publishes a compilation of earnings estimates produced by
selected research analysts on companies of interest to investors.
Comparable Companies Analysis. CS First Boston compared selected financial
and stock market data for First Interstate to corresponding data of the
following super-regional bank holding companies: Banc One Corporation,
BankAmerica Corporation, Barnett Banks, Inc., Boatmen's Bancshares, Inc.,
CoreStates Financial Corp., First Security Corporation, First Union
Corporation, Fleet Financial Group, Inc., KeyCorp, Mellon Bank Corporation,
NationsBank Corporation, Norwest Corporation and U.S. Bancorp (collectively,
the "Comparable Companies"). The Comparable Companies were selected based on a
combination of factors such as size, relative performance, operating
philosophy, geographic location and/or types of business conducted generally.
This analysis indicated, among other things, that (i) the average price to
estimated fiscal 1995 and 1996 EPS for the
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Comparable Companies were 11.0x and 9.8x, respectively, implying a market
price per share of First Interstate Common Stock of $120.56 and $110.35,
respectively, and (ii) the average price to tangible book value for the
Comparable Companies was 2.6x, implying a market price per share of First
Interstate Common Stock of $98.57 based on an estimated tangible book value
per share of First Interstate Common Stock at September 30, 1995 of $37.91.
The closing price per share of First Interstate Common Stock on October 13,
1995 was $105.75. CS First Boston also noted that First Interstate's return on
average equity for the first six months of 1995 was 23.6% as compared to the
return on average equity for the Comparable Companies of 16.9%. EPS estimates
for such analysis were based on First Call consensus estimates as of October
13, 1995.
Discounted Cash Flow Analysis. CS First Boston estimated the present value
of the future streams of distributable after-tax cash flows that First
Interstate could produce on a stand-alone basis through fiscal year 2000. CS
First Boston assumed that First Interstate would perform substantially in
accordance with the earnings forecasts of selected investment banking firms
which publicly provided detailed financial forecasts for First Interstate for
fiscal years 1995 through 1997, after giving effect to, among other things,
share repurchase estimates of such investment banking firms. This analysis
yielded EPS estimates for First Interstate in fiscal years 1996 and 1997 of
approximately $10.85 and $11.99, respectively. Based on various assumptions as
to the operational and financial performance of First Interstate in fiscal
years 1998 through 2000, CS First Boston utilized EPS estimates for First
Interstate for fiscal years 1998, 1999 and 2000 of approximately $13.02,
$14.06 and $15.16, respectively, which resulted in a compounded annual growth
rate in First Interstate's EPS of approximately 8%. CS First Boston further
assumed that First Interstate would distribute approximately 40% of its
earnings to stockholders. In estimating the terminal values of First
Interstate Common Stock, CS First Boston considered a range of valuation
methodologies, including price to earnings ratios, perpetual earnings growth
and price to book multiples. Based upon First Interstate's financial and other
characteristics, CS First Boston estimated the terminal values for First
Interstate Common Stock using 9.0x to 11.0x net earnings multiples in the
terminal year. The distributable net income streams and terminal values were
then discounted to present values using discount rates of between 12% and 16%.
This discounted cash flow analysis indicated an equity reference range of
$81.62 to $113.07 per fully diluted share of First Interstate Common Stock.
In addition to performing the above described discounted cash flow analysis
on First Interstate's cash dividend earnings stream, without giving effect to
the potential net cost savings, CS First Boston estimated the present value of
the future streams of after-tax cash flows generated by the net cost savings
which Wells Fargo's management estimated could be generated as a result of the
Merger. In performing this analysis, CS First Boston utilized the $700 million
of net pretax cost savings per year ($800 million in annual cost savings less
$100 million in potential revenue reductions) which Wells Fargo's management
estimated could be generated within 18 months of closing the Merger, a 12%
discount rate and a 3% perpetual dividend growth rate. CS First Boston
assumed, for purposes of such analysis, that 100% of the after-tax earnings
stream created as a result of the cost savings could be distributed and
further assumed that an upfront restructuring charge of $700 million would be
required in order to realize such cost savings. After deducting the
restructuring charge, this analysis yielded a present incremental equity value
for First Interstate following the Merger of approximately $3.9 billion, or an
additional $51.49 per fully diluted share of First Interstate Common Stock.
Comparable Transactions Analysis. CS First Boston reviewed and analyzed
certain financial, operating and stock market information relating to the
following selected merger transactions in excess of $1 billion announced
in 1995 involving companies with large commercial banking operations: National
Australia Bank Limited/Michigan National Corporation, Fleet Financial
Group/Shawmut National Corporation, US Bancorp/West One Bancorp, First Union
Corporation/First Fidelity Bancorporation, PNC Bank Corp/Midlantic
Corporation, First Bank System, Inc./FirsTier Financial, Inc., Boatmen's
Bancshares, Inc./Fourth Financial Corporation, National City
Corporation/Integra Financial Corp, NationsBank Corporation/Bank South
Corporation, UJB Financial Corp/Summit Bancorporation, CoreStates Financial
Corp/Meridian Bancorp, Inc. (collectively, the "Comparable Transactions").
This analysis indicated that the consideration received in the Comparable
Transactions represented (i) a percentage above market value ranging from
approximately (3%) to 46% based upon closing stock prices one day prior to
public announcement of the transaction and (ii) multiples of estimated fiscal
1995 and 1996 EPS of between 11.1x to 18.8x (with an average multiple of
14.1x) and 10.3x
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to 16.2x (with an average multiple of 12.6x), respectively. In addition, CS
First Boston reviewed, among other things, the multiples paid by purchasers to
the target companies' (i) forward EPS estimates, adjusted by the after-tax
impact per share of the target companies' common stock, of the net cost
savings estimates made public by the two merging parties at the time of
announcement, and (ii) tangible book value per share. This analysis indicated
acquisition multiples to adjusted estimated fiscal 1995 and 1996 EPS ranging
from 6.4x to 13.7x (with an average multiple of 9.8x) and 6.2x to 12.2x (with
an average multiple of 8.9x) respectively, and acquisition multiples to
tangible book value per share ranging from 1.8x to 2.8x (with an average
multiple of 2.3x). Based upon shares of First Interstate Common Stock
outstanding on June 30, 1995 and closing stock prices of Wells Fargo Common
Stock and First Interstate Common Stock on October 13, 1995, the Exchange
Ratio represented (i) a percentage above the market value of First Interstate
Common Stock of approximately 31%, (ii) a multiple of First Interstate's
estimated fiscal 1995 and 1996 EPS of 12.6x and 12.3x, respectively, (iii) a
multiple of First Interstate's estimated fiscal 1995 and 1996 EPS, adjusted
for Wells Fargo management's estimated net pretax cost savings of $700 million
per annum, of 8.6x and 8.5x, respectively, and (iv) a multiple of First
Interstate's estimated tangible book value per share as of September 30, 1995
of 3.7x. CS First Boston noted that First Interstate's return on average
equity for the first six months of 1995 was 23.6% as compared to the return on
average equity for the target companies in the Comparable Transactions of
14.7%, and that First Interstate's tangible leverage ratio as of June 30, 1995
was 5.7% as compared to the average tangible leverage ratio of the target
companies in the Comparable Transactions of 7.8%. In addition, CS First Boston
compared the net pretax cost savings projected by Wells Fargo's management to
result from the Merger with those projected in the Comparable Transactions
(excluding National Australia Bank Limited/Michigan National Corporation). The
cost savings estimates in such Comparable Transactions ranged from 19% to 60%
of the target companies' operating expense base, while Wells Fargo
management's net pretax projected costs savings of $700 million represent 32%
of First Interstate's second quarter annualized operating expense base. EPS
estimates for such analysis were based upon First Call estimates as of October
13, 1995.
Contribution Analysis. CS First Boston analyzed the contribution of each of
Wells Fargo and First Interstate to, among other things, total assets and
common equity at June 30, 1995, net income for the six months ended June 30,
1995 and projected net income for fiscal 1996 of the pro forma combined
company. Wells Fargo's contribution in terms of total assets and common equity
at June 30, 1995 equaled approximately 48% and 49%, respectively, while Wells
Fargo's contribution in terms of net income for the six months ended June 30,
1995 and projected net income for fiscal 1996 equaled approximately 52% and
49%, respectively. Based upon the Exchange Ratio and shares of Wells Fargo
Common Stock and First Interstate Common Stock outstanding on June 30, 1995,
holders of Wells Fargo Common Stock would own approximately 47% of the
combined company upon consummation of the Merger.
Pro Forma Merger Analysis. CS First Boston noted that, based upon estimates
of Wells Fargo's management and after giving effect to Wells Fargo
management's net pretax cost savings estimates and certain assumptions as to,
among other things, the number of shares outstanding in each respective
period, the proposed Merger could, at a 0.666 exchange ratio, be accretive to
Wells Fargo's cash EPS (EPS before amortization of intangibles) on a fully
diluted basis in fiscal years 1996, 1997 and 1998 by approximately 1%, 15% and
22%, respectively, and (dilutive)/accretive to Wells Fargo's reported EPS on a
fully diluted basis in fiscal years 1996, 1997 and 1998 by approximately
(10)%, (6)% and 3%, respectively. Cash EPS reflects the amount of cash
available for reinvestment in a business or distribution to stockholders in
the form of share repurchases and/or dividends. In this analysis, CS First
Boston assumed that both Wells Fargo and First Interstate would perform
substantially in accordance with earnings forecasts provided to CS First
Boston by Wells Fargo's management. The actual results achieved by the
combined company may vary from projected results and the variations may be
material.
Certain Other Factors and Comparative Analyses. In rendering its opinion, CS
First Boston considered certain other factors and conducted certain other
comparative analyses, including, among other things, a review of the
historical financial results and stock price performance of Wells Fargo and
First Interstate and the market capitalization of selected companies involved
in transactions similar to the proposed Merger both before and after such
transactions.
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Pursuant to the terms of CS First Boston's engagement, Wells Fargo has
agreed to pay CS First Boston for its services in connection with the Merger
an aggregate financial advisory fee of $10 million, payable as follows: (i) $1
million upon execution of the engagement letter, (ii) $500,000 upon the
effectiveness of the Registration Statement, (iii) $2 million upon the signing
of a definitive agreement providing for the Merger (against which the fee
described in (ii) above has been credited), (iv) $500,000 upon the mailing of
this Joint Proxy Statement/Prospectus, and (v) the balance upon Wells Fargo's
acquisition of more than 50% of First Interstate Common Stock. Wells Fargo
also has agreed to reimburse CS First Boston for its reasonable out-of-pocket
expenses, including the fees and expenses of legal counsel and any other
advisor retained by CS First Boston, and to indemnify CS First Boston and
certain related entities against certain liabilities, including liabilities
under the federal securities laws.
In the ordinary course of business, CS First Boston and its affiliates may
actively trade the debt and equity securities of Wells Fargo and First
Interstate for their own account and for accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
CS First Boston in the past has provided financial advisory and investment
banking services to Wells Fargo unrelated to the Merger, for which services CS
First Boston has received compensation, and may provide additional services to
Wells Fargo in the future.
Opinion of Montgomery
Montgomery has also acted as financial advisor to Wells Fargo in connection
with the Merger. As part of its engagement, Montgomery agreed, if requested by
Wells Fargo, to render an opinion with respect to the fairness from a
financial point of view to Wells Fargo of the consideration proposed to be
paid by Wells Fargo in connection with the Merger. Montgomery is a nationally
recognized investment banking firm and, as part of its investment banking
activities, is regularly engaged in the valuation of businesses and their
securities in connection with merger transactions and other types of
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. Wells Fargo selected Montgomery as its financial advisor on the
basis of its experience and expertise in transactions similar to the Merger
and its reputation in the banking, savings and loan and investment
communities.
At the October 17, 1995 meeting of the Wells Fargo Board, Montgomery made a
presentation to the Wells Fargo Board in which Montgomery analyzed, among
other things, exchange ratios in a range of 0.625 to two-thirds and delivered
its oral opinion to the Wells Fargo Board to the effect that, as of such date
and based upon and subject to certain matters stated in such opinion, the then
proposed exchange ratio of 0.625 was fair to Wells Fargo from a financial
point of view. At a meeting of the Wells Fargo Board held on November 9, 1995
at which the Wells Fargo Board approved the Exchange Offer (at the Exchange
Ratio of two-thirds), Montgomery rendered to the Wells Fargo Board its oral
opinion to the effect that, as of such date and based upon and subject to
certain matters, the Exchange Ratio was fair to Wells Fargo from a financial
point of view. Montgomery confirmed the latter opinion (i) orally during the
Wells Fargo Board meeting on January 23, 1996, at which the Wells Fargo Board
unanimously approved and authorized the execution and delivery of the Merger
Agreement, and (ii) by delivery of a written opinion dated January 23, 1996.
Montgomery has confirmed its opinion dated January 23, 1996 by delivery of a
written opinion dated the date of this Joint Proxy Statement/Prospectus. In
connection with its opinions of November 9, 1995, January 23, 1996 and the
date of this Joint Proxy Statement/Prospectus, Montgomery updated certain of
its analyses, as necessary, and reviewed the assumptions on which such
analyses were based and the factors considered in connection therewith.
THE FULL TEXT OF MONTGOMERY'S WRITTEN OPINION TO THE WELLS FARGO BOARD DATED
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS OF REVIEW BY MONTGOMERY,
IS ATTACHED HERETO AS APPENDIX F AND IS INCORPORATED HEREIN BY REFERENCE AND
SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY IN CONNECTION WITH THIS JOINT
PROXY STATEMENT/PROSPECTUS. THE FOLLOWING SUMMARY OF MONTGOMERY'S OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
MONTGOMERY'S OPINIONS, WHICH ARE ADDRESSED TO THE WELLS FARGO BOARD, ARE
DIRECTED ONLY TO THE
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FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW TO WELLS FARGO,
DO NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED
TRANSACTION AND DO NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO
HOW SUCH STOCKHOLDER SHOULD VOTE AT THE WELLS FARGO SPECIAL MEETING.
In connection with its opinion dated the date of this Joint Proxy
Statement/Prospectus, Montgomery, among other things: (i) reviewed certain
publicly available financial and other data with respect to Wells Fargo and
First Interstate, including the consolidated financial statements of Wells
Fargo and First Interstate for recent years and interim periods to December
31, 1995, and certain other relevant financial and operating data relating to
Wells Fargo and First Interstate made available to Montgomery from published
sources and from the internal records of Wells Fargo and First Interstate;
(ii) reviewed a draft of the Merger Agreement and certain related documents
provided to Montgomery by Wells Fargo; (iii) reviewed this Joint Proxy
Statement/Prospectus; (iv) reviewed certain historical market prices and
trading volumes of Wells Fargo Common Stock and First Interstate Common Stock
as reported by the NYSE; (v) compared Wells Fargo and First Interstate from a
financial point of view with certain other companies which Montgomery deemed
to be relevant; (vi) considered the financial terms, to the extent publicly
available, of selected business combinations in the banking and savings and
loan industries; (vii) reviewed and discussed with representatives of the
managements of Wells Fargo and First Interstate certain information of a
business and financial nature regarding Wells Fargo and First Interstate,
including financial forecasts and related assumptions of Wells Fargo and First
Interstate; (viii) made inquiries regarding and discussed the Merger, the
Merger Agreement and other matters related thereto with Wells Fargo's counsel;
and (ix) performed such other analyses and examinations as Montgomery deemed
appropriate.
In connection with its review, Montgomery did not assume any obligation
independently to verify any of the foregoing information and relied on all
such information being complete and accurate in all material respects. With
respect to the financial forecasts for Wells Fargo and First Interstate,
Montgomery assumed for purposes of its opinion that such forecasts were
reasonably prepared on bases reflecting at the time of preparation the best
available estimates and judgments of the managements of Wells Fargo and First
Interstate as to the future financial performance of Wells Fargo and First
Interstate and the cost savings and other potential synergies (including the
timing, amount and achievability thereof) anticipated to result from the
Merger, and that such forecasts provided a reasonable basis upon which
Montgomery could form its opinion. Montgomery also assumed that there were no
material changes in Wells Fargo's or First Interstate's assets, financial
condition, results of operations, business or prospects since the respective
dates of their last financial statements reviewed by Montgomery and that off-
balance-sheet activities of Wells Fargo and First Interstate, including
derivatives and other similar financial instruments, will not materially and
adversely affect the future financial position or results of operations of
Wells Fargo or First Interstate. Montgomery relied on advice of counsel and
independent accountants to Wells Fargo as to all legal and financial reporting
matters with respect to Wells Fargo and the Merger. Montgomery also assumed
that the Merger will be consummated in a manner that complies in all material
respects with the applicable provisions of the Securities Act, the Exchange
Act and all other applicable federal and state statutes, rules and
regulations. Montgomery further assumed, with the consent of the Wells Fargo
Board, that in the course of obtaining the necessary regulatory and third
party consents for the Merger, no restriction will be imposed that will have a
material adverse effect on the contemplated benefits of the Merger or the
transactions contemplated thereby. Montgomery further assumed, with the
consent of the Wells Fargo Board, that the Merger will be consummated in
accordance with the terms and provisions of the Merger Agreement, without any
amendments to, and without any waiver by Wells Fargo of, any of the material
conditions to its obligations thereunder. Montgomery noted that it is not an
expert in the evaluation of loan portfolios for purposes of assessing the
adequacy of the allowances for losses with respect thereto and Montgomery
assumed, with the consent of the Wells Fargo Board, that such allowances for
each of Wells Fargo and First Interstate are in the aggregate adequate to
cover such losses. In addition, Montgomery did not assume responsibility for
reviewing any individual credit files or making an independent evaluation,
appraisal or physical inspection of the assets or individual properties of
Wells Fargo or First Interstate, nor was Montgomery furnished with any such
evaluations or appraisals. Finally, Montgomery's opinion was based on
economic, monetary and market and other conditions as in effect on, and the
information made available to Montgomery as of, the date thereof. Although
Montgomery evaluated the
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Exchange Ratio from a financial point of view, Montgomery was not requested
to, and did not, recommend the specific consideration payable in the proposed
Merger. No other limitations were imposed by Wells Fargo on Montgomery with
respect to the investigations made or procedures followed by Montgomery in
rendering its opinion.
Set forth below is a brief summary of the material analyses performed by
Montgomery in connection with its opinion and financial presentation to the
Wells Fargo Board on October 17, 1995:
Dilution Analysis. Using estimates prepared by Wells Fargo's management,
Montgomery compared estimated reported EPS ("Reported EPS") and estimated cash
EPS ("Cash EPS") of Wells Fargo Common Stock on a stand-alone basis to the
Reported EPS and Cash EPS of the common stock for the pro forma combined
company for calendar years 1996, 1997, 1998, 1999 and 2000. Montgomery noted
that, based upon estimates of Wells Fargo's management after giving effect to
management's pretax cost savings estimates (net of revenue loss) and certain
assumptions as to, among other things, the number of shares outstanding in
each respective period, the Merger (i) at a 0.625 exchange ratio, could be
(dilutive)/accretive to Wells Fargo's Reported EPS in calendar years 1996,
1997, 1998, 1999 and 2000 by approximately (11)%, (2)%, 8%, 11% and 14%,
respectively, and accretive to Wells Fargo's Cash EPS in calendar years 1996,
1997, 1998, 1999 and 2000 by approximately 5%, 19%, 27%, 29% and 30%,
respectively, and (ii) at a two-thirds exchange ratio, could be
(dilutive)/accretive to Wells Fargo's Reported EPS in calendar years 1996,
1997, 1998, 1999 and 2000 by approximately (14)%, (7)%, 3%, 7% and 10%,
respectively, and accretive to Wells Fargo's Cash EPS in calendar years 1996,
1997, 1998, 1999 and 2000 by approximately 3%, 15%, 23%, 25% and 27%,
respectively. The assumptions utilized in Montgomery's dilution analysis were
not based on Wells Fargo's internal financial forecasts, but rather on
estimates prepared by Wells Fargo in an effort to reproduce a typical
analyst's belief of the future earnings of a combined Wells Fargo/First
Interstate entity and, thus, were prepared for analytical purposes. These
estimates are not necessarily indicative of expected results or plans of Wells
Fargo or First Interstate.
Contribution Analysis. Montgomery analyzed the contribution of each of Wells
Fargo and First Interstate to, among other things, the assets, common equity
and net income before extraordinary items of the pro forma combined company
for the latest 12 months, and three months, ended June 30, 1995. This analysis
indicated, among other things, that Wells Fargo would have contributed for the
12 months, and three months, ended June 30, 1995 approximately 48% and 48%,
respectively, of the assets, approximately 49% and 49%, respectively, of the
common equity and approximately 54% and 51%, respectively, of the net income
before extraordinary items for the pro forma combined company. Based upon
exchange ratios of 0.625 and two-thirds of a share of Wells Fargo Common Stock
for each share of First Interstate Common Stock, holders of Wells Fargo Common
Stock would own approximately 49% and 47%, respectively, of the combined
company based on the shares of common stock of the combined company estimated
by Wells Fargo to be outstanding upon consummation of the proposed Merger.
Analysis of Selected Comparable Merger Transactions. Montgomery reviewed the
consideration paid in the following 27 transactions since 1987 with deal
values greater than $1 billion: CoreStates Financial/Meridian Bancorp, UJB
Financial/Summit Bancorp, NationsBank Corporation/Bank South Corporation,
Chemical Banking Corporation/Chase Manhattan Corporation, National City
Corporation/Integra Financial, Boatmen's Bancshares/Fourth Financial, First
Chicago Corporation/NBD Bancorp, Inc., PNC Bank Corporation/Midlantic
Corporation, First Union Corporation/First Fidelity Bancorporation, Union
Bank/BanCal Tri-State, US Bancorp/West One Bancorp, Fleet Financial
Group/Shawmut National, National Australia Bank/Michigan National Corporation,
BB&T Financial Corporation/Southern National Corporation,
BankAmerica/Continental Bank, KeyCorp/Society Corporation, NationsBank
Corporation/MNC Financial Inc., Banc One Corporation/Valley National
Corporation, Comerica Inc./Manufacturers National, Society
Corporation/Ameritrust Corporation, BankAmerica/Security Pacific, NCNB
Corporation/C&S/Sovran, Chemical Banking/Manufacturers Hanover, Sovran
Financial Corporation/Citizens & Southern, Bank of New York/Irving Bank
Corporation, Fleet Financial Group/Norstar Bancorp and Security
Pacific/Rainier (collectively, the
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"Comparable Transactions"). For each company merged or to be merged in such
transactions, Montgomery compiled figures illustrating, among other things,
transaction price to latest 12 months earnings, transaction price to book
value, transaction price to tangible book value, transaction price to assets,
transaction price to deposits and the ratio of premium (i.e., transaction
price in excess of tangible book value) to core deposits.
The figures for the Comparable Transactions for calendar 1987 to 1995 and
for calendar 1995 alone produced (i) a median ratio of transaction price to
latest 12 months' earnings of 13.1x and 13.1x, respectively; (ii) a median
ratio of transaction price to book value of 1.8x and 1.9x, respectively; (iii)
a median ratio of transaction price to tangible book value of 2.0x and 2.1x,
respectively; (iv) a median ratio of transaction price to assets of 11.7% and
15.7%, respectively; (v) a median ratio of transaction price to deposits of
16.6% and 20.8%, respectively; and (vi) a median ratio of premium to core
deposits of 8.0% and 14.7%. In comparison, based upon a range of exchange
ratios of 0.625 to two-thirds of a share of Wells Fargo Common Stock for each
share of First Interstate Common Stock, representing shares of Wells Fargo
Common Stock with a value of $129.84 to $138.57 per share of First Interstate
Common Stock (based on the $207.75 per share closing price of Wells Fargo
Common Stock as reported on the NYSE on October 13, 1995), the consideration
to be paid to the holders of First Interstate Common Stock represented a ratio
of transaction price to latest 12 months earnings in the range of 13.6x to
14.5x, a ratio of transaction price to book value in the range of 2.8x to
3.0x, a ratio of transaction price to tangible book value in the range of 3.6x
to 3.8x, a ratio of transaction price to assets of 17.7% to 18.8%, a ratio of
transaction price to deposits in the range of 20.4% to 21.7% and a ratio of
premium to core deposits in the range of 15.1% to 16.5%, respectively.
No other company or transaction used in the above analysis as a comparison
is identical to Wells Fargo, First Interstate or the proposed Merger.
Accordingly, an analysis of the results of the foregoing is not mathematical;
rather, it involves complex considerations and judgments concerning
differences in financial and operating characteristics of the companies and
other factors that could affect the acquisition or public trading multiples of
the companies to which Wells Fargo, First Interstate and the proposed Merger
are being compared.
The foregoing is a summary of the material analyses performed by Montgomery
in connection with its opinion and financial presentation to the Wells Fargo
Board on October 17, 1995. The summary set forth above does not purport to be
a complete description of the presentation by Montgomery to the Wells Fargo
Board or of the analyses performed by Montgomery. The preparation of a
fairness opinion is not necessarily susceptible to partial analysis or summary
description. Montgomery believes that its analyses and the summary set forth
above must be considered as a whole and that selecting portions of its
analyses and of the factors considered, without considering all analyses and
factors, would create an incomplete view of the process underlying the
analyses set forth in its presentation to the Wells Fargo Board. In addition,
Montgomery may have given various analyses more or less weight than other
analyses, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Montgomery's
view of the actual values of Wells Fargo, First Interstate or the combined
company. The fact that any specific analysis has been referred to in the
summary above is not meant to indicate that such analysis was given greater
weight than any other analysis.
In performing its analyses, Montgomery made numerous assumptions with
respect to industry performance, regulatory, general business and economic
conditions and other matters, many of which are beyond the control of Wells
Fargo and First Interstate. The analyses performed by Montgomery are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than those suggested by such analyses.
Such analyses were prepared solely as part of Montgomery's analysis of the
fairness of the Exchange Ratio to Wells Fargo from a financial point of view
and were provided to the Wells Fargo Board in connection with the delivery of
Montgomery's opinion. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold or the prices at
which any securities may trade at the present time or at any time in the
future. Montgomery used in its analyses various projections of future
performance prepared by the management of Wells Fargo. The projections are
based on numerous variables and assumptions which are inherently unpredictable
and must be considered not certain of occurrence as projected. Accordingly,
actual results could vary significantly from those set forth in such
projections.
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As described above, Montgomery's opinion and financial presentation to the
Wells Fargo Board were only one of many factors taken into consideration by the
Wells Fargo Board in making its determination to approve the proposed Merger,
and to recommend that its stockholders approve the issuance of shares of Wells
Fargo Common Stock in connection with the Merger, and should not be viewed as
determinative of the views of Wells Fargo's Board or management with respect to
the Exchange Ratio or the proposed Merger.
Pursuant to the terms of Montgomery's engagement, Wells Fargo has agreed to
pay Montgomery a fee equal to $10 million, payable as follows: (i) $500,000
upon the effectiveness of the Registration Statement, (ii) $2 million upon the
signing of a definitive agreement providing for the Merger (against which the
fee described in (i) above, has been credited), (iii) $500,000 upon the mailing
of this Joint Proxy Statement/Prospectus and (iv) the balance upon Wells
Fargo's acquisition of more than 50% of First Interstate Common Stock. Wells
Fargo also has agreed to reimburse Montgomery for its reasonable out-of-pocket
expenses, including the fees and expenses of Montgomery's legal counsel and any
other advisor retained by Montgomery. Wells Fargo has agreed to indemnify
Montgomery, its affiliates, and their respective partners, directors, officers,
agents, consultants, employees and controlling persons against certain
liabilities, including liabilities under the federal securities laws.
Montgomery has performed various financial advisory and investment banking
services for First Interstate in the past, for which Montgomery has received
compensation, and may provide such services to Wells Fargo in the future. In
the ordinary course of its business, Montgomery actively trades the equity
securities of Wells Fargo and First Interstate for its own account and for the
accounts of its customers, and, accordingly, may at any time hold a long or
short position in such securities.
OPINIONS OF FIRST INTERSTATE FINANCIAL ADVISORS
First Interstate retained the First Interstate Financial Advisors in
connection with its consideration of the Exchange Offer and the Merger. The
First Interstate Financial Advisors were retained based upon the
qualifications, expertise and reputations of Goldman Sachs and Morgan Stanley,
as well as upon their prior investment banking relationships with First
Interstate.
Presentations by First Interstate Financial Advisors
The following summarizes the material financial comparative analyses
presented by the First Interstate Financial Advisors to the First Interstate
Board at its meeting on January 23, 1996, which analyses were considered by the
First Interstate Financial Advisors in rendering their opinions. This summary
does not purport to be a complete description of the analyses underlying the
opinions of the First Interstate Financial Advisors.
In preparing the analyses included in their presentation to the First
Interstate Board and for purposes of the description of such analyses herein,
all earnings data for First Interstate and Wells Fargo were adjusted for
normalized loan loss provisions and, unless otherwise noted, are presented on
that basis. Such adjustments were made because neither First Interstate nor
Wells Fargo recorded loan loss provisions in 1995 nor were full loan loss
provisions included in future earnings estimates. Earnings data for FBS were
not adjusted for normalized loan loss provisions. The 1995 FBS data included
recorded loan loss provisions and such provisions were included in future
earnings estimates.
Summary Comparison of Potential Merger Alternatives. The First Interstate
Financial Advisors presented a brief summary of the Merger compared to certain
aspects of the FIB/FBS Merger. The indicated values of the Merger and the
FIB/FBS Merger were $148.50 per share and $130.33 per share, respectively. The
indicated values were determined by multiplying the applicable exchange ratio
for the Merger and the FIB/FBS Merger by the closing price on the NYSE of each
of the Wells Fargo Common Stock and the FBS Common Stock, respectively, on
January 22, 1996. Each therefore necessarily was dependent upon the closing
price of each of the Wells Fargo Common Stock and the FBS Common Stock,
respectively, at a specific time. The indicated values reflected premiums over
the closing price of the First Interstate Common Stock on October 17, 1995, the
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last trading day prior to the date that the Original Proposal was made to
First Interstate, of 40% for the Merger and 23% for the FIB/FBS Merger.
In addition to reviewing the indicated values resulting from the Merger and
the FIB/FBS Merger, the analysis compared indicated values expressed as
multiples of First Interstate's tangible book value at December 31, 1995, and
as multiples of First Interstate's 1995 EPS. Under that analysis, the Merger
and the FIB/FBS Merger reflected multiples of 3.7 and 3.2 times the tangible
book value of First Interstate at December 31, 1995, respectively, and
multiples of 15.1 and 13.2, respectively, times First Interstate's 1995 EPS.
For this purpose, First Interstate's 1995 EPS were adjusted to reflect a
normal loan loss provision of .5% (pretax), excluded $27.6 million in (pretax)
merger expense and assumed a 40% tax rate. The analysis also compared the
indicated dividend and prospective ownership of the combined entities. The
indicated annual dividend to First Interstate common stockholders was
calculated to be $3.47 per share for the Merger and $3.77 per share for the
FIB/FBS Merger. The indicated annual dividends to First Interstate common
stockholders for the FIB/FBS Merger and the Merger were computed by
multiplying the current quarterly dividend rates of FBS and Wells Fargo by
four and then multiplying the resulting annual estimate by the FIB/FBS Merger
exchange ratio or the Exchange Ratio, respectively. The First Interstate
common stockholders were projected to own 52% of the combined company under
the Merger and 58% of the combined company under the FIB/FBS Merger.
Summary of Recent Developments. The First Interstate Financial Advisors
described certain of the developments that had occurred since November 19,
1995 with respect to the Merger and the FIB/FBS Merger. The First Interstate
Financial Advisors noted that normalized Wall Street earnings projections
(earnings projections adjusted for normalized loan loss provisions) for Wells
Fargo had increased by $2.57 per share for 1996, from $16.34 per share to
$18.91 per share. Wall Street estimates used by the First Interstate Financial
Advisors in making their presentation to the First Interstate Board were based
upon the most recent Institutional Brokerage Estimates System ("IBES")
earnings estimates. IBES is a data service that monitors and publishes
compilations of earnings estimates by selected research analysts regarding
companies of interest to institutional investors. On the relevant date, IBES
reflected the earnings estimates of approximately 16 analysts for First
Interstate, approximately 24 analysts for Wells Fargo and approximately 28
analysts for FBS. In addition, the First Interstate Financial Advisors noted
that Wells Fargo expected to allocate $1.5 billion (net of related deferred
tax liability) of the purchase price to certain identifiable intangibles with
an amortization period shorter than the 25 years previously assumed for
goodwill. With respect to FBS, it was noted that FBS had (i) exceeded 1995
earnings estimates ($4.11 per share compared to $4.05 per share), (ii) 1996
and 1997 earnings estimates which increased by $.05 each, to $4.65 per share
and $5.20 per share, respectively, (iii) maintained its projections as filed
in its registration statement on Form S-4, (iv) increased its estimated
attainment of net cost savings and revenue enhancements in 1996 to 50% from
25% of the total expected net cost savings and revenue enhancements, (v)
projected $44 million in revenue enhancements related to balance sheet
restructuring, (vi) expected the transaction to close on March 31, 1996,
compared to a previously assumed closing date of June 30, 1996, and (vii) in
accordance with discussions with the staff of the Commission concerning
"pooling-of- interests" accounting treatment agreed to wait two years to begin
stock repurchases, instead of 90 days. In addition, the analysis noted that
First Interstate would be required to issue up to 1.75 million shares of First
Interstate Common Stock in order for the FIB/FBS Merger to be accounted for as
a pooling-of-interests business combination under the requirements of
APB No. 16.
The First Interstate Financial Advisors compared changes in the spread
between the indicated value of the Merger and the FIB/FBS Merger for the
period November 13, 1995 to January 22, 1996. At all times during this period,
the Merger had a higher indicated value than the FIB/FBS Merger based upon
closing market prices of each of the Wells Fargo Common Stock and FBS Common
Stock. The difference in the indicated value of the two transactions ranged
from a low of $1.65 at November 14, 1995 to a high of $19.35 at January 15,
1996. The mean spread during the period was $11.49. The spread at close of
business on January 22, 1996 was $18.18.
Summary Financial Comparison. The First Interstate Financial Advisors
presented a summary financial comparison of First Interstate, Wells Fargo, FBS
and other super-regional bank and bank holding companies,
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consisting of BankAmerica Corporation, Banc One Corporation, Boatmen's
Bancshares, Inc., First Union Corporation, Fleet Financial Corporation,
KeyCorp, First Chicago NBD Corporation, National City Corporation, NationsBank
Corporation, Norwest Corporation, PNC Bank Corp., SunTrust Banks, Inc. and
Wachovia Corporation (the "Super-Regionals"), on the basis of various
financial ratios, including EPS, price to earnings ratios, dividend yield and
price to book value and price to tangible book value ratios. The Super-
Regionals were selected for comparison purposes through discussions with First
Interstate management and a review of comparably sized banking institutions.
The First Interstate Financial Advisors also reviewed the common stock price
history of First Interstate, Wells Fargo and FBS and a composite of the Super-
Regionals and changes in estimated 1995 and 1996 EPS for Wells Fargo and FBS
and a composite of the Super-Regionals. Unless otherwise noted, financial
information is at or for the 12 months ended September 30, 1995. Pro forma
adjustments were made for pending acquisitions. Market information was as of
January 22, 1996, except for First Interstate, which was determined as of
October 17, 1995. EPS and price to earnings ratios were based upon median IBES
earnings estimates as of January 18, 1996.
The First Interstate Financial Advisors compared share prices, earnings
estimates, and price to earnings ratios at November 17, 1995 and January 22,
1996 for FBS, Wells Fargo and an average of the Super-Regionals. The price of
FBS Common Stock decreased by 4% during this period compared to an increase of
3% in the price of Wells Fargo Common Stock and a decrease of 2% for the
Super-Regionals. The reported EPS of FBS during 1995 were 1% greater than
median IBES earnings estimates compared to less than a 1% decrease between
reported earnings and estimates for Wells Fargo and a 3% increase for an
average of the Super-Regionals. Estimated EPS for 1996 at January 22, 1996
were 1% greater than estimates at November 17, 1995 for FBS, 16% greater than
such estimates for Wells Fargo and 5% less than such estimates for an average
of the Super-Regionals. The price to earnings ratio during the period from
November 17, 1995 to January 22, 1996 for FBS declined by 5%, compared to an
increase of 6% for Wells Fargo and a decrease of 3% for an average of the
Super-Regionals. The price to estimated 1996 earnings ratio declined by 4% for
FBS, compared to a decline of 9% for Wells Fargo and an increase of 3% for an
average of the Super-Regionals.
EPS for 1995 were $11.25 reported ($9.68 normalized), $4.11 and $14.74 for
First Interstate, FBS and Wells Fargo, respectively. Estimated EPS for 1996
were $11.46 unadjusted ($10.99 normalized), $4.65 and $18.91 for First
Interstate, FBS and Wells Fargo, respectively. Estimated EPS for 1997 were
$12.80 unadjusted ($12.53 normalized), $5.20 and $20.13 for First Interstate,
FBS and Wells Fargo, respectively. The price to earnings ratios of First
Interstate, FBS and Wells Fargo for 1995 were 9.4x reported (11.0x
normalized), 12.2x and 15.1x, respectively. The estimated price to earnings
ratios of First Interstate, FBS and Wells Fargo for 1996 were 9.2x unadjusted
(9.6x normalized), 10.8x and 11.8x, respectively. The estimated price to
earnings ratios of First Interstate, FBS and Wells Fargo for 1997 were 8.3x
unadjusted (8.5x normalized), 9.6x and 11.1x, respectively. The median price
to earnings ratios for the Super-Regionals were 10.5x, 10.1x and 9.0x earnings
for 1995 and estimated earnings for 1996 and 1997, respectively. The dividend
yields for First Interstate, FBS and Wells Fargo (computed as described above)
were 3.0%, 2.9% and 2.1%, respectively, and the median dividend yield for the
Super-Regionals was 3.7%. The price to book value ratios of First Interstate,
FBS and Wells Fargo were 2.2x, 2.5x and 3.1x, respectively. The median price
to book value ratio of the Super-Regionals was 1.8x. The price to tangible
book value ratios of First Interstate, FBS and Wells Fargo were 2.8x, 3.2x,
and 4.1x, respectively. The median price to tangible book value ratio of the
Super-Regionals was 2.1x.
Pro Forma Financial Analysis. The First Interstate Financial Advisors
analyzed the pro forma per share impact of the Merger and the FIB/FBS Merger
from the perspective of First Interstate as well as from the perspective of
each of its potential merger partners. The analysis considered the pro forma
effects of the transaction on a variety of measures, including, among others,
EPS, cash EPS (EPS before goodwill amortization), tangible book value per
share and various profitability measures. This analysis was based on the
assumption that the combined companies would realize the projected operating
performance assumptions within the time period specified by FBS or Wells
Fargo, as applicable, in public statements. In preparing the analysis, all
earnings data for First Interstate and Wells Fargo were adjusted for
normalized loan loss provisions. Share prices for Wells Fargo and FBS were
based upon closing prices on January 22, 1996. The Merger was analyzed
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on the basis of two different cost savings assumptions, net cost savings of
$700 million (the "$700 Million Case"), and net cost savings of $900 million
(the "$900 Million Case"). In addition, a sensitivity analysis of the Merger at
various levels of assumed net cost savings from $600 million to $1 billion was
performed. Each analysis herein of which net cost savings is a component also
includes an assumption as to the percentage of the aggregate net cost savings
which would be realized in the applicable year. In the case of Wells Fargo, it
was assumed that Wells Fargo would realize 33% of the net cost savings in 1996,
67% of the net cost savings in 1997 and 100% of the net cost savings in 1998,
except in the full cost savings analysis in which it was assumed that 100% of
the net cost savings had been achieved by Wells Fargo in 1997 (the "Full Cost
Savings Analysis"); in the case of FBS, it was assumed that FBS would realize
50% of its projected net cost savings and revenue enhancements in 1996 and 100%
of its projected net cost savings and revenue enhancements in 1997.
First Interstate Pro Forma Per Share Analysis. The analysis performed
indicated that on a per share basis the Merger would be (i) accretive to
estimated EPS from First Interstate's perspective in 1996 by 5%, assuming the
$700 Million Case, and by 7%, assuming the $900 Million Case, (ii) dilutive in
1997 by 2%, assuming the $700 Million Case, and accretive in 1997 by 2%,
assuming the $900 Million Case, and (iii) accretive in 1998 by 5%, assuming the
$700 Million Case, and by 12%, assuming the $900 Million Case. The Merger was
also indicated to be accretive to First Interstate's estimated earnings in 1997
in the Full Cost Savings Analysis by 6%, assuming the $700 Million Case, and by
13%, assuming the $900 Million Case. The amount of accretion in estimated EPS
in 1997 for the Merger ranged from 16% if annualized net cost savings of $1
billion were achieved, to a low of 3% if only $600 million in annualized net
cost savings were achieved. The analysis of the FIB/FBS Merger indicated that
it would be accretive to First Interstate's estimated EPS in 1996, 1997 and
1998 by 14%, 20% and 16%, respectively.
The analysis also indicated that the Merger would be accretive to First
Interstate's estimated cash EPS in 1996, 1997 and 1998 by 16%, 15% and 21%,
respectively, assuming the $700 Million Case, and by 18%, 19% and 27%,
respectively, assuming the $900 Million Case. The Merger was also shown to be
accretive to First Interstate's estimated cash EPS in 1997 in the Full Cost
Savings Analysis by 23%, assuming the $700 Million Case, and by 29%, assuming
the $900 Million Case. The amount of accretion in First Interstate's estimated
cash EPS in 1997 for the Merger ranged from a high of 32% if $1 billion in net
cost savings were achieved, to a low of 20% if only $600 million in net cost
savings were achieved. The FIB/FBS Merger was indicated to be accretive to
First Interstate's estimated cash EPS by 15%, 21% and 16% in 1996, 1997 and
1998, respectively.
Estimated cash EPS on a stand-alone basis for 1996 were $11.81, $5.25 and
$19.71 for First Interstate, FBS and Wells Fargo, respectively. Estimated cash
EPS on a stand-alone basis for 1997 were $13.39, $5.80 and $20.97 for First
Interstate, FBS and Wells Fargo, respectively. Estimated cash EPS on a stand-
alone basis for 1998 were $15.22, $6.36 and $23.12 for First Interstate, FBS
and Wells Fargo, respectively.
The indicated impact of the Merger on tangible book value per share from
First Interstate's perspective based upon December 31, 1995 data reflected a
decrease of 11%, assuming the $700 Million Case, and a decrease of 13%,
assuming the $900 Million Case. The indicated impact of the FIB/FBS Merger on
tangible book value per share at December 31, 1995 reflected an increase of 3%.
The ratio of tangible common equity to tangible assets at December 31, 1995 was
estimated to decrease as a result of the Merger from 5.37% to 4.94%, assuming
the $700 Million Case, and from 5.37% to 4.84%, assuming the $900 Million Case.
The ratio of tangible common equity to tangible assets was estimated to
increase from 5.37% to 5.56% in the FIB/FBS Merger. The effects of the Merger
on various First Interstate return ratios for the fourth quarter of 1995
annualized assuming (i) the Merger was consummated on October 1, 1995 and (ii)
full net cost savings were realized in the fourth quarter, were shown as
follows: a 1.34% return on average assets, a 9.6% return on average common
equity and a 25.9% return on average tangible common equity, assuming the $700
Million Case, and a 1.44% return on average assets, a 10.4% return on average
common equity and a 28.4% return on average tangible common equity, assuming
the $900 Million Case, compared to a 1.46% return on average assets, a 21.1%
return on average common equity and a 28.4% return on tangible average common
equity if no transaction were consummated. The returns estimated to result from
the FIB/FBS Merger for the fourth quarter of 1995 annualized
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using the same assumptions were: a 1.88% return on average assets, a 25.4%
return on average common equity and a 37.3% return on average tangible common
equity.
Merger Partner Pro Forma Per Share Analysis. The pro forma merger analysis
was also presented from the separate perspective of each of Wells Fargo and
FBS. From a Wells Fargo perspective, the Merger was estimated to be dilutive to
Wells Fargo's estimated EPS by 9% and 8% in 1996 and 1997, respectively,
assuming the $700 Million Case, and by 6% and 5%, respectively, assuming the
$900 Million Case. The Merger was indicated to be accretive to Wells Fargo's
estimated EPS in 1998 by 2%, assuming the $700 Million Case, and by 8%,
assuming the $900 Million Case. In the Full Cost Savings Analysis, Wells
Fargo's 1997 estimated EPS was shown to be diluted by 1%, assuming $700 million
in net cost savings, and increased by 5%, assuming $900 million in net cost
savings. The change in estimated EPS in 1997 under the Full Cost Savings
Analysis ranged from accretion to estimated earnings of 8%, assuming $1 billion
in net cost savings, to dilution of 4%, assuming $600 million in net cost
savings.
The Merger was estimated to be accretive to Wells Fargo's estimated cash EPS
in 1996, 1997 and 1998 by 4%, 10% and 19%, respectively, assuming the $700
Million Case, and by 6%, 14% and 25%, assuming the $900 Million Case. The
Merger was also estimated to be accretive to Wells Fargo's estimated cash EPS
in the Full Cost Savings Analysis in 1997 by 18%, assuming the $700 Million
Case, and by 23%, assuming the $900 Million Case. The amount of accretion in
estimated cash EPS in 1997 under the Full Cost Savings Analysis ranged from a
high of 26%, assuming $1 billion in net cost savings, to a low of 15%, assuming
$600 million in net cost savings were achieved. It was estimated that Wells
Fargo's tangible book value per share based upon December 31, 1995 data would
decrease by 8%, assuming the $700 Million Case, and by 10%, assuming the $900
Million Case. The ratio of Wells Fargo's tangible common equity to tangible
assets based upon December 31, 1995 data was estimated to decrease from 5.59%
to 4.94%, assuming the $700 Million Case, and from 5.59% to 4.84%, assuming the
$900 Million Case. Goodwill as a percentage of common equity based upon
December 31, 1995 data was estimated to be 51%, assuming the $700 Million Case,
and 52%, assuming the $900 Million Case.
From an FBS perspective, an FIB/FBS Merger was indicated to be accretive to
FBS's estimated EPS in 1996, 1997 and 1998 by 3%, 11% and 11%, respectively. It
was estimated that the FIB/FBS Merger would be less than 1% dilutive
(approximately $.02 per share) on FBS's estimated cash EPS in 1996, but that an
FIB/FBS Merger would be accretive to FBS's estimated cash EPS by 7% in each of
1997 and 1998. It was also estimated that FBS's tangible book value per share
based upon December 31, 1995 data would increase by 1% and that FBS's ratio of
tangible common equity to tangible common assets based upon December 31, 1995
data would increase from 5.55% to 5.56%. Goodwill was estimated to be 19% of
common equity based upon December 31, 1995 data as a result of the FIB/FBS
Merger.
Price to Earnings Ratios Implied Value Analysis. The First Interstate
Financial Advisors compared the implied value of the Merger in 1997 on both an
accounting basis and a cash basis, assuming that (i) Wells Fargo's per share
price to earnings ratio for estimated 1997 earnings was maintained by the
combined entity and, alternatively, (ii) the ratio converged to an average of
Wells Fargo's and First Interstate's per share price to earnings ratios for
estimated 1997 earnings. This analysis was based upon the assumption that the
Merger would result in fully phased-in net cost savings of $900 million. The
implied values were determined by multiplying the estimated pro forma 1997 EPS
by the estimated 1997 price to earnings ratio and multiplying the result by
two-thirds, the exchange ratio offered by Wells Fargo. Assuming that the
current Wells Fargo price to estimated earnings ratios were maintained by the
combined entity, the implied value of the Merger to First Interstate in 1997
was estimated to be $157.10 per equivalent share, on an accounting basis, and
$183.03 per equivalent share, on a cash basis. Assuming that price to estimated
earnings ratios converged to the average of the current First Interstate and
Wells Fargo price to estimated earnings ratios (based upon the price of First
Interstate Common Stock on October 17, 1995), the implied values of the Merger
were estimated to be $138.70 per equivalent share, on an accounting basis, and
$160.58 per equivalent share on a cash basis.
Summary Comparison of 1995 Bank Mergers. The First Interstate Financial
Advisors also compared the Merger with other bank mergers announced during 1995
in which the consideration exceeded $1 billion. The
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indicated price to book value ratio of the Merger was 2.96 compared to a median
price to book value ratio of 1.93 for other transactions and was the highest of
any offer announced during 1995. The indicated price to tangible book value
ratio of the Merger was 3.66 compared to a median price to tangible book value
ratio of 2.14 for other transactions and, again, was the highest of any offer
announced during the year. The indicated price to adjusted book value ratio of
the Merger was 3.26 compared to a median price to adjusted book value ratio of
2.35 for other transactions and was the second highest of any offer announced
during the year. For this analysis, adjusted book value was determined by (i)
adjusting book value to reflect a tangible common equity to tangible assets
ratio of 6% and (ii) either deducting excess capital from the purchase price or
adding surplus capital to the purchase price. The price to latest twelve month
EPS ratio for the Merger was estimated to be 15.1 compared to a median ratio of
14.0 for other transactions. The premium to market price for the Merger was
estimated at 40.1% compared to a median premium to market ratio of 21.0% for
other transactions.
In connection with their opinions dated as of the date of this Joint Proxy
Statement/Prospectus, the First Interstate Financial Advisors confirmed the
appropriateness of their reliance on the analyses used to render their January
23, 1996 opinions by performing procedures to update certain of such analyses
and by reviewing the assumptions upon which such analyses were based and the
factors considered in connection therewith.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Each of
the First Interstate Financial Advisors believes that its analyses must be
considered as a whole and that selecting portions of its analyses, without
considering the analyses taken as a whole, would create an incomplete view of
the process underlying the analyses set forth in its opinions. In addition,
each of the First Interstate Financial Advisors considered the results of all
such analyses and did not assign relative weights to any of the analyses, so
that the ranges of valuations resulting from any particular analysis described
above should not be taken to be the First Interstate Financial Advisors' view
of the actual value of First Interstate or a combination of First Interstate
and Wells Fargo.
In performing its analyses, each of the First Interstate Financial Advisors
made numerous assumptions with respect to industry performance, general
business, economic and regulatory conditions and other matters, many of which
are beyond the control of First Interstate or Wells Fargo. The analyses
performed by the First Interstate Financial Advisors are not necessarily
indicative of actual values, trading values or actual future results that might
be achieved, all of which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of each
First Interstate Financial Advisor's analysis of the fairness of the Merger and
were provided to the First Interstate Board. The analyses do not purport to be
appraisals or to reflect the prices at which a company might be sold. In
addition, as described above, the opinions of the First Interstate Financial
Advisors were one of many factors taken into consideration by the First
Interstate Board in making its determination to approve the Merger.
Consequently, the analyses described above should not be viewed as
determinative of the First Interstate Board's or First Interstate management's
opinion with respect to the value of First Interstate or a combination of First
Interstate and Wells Fargo, or of whether the First Interstate Board or First
Interstate management would have been willing to agree to a different exchange
ratio. First Interstate placed no limits on the scope of the analysis
performed, or opinions expressed, by the First Interstate Financial Advisors.
Each First Interstate Financial Advisor is an internationally recognized
investment banking and advisory firm. Each, as part of its investment banking
business, is continuously engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
In the course of its market making and other trading activities, each may, from
time to time, have a long or short position in, and may buy and sell,
securities of First Interstate, Wells Fargo and other financial institutions.
In the past, each of the First Interstate Financial Advisors and certain of
their affiliates have provided financial advisory and financial services to
First Interstate and Wells Fargo, including Goldman Sachs advising Wells Fargo
in 1995 on the sale of its 50% ownership interest in Wells Fargo Nikko
Investment Advisers and on the formation of its mortgage joint venture with
Norwest Financial Corporation. The First Interstate Financial Advisors have
received and contemplate receiving customary fees for the rendering of these
types of financial
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services. In the future, the First Interstate Financial Advisors may provide
additional financial advisory and financial services to Wells Fargo, including
participating in underwriting and securitization transactions.
First Interstate agreed to pay each of the First Interstate Financial
Advisors a fee of $10 million, half of which was paid upon the execution of
the engagement letter with each firm and half of which was paid upon execution
of a merger agreement between First Interstate and FBS. An additional fee is
payable upon consummation of the Merger (or any other transaction in which at
least 50% of the outstanding First Interstate Common Stock is acquired),
calculated as .655% of the positive difference between the aggregate value (as
defined in the engagement letters) and approximately $10,411,186,000; provided
that in no event may the aggregate of all compensation to each First
Interstate Financial Advisor exceed .175% of the aggregate value. For purposes
of calculating the amount due the First Interstate Financial Advisors,
securities are valued on the basis of the average of the last sales prices for
such securities on the twenty trading days ending five days prior to the
consummation of the transaction. Assuming that the Merger was consummated on
February 21, 1996 the additional fee payable to each of the First Interstate
Financial Advisors would be $11,521,568. In addition, First Interstate has
agreed to reimburse each of the First Interstate Financial Advisors for its
reasonable out-of-pocket expenses incurred in connection with the services
provided by it and to indemnify and hold harmless each of the First Interstate
Financial Advisors and certain related parties, to the full extent lawful,
from and against certain liabilities and expenses, including certain
liabilities under the federal securities laws, incurred in connection with its
engagement.
Opinion of Goldman, Sachs & Co.
At the January 23, 1996 meeting of the First Interstate Board, Goldman Sachs
rendered a written opinion that, as of such date and based upon and subject to
various qualifications and assumptions described with respect to its opinion,
the Exchange Ratio was fair to the holders of First Interstate Common Stock.
Goldman Sachs has confirmed its opinion dated January 23, 1996 by delivery of
a written opinion dated the date of this Joint Proxy Statement/Prospectus.
THE FULL TEXT OF THE OPINION OF GOLDMAN SACHS, DATED THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS ON THE SCOPE OF REVIEW UNDERTAKEN, IS ATTACHED AS
APPENDIX G TO THIS JOINT PROXY STATEMENT/PROSPECTUS. FIRST INTERSTATE
STOCKHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY. NO LIMITATIONS
WERE IMPOSED BY THE FIRST INTERSTATE BOARD UPON GOLDMAN SACHS WITH RESPECT TO
THE INVESTIGATIONS MADE OR PROCEDURES FOLLOWED BY IT IN RENDERING ITS
OPINIONS. GOLDMAN SACHS' OPINIONS, WHICH ARE ADDRESSED TO THE FIRST INTERSTATE
BOARD, ARE DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO AND DO NOT
CONSTITUTE A RECOMMENDATION TO ANY FIRST INTERSTATE STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE AT THE FIRST INTERSTATE SPECIAL MEETING AND DO NOT
ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION.
THE SUMMARY OF THE OPINION OF GOLDMAN SACHS SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.
In connection with rendering its written opinion dated the date of this
Joint Proxy Statement/Prospectus, Goldman Sachs, among other things: (i)
analyzed certain publicly available financial statements and other information
of First Interstate and Wells Fargo, respectively, including this Joint Proxy
Statement/Prospectus; (ii) analyzed certain internal financial analyses and
forecasts prepared by the managements of First Interstate and Wells Fargo,
respectively, including analyses of certain cost savings, operating
efficiencies, revenue effects and financial synergies expected by Wells Fargo
to be achieved as a result of the Merger and including share repurchase and
capital management policies expected to be fulfilled by Wells Fargo following
the Merger; (iii) discussed the past and current business operations,
regulatory relationships, financial condition and future prospects of First
Interstate with senior executives of First Interstate and each senior
management's assessment of the strategic fit and implications of the Merger;
(iv) reviewed the results of First Interstate's due diligence review of Wells
Fargo with senior management of First Interstate; (v) compared the financial
performance of First Interstate and Wells Fargo and the prices and trading
activity of First Interstate Common Stock and Wells Fargo Common Stock with
that of certain other comparable publicly traded super-regional bank and bank
holding
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companies and their securities; (vi) reviewed the financial terms of certain
recent business combinations in the commercial banking industry specifically
and in other industries generally; (vii) reviewed the Merger Agreement and
certain related documents; and (viii) performed such other analyses as it
deemed appropriate.
Goldman Sachs assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for the purposes of
its opinion. With respect to the financial forecasts, including, without
limitation, the analyses and forecasts of certain cost savings, operating
efficiencies, revenue effects and financial synergies expected to result from
the Merger, anticipated share repurchase and capital management policies,
projections regarding under-performing and non-performing assets and net
charge-offs, Goldman Sachs assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
competitive, operating and regulatory environments and related financial
performance of First Interstate or Wells Fargo, respectively, and that such
forecasts will be realized in the amounts and at the times contemplated.
Goldman Sachs did not make any independent valuation or appraisal of the assets
or liabilities of First Interstate or Wells Fargo, nor was it furnished with
any such appraisals. In addition, Goldman Sachs did not examine any individual
loan credit files of First Interstate or Wells Fargo. Goldman Sachs assumed
that the allowances for loan and lease losses established by First Interstate
and Wells Fargo are in the aggregate adequate to cover such losses, and that
the derivatives, swaps, foreign exchange, financial instruments and off-
balance-sheet lending-related financial instruments of First Interstate and
Wells Fargo will not have an adverse effect that would be relevant to its
analysis. Goldman Sachs also assumed that any necessary regulatory approvals
and third-party consents obtained for the Merger would not have a materially
adverse effect on First Interstate or Wells Fargo or the combined company.
Goldman Sachs' opinion was based on economic, market and other conditions as
in effect on, and the information available to it as of, the date of its
opinion. Goldman Sachs did not express any opinion as to the price or range of
prices at which Wells Fargo Common Stock might trade subsequent to the Merger.
In addition, Goldman Sachs' opinion did not address the relative merits of the
Merger and alternative potential transactions. No opinion was rendered by
Goldman Sachs as to the fairness of the Merger to the holders of any series of
First Interstate Preferred Stock.
Opinion of Morgan Stanley
At the January 23, 1996 meeting of the First Interstate Board, Morgan Stanley
rendered its written opinion to the First Interstate Board that, as of such
date, the Exchange Ratio was fair from a financial point of view to the holders
of First Interstate Common Stock (other than Wells Fargo and its affiliates).
Morgan Stanley has confirmed its opinion dated January 23, 1996 by delivery of
a written opinion dated the date of this Joint Proxy Statement/Prospectus.
THE FULL TEXT OF THE OPINION OF MORGAN STANLEY, DATED THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX H TO
THIS JOINT PROXY STATEMENT/PROSPECTUS. NO LIMITATIONS WERE IMPOSED BY THE FIRST
INTERSTATE BOARD UPON MORGAN STANLEY WITH RESPECT TO THE INVESTIGATIONS MADE OR
PROCEDURES FOLLOWED BY IT IN RENDERING ITS OPINIONS. FIRST INTERSTATE
STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY. MORGAN STANLEY'S
OPINIONS ARE DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF
THE EXCHANGE RATIO, DO NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR
ANY RELATED TRANSACTION AND DO NOT CONSTITUTE A RECOMMENDATION TO ANY FIRST
INTERSTATE STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE FIRST
INTERSTATE SPECIAL MEETING. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET
FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In connection with rendering its opinion dated the date of this Joint Proxy
Statement/Prospectus, Morgan Stanley, among other things: (i) analyzed certain
publicly available financial statements and other information of First
Interstate and Wells Fargo, respectively; (ii) analyzed certain internal
financial statements and other financial and operating data concerning First
Interstate and Wells Fargo prepared by the managements of First
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Interstate and Wells Fargo, respectively; (iii) analyzed certain financial
projections prepared separately by the managements of First Interstate and
Wells Fargo, respectively; (iv) discussed the past and current operations and
financial conditions and the prospects of First Interstate and Wells Fargo with
senior executives of First Interstate and Wells Fargo, respectively; (v)
reviewed the reported prices and trading activity for the First Interstate
Common Stock and the Wells Fargo Common Stock; (vi) compared the financial
performance of First Interstate and Wells Fargo and the prices, trading
activity and trading multiples of the First Interstate Common Stock and the
Wells Fargo Common Stock with that of certain other comparable bank holding
companies and their securities; (vii) discussed the strategic objectives of the
Merger and the plan for the combined company with senior executives of Wells
Fargo; (viii) analyzed certain pro forma financial projections for the combined
company prepared by Wells Fargo; (ix) reviewed and discussed with the senior
management of Wells Fargo certain estimates of the potential cost savings and
revenue loss expected to result from the Merger; (x) reviewed the financial
terms, to the extent publicly available, of certain comparable bank holding
company merger transactions; (xi) participated in discussions among
representatives of First Interstate and Wells Fargo (and certain other parties)
and their financial and legal advisors; (xii) reviewed the Merger Agreement and
certain related agreements; and (xiii) performed such other analyses as it
deemed appropriate.
Morgan Stanley assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by it for the purposes of
its opinion dated the date of this Joint Proxy Statement/Prospectus. With
respect to the financial projections, including Wells Fargo's estimates of
costs savings and revenue loss expected to result from the Merger, Morgan
Stanley assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of First Interstate and Wells Fargo, respectively. Morgan Stanley also assumed
that off-balance- sheet activities of First Interstate and Wells Fargo,
including derivatives and other similar financial instruments, will not
adversely affect the future financial position and results of operations of the
combined enterprise. Morgan Stanley did not make any independent valuation or
appraisal of the assets or liabilities of First Interstate or Wells Fargo, nor
was it furnished with any such appraisals. In addition, Morgan Stanley did not
examine any individual loan credit files of First Interstate or Wells Fargo.
Morgan Stanley's opinion dated the date of this Joint Proxy
Statement/Prospectus was based on economic, market and other conditions as in
effect on, and the information made available to it as of, the date of such
opinion.
CERTAIN LITIGATION
In connection with the Exchange Offer and the FIB/FBS Merger, on November 13,
1995, Wells Fargo filed a complaint in the Delaware Court of Chancery against
First Interstate, the members of the First Interstate Board, FBS and FBS Sub.
The complaint sought, among other things, (i) a declaration that the First
Interstate Board's approval of the FIB/FBS Merger Agreement, and the related
Reciprocal Fee Letters and Reciprocal Stock Option Agreements constituted
breaches of the First Interstate Board's fiduciary duties and, therefore, that
the FIB/FBS Merger Agreement, the Reciprocal Fee Agreement and the Stock Option
Agreement granted to FBS were void and unenforceable; (ii) an injunction
compelling the First Interstate Board to terminate the FIB/FBS Merger Agreement
and the related agreements; and (iii) an injunction to prevent First Interstate
from using any defensive measures to prevent consummation of the Exchange Offer
or the consummation of Wells Fargo's proposed merger. On November 30, 1995,
Wells Fargo filed an amended complaint in this litigation which alleged, among
other things, that FBS's share repurchases after the public announcement of the
FIB/FBS Merger Agreement denied First Interstate's stockholders the ability to
assess accurately the market value of the FIB/FBS Merger proposal or to compare
it to the Exchange Offer. This amended complaint sought, among other things, to
compel the public disclosure of information regarding FBS's stock repurchases
and to prohibit FBS from continuing to repurchase its common stock while the
Exchange Offer was being considered.
Also in connection with the Exchange Offer and the FIB/FBS Merger, on
December 14, 1995 and December 18, 1995, respectively, FBS and First Interstate
each filed a complaint against Wells Fargo in the United States District Court
for the District of Delaware which alleged, among other things, that Wells
Fargo had violated the federal securities laws by releasing certain financial
projections and by making allegedly false statements regarding the FIB/FBS
Merger. FBS and First Interstate sought, among other things, an injunction
preventing
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Wells Fargo from pursuing the Exchange Offer. On December 21, 1995, Wells Fargo
answered both these complaints and asserted counterclaims against First
Interstate and FBS. The counterclaims alleged, among other things, that both
First Interstate and FBS violated federal securities laws by making false and
misleading statements and material omissions of fact regarding the FIB/FBS
Merger and the Exchange Offer.
In connection with the Exchange Offer, the FIB/FBS Merger and First
Interstate's commencement of discussions with Wells Fargo on January 20, 1996
regarding a potential merger, on January 22, 1995, FBS and FBS Sub filed a
complaint in the California Superior Court against Wells Fargo which alleged
tortious interference of contract and tortious interference with prospective
economic advantage.
Pursuant to the Settlement Agreement, each of Wells Fargo, First Interstate,
FBS and FBS Sub agreed to take all steps necessary to withdraw or otherwise
finally terminate with prejudice, each of the actions described above, without
costs imposed on any party. As of the date of this Joint Proxy
Statement/Prospectus all such actions have been dismissed with prejudice.
Certain present and former members of the First Interstate Board were named
as defendants in stockholder class action and derivative suits filed in
California, and certain present members of the First Interstate Board, First
Interstate and, in some instances, FBS, were named as defendants in several
stockholder class action and derivative suits filed in state and federal courts
in Delaware and California, which alleged that the First Interstate Board would
breach or had breached its fiduciary duties to the stockholders of First
Interstate in responding to the Original Proposal and the Exchange Offer and,
in some instances, that FBS had aided and abetted such breaches. Seven of the
eight actions filed in state court in California were stayed by the California
state court. An eighth action, captioned Bradley v. Siart et al. (Case No. BC
139665), was filed in the California Superior Court after the hearing was held
on defendants' motion to stay the seven other California proceedings. The two
federal actions that were initially filed in California have been transferred
to federal court in Delaware. Following the transfer of those actions, an
action captioned Bradley v. Siart et al., Del. Ch., C.A. No. 14799, was filed
in the Delaware Court of Chancery. Wells Fargo and First Interstate then
engaged in preliminary settlement negotiations with the plaintiffs in the class
action and derivative suits. Following the commencement of those discussions,
plaintiff Bradley attempted to withdraw his Chancery Court action and indicated
an intention to pursue certain claims, including possibly claims relating to
the termination and stock option agreements that had been entered into by First
Interstate and FBS in the action he had previously filed in California Superior
Court. First Interstate has opposed the withdrawal of the Chancery Court
action. On February 23, 1996, First Interstate and the management-affiliated
members of the First Interstate Board filed a motion in the consolidated
shareholder class action pending in the Delaware Court of Chancery seeking (i)
summary judgment as to the plaintiffs' claims relating to the termination and
stock option agreements associated with the FIB/FBS Merger; and (ii) dismissal
of all of the plaintiffs' remaining claims as moot. Also on February 23, 1996,
First Interstate and its management-affiliated directors wrote to the Court of
Chancery asking the Court to grant the plaintiffs' pending motion for class
certification. The defendants have filed answers in the pending federal actions
in Delaware and have moved to stay plaintiff Bradley's action in California
Superior Court. Pursuant to the Settlement Agreement, First Interstate has
agreed to pay the legal expenses of FBS in connection with such stockholder
class action and derivative suits in an amount not to exceed $225,000.
While there can be no assurance that any of these actions will ultimately be
settled, any such settlements may involve the payment of plaintiffs' attorneys'
fees by First Interstate.
CONVERSION OF FIRST INTERSTATE CAPITAL STOCK
Conversion of First Interstate Common Stock. At the Effective Time, each
share of First Interstate Common Stock outstanding, other than shares held in
First Interstate's treasury, by any of its subsidiaries or held by Wells Fargo
or any subsidiary of Wells Fargo (except, in both cases, for Trust/DPC Shares),
will be converted into the right to receive two-thirds of a share of Wells
Fargo Common Stock.
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Conversion of First Interstate Preferred Stock. At the Effective Time, each
share of First Interstate 9.875% Preferred Stock issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive one share of New Wells Fargo 9.875% Preferred Stock and each share of
First Interstate 9.0% Preferred Stock issued and outstanding immediately prior
to the Effective Time will be converted into the right to receive one share of
New Wells Fargo 9.0% Preferred Stock. The terms of the New Wells Fargo 9.875%
Preferred Stock and the New Wells Fargo 9.0% Preferred Stock will be
substantially the same as the terms of the corresponding series of First
Interstate Preferred Stock. At the Effective Time, Wells Fargo will assume the
obligations of First Interstate under the Deposit Agreement, dated as of
November 14, 1991, between First Interstate and First Interstate Bank of
California, as depositary (relating to the First Interstate 9.875% Preferred
Stock), and the Deposit Agreement, dated as of May 29, 1992, between First
Interstate and First Interstate Bank of California, as depositary (relating to
the First Interstate 9.0% Preferred Stock). Wells Fargo will instruct First
Interstate Bank of California (the "Depositary"), as depositary under each of
the deposit agreements (the "Deposit Agreements"), to treat the shares of New
Wells Fargo Preferred Stock received by it in exchange for shares of First
Interstate Preferred Stock as newly deposited securities under the applicable
Deposit Agreement. In accordance with the terms of the relevant Deposit
Agreement, the First Interstate Depositary Receipts then outstanding will
thereafter represent the shares of the relevant series of New Wells Fargo
Preferred Stock. Wells Fargo intends to request that the Depositary call for
surrender of all outstanding First Interstate Depositary Receipts to be
exchanged for New Wells Fargo Depositary Receipts evidencing the New Wells
Fargo Depositary Shares. See "Description of Wells Fargo Capital Stock."
Each outstanding share of First Interstate Capital Stock owned by Wells
Fargo or its subsidiaries or First Interstate or its subsidiaries (except for
Trust/DPC Shares), or by First Interstate as treasury stock, will be canceled
at the Effective Time and will cease to exist, and no securities of Wells
Fargo or other consideration will be delivered in exchange therefor. All
shares of Wells Fargo Common Stock that are owned by First Interstate or its
subsidiaries (except for Trust/DPC Shares) will become treasury stock of Wells
Fargo.
Conversion of First Interstate Stock Options. At the Effective Time, each
First Interstate Stock Option issued by First Interstate pursuant to any First
Interstate Stock Plan that is outstanding and unexercised immediately prior to
the Effective Time will be converted automatically into a Wells Fargo Option
to purchase shares of Wells Fargo Common Stock with (i) the number of shares
of Wells Fargo Common Stock subject to the Wells Fargo Option being equal to
the product of the number of shares of First Interstate Common Stock subject
to the First Interstate Stock Option multiplied by the Exchange Ratio and
rounded down to the nearest share and (ii) the exercise price per share of
Wells Fargo Common Stock subject to the Wells Fargo Option being equal to the
exercise price per share of First Interstate Common Stock under the First
Interstate Stock Option divided by the Exchange Ratio and rounded up to the
nearest cent. The conversion is intended to be effected in a manner such that
any First Interstate Stock Options that are "incentive stock options" within
the meaning of Section 422 of the Code shall remain so. As discussed below,
pursuant to the terms of the First Interstate Stock Plans and the Wells Fargo
Stock Option Plans, respectively, each First Interstate Stock Option held by
active employees will vest and become exercisable in connection with the
Merger. See "--Conduct of Business Pending the Merger and Other Agreements"
and "--Interests of Certain Persons in the Merger." Approval of the Merger
Agreement by First Interstate's stockholders will constitute a change in
control of First Interstate for purposes of First Interstate's benefit plans,
including but not limited to the First Interstate Stock Plans. Other than with
respect to the acceleration of the exercisability of such First Interstate
Stock Options upon approval of the Merger Agreement by the stockholders of
First Interstate, the duration and other terms of the Wells Fargo Stock
Options shall be the same as the predecessor First Interstate Stock Options.
EXCHANGE OF CERTIFICATES AND DEPOSITARY RECEIPTS; FRACTIONAL SHARES
First Interstate. At or prior to the Effective Time, Wells Fargo will
deposit, or cause to be deposited, with First Chicago Trust Company of New
York (the "Exchange Agent"), for the benefit of the holders of certificates of
First Interstate Capital Stock, certificates representing the shares of Wells
Fargo Common Stock and New Wells Fargo Preferred Stock (and cash in lieu of
fractional shares of Wells Fargo Common Stock, if applicable).
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As soon as is practicable after the Effective Time, and in no event later
than ten business days thereafter, the Exchange Agent will mail a form of
transmittal letter to the holders of certificates representing shares of First
Interstate Capital Stock. The form of transmittal letter will contain
instructions with respect to the surrender of such certificates in exchange
for shares of Wells Fargo Common Stock (and cash in lieu of fractional shares
of Wells Fargo Common Stock, if applicable).
THE DEPOSITARY IS THE ONLY HOLDER OF RECORD OF SHARES OF FIRST INTERSTATE
PREFERRED STOCK, WHICH ARE REPRESENTED BY THE FIRST INTERSTATE DEPOSITARY
SHARES. THE EXCHANGE AGENT WILL EFFECT THE EXCHANGE OF CERTIFICATES
REPRESENTING THE FIRST INTERSTATE PREFERRED STOCK FOR CERTIFICATES
REPRESENTING THE NEW WELLS FARGO PREFERRED STOCK IN CONNECTION WITH THE
MERGER. ALL HOLDERS OF RECORD OF FIRST INTERSTATE DEPOSITARY SHARES EVIDENCED
BY FIRST INTERSTATE DEPOSITARY RECEIPTS SHOULD FOLLOW THE EXCHANGE PROCEDURES
OUTLINED IMMEDIATELY BELOW.
Promptly after the Effective Time, the Depositary will mail to each holder
of record of First Interstate Depositary Shares a notice advising the holder
of the effectiveness of the Merger accompanied by a transmittal form (the
"Depositary Receipt Transmittal Form"). The Depositary Receipt Transmittal
Form will contain instructions with respect to the surrender of First
Interstate Depositary Receipts evidencing First Interstate Depositary Shares
and will specify that delivery will be effected, and risk of loss and title to
such First Interstate Depositary Receipts will pass, only upon delivery of the
First Interstate Depositary Receipts to the Depositary. Upon surrender in
accordance with the instructions contained in the Depositary Receipt
Transmittal Form, to the Depositary of First Interstate Depositary Receipts
evidencing First Interstate Depositary Shares, the holder thereof will be
entitled to receive in exchange therefor New Wells Fargo Depositary Receipts
evidencing the appropriate number of New Wells Fargo Depositary Shares.
FIRST INTERSTATE STOCK CERTIFICATES AND FIRST INTERSTATE DEPOSITARY RECEIPTS
SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY CARD AND SHOULD NOT BE
FORWARDED TO THE EXCHANGE AGENT OR THE DEPOSITARY EXCEPT WITH A TRANSMITTAL
FORM, WHICH WILL BE PROVIDED TO HOLDERS FOLLOWING THE EFFECTIVE TIME.
No dividends or other distributions declared with respect to Wells Fargo
Common Stock or New Wells Fargo Preferred Stock (including the related New
Wells Fargo Depositary Shares) with a record date after the Effective Time
will be paid to the holder of any certificate representing shares of First
Interstate Capital Stock or any First Interstate Depositary Receipt until such
certificate or receipt has been surrendered for exchange. Holders of
certificates representing shares of First Interstate Common Stock or First
Interstate Preferred Stock (or First Interstate Depositary Receipts
representing First Interstate Depositary Shares) will be paid the amount of
dividends or other distributions with a record date after the Effective Time
after surrender of such certificates, without any interest thereon.
No fractional shares of Wells Fargo Common Stock will be issued to any
holder of First Interstate Common Stock upon consummation of the Merger. In
lieu of each fractional share that would otherwise be issued, Wells Fargo will
pay cash in an amount equal to such fraction multiplied by the average of the
closing sale prices of Wells Fargo Common Stock on the NYSE as reported by The
Wall Street Journal for the five trading days immediately preceding the date
of the Effective Time. No interest will be paid or accrued on the cash in lieu
of fractional shares payable to holders of such certificates. No such holder
will be entitled to dividends, voting rights or any other rights as a
shareholder in respect of any fractional share of Wells Fargo Common Stock
that such holder otherwise would have been entitled to receive.
None of Wells Fargo, First Interstate, the Exchange Agent, the Depositary or
any other person will be liable to any former holder of First Interstate
Capital Stock or a First Interstate Depositary Receipt for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
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If a certificate representing First Interstate Capital Stock or a First
Interstate Depositary Receipt has been lost, stolen or destroyed, the Exchange
Agent, in the case of First Interstate Capital Stock, or the Depositary, in the
case of a First Interstate Depositary Receipt, will issue the consideration
properly payable in accordance with the Merger Agreement upon receipt of
appropriate evidence as to such loss, theft or destruction, appropriate
evidence as to the ownership of such certificate or receipt by the claimant,
and appropriate and customary indemnification.
For a description of the differences between the rights of the holders of
Wells Fargo Common Stock and First Interstate Common Stock, see "--Comparison
of Rights of Holders of First Interstate Common Stock and Wells Fargo Common
Stock." For a description of the Wells Fargo Capital Stock, including the New
Wells Fargo Preferred Stock and the New Wells Fargo Depositary Shares, see
"Description of Wells Fargo and Wells Fargo Capital Stock."
Wells Fargo. Shares of Wells Fargo Common Stock and Wells Fargo Preferred
Stock issued and outstanding immediately prior to the Effective Time will
remain issued and outstanding and be unaffected by the Merger, and holders of
such stock will not be required to exchange the certificates representing such
stock or take any other action by reason of the consummation of the Merger.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement each of Wells Fargo and First Interstate makes
representations and warranties to the other regarding, among other things, (i)
its corporate organization and existence and the corporate organization and
existence of each entity consolidated with it for financial reporting purposes
(each such entity, a "Subsidiary"); (ii) its capitalization; (iii) its
corporate power and authority to enter into, and its due authorization,
execution and delivery of, the Merger Agreement and related agreements and
documents; (iv) the Merger Agreement and related agreements and documents not
violating its charter and bylaws, applicable law and certain material
agreements; (v) required governmental and third party approvals; (vi) timely
filing of required regulatory reports; (vii) its financial statements; (viii)
its investment banking arrangements; (ix) the absence of any event since
September 30, 1995 having or reasonably likely to have a Material Adverse
Effect (as defined herein) on it or the Surviving Corporation or constituting a
material change in the conduct of its business; (x) the absence of legal
proceedings as to which there is a reasonable probability of an adverse
determination upon and which, if adversely determined, would, individually or
in the aggregate, have or reasonably be expected to have a Material Adverse
Effect; (xi) the filing and accuracy of its tax returns and the absence of any
condition that might cause the Merger not to qualify as a reorganization within
the meaning of Section 368(a) of the Code (as defined herein); (xii) its
employee benefit plans and related matters; (xiii) its compliance with
applicable law; (xiv) the absence of material defaults under certain of its
contracts; (xv) the absence of agreements between it and regulatory agencies;
(xvi) the absence of undisclosed liabilities; (xvii) the inapplicability to the
transactions contemplated by the Merger Agreement of any "moratorium," "control
share," "fair price" or other anti-takeover laws or regulations of any state;
(xviii) in the case of First Interstate only, the fact that the Merger
Agreement and the transactions contemplated thereby will not result in the
grant of any rights to any person under the Rights Agreement; (xix)
environmental liabilities; (xx) certain interest rate risk management
instruments; and (xxi) the accuracy of the information relating to it and its
Subsidiaries contained in this Joint Proxy Statement/Prospectus. In addition,
First Interstate has represented and warranted that it has taken all corporate
action necessary to terminate the FIB/FBS Merger Agreement pursuant to the
provisions thereof and has no further obligations thereunder or under any of
the other agreements entered into in connection therewith.
CONDUCT OF BUSINESS PENDING THE MERGER AND OTHER AGREEMENTS
Pursuant to the Merger Agreement, prior to the Effective Time, except as
expressly contemplated by the Merger Agreement or specified in a schedule
thereto or as contemplated by the Settlement Agreement or the Fee Agreements,
each of Wells Fargo and First Interstate has agreed to, and to cause its
Subsidiaries to, (i) conduct its business in the usual, regular and ordinary
course consistent with past practice, (ii) use its reasonable best
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efforts to maintain and preserve intact its business organization, employees
and advantageous business relationships and retain the services of its
officers and key employees and (iii) refrain from taking any action that would
adversely affect or delay the ability of either Wells Fargo or First
Interstate to obtain any Requisite Regulatory Approvals or to perform its
covenants and agreements under the Merger Agreement and the Fee Agreements.
In addition, except as expressly contemplated by the Merger Agreement or
specified in a schedule thereto or as contemplated by the Settlement Agreement
or the Fee Agreements, each of Wells Fargo and First Interstate has agreed
that prior to the Effective Time, without the consent of the other party, it
and its Subsidiaries will not, among other things: (i) declare or pay
dividends in a manner inconsistent with past practice or make any other
distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock or issue
any additional shares of capital stock except pursuant to certain exceptions
set forth in the Merger Agreement; (ii) dispose of any of its material
properties or assets or make any material acquisition or investment except in
the ordinary course of business consistent with past practice or pursuant to
certain exceptions set forth in the Merger Agreement; (iii) except for
transactions in the ordinary course of business consistent with past practice,
enter into, amend or terminate any material contract or agreement other than
renewals of contracts and leases without material adverse changes of terms; or
(iv) increase the compensation or fringe benefits of any of its employees or
enter into or modify any employee benefit plans or employment agreements
except in the ordinary course of business consistent with past practice or in
an aggregate amount not exceeding $10 million.
In the Merger Agreement, each party has agreed not to, and not to authorize
or permit any of its officers, directors, employees or agents to directly or
indirectly solicit, initiate or encourage any inquiries relating to, or the
making of any proposal which constitutes, a "Takeover Proposal" (as defined
herein), or recommend or endorse any Takeover Proposal, participate in any
discussions or negotiations regarding any Takeover Proposal, provide third
parties with any nonpublic information relating to any Takeover Proposal or
otherwise facilitate any effort or attempt to make or implement a Takeover
Proposal; provided, however, that each party may, and may authorize and permit
its officers, directors, employees or agents to, provide third parties with
nonpublic information, or otherwise facilitate any effort or attempt by any
third party to make or implement a Takeover Proposal, recommend or endorse any
Takeover Proposal with or by any third party and participate in discussions
and negotiations with any third party relating to any Takeover Proposal if
such party's Board of Directors, after having consulted with and considered
the advice of outside counsel, reasonably determines in good faith that the
failure to do so would cause the members of such Board of Directors to breach
their fiduciary duties under applicable laws. Each party is obligated to
advise the other party immediately following receipt of a Takeover Proposal
and to further advise the other party immediately of any developments relating
thereto. As used in the Merger Agreement, "Takeover Proposal" means any tender
or exchange offer, proposal for a merger, consolidation or other business
combination involving First Interstate or Wells Fargo or, as the case may be,
any of their respective Subsidiaries or any proposal or offer to acquire in
any manner a substantial equity interest in, or a substantial portion of the
assets of, First Interstate or Wells Fargo or any of their respective
Subsidiaries other than the transactions contemplated or permitted by the
Merger Agreement.
Wells Fargo and First Interstate have also agreed to use their reasonable
best efforts to promptly prepare and file all necessary documentation to
effect all applications, notices, petitions and filings, and to obtain and to
cooperate in obtaining permits, consents, approvals and authorizations of all
third parties and governmental entities necessary or advisable to consummate
the transactions contemplated by the Merger Agreement and to comply with the
terms and conditions of all such permits, consents, approvals and
authorizations. Wells Fargo and First Interstate have, subject to the
restrictions set forth in the Merger Agreement, each agreed, upon request, to
furnish to the other party all information concerning themselves and their
subsidiaries, directors, officers and shareholders and such other matters as
may be necessary in furtherance of the Merger. Wells Fargo and First
Interstate have also agreed, subject to the terms and conditions of the Merger
Agreement, to use their best efforts to take, or cause to be taken, all
actions necessary, proper or advisable to comply promptly with all legal
requirements which may be imposed on such party or its subsidiaries and to
consummate the Merger. Wells
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Fargo has further agreed to use its best efforts to cause the shares of Wells
Fargo Common Stock and the New Wells Fargo Depositary Shares to be issued in
the Merger to be approved for listing on the NYSE, subject to official notice
of issuance.
Wells Fargo and First Interstate have also agreed that the employee benefit
plans in place at the Effective Time with respect to employees of Wells Fargo
and First Interstate (the "Wells Fargo Benefit Plans" and the "First
Interstate Benefit Plans," respectively), as the case may be, will remain in
effect for such employees until such time as Wells Fargo adopts new benefit
plans (the "New Benefit Plans") covering employees of both parties who
continue to be employed by Wells Fargo or any of its subsidiaries. Wells Fargo
and First Interstate have agreed to use their reasonable best efforts to
develop New Benefit Plans that, among other things, treat similarly situated
employees on a substantially equivalent basis, taking into account all
relevant factors, including, without limitation, duties, geographic location,
tenure, qualifications and abilities. In view of the changed nature of the
benefit programs which will be applicable to employees of First Interstate
after the Effective Time, Wells Fargo and First Interstate have agreed to use
their reasonable best efforts to develop equitable transition rules relating
to the benefits to be provided to First Interstate employees, with particular
emphasis on retirement benefits to be provided to those First Interstate
employees who are nearing eligibility for early retirement. Notwithstanding
the foregoing, Wells Fargo will honor in accordance with their terms all First
Interstate Benefit Plans and other contracts, arrangements, commitments, or
understandings disclosed by First Interstate.
The approval of the Merger Agreement by First Interstate's stockholders will
constitute a change in control of First Interstate for purposes of the First
Interstate Benefit Plans. Accordingly, provisions of certain of these benefit
plans will cause the acceleration of vesting of certain equity-based
incentives and payment of certain cash-based incentives. Wells Fargo also will
be obligated to indemnify the officers and directors of Wells Fargo and First
Interstate for any liabilities incurred in connection with any matters
existing or occurring at or prior to the Effective Time and to provide
Directors and Officers liability insurance with respect to such matters for
six years. See "--Interests of Certain Persons in the Merger."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each party's obligation to effect the Merger is subject, among other things,
to satisfaction, at or prior to the Effective Time of the following
conditions: (i) the Merger Agreement shall have been approved and adopted by
the requisite affirmative votes of the holders of First Interstate Common
Stock and the Wells Fargo Common Stock entitled to vote thereon; (ii) the
shares of Wells Fargo Common Stock and the New Wells Fargo Depositary Shares
to be issued in the Merger shall have been authorized for listing on the NYSE,
subject to official notice of issuance; (iii) all regulatory approvals
required to consummate the transactions contemplated by the Merger Agreement
shall have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired (all such
approvals and the expiration of all such waiting periods being referred to
herein as the "Requisite Regulatory Approvals"), and no Requisite Regulatory
Approval shall have imposed any condition, requirement or restriction that the
Board of Directors of either party reasonably determines in good faith would
so materially adversely impact the economic or business benefits of the
transactions contemplated by the Merger Agreement as to render inadvisable the
consummation of the Merger (any such condition, requirement or restriction, a
"Burdensome Condition"), (iv) no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the Commission; and (v) no
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any of the other transactions contemplated by
the Merger Agreement shall be in effect, and no statute, rule, regulation,
order, injunction or decree shall have been enacted, entered or promulgated
which prohibits, restricts or makes illegal consummation of the Merger.
Wells Fargo's obligation to effect the Merger is also subject, among other
things, to the satisfaction or waiver by Wells Fargo at or prior to the
Effective Time of, among others, the following conditions: (i) (x) certain
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representations and warranties of First Interstate set forth in the Merger
Agreement (including, without limitation, the representation that since
September 30, 1995, no event has occurred which has had or would reasonably be
expected to have, individually or in the aggregate, a "Material Adverse
Effect" (as defined herein) on First Interstate or the Surviving Corporation)
shall be true and correct in all material respects as of the date of the
Merger Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as
of the Closing Date and (y) the representations and warranties of First
Interstate set forth in the Merger Agreement, other than those specifically
enumerated in the provision described in clause (x) hereof, shall be true and
correct in all respects as of the date of the Merger Agreement and (except to
the extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of determining the satisfaction of the condition
described in this clause (y), no effect shall be given to any exception in
such representations and warranties relating to materiality or a Material
Adverse Effect, and provided, further, however, that, for purposes of the
provision described in this clause (y), such representations and warranties
shall be deemed to be true and correct in all respects unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, results or would reasonably be expected to
result in a Material Adverse Effect on First Interstate and its Subsidiaries
taken as a whole; (ii) First Interstate shall have performed in all material
respects all obligations required to be performed by it under the Merger
Agreement on or prior to the Closing Date; (iii) the Rights issued pursuant to
the Rights Agreement shall not have become nonredeemable, exercisable,
distributed or triggered pursuant to the terms of such agreement; and (iv)
receipt of an opinion of Sullivan & Cromwell, dated as of the Effective Time,
addressed to Wells Fargo, substantially to the effect that the Merger will
qualify as a "reorganization" under Section 368(a) of the Code.
First Interstate's obligation to effect the Merger is also subject, among
other things, to: the satisfaction or waiver by First Interstate at or prior
to the Effective Time of, among others, the following conditions: (i) (x)
certain representations and warranties of Wells Fargo set forth in the Merger
Agreement (including, without limitation, the representation that since
September 30, 1995, no event has occurred which has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on Wells Fargo) shall be true and correct in all material respects as of the
date of the Merger Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date and (y) the representations and warranties
of Wells Fargo set forth in the Merger Agreement other than those specifically
enumerated in the provision described in clause (x) hereof shall be true and
correct in all respects as of the date of the Merger Agreement and (except to
the extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of determining the satisfaction of the condition
described in this clause (y), no effect shall be given to any exception in
such representations and warranties relating to materiality or a Material
Adverse Effect, and provided, further, however, that, for purposes of the
provision described in this clause (y), such representations and warranties
shall be deemed to be true and correct in all respects unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, results or would reasonably be expected to
result in a Material Adverse Effect on Wells Fargo; (ii) Wells Fargo shall
have performed in all material respects all obligations required to be
performed by it under the Merger Agreement on or prior to the Closing Date;
and (iii) receipt of an opinion of Skadden, Arps, Slate, Meagher & Flom, dated
as of the Effective Time, addressed to First Interstate, substantially to the
effect that, the Merger will qualify as a "reorganization" under Section
368(a) of the Code.
As used in the Merger Agreement, the term "Material Adverse Effect" means,
with respect to Wells Fargo, First Interstate or the Surviving Corporation, as
the case may be, a material adverse effect on the business, results of
operations or financial condition of such party and its respective
subsidiaries taken as a whole or a material adverse effect on such party's
ability to consummate the transactions contemplated hereby; provided, however,
that in determining whether a Material Adverse Effect has occurred there shall
be excluded any effect on (I) the referenced party the cause of which is (i)
any change in banking and similar laws, rules or regulations of general
applicability or interpretations thereof by courts or governmental
authorities, (ii) any change in generally accepted accounting principles or
regulatory accounting requirements applicable to banks or their holding
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companies generally, (iii) any action or omission of Wells Fargo or First
Interstate or any Subsidiary thereof in contemplation of the Merger and, (iv)
any changes in general economic conditions affecting banks or their holding
companies generally and (II) First Interstate and its subsidiaries caused by,
relating to or arising out of the actions taken or omitted to be taken on or
after October 17, 1995 by First Interstate and its directors, officers,
employees, representatives and agents (i) in response to the various actions
taken by Wells Fargo in connection with its efforts to engage in a business
combination transaction with First Interstate and (ii) in connection with
First Interstate's pursuit, prior to the date hereof, of strategic
alternatives other than a business combination transaction with Wells Fargo
(including without limitation the execution of the FIB/FBS Merger Agreement
and the Settlement Agreement and the other documents executed in connection
therewith and any actions taken in connection therewith or in respect
thereof), in each case including without limitation all attorneys', investment
bankers', accountants' and other fees and expenses incurred in connection
therewith or as a result of any actions, suits or proceedings relating
thereto.
REGULATORY APPROVALS
Under the Merger Agreement, the obligations of both Wells Fargo and First
Interstate are conditioned upon, among other things, the Requisite Regulatory
Approvals having been obtained and remaining in full force and effect, all
statutory waiting periods in respect thereof having expired and no such
approval having imposed a Burdensome Condition (as such term is defined under
"--Conditions to the Consummation of the Merger" above).
Each of Wells Fargo and First Interstate has agreed to use its reasonable
best efforts to obtain the Requisite Regulatory Approvals, which include
approvals from the Federal Reserve Board and various state and foreign
regulatory authorities. As described below, applications and notices seeking
the Requisite Regulatory Approvals have been filed. The Merger cannot proceed
in the absence of the Requisite Regulatory Approvals. In accordance with the
terms of the Merger Agreement, the Merger is to be consummated on the first
day of the month following the month in which the latest to occur of the
conditions set forth in Section 7.1 of the Merger Agreement is satisfied or
waived. Although no assurances can be given, Wells Fargo and First Interstate
are endeavoring to bring about the satisfaction of all such conditions,
including obtaining, and satisfying the conditions of, all Requisite
Regulatory Approvals, in sufficient time to consummate the Merger on April 1,
1996, and presently anticipate that the Merger will be consummated no later
than May 1, 1996. Wells Fargo and First Interstate also presently anticipate
that no Requisite Regulatory Approvals will impose a Burdensome Condition.
On November 13, 1995, Wells Fargo filed applications and notices in draft
form with the FRB-SF seeking approval of, among other things, the Merger; the
application was refiled in final form on November 17, 1995. Wells Fargo has
filed additional applications and notices with various governmental
authorities seeking all approvals required to permit consummation of the
Merger. On December 20, 1995, the FRB-SF accepted Wells Fargo's application
for processing.
The Merger is subject to approval by the Federal Reserve Board pursuant to
Sections 3 and 4 of the BHCA. Assuming Federal Reserve Board approval, the
Merger may not be consummated until 30 days after such approval, during which
time the Department of Justice may challenge the Merger on antitrust grounds
and seek the divestiture of certain assets and liabilities. With the approval
of the Federal Reserve Board and the Department of Justice, the waiting period
may be reduced to no less than 15 days.
The Federal Reserve Board is prohibited from approving any transaction under
the applicable statutes which:
(i) would result in a monopoly or which would be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize the
business of banking in any part of the United States; or
(ii) may have the effect in any section of the United States of
substantially lessening competition, or tending to create a monopoly, or
resulting in a restraint of trade, unless the Federal Reserve Board finds
that the anti-competitive effects of the transaction are clearly outweighed
in the public interest by the probable effect of the transaction in meeting
the convenience and needs of the communities to be served.
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Wells Fargo anticipates that, in order to alleviate what the Federal Reserve
Board, the Department of Justice and certain California authorities believe
would otherwise be an adverse competitive effect of the Merger, the combined
company will divest branches of First Interstate in various markets in
California having aggregate deposits of approximately $2.5 billion, based on
June 30, 1995 deposit data. Wells Fargo expects that the Federal Reserve Board
will require that sale agreements with respect to these divestitures be
entered into not later than the Effective Time. Although such divestitures may
affect certain pro forma combined financial statement amounts, merger and
restructuring costs, cost savings and revenues, Wells Fargo and First
Interstate believe that the aggregate amount and financial impact of any such
divestitures will not constitute a Burdensome Condition or have a Material
Adverse Effect. In addition, Wells Fargo believes that revenue losses will be
offset by cost savings and the premium received for the divested operations.
For these reasons, the pro forma financial statements included herein do not
reflect any such divestitures.
The Federal Reserve Board will also consider the financial and managerial
resources of the companies and their subsidiary banks. In addition, under the
Community Reinvestment Act of 1977, as amended (the "CRA"), the Federal
Reserve Board must take into account the record of performance of each of
Wells Fargo and First Interstate in meeting the credit needs of the entire
community, including low and moderate income neighborhoods, served by each
company. As part of the review process, the Federal Reserve Board frequently
receives comments and protests from community groups and others. As of the
date hereof, a number of community groups and individuals have submitted
comments and protests with respect to the application filed by Wells Fargo.
Wells Fargo's principal bank, Wells Fargo Bank, N.A. (which represents
approximately 90% of Wells Fargo's consolidated assets), has received an
"Outstanding" rating, the CRA's highest rating. Four of First Interstate's
banks, including its California lead bank, have an "Outstanding" rating, and
First Interstate's other bank subsidiaries have received a "Satisfactory" CRA
rating.
The Federal Reserve Board has furnished notice and a copy of the application
for approval of the Merger to the Office of the Comptroller of the Currency
(the "OCC"), the Federal Deposit Insurance Corporation (the "FDIC") and the
appropriate state regulatory authorities. These agencies had 30 days to submit
their views and recommendations to the Federal Reserve Board. The Federal
Reserve Board is required to hold a public hearing in the event it receives a
written recommendation of disapproval of the application from any of these
agencies within such 30-day period. Furthermore, Federal Reserve Board
regulations require publication of notice of, and the opportunity for public
comment on, the application submitted by Wells Fargo for approval of the
Merger and authorize the Federal Reserve Board to hold a public hearing in
connection therewith if the Federal Reserve Board determines that such a
hearing would be appropriate. As noted above, comments have been submitted
with respect to Wells Fargo's application; a number of such comments requested
the Federal Reserve Board to hold public hearings. The Federal Reserve Board
held hearings on Wells Fargo's application on January 22, 24 and 25, 1996.
Under Section 4 of the BHCA and related regulations, the Federal Reserve
Board must consider whether the performance of Wells Fargo's and First
Interstate's nonbanking activities on a combined basis can reasonably be
expected to produce benefits to the public (such as greater convenience,
increased competition and gains in efficiency) that outweigh possible adverse
effects (such as undue concentration of resources, decreased or unfair
competition, conflicts of interest and unsound banking practices). This
consideration includes an evaluation of the financial and managerial resources
of Wells Fargo and First Interstate and the effect of the proposed transaction
on those resources.
In addition, in connection with the Merger, Wells Fargo has filed
applications or notices with the Minister of Finance of Canada as well as a
number of state regulatory agencies, primarily in relation to the acquisition
of control over certain subsidiaries of First Interstate that will result from
consummation of the Merger. A brief description of such applications and
notices follows:
Alaska. Wells Fargo received the requisite approval on February 9, 1996
from the Alaska Department of Commerce and Economic Development to acquire
First Interstate Bank of Alaska, N.A.
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Arizona. Wells Fargo received the requisite approval on January 22, 1996
from the Arizona Superintendent of Banking to acquire First Interstate Bank
of Arizona, N.A. ("FI Arizona").
Wells Fargo has requested prior approval in connection with the
acquisition of First Interstate Insurance Company (a wholly owned
subsidiary of FI Arizona) from the Arizona Director of Insurance pursuant
to (S) 20-481.02(B) of the Arizona Revised Statutes. An application for
such approval was filed on November 29, 1995.
California. Wells Fargo has requested prior approval in connection with
the acquisition of First Interstate, First Interstate Bank of California,
First Interstate Bank, Ltd. and First Interstate Central Bank from the
California Superintendent of Banking pursuant to the California Financial
Code. An application for an exemption pursuant to (S) 708 of the California
Financial Code or an approval pursuant to (S) 701 of the California
Financial Code was filed on November 21, 1995.
Canada. Wells Fargo has requested prior approval in connection with the
acquisition of First Interstate Bank of Canada from the Minister of Finance
of Canada pursuant to (S) 377 of the Bank Act (Canada). An application for
such approval was filed on December 4, 1995.
Colorado. Wells Fargo received the requisite approval on January 18, 1996
from the Colorado Banking Board to acquire First Interstate Bank of Denver,
N.A. and First Interstate Bank of Englewood, N.A.
Idaho. Wells Fargo has requested prior approval in connection with the
acquisition of First Interstate Bank of Idaho, N.A. from the Idaho Director
of the Department of Finance pursuant to (S) 26-2606 of the Idaho Code. An
application for such approval was filed on November 24, 1995.
Montana. Wells Fargo has in connection with the acquisition of First
Interstate Bank of Montana, N.A., submitted a copy of Wells Fargo's Federal
Reserve Application to the Montana Department of Commerce, together with a
certification that Montana State deposit limitations have not been
violated, pursuant to (S) 32-1-384 of the Montana Code. An appropriate
submission was made on November 29, 1995.
Nevada. Wells Fargo received the requisite approval on January 31, 1996
from the Nevada Commissioner of Financial Institutions to acquire First
Interstate Bank of Nevada, N.A.
New Mexico. Wells Fargo has given 90 days' prior notice to the New Mexico
Director of the Financial Institutions Division of the Regulation and
Licensing Department in connection with the acquisition of First Interstate
Bank of New Mexico, N.A. pursuant to section 58-26-5 of the New Mexico
Statutes. Such notice was filed on November 20, 1995.
Texas. Wells Fargo has in connection with the acquisition of First
Interstate Bank of Texas, N.A. provided notice and a copy of Wells Fargo's
Federal Reserve Application to the Texas Banking Commissioner pursuant to
(S) 8.301 of the Texas Banking Act. Such notice and a copy of such
Application were filed on November 22, 1995.
Vermont. Wells Fargo has in connection with the acquisition of Western
Bonding & Casualty Company, a captive insurance company subsidiary of First
Interstate, given notice to the Vermont Director of Captive Insurance
Companies. Such notice was filed on November 22, 1995.
Wyoming. Wells Fargo received the requisite approval on February 7, 1996
from the Wyoming Commissioner of Banking to acquire First Interstate Bank
of Wyoming, N.A.
In addition, on February 9, 1996, an application was filed on behalf of
Pacifica Funds Trust and Pacifica Variable Trust (collectively, the
"Investment Trusts"), both registered open-end management investment
companies, and First Interstate Capital Management, Inc., the adviser to the
Investment Trusts and an indirect wholly owned subsidiary of First Interstate,
requesting an order under Section 6(c) of the Investment Company Act of 1940
for an exemption from Section 15(a) of such act. The order would (i) permit
the Investment Trusts
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to implement new advisory contracts with their adviser for a maximum period of
120 days, beginning on the Closing Date but in no event later than May 1, 1996,
without first obtaining the approval of the shareholders of the Investment
Trusts, and (ii) permit the adviser to receive fees earned under the new
advisory contracts after the approval of such shareholders has been obtained.
This order is currently expected to be issued in time to effect the Closing on
April 1, 1996.
TERMINATION OF THE MERGER AGREEMENT; FEE AGREEMENTS
The Merger Agreement may be terminated by mutual agreement of the First
Interstate Board and the Wells Fargo Board. The Merger Agreement may also be
terminated by either the First Interstate Board or the Wells Fargo Board: (a)
if (i) any governmental entity which must grant a Requisite Regulatory Approval
has denied approval of the Merger or (ii) any governmental entity has issued an
order enjoining or otherwise prohibiting the consummation of the transactions
contemplated by the Merger Agreement and such denial or order shall have become
final and nonappealable; (b) if the Merger shall not have been consummated on
or before December 31, 1996, unless the failure of the Effective Time to occur
by such date shall be due to the failure of the party seeking to terminate the
Merger Agreement to perform or observe the covenants and agreements of such
party set forth therein; (c) provided that the terminating party is not then in
material breach of the Merger Agreement, if the other party shall have breached
any of the covenants or agreements made by such other party or any of the
representations or warranties made by such other party, and in either case,
such breach is not cured within 30 days following written notice to the
breaching party, or which breach cannot be cured prior to the Closing Date and
would entitle the non-breaching party not to consummate the transactions
contemplated by the Merger Agreement; (d) if any approval of the shareholders
of Wells Fargo or First Interstate contemplated by the Merger Agreement shall
not have been obtained by reason of the failure to obtain the required vote at
the relevant Special Meeting or at any adjournment or postponement thereof; (e)
prior to the approval of the Merger Agreement by the requisite vote of First
Interstate's shareholders (if First Interstate is the terminating party) or the
Wells Fargo Proposal (if Wells Fargo is the terminating party), if there exists
at such time a Takeover Proposal by a third party to merge with or acquire a
substantial equity interest in, or a substantial portion of the assets of the
terminating party and the Board of Directors of the terminating party, after
having consulted with outside legal counsel, reasonably determines in good
faith that acceptance of such proposal is necessary in the exercise of its
fiduciary duties; (f) if the Board of Directors of either party reasonably
determines in good faith that any of the Requisite Regulatory Approvals
contains a Burdensome Condition; or (g) if the Board of Directors of the other
party withdraws, modifies or changes in a manner adverse to the terminating
party its approval or recommendation of the Merger Agreement and the
transactions contemplated thereby.
In order to induce Wells Fargo to enter into the Merger Agreement, and in
consideration of Wells Fargo's undertaking of efforts in furtherance of the
transactions contemplated by the Merger Agreement, First Interstate
entered into the First Interstate Fee Agreement with Wells Fargo and, in order
to induce First Interstate to enter into the Merger Agreement, and in
consideration of First Interstate's undertaking of efforts in furtherance of
the transactions contemplated by the Merger Agreement, Wells Fargo entered into
the Wells Fargo Fee Agreement with First Interstate. The following description
of the Fee Agreements is qualified in its entirety by reference to the Wells
Fargo Fee Agreement and the First Interstate Fee Agreement, copies of which are
set forth as Appendices B and C hereto, respectively, and which are
incorporated herein by reference.
For purposes of the following summary of the Fee Agreements, the term (i)
"Payor" means First Interstate with respect to the First Interstate Fee
Agreement and Wells Fargo with respect to the Wells Fargo Fee Agreement and
(ii) "Recipient" means Wells Fargo with respect to the First Interstate Fee
Agreement and First Interstate with respect to the Wells Fargo Fee Agreement.
Pursuant to the respective Fee Agreements, Payor is required to pay Recipient
termination fees if the Merger Agreement is terminated in certain events. A
cash fee of $50 million (the "First Trigger Fee") would generally become
payable if, prior to a "Nullifying Event" (as hereinafter defined), the Merger
Agreement is terminated after or concurrently with the occurrence of a "First
Trigger Event" (as hereinafter defined). In addition, a fee of $150 million
(less the amount of the First Trigger Fee already paid) would generally become
payable if, prior to a "Nullifying Event," (i) the Merger Agreement is
terminated, (ii) prior to or concurrently with such
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termination a First Trigger Event shall have occurred and (iii) prior to,
concurrently with or within 18 months after such termination an "Acquisition
Event" (as hereinafter defined) shall have occurred.
The Fee Agreements define the term "First Trigger Event" to mean the
occurrence of any of the following events:
(i) Payor's Board of Directors shall have failed to approve or recommend
the Merger Agreement or the Merger, or shall have withdrawn or modified in
a manner adverse to Recipient its approval or recommendation of the Merger
Agreement or the Merger, or shall have resolved or publicly announced an
intention to do either of the foregoing;
(ii) Payor or any Significant Subsidiary (as such term is defined in the
Fee Agreements), or the Board of Directors thereof, shall have recommended
that the shareholders of Payor approve any "Acquisition Proposal" (as
hereinafter defined) or shall have entered into an agreement with respect
to, or authorized, approved, proposed or publicly announced its intention
to enter into, any Acquisition Proposal;
(iii) the Merger Agreement or the Merger shall not have been approved at
a meeting of Payor's shareholders which has been held for that purpose
prior to termination of the Merger Agreement in accordance with its terms,
if prior thereto it shall have been publicly announced that any third party
shall have made, or disclosed an intention to make, an Acquisition
Proposal;
(iv) a third party shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 50% or more of the then outstanding
shares of the stock then entitled to vote generally in the election of
directors of Payor; or
(v) following the making of an Acquisition Proposal, Payor shall have
breached any covenant or agreement contained in the Merger Agreement such
that Recipient would be entitled to terminate the Merger Agreement (without
regard to any grace period provided for therein), unless such breach is
promptly cured without jeopardizing consummation of the Merger.
The Fee Agreements define the term "Acquisition Proposal" to mean the
occurrence of any (i) publicly announced proposal, (ii) regulatory application
or notice, (iii) agreement or understanding, (iv) disclosure of an intention to
make a proposal or (v) amendment to any of the foregoing, made or filed on or
after January 23, 1996, in each case with respect to any of the following
transactions with a third party: (A) a merger or consolidation, or any similar
transaction, involving Payor or any Significant Subsidiary (other than mergers,
consolidations or similar transactions involving solely Payor and/or one or
more of its subsidiaries and other than a merger or consolidation as to which
the common shareholders of Payor immediately prior thereto in the aggregate own
at least 70% of the common stock of the publicly held surviving or successor
corporation (or any publicly held or ultimate parent company thereof)
immediately following consummation thereof); (B) a purchase, lease or other
acquisition of all or substantially all of the assets or deposits of Payor or
any of its subsidiaries; or (C) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of securities
representing 20% or more of the voting power of Payor or any Significant
Subsidiary. However, for purposes of the First Interstate Fee Agreement, no
action taken by FBS prior to, on or after the date hereof with respect to a
merger or similar business combination involving First Interstate and FBS in
which the holders of First Interstate Common Stock would receive, for each such
share, solely 2.60 or less shares of the common stock of FBS (together with
cash in lieu of any fractional shares) will constitute an Acquisition Proposal.
The Fee Agreements define "Acquisition Event" to mean the consummation of any
Acquisition Proposal, provided, that the percentage referenced in clause (C)
above shall be 50% instead of 20%.
The Fee Agreements define the term "Nullifying Event" to mean (A) any of the
following events occurring and continuing at a time when Payor is not in
material breach of any of its covenants or agreements contained in the Merger
Agreement: (i) Recipient is in breach of any of its covenants or agreements
contained in the Merger Agreement such that Payor is entitled to terminate the
Merger Agreement (without regard to any grace period provided for therein),
(ii) the stockholders of Recipient shall have voted and failed to approve the
matters to be voted on at the Recipient's Special Meeting or at any adjournment
or postponement thereof (unless the matters
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to be voted on at the Payor's Special Meeting shall not have been approved at a
meeting of Payor shareholders which was held on or prior to such date) or (iii)
the Board of Directors of Recipient shall have failed to approve or recommend
that the stockholders of Recipient approve the adoption of the Merger Agreement
or shall have withdrawn, modified or changed in any manner adverse to Payor its
approval or recommendation that the stockholders of Recipient approve the
adoption of the Merger Agreement or shall have resolved or publicly announced
its intention to do any of the foregoing or (B) the termination of the Merger
Agreement as a result of either party's Board of Directors reasonably
determining in good faith that a Burdensome Condition has been imposed.
ACCOUNTING TREATMENT
Upon consummation of the Merger, Wells Fargo will account for the acquisition
of First Interstate using the purchase method of accounting. Accordingly, the
consideration to be paid in the Merger will be allocated to assets acquired and
liabilities assumed based on their estimated fair values at the consummation
date. Income (or loss) of First Interstate prior to the consummation date will
not be included in income of the combined company.
APPRAISAL RIGHTS
Under the DGCL, holders of First Interstate Common Stock, First Interstate
Preferred Stock (including the holders of First Interstate Depositary Shares),
Wells Fargo Common Stock, and Wells Fargo Preferred Stock will have no
appraisal rights in connection with the Merger Agreement and the consummation
of the transactions contemplated thereby.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
At any time prior to the Effective Time, First Interstate and Wells Fargo, by
action taken or authorized by their respective Boards of Directors, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties, (ii) waive any inaccuracies in
the representations and warranties contained in the Merger Agreement and (iii)
waive compliance with any of the agreements or conditions contained in the
Merger Agreement. Subject to compliance with applicable law, the Merger
Agreement may be amended at any time by an agreement among the parties,
approved or authorized by their respective boards of directors; except that
after any approval of the transactions contemplated by the Merger Agreement by
the stockholders of First Interstate, there may not be, without further
approval of such stockholders, any amendment to the Merger Agreement that
reduces the amount or changes the form of the consideration to be delivered to
the First Interstate stockholders thereunder.
BOARD OF DIRECTORS AND HEADQUARTERS OF WELLS FARGO FOLLOWING THE MERGER
Board of Directors
At the Effective Time, each person serving on the Wells Fargo Board
immediately prior to the Effective Time will continue to serve on the Wells
Fargo Board. In addition, Wells Fargo will cause the Wells Fargo Board to be
expanded by up to seven seats as of the Effective Time and such directorships
will be filled by persons serving on the First Interstate Board who are to be
jointly selected by Wells Fargo and First Interstate; provided that, the Wells
Fargo Board may be expanded by fewer than seven seats if there are fewer than
seven members of the First Interstate Board at the Effective Time who choose to
serve on the Wells Fargo Board.
Headquarters
Upon consummation of the Merger, the Surviving Corporation shall maintain
corporate headquarters in each of San Francisco and Los Angeles, and one or
more of the senior corporate officers of the Surviving Corporation shall be
based in Los Angeles.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Wells Fargo's management and the Wells Fargo Board, and
First Interstate's management and the First Interstate Board, respectively, may
be deemed to have certain interests in the Merger
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that are in addition to their interests as stockholders of Wells Fargo or First
Interstate, as the case may be, generally. The Wells Fargo Board and the First
Interstate Board were aware of these interests and considered them, among other
matters, in approving the Merger Agreement and the transactions contemplated
thereby.
Board of Directors. Pursuant to the terms of the Merger Agreement, members of
the Wells Fargo Board will continue to serve on the Wells Fargo Board upon
consummation of the Merger and up to seven members of the current First
Interstate Board will become members of the Wells Fargo Board at the Effective
Time.
Directors and Officers Insurance; Limitation of Liability of First Interstate
and Wells Fargo Directors and Officers. The Merger Agreement requires that
Wells Fargo and First Interstate defend and respond to any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, whether asserted or arising before or after
the Effective Time (each a "Claim"), against each present and former director,
officer and employee of First Interstate and its subsidiaries (each an
"Indemnified Party"), arising in whole or in part out of (i) his or her actions
as such a director, officer, employee, or serving on behalf of such a person,
(ii) the FIB/FBS Merger Agreement, the Reciprocal Stock Option Agreement and
the Reciprocal Fee Letter and all actions by any of the Indemnified Parties in
connection therewith, (iii) the Merger Agreement, the Fee Agreements or any
actions in connection therewith.
The Merger Agreement also requires Wells Fargo after the Effective Time to
indemnify and hold harmless, as and to the fullest extent permitted by law,
each Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of an
undertaking from such Indemnified Party to repay such advanced expenses if it
is finally and unappealably determined that such Indemnified Party was not
entitled to indemnification hereunder), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action,
suit, proceeding or investigation, and in the event of any such threatened or
actual claim, action, suit, proceeding or investigation (whether asserted or
arising before or after the Effective Time), the Indemnified Parties may retain
counsel reasonably satisfactory to them after consultation with Wells Fargo
except as provided in the Merger Agreement.
These indemnification obligations of Wells Fargo will continue in full force
for at least six years after the Effective Time and will apply to any Claim
asserted or made within such period (including, without limitation, Claims
arising out of or pertaining to the transactions contemplated by the Merger
Agreement).
The Merger Agreement requires that Wells Fargo use its best efforts to cause
the persons serving as officers and directors of First Interstate immediately
prior to the Effective Time to be covered for a period of six years from the
Effective Time by the directors' and officers' liability insurance policy
maintained by First Interstate (provided that Wells Fargo may substitute
therefor policies of at least the same coverage and amounts containing terms
and conditions which are not less advantageous to such directors and officers
of First Interstate than the terms and conditions of such existing policy) with
respect to acts or omissions occurring prior to the Effective Time which were
committed by such officers and directors in their capacity as such; provided,
however, that the Surviving Corporation will not be obligated to make annual
premium payments for such insurance to the extent such annual premiums exceed
250% of the annual premiums paid as of the date of the Merger Agreement by
First Interstate for such insurance.
New Employee Benefit Plans. The Merger Agreement provides that the Wells
Fargo Benefit Plans and First Interstate Benefit Plans will remain in effect
until such time as the New Benefit Plans are adopted with respect to employees
of the Surviving Corporation who were covered prior to the Effective Time by
the Wells Fargo Benefit Plans or First Interstate Benefit Plans. In the Merger
Agreement and subject to certain exceptions described below, Wells Fargo and
First Interstate have also agreed that they will use their reasonable best
efforts to develop New Benefit Plans that shall treat similarly situated
employees of the Surviving Corporation on a substantially equivalent basis,
taking into account all relevant factors, including, without limitation,
duties, geographic location, tenure, qualifications and abilities. In view of
the changed nature of the benefit programs which will be applicable to
employees of First Interstate after the Effective Time, Wells Fargo and First
Interstate
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further agreed to use their reasonable best efforts to develop equitable
transition rules relating to the benefits to be provided to one or more groups
of such employees, with particular emphasis on retirement benefits to be
provided to those First Interstate employees who are nearing eligibility for
early retirement. Wells Fargo also agreed that for purposes of all First
Interstate Benefit Plans and New Benefit Plans (including, without limitation,
all policies and employee fringe benefit programs of the Surviving
Corporation) under which an employee's benefit depends, in whole or in part,
on length of service, credit will be given to current employees of First
Interstate and its subsidiaries for service with First Interstate or its
subsidiaries prior to the Effective Time, provided that such crediting of
service does not result in duplication of benefits, require an accrual of
benefits under, or contributions to, a pension benefit plan on behalf of an
employee for periods before such employee becomes a participant in such plan
or require that certain additional contributions currently made to a Wells
Fargo Benefit Plan on behalf of certain employees who had participated in
Wells Fargo's prior defined benefit plan and attained a specified age upon
termination of that plan be extended to any additional employees.
Pursuant to the Merger Agreement, Wells Fargo has agreed that the Retirement
Plan for Employees of First Interstate Bancorp and its Affiliates (the "First
Interstate Retirement Plan") will be maintained in accordance with its terms
and such plan will not be terminated, merged, amended in an adverse manner or
have benefit accruals cease until First Interstate employees who continue
employment with Wells Fargo become eligible to participate in the tax-
qualified Wells Fargo defined contribution plan. Upon termination of the First
Interstate Retirement Plan, Wells Fargo has agreed to cause the plan to
purchase annuities from an insurance company rated AAA by A.M. Best to provide
for benefit payments thereunder other than amounts with a present value not in
excess of $3,500. Upon approval of the Merger Agreement by First Interstate's
stockholders, account balances for participants under The Employee Savings
Plan of First Interstate Bancorp become fully vested.
Each individual who is currently receiving retiree medical benefits under
the First Interstate retiree medical plan, or who would be entitled to receive
such retiree medical benefits if his employment with First Interstate and its
subsidiaries ceased as of the date of the Merger Agreement, will receive (or
will be entitled to receive) after the Effective Time retiree medical benefits
no less favorable than those provided to similarly situated retirees (or
employees) of Wells Fargo. First Interstate employees hired before January 1,
1992 who become entitled to severance benefits under a First Interstate
severance pay plan or employment agreement (and who would have been entitled
to Wells Fargo retiree medical benefits had employment continued through the
period for which severance payments are made) will be entitled to receive
retiree medical benefits no less favorable than those provided under Wells
Fargo's retiree medical plan.
Wells Fargo has agreed to honor all First Interstate Benefit Plans in
accordance with their terms, provided that Wells Fargo will have the right to
amend, modify or terminate such plans and arrangements in accordance with
their terms.
The approval of the Merger Agreement by First Interstate's stockholders will
constitute a change in control of First Interstate for purposes of certain of
the First Interstate Benefit Plans. Accordingly, provisions of certain of the
First Interstate Benefit Plans will cause the acceleration of vesting and/or
payment of certain equity-based and cash-based incentives.
First Interstate Change in Control Severance Agreements. First Interstate
has entered into individual employment agreements with approximately 39
officers of First Interstate and its subsidiaries (nine of which, including
the agreements between First Interstate and each of Mr. Siart and Messrs.
William S. Randall, Bruce G. Willison and James J. Curran, each of whom is one
of the executive officers named in the proxy statement, dated March 20, 1995,
sent by First Interstate to its shareholders in connection with First
Interstate's Annual Meeting of Stockholders held on April 28, 1995, are "Tier
I Agreements," and the remainder of which are "Tier II Agreements") which
provide, among other things, for severance payments upon certain terminations
of employment during the two-year period following a change in control of
First Interstate. In order to qualify for the severance benefits described
below, termination of employment must be during the two-year period following
a change in control of First Interstate (i) by First Interstate or a successor
employer other than for "cause" or (ii) by the executive for "good reason," as
such terms are defined in the agreements. The Tier I Agreements
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provide that, following a qualifying termination, the executive is entitled to
receive a lump sum payment equal to (1) $30,000 (for the purpose of purchasing
welfare benefits during the three years following termination), (2) $30,000
(for purposes of obtaining professional financial planning advice), (3) three
times the sum of annual salary plus the highest of the bonuses to the executive
in respect of the 1993, 1994 and 1995 plan years, in each case under all of
First Interstate's incentive plans under which the executive was then
participating and (4) the benefit attributable to enhancing the executive's
retirement plan benefits by three years' service and three years' age. If the
qualifying termination occurs during the calendar year in which the change in
control of First Interstate occurs, the severance benefit is reduced by a pro
rata portion of the executive's target bonus for the calendar year in which
such termination occurs. The terms of the Tier II Agreements are substantially
similar to those of the Tier I Agreements, except that the severance payments
under the Tier II Agreements have a multiplier of two, include a $20,000 cash
payment to cover two years' health and welfare benefit plan coverage, and
provide for enhancement of retirement benefits by two years' service and two
years' age. The Tier I Agreements and Tier II Agreements provide that an
executive may refuse all or any portion of the severance payments if the
executive determines that receipt of such payment may result in adverse tax
consequences to him or her. The approval of the Merger Agreement by the First
Interstate shareholders will constitute a change in control under the terms of
the Tier I Agreements and the Tier II Agreements.
On January 21, 1996, the First Interstate Board adopted resolutions which
amended the definition of "change in control" contained in First Interstate's
compensation and incentive plans, including but not limited to the First
Interstate Stock Plans, First Interstate's cash-based incentive plans, the Tier
I Agreements and the Tier II Agreements. Pursuant to such resolutions and
subject to the immediately succeeding sentence, such definition was amended to
provide that a change in control of First Interstate will occur in the event
that the stockholders of First Interstate approve an agreement to merge or
consolidate, or otherwise reorganize, with or into one or more entities which
are not subsidiaries of First Interstate, as a result of which less than 60% of
the outstanding voting securities of the surviving or resulting entity are, or
are to be, owned by former stockholders of First Interstate. Pursuant to the
resolutions, the foregoing amendment would be of no force and effect if such
amendment would prevent any transaction being pursued by First Interstate which
is intended to qualify for pooling-of-interests accounting treatment from
qualifying as such. Prior to the amendment, a change in control of First
Interstate would have been deemed to have occurred if the former stockholders
of First Interstate held less than 50% of the outstanding voting securities of
the surviving or resulting entity. The amendment was adopted to ensure that
certain benefits which were to be accelerated or paid if the FIB/FBS Merger
Agreement were approved by First Interstate's stockholders or if the Exchange
Offer were consummated would also be so accelerated or paid if First
Interstate's stockholders approve the Merger Agreement.
While it has not yet been determined which executive officers of First
Interstate will be employed with Wells Fargo following consummation of the
Merger (other than Mr. Siart, who will not be employed by Wells Fargo following
consummation of the Merger), if a change in control of First Interstate were to
occur and the employment of any of the twelve executive officers of First
Interstate were terminated under circumstances entitling them to severance
benefits under their employment agreements, such officers would be entitled to
the following approximate amounts (which amounts are based on a date of
termination which is at or close to the date on which a change in control of
First Interstate is scheduled to occur): Mr. Siart, $5,805,000; Mr. Randall,
$3,947,000; Mr. Willison, $2,805,000; Mr. Curran, $2,752,000; Ms. Linnet F.
Deily, $2,357,000 (Messrs. Siart, Randall, Willison and Curran and Ms. Deily
may hereinafter be referred to collectively as the "Named Officers"); and all
other executive officers as a group (8 persons in total), $10,297,000.
First Interstate Equity-Based Incentive Awards. The provisions of the Merger
Agreement relating to the conversion of stock options outstanding under First
Interstate Stock Plans into stock options for Wells Fargo Common Stock are
described under "The Merger -- Conversion of First Interstate Capital Stock."
Pursuant to the terms of the First Interstate Stock Plans, upon the approval of
the Merger Agreement by the stockholders of First Interstate, each First
Interstate Stock Option and related stock appreciation right held by active
employees will become immediately exercisable, all restrictions with respect to
restricted stock will automatically lapse and, unless otherwise provided in an
agreement evidencing a performance unit, all performance units will be
immediately payable in Wells Fargo Common Stock, provided in any case that such
awards (other than restricted
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stock awards) may not be accelerated to a date less than six months after the
date of grant. The following table sets forth, with respect to the Named
Officers and all other executive officers of First Interstate, (i) the number
of shares of First Interstate Common Stock subject to options held by such
persons that will become exercisable upon approval of the Merger Agreement by
First Interstate stockholders, (ii) the weighted average exercise price for
such exercisable options held by such persons, (iii) the aggregate value of
such exercisable options based upon the per share price of First Interstate
Common Stock on the Record Date (i.e., total stock value less the exercise
price) and (iv) the aggregate value to such executive officers of the lapse of
restrictions on awards of restricted shares of First Interstate Common Stock.
<TABLE>
<CAPTION>
OPTIONS
WHICH BECOME
EXERCISABLE WEIGHTED
UPON AVERAGE
APPROVAL OF EXERCISE AGGREGATE VALUE OF
THE MERGER PRICE VALUE OF RESTRICTED
AGREEMENT PER SHARE OPTIONS STOCK
------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
William E.B. Siart............... 67,500 $70.81 $ 6,290,325 $ 0
William S. Randall............... 40,250 72.33 3,689,718 0
Bruce G. Willison................ 29,750 69.48 2,811,970 0
James J. Curran.................. 29,750 69.48 2,811,970 0
Linnet F. Deily.................. 29,750 69.48 2,811,970 0
All other executive officers as a
group
(8 persons in total)............ 141,875 $70.75 $13,229,844 $615,000
</TABLE>
First Interstate Cash-Based Incentive Awards. First Interstate maintains for
the benefit of certain of the executive officers and key employees of First
Interstate and its affiliates three cash-based incentive plans. Each of these
plans provides that, within 10 days following a change in control of First
Interstate, a participant will receive 100% of his or her target bonus for the
year in which the change in control occurs. The approval of the Merger
Agreement by First Interstate stockholders will constitute a change in control
for purposes of these cash-based incentive plans. It is currently intended
that target cash incentive awards for 1996 will be established in a manner
similar to those established for 1995 under First Interstate's annual
incentive plans; if 1996 target awards are established on a similar basis,
upon a change in control of First Interstate, Messrs. Siart, Randall,
Willison, Curran and Ms. Deily would be entitled to receive $864,000,
$572,000, $450,000, $395,000 and $430,000, respectively, and all other
participants in such plans would be entitled to receive an aggregate amount of
approximately $17,000,000. These amounts are in addition to any severance
benefits which may be paid to such persons under the First Interstate Change
in Control Severance Agreements.
Wells Fargo. None of the execution of the Merger Agreement, stockholder
approval of the Merger Agreement or consummation of the Merger will cause any
awards or benefits under any employee benefit plan, arrangement or agreement
of Wells Fargo to become vested or accelerated or to increase in value.
Following the execution of the Merger Agreement, Wells Fargo amended its
severance plans to provide Wells Fargo employees with severance benefits
substantially equivalent to the severance benefits of the First Interstate
employees in the event of termination of their employment.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material federal income tax consequences of the
Merger to holders who hold shares of First Interstate Common Stock or First
Interstate Preferred Stock as capital assets deals only with holders who are
(i) citizens or residents of the United States, (ii) domestic corporations or
(iii) otherwise subject to United States federal income tax on a net income
basis in respect of Shares ("U.S. Holders"). This summary may not apply to
certain classes of taxpayers, including, without limitation, insurance
companies, tax-exempt organizations, financial institutions, dealers in
securities, persons who acquired shares of First Interstate stock pursuant to
the exercise of employee stock options or rights or otherwise as compensation
and persons who hold shares of First Interstate stock in a hedging transaction
or as part of a straddle or conversion transaction. Also, the summary does not
address state, local or foreign tax consequences of the Merger. Consequently,
each holder should consult such holder's own tax advisor as to the specific
tax consequences of the Merger to such holder.
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This summary is based on current law and the opinion of Sullivan & Cromwell,
counsel to Wells Fargo. Future legislative, judicial or administrative changes
or interpretations, which may be retroactive, could alter or modify the
statements set forth herein. The opinion of Sullivan & Cromwell set forth in
this summary is based, among other things, on assumptions relating to certain
facts and circumstances of, and the intentions of the parties to, the Merger,
which assumptions have been made with the consent of First Interstate and Wells
Fargo. Neither First Interstate nor Wells Fargo has requested or will request
any ruling from the Internal Revenue Service as to the United States federal
income tax consequences of the Merger.
It is intended that the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that, accordingly, for federal income tax purposes no gain or loss
will be recognized by either First Interstate or Wells Fargo as a result of the
Merger.
In the opinion of Sullivan & Cromwell, the material federal income tax
consequences to U.S. Holders who exchange shares of First Interstate Common
Stock or First Interstate Preferred Stock for shares of Wells Fargo Common
Stock or New Wells Fargo Preferred Stock, respectively, pursuant to the Merger
will be as follows:
(i) no gain or loss will be recognized by a U.S. Holder, except as
described below with respect to a U.S. Holder who receives cash in lieu of
a fractional share interest in Wells Fargo Common Stock;
(ii) the aggregate adjusted tax basis of shares of Wells Fargo Common
Stock (including a fractional share interest in Well Fargo Common Stock
deemed received and redeemed as described below) and New Wells Fargo
Preferred Stock received by a U.S. Holder will be the same as the aggregate
adjusted tax basis of the shares of First Interstate Common Stock or First
Interstate Preferred Stock, as the case may be, exchanged therefor;
(iii) the holding period of shares of Wells Fargo Common Stock (including
the holding period of a fractional share interest in Wells Fargo Common
Stock) or New Wells Fargo Preferred Stock received by a U.S. Holder will
include the holding period of the First Interstate Common Stock or First
Interstate Preferred Stock, as the case may be, exchanged therefor; and
(iv) a U.S. Holder of First Interstate Common Stock who receives cash in
lieu of a fractional share interest in Wells Fargo Common Stock will be
treated as having received such fractional share interest and then as
having received the cash in redemption of such fractional share interest.
Under Section 302 of the Code, if such deemed distribution is
"substantially disproportionate" with respect to the U.S Holder or is "not
essentially equivalent to a dividend" after giving effect to the
constructive ownership rules of the Code, the U.S. Holder will generally
recognize capital gain or loss equal to the difference between the amount
of cash received and the U.S. Holder's adjusted tax basis in the fractional
share interest. Under these rules, a minority stockholder of First
Interstate should recognize capital gain or loss on the receipt of cash in
lieu of a fractional share interest in Wells Fargo Common Stock. The
capital gain or loss will be long-term capital gain or loss if the U.S.
Holder's holding period in the fractional share interest is more than one
year.
The obligation of Wells Fargo to consummate the Merger is conditioned on the
receipt by Wells Fargo of an opinion of its counsel, Sullivan & Cromwell, dated
as of the Effective Time, substantially to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and that, accordingly, (i) no gain or loss will
be recognized by Wells Fargo or First Interstate as a result of the Merger;
(ii) no gain or loss will be recognized by the stockholders of First Interstate
that are U.S. Holders who exchange their First Interstate Common Stock or First
Interstate Preferred Stock solely for Wells Fargo Common Stock or New Wells
Fargo Preferred Stock, respectively, (except with respect to cash received in
lieu of a fractional share interest in Wells Fargo Common Stock); and (iii) the
tax basis of Wells Fargo Common Stock or New Wells Fargo Preferred Stock
received by stockholders that are U.S. Holders who exchange all of their First
Interstate Common Stock or First Interstate Preferred Stock solely for Wells
Fargo Common Stock or New Wells Fargo Preferred Stock, respectively, in the
Merger will be the same as the tax basis of First Interstate Common Stock or
First Interstate Preferred Stock surrendered in exchange therefor
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<PAGE>
(reduced by any amount of tax basis allocable to a fractional share interest
for which cash is received). The obligation of First Interstate to consummate
the Merger is conditioned on the receipt by First Interstate of an opinion of
its counsel, Skadden, Arps, Slate, Meagher & Flom, dated as of the Effective
Time, substantially to the same effect. The opinions of Sullivan & Cromwell
and Skadden, Arps, Slate, Meagher & Flom referred to in this paragraph will be
based upon certain facts, assumptions and representations and/or covenants,
including those contained in certificates of officers of Wells Fargo, First
Interstate and, possibly, others. Subject to the receipt of such
representations and/or covenants, Sullivan & Cromwell and Skadden, Arps,
Slate, Meagher & Flom anticipate that they will render such opinions. If such
opinions are not received, the Merger will not be consummated unless the
conditions requiring their receipt are waived and the approvals of the Wells
Fargo and First Interstate stockholders are resolicited by means of an updated
Joint Proxy Statement/Prospectus. Wells Fargo and First Interstate currently
anticipate that such opinions will be delivered and that neither Wells Fargo
nor First Interstate will waive the conditions requiring receipt of such
opinions.
STOCK EXCHANGE LISTING OF WELLS FARGO COMMON STOCK AND NEW WELLS FARGO
DEPOSITARY SHARES
Wells Fargo has agreed to use its best efforts to cause the shares of Wells
Fargo Common Stock and New Wells Fargo Depositary Shares which are issuable in
the Merger to be approved for listing on the NYSE prior to the Effective Time,
subject to official notice of issuance. It is a condition to the obligations
of First Interstate and Wells Fargo to consummate the Merger that such
securities be approved for listing on the NYSE, subject to official notice of
issuance.
RESALE OF WELLS FARGO CAPITAL STOCK RECEIVED BY FIRST INTERSTATE STOCKHOLDERS
The shares of Wells Fargo Common Stock issuable to stockholders of First
Interstate upon consummation of the Merger have been registered under the
Securities Act. The shares of Wells Fargo Common Stock and New Wells Fargo
Depositary Shares issuable to stockholders of First Interstate upon
consummation of the Merger may be traded freely without restriction by those
stockholders who are not deemed to be "affiliates" of First Interstate or
Wells Fargo, as that term is defined in rules promulgated under the Securities
Act.
Shares of Wells Fargo Common Stock received by those stockholders of First
Interstate who are deemed to be "affiliates" of First Interstate at the time
of the First Interstate Special Meeting may be resold without registration
under the Securities Act only as permitted by Rule 145 under the Securities
Act or as otherwise permitted under the Securities Act.
Each of Wells Fargo and First Interstate has agreed in the Merger Agreement
to use its reasonable best efforts to obtain and deliver to the other party as
soon as practicable, and in any event prior to the date of the Special
Meetings, signed representation letters from each director, executive officer
and other person who may reasonably be deemed to be an "affiliate" of such
party to the effect that such persons will not, among other things, offer to
sell, transfer or otherwise dispose of any of the shares of Wells Fargo Common
Stock distributed to them pursuant to the Merger except with respect to
affiliates of First Interstate and Wells Fargo, in compliance with Rule 145,
or in a transaction that, in the opinion of counsel reasonably satisfactory to
Wells Fargo, is otherwise exempt from the registration requirements of the
Securities Act, or in an offering which is registered under the Securities
Act. This Joint Proxy Statement/Prospectus does not cover resales of Wells
Fargo Common Stock received by persons who are deemed to be "affiliates" of
First Interstate. No person is authorized to make use of this Joint Proxy
Statement/Prospectus in connection with any such resales.
WELLS FARGO DIVIDEND REINVESTMENT AND COMMON STOCK PURCHASE AND SHARE CUSTODY
PLAN
Pursuant to its Dividend Reinvestment and Common Stock Purchase and Share
Custody Plan (the "Wells Fargo Reinvestment and Purchase Plan"), Wells Fargo
provides eligible stockholders with a method of investing cash dividends and
optional cash payments in additional shares of Wells Fargo Common Stock
without payment of any brokerage commission or service charge. The Wells Fargo
Reinvestment and Purchase Plan includes certain dollar limitations on
participation and provides for eligible stockholders to elect dividend
reinvestment
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<PAGE>
on only a part of the shares registered in the name of a participant (while
continuing to receive cash dividends on remaining shares). It is anticipated
that the Wells Fargo Reinvestment and Purchase Plan will continue after the
Effective Time and that stockholders of First Interstate who receive Wells
Fargo Common Stock in the Merger will have the right to participate therein.
EXPENSES
The Merger Agreement provides that the costs and expenses incurred in
connection with such agreement and the transactions contemplated thereby will
be paid by the party incurring such costs and expenses, except that the costs
and expenses of printing and mailing this Joint Proxy Statement/Prospectus,
and all filing and other fees paid to the Commission in connection with the
Merger, will be borne equally by Wells Fargo and First Interstate.
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COMPARISON OF RIGHTS OF HOLDERS OF FIRST INTERSTATE COMMON STOCK AND WELLS
FARGO COMMON STOCK
As a consequence of the Merger, stockholders of First Interstate will become
stockholders of Wells Fargo. The following is a summary of certain
similarities and all material differences between the rights of holders of
First Interstate Common Stock and the rights of holders of Wells Fargo Common
Stock. As each of First Interstate and Wells Fargo is organized under the laws
of Delaware, these differences arise solely from various provisions of the
certificate of incorporation and by-laws of each of First Interstate and Wells
Fargo, as well as from the Rights Agreement.
The following summary does not purport to be a complete statement of the
rights of stockholders under the First Interstate Certificate, the Bylaws of
First Interstate and the Rights Agreement as compared with the rights of Wells
Fargo's stockholders under the Wells Fargo Certificate and the Wells Fargo By-
Laws, or a complete description of the specific provisions referred to herein.
The summary is qualified in its entirety by reference to the governing
corporate instruments, including the aforementioned instruments, of First
Interstate and Wells Fargo.
Special Meetings of Stockholders
Under Delaware law, special meetings of the stockholders may be called by
the board of directors or such other persons as may be authorized by the
certificate of incorporation or bylaws. The First Interstate Bylaws provide
that a special meeting may also be called by the Chairman of the Board, or in
his absence or when the office of Chairman of the Board is vacant, by the
President, and shall be called by the Chairman of the Board, or in his absence
or when the office of Chairman of the Board is vacant, by the President, or
the Secretary, at the request in writing of stockholders owning a majority of
the outstanding capital stock entitled to vote. The Wells Fargo By-Laws
provide that a special meeting may also be called by the Chairman of the
Board, the President, the Chief Executive Officer (if other than the Chairman
of the Board or the President), or one or more stockholders holding not less
than 10% of the voting power of the corporation.
Number of Directors
Under Delaware law, the number of directors shall be fixed by or in the
manner provided in the bylaws, unless the certificate of incorporation fixes
the number of directors, in which case a change in the number of directors
shall be made only by amendment to the certificate. The First Interstate
Bylaws provide that the First Interstate Board is to consist of not less than
three nor more than 26 directors, as shall be determined by resolution of the
Board. The Wells Fargo By-Laws provide that the Wells Fargo Board is to
consist of not less than 10 nor more than 20 directors, the exact number to be
fixed from time to time by a bylaw adopted by the stockholders or by the Board
of Directors, but until some other number is so fixed, the number of directors
shall be 14.
In the Merger Agreement, Wells Fargo has agreed to expand the Wells Fargo
Board by up to seven seats as of the Effective Time, which could raise the
number of directors to 21. Accordingly, the Wells Fargo By-Laws will be
amended to permit such expansion of the Wells Fargo Board.
Advance Notice of Stockholder Nominations of Directors
Under the First Interstate Bylaws, nominations of persons for election to
the First Interstate Board may be made at a meeting of stockholders by any
stockholder, provided that the Secretary of First Interstate receives written
notice not less than 30 days nor more than 60 days prior to the meeting. If
less than 40 days' notice or prior public disclosure of the date of the
meeting is given or made by First Interstate to stockholders, the notice of a
nomination must be received not later than the close of business on the tenth
day following the day on which such notice of the date of the meeting was
mailed or public disclosure was made. Notices of nominations, among other
things, must state the nominee's name, age, business and residential address
and principal
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occupation and employment, as well as the class and number of Shares of First
Interstate beneficially owned by such nominee and any other information about
the nominee required to be disclosed in solicitations for proxies for the
election of directors pursuant to Regulation 14A of the Exchange Act. In
addition, the notice must state the name and record address of the nominating
stockholder and the class and number of shares of First Interstate
beneficially owned by the stockholder. The Wells Fargo By-Laws do not contain
any similar advance notice provisions for the nomination of directors.
Stockholder Proposal Procedures
Under the First Interstate Bylaws, business is properly brought before an
annual meeting if the Secretary of First Interstate receives written notice
not less than 30 days nor more than 60 days prior to the annual meeting. If
less than 40 days' notice or prior public disclosure of the date of the annual
meeting is given or made by First Interstate to stockholders, notice by the
stockholder must be received not later than the close of business on the tenth
day following the day on which such notice of the date of the annual meeting
was mailed or public disclosure was made. Stockholder notices must state,
among other things, a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, the name and record address of the stockholder proposing the
business, the class and number of shares of First Interstate beneficially
owned by the stockholder and any material interest in such business. The Wells
Fargo By-Laws do not contain any similar advance notice provisions for
stockholder proposals.
Indemnification
Both the First Interstate Bylaws and the Wells Fargo By-Laws provide for the
indemnification of directors, officers and persons serving at the request of
the respective corporations as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise to the fullest extent authorized by the DGCL. The Wells Fargo By-
Laws also mandatorily extend this right to indemnification to all employees of
Wells Fargo, whereas the First Interstate Bylaws provide that this right to
indemnification may only be extended to employees and agents by action of the
First Interstate Board.
Certain Voting Rights with Respect to Mergers
Under Delaware law, certain mergers and consolidations or the sale of all or
substantially all of the assets of a corporation requires the approval of the
holders of a majority (unless the certificate of incorporation requires a
higher percentage) of the outstanding shares of such corporation entitled to
vote thereon. Neither the First Interstate Certificate nor the Wells Fargo
Certificate requires a higher percentage.
Cumulative Voting
Under Delaware law, stockholders of a corporation are not entitled to
cumulate their votes in the election of directors unless the corporation's
certificate of incorporation so provides. Neither the First Interstate
Certificate nor the Wells Fargo Certificate provides for cumulative voting.
Removal of Directors; Filling Vacancies on the Board of Directors
Under Delaware law, any or all directors of a corporation which does not
have cumulative voting or a classified board may be removed, with or without
cause, by the holders of a majority of the shares entitled to vote at an
election of directors, unless such corporation's certificate of incorporation
provides otherwise. Neither the First Interstate Certificate nor the Wells
Fargo Certificate provides otherwise.
Under Delaware law, vacancies and newly-created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors in office. Under both the First Interstate Bylaws and the
Wells Fargo By-Laws, such vacancies and newly-created directorships may also
be filled by the stockholders of the respective corporations.
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Stockholder Action by Written Consent
Under Delaware law, unless otherwise provided in the certificate of
incorporation, any action which may be taken at any annual or special meeting
may be taken without a meeting and without prior notice, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Neither the First Interstate
Certificate nor the Wells Fargo Certificate contains provisions to the
contrary.
Amendment of Bylaws
Under Delaware law, the power to adopt, amend or repeal bylaws is vested in
the stockholders unless the certificate of incorporation confers the power to
adopt, amend or repeal bylaws upon the directors as well. Both the First
Interstate Certificate and the Wells Fargo Certificate confer such power on
their respective boards of directors.
Classification of Board of Directors
Delaware law permits (but does not require) a certificate of incorporation
to provide that a board of directors be divided into classes, with each class
having a term of office longer than one year but not longer than three years.
Neither the First Interstate Certificate nor the Wells Fargo Certificate
provides for classes of directors.
Stockholder Rights Plan
On November 21, 1988, the First Interstate Board declared a dividend of one
Right for each outstanding share of First Interstate Common Stock. The
dividend was payable on December 30, 1988 to stockholders of record on that
date. Each Right entitles the registered holder to purchase from First
Interstate one share of First Interstate Common Stock at a price of $170.00
per share (the "Purchase Price"), subject to adjustment. The description and
terms of the Rights are set forth in the Rights Agreement.
In the event that First Interstate is acquired in a merger or other business
combination transaction (other than a merger which follows a Qualified Offer
(as defined in the Rights Agreement) at the same or a higher price) or 50% or
more of its consolidated assets or earning power are sold, proper provision
will be made so that each holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the
exercise price of the Right. In the event that any person becomes the
beneficial owner of 20% or more of the outstanding shares of First Interstate
Common Stock by a purchase other than pursuant to a Qualified Offer, proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which become void), will
thereafter have the right to receive upon exercise that number of shares of
First Interstate Common Stock having a market value of two times the exercise
price of the Right.
First Interstate has represented and warranted to Wells Fargo that the
Rights have not and will not become exercisable, distributed or triggered in
connection with the execution of the Merger Agreement or the consummation of
the Merger.
The Rights Agreement, and any Rights issued thereunder, will expire at the
Effective Time.
The Wells Fargo Board has not adopted a stockholder rights plan.
DIVIDENDS
The Merger Agreement provides that Wells Fargo and First Interstate will
coordinate the declaration and payment of dividends in respect of Wells Fargo
Common Stock and First Interstate Common Stock, it being the intent of Wells
Fargo and First Interstate that holders of Wells Fargo Common Stock or First
Interstate Common Stock will not (i) receive more than one dividend for any
single calendar quarter, or (ii) fail to receive a dividend, for any single
calendar quarter in which they would have received a dividend in the absence
of the Merger.
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MARKET PRICES AND DIVIDENDS
WELLS FARGO
The Wells Fargo Common Stock is listed and principally traded on the NYSE
and is also listed on the PSE, London Stock Exchange and Frankfurt Stock
Exchange. The following table sets forth the range of high and low sales
prices as reported on the NYSE Composite Tape, together with the per share
dividends declared by Wells Fargo, during the periods indicated.
<TABLE>
<CAPTION>
PRICE RANGE
-----------------
QUARTER HIGH LOW DIVIDENDS
- ------- -------- -------- ---------
<S> <C> <C> <C>
1993:
First............................................. $109 1/2 $ 75 1/2 $0.50
Second............................................ 120 95 3/4 0.50
Third............................................. 127 3/8 107 1/4 0.50
Fourth............................................ 133 105 7/8 0.75
1994:
First............................................. $147 1/2 $127 5/8 $1.00
Second............................................ 159 1/2 136 5/8 1.00
Third............................................. 160 3/8 145 1/8 1.00
Fourth............................................ 149 5/8 141 1.00
1995:
First............................................. $160 5/8 $143 3/8 $1.15
Second............................................ 185 7/8 157 1.15
Third............................................. 189 177 3/4 1.15
Fourth............................................ 229 190 1.15
1996:
January 1 to February 23, 1996.................... $258 1/2 $203 1/8 $1.30
</TABLE>
On January 19, 1996, the last trading day before January 21, 1996, the day
on which Wells Fargo and First Interstate reached agreement on the Exchange
Ratio to be included in the Merger Agreement, the other terms of which the
parties were working to finalize, the closing price per share of Wells Fargo
Common Stock was $217.25. On January 23, 1996, the last trading day before
Wells Fargo and First Interstate announced the execution of the Merger
Agreement, the closing sales price per share of Wells Fargo Common Stock was
$228.50. On February 23, 1996, the last practicable date prior to the date of
this Joint Proxy Statement/Prospectus, such price was $252.13. Past price
performance is not necessarily indicative of likely future price performance.
Holders of First Interstate Common Stock are urged to obtain current market
quotations for shares of Wells Fargo Common Stock.
On January 16, 1996, Wells Fargo increased the quarterly dividend on the
Wells Fargo Common Stock to $1.30 per share.
Holders of Wells Fargo Common Stock are entitled to receive dividends from
funds legally available therefor when, as and if declared by the Wells Fargo
Board. Although the Wells Fargo Board presently intends to continue the policy
of paying quarterly cash dividends, future dividends of Wells Fargo will
depend upon the earnings of Wells Fargo and its subsidiaries, their financial
condition and other factors including applicable governmental regulations and
policies. See "Description of Wells Fargo Capital Stock--Certain Regulatory
Considerations." The Wells Fargo Board will continue to determine dividends by
considering the factors listed above and expects that dividends will continue
to be paid in amounts consistent with prior levels. As the factors used to
determine dividends necessarily involve a number of future contingencies to
which all companies are subject, there can be no certainty that dividends of
the combined entity will equal Wells Fargo's current dividend rate per share.
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FIRST INTERSTATE
The First Interstate Common Stock is listed and principally traded on the
NYSE and is also listed on the Boston Stock Exchange, Cincinnati Stock
Exchange, Midwest Stock Exchange, Philadelphia-Baltimore-Washington Stock
Exchange and the PSE. The following table sets forth the range of high and low
sales prices as reported on the NYSE Composite Tape, together with the per
share dividends declared by First Interstate, during the periods indicated.
<TABLE>
<CAPTION>
PRICE RANGE
-----------------
QUARTER HIGH LOW DIVIDENDS
- ------- -------- -------- ---------
<S> <C> <C> <C>
1993:
First............................................. $ 58 3/4 $ 45 5/8 $0.30
Second............................................ 64 53 1/2 0.40
Third............................................. 66 5/8 59 1/2 0.40
Fourth............................................ 67 5/8 54 1/8 0.50
1994:
First............................................. $ 78 3/4 $ 63 1/4 $0.50
Second............................................ 83 7/8 72 1/2 0.75
Third............................................. 83 1/2 72 3/4 0.75
Fourth............................................ 81 3/8 67 0.75
1995:
First............................................. $ 82 1/8 $ 68 5/8 $0.75
Second............................................ 88 1/4 75 1/8 0.75
Third............................................. 103 79 3/4 0.80
Fourth............................................ 141 100 3/4 0.80
1996:
January 1 to February 23, 1996.................... $169 5/8 $130 --
</TABLE>
On January 19, 1996, the last trading day before January 21, 1996, the day
on which Wells Fargo and First Interstate reached agreement on the Exchange
Ratio to be included in the Merger Agreement, the other terms of which the
parties were working to finalize, the closing sales price was $138.88 per
share of First Interstate Common Stock. On January 23, 1996, the last trading
day before Wells Fargo and First Interstate announced the execution of the
Merger Agreement, the closing sales price was $147 per share of First
Interstate Common Stock. On February 23, 1996, the last practicable date prior
to the date of this Joint Proxy Statement/Prospectus, such price was $165.75.
Past price performance is not necessarily indicative of likely future price
performance. Holders of shares of First Interstate Common Stock are urged to
obtain current market quotations for shares of First Interstate Common Stock.
In July 1995, First Interstate increased the quarterly dividend on the First
Interstate Common Stock to $0.80 per share.
Holders of shares of First Interstate Common Stock are entitled to receive
dividends from funds legally available therefor when, as and if declared by
the First Interstate Board. Future dividends of First Interstate will depend
upon the earnings of First Interstate and its subsidiaries, their financial
condition and other factors including applicable governmental regulations and
policies.
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BUSINESS OF WELLS FARGO
Wells Fargo is a bank holding company incorporated under the laws of the
State of Delaware and registered under the BHCA. Based on total consolidated
assets at December 31, 1995, it was the 17th largest bank holding company in
the United States, having total assets of $50.3 billion and total deposits of
$39.0 billion. Wells Fargo's principal subsidiary is Wells Fargo Bank, N.A.,
which is the 9th largest bank in the United States (as of September 30, 1995)
and is the successor to the banking portion of the business founded by Henry
Wells and William G. Fargo in 1852.
Today, Wells Fargo operates one of the largest banking businesses in the
United States. Wells Fargo provides a broad range of financial products and
services through electronic and traditional channels. Customers can access
accounts electronically seven days a week, 24 hours a day. Besides serving as
banker to millions of California households, Wells Fargo provides a full range
of banking and financial services to commercial, corporate, real estate and
small business customers across the nation. Its primary lines of business are
highlighted below.
The Retail Distribution Group sells and services a complete line of retail
financial products for consumers and small businesses. It encompasses a branch
network (including supermarket branches and banking centers), the 24-hour
Customer Sales and Service Centers (telephone banking), the ATM network and
Wells Fargo ON-LINE, Wells Fargo's personal computer banking service. In
addition, Retail Distribution includes product management for the consumer
checking business, which primarily uses the branches as a source of new
customers.
As part of the ongoing effort to provide more convenient, lower-cost service
to customers, Wells Fargo has opened supermarket branches, which are a more
efficient delivery channel for a full line of retail banking services, and
banking centers throughout California. The supermarket banking centers
(modularly-designed kiosks equipped with ATMs and a customer service telephone
and staffed by a banking officer) are capable of providing substantially all
consumer services.
The Business Banking Group provides a full range of financial services to
small businesses, including credit, deposits, investments, payroll services,
retirement programs and credit and debit card services. Business Banking
customers include small businesses with annual sales up to $10 million in
which the owner of the business is also the principal financial decision
maker.
The Investment Group is responsible for the sales and management of savings
and investment products, investment management and brokerage services,
including the Stagecoach and Overland Express Funds and personal trust,
employee benefit trust and agency assets. It also includes product management
for market rate accounts, savings deposits, Individual Retirement Accounts and
time deposits.
Real Estate products and services include construction loans for commercial
and residential development, land acquisition and development loans, secured
and unsecured lines of credit, interim financing arrangements for completed
buildings, rehabilitation loans, affordable housing loans and letters of
credit. Secondary market services are provided through the Real Estate Capital
Markets Group, whose business includes purchases of distressed loans at a
discount, mezzanine financing, acquisition financing, origination of permanent
loans for securitization, syndications, commercial real estate loan servicing
and real estate pension fund advisory services.
The Wholesale Products Group includes the Commercial Banking Group, which
serves businesses with annual sales of $5 million to $250 million, and the
Corporate Banking Group, which maintains relationships with major corporations
throughout the United States. The group is responsible for soliciting and
maintaining credit and noncredit relationships with businesses by offering a
variety of products and services including traditional commercial loans and
lines of credit, letters of credit, trade facilities and cash management.
Consumer Lending offers a full array of consumer loan products ranging from
credit card loans and auto financing and leases to other installment loans and
lines of credit.
Wells Fargo is frequently evaluating acquisition opportunities and may
conduct due diligence activities in connection with possible acquisitions. As
a result, from time to time acquisition discussions and, in some cases,
negotiations may take place and future acquisitions involving cash, debt or
equity securities may occur. Any acquisitions may involve the payment of a
premium over book and market values, and therefore could dilute Wells Fargo's
book value and net income per share of Wells Fargo Common Stock.
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BUSINESS OF FIRST INTERSTATE
First Interstate is a bank holding company registered under the BHCA, and
conducts a commercial banking business through its bank subsidiaries. First
Interstate was incorporated under the laws of the State of Delaware and began
operations in 1958. At December 31, 1995, First Interstate, through its 16
subsidiary banks (the "Subsidiary Banks"), operated approximately 1,150
banking offices in 13 states.
At December 31, 1995, First Interstate and its consolidated subsidiaries had
total assets of $58.1 billion and consolidated deposits of $50.2 billion. At
that date, First Interstate was the 15th largest bank holding company in the
United States ranked by total assets.
The Subsidiary Banks accept checking, savings and other time deposit
accounts and employ these funds by making principally consumer, real estate
and commercial loans and investing in securities and other interest bearing
assets. All of their deposit accounts are insured by the FDIC, all but three
exercise trust powers, and the thirteen national banks and one of the three
state banks are members of the Federal Reserve System. The larger Subsidiary
Banks provide international banking services throughout the international
departments of their domestic offices and through a business development
agreement between First Interstate Bank of California and Standard Chartered
PLC. They also maintain correspondent relationships with major banks
throughout the world.
First Interstate also provides banking-related financial services and
products. These include asset-based commercial financing, asset management and
investment counseling, bank card operations, mortgage banking, venture capital
and investment products. It engages in these activities through non-bank
subsidiaries of First Interstate, through the Subsidiary Banks and through
subsidiaries of the Subsidiary Banks.
The largest of the Subsidiary Banks, First Interstate Bank of California, a
California state-chartered bank, had total assets of approximately $26.7
billion and total deposits of approximately $22.5 billion at December 31,
1995.
Additional information about First Interstate and its subsidiaries is
included in documents incorporated by reference in this Joint Proxy
Statement/Prospectus. See "Incorporation of Certain Information by Reference."
80
<PAGE>
WELLS FARGO AND FIRST INTERSTATE
PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma combined financial statements were
prepared in connection with the Merger (in which each outstanding share of
First Interstate Common Stock will be exchanged for two-thirds of a share of
Wells Fargo Common Stock) and give effect to the purchase accounting
adjustments and other assumptions described in the accompanying notes. The
unaudited pro forma combined balance sheet is based upon the consolidated
balance sheets (excluding notes) of Wells Fargo and First Interstate as of
December 31, 1995. The unaudited pro forma combined statement of income is
based on the consolidated statements of income (excluding notes) of Wells
Fargo and First Interstate for the year ended December 31, 1995. The unaudited
pro forma combined financial statements do not give effect to the anticipated
cost savings, the disposition of certain yet-to-be identified assets or the
effects of any required regulatory divestitures. Wells Fargo anticipates that,
in order to alleviate what the Federal Reserve Board, the Department of
Justice and certain California authorities believe would otherwise be an
adverse competitive effect of the Merger, the combined company will divest
branches of First Interstate in various markets in California having aggregate
deposits of approximately $2.5 billion, based on June 30, 1995 deposit data.
Such divestitures may affect certain pro forma combined financial statement
amounts, but the net effect of any required divestitures is not expected to be
material. See "The Merger--Regulatory Approvals."
The resolution of the pending matters pertaining to the assets and
liabilities of First Interstate described above, as well as the operations of
First Interstate subsequent to December 31, 1995, will affect the allocation
of the purchase price. In addition, changes to the adjustments already
included in the unaudited pro forma combined financial statements are subject
to update as additional information becomes available. An increase in the
unallocated portion of the purchase price remaining after fair value
adjustments will result in a greater final allocation to goodwill, which will
have a corresponding effect on amortization expense and will reduce tangible
common equity. A decrease in the unallocated portion of the purchase price
remaining after fair value adjustments will have the opposite effects.
Accordingly, the final pro forma combined amounts will differ from those set
forth in the unaudited pro forma combined financial statements.
The information shown below should be read in conjunction with the
consolidated historical financial statements of Wells Fargo and First
Interstate, which are incorporated by reference in this Joint Proxy
Statement/Prospectus, and the unaudited pro forma combined per share financial
information which appear elsewhere in this Joint Proxy Statement/Prospectus.
The pro forma data are presented for comparative purposes only and are not
necessarily indicative of the combined financial position or results of
operations in the future. The pro forma data are also not necessarily
indicative of the combined financial position or results of operations which
would have been realized had the Merger been consummated during the periods or
as of the dates for which the pro forma financial statements are presented.
81
<PAGE>
WELLS FARGO AND FIRST INTERSTATE
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1995(A)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------
PRO FORMA
ADJUSTMENTS PRO FORMA
WELLS FARGO FIRST INTERSTATE(1) (B,C & D) COMBINED
----------- ------------------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from
banks.................. $ 3,375 $ 7,143 $ -- $ 10,518
Investment securities... 8,920 9,017 (27)(H) 17,910
Loans................... 35,582 36,673 105 (H) 72,360
Allowance for loan loss-
es..................... 1,794 804 -- 2,598
------- ------- ------ --------
Net loans............. 33,788 35,869 105 69,762
------- ------- ------ --------
Goodwill................ 382 682 5,745 (E) 6,809
Other assets............ 3,851 5,360 1,851 (F) 11,062
------- ------- ------ --------
Total assets.......... $50,316 $58,071 $7,674 $116,061
======= ======= ====== ========
LIABILITIES
Noninterest-bearing de-
posits................. $10,391 $19,083 $ -- $ 29,474
Interest-bearing depos-
its.................... 28,591 31,102 35 (H) 59,728
------- ------- ------ --------
Total deposits.......... 38,982 50,185 35 89,202
Federal funds purchased
and securities sold un-
der repurchase agree-
ments.................. 2,781 940 -- 3,721
Senior and subordinated
debt................... 3,049 1,355 (9)(H) 4,395
Other liabilities....... 1,449 1,437 455 (I) 3,341
------- ------- ------ --------
Total liabilities..... 46,261 53,917 481 100,659
------- ------- ------ --------
STOCKHOLDERS' EQUITY
Preferred stock......... $ 489 $ 350 $ -- $ 839
Common stock............ 235 169 84 488
Additional paid-in capi-
tal.................... 1,135 1,682 9,062 11,879
Retained earnings....... 2,174 2,583 (2,583) 2,174
Other................... 22 6 (6) 22
Less: Treasury stock.... -- (636) 636 --
------- ------- ------ --------
Total stockholders'
equity............... 4,055 4,154 7,193 (G) 15,402
------- ------- ------ --------
Total liabilities and
stockholders' equi-
ty................... $50,316 $58,071 $7,674 $116,061
======= ======= ====== ========
</TABLE>
- --------
(1) Federal Reserve Bank stock of $81 million has been reclassified from
investment securities to other assets to be consistent with Wells Fargo's
classifications.
See Notes to Pro Forma Combined Financial Statements.
82
<PAGE>
WELLS FARGO AND FIRST INTERSTATE
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995(A)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
PRO FORMA
ADJUSTMENTS PRO FORMA
WELLS FARGO FIRST INTERSTATE (C & H) COMBINED
----------- ---------------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
INTEREST INCOME
Investment securities....... $ 599 $ 609 $ 14 $1,222
Loans....................... 3,403 3,052 (35) 6,420
Other....................... 83 47 -- 130
------- ------ ------ ------
Total interest income..... 4,085 3,708 (21) 7,772
------- ------ ------ ------
INTEREST EXPENSE
Deposits.................... 997 975 (18) 1,954
Federal funds purchased and
securities sold under
repurchase agreements...... 199 74 -- 273
Senior and subordinated
debt....................... 203 119 2 324
Other....................... 32 3 -- 35
------- ------ ------ ------
Total interest expense.... 1,431 1,171 (16) 2,586
------- ------ ------ ------
NET INTEREST INCOME......... 2,654 2,537 (5) 5,186
Provision for loan losses... -- -- -- --
------- ------ ------ ------
Net interest income after
provision for loan losses.. 2,654 2,537 (5) 5,186
------- ------ ------ ------
NONINTEREST INCOME
Service charges on deposit
accounts................... 478 597 -- 1,075
Fees and commissions........ 433 215 -- 648
Trust and investment
services income............ 241 170 -- 411
Other....................... 172 137 -- 309
------- ------ ------ ------
Total noninterest income.. 1,324 1,119 -- 2,443
------- ------ ------ ------
NONINTEREST EXPENSE
Salaries and employee
benefits................... 1,026 1,061 -- 2,087
Net occupancy............... 211 235 -- 446
Equipment................... 193 154 -- 347
Federal deposit insurance... 52 65 -- 117
Other....................... 719 698 484 1,901
------- ------ ------ ------
Total noninterest
expense.................. 2,201 2,213 484 4,898
------- ------ ------ ------
INCOME BEFORE INCOME TAXES.. 1,777 1,443 (489) 2,731
Income tax expense.......... 745 558 (121) 1,182
------- ------ ------ ------
NET INCOME.................. $ 1,032 $ 885 $ (368) $1,549
======= ====== ====== ======
NET INCOME APPLICABLE TO
COMMON STOCK............... $ 990 $ 852 $ (368) $1,474
======= ====== ====== ======
PER COMMON SHARE
Net income.................. $ 20.37 $14.87
======= ======
Dividends declared.......... $ 4.60 $ 4.60
======= ======
Average common shares
outstanding................ 48.6 50.5 99.1
======= ====== ======
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
83
<PAGE>
WELLS FARGO AND FIRST INTERSTATE
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A: BASIS OF PRESENTATION
The unaudited pro forma combined balance sheet combines the historical
consolidated balance sheets of Wells Fargo and First Interstate as if the
Merger had become effective on December 31, 1995. The pro forma combined
statement of income for the year ended December 31, 1995 combines the
historical consolidated statements of income of Wells Fargo and First
Interstate as if the Merger had become effective on January 1, 1995. Certain
amounts in the historical financial statements of First Interstate have been
reclassified in the unaudited pro forma combined financial statements to
conform to Wells Fargo's historical financial statements.
The Merger is accounted for as a purchase. Under this method of accounting,
assets and liabilities of First Interstate are adjusted to their estimated
fair value and combined with the recorded book values of the assets and
liabilities of Wells Fargo. Applicable income tax effects of such adjustments
are included as a component of Wells Fargo's net deferred tax asset with a
corresponding offset to goodwill. Certain transactions conducted in the
ordinary course of business between Wells Fargo and First Interstate are
immaterial and, accordingly, have not been eliminated.
For purposes of the pro forma financial statements, estimates of the fair
value of First Interstate's assets and liabilities as of December 31, 1995
have been combined with the recorded values of the assets and liabilities of
Wells Fargo. Fair value adjustments are subject to update as additional
information becomes available.
Following the Merger, Wells Fargo intends to combine the operations of and,
subject to regulatory approvals, to merge Wells Fargo Bank, N.A. and First
Interstate Bank of California as well as certain other operations. Wells Fargo
anticipates that, in order to alleviate what the Federal Reserve Board, the
Department of Justice and certain California authorities believe would
otherwise be an adverse competitive effect of the Merger, the combined company
will divest branches of First Interstate in various markets in California
having aggregate deposits of approximately $2.5 billion, based on June 30,
1995 deposit data. The impact of such divestitures is not expected to be
material. Wells Fargo expects to achieve significant operating cost savings as
a result of the Merger. See "The Merger--Reasons of Wells Fargo for the
Merger; Recommendation of the Wells Fargo Board of Directors." No adjustment
has been included in the unaudited pro forma combined financial statements for
the anticipated divestitures or operating cost savings.
NOTE B: PURCHASE PRICE
The purchase price is based on exchanging two-thirds of a share of Wells
Fargo Common Stock for each outstanding share of First Interstate Common Stock
at the closing price per share of Wells Fargo Common Stock on January 19,
1996, the last trading day before January 21, 1996, the day on which Wells
Fargo and First Interstate reached agreement on the Exchange Ratio to be
included in the Merger Agreement, the other terms of which the parties were
working to finalize. Shares issuable upon the exercise of First Interstate's
stock options are not included in the number of outstanding shares of First
Interstate Common Stock on the assumption that all options will become
equivalent options to purchase Wells Fargo Common Stock. In addition, the
number of the shares of First Interstate Common Stock used in calculating the
total market value of Wells Fargo Common Stock to be issued in connection with
the Merger reflects an exchange of Wells Fargo Common Stock for the
outstanding shares of First Interstate Common Stock, exclusive of First
Interstate's common stock equivalents.
The total market value of the Wells Fargo Common Stock to be issued in
connection with the Merger is calculated as follows:
<TABLE>
<S> <C>
First Interstate's common shares outstanding on December 31, 1995
(in thousands)..................................................... 75,929
Exchange ratio...................................................... 2/3
-------
Wells Fargo Common Stock to be issued (in thousands)................ 50,620
Market price per share of Wells Fargo Common Stock on January 19,
1996............................................................... $217.25
-------
Total market value of Wells Fargo Common Stock to be issued (in
millions)........................................................ $10,997
=======
</TABLE>
84
<PAGE>
WELLS FARGO AND FIRST INTERSTATE
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
In addition to the total market value of the Wells Fargo Common Stock to be
issued, the total purchase price will include other direct acquisition costs,
such as investment banking, legal, accounting and other professional fees;
printing and mailing costs; and other miscellaneous expenses. These costs,
which are not expected to be material to the transaction and are preliminarily
expected to be approximately $50 million, have not been included in the
unaudited pro forma combined financial statements.
NOTE C: RESTRUCTURING CHARGES
Wells Fargo's management estimates that approximately $700 million of costs
related to premises, severance and other restructuring charges will be
incurred in connection with the Merger; these estimates of costs are not yet
based on sufficient factual data so as to be included as adjustments to the
unaudited pro forma combined financial statements and are subject to change as
additional information becomes available. Of this amount, approximately $400
million of costs relate to First Interstate's premises, employees and
operations and will affect the final amount of goodwill as of the consummation
of the Merger, which goodwill will be amortized as described in Note H below.
The remaining estimated amount of approximately $300 million of costs relates
to Wells Fargo's premises, employees and operations, as well as all costs
relating to systems conversions and other indirect integration costs, and will
be expensed, either upon consummation of the Merger or as incurred. With
respect to timing, it has been assumed that the integration would be complete
and that the costs referred to above would be incurred not later than 18
months after the closing of the Merger.
The estimated restructuring charges are expected to be incurred as set forth
in the following table:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Total owned premises.................................................... $130
Total leased premises................................................... 230
Severance............................................................... 270
Other restructuring..................................................... 70
----
Total restructuring..................................................... $700
====
</TABLE>
The foregoing estimates are based on the assumption that the equivalent of
85% of First Interstate's California branches will be consolidated (by closing
or divesting both First Interstate and Wells Fargo branches) in connection
with the Merger. In addition, the costs for total owned premises and total
leased premises assume that the relationship between leased and owned premises
is in a similar proportion for First Interstate to such proportion for Wells
Fargo, and Wells Fargo believes that information received from First
Interstate prior to the date of this Joint Proxy Statement/Prospectus has
confirmed that the assumption of such similar proportion between leased and
owned premises is reasonable.
Wells Fargo's management estimates that the total severance costs in
connection with the Merger will be approximately $270 million. Such $270
million estimate is based on anticipated aggregate terminations, assumptions
regarding severance benefits on an aggregate basis and Wells Fargo's
experience in the integration of mergers and does not reflect any information
as to which employees will be terminated as this information is not yet
available.
Wells Fargo's estimate of $700 million in restructuring charges is in the
range of restructuring charges announced in connection with other similar
transactions and is based on the assumption that Wells Fargo's experience in
integrating First Interstate's organization and operations will be similar to
comparable transactions in the past.
85
<PAGE>
WELLS FARGO AND FIRST INTERSTATE
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
NOTE D: ALLOCATION OF PURCHASE PRICE
Certain matters are still pending that will have an effect on the ultimate
allocation of the purchase price. Accordingly, the allocation of the purchase
price has not been finalized and the portion of the purchase price allocated
to fair value adjustments, goodwill and the identifiable intangibles
(discussed below) is subject to change.
Subject to the foregoing, the purchase price has been allocated as described
in the table below:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
Net assets applicable to the First Interstate's common
stock at December 31, 1995............................... $ 3,804
Increase (decrease) to the First Interstate's net asset
value at December 31, 1995 as a result of estimated fair
value adjustments (see Note H)*
Investment securities................................... (16)
Loans................................................... 61
Other assets (miscellaneous equity investments)......... 101
Deposits................................................ (20)
Senior and subordinated debt............................ 5
-------
Estimated fair value adjustments (total excluding iden-
tifiable intangibles).................................. 131
Purchased credit card relationships..................... 100
Purchased mortgage servicing rights..................... 50
Core deposit intangibles................................ 1,350
-------
Total estimated fair value adjustments................ 1,631
Elimination of First Interstate's existing goodwill and
identifiable intangibles, net of applicable income tax effects... (707)
Termination fees, net of expected applicable income tax effects... (158)
-------
Total preliminary allocation of purchase price................ 4,570
Goodwill due to the Merger........................................ 6,427
-------
Total purchase price.......................................... $10,997
=======
</TABLE>
- --------
* Amounts are net of applicable income tax effects, using an estimated
marginal tax rate of 42.4%.
The adjustment for termination fees relates to the fees provided for in the
Reciprocal Fee Letters and the Reciprocal Stock Option Agreements that First
Interstate has agreed to pay FBS pursuant to the Settlement Agreement. With
respect to such termination fees, First Interstate paid FBS $125 million on
January 24, 1996 and will pay an additional $75 million upon consummation of
the Merger.
86
<PAGE>
WELLS FARGO AND FIRST INTERSTATE
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
NOTE E: CALCULATION OF GOODWILL ADJUSTMENT AND TOTAL GOODWILL DUE TO MERGER
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Purchase price..................................................... $10,997
First Interstate total common stockholders' equity................. (3,804)
Estimated fair value adjustments (excluding identifiable intangi-
bles)*............................................................ (131)
Identifiable intangibles*.......................................... (1,500)
Termination fees*.................................................. 158
First Interstate existing identifiable intangibles*................ 25
-------
Goodwill adjustment................................................ 5,745
First Interstate existing goodwill................................. 682
-------
Total goodwill due to Merger....................................... $ 6,427
=======
</TABLE>
- --------
* Net of applicable income tax effects.
For purposes of the pro forma combined balance sheet, estimates have been
made of the fair value of First Interstate's assets and liabilities as of
December 31, 1995. Fair value adjustments are subject to update as additional
information becomes available.
NOTE F: OTHER ASSETS
Adjustments to other assets are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
Deferred Tax Asset
Deferred tax liability from fair value adjustments
(excluding identifiable intangibles) (See Note H)... $ (96)
Deferred tax liability from identifiable intangibles. (1,105)
Reversal of First Interstate deferred tax liability
from intangibles.................................... 17
Deferred tax benefit (expected) from termination
fees................................................ 42
-------
Total net deferred tax asset reduction..................... $ (1,142)
Gross identifiable intangibles due to Merger................... 2,605
First Interstate's existing identifiable intangibles, gross of
income tax effects............................................ (42)
Miscellaneous equity investments (See Note H).................. 175
Purchase of Federal Reserve stock.............................. 255
--------
Total adjustments to other assets.......................... $ 1,851
========
</TABLE>
The identifiable intangibles of $1,500 million (net of applicable income tax
effects) are amortized over their estimated period of benefit (not exceeding
15 years) on an accelerated basis.
The adjustment for the purchase of Federal Reserve Bank stock reflects the
required purchase of Federal Reserve Bank stock by Wells Fargo Bank (upon
merger with First Interstate California) and each of the banks currently held
by First Interstate. The $255 million represents 3% of the increment to common
stock and additional paid-in-capital at the subsidiary banks.
87
<PAGE>
WELLS FARGO AND FIRST INTERSTATE
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
NOTE G: STOCKHOLDERS' EQUITY
The purchase price of $10,997 million is reduced by First Interstate's common
stockholders' equity of $3,804 million. In the Merger, Wells Fargo will issue
two-thirds of a share of Wells Fargo's common stock in exchange for each of the
75,929,295 shares of First Interstate's outstanding common stock (based on the
number of shares outstanding as of December 31, 1995). The price of Wells
Fargo's stock on January 19, 1996 was $217 1/4; total par value of new common
stock of Wells Fargo is $253 million. The remaining $10,744 million represents
additional paid-in capital. First Interstate's preferred stock will be
converted into Wells Fargo's preferred stock and First Interstate's treasury
stock will be eliminated.
Adjustments to stockholders' equity are as follows:
<TABLE>
<CAPTION>
FIRST
PURCHASE INTERSTATE
PRICE COMMON EQUITY ADJUSTMENT
-------- ------------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Common stock.......................... $ 253 $ (169) $ 84
Additional paid-in capital............ 10,744 (1,682) 9,062
Retained earnings..................... (2,583) (2,583)
Other (net unrealized gains on
available-for-sale securities)....... (6) (6)
Treasury stock........................ 636 636
------- ------- -------
Total common stockholders' equity..... $10,997 $(3,804) $ 7,193
======= ======= =======
</TABLE>
NOTE H: PURCHASE ACCOUNTING ADJUSTMENTS
Adjustments are made to reflect the recording of intangibles as well as to
eliminate any intangible balances previously recorded by First Interstate in
accordance with the purchase method of accounting. Purchase accounting
adjustments, including estimates of the fair value of First Interstate's assets
and liabilities as of December 31, 1995, are based on the best available
information and are subject to update as additional information becomes
available. Purchase accounting adjustments will be booked on a gross basis with
related adjustments to Wells Fargo's net deferred tax asset as follows:
88
<PAGE>
WELLS FARGO AND FIRST INTERSTATE
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
RELATED (INCREASE)
NET OF DECREASE
APPLICABLE TO NET INCOME
INCOME FOR YEAR ENDED
TAXES GROSS 12/31/95*
---------- ------- ------------------
(IN MILLIONS)
<S> <C> <C> <C>
DEBIT (CREDIT)
Estimated fair value adjustments*
Investment Securities............. $ (16) $ (27) $ (14)
Loans............................. 61 105 35
Other Assets (miscellaneous equity
investments)..................... 101 175 --
Deposits.......................... (20) (35) (18)
Senior and Subordinated Debt...... 5 9 2
------ ------- -----
Estimated fair value adjustments
(total excluding identifiable in-
tangibles)......................... 131 227 5
Goodwill and identifiable intangi-
bles of the First Interstate....... (707) (724) (60)
Goodwill due to the Merger*......... 6,427 6,427 257
Identifiable intangibles due to the
Merger*............................ 1,500 2,605 287
------ ------- -----
7,351 8,535 489
Adjustment to Wells Fargo net de-
ferred tax asset related to pur-
chase
accounting adjustments............. -- (1,184) (121)
------ ------- -----
Total............................... $7,351 $ 7,351 $ 368
====== ======= =====
</TABLE>
- --------
* Goodwill due to the Merger is amortized on a straight-line basis over 25
years. Identifiable intangibles due to the Merger are amortized over their
estimated period of benefit (not exceeding 15 years) on an accelerated
basis. Fair value adjustments are amortized over their estimated maturity.
The incremental effect on net income of the purchase accounting adjustments
is estimated to be a net after-tax expense of approximately $365 million for
the first 12-month period subsequent to the Merger, of approximately $355
million for the second 12-month period subsequent to the Merger, of
approximately $360 million for the third 12-month period subsequent to the
Merger, of approximately $335 million for the fourth 12-month period
subsequent to the Merger and of approximately $325 million for the fifth 12-
month period subsequent to the Merger. Amounts exclude amortization of
existing goodwill and identifiable intangibles of First Interstate.
NOTE I: OTHER LIABILITIES
Adjustments to other liabilities are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
First Interstate's termination fees (See Note D)................. $200
Adjustment to other borrowings for purchase of Federal Reserve
stock (See Note F).............................................. 255
----
Total adjustment to other liabilities............................ $455
====
</TABLE>
89
<PAGE>
DESCRIPTION OF WELLS FARGO CAPITAL STOCK
WELLS FARGO COMMON STOCK
The Restated Certificate of Incorporation of Wells Fargo (the "Wells Fargo
Certificate") provides that Wells Fargo has authority to issue 150,000,000
shares of Wells Fargo Common Stock. On the Record Date, there were 46,994,234
shares of Wells Fargo Common Stock issued and outstanding. In 1995, Wells
Fargo authorized the continuation of certain stock repurchase programs. For a
full description of these programs see "--Repurchases of Wells Fargo Common
Stock."
Holders of shares of Wells Fargo Common Stock are entitled to one vote per
share for each share held. Subject to the rights of holders of shares of Wells
Fargo's outstanding preferred stock (the "Wells Fargo Preferred Stock") (as
described below), holders of shares of Wells Fargo Common Stock have equal
rights to participate in dividends when declared and, in the event of
liquidation, in the net assets of Wells Fargo available for distribution to
stockholders. Wells Fargo may not declare any dividends on the Wells Fargo
Common Stock unless full preferential amounts to which holders of Wells Fargo
Preferred Stock are entitled have been paid or declared and set apart for
payment upon all outstanding shares of Wells Fargo Preferred Stock. Wells
Fargo is also subject to certain contractual and regulatory restrictions on
the payment of dividends. See "--Certain Regulatory Considerations."
The holders of shares of Wells Fargo Common Stock do not have preemptive
rights or preferential rights of subscription for any shares of Wells Fargo
Common Stock or other securities of Wells Fargo. Outstanding shares of Wells
Fargo Common Stock are, and shares to be issued pursuant to the Merger will
be, validly issued, fully paid and nonassessable.
The Wells Fargo Common Stock is listed on the NYSE, the PSE, the London
Stock Exchange and the Frankfurt Stock Exchange. Application will be made to
list the shares of Wells Fargo Common Stock to be issued pursuant to the
Merger on the NYSE.
First Chicago Trust Company of New York is the transfer agent and registrar
for the Wells Fargo Common Stock.
REPURCHASES OF WELLS FARGO COMMON STOCK
In April 1995, the Wells Fargo Board of Directors authorized the repurchase
of up to 4,957,991 shares of Wells Fargo Common Stock, representing 10 percent
of Wells Fargo's outstanding Common Stock as of March 31, 1995. This
authorization continues a repurchase program which Wells Fargo began in 1994,
and is supplemental to the shares of Wells Fargo Common Stock Wells Fargo
routinely buys to offset stock issued or expected to be issued under its
employee benefit and dividend reinvestment plans. There is no scheduled date
for completion of the repurchase program and it is expected that Wells Fargo
will purchase shares from time to time, subject to market conditions. Wells
Fargo does not anticipate that completion of the Merger will have any impact
on its ability to continue to repurchase stock.
During the year ended December 31, 1995, Wells Fargo repurchased 4,278,329
shares (net of issuances of 747,373 shares) of Wells Fargo Common Stock.
WELLS FARGO PREFERRED STOCK
The Wells Fargo Certificate provides that Wells Fargo is authorized to issue
25,000,000 shares of Wells Fargo Preferred Stock. The Wells Fargo Preferred
Stock may be issued from time to time in one or more series and the Wells
Fargo Board is authorized to determine or alter the powers, preferences and
rights, and the qualifications, limitations or restrictions to be granted to
or imposed upon the Wells Fargo Preferred Stock or any series thereof with
respect to any wholly unissued class or series of Wells Fargo Preferred Stock,
and to fix
90
<PAGE>
the number of shares constituting any such series and the designation thereof,
or any of them. Thus, the Wells Fargo Board is authorized to establish,
designate and fix with respect to each series of Wells Fargo Preferred Stock
the specific designation of that series, the number of shares, the dividend
rate, any right of redemption and the price, terms and manner of such
redemption, special and relative rights on liquidation, sinking fund
provisions, conversion rights and voting rights, all without further action by
the holders of Wells Fargo Common Stock.
Because Wells Fargo is a holding company, its rights, the rights of its
creditors and of its stockholders, including the holders of the shares of the
Wells Fargo Preferred Stock, to participate in any distribution of the assets
of any subsidiary upon the latter's liquidation or recapitalization will be
subject to the prior claims of the subsidiary's creditors, except to the
extent that Wells Fargo may itself be a creditor with recognized claims
against the subsidiary. The principal source of Wells Fargo's revenues are
dividends received from its banking and other subsidiaries. Various statutory
provisions limit the amount of dividends its bank subsidiaries and certain
nonbank subsidiaries can pay without regulatory approval, and various
regulations can also restrict the payment of dividends. In addition, federal
statutes limit the ability of its bank subsidiaries to make loans to Wells
Fargo. See "--Certain Regulatory Considerations."
The following is a brief description of certain terms of the outstanding
series of Wells Fargo Preferred Stock. This description does not purport to be
complete and is qualified in its entirety by reference to the Wells Fargo
Certificate, including the certificate of designations with respect to each
such series.
The shares of Wells Fargo Preferred Stock now outstanding have preference
over Wells Fargo Common Stock with respect to the payment of dividends and the
distribution of assets in the event of liquidation, winding up or dissolution
of Wells Fargo. Each of such series ranks on a parity with one another as to
dividends and the distribution of assets upon liquidation, winding up or
dissolution.
Generally, the holders of each series of Wells Fargo Preferred Stock have no
voting rights. However, if the equivalent of six quarterly dividends payable
on a series of Wells Fargo Preferred Stock are in default, the number of
directors of Wells Fargo will be increased by two and the holders of such
outstanding series of Wells Fargo Preferred Stock together with the holders of
shares of every other series of Wells Fargo Preferred Stock similarly entitled
to vote for the election of two directors, acting together as a single class,
will be entitled to elect two of the authorized number of members of the Wells
Fargo Board at the next annual meeting and at each subsequent annual meeting
of stockholders to serve until all dividends accumulated have been fully paid
or set apart for payment. Each series of Wells Fargo Preferred Stock is listed
on the NYSE.
Wells Fargo Series B Preferred Stock. As of December 31, 1995, there were
issued and outstanding 1,500,000 shares of Adjustable Rate Cumulative
Preferred Stock, Series B, par value $5.00 per share (the "Wells Fargo Series
B Preferred Stock"). The Wells Fargo Series B Preferred Stock is redeemable at
the option of Wells Fargo, in whole or in part, through May 14, 1996 at a
price of $51.50 per share and, thereafter, at $50 per share, plus accrued and
unpaid dividends to the redemption date.
Dividends on the Wells Fargo Series B Preferred Stock are cumulative and
payable quarterly on the fifteenth day of February, May, August and November
of each year at the rate of 76% of the highest of the three-month Treasury
Bill discount rate, 10-year constant maturity Treasury security yield or 20-
year constant maturity Treasury security yield, but in no event shall be less
than 5.5% per annum or greater than 10.5% per annum. The average dividend rate
was 5.7%, 5.6% and 6.2% during 1994, 1993 and 1992, respectively.
Wells Fargo Series C Preferred Stock. As of December 31, 1995, there were
issued and outstanding 477,500 shares of 9% Preferred Stock, Series C, par
value $5.00 per share (the "Wells Fargo Series C Preferred Stock"), evidenced
by 9,550,000 depositary shares, each representing a one-twentieth interest in
a share of Wells Fargo Series C Preferred Stock. The Wells Fargo Series C
Preferred Stock is redeemable at the option of Wells Fargo, in whole or in
part, on and after October 24, 1996 at a price of $500 per share (equivalent
to $25 per depositary share) plus accrued and unpaid dividends to the
redemption date.
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Dividends on the Wells Fargo Series C Preferred Stock of $11.25 per share
(9% annualized rate) are cumulative and are paid quarterly on the last day of
March, June, September and December (equivalent to $0.56 per annum per
depositary share).
Wells Fargo Series D Preferred Stock. As of December 31, 1995, there were
issued and outstanding 350,000 shares of 8 7/8% Preferred Stock, Series D, par
value $5.00 per share (the "Wells Fargo Series D Preferred Stock"), evidenced
by 7,000,000 depositary shares, each representing a one-twentieth interest in
a share of Wells Fargo Series D Preferred Stock. The Wells Fargo Series D
Preferred Stock is redeemable at the option of Wells Fargo, in whole or in
part, on and after March 5, 1997 at a price of $500 per share (equivalent to
$25 per depositary share) plus accrued and unpaid dividends to the redemption
date.
Dividends on the Wells Fargo Series D Preferred Stock of $11.09 per share (8
7/8% annualized rate) are cumulative and are paid quarterly on the last day of
March, June, September and December (equivalent to $0.55 per annum per
depositary share).
NEW WELLS FARGO PREFERRED STOCK
The summary of terms of the New Wells Fargo Preferred Stock contained herein
does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of the Wells Fargo Certificate and the respective
Certificates of Designations of the New Wells Fargo Preferred Stock (each a
"Certificate of Designations") and the provisions of the Deposit Agreement.
NEW WELLS FARGO 9.875% PREFERRED STOCK
Pursuant to the terms of the Merger Agreement, each share of First
Interstate 9.875% Preferred Stock will be converted into the right to receive
one share of New Wells Fargo 9.875% Preferred Stock. The terms of the New
Wells Fargo 9.875% Preferred Stock will be substantially the same as the terms
of the First Interstate 9.875% Preferred Stock.
Rank. The New Wells Fargo 9.875% Preferred Stock shall rank on a parity as
to payment of dividends and distribution of assets upon dissolution,
liquidation or winding up of Wells Fargo with each other currently outstanding
series of Wells Fargo Preferred Stock and with the New Wells Fargo 9.0%
Preferred Stock. See "Description of Wells Fargo Capital Stock--Wells Fargo
Preferred Stock." The New Wells Fargo 9.875% Preferred Stock will rank prior
to the Wells Fargo Common Stock with respect to the payment of dividends and
distribution of assets upon dissolution, liquidation or winding up of Wells
Fargo.
Dividends. Holders of shares of New Wells Fargo 9.875% Preferred Stock shall
be entitled to receive, when, as and if declared by the Wells Fargo Board, or
any duly authorized committee thereof, out of funds of Wells Fargo legally
available therefor, cash dividends, payable quarterly, at the rate of 9.875%
per share per annum (equivalent to $2.46875 per New Wells Fargo 9.875%
Depositary Share per annum). Dividends on the New Wells Fargo 9.875% Preferred
Stock will be payable quarterly on the last day of March, June, September and
December of each year (each, a "Dividend Payment Date"), commencing on the
first Dividend Payment Date following the Effective Time. Dividends payable on
the first Dividend Payment Date following the Effective Time shall be in
respect of the quarterly dividend period commencing on and including the last
dividend payment date with respect to the First Interstate 9.875% Preferred
Stock on which dividends were paid prior to the Effective Time. Each declared
dividend shall be payable to holders of record as they appear at the close of
business on the stock register of Wells Fargo on such record date, not
exceeding 60 calendar days preceding the Dividend Payment Date thereof, as
shall be fixed by the Wells Fargo Board or by a committee of the Wells Fargo
Board duly authorized to fix such date. Quarterly dividend periods shall
commence on and include the Dividend Payment Date and shall end on and include
the day next preceding the next following Dividend Payment Date. Dividends
payable on New Wells Fargo 9.875% Preferred Stock for any period less than a
full quarterly dividend period shall be computed on the basis of a 360-day
year of four 90-day quarters and the actual number of days elapsed in the
period for which payable. The right of holders of New Wells Fargo 9.875%
Preferred Stock to receive dividends is cumulative.
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So long as any shares of the New Wells Fargo 9.875% Preferred Stock are
outstanding, no dividends shall be paid or declared upon any shares of any class
or series of stock of Wells Fargo ranking on a parity with the New Wells Fargo
9.875% Preferred Stock in the payment of dividends for any period unless, at or
prior to the time of such payment or declaration, (i) all dividends payable on
the New Wells Fargo 9.875% Preferred Stock for all dividend periods ended prior
to the date of such payment or declaration shall have been paid and (ii) a like
proportionate dividend for the same dividend period, ratably in proportion to
the respective annual dividend rates fixed thereupon, shall be paid upon or
declared for the New Wells Fargo 9.875% Preferred Stock then issued and
outstanding.
So long as any shares of the New Wells Fargo 9.875% Preferred Stock are
outstanding, no full dividends shall be declared or paid or set apart for
payment on any series of the preferred stock of Wells Fargo ranking, as to
dividends, on a parity with or junior to the New Wells Fargo 9.875% Preferred
Stock for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the New Wells Fargo 9.875%
Preferred Stock for all dividend periods terminating on or prior to the date of
payment of such full cumulative dividends. In the event that dividends are not
paid in full (or a sum sufficient for such full payment set apart) upon the
shares of New Wells Fargo 9.875% Preferred Stock or the shares of any other
series of preferred stock ranking on a parity as to dividends with the New
Wells Fargo 9.875% Preferred Stock, dividends declared upon shares of New Wells
Fargo 9.875% Preferred Stock and any other preferred stock ranking on a parity
as to dividends shall be declared by the Wells Fargo Board or a duly authorized
committee thereof pro rata so that the amount of dividends declared per share
on the New Wells Fargo 9.875% Preferred Stock and such other preferred stock
shall in all cases bear to each other the same ratio that full cumulative
dividends per share on the shares of New Wells Fargo 9.875% Preferred Stock and
such other preferred stock bear to each other. Except as provided above, if
full cumulative dividends on the New Wells Fargo 9.875% Preferred Stock shall
not have been declared and paid or set apart for payment for a dividend period,
Wells Fargo shall not, until full cumulative dividends have been declared and
paid or set aside for payment on all outstanding shares of the New Wells Fargo
9.875% Preferred Stock, (i) declare or pay or set aside for payment any
dividends (other than a dividend in Wells Fargo Common Stock or in any other
stock ranking junior to the New Wells Fargo Preferred Stock as to dividends and
upon liquidation, dissolution or winding up of Wells Fargo) or make any other
distribution on the Wells Fargo Common Stock or any other stock of Wells Fargo
ranking junior to or on a parity with shares of the new Wells Fargo 9.875%
Preferred Stock with respect to the payment of dividends or distribution of
assets upon liquidation, dissolution or winding up of Wells Fargo, or (ii) make
any payment on account of the purchase, redemption or other retirement of, or
pay or make available any moneys for a sinking fund for the redemption of, any
shares of Wells Fargo Common Stock or such other junior or parity stock except
by conversion into or exchange for stock of Wells Fargo ranking junior to the
New Wells Fargo 9.875% Preferred Stock as to dividends and upon liquidation.
Any dividend payment made on shares of New Wells Fargo 9.875% Preferred Stock
shall first be credited against the earliest accumulated but unpaid dividend
due with respect to such shares.
Redemption. Prior to November 15, 1996, the New Wells Fargo 9.875% Preferred
Stock is not redeemable. At any time on or after November 15, 1996, the New
Wells Fargo 9.875% Preferred Stock is redeemable, in whole or in part, from
time to time at the option of Wells Fargo upon not less than 40 nor more than
70 days' notice (or not less than 30 nor more than 60 days' notice in the case
of the New Wells Fargo 9.875% Depositary Shares) at a redemption price of
$200.00 per share (equivalent to $25.00 per New Wells Fargo 9.875% Depositary
Share) plus all accrued and unpaid dividends thereon (whether or not earned or
declared) to the date fixed for redemption.
In the event that fewer than all the outstanding shares of New Wells Fargo
9.875% Preferred Stock are to be redeemed, the number of shares to be redeemed
shall be determined by the Wells Fargo Board or a duly authorized committee
thereof and the shares to be redeemed shall be redeemed pro rata from the
holders of record of such shares held by such holders (with adjustments to
avoid fractional shares). On and after the redemption date, dividends will
cease to accrue on such shares, and they shall no longer be deemed to be
outstanding,
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provided that the redemption price (including any accrued and unpaid dividends
to the date fixed for redemption) has been duly paid or provided for.
The New Wells Fargo 9.875% Preferred Stock will not be entitled to the
benefits of any sinking fund.
Notwithstanding the foregoing, if full cumulative dividends on all
outstanding shares of New Wells Fargo 9.875% Preferred Stock shall not have
been paid or contemporaneously declared and paid for all past dividend
periods, no shares of New Wells Fargo 9.875% Preferred Stock shall be redeemed
unless all outstanding shares of New Wells Fargo 9.875% Preferred Stock are
simultaneously redeemed, and, unless the full cumulative dividends on all
outstanding shares of New Wells Fargo 9.875% Preferred Stock and any other
stock of Wells Fargo ranking on a parity with such series as to dividends and
upon liquidation shall have been paid or contemporaneously are declared and
paid for all past dividend periods, Wells Fargo shall not purchase or
otherwise acquire any shares of New Wells Fargo 9.875% Preferred Stock or
shares of any other series of preferred stock ranking on a parity therewith as
to dividends or upon liquidation (except by conversion into or exchange for
stock of Wells Fargo ranking junior to the shares of New Wells Fargo 9.875%
Preferred Stock.); provided, however that the foregoing shall not prevent the
purchase or acquisition of shares of New Wells Fargo 9.875% Preferred Stock or
of shares of such other series of preferred stock pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
New Wells Fargo 9.875% Preferred Stock or of such other series.
In addition, in order to qualify as Tier 1 capital, New Wells Fargo 9.875%
Preferred Stock may not be redeemed at Wells Fargo's option without the prior
approval of the Federal Reserve Board.
Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of Wells Fargo, the
holders of shares of outstanding New Wells Fargo 9.875% Preferred Stock shall
be entitled, subject to the rights of creditors, but before any distribution
or payment to the holders of Wells Fargo Common Stock or any other security
ranking junior to the New Wells Fargo 9.875% Preferred Stock upon liquidation
of Wells Fargo, to be paid in full an amount equal to $200.00 per share
(equivalent to $25.00 per New Wells Fargo 9.875% Depositary Share) plus an
amount equal to all accumulated and unpaid dividends. After payment of the
full amount of such liquidation distribution, the holders of outstanding New
Wells Fargo 9.875% Preferred Stock shall not be entitled to any further
participation in any distribution of assets of Wells Fargo. If, upon any
liquidation, dissolution or winding up of Wells Fargo, the available assets of
Wells Fargo, or proceeds thereof, shall be insufficient to pay such amount on
all outstanding shares of New Wells Fargo 9.875% Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
stock of Wells Fargo ranking on a parity with the New Wells Fargo 9.875%
Preferred Stock in the distribution of assets, then the holders of the New
Wells Fargo 9.875% Preferred Stock and of all other such classes or series
shall share ratably in any distribution of assets in proportion to the full
amounts to which they would otherwise be respectively entitled.
If such payment shall have been made in full to all holders of shares of New
Wells Fargo 9.875% Preferred Stock, the remaining assets of Wells Fargo shall
be distributed among the holders of any other classes of stock ranking junior
to the New Wells Fargo 9.875% Preferred Stock upon liquidation, dissolution or
winding up, according to their respective rights and preferences and in each
case according to their respective number of shares. For such purposes, the
consolidation or merger of Wells Fargo with any other corporation shall not be
deemed to constitute a liquidation, dissolution or winding up of Wells Fargo.
Voting Rights. If at the time of any annual meeting of stockholders for the
election of directors of Wells Fargo, a default in preference dividends (as
defined below) shall exist on the New Wells Fargo 9.875% Preferred Stock or on
any shares of preferred stock ranking on a parity with the shares of New Wells
Fargo 9.875% Preferred Stock as to dividends or upon liquidation (the New
Wells Fargo 9.875% Preferred Stock and any such shares of preferred stock
being herein referred to as "Parity Preferred Stock"), the maximum authorized
number of members of the Wells Fargo Board shall automatically be increased by
two. The two vacancies so created shall be filled at such meeting by the vote
of the holders of the New Wells Fargo 9.875% Preferred Stock and
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the holders of any other Parity Preferred Stock upon which like voting rights
have been conferred and are then exercisable (the New Wells Fargo 9.875%
Preferred Stock and such other Parity Preferred Stock being herein referred to
as "Voting Parity Preferred Stock"), voting together as a single class without
regard to series, to the exclusion of the holders of the Wells Fargo Common
Stock and any other class of capital stock that is not Voting Parity Preferred
Stock. The holders of the Wells Fargo Common Stock and any other class of
capital stock which has the right to vote at such meeting (other than the
Voting Parity Preferred Stock) shall elect the remaining directors. Such
rights of the holders of Voting Parity Preferred Stock shall continue until
there are no preference dividends in arrears upon the Parity Preferred Stock
of any series at which time such right shall terminate, except as by law
expressly provided, subject to revesting in the event of each and every
subsequent default of the character above mentioned. Upon any such termination
of the right of the holders of shares of Voting Parity Preferred Stock as a
class to vote for directors as herein provided, the term of office of each
director then in office elected by such holders voting as a class (herein
called a "Preferred Director") shall terminate immediately. Any Preferred
Director may be removed by, and shall not be removed except by, the vote of
the holders of record of the outstanding shares of Voting Parity Preferred
Stock, voting together as a single class without regard to series, at a
meeting of the stockholders, or of the holders of shares of Voting Parity
Preferred Stock, called for such purpose. So long as a default in any
preference dividends on any Parity Preferred Stock of any series shall exist,
(A) any vacancy in the office of a Preferred Director may be filled (except as
provided in the following clause (B)) by the person appointed by an instrument
in writing signed by the remaining Preferred Director and filed with Wells
Fargo and (B) in the case of the removal of any Preferred Director, the
vacancy may be filled by the person elected by the vote of the holders of the
outstanding shares of Voting Parity Preferred Stock, voting together as a
single class without regard to series, at the same meeting at which such
removal shall be voted or at any subsequent meeting. Each director appointed
as aforesaid by the remaining Preferred Director shall be deemed to be a
Preferred Director. Whenever a default in preference dividends shall no longer
exist: (i) the term of office of the Preferred Directors shall end, (ii) the
special voting powers vested in the holders of the Voting Parity Preferred
Stock as provided herein shall expire and (iii) the number of members of the
Wells Fargo Board of Directors shall be such number as may be provided for in
Wells Fargo's By-Laws irrespective of any increase made as provided herein. A
"default in preference dividends" on the Voting Parity Preferred Stock of any
series shall be deemed to have occurred whenever the amount of unpaid accrued
dividends upon any series of preferred stock of Wells Fargo through the last
preceding dividend period therefor shall be equivalent to six quarterly
dividends (which, with respect to New Wells Fargo 9.875% Preferred Stock or
any other series of Parity Preferred Stock, shall be deemed to be dividends in
respect of a number of dividend periods containing not less than 540 days) or
more, and, having so occurred, such default shall be deemed to exist
thereafter until, but only until, all accrued dividends on all shares of
Voting Parity Preferred Stock of each and every series then outstanding shall
have been paid to the end of the last preceding dividend period.
Under regulations adopted by the Federal Reserve Board, a holder of 25% or
more of the New Wells Fargo 9.875% Preferred Stock (or the New Wells Fargo
Depositary Shares in respect thereof) (or a holder of 5% or more if it
otherwise exercises a "controlling influence" over Wells Fargo) may then be
subject to regulation as a bank holding company in accordance with the BHCA.
In addition, any other bank holding company may be required to obtain the
prior approval of the Federal Reserve Board to acquire or control 5% or more
of the New Wells Fargo 9.875% Preferred Stock (or the New Wells Fargo
Depositary Shares). See "--Certain Regulatory Considerations."
So long as any shares of New Wells Fargo 9.875% Preferred Stock remain
outstanding, Wells Fargo shall not, without the affirmative vote or consent of
the holders of at least two-thirds of the shares of each series of Wells Fargo
Preferred Stock outstanding at the time, given in person or by proxy, either
in writing or at a meeting (voting separately as a class together with all
other series of Voting Parity Preferred Stock), (i) authorize, create or
issue, or increase the authorized or issued amount of, any class or series of
stock ranking prior to the New Wells Fargo 9.875% Preferred Stock with respect
to payment of dividends or the distribution of assets on liquidation, or
reclassify any authorized stock of Wells Fargo into any such shares, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares or (ii) amend, alter or
repeal the provisions of Wells Fargo's Certificate, or of the resolutions
contained in the Certificate of Designations for such series of preferred
stock whether by merger, consolidation or otherwise, so as to materially
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and adversely affect any right, preference, privilege or voting power of such
series of preferred stock or the holders thereof; provided, however, that any
increase in the amount of the authorized preferred stock or the creation or
issuance of other series of preferred stock, or any increase in the amount of
authorized shares of such series or of any other series of Wells Fargo
Preferred Stock, in each case ranking on a parity with or junior to the New
Wells Fargo 9.875% Preferred Stock, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of the New Wells Fargo 9.875% Preferred
Stock shall have been redeemed or called for redemption and sufficient funds
shall have been deposited in trust to effect such redemption.
Conversion Rights. The New Wells Fargo 9.875% Preferred Stock is not
convertible into shares of any other class or series of the capital stock of
Wells Fargo.
No Other Rights. The shares of New Wells Fargo 9.875% Preferred Stock shall
not have any preferences, voting powers or relative, participating, optional
or other special rights except as set forth above, in the Wells Fargo
Certificate or as otherwise required by law.
NEW WELLS FARGO 9.0% PREFERRED STOCK
Pursuant to the terms of the Merger Agreement, each share of First
Interstate 9.0% Preferred Stock will be converted into one share of New Wells
Fargo 9.0% Preferred Stock. The New Wells Fargo 9.0% Preferred Stock will be
substantially the same as the First Interstate 9.0% Preferred Stock.
Rank. The New Wells Fargo 9.0% Preferred Stock shall rank on a parity as to
payment of dividends and distribution of assets upon dissolution, liquidation
or winding up of Wells Fargo with each other currently outstanding series of
Wells Fargo Preferred Stock and with the New Wells Fargo 9.875% Preferred
Stock. See "Description of Wells Fargo Capital Stock--Wells Fargo Preferred
Stock." The New Wells Fargo 9.0% Preferred Stock will rank prior to the Wells
Fargo Common Stock with respect to the payment of dividends and distribution
of assets upon dissolution, liquidation or winding up of Wells Fargo.
Dividends. Holders of shares of New Wells Fargo 9.0% Preferred Stock shall
be entitled to receive, when, as and if declared by the Wells Fargo Board, or
any duly authorized committee thereof, out of funds of Wells Fargo legally
available therefor, cash dividends, payable quarterly, at the rate of 9.0% per
share per annum (equivalent to $2.25 per New Wells Fargo 9.0% Depositary Share
per annum). Dividends on the New Wells Fargo 9.0% Preferred Stock shall be
payable quarterly on the last day of March, June, September and December of
each year (each, a "Dividend Payment Date"), commencing on the first Dividend
Payment Date following the Effective Time. Dividends payable on the first
Dividend Payment Date following the Effective Time shall be in respect of the
quarterly dividend period commencing on and including the last dividend
payment date with respect to the First Interstate 9.0% Preferred Stock on
which dividends were paid prior to the Effective Time. Each declared dividend
shall be payable to holders of record as they appear at the close of business
on the stock register of Wells Fargo on such record date, not exceeding 60
calendar days preceding the Dividend Payment Date thereof, as shall be fixed
by the Wells Fargo Board or by a committee of the Wells Fargo Board duly
authorized to fix such date. Quarterly dividend periods shall commence on and
include the Dividend Payment Date and shall end on and include the day next
preceding the next following Dividend Payment Date. Dividends payable on New
Wells Fargo 9.0% Preferred Stock for any period less than a full quarterly
dividend period shall be computed on the basis of a 360-day year of four 90-
day quarters and the actual number of days elapsed in the period for which
payable. The right of holders of New Wells Fargo 9.0% Preferred Stock to
receive dividends is cumulative.
All other terms and provisions governing the payment of dividends on the New
Wells Fargo 9.0% Preferred Stock are identical to those governing the New
Wells Fargo 9.875% Preferred Stock. See "--New Wells Fargo 9.875% Preferred
Stock--Dividends."
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Redemption. Prior to May 29, 1997, the New Wells Fargo 9.0% Preferred Stock
is not redeemable. At any time on or after May 29, 1997, the New Wells Fargo
9.0% Preferred Stock is redeemable, in whole or in part, from time to time at
the option of Wells Fargo upon not less than 40 nor more than 70 days' notice
(or not less than 30 nor more than 60 days' notice in the case of the New
Wells Fargo 9.0% Depositary Shares) at a redemption price of $200.00 per share
(equivalent to $25.00 per New Wells Fargo 9.0% Depositary Share) plus all
accrued and unpaid dividends thereon (whether or not earned or declared) to
the date fixed for redemption.
The remaining provisions governing redemption of the New Wells Fargo 9.0%
Preferred Stock are identical to those for the New Wells Fargo 9.875%
Preferred Stock. See "--New Wells Fargo 9.875% Preferred Stock--Redemption."
Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of Wells Fargo, the
holders of shares of outstanding New Wells Fargo 9.0% Preferred Stock shall be
entitled, subject to the rights of creditors, but before any distribution or
payment to the holders of Wells Fargo Common Stock or any other security
ranking junior to the New Wells Fargo 9.0% Preferred Stock upon liquidation of
Wells Fargo, to be paid in full an amount equal to $200.00 per share
(equivalent to $25.00 per New Wells Fargo 9.0% Depositary Share) plus an
amount equal to all accumulated and unpaid dividends.
The remaining provisions governing liquidation rights of the New Wells Fargo
9.0% Preferred Stock are identical to those governing the New Wells Fargo
9.875% Preferred Stock. See "--New Wells Fargo 9.875% Preferred Stock--
Liquidation Preference."
Voting Rights. Holders of the New Wells Fargo 9.0% Preferred Stock will have
voting rights identical to those of the holders of New Wells Fargo 9.875%
Preferred Stock.
Conversion Rights. The New Wells Fargo 9.0% Preferred Stock is not
convertible into shares of any other class or series of the capital stock of
Wells Fargo.
No Other Rights. The shares of New Wells Fargo 9.0% Preferred Stock shall
not have any preferences, voting powers or relative, participating, optional
or other special rights except as set forth above, in the Wells Fargo
Certificate or as otherwise required by law.
NEW WELLS FARGO DEPOSITARY SHARES
At the Effective Time, Wells Fargo will assume the obligations of First
Interstate under the Deposit Agreements and will instruct the Depositary to
treat the shares of New Wells Fargo 9.875% Preferred Stock and New Wells Fargo
9.0% Preferred Stock, respectively, as new deposited securities under the
applicable Deposit Agreement. In accordance with the terms of the relevant
Deposit Agreement, the First Interstate Depositary Shares then outstanding
shall thereafter represent the shares of New Wells Fargo 9.875% Preferred
Stock or New Wells Fargo 9.0% Preferred Stock, as the case may be. Wells Fargo
will request that the Depositary call for surrender of all outstanding First
Interstate Depositary Receipts to be exchanged for New Wells Fargo Depositary
Receipts specifically describing the New Wells Fargo 9.875% Preferred Stock or
the New Wells Fargo 9.0% Preferred Stock, as the case may be. The New Wells
Fargo Depositary Receipts to be issued in exchange for the First Interstate
Depositary Receipts will evidence the New Wells Fargo Depositary Shares.
Each New Wells Fargo Depositary Share will represent a one-eighth interest
in a share of New Wells Fargo Preferred Stock. Wells Fargo has agreed to use
its best efforts to list the New Wells Fargo Depositary Shares on the NYSE,
subject to official notice of issuance. The New Wells Fargo Depositary Shares
will be freely transferable under the Securities Act.
Subject to the terms of the Deposit Agreements, each owner of a New Wells
Fargo Depositary Share will be entitled through the Depositary, in proportion
to the one-eighth interest in a share of New Wells Fargo
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Preferred Stock underlying such New Wells Fargo Depositary Shares, to all
rights and preferences of a share of New Wells Fargo Preferred Stock
(including dividend, voting, redemption and liquidation rights). Because each
share of New Wells Fargo Preferred Stock entitles the holder thereof to one
vote on matters on which the New Wells Fargo Preferred Stock is entitled to
vote, each New Wells Fargo Depositary Share will, in effect, entitle the
holder thereof to one-eighth of a vote thereon, rather than one full vote. See
"--New Wells Fargo Preferred Stock--Voting Rights."
Pending the preparation of definitive, engraved New Wells Fargo Depositary
Receipts, the Depositary may, upon the written order of Wells Fargo, issue
temporary New Wells Fargo Depositary Receipts substantially identical to (and
entitling the holders thereof to all the rights pertaining to) the definitive
New Wells Fargo Depositary Receipts but not in definitive form. Definitive New
Wells Fargo Depositary Receipts will be prepared thereafter without unreasonable
delay, and temporary New Wells Fargo Depositary Receipts will be exchangeable
for definitive New Wells Fargo Depositary Receipts at Wells Fargo's expense.
Dividends and Other Distributions. The Depositary will distribute all cash
distributions received in respect of the New Wells Fargo Preferred Stock to
the record holders of New Wells Fargo Depositary Shares relating to such New
Wells Fargo Preferred Stock in proportion to the numbers of such New Wells
Fargo Depositary Shares owned by such holders on the relevant record date. The
Depositary shall distribute only such amount, however, as can be distributed
without attributing to any holder of New Wells Fargo Depositary Shares a
fraction of one cent, and any balance not so distributed shall be added to and
treated as part of the next sum received by the Depositary for distribution to
record holders of New Wells Fargo Depositary Shares.
In the event of a distribution in respect of New Wells Fargo Preferred Stock
other than in cash, the Depositary will distribute property received by it to
the record holders of New Wells Fargo Depositary Shares entitled thereto,
unless the Depositary determines that it is not feasible to make such
distribution, in which case the Depositary may, with the approval of Wells
Fargo, sell such property and distribute the net proceeds from such sale to
such holders.
The Deposit Agreements also contain provisions relating to the manner in
which any subscription or similar rights offered by Wells Fargo to holders of
the New Wells Fargo Preferred Stock shall be made available to holders of New
Wells Fargo Depositary Shares.
Redemption of New Wells Fargo Depositary Shares. If a series of the New
Wells Fargo Preferred Stock underlying the New Wells Fargo Depositary Shares
is subject to redemption, the New Wells Fargo Depositary Shares will be
redeemed from the proceeds received by the Depositary resulting from the
redemption in whole or in part, of such series of the New Wells Fargo
Preferred Stock held by the Depositary. The Depositary shall mail notice of
redemption not less than 30 and not more than 60 days prior to the date fixed
for redemption to the record holders of the New Wells Fargo Depositary Shares
to be so redeemed at their respective addresses appearing in the Depositary's
books. The redemption price per New Wells Fargo Depositary Share will be equal
to the applicable fraction of the redemption price per share payable with
respect to such series of New Wells Fargo Preferred Stock. Whenever Wells
Fargo redeems shares of New Wells Fargo Preferred Stock held by the
Depositary, the Depositary will redeem as of the same redemption date the
number of New Wells Fargo Depositary Shares relating to shares of New Wells
Fargo Preferred Stock so redeemed. If less than all the New Wells Fargo
Depositary Shares are to be redeemed, the New Wells Fargo Depositary Shares to
be redeemed will be selected by lot or pro rata, all as may be determined by
the Depositary.
After the date fixed for redemption, the New Wells Fargo Depositary Shares
so called for redemption will no longer be deemed to be outstanding and all
rights of the holders of the New Wells Fargo Depositary Shares will cease,
except the right to receive the moneys payable upon such redemption and any
money or other property to which the holders of such New Wells Fargo
Depositary Shares were entitled upon such redemption upon surrender to the
Depositary of the New Wells Fargo Depositary Receipts evidencing such New
Wells Fargo Depositary Shares.
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Voting the New Wells Fargo Preferred Stock. Upon receipt of notice of any
meeting at which the holders of the New Wells Fargo Preferred Stock are
entitled to vote, the Depositary will mail the information contained in such
notice of meeting to the record holders of the New Wells Fargo Depositary
Shares relating to such New Wells Fargo Preferred Stock. Each record holder of
such New Wells Fargo Depositary Shares on the record date (which will be the
same date as the record date for the New Wells Fargo Preferred Stock) will be
entitled to instruct the Depositary as to the exercise of the voting rights
pertaining to the number of shares of New Wells Fargo Preferred Stock
underlying such holder's New Wells Fargo Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the number of shares of New
Wells Fargo Preferred Stock underlying such New Wells Fargo Depositary Shares
in accordance with such instructions, and Wells Fargo will agree to take
action as may be deemed necessary by the Depositary in order to enable the
Depositary to do so. The Depositary will abstain from voting shares of New
Wells Fargo Depositary Shares relating to such New Wells Fargo Preferred Stock
to the extent it does not receive specific instructions from the holders of
New Wells Fargo Depositary Shares representing such shares of New Wells Fargo
Preferred Stock.
Amendment and Termination of the Deposit Agreements. The form of New Wells
Fargo Depositary Receipts evidencing the New Wells Fargo Depositary Shares and
any provision of the Deposit Agreements may at any time be amended by
agreement between Wells Fargo and the Depositary. However, any amendment that
materially and adversely alters the rights of the existing holders of New
Wells Fargo Depositary Shares will not be effective unless such amendment has
been approved by the record holders of at least a majority of the New Wells
Fargo Depositary Shares then outstanding. A Deposit Agreement may be
terminated by Wells Fargo or the Depositary only if (i) all outstanding New
Wells Fargo Depositary Shares relating thereto have been redeemed or (ii)
there has been a final distribution in respect of the New Wells Fargo
Preferred Stock of the relevant series in connection with any liquidation,
dissolution or winding up of Wells Fargo and such distribution has been
distributed to the holders of the related New Wells Fargo Depositary Receipts.
Charges of Depositary. Wells Fargo will pay all transfer and other taxes and
governmental charges arising solely from the existence of the depositary
arrangements. Wells Fargo will pay charges of the Depositary in connection
with the initial deposit of the New Wells Fargo Preferred Stock and any
redemption of the New Wells Fargo Preferred Stock. Holders of New Wells Fargo
Depositary Receipts will pay other transfer and other taxes and governmental
charges and such other charges as are expressly provided in the Deposit
Agreements to be for their accounts.
Miscellaneous. The Depositary will forward to the holders of New Wells Fargo
Depositary Shares all reports and communications from Wells Fargo that are
delivered to the Depositary and that Wells Fargo is required to furnish to the
holders of the New Wells Fargo Preferred Stock.
Neither the Depositary nor Wells Fargo will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreements. The obligations of Wells Fargo and
the Depositary under the Deposit Agreements will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any New Wells Fargo
Depositary Shares or New Wells Fargo Preferred Stock unless satisfactory
indemnity is furnished. They may rely upon written advice of counsel or
accountants, or information provided by persons presenting New Wells Fargo
Preferred Stock for deposit, holders of New Wells Fargo Depositary Receipts or
other persons believed to be competent and on documents believed to be
genuine.
The Deposit Agreements will not permit holders of New Wells Fargo Depositary
Receipts to withdraw shares of New Wells Fargo Preferred Stock held by the
Depositary upon surrender of such New Wells Fargo Depositary Receipts or
otherwise.
Resignation and Renewal of Depositary. The Depositary may resign at any time
by delivering to Wells Fargo notice of its election to do so, and Wells Fargo
may at any time remove the Depositary, any such resignation or removal to take
effect upon the appointment of a successor Depositary and its acceptance of
such appointment. Such successor Depositary must be appointed within 60 days
after delivery of the notice of
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resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
Taxation. Owners of the New Wells Fargo Depositary Shares will be treated
for federal income tax purposes as if they were owners of the New Wells Fargo
Preferred Stock represented by such New Wells Fargo Depositary Shares.
CERTAIN REGULATORY CONSIDERATIONS
The following discussion addresses the regulatory framework applicable to
bank holding companies and their subsidiaries, and provides certain specific
information relevant to Wells Fargo. Regulation of financial institutions such
as Wells Fargo and its subsidiaries is intended primarily for the protection
of depositors, the deposit insurance funds of the FDIC and the banking system
as a whole, and generally is not intended for the protection of stockholders
or other investors.
The following is a summary of certain statutes and regulations that apply to
the operation of banking institutions. Changes in the applicable laws, and in
their application by regulatory agencies, cannot necessarily be predicted, but
they may have a material effect on the business and results of banking
organizations, including Wells Fargo.
SUPERVISION AND REGULATION. As a bank holding company, Wells Fargo is
subject to regulation, supervision and examination by the Federal Reserve
Board under the BHCA. Under the BHCA, bank holding companies may not, in
general, directly or indirectly acquire ownership or control of more than 5%
of the voting shares of any company, including a bank or bank holding company,
without the prior approval of the Federal Reserve Board. In addition, bank
holding companies are generally prohibited from engaging in nonbanking (i.e.,
commercial or industrial) activities, subject to certain exceptions under the
BHCA.
Wells Fargo's banking subsidiaries, as national banking associations, are
subject to regulation, supervision and examination by the OCC.
Depository institutions are also affected by various state and federal laws,
including those relating to consumer protection and similar matters, as well
as by the fiscal and monetary policies of the federal government and its
agencies, including the Federal Reserve Board. An important purpose of these
policies is to curb inflation and control recessions through control of the
supply of money and credit. The Federal Reserve Board uses its powers to
establish reserve requirements of depository institutions and to conduct open
market operations in United States government securities so as to influence
the supply of money and credit. These policies have a direct effect on the
availability of bank loans and deposits and on interest rates charged on loans
and paid on deposits, with the result that federal policies have a material
effect on the earnings of the banking subsidiaries, and, hence, Wells Fargo.
Wells Fargo also has other financial services subsidiaries that are subject
to regulation, supervision and examination by the Federal Reserve Board, as
well as other applicable state and federal regulatory agencies. For example,
Wells Fargo's discount brokerage and asset management subsidiaries are subject
to supervision and regulation by the Commission, the National Association of
Securities Dealers, Inc. and state securities regulators; and Wells Fargo's
insurance subsidiaries are subject to regulation by the insurance regulatory
authorities of the various states. Other nonbank subsidiaries of Wells Fargo
are subject to other laws and regulations of both the federal government and
the various states in which they are authorized to do business.
Acquisitions of Control. The Change in Bank Control Act prohibits a person
or group of persons from acquiring "control" of a bank holding company unless
the Federal Reserve Board has been given 60 days' prior written notice of such
proposed acquisition and within that time period the Federal Reserve Board has
not issued a notice disapproving the proposed acquisition or extending for up
to another 30 days the period during which such a disapproval may be issued,
or unless the acquisition is subject to Federal Reserve Board approval under
the BHCA. An acquisition may be made prior to the expiration of the
disapproval period if the Federal Reserve
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Board issues written notice of its intent not to disapprove the action. Under a
rebuttable presumption established by the Federal Reserve Board, the
acquisition of more than 10% of a class of voting stock of a bank holding
company with a class of securities registered under Section 12 of the Exchange
Act, such as Wells Fargo, would under the circumstances set forth in the
presumption, constitute the acquisition of control.
In addition, any "company" would be required to obtain the approval of the
Federal Reserve Board under the BHCA before acquiring 25% (5% in the case of an
acquiror that is a bank holding company) or more of the outstanding shares of
any class of voting stock of Wells Fargo, or otherwise obtaining "control" over
Wells Fargo. Under the BHCA, "control" generally means (i) the ownership or
control of 25 percent or more of any class of voting securities of the bank
holding company, (ii) the ability to elect a majority of the bank holding
company's directors, or (iii) the ability otherwise to exercise a controlling
influence over the management and policies of the bank holding company.
REGULATORY DIVIDEND RESTRICTIONS. Wells Fargo is a legal entity separate and
distinct from its banking and other subsidiaries. The principal source of cash
flow of Wells Fargo, including cash flow to pay dividends on Wells Fargo's
common and preferred stock and debt service on Wells Fargo's debt, is dividends
from its banking and other subsidiaries. Various federal and state statutes and
regulations limit the amount of dividends that may be paid to Wells Fargo by
its banking subsidiaries without regulatory approval.
The approval of the OCC is required for the payment of any dividend by a
national bank if the total of all dividends declared by the board of directors
of such bank in any calendar year would exceed the total of (i) the bank's
retained net profits (as defined and interpreted by regulation) for the current
year plus (ii) the retained net profits (as defined and interpreted by
regulation) for the preceding two years, less any required transfer to surplus
or a fund for the retirement of any preferred stock. In addition, a national
bank can pay dividends only to the extent that retained net profits (including
the portion transferred to surplus) exceed bad debts (as defined and
interpreted by regulation).
In addition, if, in the opinion of the applicable federal bank regulatory
agency, a depository institution under its jurisdiction is engaged in or is
about to engage in an unsafe or unsound practice (which, depending on the
financial condition of the institution, could include the payment of dividends)
the agency may require, after notice and hearing, that such institution cease
and desist from such practice. The OCC has indicated that paying dividends that
would deplete a depository institution's capital base to an inadequate level
would be an unsafe and unsound practice. Moreover, under the Federal Deposit
Insurance Act (the "FDI Act"), an insured depository institution may not pay
any dividend if payment would cause it to become undercapitalized or once it is
undercapitalized. See "--Regulatory Capital Standards and Related Matters."
Also, the federal bank regulatory agencies have issued policy statements which
provide that depository institutions and their holding companies should
generally pay dividends only out of current operating earnings.
HOLDING COMPANY STRUCTURE. Transactions Involving Banking Subsidiaries. Wells
Fargo's banking subsidiaries are subject to Federal Reserve Act restrictions
which limit the transfer of funds or other items of value from such
subsidiaries to Wells Fargo and (with certain exceptions) to Wells Fargo's
nonbanking subsidiaries (together, "affiliates") in so-called "covered
transactions." In general, covered transactions include loans and other
extensions of credit, investments and asset purchases, as well as other
transactions involving the transfer of value from a banking subsidiary to an
affiliate or for the benefit of an affiliate. Unless an exemption applies,
covered transactions by a banking subsidiary with any one of its affiliates is
limited in amount to 10% of that banking subsidiary's capital and surplus (as
defined and interpreted by regulation) and, with respect to covered
transactions with all affiliates, in the aggregate, to 20% of that banking
subsidiary's capital and surplus. Furthermore, loans and extensions of credit
to affiliates generally are required to be secured in specified amounts.
Source of Strength Doctrine. Under Federal Reserve Board policy, a bank
holding company is expected to serve as a source of financial and managerial
strength to each of its subsidiary banks and, under appropriate circumstances,
to commit resources to support each such subsidiary bank. This support may be
required by the
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Federal Reserve Board at times when Wells Fargo may not have the resources to
provide it or, for other reasons, would not otherwise be inclined to provide
it. Certain loans by a bank holding company to any of its subsidiary banks are
subordinate in right of payment to deposits in, and certain other indebtedness
of, the subsidiary bank. In addition, in the event of a bank holding company's
bankruptcy, any commitment by a bank holding company to a Federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
Depositor Preference. The FDI Act provides that, in the event of the
"liquidation or other resolution" of an insured depository institution, the
claims of depositors of such institution (including claims by the FDIC as
subrogee of insured depositors) and certain claims for administrative expenses
of the FDIC as a receiver would be afforded a priority over other general
unsecured claims against such an institution. If an insured depository
institution fails, insured and uninsured depositors, along with the FDIC, will
be placed ahead of unsecured, nondeposit creditors, including a parent holding
company such as Wells Fargo, in order of priority of payment.
Liability of Commonly Controlled Institutions. Under the FDI Act, an insured
depository institution that is under common control with another insured
depository institution is generally liable for any loss incurred, or
reasonably anticipated to be incurred, by the FDIC in connection with the
default of such commonly controlled institution, or any assistance provided by
the FDIC to any such commonly controlled institution that is in danger of
default. The term "default" is defined generally to mean the appointment of a
conservator or receiver and the term "in danger of default" is defined
generally as the existence of certain conditions indicating that a "default"
is likely to occur in the absence of regulatory assistance.
REGULATORY CAPITAL STANDARDS AND RELATED MATTERS. Capital Guidelines. The
Federal Reserve Board, the FDIC and the OCC have adopted substantially similar
risk-based and leverage capital guidelines for United States banking
organizations. The guidelines establish a systematic, analytical framework
that makes regulatory capital requirements sensitive to differences in risk
profiles among banking organizations, takes off-balance sheet exposure into
account in assessing capital adequacy and reduces disincentives to holding
liquid, low-risk assets. Risk-based capital ratios are determined by
classifying assets and specified off-balance sheet financial instruments into
weighted categories with higher levels of capital being required for
categories perceived as representing greater risk. The Federal bank regulatory
agencies have indicated that in assessing the capital adequacy of a banking
organization they will consider, among other things, interest rate risk, and
are each considering a proposal to incorporate an explicit mechanism by which
interest rate risk would be incorporated into the risk-based capital
standards. Federal Reserve Board policy also provides that banking
organizations generally, and, in particular, those that are experiencing
internal growth or actively making acquisitions, are expected to maintain
capital positions that are substantially above the minimum supervisory levels,
without significant reliance on intangible assets.
Under the risk-based capital standard, the minimum consolidated ratio of
total capital to risk-adjusted assets (including certain off-balance sheet
items, such as standby letters of credit) required by the Federal Reserve
Board for bank holding companies, such as Wells Fargo, is currently 8%. At
least one-half of the total capital must be comprised of common equity,
retained earnings, qualifying noncumulative perpetual preferred stock, a
limited amount of qualifying cumulative perpetual preferred stock and minority
interests in the equity accounts of consolidated subsidiaries, less certain
items such as goodwill and certain other intangible assets ("Tier I capital").
The remainder may consist of qualifying hybrid capital instruments, perpetual
debt, mandatory convertible debt securities, a limited amount of subordinated
debt, preferred stock that does not qualify as Tier I capital and a limited
amount of loan and lease loss reserves ("Tier II capital"). As of December 31,
1995, Wells Fargo's Tier I and total capital to risk-adjusted assets ratios
were 8.81% and 12.46%, respectively. At December 31, 1995, on a pro forma
combined basis after giving effect to the Merger on a purchase accounting
basis, Wells Fargo's estimated consolidated Tier I capital and total capital
to risk-adjusted assets ratios would be 7.80% and 11.05%, respectively.
In addition to the risk-based standard, Wells Fargo is subject to minimum
leverage ratio guidelines. The leverage ratio is defined to be the ratio of a
bank holding company's Tier I capital to its total consolidated
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quarterly average assets less, goodwill and certain other intangible assets
(the "Leverage Ratio"). These guidelines provide for a minimum Leverage Ratio
of 3% for bank holding companies that have the highest supervisory rating. All
other bank holding companies must maintain a minimum Leverage Ratio of at
least 4% to 5%. Neither Wells Fargo nor any of its banking subsidiaries has
been advised by the appropriate Federal banking regulator of any specific
Leverage Ratio applicable to it. As of December 31, 1995, Wells Fargo's
Leverage Ratio was 7.46%. At December 31, 1995, on a pro forma combined basis
after giving effect to the Merger on a purchase accounting basis, Wells
Fargo's estimated consolidated Leverage Ratio would be 6.50%.
The reductions in Wells Fargo's pro forma combined capital ratios are due to
the effect of First Interstate's capital ratios, which are lower than Wells
Fargo's.
Wells Fargo's banking subsidiaries are also subject to capital requirements
substantially similar to those imposed by the Federal Reserve Board on bank
holding companies. As of September 30, 1995, each of Wells Fargo's banking
subsidiaries had capital in excess of the foregoing minimum regulatory ratio
requirements.
Prompt Corrective Action. The FDI Act requires the federal bank regulatory
agencies to take "prompt corrective action" in respect of FDIC-insured
depository institutions that do not meet minimum capital requirements. A
depository institution's treatment for purposes of the prompt corrective
action provisions will depend upon how its capital levels compare to various
relevant capital measures and certain other factors, as established by
regulation.
The OCC (and the other federal bank regulatory agencies) have adopted
regulations establishing relevant capital measures and relevant capital
levels. The relevant capital measures are the total capital ratio, Tier 1
capital ratio and the Leverage Ratio. Under the regulations, a national bank
will be: (i) "well capitalized" if it has a total capital ratio of 10% or
greater, a Tier 1 capital ratio of 6% or greater and a Leverage Ratio of 5% or
greater and is not subject to any order or written directive by any such
regulatory authority to meet and maintain a specific capital level for any
capital measure; (ii) "adequately capitalized" if it has a total capital ratio
of 8% or greater, a Tier 1 capital ratio of 4% or greater and a Leverage Ratio
of 4% or greater (3% in certain circumstances) and is not "well capitalized,"
(iii) "undercapitalized" if it has a total capital ratio of less than 8%, a
Tier 1 capital ratio of less than 4% or a Leverage Ratio of less than 4% (3%
in certain circumstances); (iv) "significantly undercapitalized" if it has a
total capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% or
a Leverage Ratio of less than 3%; and (v) "critically undercapitalized" if its
tangible equity is equal to or less than 2% of average quarterly tangible
assets. In addition, a bank's primary federal bank regulatory agency is
authorized to downgrade the bank's capital category to the next lower category
upon a determination that the bank is in an unsafe or unsound condition or is
engaged in an unsafe or unsound practice. An unsafe or unsound practice can
include receipt by the institution of a less than satisfactory rating on its
most recent examination with respect to its asset quality, management,
earnings or liquidity. As of December 31, 1995, all of Wells Fargo's
subsidiary banks had capital levels that qualify them as "well capitalized"
under such regulations.
The FDI Act generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
therefore be "undercapitalized." "Undercapitalized" depository institutions
are subject to limitations on, among other things, asset growth; acquisitions;
branching; new business lines; acceptance of brokered deposits; and borrowings
from the Federal Reserve System and are required to submit a capital
restoration plan. The federal bank regulatory agencies may not accept a
capital plan without determining, among other things, that the plan is based
on realistic assumptions and is likely to succeed in restoring the depository
institution's capital. In addition, for a capital restoration plan to be
acceptable, the depository institution's parent holding company must guarantee
that the institution will comply with such capital restoration plan. The
aggregate liability of the parent holding company is limited to the lesser of
(i) an amount equal to 5% of the depository institution's total assets at the
time it became "undercapitalized," and (ii) the amount which is necessary (or
would have been necessary) to bring the institution into compliance with all
capital standards applicable with respect to such institution as of the time
it fails to comply with the plan. If a depository institution fails to submit
an acceptable plan, it is treated
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as if it is "significantly undercapitalized." "Significantly undercapitalized"
depository institutions may be subject to a number of requirements and
restrictions, including orders to sell sufficient voting stock to become
"adequately capitalized," requirements to reduce total assets, and cessation
of receipt of deposits from correspondent banks. "Critically undercapitalized"
institutions are subject to the appointment of a receiver or conservator.
FDIC Insurance. On August 8, 1995, the FDIC amended its regulations on
insurance assessments to establish an assessment rate schedule that ranged
from 4 to 31 cents per $100 of insured deposits in replacement of the previous
schedule of 23 to 31 cents (based on each institution's assigned risk
classification) per $100 of insured deposits for institutions whose deposits
are subject to assessment by the Bank Insurance Fund ("BIF"). All of Wells
Fargo's insured deposits are subject to assessments payable to BIF. This BIF
schedule became effective on June 1, 1995, the first day of the month after
the month in which BIF reached its "designated reserve ratio" of 1.25% of
total estimated insured deposits. Assessments collected under the previous
assessment schedule in excess of the amount due under the new schedule were
refunded, with interest, from the effective date of the new schedule. Wells
Fargo's subsidiary banks received an aggregate refund of approximately $23
million. An institution's risk classification is based on an assignment of the
institution by the FDIC to one of three capital groups and to one of three
supervisory subgroups. The capital groups are "well capitalized," "adequately
capitalized" and "undercapitalized." The three supervisory subgroups are Group
"A" (for financially solid institutions with only a few minor weaknesses),
Group "B" (for those institutions with weaknesses which, if uncorrected, could
cause substantial deterioration of the institution and increase the risk to
the deposit insurance fund) and Group "C" (for those institutions with a
substantial probability of loss to the fund absent effective corrective
action).
On November 14, 1995, the Board of Directors of the FDIC approved a further
reduction in the assessment schedule for BIF deposits. Effective January 1,
1996, the assessment schedule now ranges from 0 to 27 cents per $100 of
deposits subject to BIF assessments, based on each institution's risk
classification.
Various legislative proposals regarding the future of BIF and SAIF have
recently been reported, which generally provide for a special assessment on
SAIF deposits. While the ultimate outcome of the legislative process cannot be
predicted, Wells Fargo does not expect these proposals to have an effect on
its financial condition. Wells Fargo's bank subsidiaries currently hold no
deposits subject to assessments payable to SAIF.
As part of the currently pending Budget Reconciliation Act for fiscal year
1996, the House-Senate Conference Committee has proposed an assessment on all
FDIC-insured depository institutions to provide funds for payment of interest
on Financing Corporation debt when due. If enacted, this proposal would result
in minimum BIF insurance premiums which are expected to be approximately 2.5
cents on each $100 in deposits subject to BIF assessments.
INTERSTATE BANKING AND OTHER RECENT LEGISLATION. Under the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate
Act"), which became effective on September 29, 1995, bank holding companies
are permitted to acquire banks located in any state regardless of the state
law in effect at the time. The Interstate Act also provides for the nationwide
interstate branching of banks. Under the Interstate Act, both national and
state-chartered banks will be permitted to merge across state lines (and
thereby create interstate branches) commencing on June 1, 1997. States are
permitted to "opt-out" of the interstate branching authority by taking action
prior to the commencement date. States may also "opt-in" early (i.e., prior to
June 1, 1997) to the interstate branching provisions.
In addition to the matters discussed above, there have been proposed a
number of legislative and regulatory proposals designed to strengthen the
Federal deposit insurance system and to improve the overall financial
stability of the U.S. banking system, and to provide for other changes in the
bank regulatory structure, including proposals to reduce regulatory burdens on
banking organizations and to expand the nature of products and services banks
and bank holding companies may offer. It is impossible to predict whether or
in what form these proposals may be adopted in the future, and, if adopted,
what their effect will be on Wells Fargo.
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VALIDITY OF WELLS FARGO COMMON STOCK
The validity of the shares of Wells Fargo Common Stock offered hereby will
be passed upon for Wells Fargo by Sullivan & Cromwell, New York, New York.
EXPERTS
The consolidated financial statements of Wells Fargo & Company as of
December 31, 1994 and 1993, and for each of the years in the three-year period
ended December 31, 1994, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. The
consolidated financial statements of First Interstate as of December 31, 1994
and 1993, and for each of the three years in the period ended December 31,
1994 appearing in the Annual Report on Form 10-K of First Interstate for the
year ended December 31, 1994 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such consolidated financial statements
are incorporated herein by reference in reliance upon such report given upon
the authority of said firm as experts in accounting and auditing.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of KPMG Peat Marwick LLP, certified public accountants, the
independent auditors of Wells Fargo for the current fiscal year and for the
most recently completed fiscal year, and Ernst & Young LLP, certified public
accountants, the independent auditors of First Interstate for the current
fiscal year and for the most recently completed fiscal year, are expected to
be present at the Wells Fargo Special Meeting and the First Interstate Special
Meeting, respectively, to respond to appropriate questions and to make a
statement if they desire to do so.
STOCKHOLDER PROPOSALS
A stockholder of Wells Fargo who intended to present a proposal at the 1996
annual meeting of stockholders for inclusion in Wells Fargo's proxy statement
and form of proxy relating to such meeting must have submitted such proposal
by November 14, 1995.
A stockholder of First Interstate who intended to present a proposal at the
1996 annual meeting of stockholders for inclusion in First Interstate's proxy
statement and form of proxy relating to such meeting must have submitted such
proposal by November 21, 1995.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the management, executive compensation,
various benefit plans (including stock plans), voting securities and the
principal holders thereof, certain relationships and related transactions and
other related matters as to Wells Fargo and First Interstate is set forth in
or incorporated by reference in the respective Annual Reports on Form 10-K for
the year ended December 31, 1994 of Wells Fargo and First Interstate, which
are incorporated by reference in this Joint Proxy Statement/Prospectus. See
"Incorporation of Certain Information by Reference." Wells Fargo and First
Interstate stockholders who wish to obtain copies of these documents may
contact Wells Fargo or First Interstate, as applicable, at its address or
telephone number set forth under "Incorporation of Certain Information by
Reference."
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APPENDIX A
[Conformed Copy]
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 23, 1996
BY AND BETWEEN
WELLS FARGO & COMPANY
AND
FIRST INTERSTATE BANCORP
AS AMENDED AS OF FEBRUARY 23, 1996
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A-i
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
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1.1 The Merger......................................................... 1
1.2 Effective Time..................................................... 1
1.3 Effects of the Merger.............................................. 1
Conversion of Subject Company Common Stock, Subject Company
1.4 Preferred Stock.................................................... 2
1.5 Parent Common Stock; Parent Preferred Stock........................ 3
1.6 Options............................................................ 3
1.7 Certificate of Incorporation....................................... 4
1.8 Bylaws............................................................. 4
1.9 Tax Consequences................................................... 4
1.10 Board of Directors................................................. 4
1.11 Headquarters....................................................... 4
ARTICLE II
EXCHANGE OF SHARES
2.1 Parent to Make Shares Available.................................... 4
2.2 Exchange of Shares................................................. 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY
3.1 Corporate Organization............................................. 6
3.2 Capitalization..................................................... 7
3.3 Authority; No Violation............................................ 8
3.4 Consents and Approvals............................................. 8
3.5 Reports............................................................ 9
3.6 Financial Statements............................................... 9
3.7 Broker's Fees...................................................... 10
3.8 Absence of Certain Changes or Events............................... 10
3.9 Legal Proceedings.................................................. 10
3.10 Taxes and Tax Returns.............................................. 10
3.11 Employees.......................................................... 11
3.12 SEC Reports........................................................ 12
3.13 Compliance with Applicable Law..................................... 12
3.14 Certain Contracts.................................................. 12
3.15 Agreements with Regulatory Agencies................................ 12
3.16 Undisclosed Liabilities............................................ 13
3.17 State Takeover Laws................................................ 13
3.18 Rights Agreement................................................... 13
3.19 Subject Company Information........................................ 13
3.20 Environmental Liability............................................ 13
3.21 Interest Rate Risk Management Instruments.......................... 14
3.22 Terminated Merger Agreement........................................ 14
</TABLE>
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
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4.1 Corporate Organization.............................................. 14
4.2 Capitalization...................................................... 15
4.3 Authority; No Violation............................................. 15
4.4 Consents and Approvals.............................................. 16
4.5 Reports............................................................. 16
4.6 Financial Statements................................................ 17
4.7 Broker's Fees....................................................... 17
4.8 Absence of Certain Changes or Events................................ 17
4.9 Legal Proceedings................................................... 18
4.10 Taxes and Tax Returns............................................... 18
4.11 Employees........................................................... 18
4.12 SEC Reports......................................................... 19
4.13 Compliance with Applicable Law...................................... 19
4.14 Certain Contracts................................................... 19
4.15 Agreements with Regulatory Agencies................................. 20
4.16 Undisclosed Liabilities............................................. 20
4.17 State Takeover Laws................................................. 20
4.18 Parent Information.................................................. 20
4.19 Environmental Liability............................................. 20
4.20 Interest Rate Risk Management Instruments........................... 21
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective Time................... 21
5.2 Forbearances........................................................ 21
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.................................................. 23
6.2 Access to Information............................................... 24
6.3 Stockholders' Approvals............................................. 25
6.4 Legal Conditions to Merger.......................................... 25
6.5 Affiliates; Publication of Combined Financial Results............... 25
6.6 Stock Exchange Listing.............................................. 25
6.7 Employee Benefit Plans.............................................. 25
6.8 Indemnification; Directors' and Officers' Insurance................. 27
6.9 Additional Agreements............................................... 29
6.10 Advice of Changes................................................... 29
6.11 Dividends........................................................... 29
6.12 Subsequent Interim and Annual Financial Statements.................. 29
6.13 Litigation.......................................................... 29
</TABLE>
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ARTICLE VII
CONDITIONS PRECEDENT
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7.1 Conditions to Each Party's Obligation To Effect the Merger.......... 30
7.2 Conditions to Obligations of Parent................................. 30
7.3 Conditions to Obligations of Subject Company........................ 31
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination......................................................... 32
8.2 Effect of Termination............................................... 33
8.3 Amendment........................................................... 33
8.4 Extension; Waiver................................................... 33
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing............................................................. 33
9.2 Nonsurvival of Representations, Warranties and Agreements........... 33
9.3 Expenses............................................................ 34
9.4 Notices............................................................. 34
9.5 Interpretation...................................................... 34
9.6 Counterparts........................................................ 35
9.7 Entire Agreement.................................................... 35
9.8 Governing Law....................................................... 35
9.9 Severability........................................................ 35
9.10 Publicity........................................................... 35
9.11 Assignment; Third Party Beneficiaries............................... 35
9.12 Alternative Structure............................................... 35
9.13 Enforcement of the Agreement........................................ 35
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 23, 1996, by and between
Wells Fargo & Company, a Delaware corporation ("Parent"), and First Interstate
Bancorp, a Delaware corporation ("Subject Company").
WHEREAS, the Boards of Directors of Parent and Subject Company have
determined that it is in the best interests of their respective companies and
their stockholders to consummate the strategic business combination
transaction provided for herein in which Subject Company will, subject to the
terms and conditions set forth herein, merge (the "Merger") with and into
Parent, so that Parent is the surviving corporation in the Merger; and
WHEREAS, Subject Company, First Bank System, Inc., a Delaware corporation
("North"), and Eleven Acquisition Corp. ("Merger Sub"), a Delaware
corporation, were parties to that certain Agreement and Plan of Merger (the
"Terminated Merger Agreement"), dated as of November 5, 1995, that Subject
Company has terminated in accordance with the terms thereof; and
WHEREAS, Parent, Subject Company, North and Merger Sub have entered into
that certain Settlement and Release Agreement, dated as of January 23, 1996
(the "Settlement Agreement"), pursuant to which North has agreed, in
consideration of certain payments, to termination of the Fee Letter, dated as
of November 5, 1995, between Subject Company and North (the "North Fee
Letter") and the Stock Option Agreement, dated November 5, 1995 (the "Subject
Company Stock Option Agreement"), between Subject Company as issuer and North
as grantee; and
WHEREAS, as a condition to the execution of this Agreement, Parent and
Subject Company are entering into the Parent Fee Letter (as defined below) and
the Subject Company Fee Letter (as defined below); and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the Delaware General Corporation Law (the "DGCL"), at the
Effective Time (as defined in Section 1.2 hereof), Subject Company shall merge
with and into Parent. Parent shall be the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") in the Merger, and shall
continue its corporate existence under the laws of the State of Delaware. The
name of the Surviving Corporation shall be Wells Fargo & Company. Upon
consummation of the Merger, the separate corporate existence of Subject
Company shall terminate.
1.2 Effective Time. The Merger shall become effective as set forth in the
certificate of merger (the "Certificate of Merger") which shall be filed with
the Secretary of State of the State of Delaware (the "Delaware Secretary") on
the Closing Date (as defined in Section 9.1 hereof). The term "Effective Time"
shall be the date and time when the Merger becomes effective, as set forth in
the Certificate of Merger.
1.3 Effects of the Merger. At and after the Effective Time, the Merger shall
have the effects set forth in the DGCL.
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1.4 Conversion of Subject Company Common Stock, Subject Company Preferred
Stock. At the Effective Time, subject to Section 2.2(e) hereof, by virtue of
the Merger and without any action on the part of Parent, Subject Company or
the holder of any of the following securities:
(a) Each share of the common stock, par value $2.00 per share, of Subject
Company (the "Subject Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of Subject
Company Common Stock held (x) in Subject Company's treasury or (y) directly
or indirectly by Parent or Subject Company or any of their respective
Subsidiaries (as defined below) (except for Trust Account Shares and DPC
shares, as such terms are defined below)), together with the rights (the
"Subject Company Rights") attached thereto issued pursuant to the Rights
Agreement, dated as of November 21, 1988, as amended, between Subject
Company and First Interstate Bank, Ltd., as Rights Agent (the "Subject
Company Rights Agreement"), shall, subject to Section 1.4(d) hereof, be
converted into the right to receive two-thirds of a share (the "Common
Exchange Ratio") of the common stock, par value $5.00 per share, of Parent
("Parent Common Stock").
(b) Each share of 9.875% preferred stock, Series F, of Subject Company
(the "Subject Company 9.875% Preferred") issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive
one share of 9.875% preferred stock of Parent (the "Parent 9.875%
Preferred"). The terms of the Parent 9.875% Preferred shall be
substantially the same as the terms of the Subject Company 9.875%
Preferred.
(c) Each share of 9.0% preferred stock, Series G, of Subject Company (the
"Subject Company 9.0% Preferred," and together with the Subject Company
9.875% Preferred, the "Subject Company Preferred Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into
the right to receive one share of 9.0% preferred stock of Parent (the
"Parent 9.0% Preferred," and together with the Parent 9.875% Preferred, the
"Parent New Preferred"). The terms of the Parent 9.0% Preferred shall be
substantially the same as the terms of the Subject Company 9.0% Preferred.
For purposes of this Agreement (i) the Subject Company Common Stock and
Subject Company Preferred Stock are referred to herein as the "Subject
Company Capital Stock," and (ii) the Parent Common Stock and Parent
Preferred Stock (as defined below) are collectively referred to as the
"Parent Capital Stock."
(d) All of the shares of Subject Company Common Stock converted into
Parent Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist
as of the Effective Time, and each certificate (each a "Common
Certificate") previously representing any such shares of Subject Company
Common Stock shall thereafter represent the right to receive (i) a
certificate representing the number of whole shares of Parent Common Stock
and (ii) the cash in lieu of fractional shares into which the shares of
Subject Company Common Stock represented by such Common Certificate have
been converted pursuant to this Section 1.4 and Section 2.2(e) hereof.
Common Certificates previously representing shares of Subject Company
Common Stock shall be exchanged for certificates representing whole shares
of Parent Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Common Certificates in
accordance with Section 2.2 hereof, without any interest thereon. If prior
to the Effective Time the outstanding shares of Parent Common Stock shall
have been increased, decreased, changed into or exchanged for a different
number or kind of shares or securities as a result of a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split, or other similar change in Parent's capitalization, then an
appropriate and proportionate adjustment shall be made to the Common
Exchange Ratio.
(e) All of the shares of Subject Company Preferred Stock converted into
Parent New Preferred pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist
as of the Effective Time, and each certificate (each a "Preferred
Certificate," and collectively with the Common Certificates, the
"Certificates") previously representing any such shares of Subject Company
Preferred Stock shall thereafter represent the right to receive a
certificate representing the number of shares of corresponding Parent New
Preferred into which the shares of Subject Company Preferred Stock
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represented by such Preferred Certificate have been converted pursuant to
this Section 1.4. Preferred Certificates previously representing shares of
Subject Company Preferred Stock shall be exchanged for certificates
representing shares of corresponding Parent New Preferred issued in
consideration therefor upon the surrender of such Preferred Certificates in
accordance with Section 2.2 hereof, without any interest thereon.
(f) At the Effective Time, all shares of Subject Company Capital Stock
that are owned by Subject Company as treasury stock and all shares of
Subject Company Capital Stock that are owned directly or indirectly by
Parent or Subject Company or any of their respective Subsidiaries (other
than shares of Subject Company Capital Stock held directly or indirectly in
trust accounts, managed accounts and the like or otherwise held in a
fiduciary capacity that are beneficially owned by third parties (any such
shares, and shares of Parent Common Stock which are similarly held, whether
held directly or indirectly by Parent or Subject Company or any of their
respective Subsidiaries, as the case may be, being referred to herein as
"Trust Account Shares") and other than any shares of Subject Company
Capital Stock held by Parent or Subject Company or any of their respective
Subsidiaries in respect of a debt previously contracted (any such shares of
Subject Company Capital Stock, and shares of Parent Common Stock which are
similarly held, whether held directly or indirectly by Parent or Subject
Company or any of their respective Subsidiaries, being referred to herein
as "DPC Shares")) shall be cancelled and shall cease to exist and no stock
of Parent or other consideration shall be delivered in exchange therefor.
All shares of Parent Common Stock that are owned by Subject Company or any
of its Subsidiaries (other than Trust Account Shares and DPC Shares) shall
become treasury stock of Parent.
(g) At the Effective Time, Parent shall assume the obligations of Subject
Company under the Deposit Agreement, dated as of November 14, 1991, between
Subject Company and First Interstate Bank of California, as depositary
(relating to the Subject Company 9.875% Preferred), and the Deposit
Agreement, dated as of May 29, 1992, between Subject Company and First
Interstate Bank of California, as depositary (relating to the Subject
Company 9.0% Preferred). Parent shall instruct the applicable depositary to
treat the shares of Parent 9.875% Preferred and Parent 9.0% Preferred
received by such depositary in exchange for and upon conversion of the
shares of Subject Company 9.875% Preferred and Subject Company 9.0%
Preferred, respectively, as new deposited securities under the applicable
deposit agreement. In accordance with the terms of the relevant deposit
agreement, the depositary receipts then outstanding shall thereafter
represent the shares of Parent 9.875% Preferred and Parent 9.0% Preferred
so received upon conversion and exchange for the shares of Subject Company
9.875% Preferred and Subject Company 9.0% Preferred, respectively. Parent
shall request that such depositary call for the surrender of all
outstanding receipts to be exchanged for new receipts (the "New Parent
Depositary Shares") specifically describing the relevant series of Parent
New Preferred.
1.5 Parent Common Stock; Parent Preferred Stock. At and after the Effective
Time, each share of Parent Common Stock and each share of Parent Preferred
Stock issued and outstanding immediately prior to the Effective Time shall
remain an issued and outstanding share of common stock or preferred stock, as
the case may be, of Parent and shall not be affected by the Merger.
1.6 Options. (a) At the Effective Time, each option granted by Subject
Company to purchase shares of Subject Company Common Stock (each a "Subject
Company Option") which is outstanding and unexercised immediately prior
thereto shall cease to represent a right to acquire shares of Subject Company
Common Stock and shall be converted automatically into an option to purchase
shares of Parent Common Stock in an amount and at an exercise price determined
as provided below (and otherwise subject to the terms of the Subject Company
1995 Performance Stock Plan, the Subject Company 1991 Performance Stock Plan
(as amended), the Subject Company 1988 Performance Stock Plan (as amended),
the Subject Company 1983 Performance Stock Plan (as amended), the Subject
Company Performance Stock Plan of 1980 (as amended and restated) and the
Subject Company 1991 Director Option Plan (as amended and restated), as the
case may be (collectively, the "Subject Company Stock Option Plans"), and the
agreements evidencing grants thereunder, including, but not limited to, the
accelerated vesting of such options which shall occur in connection with and
by virtue of the
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approval of the Merger Agreement and the Merger by the stockholders of Subject
Company as and to the extent required by such plans and agreements):
(1) the number of shares of Parent Common Stock to be subject to the new
option shall be equal to the product of the number of shares of Subject
Company Common Stock subject to the original option and the Common Exchange
Ratio, provided that any fractional shares of Parent Common Stock resulting
from such multiplication shall be rounded down to the nearest share; and
(2) the exercise price per share of Parent Common Stock under the new
option shall be equal to the exercise price per share of Subject Company
Common Stock under the original option divided by the Common Exchange
Ratio, provided that such exercise price shall be rounded up to the nearest
cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code and, to the
extent it is not so consistent, such Section 424(a) shall override anything to
the contrary contained herein. The duration and other terms of the new option
shall be the same as the original option (subject to Section 6.7(b) hereof)
except that all references to Subject Company shall be deemed to be references
to Parent.
1.7 Certificate of Incorporation. At the Effective Time, the Certificate of
Incorporation of Parent, as in effect at the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation. At or prior to the
Effective Time, Parent shall duly execute and file with the Delaware Secretary
of State one or more Certificates of Designation establishing the New Parent
Preferred.
1.8 Bylaws. At the Effective Time, the Bylaws of Parent, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.9 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" for purposes of the
Code.
1.10 Board of Directors. At the Effective Time, each person serving on the
Board of Directors of Parent immediately prior to the Effective Time shall
continue to serve on the Board of Directors of Parent. In addition, Parent
shall cause its Board of Directors to be expanded by seven seats as of the
Effective Time and such directorships shall, as of such time, be filled by
persons serving on the Board of Directors of Subject Company immediately prior
to the Effective Time who shall be jointly selected by of the Board of
Directors of each of Parent and Subject Company; provided that Parent's Board
of Directors may be expanded by fewer than seven seats in case there are fewer
than seven members of Subject Company's Board of Directors who choose to serve
on Parent's Board.
1.11 Headquarters. Upon consummation of the Merger, the Surviving Company
shall maintain corporate headquarters in each of San Francisco and Los
Angeles, and one or more of the senior corporate officers of the Surviving
Corporation shall be based in Los Angeles.
ARTICLE II
EXCHANGE OF SHARES
2.1 Parent to Make Shares Available. At or prior to the Effective Time,
Parent shall deposit, or shall cause to be deposited, with a bank or trust
company which may be a Subsidiary of Parent (the "Exchange Agent"), for the
benefit of the holders of Certificates, for exchange in accordance with this
Article II, certificates representing the shares of Parent Common Stock and
Parent New Preferred and an estimated amount of cash in lieu of any fractional
shares (the cash payable in lieu of fractional shares and certificates for
shares of Parent
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Common Stock and Parent New Preferred, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant to
Section 2.2(a) in exchange for outstanding shares of Subject Company Capital
Stock.
2.2 Exchange of Shares. (a) As soon as practicable after the Effective Time,
and in no event later than ten business days thereafter, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates a form
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing, as the case may be, the shares of Parent Common Stock or Parent
New Preferred and the cash in lieu of fractional shares, if any, into which
the shares of Subject Company Capital Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. Upon proper
surrender of a Certificate for exchange and cancellation to the Exchange
Agent, together with such properly completed letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor, as applicable, (i) a certificate representing that number
of shares of Parent Common Stock, if any, to which such holder of Subject
Company Common Stock shall have become entitled pursuant to the provisions of
Article I hereof, (ii) certificates representing that number of shares of
Parent 9.875% Preferred and Parent 9.0% Preferred, if any, to which such
holder of Subject Company Preferred Stock shall have become entitled pursuant
to the provisions of Article I hereof and (iii) a check representing the
amount of cash in lieu of fractional shares, if any, which such holder has the
right to receive in respect of the Certificate surrendered pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on the cash in
lieu of fractional shares and unpaid dividends and distributions, if any,
payable to holders of Certificates.
(b) No dividends or other distributions with a record date after the
Effective Time with respect to Parent Common Stock or Parent New Preferred
shall be paid to the holder of any unsurrendered Certificate until the holder
thereof shall surrender such Certificate in accordance with this Article II.
After the surrender of a Certificate in accordance with this Article II, the
record holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Parent Common Stock or Parent New Preferred
represented by such Certificate.
(c) If any certificate representing shares of Parent Common Stock or Parent
New Preferred is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered shall be
properly endorsed (or accompanied by an appropriate instrument of transfer)
and otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other
taxes required by reason of the issuance of a certificate representing shares
of Parent Common Stock or Parent New Preferred in any name other than that of
the registered holder of the Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(d) At or after the Effective Time, there shall be no transfers on the stock
transfer books of Subject Company of the shares of Subject Company Capital
Stock which were issued and outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be cancelled and
exchanged for certificates representing shares of Parent Capital Stock as
provided in this Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of Common Certificates, no
dividend or distribution with respect to Parent Common Stock shall be payable
on or with respect to any fractional share, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights
of a stockholder of Parent. In lieu of the issuance of any such fractional
share, Parent shall pay to each former stockholder of Subject Company who
otherwise would be entitled to receive such fractional share an amount in cash
determined by multiplying (i) the average of the closing sale prices of Parent
Common Stock on the New York Stock Exchange (the "NYSE") as reported by The
Wall Street Journal for the five trading
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days immediately preceding the date on which the Effective Time occurs by (ii)
the fraction of a share of Parent Common Stock to which such holder would
otherwise be entitled to receive pursuant to Section 1.4 hereto.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Subject Company for twelve months after the Effective Time
shall be paid to Parent. Any stockholders of Subject Company who have not
theretofore complied with this Article II shall thereafter look only to Parent
for payment of the shares of Parent Common Stock or Parent New Preferred, cash
in lieu of any fractional shares and unpaid dividends and distributions on the
Parent Common Stock or Parent New Preferred deliverable in respect of each
share of Subject Company Common Stock or Subject Company Preferred Stock, as
the case may be, such stockholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon. Notwithstanding
anything to the contrary contained herein, none of Parent, Subject Company,
the Exchange Agent or any other person shall be liable to any former holder of
shares of Subject Company Common Stock or Subject Company Preferred Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such amount as Parent may determine is
reasonably necessary as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common
Stock and cash in lieu of fractional shares or Parent New Preferred, as the
case may be, deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY
Subject Company hereby represents and warrants to Parent as follows:
3.1 Corporate Organization. (a) Subject Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Subject Company has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is
now being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not have nor reasonably be expected to have a
Material Adverse Effect (as defined below) on Subject Company. As used in this
Agreement, the term "Material Adverse Effect" means, with respect to Parent,
Subject Company or the Surviving Corporation, as the case may be, a material
adverse effect on the business, results of operations or financial condition
of such party and its Subsidiaries taken as a whole or a material adverse
effect on such party's ability to consummate the transactions contemplated
hereby; provided, however, that in determining whether a Material Adverse
Effect has occurred there shall be excluded any effect on (I) the referenced
party the cause of which is (i) any change in banking and similar laws, rules
or regulations of general applicability or interpretations thereof by courts
or governmental authorities, (ii) any change in generally accepted accounting
principles or regulatory accounting requirements applicable to banks or their
holding companies generally, (iii) any action or omission of Subject Company
or Parent or any Subsidiary of either of them taken with the prior written
consent of Parent or Subject Company, as applicable, in contemplation of the
Merger and (iv) any changes in general economic conditions affecting banks or
their holding companies generally and (II) Subject Company and its
Subsidiaries caused by, relating to or arising out of the actions taken or
omitted to be taken on or after October 17, 1995 by Subject Company and its
directors, officers, employees, representatives and agents (i) in response to
the various actions taken by Parent in connection with its efforts to engage
in a business combination transaction with Subject Company and (ii) in
connection with Subject Company's pursuit, prior to the date hereof, of
strategic alternatives other than a business combination transaction with
Parent (including without limitation the execution
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of the Terminated Merger Agreement and the Settlement Agreement and the other
documents executed in connection therewith and any actions taken in connection
therewith or in respect thereof), in each case including without limitation
all attorneys', investment bankers', accountants' and other fees and expenses
incurred in connection therewith or as a result of any actions, suits or
proceedings relating thereto. As used in this Agreement, the word "Subsidiary"
when used with respect to any party means any bank, corporation, partnership
or other organization, whether incorporated or unincorporated, which is
consolidated with such party for financial reporting purposes. Subject Company
is duly registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended (the "BHC Act"). The copies of the Certificate of
Incorporation and Bylaws of Subject Company which have previously been made
available to Parent, are true, complete and correct copies of such documents
as in effect as of the date of this Agreement.
(b) Each Subject Company Subsidiary (i) is duly organized and validly
existing as a bank, corporation or partnership under the laws of its
jurisdiction of organization, (ii) is duly qualified to do business and in
good standing in all jurisdictions (whether federal, state, local or foreign)
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and in which the failure to be so qualified
would have or reasonably be expected to have a Material Adverse Effect on
Subject Company, and (iii) has all requisite corporate power and authority to
own or lease its properties and assets and to carry on its business as now
conducted.
3.2 Capitalization. (a) The authorized capital stock of Subject Company
consists of 250,000,000 shares of Subject Company Common Stock, 15,000,000
shares of preferred stock, no par value, and 43,500,000 shares of Class A
Common Stock, par value $0.01 per share ("Class A Common Stock"). At the close
of business on December 31, 1995, there were 75,929,395 shares of Subject
Company Common Stock outstanding, 1,750,000 shares of Subject Company
Preferred Stock outstanding (evidenced by 14,000,000 Subject Company
Depositary Shares, 8,000,000 of which each represent a one-eighth interest in
a share of Subject Company 9.875% Preferred and 6,000,000 of which each
represent a one-eighth interest in a share of Subject Company 9.0% Cumulative
Preferred), no Shares of Class A Common Stock outstanding, and 8,356,601
shares of Subject Company Common Stock held in Subject Company's treasury. As
of December 31, 1995, no shares of Subject Company Common Stock or Subject
Company Preferred Stock were reserved for issuance, except (i) 1,828,250
shares of Subject Company Common Stock were reserved for issuance pursuant to
Subject Company's dividend reinvestment and stock purchase plans, (ii)
3,505,348 shares of Subject Company Common Stock were reserved for issuance
upon the exercise of stock options pursuant to the Subject Company Stock
Option Plans, (iii) 15,073,106 shares of Subject Company Common Stock were
reserved for issuance pursuant to the Subject Company Stock Option Agreement
and (iv) the shares of Subject Company Common Stock reserved for issuance upon
exercise of the Subject Company Rights distributed to holders of Subject
Company Common Stock pursuant to the Subject Company Rights Agreement. All of
the issued and outstanding shares of Subject Company Common Stock and Subject
Company Preferred Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. As of the date of this
Agreement, except (i) as set forth in Section 3.2(a) of the disclosure
schedule of Subject Company delivered to Parent concurrently herewith (the
"Subject Company Disclosure Schedule"), (ii) for the Subject Company Rights
Agreement (a true and correct copy of which, including all amendments thereto,
has been made available to Parent) and (iii) as set forth elsewhere in this
Section 3.2(a), Subject Company does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Subject
Company Common Stock or Subject Company Preferred Stock or any other equity
securities of Subject Company or any securities representing the right to
purchase or otherwise receive any shares of Subject Company Common Stock or
Subject Company Preferred Stock. Except (i) as set forth in Section 3.2(a) of
the Subject Company Disclosure Schedule, and (ii) for options permitted by
this Agreement to be granted subsequent to the date of this Agreement,
December 31, 1995 Subject Company has not issued any shares of its capital
stock or any securities convertible into or exercisable for any shares of its
capital stock, other than pursuant to Subject Company's dividend reinvestment
and stock purchase plans, the exercise of employee stock options granted prior
to such date and as disclosed in Section 3.2(a) of the Subject Company
Disclosure Schedule, and the issuance of rights pursuant to the Subject
Company Rights Agreement.
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(b) Except as set forth in Section 3.2(b) of the Subject Company Disclosure
Schedule, Subject Company owns, directly or indirectly, at least 99% of the
issued and outstanding shares of capital stock of each of the material Subject
Company Subsidiaries, free and clear of any liens, charges, encumbrances,
adverse rights or claims and security interests whatsoever ("Liens"), and all
of such shares are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. No Subject Company Subsidiary has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of any
shares of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares
of capital stock or any other equity security of such Subsidiary.
3.3 Authority; No Violation. (a) Subject Company has full corporate power
and authority to execute and deliver this Agreement, the Fee Letter, of even
date herewith, between Parent and Subject Company (the "Subject Company Fee
Letter") pursuant to which Subject Company will in certain circumstances pay
certain amounts to Parent, and the other documents, including the Settlement
Agreement, contemplated to be executed and delivered by Subject Company in
connection with the transactions contemplated hereby (this Agreement, together
with the Subject Company Fee Letter and such other documents, collectively,
the "Subject Company Documents"), and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of each of the
Subject Company Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and validly approved by the
Board of Directors of Subject Company. The Board of Directors of Subject
Company has directed that the agreement of merger (within the meaning of
Section 251 of the DGCL) contained in this Agreement and the transactions
contemplated hereby be submitted to Subject Company's stockholders for
approval at a meeting of such stockholders and, except for the adoption of
such agreement of merger by the affirmative vote of the holders of a majority
of the outstanding shares of Subject Company Common Stock, no other corporate
proceedings on the part of Subject Company are necessary to approve the
Subject Company Documents and to consummate the transactions contemplated
hereby and thereby. Each of the Subject Company Documents has been duly and
validly executed and delivered by Subject Company and (assuming due
authorization, execution and delivery by Parent) this Agreement constitutes a
valid and binding obligation of Subject Company, enforceable against Subject
Company in accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
(b) Except as set forth in Section 3.3(b) of the Subject Company Disclosure
Schedule, neither the execution and delivery of the Subject Company Documents
by Subject Company nor the consummation by Subject Company of the transactions
contemplated hereby and thereby, nor compliance by Subject Company with any of
the terms or provisions hereof or thereof, will (i) violate any provision of
the Certificate of Incorporation or Bylaws of Subject Company or any of the
similar governing documents of any of its Subsidiaries or (ii) assuming that
the consents and approvals referred to in Section 3.4 are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Subject Company or any of its Subsidiaries
or any of their respective properties or assets, or (y) violate, conflict
with, result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a
right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the respective
properties or assets of Subject Company or any of its Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which Subject Company or any of its Subsidiaries is a party, or by which they
or any of their respective properties or assets may be bound or affected,
except (in the case of clause (ii) above) for such violations, conflicts,
breaches or defaults which, either individually or in the aggregate, will not
have and would not reasonably be expected to have a Material Adverse Effect on
Subject Company.
3.4 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHC Act and approval of such
applications and notices, (ii) the filing of any requisite applications with
the Office of the Comptroller of the Currency (the "OCC") and the approval of
such applications, (iii) the filing of any required
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applications or notices with any state agencies and approval of such
applications and notices (the "State Approvals"), (iv) approvals of boards of
directors (or similar boards) and of shareholders of investment companies
sponsored, advised or administered by Subject Company or its subsidiaries (the
"Fund Approvals") (and related SEC filings) (v) approval of the listing of the
Parent Capital Stock to be issued in the Merger on the NYSE, (vi) the filing
with the Securities and Exchange Commission (the "SEC") of a joint proxy
statement in definitive form relating to the meetings of Parent's and Subject
Company's stockholders to be held in connection with this Agreement and the
transactions contemplated hereby (the "Joint Proxy Statement") and the filing
and declaration of effectiveness of the registration statement on Form S-4
(the "S-4") in which the Joint Proxy Statement will be included as a
prospectus, (vii) the filing of the Certificate of Merger with the Delaware
Secretary pursuant to the DGCL, (viii) such filings and approvals as are
required to be made or obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of the shares of Parent Capital
Stock pursuant to this Agreement, (ix) the adoption of the agreement of merger
(within the meaning of Section 251 of the DGCL) contained in this Agreement by
the requisite votes of the stockholders of Subject Company and the
stockholders of Parent, (x) the consents and approvals set forth in Section
3.4 of the Subject Company Disclosure Schedule, and (xi) the consents and
approvals of third parties which are not Governmental Entities (as defined
below), the failure of which to obtain will not have and would not be
reasonably expected to have a Material Adverse Effect, no consents or
approvals of, or filings or registrations with, any court, administrative
agency or commission or other governmental authority or instrumentality (each
a "Governmental Entity") or with any third party are necessary in connection
with (A) the execution and delivery by Subject Company of the Subject Company
Documents and (B) the consummation by Subject Company of the Merger and the
other transactions contemplated hereby and thereby.
3.5 Reports. Subject Company and each of its Subsidiaries have timely filed
all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required
to file since January 1, 1993 with (i) the Federal Reserve Board, (ii) the
OCC, (iii) any state regulatory authority (each a "State Regulator"), (iv) the
SEC, (v) the FDIC, (vi) any self-regulatory organization ("SRO") and (vii) any
foreign financial or self-regulatory organization (collectively "Regulatory
Agencies") and have paid all fees and assessments due and payable in
connection therewith. Except for normal examinations conducted by a Regulatory
Agency in the regular course of the business of Subject Company and its
Subsidiaries or as set forth in Section 3.5 of the Subject Company Disclosure
Schedule, no Regulatory Agency has initiated any proceeding or, to the best
knowledge of Subject Company, investigation into the business or operations of
Subject Company or any of its Subsidiaries since January 1, 1993. Except as
set forth in Section 3.5 of the Subject Company Disclosure Schedule, there is
no material unresolved violation, criticism or exception by any Regulatory
Agency with respect to any report or statement relating to any examinations of
Subject Company or any of its Subsidiaries. The deposits of each Subject
Company Subsidiary that is an insured institution are insured by the FDIC in
accordance with the Federal Deposit Insurance Act up to applicable limits.
3.6 Financial Statements. Subject Company has previously made available to
Parent copies of (a) the consolidated balance sheets of Subject Company and
its Subsidiaries, as of December 31, for the fiscal years 1993 and 1994, and
the related consolidated statements of operations, shareholders' equity and
cash flows for the fiscal years 1992 through 1994, inclusive, as reported in
Subject Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 filed with the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in each case accompanied by the audit
report of Ernst & Young LLP, independent auditors with respect to Subject
Company and (b) the unaudited consolidated balance sheet of Subject Company
and its Subsidiaries as of September 30, 1994 and September 30, 1995 and the
related unaudited consolidated statements of operations, shareholders' equity
and cash flows for the periods then ended, as reported in Subject Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1995 filed
with the SEC under the Exchange Act. The December 31, 1994 consolidated
balance sheet of Subject Company (including the related notes, where
applicable) fairly presents the consolidated financial position of Subject
Company and its Subsidiaries as of the date thereof, and the other financial
statements referred to in this Section 3.6 (including the related notes, where
applicable) fairly present, and the financial statements referred to in
Section 6.12 hereof will fairly present (subject, in the case of the unaudited
statements, to recurring audit
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adjustments normal in nature and amount), the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of Subject Company and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth. Each of such
statements (including the related notes, where applicable) complies, and the
financial statements referred to in Section 6.12 hereof will comply, in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto and each of
such statements (including the related notes, where applicable) has been, and
the financial statements referred to in Section 6.12 will be, prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods involved, except in each case as indicated in such
statements or in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. The books and records of Subject Company and its
Subsidiaries have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
3.7 Broker's Fees. Except as set forth in Section 3.7 of the Subject Company
Disclosure Schedule, neither Subject Company nor any Subject Company
Subsidiary nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker's fees, commissions
or finder's fees in connection with any of the transactions contemplated by
the Subject Company Documents.
3.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in Subject Company Reports (as defined in Section 3.12) filed prior to the
date hereof, or as set forth in Section 3.8(a) of the Subject Company
Disclosure Schedule, since September 30, 1995, no event (including, without
limitation, any earthquake or other act of God) has occurred which has had or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Subject Company or the Surviving Corporation.
(b) Except as set forth in Section 3.8(b) of the Subject Company Disclosure
Schedule, since September 30, 1995, Subject Company and its Subsidiaries have
carried on their respective businesses in all material respects in the
ordinary course of business, and neither Subject Company nor any of its
Subsidiaries has (i) except for normal increases in the ordinary course of
business consistent with past practice and except as required by applicable
law, increased the wages, salaries, compensation, pension or other fringe
benefits or perquisites payable to any named executive officer (within the
meaning of Regulation S-K of the SEC) or director, other than persons newly
hired for such position, from the amount thereof in effect as of September 30,
1995, or granted any severance or termination pay, entered into any contract
to make or grant any severance or termination pay, or paid any bonus, in each
case to any such named executive officer or director, other than pursuant to
preexisting agreements or arrangements or (ii) suffered any strike, work
stoppage, slow-down or other labor disturbance.
3.9 Legal Proceedings. (a) Except as set forth in Section 3.9 of the
Subject Company Disclosure Schedule, neither Subject Company nor any of its
Subsidiaries is a party to any, and there are no pending or, to the best of
Subject Company's knowledge, threatened, legal, administrative, arbitral or
other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Subject Company or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by the Subject Company Documents as to which there is a
reasonable probability of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect on Subject Company.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon Subject Company, any of its Subsidiaries or the
assets of Subject Company or any of its Subsidiaries which has had, or would
reasonably be expected to have, a Material Adverse Effect on Subject Company
or the Surviving Corporation.
3.10 Taxes and Tax Returns. (a) Subject Company and each of its Subsidiaries
has timely filed or caused to be filed all returns, declarations, reports,
estimates, information returns and statements required to be filed under
federal, state, local or any foreign tax laws ("Tax Returns") with respect to
Subject Company or any of its Subsidiaries, except where the failure to file
timely such Tax Returns would not have and would not
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reasonably be expected to have a Material Adverse Effect on Subject Company.
All Taxes shown to be due on such Tax Returns have been paid or adequate
reserves have been established for the payment of such Taxes, except where the
failure to pay or establish adequate reserves would not have and would not
reasonably be expected to have a Material Adverse Effect on Subject Company.
Except as set forth in Section 3.10(a) of the Subject Company Disclosure
Schedule, no material (i) audit or examination or (ii) refund litigation with
respect to any Tax Return is pending. All material Tax Returns filed by
Subject Company and each of its Subsidiaries are complete and accurate in all
material respects.
(b) Subject Company has no reason to believe that any conditions exist that
might prevent or impede the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
(c) For purposes of this Agreement, "Taxes" shall mean all taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, goods and
services, capital, transfer, franchise, profits, license, withholding,
payroll, employment, employer health, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority.
3.11 Employees. (a) Section 3.11(a) of the Subject Company Disclosure
Schedule sets forth a true and complete list of each material employee benefit
plan, arrangement or agreement that is maintained as of the date of this
Agreement (the "Plans") by Subject Company or any of its Subsidiaries or by
any trade or business, whether or not incorporated (an "ERISA Affiliate"), all
of which together with Subject Company would be deemed a "single employer"
within the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
(b) As soon as practicable after the date hereof, Subject Company shall make
available to Parent true and complete copies of each of the Plans and all
related documents, including but not limited to (i) the actuarial report for
such Plan (if applicable) for each of the last two years, and (ii) the most
recent determination letter from the Internal Revenue Service (if applicable)
for such Plan.
(c) Except as set forth in Section 3.11(c) of the Subject Company Disclosure
Schedule, (i) each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including but not
limited to ERISA and the Code, (ii) each of the Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified,
(iii) with respect to each Plan which is subject to Title IV of ERISA, the
present value of accrued benefits under such Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Plan's actuary with respect to such Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such
Plan allocable to such accrued benefits, (iv) no Plan provides benefits,
including without limitation death or medical benefits (whether or not
insured), with respect to current or former employees of Subject Company, its
Subsidiaries or any ERISA Affiliate beyond their retirement or other
termination of service, other than (w) coverage mandated by applicable law,
(x) death benefits or retirement benefits under any "employee pension plan,"
as that term is defined in Section 3(2) of ERISA, (y) deferred compensation
benefits accrued as liabilities on the books of Subject Company, its
Subsidiaries or the ERISA Affiliates or (z) benefits the full cost of which is
borne by the current or former employee (or his beneficiary), (v) no liability
under Title IV of ERISA has been incurred by Subject Company, its Subsidiaries
or any ERISA Affiliate that has not been satisfied in full, and no condition
exists that presents a material risk to Subject Company, its Subsidiaries or
any ERISA Affiliate of incurring a material liability thereunder, (vi) no Plan
is a "multiemployer pension plan," as such term is defined in Section 3(37) of
ERISA, (vii) all contributions or other amounts payable by Subject Company or
its Subsidiaries as of the Effective Time with respect to each Plan in respect
of current or prior plan years have been paid or accrued in accordance with
generally accepted accounting practices and Section 412 of the Code, (viii)
since January 1, 1994 neither Subject Company, its Subsidiaries nor any ERISA
Affiliate has engaged in a transaction in connection with which Subject
Company, its Subsidiaries or any ERISA Affiliate could be subject to either a
material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or
a material tax imposed pursuant to
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Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Subject
Company there are no pending, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the Plans or
any trusts related thereto which would, individually or in the aggregate, have
or be reasonably expected to have a Material Adverse Effect on Subject
Company.
3.12 SEC Reports. Subject Company has previously made available to Parent an
accurate and complete copy of each final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1994
and prior to the date hereof by Subject Company with the SEC pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act
(the "Subject Company Reports"), and no such registration statement,
prospectus, report, schedule or proxy statement contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Subject Company has
timely filed all Subject Company Reports and other documents required to be
filed by it under the Securities Act and the Exchange Act, and, as of their
respective dates, all Subject Company Reports complied in all material
respects with the published rules and regulations of the SEC with respect
thereto.
3.13 Compliance with Applicable Law. Except as disclosed in Section 3.13 of
the Subject Company Disclosure Schedule, Subject Company and each of its
Subsidiaries hold, and have at all times held, all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of
their respective businesses under and pursuant to all, and have complied with
and are not in default in any material respect under any, applicable law,
statute, order, rule, regulation, policy and/or guideline of any Governmental
Entity relating to Subject Company or any of its Subsidiaries, except where
the failure to hold such license, franchise, permit or authorization or such
noncompliance or default would not, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect on Subject Company,
and neither Subject Company nor any of its Subsidiaries knows of, or has
received notice of, any violations of any of the above which, individually or
in the aggregate, would have or would reasonably be expected to have a
Material Adverse Effect on Subject Company.
3.14 Certain Contracts. (a) Except as set forth in Section 3.14(a) of the
Subject Company Disclosure Schedule and except for the Settlement Agreement,
neither Subject Company nor any of its Subsidiaries is a party to or is bound
by any contract, arrangement, commitment or understanding (whether written or
oral) (i) which is a material contract (as defined in Item 601(b)(10) of
Regulation S-K of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the Subject Company
Reports, (ii) which materially restricts the conduct of any line of business
by Subject Company, or (iii) with or to a labor union or guild (including any
collective bargaining agreement). Subject Company has made available to Parent
true and correct copies of all material employment, consulting and deferred
compensation agreements to which Subject Company or any of its Subsidiaries is
a party. Each contract, arrangement, commitment or understanding of the type
described in this Section 3.14(a), other than the Subject Company Documents,
whether or not set forth in Section 3.14(a) of the Subject Company Disclosure
Schedule, is referred to herein as a "Subject Company Contract," and neither
Subject Company nor any of its Subsidiaries knows of, or has received notice
of, any violation of the above by any of the other parties thereto which,
individually or in the aggregate, would have or would reasonably be expected
to have a Material Adverse Effect on Subject Company.
(b) (i) Each Subject Company Contract is valid and binding and in full force
and effect, (ii) Subject Company and each of its Subsidiaries has in all
material respects performed all obligations required to be performed by it to
date under each Subject Company Contract, and (iii) no event or condition
exists which constitutes or, after notice or lapse of time or both, would
constitute a material default on the part of Subject Company or any of its
Subsidiaries under any such Subject Company Contract, except, in each case,
where such invalidity, failure to be binding, failure to so perform or
default, individually or in the aggregate, would not have or reasonably be
expected to have a Material Adverse Effect on Subject Company.
3.15 Agreements with Regulatory Agencies. Except as set forth in Section
3.15 of the Subject Company Disclosure Schedule, neither Subject Company nor
any of its Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of
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understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has adopted any
board resolutions at the request of (each, whether or not set forth in Section
3.15 of the Subject Company Disclosure Schedule, a "Regulatory Agreement"),
any Regulatory Agency or other Governmental Entity that restricts the conduct
of its business or that in any manner relates to its capital adequacy, its
credit policies, its management or its business, nor has Subject Company or
any of its Subsidiaries been advised by any Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement.
3.16 Undisclosed Liabilities. Except (i) for those liabilities that are
fully reflected or reserved against on the consolidated balance sheet of
Subject Company included in the Subject Company Form 10-Q for the quarter
ended September 30, 1995, (ii) for liabilities incurred in the ordinary course
of business consistent with past practice since September 30, 1995, and (iii)
as set forth in Section 3.16 of the Subject Company Disclosure Schedule,
neither Subject Company nor any of its Subsidiaries has incurred any liability
of any nature whatsoever (whether absolute, accrued, contingent or otherwise
and whether due or to become due) that, either alone or when combined with all
similar liabilities, has had, or would reasonably be expected to have, a
Material Adverse Effect on Subject Company.
3.17 State Takeover Laws. The Board of Directors of Subject Company has
taken all action required to be taken by it to provide that this Agreement,
the Subject Company Fee Letter and the transactions contemplated hereby and
thereby shall be exempt from the requirements of any "moratorium," "control
share," "fair price" or other anti-takeover laws or regulations of any state.
3.18 Rights Agreement. Subject Company has taken all action (including, if
required, redeeming all of the outstanding common stock purchase rights issued
pursuant to the Subject Company Rights Agreement or amending or terminating
the Subject Company Rights Agreement) so that the entering into of the Subject
Company Documents and the consummation of the transactions contemplated hereby
and thereby do not and will not result in the grant of any rights to any
person under the Subject Company Rights Agreement or enable or require the
Subject Company Rights to be exercised, distributed or triggered.
3.19 Subject Company Information. The information relating to Subject
Company and its Subsidiaries to be provided by Subject Company to be contained
in the Joint Proxy Statement and the S-4, or in any other document filed with
any other regulatory agency in connection herewith, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances in which they
are made, not misleading. The Joint Proxy Statement (except for such portions
thereof that relate only to Parent or any of its Subsidiaries) will comply as
to form in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder.
3.20 Environmental Liability. Except as set forth in Section 3.20 of the
Subject Company Disclosure Schedule, there are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that reasonably could be
expected to result in the imposition, on Subject Company or any of its
Subsidiaries of any liability or obligation arising under common law standards
relating to environmental protection, human health or safety, or under any
local, state or federal environmental statute, regulation or ordinance,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (collectively, the
"Environmental Laws"), pending or, to the knowledge of Subject Company,
threatened, against Subject Company or any of its Subsidiaries, which
liability or obligation would have or would reasonably be expected to have a
Material Adverse Effect on Subject Company. To the knowledge of Subject
Company or any of its Subsidiaries, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation that would impose any
liability or obligation that would have or would reasonably be expected to
have a Material Adverse Effect on Subject Company. To the knowledge of Subject
Company, during or prior to the period of (i) its or any of its Subsidiaries'
ownership or operation of any of their respective current properties, (ii) its
or any of its Subsidiaries' participation in the management of any property,
or (iii) its or any of its Subsidiaries' holding of a security interest or
other interest in any property,
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there were no releases or threatened releases of hazardous, toxic, radioactive
or dangerous materials or other materials regulated under Environmental Laws
in, on, under or affecting any such property which would reasonably be
expected to have a Material Adverse Effect. Neither Subject Company nor any of
its Subsidiaries is subject to any agreement, order, judgment, decree, letter
or memorandum by or with any court, governmental authority, regulatory agency
or third party imposing any material liability or obligation pursuant to or
under any Environmental Law that would have or would reasonably be expected to
have a Material Adverse Effect on Subject Company.
3.21 Interest Rate Risk Management Instruments. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of Subject Company or for
the account of a customer of Subject Company or one of its Subsidiaries, were
entered into in accordance with prudent banking practices and applicable
rules, regulations and policies of any regulatory authority and with
counterparties believed to be financially responsible at the time and are
legal, valid and binding obligations of Subject Company or one of its
Subsidiaries enforceable in accordance with their terms (except as enforcement
may be limited by general principles of equity whether applied in a court of
law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally), and are in full force and
effect. Subject Company and each of its Subsidiaries have duly performed in
all material respects all of their material obligations thereunder to the
extent that such obligations to perform have accrued; and, to Subject
Company's knowledge, there are no breaches, violations or defaults or
allegations or assertions of such by any party thereunder which would have or
would reasonably be expected to have a Material Adverse Effect on Subject
Company.
3.22 Terminated Merger Agreement. Subject Company (i) has taken all
corporate action necessary to terminate the Terminated Merger Agreement
pursuant to the provisions of Section 8.1(f) thereof and (ii) has no further
obligation under the Terminated Merger Agreement and the other agreements
executed in connection therewith, including the Subject Company Stock Option
Agreement and the North Fee Letter, other than as specified in Section 8.2 of
the Terminated Merger Agreement or in the Settlement Agreement. Before Subject
Company provided Parent with any nonpublic information, otherwise facilitated
any effort or attempt by Parent to make or implement a Takeover Proposal (as
defined, for purposes of this Section 3.22, in Section 5.2(f) of the
Terminated Merger Agreement) for Subject Company, recommended or endorsed
Parent's Takeover Proposal or participated in discussions and negotiations
with Parent relating to such Takeover Proposal, or authorized its officers,
directors, employees or agents to do any of the foregoing, the Board of
Directors of Subject Company, after having consulted with and considered the
advice of outside counsel, reasonably determined in good faith that the
failure to do so would have caused the members of such Board of Directors to
breach their fiduciary duties under applicable law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent hereby represents and warrants to Subject Company as follows:
4.1 Corporate Organization. (a) Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Parent has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not have or reasonably be expected to have a
Material Adverse Effect on Parent. Parent is duly registered as a bank holding
company under the BHC Act. The copies of the Restated Certificate of
Incorporation and Bylaws of Parent, which have previously been made available
to Subject Company, are true, complete and correct copies of such documents as
in effect as of the date of this Agreement.
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(b) Each Parent Subsidiary (i) is duly organized and validly existing as a
bank, corporation or partnership under the laws of its jurisdiction of
organization, (ii) is duly qualified to do business and in good standing in
all jurisdictions (whether federal, state, local or foreign) where its
ownership or leasing of property or the conduct of its business requires it to
be so qualified and in which the failure to be so qualified would have or
reasonably be expected to have a Material Adverse Effect on Parent, and (iii)
has all requisite corporate power and authority to own or lease its properties
and assets and to carry on its business as now conducted.
4.2 Capitalization. (a) The authorized capital stock of Parent consists of
150,000,000 shares of Parent Common Stock and 25,000,000 shares of Preferred
Stock, par value $5.00 per share ("Parent Preferred Stock"). At the close of
business on December 31, 1995, there were 46,973,319 shares of Parent Common
Stock outstanding, 1,500,000 shares of Parent Preferred Stock designated and
1,500,000 shares issued and outstanding as Series Adjustable Rate Cumulative
Preferred Stock, Series B ("Parent Series B Preferred Stock"), 517,500 shares
of Parent Preferred Stock designated and 517,500 shares issued and outstanding
as 9% Preferred Stock, Series C ("Parent Series C Preferred Stock"), 368,000
shares of Parent Preferred Stock designated and 368,000 shares issued and
outstanding as 8 7/8 Preferred Stock, Series D ("Parent Series D Preferred
Stock"), and no shares of Parent Common Stock held in Parent's treasury. On
December 31, 1995, no shares of Parent Common Stock or Parent Preferred Stock
were reserved for issuance, except that (i) 11,555,655 shares of Parent Common
Stock were reserved for issuance pursuant to outstanding options, the Parent
dividend reinvestment plan, the Parent employee stock purchase plan, the
Parent director option plans and employee benefit plans and (ii) $180 million
in stockholders equity designated for the retirement or redemption of the
Parent Mandatory Equity Notes due 1998. All of the issued and outstanding
shares of the Parent Common Stock and Parent Preferred Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except (i) as set forth in Schedule
4.2(a) of the Parent Disclosure Schedule (as defined below) and (ii) as set
forth elsewhere in this Section 4.2(a), Parent does not have and is not bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of Parent Common Stock or Parent Preferred Stock or any other equity
securities of Parent or any securities representing the right to purchase or
otherwise receive any shares of Parent Common Stock or Parent Preferred Stock.
Except (i) as set forth in Section 4.2(a) of the disclosure schedule of Parent
delivered to Subject Company concurrently herewith (the "Parent Disclosure
Schedule") and (ii) for options permitted by this Agreement to be granted
subsequent to the date of this Agreement, since December 31, 1995, Parent has
not issued any shares of its capital stock or any securities convertible into
or exercisable for any shares of its capital stock, other than pursuant to
Parent's dividend reinvestment and stock purchase plans and the exercise of
employee stock options granted prior to such date and as disclosed in Section
4.2(a) of the Parent Disclosure Schedule. The shares of Parent Capital Stock
to be issued pursuant to the Merger will be duly authorized and validly issued
and, at the Effective Time, all such shares will be fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof.
(b) Except as set forth in Section 4.2(b) of the Parent Disclosure Schedule,
Parent owns, directly or indirectly, at least 99% of the issued and
outstanding shares of capital stock of each of the material Parent
Subsidiaries, free and clear of any Liens, and all of such shares are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. No Parent Subsidiary has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock
or any other equity security of such Subsidiary or any securities representing
the right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary.
4.3 Authority; No Violation. (a) Parent has full corporate power and
authority to execute and deliver this Agreement, the Fee Letter, of even date
herewith, between Parent and Subject Company (the "Parent Fee Letter," and
together with the Subject Company Fee Letter, the "Fee Letters") pursuant to
which Parent will in certain circumstances pay certain amounts to Subject
Company, and the other documents contemplated to be executed and delivered by
Parent, including the Settlement Agreement, in connection with the
transactions contemplated hereby (this Agreement, together with the Parent Fee
Letter, and such other documents,
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collectively, the "Parent Documents") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of each of the
Parent Documents and the consummation of the transactions contemplated hereby
and thereby have been duly and validly approved by the Board of Directors of
Parent. The Board of Directors of Parent has directed that the agreement of
merger (within the meaning of Section 251 of the DGCL) contained in this
Agreement and the transactions contemplated hereby be submitted to Parent's
stockholders for approval at a meeting of such stockholders and, except for
the adoption of such agreement of merger by the affirmative vote of the
holders of a majority of the outstanding shares of Parent Common Stock, no
other corporate proceedings on the part of Parent are necessary to approve the
Parent Documents and to consummate the transactions contemplated hereby and
thereby. Each of the Parent Documents has been duly and validly executed and
delivered by Parent and (assuming due authorization, execution and delivery by
Subject Company) this Agreement constitutes a valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in
a court of law or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 4.3(b) of the Parent Disclosure Schedule,
neither the execution and delivery of the Parent Documents by Parent, nor the
consummation by Parent of the transactions contemplated hereby and thereby,
nor compliance by Parent with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the Restated Certificate of
Incorporation or Bylaws of Parent or any of the similar governing documents of
any of its Subsidiaries or (ii) assuming that the consents and approvals
referred to in Section 4.4 are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Parent or any of its Subsidiaries or any of their respective
properties or assets, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of
any Lien upon any of the respective properties or assets of Parent or any of
its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except (in the case of clause (ii) above) for such
violations, conflicts, breaches or defaults which either individually or in
the aggregate will not have and would not reasonably be expected to have a
Material Adverse Effect on Parent.
4.4 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act and
approval of such applications and notices, (ii) the filing of any requisite
applications with the OCC and the approval of such applications, (iii) the
filings with respect to the State Approvals (including receipt of such State
Approvals), (iv) the Fund Approvals (and related SEC filings), (v) approval of
the listing of the Parent Capital Stock to be issued in the Merger on the
NYSE, (vi) the filing with the SEC of the Joint Proxy Statement and the filing
and declaration of effectiveness of the S-4, (vii) the filing of the
Certificate of Merger with the Delaware Secretary pursuant to the DGCL, (viii)
such filings and approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states in connection with the
issuance of the shares of Parent Capital Stock pursuant to this Agreement,
(ix) the adoption of the agreement of merger (within the meaning of Section
251 of the DGCL) contained in this Agreement by the requisite votes of the
stockholders of Subject Company and the stockholders of Parent, (x) the
consents and approvals set forth in Section 4.4 of the Parent Disclosure
Schedule, and (xi) the consents and approvals of third parties which are not
Governmental Entities, the failure of which to obtain will not have and would
not be reasonably expected to have a Material Adverse Effect, no consents or
approvals of, or filings or registrations with, any Governmental Entity or any
third party are necessary in connection with (A) the execution and delivery by
Parent of the Parent Documents and (B) the consummation by Parent of the
Merger and the other transactions contemplated hereby and thereby.
4.5 Reports. Parent and each of its Subsidiaries have timely filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file
since January 1, 1993 with the Regulatory Agencies, and have paid all fees and
assessments due and payable
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in connection therewith. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of Parent and its
Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the
best knowledge of Parent, investigation into the business or operations of
Parent or any of its Subsidiaries since January 1, 1993. There is no material
unresolved violation, criticism, or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations of Parent or
any of its Subsidiaries. The deposits of each Parent Subsidiary that is an
insured institution are insured by the FDIC in accordance with the Federal
Deposit Insurance Act up to applicable limits.
4.6 Financial Statements. Parent has previously made available to Subject
Company copies of (a) the consolidated balance sheets of Parent and its
Subsidiaries, as of December 31, for the fiscal years 1993 and 1994, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1992 through 1994, inclusive, as reported in
Parent's Annual Report on Form 10-K for the fiscal year ended December 31,
1994 filed with the SEC under the Exchange Act, in each case accompanied by
the audit report of KPMG Peat Marwick LLP, independent public accountants with
respect to Parent and (b) the unaudited consolidated balance sheet of Parent
and its Subsidiaries as of September 30, 1994 and September 30, 1995 and the
related unaudited consolidated statements of income, cash flows and changes in
stockholders' equity for the periods then ended, as reported in Parent's
Quarterly Report on Form 10-Q for the period ended September 30, 1995 filed
with the SEC under the Exchange Act. The December 31, 1994 consolidated
balance sheet of Parent (including the related notes, where applicable) fairly
presents the consolidated financial position of Parent and its Subsidiaries as
of the date thereof, and the other financial statements referred to in this
Section 4.6 (including the related notes, where applicable) fairly present,
and the financial statements referred to in Section 6.12 hereof will fairly
present (subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount), the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of Parent and its Subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth. Each of such statements
(including the related notes, where applicable) complies, and the financial
statements referred to in Section 6.12 hereof will comply, in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and each of such statements
(including the related notes, where applicable) has been, and the financial
statements referred to in Section 6.12 will be, prepared in accordance with
GAAP consistently applied during the periods involved, except in each case as
indicated in such statements or in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q. The books and records of
Parent and its Subsidiaries have been, and are being, maintained in all
material respects in accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions.
4.7 Broker's Fees. Except as set forth in Section 4.7 of the Parent
Disclosure Schedule, neither Parent nor any Parent Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by the Parent Documents.
4.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in Parent Reports (as defined below) filed prior to the date hereof, since
September 30, 1995, no event (including, without limitation, any earthquake or
other act of God) has occurred which has had or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on
Parent.
(b) Except as set forth in Section 4.8(b) of the Parent Disclosure Schedule,
since September 30, 1995, Parent and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary course of
business, and neither Parent nor any of its Subsidiaries has (i) except for
normal increases in the ordinary course of business consistent with past
practice and except as required by applicable law, increased the wages,
salaries, compensation, pension or other fringe benefits or perquisites
payable to any named executive officer (within the meaning of Regulation S-K
of the SEC) or director, other than persons newly hired for such positions,
from the amount thereof in effect as of September 30, 1995, or granted any
severance or termination pay, entered into any contract to make or grant any
severance or termination pay, or paid any bonus, in each
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case to any such named executive officer or director, other than pursuant to
preexisting agreements or arrangements or (ii) suffered any strike, work
stoppage, slow-down or other labor disturbance.
4.9 Legal Proceedings. (a) Neither Parent nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of Parent's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
Parent or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by the Parent Documents as to which there is a
reasonable probability of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect on Parent.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Parent, any of its Subsidiaries or the assets of
Parent or any of its Subsidiaries which has had, or would reasonably be
expected to have, a Material Adverse Effect on Parent or the Surviving
Corporation.
4.10 Taxes and Tax Returns. (a) Parent and each of its Subsidiaries has
timely filed or caused to be filed all Tax Returns with respect to Parent or
any of its Subsidiaries, except where the failure to file timely such Tax
Returns would not have and would not reasonably be expected to have a Material
Adverse Effect on Parent. All Taxes shown to be due on such Tax Returns have
been paid or adequate reserves have been established for the payment of such
Taxes, except where the failure to pay or establish adequate reserves would
not have and would not reasonably be expected to have a Material Adverse
Effect on Parent. Except as set forth in Section 4.10(a) of the Parent
Disclosure Schedule, no material (i) audit or examination or (ii) refund
litigation with respect to any Tax Return is pending. All material Tax Returns
filed by Parent and each of its Subsidiaries are complete and accurate in all
material respects.
(b) Parent has no reason to believe that any conditions exist that might
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
4.11 Employees. (a) Section 4.11(a) of the Parent Disclosure Schedule sets
forth a true and complete list of each material employee benefit plan,
arrangement or agreement that is maintained as of the date of this Agreement
(the "Parent Plans") by Parent or any of its Subsidiaries or by any trade or
business, whether or not incorporated (a "Parent ERISA Affiliate"), all of
which together with Parent would be deemed a "single employer" within the
meaning of Section 4001 of ERISA.
(b) As soon as practicable after the date hereof, Parent shall make
available to Subject Company true and complete copies of each of the Parent
Plans and all related documents, including but not limited to (i) the
actuarial report for such Parent Plan (if applicable) for each of the last two
years, and (ii) the most recent determination letter from the Internal Revenue
Service (if applicable) for such Parent Plan.
(c) Except as set forth in Section 4.11(c) of the Parent Disclosure
Schedule, (i) each of the Parent Plans has been operated and administered in
all material respects in accordance with applicable laws, including but not
limited to ERISA and the Code, (ii) each of the Parent Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified,
(iii) with respect to each Parent Plan which is subject to Title IV of ERISA,
the present value of accrued benefits under such Parent Plan, based upon the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such Parent Plan's actuary with respect to such Parent
Plan, did not, as of its latest valuation date, exceed the then current value
of the assets of such Parent Plan allocable to such accrued benefits, (iv) no
Parent Plan provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former employees
of Parent, its Subsidiaries or any Parent ERISA Affiliate beyond their
retirement or other termination of service, other than (w) coverage mandated
by applicable law, (x) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (y)
deferred compensation benefits accrued as liabilities on the books of Parent,
its Subsidiaries or the Parent ERISA Affiliates or (z) benefits the full cost
of which is borne by the current or former employee (or his beneficiary), (v)
no liability under Title IV of ERISA has been
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incurred by Parent, its Subsidiaries or any Parent ERISA Affiliate that has
not been satisfied in full, and no condition exists that presents a material
risk to Parent, its Subsidiaries or any Parent ERISA Affiliate of incurring a
material liability thereunder, (vi) no Parent Plan is a "multiemployer pension
plan," as such term is defined in Section 3(37) of ERISA, (vii) all
contributions or other amounts payable by Parent or its Subsidiaries as of the
Effective Time with respect to each Parent Plan in respect of current or prior
plan years have been paid or accrued in accordance with generally accepted
accounting practices and Section 412 of the Code, (viii) since January 1, 1994
neither Parent, its Subsidiaries nor any Parent ERISA Affiliate has engaged in
a transaction in connection with which Parent, its Subsidiaries or any Parent
ERISA Affiliate could be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant
to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Parent
there are no pending, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the Parent Plans or
any trusts related thereto which would, individually or in the aggregate, have
or be reasonably expected to have a Material Adverse Effect on Parent.
4.12 SEC Reports. Parent has previously made available to Subject Company an
accurate and complete copy of each final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1994
and prior to the date hereof by Parent with the SEC pursuant to the Securities
Act or the Exchange Act (the "Parent Reports"), and no such registration
statement, prospectus, report, schedule or proxy statement contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading. Parent has timely filed all Parent Reports and other documents
required to be filed by it under the Securities Act and the Exchange Act, and,
as of their respective dates, all Parent Reports complied in all material
respects with the published rules and regulations of the SEC with respect
thereto.
4.13 Compliance with Applicable Law. Except as disclosed in Section 4.13 of
the Parent Disclosure Schedule, Parent and each of its Subsidiaries hold, and
have at all times held, all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in
any material respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to
Parent or any of its Subsidiaries, except where the failure to hold such
license, franchise, permit or authorization or such noncompliance or default
would not, individually or in the aggregate, have or reasonably be expected to
have a Material Adverse Effect on Parent, and neither Parent nor any of its
Subsidiaries knows of, or has received notice of, any material violations of
any of the above which, individually or in the aggregate, would have or
reasonably be expected to have a Material Adverse Effect on Parent.
4.14 Certain Contracts. (a) Except as set forth in Section 4.14(a) of the
Parent Disclosure Schedule and except for the Settlement Agreement, neither
Parent nor any of its Subsidiaries is a party to or is bound by any contract,
arrangement, commitment or understanding (whether written or oral) (i) which
is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the
SEC) to be performed after the date of this Agreement that has not been filed
or incorporated by reference in the Parent Reports, (ii) which materially
restricts the conduct of any line of business by Parent, or (iii) with or to a
labor union or guild (including any collective bargaining agreement). Parent
has made available to Subject Company true and correct copies of all material
employment, consulting and deferred compensation agreements to which Parent or
any of its Subsidiaries is a party. Each contract, arrangement, commitment or
understanding of the type described in this Section 4.14(a), other than the
Parent Documents, whether or not set forth in Section 4.14(a) of the Parent
Disclosure Schedule, is referred to herein as a "Parent Contract," and neither
Parent nor any of its Subsidiaries knows of, or has received notice of, any
violation of the above by any of the other parties thereto which, individually
or in the aggregate, would have or would reasonably be expected to have a
Material Adverse Effect on Parent.
(b) (i) Each Parent Contract is valid and binding and in full force and
effect, (ii) Parent and each of its Subsidiaries has in all material respects
performed all obligations required to be performed by it to date under each
Parent Contract, and (iii) no event or condition exists which constitutes or,
after notice or lapse of time or
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both, would constitute, a material default on the part of Parent or any of its
Subsidiaries under any such Parent Contract, except, in each case, where any
such invalidity, failure to be binding, failure to so perform or default,
individually or in the aggregate, would not have or reasonably be expected to
have a Material Adverse Effect on Parent.
4.15 Agreements with Regulatory Agencies. Except as set forth in Section
4.15 of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or
is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has adopted any
board resolutions at the request of (each, whether or not set forth in Section
4.15 of the Parent Disclosure Schedule, a "Parent Regulatory Agreement"), any
Regulatory Agency or other Governmental Entity that restricts the conduct of
its business or that in any manner relates to its capital adequacy, its credit
policies, its management or its business, nor has Parent or any of its
Subsidiaries been advised by any Regulatory Agency or other Governmental
Entity that it is considering issuing or requesting any Regulatory Agreement.
4.16 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of Parent
included in the Parent Form 10-Q for the quarter ended September 30, 1995, and
for liabilities incurred in the ordinary course of business consistent with
past practice since September 30, 1995, neither Parent nor any of its
Subsidiaries has incurred any liability of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
that, either alone or when combined with all similar liabilities, has had, or
would reasonably be expected to have, a Material Adverse Effect on Parent.
4.17 State Takeover Laws. The Board of Directors of Parent has taken all
action required to be taken by it to provide that this Agreement, the Parent
Fee Letter and the transactions contemplated hereby and thereby shall be
exempt from the requirements of any "moratorium," "control share," "fair
price" or other anti-takeover laws or regulations of any state.
4.18 Parent Information. The information relating to Parent and its
Subsidiaries to be provided by Parent to be contained in the Joint Proxy
Statement and the S-4, or in any other document filed with any other
regulatory agency in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances in which they are
made, not misleading. The Joint Proxy Statement (except for such portions
thereof that relate only to Subject Company or any of its Subsidiaries) will
comply in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder. The S-4 will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations thereunder.
4.19 Environmental Liability. Except as set forth in Section 4.19 of the
Parent Disclosure Schedule, there are no legal, administrative, arbitral or
other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably would be expected to result in
the imposition, on Parent or any of its Subsidiaries of any liability or
obligation arising under any Environmental Law, pending or, to the knowledge
of Parent, threatened, against Parent or any of its Subsidiaries, which
liability or obligation would reasonably be expected to have a Material
Adverse Effect on Parent. To the knowledge of Parent, there is no reasonable
basis for any such proceeding, claim, action or governmental investigation
that would impose any liability or obligation that would reasonably be
expected to have a Material Adverse Effect on Parent. To the knowledge of
Parent, during or prior to the period of (i) its or any of its Subsidiaries'
ownership or operation of any of their respective current properties, (ii) its
or any of its Subsidiaries' participation in the management of any property,
or (iii) its or any of its Subsidiaries' holding of a security interest or
other interest in any property, there were no releases or threatened releases
of hazardous, toxic, radioactive or dangerous materials or other materials
regulated under Environmental Laws in, on, under or affecting any such
property, which would reasonably be expected to have a Material Adverse Effect
on Parent. Neither Parent nor any of its Subsidiaries is subject to any
agreement, order, judgment, decree, letter or memorandum by or with any court,
governmental authority, regulatory agency or third party
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imposing any material liability or obligation pursuant to or under any
Environmental Law that would reasonably be expected to have a Material Adverse
Effect on Parent.
4.20 Interest Rate Risk Management Instruments. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of Parent or for the
account of a customer of Parent or one of its Subsidiaries, were entered into
in accordance with prudent banking practices and applicable rules, regulations
and policies of any regulatory authority and with counterparties believed to
be financially responsible at the time and are legal, valid and binding
obligations of Parent or one of its Subsidiaries enforceable in accordance
with their terms (except as enforcement may be limited by general principles
of equity whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally), and are in full force and effect. Parent and each of its
Subsidiaries have duly performed in all material respects all of their
material obligations thereunder to the extent that such obligations to perform
have accrued; and, to Parent's knowledge, there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder which would have or would reasonably be expected to have a Material
Adverse Effect on Parent.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective Time. Except as set forth
in the Subject Company Disclosure Schedule or the Parent Disclosure Schedule,
as the case may be, as expressly contemplated or permitted by this Agreement,
the Settlement Agreement, or the Fee Letters, as required by applicable law,
rule or regulation, during the period from the date of this Agreement to the
Effective Time, each of Parent and Subject Company shall, and shall cause each
of their respective Subsidiaries to, (i) conduct its business in the usual,
regular and ordinary course consistent with past practice, (ii) use reasonable
best efforts to maintain and preserve intact its business organization,
employees and advantageous business relationships and retain the services of
its officers and key employees and (iii) take no action which would reasonably
be expected to adversely affect or delay the ability of either Parent or
Subject Company to obtain any approvals of any Regulatory Agency or other
governmental authority required to consummate the transactions contemplated
hereby or by the Fee Letters or to perform its covenants and agreements under
the Subject Company Documents or the Parent Documents, as the case may be.
5.2 Forbearances. Except as set forth in Section 5.2 of the Subject Company
Disclosure Schedule or Section 5.2 of the Parent Disclosure Schedule, as the
case may be, as expressly contemplated or permitted by this Agreement, the
Settlement Agreement, or the Fee Letters, as required by applicable law, rule
or regulation, during the period from the date of this Agreement to the
Effective Time, neither Parent nor Subject Company shall, and neither Parent
nor Subject Company shall permit any of their respective Subsidiaries to,
without the prior written consent of the other:
(a) adjust, split, combine or reclassify any capital stock; make, declare
or pay any dividend or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for
any shares of its capital stock, or grant any stock appreciation rights or
grant any individual, corporation or other entity any right to acquire any
shares of its capital stock (except for regular quarterly cash dividends on
Subject Company Common Stock and on Parent Common Stock at a rate equal to
the rates recently paid by each of Subject Company and Parent, as the case
may be, as such rates may be increased by either party in the ordinary
course of business consistent with past practice and, in the case of
Subject Company Preferred Stock and Parent Preferred Stock, for regular
quarterly or semiannual cash dividends thereon at the rates set forth in
the applicable certificate of incorporation or certificate of designation
for such securities and except for dividends paid by any of the wholly
owned Subsidiaries of each of Parent and Subject Company to Parent or
Subject Company or any of their wholly owned Subsidiaries, respectively,
and except for the issuance of employee stock options and restricted stock
consistent with past practices); or issue any additional shares of
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capital stock except pursuant to (A) the exercise of stock options
outstanding as of the date hereof or issued after the date hereof in a
manner consistent with past practice, (B) the award of restricted shares of
Subject Company Common Stock in a manner consistent with past practice, (C)
the vesting of Performance Units outstanding as of the date hereof pursuant
to Subject Company Stock Option Plans, (D) the Subject Company Rights
Agreement, and (E) acquisitions and investments permitted by paragraph (c)
hereof;
(b) sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties or assets to any individual, corporation or other entity other
than a direct or indirect wholly owned Subsidiary, or cancel, release or
assign any indebtedness to any such person or any claims held by any such
person, in each case that is material to such party, except (i) in the
ordinary course of business consistent with past practice, (ii) pursuant to
contracts or agreements in force at the date of this Agreement or (iii)
pursuant to plans disclosed in writing prior to the execution of this
Agreement to the other party;
(c) except for (i) transactions in the ordinary course of business
consistent with past practice, or (ii) acquisitions of an entity or
business having assets not exceeding 10% of the consolidated assets of
Subject Company or Parent, as applicable, on a pro forma basis giving
effect to such transaction, make any material acquisition or investment
either by purchase of stock or securities, merger or consolidation,
contributions to capital, property transfers, or purchases of any property
or assets of any other individual, corporation or other entity other than a
wholly owned Subsidiary thereof;
(d) except for transactions in the ordinary course of business consistent
with past practice, enter into or terminate any contract or agreement, or
make any change in any of its leases or contracts, in each case that is
material to such party, other than renewals of contracts and leases without
materially adverse changes of terms thereof;
(e) other than (i) in the ordinary course of business consistent with
past practice, or (ii) in an aggregate amount not exceeding $10 million,
increase in any material respect the compensation or fringe benefits of any
of its employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees or become a party to,
amend or commit itself to any material pension, retirement, profit-sharing
or welfare benefit plan or agreement or employment agreement with or for
the benefit of any employee or accelerate the vesting of any stock options
or other stock-based compensation;
(f) authorize or permit any of its officers, directors, employees or
agents to directly or indirectly solicit, initiate or encourage any
inquiries relating to, or the making of any proposal which constitutes, a
Takeover Proposal (as defined below), or recommend or endorse any Takeover
Proposal, or participate in any discussions or negotiations, or provide
third parties with any nonpublic information, relating to any such inquiry
or proposal or otherwise facilitate any effort or attempt to make or
implement a Takeover Proposal, provided, however, that each of Parent and
Subject Company may, and may authorize and permit its officers, directors,
employees or agents to, provide third parties with nonpublic information,
otherwise facilitate any effort or attempt by any third party to make or
implement a Takeover Proposal, recommend or endorse any Takeover Proposal
with or by any third party, and participate in discussions and negotiations
with any third party relating to any Takeover Proposal, if such party's
Board of Directors, after having consulted with and considered the advice
of outside counsel, has reasonably determined in good faith that the
failure to do so would cause the members of such Board of Directors to
breach their fiduciary duties under applicable law. Subject Company will
immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
other than Parent with respect to any of the foregoing. Each party shall
immediately advise the other following the receipt by it of any Takeover
Proposal and the details thereof, and advise the other of any developments
with respect to such Takeover Proposal immediately upon the occurrence
thereof. As used in this Agreement, "Takeover Proposal" shall mean, with
respect to any person, any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving Subject Company or
Parent or any of their respective Subsidiaries or any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial
portion of the assets of, Subject Company or Parent or any of their
respective Subsidiaries other than the transactions contemplated or
permitted by this Agreement;
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(g) settle any claim, action or proceeding involving money damages which
is material to Parent or Subject Company, as applicable, except (x) in the
ordinary course of business consistent with past practice and (y) in the
case of Subject Company, for any claim, action or proceeding caused by,
relating to or arising out of the matters described in clause (II) of the
definition of Material Adverse Effect set forth in Section 3.1, which
claim, action or proceeding may be settled with the consent of Parent
(which consent shall not be unreasonably withheld);
(h) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code;
(i) amend its certificate of incorporation, bylaws or similar governing
documents or, in the case of Subject Company, the Subject Company Rights
Agreement, in a manner that would materially and adversely affect either
party's ability to consummate the Merger or the economic benefits of the
Merger to either party;
(j) except in the ordinary course or following prior consultation with
the other party to this Agreement, materially change its investment
securities portfolio policy, or the manner in which the portfolio is
classified or reported;
(k) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set
forth in Article VII not being satisfied or in a violation of any provision
of this Agreement, except, in every case, as may be required by applicable
law; or
(l) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.2.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters. (a) Parent and Subject Company shall promptly
prepare and file with the SEC a preliminary version of the Joint Proxy
Statement and, following comment thereon, Parent shall promptly prepare and
file with the SEC the S-4, in which the definitive Joint Proxy Statement will
be included as a prospectus. Each of Parent and Subject Company shall use all
reasonable efforts to have the S-4 declared effective under the Securities Act
as promptly as practicable after such filing, and Parent and Subject Company
shall thereafter mail the definitive Joint Proxy Statement to their respective
stockholders. Parent shall also use all reasonable efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement, and Subject Company
shall furnish all information concerning Subject Company and the holders of
Subject Company Capital Stock as may be reasonably requested in connection
with any such action.
(b) The parties hereto shall cooperate with each other and use reasonable
best efforts to promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, to obtain as promptly
as practicable all permits, consents, approvals and authorizations of all
third parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including without
limitation the Merger), and to comply with the terms and conditions of all
such permits, consents, approvals and authorizations of all such Governmental
Entities. Parent and Subject Company shall have the right to review in
advance, and to the extent practicable each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all
the information relating to Subject Company or Parent, as the case may be, and
any of their respective Subsidiaries which appear in any filing made with, or
written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals
and authorizations of all third parties and Governmental Entities
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necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated herein.
(c) Parent and Subject Company shall, upon request, furnish each other with
all information concerning themselves, their Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Joint Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of Parent,
Subject Company or any of their respective Subsidiaries to any Governmental
Entity in connection with the Merger and the other transactions contemplated
by this Agreement.
(d) Parent and Subject Company shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (as defined below) will not
be obtained or that the receipt of any such approval will be materially
delayed.
6.2 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each of Parent and
Subject Company shall, and shall cause each of their respective Subsidiaries
to, afford to the officers, employees, accountants, counsel and other
representatives of the other party access, during normal business hours during
the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records, and to its officers, employees,
accountants, counsel and other representatives and, during such period, each
of Parent and Subject Company shall, and shall cause their respective
Subsidiaries to, make available to the other party (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of Federal securities laws or
Federal or state banking laws (other than reports or documents which Parent or
Subject Company, as the case may be, is not permitted to disclose under
applicable law) and (ii) all other information concerning its business,
properties and personnel as such other party may reasonably request. Neither
Parent nor Subject Company nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client privilege of the institution in possession or control of
such information or contravene any law, rule, regulation, order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date of
this Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) All information furnished pursuant to Section 6.2(a) or otherwise by
Parent or its representatives to Subject Company or its representatives or by
Subject Company or its representatives to Parent or its representatives, as
the case may be, shall be treated as the sole property of the party furnishing
such information and, if the Merger shall not occur, Parent and Subject
Company and their respective representatives shall return to the other party
all of such written information and all documents, notes, summaries or other
materials containing, reflecting or referring to, or derived from, such
information. Each of Parent and Subject Company shall, and shall use its best
efforts to cause its representatives to, keep confidential all such
information, and shall not directly or indirectly use such information for any
competitive or other commercial purpose. The obligation to keep such
information confidential shall continue for five years from the date the
proposed Merger is abandoned and shall not apply to (i) any information which
(x) was already in the receiving party's possession prior to the disclosure
thereof by the other party; (y) was then generally known to the public; or (z)
was disclosed to the receiving party by a third party not bound by an
obligation of confidentiality or (ii) disclosures made as required by law. It
is further agreed that, if in the absence of a protective order or the receipt
of a waiver hereunder the receiving party is nonetheless, in the opinion of
its counsel, compelled to disclose information concerning the other party to
any tribunal or governmental body or agency or else stand liable for contempt
or suffer other censure or penalty, the receiving party may disclose such
information to such tribunal or governmental body or agency without liability
hereunder.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
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6.3 Stockholders' Approvals. Each of Parent and Subject Company shall duly
call, give notice of, convene and hold a meeting of its stockholders to be
held as soon as practicable following the date hereof for the purpose of
obtaining the requisite stockholder approvals required in connection with this
Agreement and the Merger, and each shall use its best efforts to cause such
meetings to occur on the same date. Subject to the provisions of the next
sentence, each of Parent and Subject Company shall, through its Board of
Directors, recommend to its stockholders approval of such matters. The Board
of Directors of each party may fail to make such recommendation, or withdraw,
modify or change any such recommendation in a manner adverse to the other
party hereto, if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has reasonably determined in good
faith that the making of such recommendation, or the failure to withdraw,
modify or change its recommendation, would constitute a breach of the
fiduciary duties of the members of such Board of Directors under applicable
law.
6.4 Legal Conditions to Merger. (a) Subject to the terms and conditions of
this Agreement, each of Parent and Subject Company shall, and shall cause its
Subsidiaries to, use their reasonable best efforts (i) to take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries with
respect to the Merger and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this Agreement and (ii)
to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by Subject
Company or Parent or any of their respective Subsidiaries in connection with
the Merger and the other transactions contemplated by this Agreement, and to
comply with the terms and conditions of any such consent, authorization, order
or approval.
(b) Subject to the terms and conditions of this Agreement, each of Parent
and Subject Company agrees to use reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective, as soon as practicable
after the date of this Agreement, the transactions contemplated hereby,
including, without limitation, using reasonable efforts to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby and using
reasonable efforts to defend any litigation seeking to enjoin, prevent or
delay the consummation of the transactions contemplated hereby or seeking
material damages.
6.5 Affiliates; Publication of Combined Financial Results. Subject Company
shall use its reasonable best efforts to cause each director, executive
officer and other person who is an "affiliate" (for purposes of Rule 145 under
the Securities Act) of Subject Company to deliver to Parent, as soon as
practicable after the date of this Agreement, and in any event prior to the
date of the stockholders meetings called by Parent and Subject Company
pursuant to Section 6.3 hereof, a written agreement, in the form of Exhibit
6.5 hereto.
6.6 Stock Exchange Listing. Parent shall use its best efforts to cause the
shares of Parent Common Stock to be issued in the Merger and the New Parent
Depositary Shares to be approved for listing on the NYSE, subject to official
notice of issuance, prior to the Effective Time.
6.7 Employee Benefit Plans. (a) From and after the Effective Time, unless
otherwise mutually determined and except as provided in Section 1.6 hereof,
Parent Plans and Plans in effect as of the date of this Agreement shall remain
in effect with respect to employees of Parent or Subject Company (or their
Subsidiaries) covered by such plans at the Effective Time until such time as
Parent shall, subject to applicable law, the terms of this Agreement and the
terms of such plans, adopt new benefit plans with respect to employees of the
Surviving Corporation and its Subsidiaries (the "New Parent Plans"). Prior to
the Closing Date, Parent and Subject Company shall cooperate in reviewing,
evaluating and analyzing the Parent Plans and the Plans with a view toward
developing appropriate New Parent Plans for the employees covered thereby
subsequent to the Merger. Except as provided in paragraphs (c)-(e) hereof,
Parent and Subject Company shall use their reasonable best efforts to develop
New Parent Plans which, among other things, treat similarly situated employees
of the Surviving Corporation and its Subsidiaries on a substantially
equivalent basis, taking into account all relevant
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factors, including, without limitation, duties, geographic location, tenure,
qualifications and abilities. In view of the changed nature of the benefit
programs which will be applicable to employees of Subject Company after the
Effective Time, Parent and Subject Company further agree to use their
reasonable best efforts to develop equitable transition rules relating to the
benefits to be provided to one or more groups of such employees, with
particular emphasis on retirement benefits to be provided to those Subject
Company employees who are nearing eligibility for early retirement. Parent
agrees that for purposes of all Plans and New Parent Plans (including, without
limitation, all policies and employee fringe benefit programs of the Surviving
Corporation) under which an employee's benefit depends, in whole or in part,
on length of service, credit will be given to current employees of the Subject
Company and its Subsidiaries for service with Subject Company or its
Subsidiaries prior to the Effective Time, provided that such crediting of
service does not result in duplication of benefits, require an accrual of
benefits under, or contributions to, a pension benefit plan on behalf of an
employee for periods before such employee becomes a participant in such plan
or require that certain additional contributions currently made to a Parent
Plan on behalf of certain employees who had participated in Parent's prior
defined benefit plan and attained a specified age upon termination of that
plan be extended to any additional employees.
(b) Notwithstanding the foregoing, Parent shall, and shall cause its
Subsidiaries to, honor in accordance with their terms all Plans, as amended as
permitted hereunder, and other contracts, arrangements, commitments or
understandings described in the Subject Company Disclosure Schedule; provided,
however, that this paragraph (b) shall be subject to the provisions of
paragraph (f) hereof. Parent and Subject Company hereby acknowledge that
approval of the Merger Agreement and the Merger by stockholders of the Subject
Company will constitute a "Change in Control" for purposes of the Plans and
agree to abide by the provisions of any Plan which relate to a Change in
Control, including, but not limited to, the accelerated vesting and/or payment
of equity-based awards under the Subject Company Stock Option Plans, each as
amended to the date hereof.
(c) To the extent permitted by applicable law, (1) Parent and the Subject
Company agree that (i) until such time (the "Transition Date") as those
employees of the Subject Company who continue in employment with the Surviving
Corporation following the Effective Time become eligible to participate in
Parent's qualified defined contribution plan, Parent shall maintain in
accordance with its terms (as in effect immediately prior to the date hereof)
the Retirement Plan for the Employees of First Interstate Bancorp and its
Affiliates (the "Subject Company Pension Plan"), (ii) prior to the Transition
Date, Parent shall not terminate the Subject Company Pension Plan, cease
benefit accruals under such Plan, merge such plan with or into any other plan
or amend such plan in any manner adverse to participants or beneficiaries of
such plan (including, but not limited to, amending to the detriment of
participants the actuarial factors or assumptions utilized in determining
early retirement benefits or lump sum present values), and (iii) from and
after the Transition Date, Parent shall be free to terminate the Subject
Company Pension Plan or to freeze accruals thereunder, subject to compliance
with the terms of paragraph (2) below.
(2) Parent hereby agrees that in the event Parent terminates the Subject
Company Pension Plan on or after the Effective Time, Parent shall cause
such termination to be implemented in all respects in accordance with
applicable law (and without limiting the generality of the foregoing, shall
cause to be purchased from an insurance company rated AAA or better by
Bests, irrevocable annuities representing the accrued benefits of all
participants and beneficiaries of such plan); provided, however, that
Parent may cause accrued benefits subject to Section 417(e)(1) of the Code
to be cashed out in a lump sum.
(d) Parent and the Subject Company agree that, effective as of the date of
the approval of the Merger Agreement and the Merger by the stockholders of the
Subject Company, each participant in The Employee Savings Plan of First
Interstate Bancorp shall become fully vested with respect to such
participant's account balance thereunder.
(e) Parent and the Subject Company hereby agree as follows:
(1) each individual who is currently receiving benefits under the First
Interstate Retiree Medical Plan (the "Subject Company Retiree Medical
Plan"), or who would be entitled to receive such benefits if such
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individual ceased employment with the Subject Company and its subsidiaries
as of the date hereof, shall, after the Effective Time, receive (or, upon
termination of employment with the Surviving Corporation and its
subsidiaries, shall be entitled to receive) retiree medical benefits which
are no less favorable than the benefits which similarly situated retirees
(or employees) of the Parent are entitled to receive (or would be entitled
to receive) under the Parent's retiree medical plan, as such plan may be
amended from time to time;
(2) each employee of the Subject Company who was hired prior to January
1, 1992 and whose employment is terminated under circumstances entitling
such employee to severance benefits under the First Interstate Bancorp
Broad-Based Change in Control Severance Pay Plan, the First Interstate
Bancorp Middle Management Change in Control Severance Pay Plan, the First
Interstate Bancorp Senior Management Change in Control Severance Pay Plan
or an employment agreement between such participant and Subject Company or
a subsidiary thereof which is listed on Exhibit 3.11(a) hereto
(collectively, the "Subject Company Severance Plans"), shall be entitled to
receive retiree medical benefits which are no less favorable than the
benefits provided under the Parent's retiree medical plan (as such plan may
be amended from time to time) if such employee would have been eligible for
benefits under such plan had such employee remained employed through the
end of the period with respect to which severance benefits are payable
under the Subject Company Severance Plans.
(f) Except as otherwise provided herein, nothing in this Section 6.7 shall
be interpreted as preventing Parent or its Subsidiaries from amending,
modifying or terminating any Parent Plans, Plans, or other contracts,
arrangements, commitments or understandings, in accordance with their terms
and applicable law.
(g) It is the express understanding and intention of Subject Company and
Parent that no Subject Company Employee or Parent Employee or other person
shall be deemed to be a third party beneficiary, or have or acquire any right
to enforce the provisions, of this Section 6.7, and that nothing in this
Agreement shall be deemed to constitute a Plan, a Parent Plan or a New Parent
Plan or an amendment to a Plan, a Parent Plan or a New Parent Plan. Parent
agrees, however, that, prior to the Effective Time, the Subject Company may
take all necessary action to amend the appropriate Plans to reflect the
provisions of this Section 6.7.
6.8 Indemnification; Directors' and Officers' Insurance. (a) In the event of
any threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any person who
is now, or has been at any time prior to the date of this Agreement, or who
becomes prior to the Effective Time, a director, officer or employee of
Subject Company or any of its Subsidiaries (the "Indemnified Parties") is, or
is threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he is or was a
director, officer or employee of Subject Company, any of the Subject Company
Subsidiaries or any of their respective predecessors or was prior to the
Effective Time serving at the request of any such party as a director,
officer, employee, fiduciary or agent of another corporation, partnership,
trust or other enterprise, (ii) the Terminated Merger Agreement, the Subject
Company Stock Option Agreement and the North Fee Letter and all actions by any
Indemnified Party in connection therewith or (iii) this Agreement, the Fee
Letters or any of the transactions contemplated hereby or thereby and all
actions taken by an Indemnified Party in connection therewith, whether in any
case asserted or arising before or after the Effective Time, the parties
hereto agree to cooperate and use their best efforts to defend against and
respond thereto. It is understood and agreed that after the Effective Time,
Parent shall indemnify and hold harmless, as and to the fullest extent
permitted by law, each such Indemnified Party against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's fees
and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of an undertaking from such Indemnified Party to
repay such advanced expenses if it is finally and unappealably determined that
such Indemnified Party was not entitled to indemnification hereunder),
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation, and in
the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective
Time), the Indemnified Parties may retain counsel reasonably satisfactory to
them after consultation with Parent; provided, however, that (1) Parent shall
have the right to assume the defense
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thereof and upon such assumption Parent shall not be liable to any Indemnified
Party for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection with the defense
thereof, except that if Parent elects not to assume such defense or counsel
for the Indemnified Parties reasonably advises the Indemnified Parties that
there are or may be (whether or not any have yet actually arisen) issues which
raise conflicts of interest between Parent and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to them, and
Parent shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties who are non-management directors of the Subject Company
and one other firm of counsel for all other Indemnified Parties, (2) Parent
shall be obligated pursuant to this paragraph to pay for only one firm of
counsel for all Indemnified Parties who are non-management directors of the
Subject Company and one other firm of counsel for all of the other Indemnified
Parties, (3) Parent shall not be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably withheld)
and (4) Parent shall have no obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall ultimately determine, and
such determination shall have become final and nonappealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 6.8, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify Parent thereof,
provided that the failure to so notify shall not affect the obligations of
Parent under this Section 6.8 except (and only) to the extent such failure to
notify materially prejudices Parent. Parent's obligations under this Section
6.8 shall continue in full force and effect for a period of six (6) years from
the Effective Time; provided, however, that all rights to indemnification in
respect of any claim (a "Claim") asserted or made within such period shall
continue until the final disposition of such Claim.
(b) Without limiting any of the obligations under paragraph (a) of this
Section 6.8, Parent agrees that all rights to indemnification and all
limitations of liability existing in favor of the Indemnified Parties as
provided in Subject Company's Certificate of Incorporation or By-Laws or in
the similar governing documents of any of Subject Company's Subsidiaries as in
effect as of the date of this Agreement with respect to matters occurring on
or prior to the Effective Time shall survive the Merger and shall continue in
full force and effect, without any amendment thereto, for a period of six
years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Claim asserted or made within such period
shall continue until the final disposition of such Claim; provided further,
however, that nothing contained in this Section 6.8(b) shall be deemed to
preclude the liquidation, consolidation or merger of Subject Company or any
Subject Company Subsidiary, in which case all of such rights to
indemnification and limitations on liability shall be deemed to so survive and
continue notwithstanding any such liquidation, consolidation or merger and
shall constitute rights which may be asserted against Parent. Nothing
contained in this Section 6.8(b) shall be deemed to preclude any rights to
indemnification or limitations on liability provided in Subject Company's
Certificate of Incorporation or By-laws or the similar governing documents of
any of Subject Company's Subsidiaries with respect to matters occurring
subsequent to the Effective Time to the extent that the provisions
establishing such rights or limitations are not otherwise amended to the
contrary.
(c) Parent shall use its best efforts to cause the persons serving as
officers and directors of Subject Company immediately prior to the Effective
Time to be covered for a period of six (6) years from the Effective Time by
the directors' and officers' liability insurance policy maintained by Subject
Company (provided that Parent may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are not less
advantageous to such directors and officers of Subject Company than the terms
and conditions of such existing policy) with respect to acts or omissions
occurring prior to the Effective Time which were committed by such officers
and directors in their capacity as such; provided, however, that the Surviving
Corporation shall not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 250% of the premiums paid as of
the date hereof by Subject Company for such insurance ("Subject Company's
Current Premium"), and if such premiums for such insurance would at any time
exceed 250% of Subject Company's Current Premium, then the Surviving
Corporation shall cause to be maintained policies of insurance which, in the
Surviving Corporation's good faith determination, provide the maximum coverage
available at an annual premium equal to 250% of Subject Company's Current
Premium.
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(d) In the event Parent or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of Parent shall
assume the obligations set forth in this Section 6.8.
(e) The provisions of this Section 6.8 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
6.9 Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any merger between a Subsidiary of
Parent and a Subsidiary of Subject Company) or to vest the Surviving
Corporation with full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the merger, the proper
officers and directors of each party to this Agreement and their respective
Subsidiaries shall take all such necessary action as may be reasonably
requested by, and at the sole expense of, Parent.
6.10 Advice of Changes. Parent and Subject Company shall promptly advise the
other party of any change or event which, individually or in the aggregate
with other such changes or events, has a Material Adverse Effect on it or
which it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or covenants
contained herein.
6.11 Dividends. After the date of this Agreement, each of Parent and Subject
Company shall coordinate with the other the declaration of any dividends in
respect of Parent Common Stock and Subject Company Common Stock and the record
dates and payment dates relating thereto, it being the intention of the
parties hereto that holders of Parent Common Stock or Subject Company Common
Stock shall not receive more than one dividend, or fail to receive one
dividend, for any single calendar quarter with respect to their shares of
Parent Common Stock and/or Subject Company Common Stock and any shares of
Parent Common Stock any such holder receives in exchange therefor in the
Merger.
6.12 Subsequent Interim and Annual Financial Statements. As soon as
reasonably available, but in no event more than 45 days after the end of each
fiscal quarter (other than the fourth quarter of a fiscal year) or 90 days
after December 31, 1995 or the end of each fiscal year ending after the date
of this Agreement, each party will deliver to the other party its Quarterly
Report on Form 10-Q or its Annual Report on Form 10-K, as the case may be, as
filed with the SEC under the Exchange Act.
6.13 Litigation. Each of Parent and Subject Company shall immediately
dismiss, with prejudice, with each party bearing its own costs, attorneys'
fees and litigation expenses and without payment by Parent or Subject Company
to any adverse party of any damages, costs, expenses or attorneys' fees, all
proceedings pending in Wells Fargo & Company v. First Interstate Bancorp, et
al., Delaware Chancery, C.A. No. 14696, and First Interstate Bancorp v. Wells
Fargo & Company, et al., United States District Court for the District of
Delaware, C.A. No. 95-800, and shall execute and deliver such further papers
as may be necessary in connection with such dismissals, including, but not
limited to, exchanging mutual releases with respect or relating to the subject
matter of such proceedings.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. The agreement of merger contained in this
Agreement shall have been approved and adopted by the requisite affirmative
votes of the holders of Subject Company Common Stock and Parent Common
Stock entitled to vote thereon.
(b) NYSE Listing. The shares of Parent Common Stock which shall be issued
to the stockholders of Subject Company upon consummation of the Merger and
the New Parent Depositary Shares shall have been authorized for listing on
the NYSE, subject to official notice of issuance.
(c) Other Approvals. All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect
thereof shall have expired (all such approvals and the expiration of all
such waiting periods being referred to herein as the "Requisite Regulatory
Approvals") and no such approval shall have imposed any condition,
requirement or restriction which the Board of Directors of either Parent or
Subject Company reasonably determines in good faith would so materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement to Parent and its stockholders or Subject
Company and its stockholders, as the case may be, as to render inadvisable
the consummation of the Merger (any such condition, requirement or
restriction, a "Burdensome Condition").
(d) S-4. The S-4 shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the S-4 shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or any of the other transactions contemplated by
this Agreement shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restricts or makes
illegal the consummation of the Merger.
7.2 Conditions to Obligations of Parent. The obligation of Parent to effect
the Merger is also subject to the satisfaction or waiver by Parent at or prior
to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Subject Company set forth in Sections 3.2, 3.3(a), 3.6,
3.8(a), 3.17 and 3.18 of this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date and (ii)
the representations and warranties of Subject Company set forth in this
Agreement other than those specifically enumerated in clause (i) hereof
shall be true and correct in all respects as of the date of this Agreement
and (except to the extent such representations and warranties speak as of
an earlier date) as of the Closing Date as though made on and as of the
Closing Date; provided, however, that for purposes of determining the
satisfaction of the condition contained in this clause (ii), no effect
shall be given to any exception in such representations and warranties
relating to materiality or a Material Adverse Effect, and provided,
further, however, that, for purposes of this clause (ii), such
representations and warranties shall be deemed to be true and correct in
all respects unless the failure or failures of such representations and
warranties to be so true and correct, individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse
Effect on Subject Company and its Subsidiaries taken as a whole. Parent
shall have received a certificate signed on behalf of the Subject Company
by the Chief Executive Officer and Chief Financial Officer of Subject
Company to the foregoing effect.
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(b) Performance of Obligations of Subject Company. Subject Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Parent shall have received a certificate signed on behalf of Subject
Company by the Chief Executive Officer and the Chief Financial Officer of
Subject Company to such effect.
(c) Subject Company Rights Agreement. The rights issued pursuant to the
Subject Company Rights Agreement shall not have become nonredeemable,
exercisable, distributed or triggered pursuant to the terms of such
agreement.
(d) Federal Tax Opinion. Parent shall have received an opinion of
Sullivan & Cromwell, counsel to Parent, in form and substance reasonably
satisfactory to Parent, dated as of the Effective Time, substantially to
the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing
at the Effective Time, the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code and that accordingly:
(1) No gain or loss will be recognized by Parent or Subject Company
as a result of the Merger;
(2) No gain or loss will be recognized by the stockholders of Subject
Company who exchange their Subject Company Capital Stock solely for
Parent Capital Stock pursuant to the Merger (except with respect to
cash received in lieu of a fractional share interest in Parent Common
Stock); and
(3) The tax basis of the Parent Capital Stock received by
stockholders who exchange all of their Subject Company Capital Stock
solely for Parent Capital Stock in the Merger will be the same as the
tax basis of the Subject Company Capital Stock surrendered in exchange
therefor (reduced by any amount of tax basis allocable to a fractional
share interest for which cash is received).
In rendering such opinion, Sullivan & Cromwell may require and rely upon
representations and covenants including those contained in certificates of
officers of Parent and Subject Company and others.
7.3 Conditions to Obligations of Subject Company. The obligation of Subject
Company to effect the Merger is also subject to the satisfaction or waiver by
Subject Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Parent set forth in Sections 4.2, 4.3(a), 4.6, 4.8(a), 4.17
and 4.18 of this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date and (ii) the
representations and warranties of Parent set forth in this Agreement other
than those specifically enumerated in clause (i) hereof shall be true and
correct in all respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of determining the satisfaction of the condition
contained in this clause (ii), no effect shall be given to any exception in
such representations and warranties relating to materiality or a Material
Adverse Effect, and provided, further, however, that, for purposes of this
clause (ii), such representations and warranties shall be deemed to be true
and correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct, individually or
in the aggregate, results or would reasonably be expected to result in a
Material Adverse Effect on Parent and its Subsidiaries taken as a whole.
Subject Company shall have received a certificate signed on behalf of
Parent by the Chief Executive Officer and the Chief Financial Officer of
Parent to the foregoing effect.
(b) Performance of Obligations of Parent. Parent shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Subject Company shall
have received a certificate signed on behalf of Parent by the Chief
Executive Officer and the Chief Financial Officer of Parent to such effect.
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(c) Federal Tax Opinion. Subject Company shall have received an opinion
of Skadden, Arps, Slate, Meagher & Flom, counsel to Subject Company, in
form and substance reasonably satisfactory to Subject Company, dated as of
the Effective Time, substantially to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and that accordingly:
(1) No gain or loss will be recognized by Parent or Subject Company
as a result of the Merger;
(2) No gain or loss will be recognized by the stockholders of Subject
Company who exchange their Subject Company Capital Stock solely for
Parent Capital Stock pursuant to the Merger (except with respect to
cash received in lieu of a fractional share interest in Parent Common
Stock); and
(3) The tax basis of the Parent Capital Stock received by
stockholders who exchange all of their Subject Company Capital Stock
solely for Parent Capital Stock in the Merger will be the same as the
tax basis of the Subject Company Capital Stock surrendered in exchange
therefor (reduced by any amount of tax basis allocable to a fractional
share interest for which cash is received).
In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom may
require and rely upon representations and covenants including those
contained in certificates of officers of Parent and Subject Company and
others.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual consent of Parent and Subject Company in a written
instrument, if the Board of Directors of each so determines;
(b) by either the Board of Directors of Parent or the Board of Directors
of Subject Company if (i) any Governmental Entity which must grant a
Requisite Regulatory Approval has denied approval of the Merger and such
denial has become final and nonappealable or (ii) any Governmental Entity
of competent jurisdiction shall have issued a final nonappealable order
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(c) by either the Board of Directors of Parent or the Board of Directors
of Subject Company if the Merger shall not have been consummated on or
before December 31, 1996, unless the failure of the Closing to occur by
such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the covenants and agreements of such
party set forth herein;
(d) by either the Board of Directors of Parent or the Board of Directors
of Subject Company (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein) if the other party shall have breached (i) any
of the covenants or agreements made by such other party herein or (ii) any
of the representations or warranties made by such other party herein, and
in either case, such breach (x) is not cured within thirty (30) days
following written notice to the party committing such breach, or which
breach, by its nature, cannot be cured prior to the Closing and (y) would
entitle the non-breaching party not to consummate the transactions
contemplated hereby under Article VII hereof;
(e) by either the Board of Directors of Parent or the Board of Directors
of Subject Company if any approval of the stockholders of Parent or the
Subject Company contemplated by this Agreement shall not have been obtained
by reason of the failure to obtain the required vote at a duly held meeting
of stockholders or at any adjournment or postponement thereof;
(f) prior to the approval of this Agreement by the requisite vote of
Subject Company's stockholders (if Subject Company is the terminating
party) or by the requisite vote of Parent's stockholders (if Parent is
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the terminating party), by either the Board of Directors of Parent or the
Board of Directors of Subject Company, if there exists at such time a
Takeover Proposal for the party whose Board of Directors is seeking to
terminate this Agreement pursuant to this paragraph (f) and such Board of
Directors, after having consulted with and considered the advice of outside
legal counsel, reasonably determines in good faith that such action is
necessary in the exercise of its fiduciary duties under applicable laws;
(g) by either the Board of Directors of Parent or the Board of Directors
of Subject Company, if such Board shall have reasonably determined in good
faith that any of the Requisite Regulatory Approvals contains a Burdensome
Condition; or
(h) by either the Board of Directors of Parent or the Board of Directors
of Subject Company, if the Board of Directors of the other party shall have
withdrawn, modified or changed in a manner adverse to the terminating party
its approval or recommendation of this Agreement and the transactions
contemplated hereby.
8.2 Effect of Termination. In the event of termination of this Agreement by
either Parent or Subject Company as provided in Section 8.1, this Agreement
shall forthwith become void and have no effect, and none of Parent, Subject
Company, any of their respective Subsidiaries or any of the officers or
directors of any of them shall have any liability of any nature whatsoever
hereunder, or in connection with the transactions contemplated hereby, except
that (i) Sections 6.2(b), 8.2, and 9.3 shall survive any termination of this
Agreement and (ii) notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor Subject Company shall be relieved or released
from any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
8.3 Amendment. Subject to compliance with applicable law, this Agreement may
be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of Subject
Company and Parent; provided, however, that after any approval of the
transactions contemplated by this Agreement by Subject Company's stockholders,
there may not be, without further approval of such stockholders, any amendment
of this Agreement which reduces the amount or changes the form of the
consideration to be delivered to the Subject Company stockholders hereunder
other than as contemplated by this Agreement. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 12:01 a.m. on the
first day of the month following the month in which the latest to occur of the
conditions set forth in Section 7.1 hereof is satisfied or waived (subject to
applicable law) or on such other date to which the parties hereto shall
mutually agree (the "Closing Date").
9.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this
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Agreement (other than the Fee Letters, for which provision has been made
therein) shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply in whole or
in part after the Effective Time.
9.3 Expenses. Except as provided in the Fee Letters or in Section 8.2
hereof, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expense, provided, however, that (i) the costs and expenses of printing and
mailing the Joint Proxy Statement, and all filing and other fees paid to the
SEC in connection with the Merger, shall be borne equally by Parent and
Subject Company and (ii) notwithstanding anything to the contrary contained in
this Agreement, neither Parent nor Subject Company shall be relieved or
released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
9.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent, to:
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
Attn: Guy Rounsaville, Jr., Esq.
(415) 396-2029
Fax: (415) 396-2987
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attn: Mitchell Eitel, Esq.
(212) 558-4000
Fax: (212) 558-3588
(b) if to Subject Company, to:
First Interstate Bancorp
633 West Fifth Street, T7-10
Los Angeles, California 90071
Attn: General Counsel
Fax: (213) 614-3741
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: Fred B. White, III, Esq.
Fax: (212) 735-2000
9.5 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". Whenever the word "material" is used in this Agreement and the
context in which it is used refers to any of the parties to this Agreement or
any of their respective Subsidiaries, it shall be deemed to be followed by "to
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[Subject Company] [Parent] and its Subsidiaries, taken together as a whole,"
as applicable. No provision of this Agreement shall be construed to require
Subject Company, Parent or any of their respective Subsidiaries or affiliates
to take any action which would violate or conflict with any applicable law
(whether statutory or common), rule or regulation.
9.6 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.7 Entire Agreement. This Agreement (together with the documents and the
instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, other than the
Subject Company Documents and the Parent Documents.
9.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law.
9.9 Severability. Except to the extent that application of this Section 9.9
would have a Material Adverse Effect on either party or the Surviving
Corporation, any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
9.10 Publicity. Except as otherwise required by applicable law or the rules
of the NYSE, neither Parent nor Subject Company shall, or shall permit any of
its Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement or the
Fee Letters without the consent of the other party, which consent shall not be
unreasonably withheld.
9.11 Assignment; Third Party Beneficiaries. Neither this Agreement nor any
of the rights, interests or obligations of any party hereunder shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns. Except as otherwise specifically provided in Section 6.8 hereof,
this Agreement (including the documents and instruments referred to herein) is
not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
9.12 Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, the parties may
mutually agree to revise the structure of the Merger and related transactions
provided that each of the transactions comprising such revised structure shall
(i) not change the amount or form of consideration to be received by the
stockholders of Subject Company and the holders of Subject Company Options,
(ii) be capable of consummation in as timely a manner as the structure
contemplated herein and (iii) not otherwise be prejudicial to the interests of
the stockholders of Subject Company. This Agreement and any related documents
shall be appropriately amended in order to reflect any such revised structure.
9.13 Enforcement of the Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, Parent and Subject Company have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
Wells Fargo & Company
By: /s/ Rodney L. Jacobs
----------------------------
Name: Rodney L. Jacobs
Title: Vice Chairman and Chief
Financial Officer
First Interstate Bancorp
By: /s/ Theodore F. Craver, Jr.
----------------------------
Name: Theodore F. Craver, Jr.
Title: Executive Vice President
and Treasurer
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APPENDIX B
[Conformed Copy]
January 23, 1996
Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94163
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger (the "Merger Agreement") of
even date herewith between First Interstate Bancorp ("Subject Company") and
Wells Fargo & Company ("Parent"). Capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Merger Agreement.
In order to induce Parent to enter into the Merger Agreement, and in
consideration of Parent's undertaking of efforts in furtherance of the
transactions contemplated thereby, Subject Company agrees as follows:
1. Representations and Warranties. Subject Company hereby represents and
warrants to Parent that Subject Company has all requisite corporate power
and authority to enter into this letter agreement (this "Agreement") and to
perform its obligations set forth herein. The execution, delivery and
performance of this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Parent. This Agreement has been
duly executed and delivered by Subject Company.
2. Termination Fee. (a) Unless a Nullifying Event (as such term is
defined below) shall have occurred and be continuing at the time the Merger
Agreement is terminated, in the event that the Merger Agreement is
terminated pursuant to Article VIII thereof (regardless of whether such
termination is by Parent or Subject Company) and prior to or concurrently
with such termination a First Trigger Event (as such term is defined below)
shall have occurred, Subject Company shall pay to Parent a cash fee of $50
million. Such fee shall be payable in immediately available funds on or
before the second business day following such termination of the Merger
Agreement.
(b) In addition, unless a Nullifying Event shall have occurred and be
continuing at the time the Merger Agreement is terminated, in the event
that (i) the Merger Agreement shall have been terminated pursuant to
Article VIII thereof, (ii) prior to or concurrently with such termination a
First Trigger Event shall have occurred, and (iii) prior to, concurrently
with or within 18 months after such termination an Acquisition Event (as
such term is defined below) shall have occurred, Subject Company shall pay
to Parent an additional cash fee of (i) $150 million, less (ii) any amount
paid by Subject Company pursuant to Paragraph 2(a) hereof. Such fee shall
be payable in immediately available funds on or before the second business
day following the occurrence of such Acquisition Event.
(c) As used herein, a "First Trigger Event" shall mean the occurrence of
any of the following events:
(i) Subject Company's Board of Directors shall have failed to approve
or recommend the Merger Agreement or the Merger or shall have withdrawn
or modified in a manner adverse to Parent its approval or
recommendation of the Merger Agreement or the Merger, or shall have
resolved or publicly announced an intention to do either of the
foregoing;
(ii) Subject Company or any Significant Subsidiary (as such term is
defined below), or the Board of Directors of Subject Company or a
Significant Subsidiary, shall have recommended that the
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stockholders of Subject Company approve any Acquisition Proposal (as
such term is defined below) or shall have entered into an agreement
with respect to, or authorized, approved, proposed or publicly
announced its intention to enter into, any Acquisition Proposal;
(iii) the Merger Agreement or the Merger shall not have been approved
at a meeting of Subject Company stockholders which has been held for
that purpose prior to termination of the Merger Agreement in accordance
with its terms, if prior thereto it shall have been publicly announced
that any person (other than Parent or any of its Subsidiaries) shall
have made, or disclosed an intention to make, an Acquisition Proposal;
(iv) any person (together with its affiliates and associates) or
group (as such terms are used for purposes of Section 13(d) of the
Exchange Act)(other than Parent and its Subsidiaries) shall have
acquired beneficial ownership (as such term is used for purposes of
Section 13(d) of the Exchange Act) or the right to acquire beneficial
ownership of 50% or more of the then outstanding shares of the stock
then entitled to vote generally in the election of directors of Subject
Company or any Significant Subsidiary; or
(v) following the making of an Acquisition Proposal, Subject Company
shall have breached any covenant or agreement contained in the Merger
Agreement such that Parent would be entitled to terminate the Merger
Agreement under Section 8.1(d) thereof (without regard to any grace
period provided for therein) unless such breach is promptly cured
without jeopardizing consummation of the Merger pursuant to the terms
of the Merger Agreement.
(d) As used herein, "Acquisition Event" shall mean the consummation of
any event described in the definition of "Acquisition Proposal," except
that the percentage reference contained in clause (C) of such definition
shall be 50% instead of 20%.
(e) As used herein, "Acquisition Proposal" shall mean any (i) publicly
announced proposal, (ii) regulatory application or notice (whether in draft
or final form), (iii) agreement or understanding, (iv) disclosure of an
intention to make a proposal, or (v) amendment to any of the foregoing,
made or filed on or after the date hereof, in each case with respect to any
of the following transactions with a counterparty other than Parent or any
of its Subsidiaries: (A) a merger or consolidation, or any similar
transaction, involving Subject Company or any Significant Subsidiary (other
than mergers, consolidations, or any similar transactions involving solely
Subject Company and/or one or more wholly owned Subsidiaries of Subject
Company and other than a merger or consolidation as to which the common
shareholders of Subject Company immediately prior thereto in the aggregate
own at least 70% of the common stock of the publicly held surviving or
successor corporation (or any publicly held ultimate parent company
thereof) immediately following consummation thereof); (B) a purchase, lease
or other acquisition of all or substantially all of the assets or deposits
of Subject Company or any Significant Subsidiary; or (C) a purchase or
other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 20% or more of the voting
power of Subject Company or any Significant Subsidiary.
(f) As used herein, "Nullifying Event" shall mean (I) any of the
following events occurring and continuing at a time when Subject Company is
not in material breach of any of its covenants or agreements contained in
the Merger Agreement: (i) Parent shall be in breach of any of its covenants
or agreements contained in the Merger Agreement such that Subject Company
shall be entitled to terminate the Merger Agreement pursuant to Section
8.1(d) thereof (without regard to any grace period provided for therein),
(ii) the stockholders of Parent shall have voted and failed to approve the
adoption of the agreement of merger (within the meaning of Section 251 of
the DGCL) contained in the Merger Agreement at a meeting of such
stockholders which has been held for that purpose or at any adjournment or
postponement thereof (unless the Merger Agreement shall not have been
approved at a meeting of Subject Company stockholders which was held on or
prior to such date for the purpose of voting with respect to the Merger
Agreement) or (iii) the Board of Directors of Parent shall have failed to
approve or recommend that the stockholders of Parent approve the adoption
of the agreement of merger (within the meaning of Section 251 of the DGCL)
contained in the Merger Agreement or shall have withdrawn, modified or
changed in any manner adverse to
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Subject Company its approval or recommendation that the stockholders of
Parent approve the adoption of the agreement of merger (within the meaning
of Section 251 of the DGCL) contained in the Merger Agreement or shall have
resolved or publicly announced its intention to do any of the foregoing or
(II) the termination of the Merger Agreement pursuant to Section 8.1(g)
thereof.
(g) As used herein, "Significant Subsidiary" shall mean a "significant
subsidiary," as defined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission, of Subject Company.
(h) Notwithstanding anything to the contrary contained herein, in no
event shall any action taken by North prior to, on or after the date hereof
with respect to a merger or similar business combination involving Subject
Company and North in which the holders of Subject Company Common Stock
would receive, for each such share, solely 2.60 or less shares of the
common stock of North (together with cash in lieu of any fractional shares)
be deemed to constitute an Acquisition Proposal.
3. To the extent that Subject Company is prohibited by applicable law or
regulation, or by administrative actions or policy of a Federal or state
financial institution supervisory agency having jurisdiction over it, from
making the payments required to be paid by Subject Company herein in full,
it shall immediately so notify Parent and thereafter deliver or cause to be
delivered, from time to time, to Parent, the portion of the payments
required to be paid by it herein that is no longer prohibited from paying,
within five business days after the date on which Subject Company is no
longer so prohibited; provided, however, that if Subject Company at any
time is prohibited by applicable law or regulation, or by administrative
actions or policy of a Federal or state financial institution supervisory
agency having jurisdiction over it, from making the payments required
hereunder in full, it shall (i) use its reasonable best efforts to obtain
all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to make such payments, (ii)
within five days of the submission or receipt of any documents relating to
any such regulatory and legal approvals, provide Parent with copies of the
same and (iii) keep Parent advised of both the status of any such request
for regulatory and legal approvals, as well as any discussions with any
relevant regulatory or other third party reasonably related to the same.
4. Except where federal law specifically applies, this Agreement shall be
construed and interpreted according to the laws of the State of Delaware
without regard to conflicts of laws principles thereof.
5. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
6. Nothing contained herein shall be deemed to authorize Subject Company
or Parent to breach any provision of the Merger Agreement.
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Please confirm your agreement with the understandings set forth herein by
signing and returning to us the enclosed copy of this Agreement.
Very truly yours,
First Interstate Bancorp
/s/ Theodore F. Craver, Jr.
By: _________________________________
Name:Theodore F. Craver, Jr.
Title:EVP and Treasurer
Accepted and agreed to as of the date
first above written:
Wells Fargo & Company
/s/ Rodney L. Jacobs
By: ______________________________________
Name:Rodney L. Jacobs
Title:Vice Chairman and Chief Financial Officer
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APPENDIX C
[Conformed Copy]
January 23, 1996
First Interstate Bancorp
633 West 5th Street
Los Angeles, CA 90071
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger (the "Merger Agreement") of
even date herewith between First Interstate Bancorp ("Subject Company") and
Wells Fargo & Company ("Parent"). Capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Merger Agreement.
In order to induce Subject Company to enter into the Merger Agreement, and
in consideration of Subject Company's undertaking of efforts in furtherance of
the transactions contemplated thereby, Parent agrees as follows:
1. Representations and Warranties. Parent hereby represents and warrants to
Subject Company that Parent has all requisite corporate power and authority to
enter into this letter agreement (this "Agreement") and to perform its
obligations set forth herein. The execution, delivery and performance of this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of Parent. This Agreement has been duly executed and
delivered by Parent.
2. Termination Fee. (a) Unless a Nullifying Event (as such term is defined
below) shall have occurred and be continuing at the time the Merger Agreement
is terminated, in the event that the Merger Agreement is terminated pursuant
to Article VIII thereof (regardless of whether such termination is by Parent
or Subject Company) and prior to or concurrently with such termination a First
Trigger Event (as such term is defined below) shall have occurred, Parent
shall pay to Subject Company a cash fee of $50 million. Such fee shall be
payable in immediately available funds on or before the second business day
following such termination of the Merger Agreement.
(b) In addition, unless a Nullifying Event shall have occurred and be
continuing at the time the Merger Agreement is terminated, in the event that
(i) the Merger Agreement shall have been terminated pursuant to Article VIII
thereof, (ii) prior to or concurrently with such termination a First Trigger
Event shall have occurred, and (iii) prior to, concurrently with or within 18
months after such termination an Acquisition Event (as such term is defined
below) shall have occurred, Parent shall pay to Subject Company an additional
cash fee of (i) $150 million, less (ii) any amount paid by Parent pursuant to
Paragraph 2(a) hereof. Such fee shall be payable in immediately available
funds on or before the second business day following the occurrence of any
such Acquisition Event.
(c) As used herein, a "First Trigger Event" shall mean the occurrence of any
of the following events:
(i) Parent's Board of Directors shall have failed to approve or recommend
the Merger Agreement or the Merger, or shall have withdrawn or modified in
a manner adverse to Subject Company its approval or recommendation of the
Merger Agreement or the Merger, or shall have resolved or publicly
announced an intention to do either of the foregoing;
(ii) Parent or any Significant Subsidiary (as such term is defined
below), or the Board of Directors of Parent or a Significant Subsidiary,
shall have recommended that the stockholders of Parent approve any
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Acquisition Proposal (as such term is defined below) or shall have entered
into an agreement with respect to, or authorized, approved, proposed or
publicly announced its intention to enter into, any Acquisition Proposal;
(iii) the Merger Agreement or the Merger shall not have been approved at
a meeting of Parent stockholders which has been held for that purpose prior
to termination of the Merger Agreement in accordance with its terms, if
prior thereto it shall have been publicly announced that any person (other
than Subject Company or any of its Subsidiaries) shall have made, or
disclosed an intention to make, an Acquisition Proposal;
(iv) any person (together with its affiliates and associates) or group
(as such terms are used for purposes of Section 13(d) of the Exchange
Act)(other than Subject Company and its Subsidiaries) shall have acquired
beneficial ownership (as such term is used for purposes of Section 13(d) of
the Exchange Act) or the right to acquire beneficial ownership of 50% or
more of the then outstanding shares of the stock then entitled to vote
generally in the election of directors of Parent or any Significant
Subsidiary; or
(v) following the making of an Acquisition Proposal, Parent shall have
breached any covenant or agreement contained in the Merger Agreement such
that Subject Company would be entitled to terminate the Merger Agreement
under Section 8.1(d) thereof (without regard to any grace period provided
for therein), unless such breach is promptly cured without jeopardizing
consummation of the Merger pursuant to the terms of the Merger Agreement.
(d) As used herein, "Acquisition Event" shall mean the consummation of any
event described in the definition of "Acquisition Proposal," except that the
percentage reference contained in clause (C) of such definition shall be 50%
instead of 20%.
(e) As used herein, "Acquisition Proposal" shall mean any (i) publicly
announced proposal, (ii) regulatory application or notice (whether in draft or
final form), (iii) agreement or understanding, (iv) disclosure of an intention
to make a proposal, or (v) amendment to any of the foregoing, made or filed on
or after the date hereof, in each case with respect to any of the following
transactions with a counterparty other than Subject Company or any of its
Subsidiaries: (A) a merger or consolidation, or any similar transaction,
involving Parent or any Significant Subsidiary (other than mergers,
consolidations, or any similar transactions involving solely Parent and/or one
or more wholly owned Subsidiaries of Parent and other than a merger or
consolidation as to which the common shareholders of Parent immediately prior
thereto in the aggregate own at least 70% of the common stock of the publicly
held surviving or successor corporation (or any publicly held ultimate parent
company thereof) immediately following consummation thereof); (B) a purchase,
lease or other acquisition of all or substantially all of the assets or
deposits of Parent or any Significant Subsidiary; or (C) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 20% or more of the voting power of
Parent or any Significant Subsidiary.
(f) As used herein, "Nullifying Event" shall mean (I) any of the following
events occurring and continuing at a time when Parent is not in material
breach of any of its covenants or agreements contained in the Merger
Agreement: (i) Subject Company shall be in breach of any of its covenants or
agreements contained in the Merger Agreement such that Parent shall be
entitled to terminate the Merger Agreement pursuant to Section 8.1(d) thereof
(without regard to any grace period provided for therein), (ii) the
stockholders of Subject Company shall have voted and failed to approve the
adoption of the agreement of merger (within the meaning of Section 251 of the
DGCL) contained in the Merger Agreement at a meeting of such stockholders
which has been held for that purpose or at any adjournment or postponement
thereof (unless the Merger Agreement shall not have been approved at a meeting
of Parent stockholders which was held on or prior to such date for the purpose
of voting with respect to the Merger Agreement) or (iii) the Board of
Directors of Subject Company shall have failed to approve or recommend that
the stockholders of Subject Company approve the adoption of the agreement of
merger (within the meaning of Section 251 of the DGCL) contained in the Merger
Agreement or shall have withdrawn, modified or changed in any manner adverse
to Parent its approval or recommendation that the stockholders of Subject
Company approve the adoption of the agreement of merger (within the meaning of
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<PAGE>
Section 251 of the DGCL) contained in the Merger Agreement or shall have
resolved or publicly announced its intention to do any of the foregoing, or
(II) the termination of the Merger Agreement pursuant to Section 8.1(g)
thereof.
(g) As used herein, "Significant Subsidiary" shall mean a "significant
subsidiary," as defined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission, of Parent.
3. To the extent that Parent is prohibited by applicable law or regulation,
or by administrative actions or policy of a Federal or state financial
institution supervisory agency having jurisdiction over it, from making the
payments required to be paid by Parent herein in full, it shall immediately so
notify Subject Company and thereafter deliver or cause to be delivered, from
time to time, to Subject Company, the portion of the payments required to be
paid by it herein that is no longer prohibited from paying, within five
business days after the date on which Parent is no longer so prohibited;
provided, however, that if Parent at any time is prohibited by applicable law
or regulation, or by administrative actions or policy of a Federal or state
financial institution supervisory agency having jurisdiction over it, from
making the payments required hereunder in full, it shall (i) use its
reasonable best efforts to obtain all required regulatory and legal approvals
and to file any required notices as promptly as practicable in order to make
such payments, (ii) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Subject
Company with copies of the same and (iii) keep Subject Company advised of both
the status of any such request for regulatory and legal approvals, as well as
any discussions with any relevant regulatory or other third party reasonably
related to the same.
4. Except where federal law specifically applies, this Agreement shall be
construed and interpreted according to the laws of the State of Delaware
without regard to conflicts of laws principles thereof.
5. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6. Nothing contained herein shall be deemed to authorize Subject Company or
Parent to breach any provision of the Merger Agreement.
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<PAGE>
Please confirm your agreement with the understandings set forth herein by
signing and returning to us the enclosed copy of this Agreement.
Very truly yours,
WELLS FARGO & COMPANY
/s/ Rodney L. Jacobs
By: _________________________________
Name:Rodney L. Jacobs
Title:Vice Chairman and Chief
Financial Officer
Accepted and agreed to as of the date
first above written:
FIRST INTERSTATE BANCORP
/s/ Theodore F. Craver, Jr.
By: ______________________________________
Name:Theodore F. Craver, Jr.
Title:EVP and Treasurer
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<PAGE>
APPENDIX D
[Conformed Copy]
AGREEMENT
AGREEMENT (this "Agreement") dated January 23, 1996 among FIRST BANK SYSTEM,
INC., a Delaware corporation ("FBS"), ELEVEN ACQUISITION CORP., a Delaware
corporation and an indirect wholly-owned subsidiary of FBS ("Acquisition"),
FIRST INTERSTATE BANCORP, a Delaware corporation ("FI"), and WELLS FARGO &
COMPANY, a Delaware corporation ("Wells").
WHEREAS, FBS, Acquisition and FI entered into an Agreement and Plan of
Merger dated as of November 5, 1995 (the "Merger Agreement") providing, upon
the terms and subject to the conditions contained in the Merger Agreement, for
Acquisition to be merged with and into FI (the "Merger");
WHEREAS, in connection with the Merger Agreement, FI and FBS entered into a
Stock Option Agreement dated as of November 5, 1995 (the "FI Option
Agreement") pursuant to which FI granted to FBS an irrevocable option (the "FI
Stock Option") to purchase shares of FI Common Stock;
WHEREAS, in connection with the Merger Agreement, FI and FBS entered into a
Letter Agreement dated November 5, 1995 (the "FI Fee Agreement") pursuant to
which FI agreed to pay FBS certain amounts under certain circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement FI
is terminating the Merger Agreement pursuant to Section 8.1(f) thereof and
entering into an agreement and plan of merger with Wells (the "Wells Merger
Agreement"); and
WHEREAS, certain litigation is pending between the parties hereto;
NOW THEREFORE, in consideration of the foregoing and the mutual agreements
herein set forth, the parties do hereby agree as follows:
1. Payments by FI to FBS. (a) FI irrevocably and unconditionally agrees to
pay FBS as early as practicable on January 24, 1996, by wire transfer in
immediately available funds, $125,000,000;
(b) Upon the occurrence of an Acquisition Event (as defined in the FI Fee
Agreement), FI irrevocably and unconditionally agrees to pay FBS, on the
date of such occurrence, by wire transfer in immediately available funds,
$75,000,000; and
(c) The payment pursuant to Section 1(a) of this Agreement shall be in
full satisfaction of FI's obligations under the FI Option Agreement and, to
the extent provided in the Releases (as hereinafter defined), in
satisfaction of any claims that FBS may have against FI and any other
releasee for breach of the Merger Agreement and any claims that FBS may
have against Wells for tortious interference with the contractual or
prospective economic advantage resulting from the Merger Agreement, and the
payments pursuant to Sections 1(a) and 1(b) of this Agreement shall be in
full satisfaction of FI's obligations under the FI Fee Agreement.
2. Termination of Merger Agreement and Parent Agreements. FBS, FI and
Acquisition agree that the Merger Agreement is hereby terminated by FI in
accordance with Section 8.1(f) thereof. FBS and FI further agree that the
Parent Fee Letter and the Parent Option Agreement (as such terms are defined
in the Merger Agreement) are terminated and rendered null and void effective
immediately.
3. Termination of FI Option Agreement and FI Fee Agreement. FBS and FI agree
that (i) FBS shall have no further rights under the FI Option Agreement and
such agreement shall be terminated and rendered null and void effective
immediately upon full and timely payment to FBS of the amount referred to in
Section 1(a) and (ii) FBS shall have no further rights under the FI Fee
Agreement immediately upon full and timely payment to FBS of the amounts
referred to in Sections 1(a) and 1(b) hereof. FBS and FI further agree that
the FI Fee Agreement shall remain in full force and effect until the timely
payment to FBS of the amount referred to in
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Section 1(b) hereof, provided, however, that FBS agrees not to seek any
amounts under the FI Fee Agreement unless and until the Wells Merger Agreement
is terminated without consummation of an Acquisition Event involving Wells.
FBS and FI further agree that if the Wells Merger Agreement is terminated
after payment of the amount referred to in Section 1(a) and prior to the
payment to FBS of the amount referred to in Section 1(b) hereof, $25 million
of the amount paid to FBS pursuant to Section 1(a) hereof shall constitute
payment pursuant to Section 2(a) of the FI Fee Agreement.
4. Release; Withdrawal of Litigation, Regulatory Filings and Protests. Each
of FBS, Acquisition, Wells and FI shall execute releases immediately upon
execution of this Agreement, substantially in the form attached hereto as
Exhibits A, B, C and D, as applicable (collectively the "Releases"). Each
party hereto shall take all steps necessary promptly to withdraw or otherwise
finally terminate with prejudice, without costs imposed on any party, all
litigation initiated by such party and to which the Releases relate, including
without limitation the cases set forth on Schedule 4. In addition, each party
hereto will promptly withdraw any protest or opposition which it has filed
with the Board of Governors of the Federal Reserve System or any other bank
regulatory agency concerning any application filed by any other party hereto
with any such agency. FBS further agrees that it shall promptly following the
execution of this Agreement (i) withdraw its application filed with the
Federal Reserve Bank of Minneapolis on November 10, 1995 for approval from the
Federal Reserve Board of the Merger and the transactions contemplated thereby
and all applications and/or notices filed with state regulatory authorities in
connection with the Merger and (ii) withdraw or amend to be inapplicable to
any merger between FBS and FI or any acquisition by FBS of FI its Registration
Statement on Form S-4 (File No. 33-64447) filed on November 21, 1995 with the
Securities and Exchange Commission, as amended by Amendment No. 1 thereto
dated December 29, 1995.
5. Effect of Termination; Confidentiality. (a) FBS, Acquisition and FI agree
that notwithstanding clause (ii) of Section 8.2 of the Merger Agreement, none
of FBS, Acquisition or FI shall have any liabilities for any breach or alleged
breach of the Merger Agreement, including any willful breach. As provided in
clause (i) of said Section 8.2, Sections 6.2(b), 8.2 and 9.3 of the Merger
Agreement and the Confidentiality Agreement (as defined in said Section
6.2(b)) shall survive the termination of the Merger Agreement. Wells hereby
agrees to be bound by the confidentiality undertakings and agreements of the
Confidentiality Agreement, insofar as the Confidentiality Agreement relates to
information supplied by FBS or its representatives to FI that becomes
available to Wells, to the same extent as FI is so obligated pursuant thereto.
(b) Each of FBS and FI shall, as promptly as practicable after the
execution of this Agreement, (i) return to the other party or destroy all
Evaluation Material (as such term is defined in the Confidentiality
Agreement with respect to such party) in accordance with the terms of the
Confidentiality Agreement, and (ii) jointly instruct Andersen Consulting
("Andersen") (A) not to issue its report with respect to technology
integration as provided for in its letter agreement with FBS and FI (the
"Andersen Agreement") and (B) to return to FBS or FI (as applicable) as
promptly as practicable the information provided by such party to Andersen
in connection with the preparation of such report and to destroy all
materials derived from or containing such information. Each of FBS and FI
shall bear one-half of the fees and expenses of Andersen payable under the
Andersen Agreement.
6. Indemnification. Wells hereby agrees to indemnify and hold harmless FBS
and Acquisition and their respective officers, directors, employees, agents
and advisors (the "FBS Parties") against any and all liabilities, judgments,
settlements, costs, reasonable expenses (including legal fees) (collectively,
"Losses") arising out of or in connection with any claims (including, but not
limited to, claims that have been or could have been asserted in actions
pending prior to the date hereof) by or on behalf of any FI securityholders
(or by any such securityholders on behalf or purportedly on behalf of FI),
arising out of or in connection with the Merger Agreement, the FI Option
Agreement, the FI Fee Agreement, this Agreement or the transactions
contemplated thereby and hereby but, to the extent such Losses arise out of
acts or omissions of FBS, only to the extent that such acts or omissions shall
have been taken prior to the date hereof or are contemplated by this
Agreement. FBS hereby agrees that it will, and will cause its affiliates to,
cooperate with Wells in connection with any litigation or claims for which
indemnification is sought pursuant to the preceding sentence. FBS and
Acquisition
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<PAGE>
further agree that they will not settle any such litigation without the prior
written consent of Wells, which consent will not be unreasonably withheld.
Wells also agrees to indemnify the FBS Parties against all reasonable legal
fees or other expenses incurred in enforcing this Agreement. In addition, FI
agrees promptly to reimburse FBS for legal expenses (not to exceed $225,000)
incurred in connection with any such securityholder litigation prior to the
date hereof.
7. Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT
ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY
JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, OR THE SUBJECT MATTER
HEREOF IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE.
8. Validity; Due Authorization. Each party hereto represents and warrants to
the others that it is duly authorized to execute and deliver this Agreement
and the relevant Release, that no further corporate authorizations (including
shareholder approvals or approval under Section 203 of the Delaware General
Corporation Law) are required for such party's execution, delivery and
performance of this Agreement and the relevant Release, and that this
Agreement and such Release is a valid and binding obligation of such party.
9. Specific Performance. The parties hereto acknowledge that damages would
be an inadequate remedy for any breach of the provisions of this Agreement and
agree that the obligations of the parties hereunder shall be specifically
enforceable and no party shall take any action to impede the others from
seeking to enforce such rights of specific performance.
10. Notices. All notices, requests, claims, demands and other communications
hereunder shall be effective upon receipt, shall be in writing and shall be
delivered in person, by cable, telegram or telex, or by facsimile transmission
as follows: (i) if to Wells, addressed to Wells Fargo & Co., 420 Montgomery
Street, San Francisco, CA 94163 (Att: General Counsel) with a copy to Sullivan
& Cromwell, 125 Broad Street, New York, New York 10004 (Att: H. Rodgin Cohen,
Esq.), (ii) if to FBS or Acquisition, addressed to First Bank System, Inc.,
601 Second Avenue South, Minneapolis, Minnesota 55402 (Att: General Counsel)
with a copy to Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New
York, New York 10006 (Att: Victor I. Lewkow, Esq.), (iii) if to FI, addressed
to First Interstate Bancorp, 633 West Fifth Street, Los Angeles, CA 90071
(Att: General Counsel) with a copy to Skadden, Arps, Meagher & Flom, 919 Third
Avenue, New York, New York 10022 (Att: Fred B. White, III, Esq.) or (iv) or to
such other address as any party may have furnished to the others in writing in
accordance herewith.
11. Governing Law and Venue. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without
giving effect to the principles of conflict of laws thereof. Any suit brought
hereon and any and all legal proceedings to enforce this Agreement, whether in
contract, tort, equity or otherwise, shall be brought in the Court of Chancery
of the State of Delaware to the extent such court has subject matter
jurisdiction of such suit, and otherwise in the Superior Court of the State of
Delaware, the parties hereto hereby waiving any claim or defense that such
forum is not convenient or proper. Each party hereby agrees that such court
shall have in personam jurisdiction over it, consents to service of process in
any manner prescribed in Section 10 hereof or in any other manner authorized
by Delaware law, and agrees that a final judgment in any such action or
proceeding, no longer subject to any appeal, shall be conclusive.
12. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
13. Effect of Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
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<PAGE>
14. Amendment; Waiver. No amendment or waiver of any provision of this
Agreement or consent to departure therefrom shall be effective unless in
writing and signed by the parties hereto affected thereby, in the case of an
amendment, or by the party which is the beneficiary of any such provision, in
the case of a waiver or a consent to departure therefrom.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto all as of the day and year first above written.
FIRST BANK SYSTEM, INC. FIRST INTERSTATE BANCORP
/s/ Lee R. Mitau /s/ Theodore F. Craver, Jr.
By: _________________________________ By: _________________________________
Name: Lee R. Mitau Name: Theodore F. Craver, Jr.
Title:
Executive Vice President, Title:Executive Vice President &
General Counsel & Secretary Treasurer
ELEVEN ACQUISITION CORP. WELLS FARGO & COMPANY
/s/ Lee R. Mitau /s/ Guy Rounsaville, Jr.
By: _________________________________ By: _________________________________
Name: Lee R. Mitau Name: Guy Rounsaville, Jr.
Title:
Executive Vice President & Title:General Counsel
Secretary
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SCHEDULE 4
1. Wells Fargo & Company v. First Interstate Bancorp, First Bank System, Inc.,
Eleven Acquisition Corp., John E. Bryson, Edward M. Carson, Jewel Plummer
Cobb, Ralph P. Davidson, Myron Du Bain, Don C. Frisbee, George M. Keller,
Thomas L. Lee, William F. Miller, William S. Randall, Stephen B. Sample,
Forrest N. Shumway, William E. B. Siart, Richard J. Stegemeier, and Daniel
M. Tellep, C.A. No. 14696, filed November 13, 1995, in the Court of
Chancery of the State of Delaware in and for New Castle County.
2. First Bank System, Inc. and Eleven Acquisition Corp. v. Wells Fargo &
Company, C.A. No. 95-787, filed December 14, 1995 in the United States
District Court for the District of Delaware, counterclaims filed by Wells
Fargo & Company on December 22, 1995.
3. First Interstate Bancorp v. Wells Fargo & Company, Paul Hazen, H. Jesse
Arnelle, William R. Breuner, William S. Davila, Rayburn S. Dezember, Robert
K. Jaedicke, Ellen M. Newman, Philip J. Quigley, Carl E. Reichardt, Donald
B. Rice, Susan G. Swenson, Chang-Lin Tien, John A. Young and William F.
Zuendt, C.A. No. 95-800, filed December 18, 1995 in the United States
District Court for the District of Delaware, counterclaims filed by Wells
Fargo & Company on December 22, 1995.
4. First Bank System, Inc. and Eleven Acquisition Corp. v. Wells Fargo &
Company, Case No. BC 142972, filed January 22, 1996 in the Superior Court
for the State of California for the County of Los Angeles.
D-5
<PAGE>
EXHIBIT A
LIMITED RELEASE
First Bank System, Inc. and Eleven Acquisition Corp. ("RELEASORS"), for
valuable consideration, including the release of even date executed by Wells
Fargo & Company in favor of RELEASORS, the receipt of which is hereby
acknowledged, release and discharge Wells Fargo & Company, its subsidiaries
and affiliates and their present and former directors, officers, stockholders,
employees, agents, attorneys, successors and assigns (collectively, with Wells
Fargo & Company, "RELEASEES") from all actions, accounts, agreements, bonds,
bills, causes of action, claims, covenants, contracts, controversies, damages,
demands, debts, dues, extents, expenses, executions, judgments, liabilities,
obligations, promises, predicate acts, reckonings, specialties, suits, sums of
money, trespasses and variances whatsoever, in law, equity or otherwise, known
or unknown ("CLAIMS"), which against the RELEASEES or any of them, the
RELEASORS, their successors, affiliates and assigns, or anyone claiming
through or under any of them, ever had or now have, or may hereafter have or
acquire, based upon, related to, arising from, or connected in any way with
any of the Agreement and Plan of Merger dated as of November 5, 1995 among
First Bank System, Inc., Eleven Acquisition Corp., and First Interstate
Bancorp, the related Termination Fee Agreements, Stock Option Agreements,
Confidentiality Agreement (as that term is defined in the Merger Agreement)
and other related agreements, the transactions contemplated thereby, the
Exchange Offer, Proxy Solicitation and Consent Solicitation announced by Wells
Fargo & Company on November 13, 1995, the transactions contemplated thereby,
and the acquisition of First Interstate Bancorp by Wells Fargo & Company,
including without limitation all CLAIMS that were or could have been asserted
in the actions captioned Wells Fargo & Company v. First Interstate Bancorp, et
al., No. 14696 (Delaware Court of Chancery), First Bank System, Inc. et ano.
v. Wells Fargo & Company, No. 95-787 (United States District Court for the
District of Delaware), First Interstate Bancorp v. Wells Fargo & Company et
al., No. 95-800 (United States District Court for the District of Delaware),
First Bank System, Inc., et ano. v. Wells Fargo & Company (California Superior
Court, County of Los Angeles), No. BC142972, James T. Williamson, et al. v.
First Interstate Bancorp, et al. , No. 95-810 (United States District Court
for the District of Delaware), In re First Interstate Bancorp Shareholder
Litigation, No. 14623 (Delaware Court of Chancery), Howard Kaplin,
derivatively on behalf of First Interstate Bancorp, Inc. v. John E. Bryson, et
al., No. 95-7954 (United States District Court for the Central District of
California), Timothy W. Bradley, on behalf of himself and others similarly
situated v. William E.B. Siart, et al., No. 95-8047 (United States District
Court for the Central District of California), Timothy W. Bradley, on behalf
of himself and others similarly situated v. William E.B. Siart, et al., No.
BC139665, (California Superior Court, County of Los Angeles), other than any
CLAIMS arising with respect to any breach that occurs on or after the date
hereof of the Confidentiality Agreement, the Agreement of even date executed
by First Bank System, Inc., Eleven Acquisition Corp., First Interstate
Bancorp, and Wells Fargo & Company, or Sections 6.2(b), 8.2 or 9.3 of the
Merger Agreement.
To ensure that this RELEASE is enforced in accordance with its terms, the
RELEASORS and the RELEASEES hereby acknowledge that each of them is familiar
with section 1542 of the Civil Code of California and knowingly and
voluntarily waives any rights or protections afforded by that Section, which
provides as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
The RELEASORS and the RELEASEES also knowingly and voluntarily waive all
rights and benefits they may have under comparable or similar statutes and
principles of common law of any and all states of the United States or of the
United States.
This RELEASE is governed by and shall be construed and interpreted in
accordance with the laws of the State of New York.
This RELEASE may not be modified or amended except by an instrument in
writing signed by the RELEASORS and the RELEASEES.
D-6
<PAGE>
IN WITNESS WHEREOF, the RELEASORS have executed this RELEASE on the 23rd day
of January, 1996.
FIRST BANK SYSTEM, INC. ELEVEN ACQUISITION CORP.
By:/s/ Lee R. Mitau By:/s/ Lee R. Mitau
----------------------------------- -----------------------------------
Name:Lee R. Mitau Name:Lee R. Mitau
Title: Executive Vice Title:Executive Vice President &
President,General Counsel & Secretary
Secretary
D-7
<PAGE>
STATE OF MINNESOTA )
)
COUNTY OF HENNEPIN )
On January 23, 1996 before me personally came Lee R. Mitau, to me known,
who, being by me duly sworn, did depose and state that he is the Executive
Vice President, General Counsel & Secretary of First Bank System, Inc. and the
Executive Vice President & Secretary of Eleven Acquisition Corp., the entities
described in and that executed the foregoing RELEASE and that he is duly
authorized by the Boards of Directors of First Bank System, Inc. and Eleven
Acquisition Corp. to execute said RELEASE on behalf of First Bank System, Inc.
and Eleven Acquisition Corp.
/s/ Rae Jean Armstrong
-------------------------------------
Notary Public
[Seal]
D-8
<PAGE>
EXHIBIT B
LIMITED RELEASE
First Bank System, Inc. and Eleven Acquisition Corp. ("RELEASORS"), for
valuable consideration, including the release of even date executed by First
Interstate Bancorp in favor of RELEASORS, the receipt of which is hereby
acknowledged, release and discharge First Interstate Bancorp, its subsidiaries
and affiliates and their present and former directors, officers, stockholders,
employees, agents, attorneys, successors and assigns (collectively, with First
Interstate Bancorp, "RELEASEES") from all actions, accounts, agreements,
bonds, bills, causes of action, claims, covenants, contracts, controversies,
damages, demands, debts, dues, extents, expenses, executions, judgments,
liabilities, obligations, promises, predicate acts, reckonings, specialties,
suits, sums of money, trespasses and variances whatsoever, in law, equity or
otherwise, known or unknown ("CLAIMS"), which against the RELEASEES or any of
them, the RELEASORS, their successors, affiliates and assigns, or anyone
claiming through or under any of them, ever had or now have, or may hereafter
have or acquire, based upon, related to, arising from, or connected in any way
with any of the Agreement and Plan of Merger dated as of November 5, 1995
among First Bank System, Inc., Eleven Acquisition Corp., and First Interstate
Bancorp, the related Termination Fee Agreements, Stock Option Agreements,
Confidentiality Agreement (as that term is defined in the Merger Agreement)
and other related agreements, the transactions contemplated thereby, the
Exchange Offer, Proxy Solicitation and Consent Solicitation announced by Wells
Fargo & Company on November 13, 1995, the transactions contemplated thereby,
and the acquisition of First Interstate Bancorp by Wells Fargo & Company,
including without limitation all CLAIMS that were or could have been asserted
in the actions captioned Wells Fargo & Company v. First Interstate Bancorp, et
al., No. 14696 (Delaware Court of Chancery), First Bank System, Inc. et ano.
v. Wells Fargo & Company, No. 95-787 (United States District Court for the
District of Delaware), First Interstate Bancorp v. Wells Fargo & Company et
al., No. 95-800 (United States District Court for the District of Delaware),
First Bank System, Inc., et ano. v. Wells Fargo & Company (California Superior
Court, County of Los Angeles) No. BC142972, James T. Williamson, et al. v.
First Interstate Bancorp, et al., No. 95-810 (United States District Court for
the District of Delaware), In re First Interstate Bancorp Shareholder
Litigation, No. 14623 (Delaware Court of Chancery), Howard Kaplin,
derivatively on behalf of First Interstate Bancorp, Inc. v. John E. Bryson, et
al., No. 95-7954 (United States District Court for the Central District of
California), Timothy W. Bradley, on behalf of himself and others similarly
situated v. William E.B. Siart, et al., No. 95-8047 (United States District
Court for the Central District of California), Timothy W. Bradley, on behalf
of himself and others similarly situated v. William E.B. Siart, et al., No.
BC139665, (California Superior Court, County of Los Angeles), other than any
CLAIMS arising with respect to any breach that occurs on or after the date
hereof of the Confidentiality Agreement, the Agreement of even date executed
by First Bank System, Inc., Eleven Acquisition Corp., First Interstate
Bancorp, and Wells Fargo & Company, or Sections 6.2(b), 8.2 or 9.3 of the
Merger Agreement.
To ensure that this RELEASE is enforced in accordance with its terms, the
RELEASORS and the RELEASEES hereby acknowledge that each of them is familiar
with section 1542 of the Civil Code of California and knowingly and
voluntarily waives any rights or protections afforded by that Section, which
provides as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
The RELEASORS and the RELEASEES also knowingly and voluntarily waive all
rights and benefits they may have under comparable or similar statutes and
principles of common law of any and all states of the United States or of the
United States.
This RELEASE is governed by and shall be construed and interpreted in
accordance with the laws of the State of New York.
This RELEASE may not be modified or amended except by an instrument in
writing signed by the RELEASORS and the RELEASEES.
D-9
<PAGE>
IN WITNESS WHEREOF, the RELEASORS have executed this RELEASE on the 23rd day
of January, 1996.
FIRST BANK SYSTEM, INC. ELEVEN ACQUISITION CORP.
/s/ Lee R. Mitau /s/ Lee R. Mitau
By___________________________________ By___________________________________
Name:Lee R. Mitau Name:Lee R. Mitau
Title: Executive Vice President, Title:Executive Vice President &
General Counsel & Secretary Secretary
D-10
<PAGE>
STATE OF MINNESOTA )
)
COUNTY OF HENNEPIN )
On January 23, 1996 before me personally came Lee R. Mitau, to me known,
who, being by me duly sworn, did depose and state that he is the Executive
Vice President, General Counsel & Secretary of First Bank System, Inc. and the
Executive Vice President & Secretary of Eleven Acquisition Corp., the entities
described in and that executed the foregoing RELEASE and that he is duly
authorized by the Boards of Directors of First Bank System, Inc. and Eleven
Acquisition Corp. to execute said RELEASE on behalf of First Bank System, Inc.
and Eleven Acquisition Corp.
/s/ Rae Jean Armstrong
-------------------------------------
Notary Public
[Seal]
D-11
<PAGE>
EXHIBIT C
LIMITED RELEASE
Wells Fargo & Company ("RELEASOR"), for valuable consideration, including
the release of even date executed by First Bank System, Inc. and Eleven
Acquisition Corp. in favor of RELEASOR, the receipt of which is hereby
acknowledged, releases and discharges First Bank System, Inc., its
subsidiaries and affiliates (including without limitation Eleven Acquisition
Corp.) and their present and former directors, officers, stockholders,
employees, agents, attorneys, successors and assigns (collectively, with First
Bank System, Inc., "RELEASEES") from all actions, accounts, agreements, bonds,
bills, causes of action, claims, covenants, contracts, controversies, damages,
demands, debts, dues, extents, expenses, executions, judgments, liabilities,
obligations, promises, predicate acts, reckonings, specialties, suits, sums of
money, trespasses and variances whatsoever, in law, equity or otherwise, known
or unknown ("CLAIMS"), which against the RELEASEES or any of them, the
RELEASOR, its successors, affiliates and assigns, or anyone claiming through
or under any of them, ever had or now has, or may hereafter have or acquire,
based upon, related to, arising from, or connected in any way with any of the
Agreement and Plan of Merger dated as of November 5, 1995 among First Bank
System, Inc., Eleven Acquisition Corp., and First Interstate Bancorp, ("Merger
Agreement"), the related Termination Fee Agreements, Stock Option Agreements,
Confidentiality Agreement (as that term is defined in the Merger Agreement)
and other related agreements, the transactions contemplated thereby, the
Exchange Offer, Proxy Solicitation and Consent Solicitation announced by Wells
Fargo & Company on November 13, 1995, the transactions contemplated thereby,
and the acquisition of First Interstate Bancorp by Wells Fargo & Company,
including without limitation all CLAIMS that were or could have been asserted
in the actions captioned Wells Fargo & Company v. First Interstate Bancorp, et
al., No. 14696 (Delaware Court of Chancery), First Bank System, Inc. et ano.
v. Wells Fargo & Company, No. 95-787 (United States District Court for the
District of Delaware), First Interstate Bancorp v. Wells Fargo & Company et
al., No. 95-800 (United States District Court for the District of Delaware),
First Bank System, Inc., et ano. v. Wells Fargo & Company (California Superior
Court, County of Los Angeles) No. BC142972, James T. Williamson, et al. v.
First Interstate Bancorp, et al., No. 95-810 (United States District Court for
the District of Delaware), In re First Interstate Bancorp Shareholder
Litigation, No. 14623 (Delaware Court of Chancery), Howard Kaplin,
derivatively on behalf of First Interstate Bancorp, Inc. v. John E. Bryson, et
al., No. 95-7954 (United States District Court for the Central District of
California), Timothy W. Bradley, on behalf of himself and others similarly
situated v. William E.B. Siart, et al., No. 95-8047 (United States District
Court for the Central District of California), Timothy W. Bradley, on behalf
of himself and others similarly situated v. William E.B. Siart, et al., No.
BC139665, (California Superior Court, County of Los Angeles), other than any
CLAIMS arising with respect to any breach that occurs on or after the date
hereof of the Confidentiality Agreement, the Agreement of even date executed
by First Bank System, Inc., Eleven Acquisition Corp., First Interstate
Bancorp, and Wells Fargo & Company, or of Sections 6.2(b), 8.2 or 9.3 of the
Merger Agreement.
To ensure that this RELEASE is enforced in accordance with its terms, the
RELEASOR and the RELEASEES hereby acknowledge that each of them is familiar
with section 1542 of the Civil Code of California and knowingly and
voluntarily waives any rights or protections afforded by that Section, which
provides as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
The RELEASOR and the RELEASEES also knowingly and voluntarily waive all
rights and benefits they may have under comparable or similar statutes and
principles of common law of any and all states of the United States or of the
United States.
This RELEASE is governed by and shall be construed and interpreted in
accordance with the laws of the State of New York.
D-12
<PAGE>
This RELEASE may not be modified or amended except by an instrument in
writing signed by the RELEASOR and the RELEASEES.
IN WITNESS WHEREOF, the RELEASOR has executed this RELEASE on the 23rd day
of January, 1996.
WELLS FARGO & COMPANY
/s/ Guy Rounsaville, Jr.
By: _________________________________
Name: Guy Rounsaville, Jr.
Title:
General Counsel
D-13
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF CONTRA COSTA )
On January 23, 1996 before me personally came Guy Rounsaville, to me known,
who, being by me duly sworn, did depose and state that he is the General
Counsel of Wells Fargo & Company, the entity described in and that executed the
foregoing RELEASE and that he is duly authorized by the Board of Directors of
Wells Fargo & Company to execute said RELEASE on behalf of Wells Fargo &
Company.
/s/ C. Peregoy
_____________________________________
Notary Public
[Seal]
D-14
<PAGE>
EXHIBIT D
LIMITED RELEASE
First Interstate Bancorp ("RELEASOR"), for valuable consideration, including
the release of even date executed by First Bank System, Inc. and Eleven
Acquisition Corp. in favor of RELEASOR, the receipt of which is hereby
acknowledged, releases and discharges First Bank System, Inc., its
subsidiaries and affiliates (including without limitation Eleven Acquisition
Corp.) and their present and former directors, officers, stockholders,
employees, agents, attorneys, successors and assigns (collectively, with First
Bank System, Inc., "RELEASEES") from all actions, accounts, agreements, bonds,
bills, causes of action, claims, covenants, contracts, controversies, damages,
demands, debts, dues, extents, expenses, executions, judgments, liabilities,
obligations, promises, predicate acts, reckonings, specialties, suits, sums of
money, trespasses and variances whatsoever, in law, equity or otherwise, known
or unknown ("CLAIMS"), which against the RELEASEES or any of them, the
RELEASOR, its successors, affiliates and assigns, or anyone claiming through
or under any of them, ever had or now has, or may hereafter have or acquire,
based upon, related to, arising from, or connected in any way with any of the
Agreement and Plan of Merger dated as of November 5, 1995 among First Bank
System, Inc., Eleven Acquisition Corp., and First Interstate Bancorp, the
related Termination Fee Agreements, Stock Option Agreements, Confidentiality
Agreement (as that term is defined in the Merger Agreement) and other related
agreements, the transactions contemplated thereby, the Exchange Offer, Proxy
Solicitation and Consent Solicitation announced by Wells Fargo & Company on
November 13, 1995, the transactions contemplated thereby, and the acquisition
of First Interstate Bancorp by Wells Fargo & Company, including without
limitation all CLAIMS that were or could have been asserted in the actions
captioned Wells Fargo & Company v. First Interstate Bancorp, et al., No. 14696
(Delaware Court of Chancery), First Bank System, Inc. et ano. v. Wells Fargo &
Company, No. 95-787 (United States District Court for the District of
Delaware), First Interstate Bancorp v. Wells Fargo & Company et al., No. 95-
800 (United States District Court for the District of Delaware), First Bank
System, Inc., et ano. v. Wells Fargo & Company (California Superior Court,
County of Los Angeles) No. BC142972, James T. Williamson, et al. v. First
Interstate Bancorp, et al., No. 95-810 (United States District Court for the
District of Delaware), In re First Interstate Bancorp Shareholder Litigation,
No. 14623 (Delaware Court of Chancery), Howard Kaplin, derivatively on behalf
of First Interstate Bancorp, Inc. v. John E. Bryson, et al., No. 95-7954
(United States District Court for the Central District of California), Timothy
W. Bradley, on behalf of himself and others similarly situated v. William E.B.
Siart, et al., No. 95-8047 (United States District Court for the Central
District of California), Timothy W. Bradley, on behalf of himself and others
similarly situated v. William E.B. Siart, et al., No. BC139665, (California
Superior Court, County of Los Angeles), other than any CLAIMS arising with
respect to any breach that occurs on or after the date hereof of the
Confidentiality Agreement, the Agreement of even date executed by First Bank
System, Inc., Eleven Acquisition Corp., First Interstate Bancorp, and Wells
Fargo & Company, or of Sections 6.2(b), 8.2 or 9.3 of the Merger Agreement.
To ensure that this RELEASE is enforced in accordance with its terms, the
RELEASOR and the RELEASEES hereby acknowledge that each of them is familiar
with section 1542 of the Civil Code of California and knowingly and
voluntarily waives any rights or protections afforded by that Section, which
provides as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
The RELEASOR and the RELEASEES also knowingly and voluntarily waive all
rights and benefits they may have under comparable or similar statutes and
principles of common law of any and all states of the United States or of the
United States.
This RELEASE is governed by and shall be construed and interpreted in
accordance with the laws of the State of New York.
This RELEASE may not be modified or amended except by an instrument in
writing signed by the RELEASOR and the RELEASEES.
D-15
<PAGE>
IN WITNESS WHEREOF, the RELEASOR has executed this RELEASE on the 23rd day
of January, 1996.
FIRST INTERSTATE BANCORP
/s/ Theodore F. Craver, Jr.
By: _________________________________
Name: Theodore F. Craver, Jr.
Title:Executive Vice President &
Treasurer
D-16
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On January 23, 1996 before me personally came Theodore F. Craver, Jr., to me
known, who, being by me duly sworn, did depose and state that he is the
Executive Vice President and Treasurer of First Interstate Bancorp, the entity
described in and that executed the foregoing RELEASE and that he is duly
authorized by the Board of Directors of First Interstate Bancorp to execute
said RELEASE on behalf of First Interstate Bancorp.
/s/ Susanne Estrada
_____________________________________
Notary Public
[Seal]
D-17
<PAGE>
Appendix E
[LETTERHEAD OF CS FIRST BOSTON]
February 27, 1996
Board of Directors
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94104
Members of the Board:
You have asked us to advise you with respect to the fairness to Wells
Fargo & Company ("Wells Fargo") from a financial point of view of the
consideration proposed to be paid by Wells Fargo pursuant to the terms of the
Agreement and Plan of Merger, dated as of January 23, 1996, as amended (the
"Merger Agreement"), between Wells Fargo and First Interstate Bancorp ("First
Interstate"). The Merger Agreement provides for, among other things, the merger
of First Interstate with and into Wells Fargo pursuant to which Wells Fargo
will be the surviving corporation (the "Merger"), each outstanding share of the
common stock, par value $2.00 per share (including the associated common stock
purchase rights), of First Interstate will be converted into the right to
receive two-thirds (the "Exchange Ratio") of a share of the common stock, par
value $5.00 per share, of Wells Fargo (the "Wells Fargo Common Stock"), and
each outstanding share of each series of the preferred stock of First
Interstate will be converted into the right to receive one share of a series of
preferred stock of Wells Fargo with substantially the same terms as that of the
exchanged share.
In arriving at our opinion, we have reviewed the Merger Agreement and
certain related documents, the Joint Proxy Statement/Prospectus dated the date
hereof of Wells Fargo and First Interstate relating to the proposed Merger, and
certain publicly available business and financial information relating to Wells
Fargo and First Interstate. We also have reviewed certain other information,
including financial forecasts, provided to us by Wells Fargo and First
Interstate, and have met with the respective managements of Wells Fargo and
First Interstate to discuss the businesses and prospects of Wells Fargo and
First Interstate.
We also have considered certain financial and stock market data of
Wells Fargo and First Interstate, and we have compared that data with similar
data for other publicly held companies in businesses similar to those of Wells
Fargo and First Interstate and we have considered, to the extent publicly
available, the financial terms of certain other business combinations and other
transactions which have recently been effected. We also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility
for independent verification of any of the foregoing information and have
relied upon its being complete and accurate in all material respects. With
respect to the financial forecasts, we have assumed that such forecasts have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the managements of Wells Fargo and First Interstate
as to the future financial performance of Wells Fargo and First Interstate and
the cost savings and other potential synergies (including the amount, timing
and achievability thereof) anticipated to result from the Merger. We also have
assumed, with your consent, that off-balance sheet activities of Wells Fargo
and First Interstate, including derivatives and other similar financial
instruments, will not materially and adversely affect the future financial
position and results of operations of Wells Fargo or First Interstate.
<PAGE>
Board of Directors
Wells Fargo & Company
February 27, 1996
Page 2
We have not reviewed individual credit files or made an independent evaluation
or appraisal of the assets or liabilities (contingent or otherwise) of Wells
Fargo or First Interstate, nor have we been furnished with any such evaluations
or appraisals, including loan or lease portfolios or the allowances for losses
with respect thereto, and have assumed, with your consent, that such allowances
for Wells Fargo and First Interstate are in the aggregate adequate to cover
such losses. We also have assumed, with your consent, that in the course of
obtaining the necessary regulatory and third party consents for the Merger, no
restriction will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger or the transactions contemplated thereby.
Our opinion is necessarily based upon information available to us and
financial, stock market and other conditions as they exist and can be evaluated
on the date hereof. We are not expressing any opinion as to what the value of
the Wells Fargo Common Stock actually will be when issued to First Interstate's
stockholders pursuant to the Merger or the prices at which such Wells Fargo
Common Stock will trade subsequent to the Merger.
We have acted as financial advisor to Wells Fargo in connection
with the Merger and will receive a fee for our services, a significant
portion of which is contingent upon the consummation of the Merger. We have
in the past provided financial advisory and investment banking services to
Wells Fargo unrelated to the Merger, and have received compensation for the
rendering of such services. In the ordinary course of our business, CS First
Boston and its affiliates may actively trade the debt and equity securities of
Wells Fargo and First Interstate for their own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is for the information of the Board
of Directors of Wells Fargo in connection with its evaluation of the Merger and
is not intended to be and shall not be deemed to constitute a recommendation to
any stockholder as to how such stockholder should vote on the Merger. This
letter is not to be quoted or referred to, in whole or in part, in any
registration statement, prospectus or proxy statement, or in any other document
used in connection with the offering or sale of securities, nor shall this
letter be used for any other purposes, without CS First Boston's prior written
consent.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the proposed Exchange Ratio is fair to Wells Fargo from a
financial point of view.
Very truly yours,
/s/ CS FIRST BOSTON CORPORATION
<PAGE>
APPENDIX F
LOGO
February 27, 1996 MONTGOMERY
Members of the Board of Directors
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94104
Members of the Board:
We understand that Wells Fargo & Company, a Delaware corporation (the
"Company"), and First Interstate Bancorp, a Delaware corporation ("First
Interstate'), have entered into an Agreement and Plan of Merger, dated as of
January 23, 1996, as amended (the "Merger Agreement"), pursuant to which, among
other things, First Interstate will be merged with and into the Company, which
will be the surviving entity (the "Merger"). Pursuant to the Merger, as more
fully described in the Merger Agreement, we understand that (i) each
outstanding share of the common stock, par value $2.00 per share (including the
associated common stock purchase rights), of First Interstate (the "First
Interstate Common Stock") will be converted into the right to receive two-
thirds (the "Exchange Ratio") of a share of the common stock, par value $5.00
per share, of the Company (the "Company Common Stock") and (ii) each
outstanding share of each series of preferred stock of First Interstate will be
converted into the right to receive one share of a series of preferred stock of
the Company with substantially the same terms as that of the exchanged share.
You have asked for our opinion as investment bankers as to whether
the Exchange Ratio is fair to the Company from a financial point of view, as of
the date hereof.
In connection with our opinion, we have, among other things: (i)
reviewed certain publicly available financial and other data with respect to
the Company and First Interstate, including the consolidated financial
statements for recent years and interim periods to December 31, 1995 and
certain other relevant financial and operating data relating to the Company and
First Interstate made available to us from published sources and from the
internal records of the Company and First Interstate; (ii) reviewed the Merger
Agreement and certain related documents provided to us by the Company; (iii)
reviewed the Joint Proxy Statement/Prospectus dated the date hereof of the
Company and First Interstate relating to the proposed Merger; (iv) reviewed
certain historical market prices and trading volumes of the Company Common
Stock and the First Interstate Common Stock as reported by the New York Stock
Exchange; (v) compared the Company and First Interstate from a financial point
of view with certain other companies which we deemed to be relevant; (vi)
considered the financial terms, to the extent publicly available, of selected
business
<PAGE>
Montgomery
combinations in the banking and savings and loan industries; (vii) reviewed and
discussed with representatives of the management of the Company and First
Interstate, respectively, certain information of a business and financial nature
regarding the Company and First Interstate, furnished to us by them, including
financial forecasts and related assumptions of the Company and First Interstate;
(viii) made inquiries regarding and discussed the Merger, the Merger Agreement
and other matters related thereto with the Company's counsel; and (ix) performed
such other analyses and examinations as we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify any of the foregoing information and have relied on all
such information being complete and accurate in all material respects. With
respect to the financial forecasts for the Company and First Interstate provided
to us by their respective management, we have assumed for purposes of our
opinion that such forecasts have been reasonably prepared on bases reflecting at
the time of preparation the best available estimates and judgments of their
respective management as to the future financial performance of the Company and
First Interstate and the cost savings and other potential synergies (including
the timing, amount and achievability thereof) anticipated to result from the
Merger, and that they provide a reasonable basis upon which we can form our
opinion. We have also assumed that there have been no material changes in the
Company's or First Interstate's assets, financial condition, results of
operations, business or prospects since the respective dates of their last
financial statements reviewed by us and that off-balance sheet activities of the
Company and First Interstate, including derivatives and other similar financial
instruments, will not materially and adversely affect the future financial
position or results of operations of the Company or First Interstate. We have
relied on advice of counsel and independent accountants to the Company as to all
legal and financial reporting matters with respect to the Company and the
Merger. We have also assumed that the Merger will comply in all material
respects with the applicable provisions of the Securities Act of 1933, as
amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended, and all other applicable federal and state statutes, rules and
regulations. We have further assumed, with your consent, that in the course of
obtaining the necessary regulatory and third party consents for the Merger, no
restriction will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger or the transactions contemplated thereby. We
are not an expert in the evaluation of loan portfolios for purposes of assessing
the adequacy of the allowances for losses with respect thereto and have assumed,
with your consent, that such allowances for each of the Company and First
Interstate are in the aggregate adequate to cover such losses. In addition, we
have not assumed responsibility for reviewing any individual credit files or
making an independent evaluation, appraisal or physical inspection of the assets
or individual properties of the Company or First Interstate, nor have we been
furnished with any such evaluations or appraisals. Finally, our opinion is based
on economic, monetary and market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We have further assumed, with your consent, that the Merger will be
consummated in accordance with the terms and provisions of the Merger Agreement,
without any amendments to, and without any waiver by the Company of, any of the
material conditions to its obligations thereunder.
We have acted as financial advisor to the Company in connection with
the Merger and will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Merger. In the ordinary course
of our business, we actively trade the equity securities of the
<PAGE>
Montgomery
Company and First Interstate for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. We have also performed various financial advisory and
investment banking services for First Interstate in the past for which we have
received compensation.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Exchange Ratio is fair to the Company from a
financial point of view, as of the date hereof.
This opinion is furnished pursuant to our engagement letter dated
October 16, 1995, as amended. This opinion is addressed to the Board of
Directors of the Company and is not intended to be and shall not be deemed to
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to the Merger. Except as provided in such engagement letter,
this opinion may not be used or referred to by the Company, or quoted or
disclosed to any person in any manner without our prior written consent. In
furnishing this opinion, we do not admit that we are experts within the meaning
of the term "experts" as used in the Securities Act and the rules and
regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act.
Very truly yours,
/s/ MONTGOMERY SECURITIES
MONTGOMERY SECURITIES
<PAGE>
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
Appendix G
PRIVILEGED AND CONFIDENTIAL
February 27, 1996
Board of Directors
First Interstate Bancorp
633 West Fifth Street
Los Angeles, California 90071
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $2.00 per share (the "Shares"), of
First Interstate Bancorp (the "Company") of the exchange ratio of two-thirds
shares of Common Stock, par value $5.00 per share, of Wells Fargo & Company
("Wells Fargo") to be received for each Share (the "Exchange Ratio") pursuant to
the merger (the "Merger") contemplated by the Agreement and Plan of Merger dated
as of January 23, 1996 by and between Wells Fargo and the Company, as amended as
of February 23, 1996 (the "Agreement").
Goldman, Sachs & Co. ("Goldman Sachs"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with the Company having performed investment
banking services for the Company from time to time and having acted as its
financial advisor in connection with the Agreement. We also have provided
certain investment banking services to Wells Fargo from time to time including,
in 1995, advising Wells Fargo in the sale of its 50% ownership interest in Wells
Fargo Nikko Investment Advisors and in its mortgage joint venture with Norwest
Financial Corporation, and may provide investment banking services, including
underwriting and securization of commercial mortgage portfolios, to Wells Fargo
or the combined company in the future. In addition, Goldman Sachs is a full
service securities firm and in the course of its trading activities it may from
time to time effect transactions, for its own account or the account of
customers, and hold positions in securities or options on securities of the
Company and Wells Fargo.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Joint Proxy Statement/Prospectus of Wells Fargo and the Company
dated February 27, 1996 relating to the Merger; Annual Reports to Stockholders
and Annual Reports on Form 10-K of the Company and Wells Fargo for the five
years ended December 31, 1994; certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of the Company and Wells Fargo; certain other
communications from the Company and Wells Fargo to their respective
stockholders; and certain internal financial analyses and forecasts for the
Company and Wells Fargo prepared by their respective managements, including
analyses and forecasts of certain cost savings, operating efficiencies, revenue
effects and financial synergies (collectively, the "Synergies") expected by
Wells Fargo to be
<PAGE>
LOGO GOLDMAN SACHS
First Interstate Bancorp
February 27, 1996
Page Two
achieved as a result of the Merger and including share repurchase and capital
management policies expected to be fulfilled by Wells Fargo following the
merger. We also have held discussions with members of the senior managements of
the Company and Wells Fargo regarding the past and current business operations,
regulatory relationships, financial condition and future prospects of their
respective companies, each senior managements' assessment of the strategic fit
and implications of the Merger, and the Synergies. We also have reviewed with
members of the senior management of the Company the results of the Company's due
diligence examination of Wells Fargo. In addition, we have reviewed the reported
price and trading activity for the Shares and Wells Fargo Common Stock, compared
certain financial and stock market information for the Company and Wells Fargo
with similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the commercial banking industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us or
conveyed to us in discussions with senior managements of the Company and Wells
Fargo for purposes of this opinion. In that regard, we have assumed, with your
consent, that the financial forecasts, including, without limitation, the
Synergies, the anticipated share repurchase and capital management policies, and
projections regarding under-performing and non-performing assets and net charge-
offs have been reasonably prepared on a basis reflecting the best currently
available judgments and estimates of the Company and Wells Fargo and that such
forecasts will be realized in the amounts and at the times contemplated thereby.
We are not experts in the evaluation of loan and lease portfolios for purposes
of assessing the adequacy of the allowances for losses with respect thereto and
have assumed, with your consent, that such allowances for each of the Company
and Wells Fargo are in the aggregate adequate to cover all such losses.
Similarly, we have assumed, with your consent and without independent analysis,
that the obligations of the Company and Wells Fargo pursuant to derivatives,
swaps, foreign exchange, financial instruments and off-balance sheet lending-
related financial instruments will not have an adverse effect which would be
relevant to our analysis. In addition, we have not reviewed individual credit
files nor have we made an independent evaluation or appraisal of the assets and
liabilities of the Company or Wells Fargo or any of their respective
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We also have assumed, with your consent, that obtaining any necessary
regulatory approvals and third-party consents for the Merger or otherwise will
not have a materially adverse effect on the Company, Wells Fargo or the combined
company. Our opinion as to the fairness of the Exchange Ratio addresses the
ownership position in the combined company to be received by the holders of
Shares pursuant to the Exchange Ratio on the terms set forth in the Agreement
and does not address the future trading or acquisition value for the stock of
the combined company. In addition, our opinion does not address the relative
merits of the Merger and alternative potential transactions.
<PAGE>
LOGO GOLDMAN SACHS
First Interstate Bancorp
February 27, 1996
Page Three
Our opinion is directed to the Board of Directors of the Company and does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote at the stockholders' meeting to be held in connection
with the Merger.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair to the holders of Shares.
Very truly yours,
/S/ GOLDMAN, SACHS & CO
GOLDMAN, SACHS & CO
<PAGE>
Appendix H
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
February 27, 1996
Board of Directors
First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Members of the Board:
We understand that First Interstate Bancorp ("First Interstate" or the
"Company") and Wells Fargo & Company ("Wells Fargo") have entered into an
Agreement and Plan of Merger on January 23, 1996, as amended on February 23,
1996 (the "Merger Agreement"), which provides, among other things, for the
merger of First Interstate with Wells Fargo (the "Merger"). Pursuant to the
Merger Agreement, each outstanding share of common stock of First Interstate
(the "First Interstate Common Stock"), other than shares held in treasury or
held by Wells Fargo or any affiliate of Wells Fargo or as to which dissenters'
rights have been perfected, will be converted into two-thirds of a share (the
"Wells Fargo Exchange Ratio") of common stock of Wells Fargo (the "Wells Fargo
Common Stock"). The terms and conditions of the Merger are more fully set out in
the Merger Agreement.
You have asked for our opinion as to whether the Wells Fargo Exchange
Ratio pursuant to the Merger Agreement is fair from a financial point of view to
holders of First Interstate Common Stock (other than Wells Fargo and its
affiliates).
For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and other
information of First Interstate and Wells Fargo, respectively;
(ii) analyzed certain internal financial statements and other
financial and operating data concerning First Interstate and
Wells Fargo prepared by the managements of First Interstate and
Wells Fargo, respectively;
(iii) analyzed certain financial projections prepared separately by the
managements of First Interstate and Wells Fargo, respectively;
<PAGE>
LOGO MORGAN STANLEY
Board of Directors
February 27, 1996
Page 2
(iv) discussed the past and current operations and financial conditions and
the prospects of First Interstate and Wells Fargo with senior executives
of First Interstate and Wells Fargo, respectively;
(v) reviewed the reported prices and trading activity for the First
Interstate Common Stock and the Wells Fargo Common Stock;
(vi) compared the financial performance of First Interstate and Wells Fargo
and the prices, trading activity and trading multiples of the First
Interstate Common Stock and the Wells Fargo Common Stock with that of
certain other comparable bank holding companies and their securities;
(vii) discussed the strategic objectives of the Merger and the plan for the
combined company with senior executives of Wells Fargo;
(viii) analyzed certain pro forma financial projections for the combined company
prepared by Wells Fargo;
(ix) reviewed and discussed with the senior management of Wells Fargo certain
estimates of the potential cost savings and revenue loss expected to
result from the Merger;
(x) reviewed the financial terms, to the extent publicly available, of
certain comparable bank holding company merger transactions;
(xi) participated in discussions among representatives of First Interstate and
Wells Fargo (and certain other parties) and their financial and legal
advisors;
(xii) reviewed the Merger Agreement and certain related agreements; and
(xiii) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, including Wells Fargo's
estimates of cost savings and revenue loss expected to result from the Merger,
we have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the future financial
performance of First Interstate and Wells Fargo, respectively. We have also
assumed that off-balance sheet activities of First Interstate and
<PAGE>
LOGO MORGAN STANLEY
Board of Directors
February 27, 1996
Page 3
Wells Fargo, including derivatives and other similar financial instruments, will
not adversely affect the future financial position and results of operations of
the combined enterprise. We have not made any independent valuation or appraisal
of the assets or liabilities of First Interstate or Wells Fargo, nor have we
been furnished with any such appraisals and we have not examined any individual
loan credit files of First Interstate and Wells Fargo. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of First
Interstate in connection with this transaction and will receive a fee for our
services. In the past, Morgan Stanley & Co. Incorporated and its affiliates have
provided financial advisory and financing services for First Interstate and
Wells Fargo and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board
of Directors of First Interstate and does not constitute a recommendation to
stockholders of First Interstate as to the voting of their shares on the Merger
or any other transaction.
Based on the foregoing, we are of the opinion on the date hereof that
the Wells Fargo Exchange Ratio is fair from a financial point of view to holders
of First Interstate Common Stock (other than Wells Fargo and its affiliates).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Donald A. Moore, Jr.
--------------------------
Donald A. Moore, Jr.
Managing Director
<PAGE>
APPENDIX I
[Conformed Copy]
CONTACT: Investor Relations
Christine M. McCarthy, Executive Vice President--(213) 614-5866
Mariann Ohanesian, Vice President--(213) 614-2465
FIRST INTERSTATE BANCORP
1995 FULL YEAR AND FOURTH QUARTER RESULTS
(THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
CORPORATION'S FORM 10-K, WHICH WILL BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION BY MARCH 29, 1996.)
January 16, 1996
FINANCIAL SUMMARY:
. The Corporation and First Bank System, Inc. (FBS) have entered into a
merger agreement whereby FBS will exchange 2.6 shares of its common stock
for each share of First Interstate common stock. The merger is subject to
approval by bank regulatory authorities and by the Corporation's
shareholders. Please see the Recent Developments section of this report.
. The Corporation recorded net income of $885.1 million ($11.02 per share)
for all of 1995, an increase in earnings per share of 26.5% over 1994. Net
income for 1995 included the effect of $14.7 million ($0.19 per share) of
restructuring charges, and $27.6 million ($0.35 per share) of merger
related expenses. The restructuring charges relate to the restructuring
program announced in September 1994; the Corporation does not expect to
take any further charges in connection with this restructuring program. Net
income in 1994 included the effect of $87.6 million ($1.09 per share) of
such restructuring charges.
. The Corporation recorded net income for the 1995 fourth quarter of $215.4
million ($2.66 per share), versus $211.3 million ($2.65 per share) in the
1994 fourth quarter. Before the effect of restructuring charges and merger
related expenses, income after taxes for the 1995 fourth quarter amounted
to $248.3 million ($3.08 per share), an increase of 16.7% from $212.7
million ($2.67 per share) for the 1994 fourth quarter.
. Total revenue, which includes taxable-equivalent net interest income and
noninterest income, in 1995 was up 8.1% from 1994. Loans of $36.7 billion
at December 31, 1995, were $3.5 billion (10.4%) above the yearend 1994
level and were $706 million (2.0%) above September 30, 1995.
. The net interest margin was 5.50% in the 1995 fourth quarter, up 21 basis
points from 5.29% reported a year earlier and up 5 basis points from the
third quarter of 1995.
. The Corporation's efficiency ratio for the fourth quarter of 1995 was
57.7%, before the effect of merger expenses, restructuring charges and ORE
expenses, compared to 61.3% in the 1994 fourth quarter and 57.3% in the
1995 third quarter.
. Nonperforming assets totaled $232 million at yearend 1995, down $26 million
(10.1%) from a year earlier. Nonperforming assets as a percent of total
assets were 0.40% for the 1995 fourth quarter.
. For 1995, the return on average total assets was 1.59% and the return on
average common equity was 24.57%. For 1994, the return on average total
assets was 1.38% and the return on average common equity was 21.56%.
COMPARISON OF ANNUAL RESULTS:
The Corporation recorded net income for 1995 of $885.1 million, or $11.02
per share. This includes the effect of $24.4 million of restructuring charges
($14.7 million after taxes, or $0.19 per share), and $27.6 million ($0.35 per
share) of merger related expenses, and represents an increase in earnings per
share of 26.5% from 1994. Net income of $733.5 million ($8.71 per share) in
1994 included restructuring charges of $141.3 million ($87.6 million after
taxes, or $1.09 per share). Before the effect of restructuring charges and
merger related expenses, income after taxes in 1995 amounted to $927.4 million
($11.56 per share), representing an increase in earnings per share of 18.0%
from $9.80 in 1994.
I-1
<PAGE>
Taxable-equivalent net interest income was $2,558.3 million in 1995, up 9.0%
from 1994. This increase resulted primarily from expansion of the net interest
margin to 5.43% from 5.14% in 1994, together with average earning asset growth
of $1.5 billion (3.3%).
Average loans increased $6.6 billion (23.0%) from 1994 to $35.2 billion in
1995. Instalment loans averaged $12.6 billion in 1995, up $893 million (7.7%)
from a year earlier. Residential real estate mortgages averaged $6.6 billion,
$2.6 billion (67.3%) above 1994. Commercial real estate mortgages averaged
$4.7 billion, $1.0 billion (28.5%) above a year ago. Average commercial loans
were up $1.4 billion (17.1%) from 1994 to $9.7 billion in 1995. Average
construction loans increased $299 million (37.1%) from 1994 to $1.1 billion.
At December 31, 1995, loans and leases totaled $36.7 billion, up $3.5
billion (10.4%) from a year earlier and up $706 million (2.0%) from September
30, 1995. Instalment loans totaled $12.9 billion at yearend 1995, an increase
of $590 million (4.8%) from a year earlier and an increase of $181 million
(1.4%) from September 30, 1995. At the same time, commercial loans were $10.9
billion, up $1.6 billion (17.5%) from a year earlier and up $667 million
(6.5%) from the end of the 1995 third quarter. Residential real estate
mortgages totaled $6.4 billion, $537 million (9.2%) above a year ago and $156
million (2.4%) below September 30, 1995. Commercial real estate mortgages
amounted to $4.8 billion at December 31, 1995, up $395 million (9.0%) from a
year ago and up $63 million (1.3%) from September 30, 1995. Construction loans
were $1.1 billion at yearend 1995, up $118 million (12.6%) from a year earlier
and down $101 million (8.8%) from the end of the third quarter.
As a result of maturities and paydowns, total investment securities amounted
to $9.1 billion at yearend 1995, down $4.8 billion (34.3%) from yearend 1994
and down $334 million (3.5%) from September 30, 1995. These proceeds supported
loan growth in 1995. On December 27, 1995, the Corporation reclassified all
but $88 million of its investment securities to available-for-sale.
Total deposits averaged $47.9 billion in 1995, up $1.6 billion (3.4%) from
1994. Consumer savings, time and net transaction accounts increased $905
million (2.3%) from 1994 to an average of $40.9 billion in 1995. The
Corporation's CDs over $100,000 increased $273 million (25.4%) from the year
earlier. At the same time, short term borrowings, primarily federal funds
purchased, averaged $1.4 billion, up $707 million. The higher level of short
term borrowings, together with maturing securities and deposit growth,
supported loan growth in 1995.
No provision for credit losses for the consolidated Corporation has been
recorded since the fourth quarter of 1993. Loans charged off, net of
recoveries, were $154.7 million (0.44% of average loans) for the year,
compared to $133.0 million (0.46% of average loans) in 1994.
Noninterest income totaled $1,119.6 million in 1995, an increase of $65.3
million (6.2%) from a year earlier. Service charges on deposit accounts
increased $35.4 million (6.3%) from 1994 to $597.3 million and trust fees
declined $23.0 million (11.9%) to $170.3 million. The decline in trust fees
reflects the previously announced disposition of Denver Investment Advisors, a
subsidiary of First Interstate Bank of Denver, N.A. Noninterest income also
benefited from venture capital gains of $35.5 million in 1995, compared to
$28.3 million in 1994. The year-to-year increase in other charges, commission
and fees is primarily the result of growth in revenue from sales of investment
products.
Noninterest expenses totaled $2,213.1 million in 1995. This includes $24.4
million of restructuring charges in the latest year, versus $141.3 million in
1994, as previously noted. In addition, noninterest expenses in 1995 included
$27.6 million of merger related expenses in the fourth quarter. Noninterest
expenses before the effect of these charges and including the effect of
completed acquisitions were $2,161.1 million in 1995, an increase of $104.6
million (5.1%) from 1994. Approximately $53.2 million of the increase
represents higher outside contract fees, $32.9 million reflects higher
occupancy and equipment expenses, $25.4 million represents higher charges
resulting from the amortization of intangibles and $22.0 million represents
higher communications expenses.
I-2
<PAGE>
These increases were partially offset by declines of $38.2 million in FDIC
assessments and $19.1 million of salary and benefits expenses in 1995.
The Corporation's efficiency ratio for 1995 was 58.7%, which reflects
noninterest expenses before merger related expenses, restructuring charges and
ORE expenses as a percent of taxable-equivalent net interest income plus
noninterest income. This compares to 60.8% in 1994.
For 1995, the Corporation recorded income tax expense of $558.1 million,
resulting in an effective income tax rate of 38.7%, compared to 38.0% in 1994.
COMPARISON OF FOURTH QUARTER RESULTS
The Corporation recorded net income for the 1995 fourth quarter of $215.4
million ($2.66 per share), despite absorbing $8.7 million of restructuring
charges ($5.3 million after taxes, or $0.07 per share), and $27.6 million
($0.35 per share) of merger related expenses. Net income of $211.3 million
($2.65 per share) for the 1994 fourth quarter included the effect of $2.3
million of restructuring charges ($1.4 million after taxes, or $0.02 per
share). Before the effect of restructuring charges and merger related
expenses, income after taxes in the 1995 fourth quarter amounted to $248.3
million ($3.08 per share), an increase of 16.7% from $212.7 million ($2.67 per
share) in the 1994 fourth quarter.
Taxable-equivalent net interest income was $636.9 million in the fourth
quarter of 1995, an increase of 2.4% from a year earlier. This increase
resulted primarily from expansion of the net interest margin, up 21 basis
points to 5.50%. Average earning assets in the fourth quarter of 1995 declined
$633 million (1.4%) to $46.2 billion, and includes loan growth of $3.7 billion
(11.5%), which was more than offset by a decline in investment securities of
$5.2 billion (36.1%). The net interest margin the 1995 fourth quarter was 5
basis points above the third quarter margin of 5.45%. Recent declines in short
term interest rates may lead to moderate declines in the Corporation's net
interest margin.
Average loans and leases increased $3.7 billion (11.5%) from the 1994 fourth
quarter and $55 million from the third quarter to $35.5 billion in the 1995
fourth quarter. Instalment loans averaged $12.7 billion in the fourth quarter
of 1995, up $578 million (4.8%) from a year earlier and up $71 million (0.6%)
from the third quarter of 1995. Average commercial loans outstanding were up
$819 million (9.1%) from a year earlier and $126 million (1.3%) from the 1995
third quarter to an average of $9.8 billion. Residential real estate mortgages
averaged $6.5 billion, up $1.2 billion (23.1%) from a year ago and down $130
million (2.0%) from the 1995 third quarter level. Commercial real estate
mortgages averaged $4.7 billion, $621 million (15.1%) above a year ago and
unchanged from the 1995 third quarter. Average construction loans increased
$209 million (23.1%) from the 1994 fourth quarter and declined $32 million
(2.8%) from the 1995 third quarter to $1.1 billion in the latest period.
Total deposits averaged $48.3 billion in the 1995 fourth quarter, up $491
million (1.0%) from the 1994 fourth quarter and up $481 million (1.0%) from
the 1995 third quarter. Average deposits in consumer savings, time and net
transaction accounts declined $197 million (0.5%) from the 1994 fourth quarter
and $224 million (0.5%) from the 1995 third quarter to an average of $40.8
billion in the 1995 fourth quarter. The Corporation's CDs over $100,000
declined $112 million (8.0%) from the 1994 fourth quarter and increased $19
million (1.5%) from the 1995 third quarter to an average of $1.3 billion. At
the same time, short term borrowings, primarily federal funds purchased,
averaged $503 million, down $488 million (49.2%) from the 1994 fourth quarter
and down $169 million (25.1%) from the 1995 third quarter.
Based on an assessment of the Corporation's current risk profile, no
provision for credit losses for the Corporation has been recorded since the
fourth quarter of 1993. Loans charged off, net of recoveries, were $42.8
million (0.48% of average loans) in the last quarter of 1995, compared to
$38.2 million (0.48% of average loans) reported for the comparable 1994
quarter. The Corporation continued to experience a strong level of recoveries
on prior period chargeoffs.
I-3
<PAGE>
Noninterest income totaled $296.3 million in the fourth quarter of 1995,
compared to $262.3 million reported for the 1994 fourth quarter. Noninterest
income in the 1995 fourth quarter included $13.6 million of venture capital
gains. The 1994 fourth quarter included $13.6 million of venture capital
gains, which were reported as investment securities gains. Service charges on
deposit accounts rose $7.6 million (5.3%) from the 1994 level to $151.0
million, while trust fees declined $2.1 million (4.3%) to $47.0 million. The
decline in trust fees reflects the previously announced disposition of Denver
Investment Advisors (DIA), a subsidiary of First Interstate Bank of Denver,
N.A. Since the disposition of DIA in the 1995 first quarter, trust fees have
increased on a consecutive quarterly basis. The increase in other charges,
commissions and fees between fourth quarters is primarily the result of growth
in revenue from sales of investment products.
Total noninterest expenses amounted to $574.8 million in the 1995 fourth
quarter, including $8.7 million of restructuring charges and $27.6 million of
merger related expenses, as previously noted. Excluding restructuring charges
and merger related expenses and including the effect of completed
acquisitions, noninterest expenses were $538.5 million, essentially unchanged
from the comparable 1994 quarter. Due to acquisitions completed in 1995,
expenses arising from the amortization of goodwill and other intangibles
increased $3.5 million from the 1994 fourth quarter to a total of $15.3
million in the 1995 fourth quarter.
The Corporation's efficiency ratio for the 1995 fourth quarter was 57.7%,
which reflects noninterest expenses before merger expenses, restructuring
charges and ORE expenses as a percent of taxable-equivalent net interest
income plus noninterest income. This compares to 57.3% in the 1995 third
quarter and 61.3% in the 1994 fourth quarter.
In the fourth quarter of 1995, the Corporation recorded income tax expense
of $138.2 million, resulting in an effective income tax rate of 39.1%. This
compares to an effective tax rate of 38.0% in the comparable 1994 quarter. The
effective rate for the current quarter was impacted by nondeductible merger
related costs, offset by resolution of federal audit issues for which tax
benefits were not previously recognized.
LIQUIDITY MANAGEMENT
Liquidity refers to the Corporation's ability to adjust its future cash
flows to meet the needs of depositors and borrowers and to fund operations on
a timely and cost effective basis.
The Corporation continues to utilize the core deposits gathered through its
extensive interstate retail banking network as a key source of low-cost
funding. Core deposits, defined as demand deposits, interest bearing consumer
deposits under $100,000 and noninterest bearing time deposits, together with
corporate purchased funds and equity are the primary sources for funding
earning assets. During the fourth quarter of 1995, core deposits represented
88% of average earning assets, virtually unchanged from the fourth quarter of
1994 and third quarter of 1995.
At the same time, average corporate purchased funds declined $571 million
from the 1994 fourth quarter to $3.1 billion, and declined $176 million from
the 1995 third quarter level. Average short term borrowings declined $488
million from the fourth quarter of 1994 and $169 million from the 1995 third
quarter level.
The Corporation's other sources of liquidity include maturing securities in
addition to those which are available for sale or repurchase activity. In
addition, subsidiary banks may directly access funds placed by them through
existing agency agreements for the placement of federal funds and may also
access the Federal Reserve for short term liquidity needs.
At December 31, 1995, the Parent Corporation had no short term borrowings
outstanding. Immediate liquidity available to the Corporation includes a $500
million senior revolving credit facility, as well as cash and other short term
financial instruments at the Parent Corporation totaling $265 million at
yearend 1995. This compares to $300 million at September 30, 1995.
I-4
<PAGE>
The Parent Corporation has access to regional, national and international
capital and money markets, through its $2.3 billion shelf registration on file
with the Securities and Exchange Commission.
RISK ELEMENTS:
Nonperforming Assets--At December 31, 1995, nonperforming assets totaled
$232 million, down $26 million (10.1%) from the year ago level of $258
million, and up $26 million (12.6%) from $206 million reported at September
30, 1995. The current level of nonperforming assets represents 0.40% of total
assets, versus 0.46% and 0.37% of total assets a year earlier and at September
30, 1995, respectively.
Nonperforming loans totaled $171 million at yearend 1995, a decline of $15
million (8.1%) from $186 million a year earlier and an increase of $31 million
(22.1%) from $140 million at September 30, 1995. ORE totaled $61 million at
December 31, 1995, down from $72 million a year earlier and $66 million at
September 30, 1995.
In addition to credit assets classified as nonperforming, the Corporation
reported accruing loans that were past due 90 days or more of $100 million at
December 31, 1995, versus $51 million a year earlier and $98 million at
September 30, 1995. The current level of past due loans represents 0.17% of
total assets.
Allowance for Credit Losses--At December 31, 1995, the allowance for credit
losses totaled $804 million, or 2.19% of total loans. This compares to an
allowance of $934 million, or 2.81% of loans, a year ago and $847 million, or
2.35% of loans, at September 30, 1995.
Historical and projected allowances for credit losses reflect management's
assessment of the credit risk inherent in the Corporation's loan portfolio, as
well as the possible impact of known and potential problems in certain off-
balance sheet financial instruments and uncertain events.
Derivatives--The Corporation continues to engage in a minimum of derivative
activities for risk management purposes. The Corporation does not engage in
any trading or speculative derivative activities.
CAPITAL AND OTHER FINANCIAL STATISTICS:
At December 31, 1995, total shareholders' equity represented 7.15% of total
assets, versus 6.16% a year earlier and 7.23% at September 30, 1995. On the
same dates, common equity equaled 6.55%, 5.53% and 6.59% of total assets,
respectively. The Corporation's capital ratios include the effects of common
stock repurchase programs and completed acquisitions.
The tangible common equity ratio was 5.37% at yearend 1995, compared to
4.57% a year earlier and 5.32% at September 30, 1995. The regulatory leverage
ratio was estimated at 6.3% at yearend 1995, versus 5.35% a year ago and 6.00%
at September 30, 1995.
The Corporation's Tier 1 and Total Capital ratios at September 30, 1995,
were 7.48% and 10.48%, respectively. While information as of December 31,
1995, has not yet been finalized, the ratios are estimated at 7.6% and 10.5%,
respectively.
On October 17, 1995, the Board of Directors declared a quarterly cash
dividend of $0.80 on the Corporation's $2 par value Common Stock, payable on
November 30, 1995, to shareholders of record on November 6, 1995. On November
1, 1995, the Preferred Stock Committee of the Board of Directors declared
dividends on the Corporation's outstanding preferred stock. During 1995, the
Corporation recorded common stock dividends of $236.0 million and preferred
stock dividends of $33.3 million.
On April 28, 1995, the Board of Directors authorized the repurchase of up to
7.6 million shares of issued and outstanding common stock, representing
approximately 10% of the total number of shares outstanding. As
I-5
<PAGE>
of yearend 1995, the Corporation had repurchased 956,100 shares. The program
has been suspended as a result of the pending merger with FBS.
Total intangibles amounted to $724 million at December 31, 1995, versus $561
million a year earlier and $740 million at September 30, 1995. The higher
recent levels reflect the completion of five acquisitions in 1995. As a
result, goodwill increased to $682 million at yearend 1995 from $514 million a
year earlier.
The common shares used in the calculation of 1995 fourth quarter and full
year results per share were 77,858,926 and 77,329,761, respectively. During
the first quarter, 1.3 million of the Corporation's treasury shares were
issued in conjunction with the purchase acquisition of Levy Bancorp in
February 1995, of which 1.1 million represent shares repurchased for such
purpose.
RECENT DEVELOPMENTS:
On October 18, 1995, the Corporation announced that it had received an
unsolicited merger proposal from Wells Fargo & Company (Wells Fargo). The
proposal by Wells Fargo contemplated a merger of the two companies in which
each share of the Corporation's Common Stock would have been converted into
0.625 shares of Wells Fargo Common Stock. The Corporation's Board of Directors
rejected the merger offer from Wells Fargo. On November 6, 1995, after
exploring a wide range of strategic alternatives, the Corporation announced
that it had agreed to merge with FBS, pursuant to an Agreement and Plan of
Merger (the Merger Agreement), between the Corporation, FBS and Eleven
Acquisition Corp., a wholly owned subsidiary of FBS. Pursuant to the Merger
Agreement, each share of the Corporation's Common Stock outstanding
immediately prior to the merger will be converted into 2.60 shares of common
stock of FBS.
On November 13, 1995, the Corporation received a revised offer from Wells
Fargo, pursuant to which each share of the Corporation's Common Stock would
have been converted into 0.667 shares of Wells Fargo Common Stock. On November
19, 1995, the Corporation's Board of Directors rejected the revised merger
offer from Wells Fargo and reaffirmed the proposed merger with FBS.
The proposed merger with FBS is subject to shareholder and regulatory
approvals and is expected to close in the second quarter of 1996. The new
institution will retain the First Interstate name and will have approximately
$90 billion in assets and $7 billion in shareholders' equity.
OTHER DEVELOPMENTS
Deposits insured by the Savings Association Insurance Fund (SAIF), which
represent approximately 9% of the Corporation's deposits, continue to be
assessed at the rate of $0.23 per $100 of deposits. However, Congress is
considering a plan to replenish the SAIF through a one-time assessment.
Assuming a one-time assessment rate of 0.85% and deposits of $4.1 billion, the
Corporation's estimated assessment would be $28 million. The assessment will
be recorded upon passage of the legislation.
In the fourth quarter, the Corporation adopted, retroactive to January 1,
1995, Statement of Financial Accounting Standards No. 122 (SFAS 122),
"Accounting for Mortgage Servicing Rights--an amendment to FASB Statement No.
65." The statement was issued in May 1995 by the FASB and requires the
recognition of mortgage servicing rights as a separate asset, irrespective of
whether those servicing rights are acquired through the purchase or the
origination of mortgage loans. In addition, it requires the capitalization of
originated mortgage servicing rights based upon fair values. Mortgage
servicing rights acquired after adoption of SFAS 122, are stratified based
upon certain predominant risk characteristics for purposes of measuring
impairment. Fair value is determined based on discounted cash flows using
incremental direct and indirect costs. The adoption of SFAS 122 did not have a
material effect on the Corporation's earnings, liquidity, capital resources or
financial statements.
I-6
<PAGE>
OPERATING SUMMARY
<TABLE>
<CAPTION>
YEAR ENDED
1995 1994 DECEMBER 31
---------------------------------- ------- --------------
FOURTH THIRD SECOND FIRST FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER 1995 1994
------- ------- ------- ------- ------- ------ ------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income.............. $215.4 $237.8 $219.9 $212.0 $211.3 $885.1 $733.5
====== ====== ====== ====== ====== ====== ======
Net income to:
Average assets........ 1.54% 1.72% 1.58% 1.52% 1.54% 1.59% 1.38%
Average common equity. 22.32 25.61 24.80 25.80 26.19 24.57 21.56
Average total equity.. 21.20 24.16 23.39 24.20 24.47 23.19 20.38
Per share:
Net income............ $ 2.66 $ 2.96 $ 2.73 $ 2.66 $ 2.65 $11.02 $ 8.71
Dividends paid on com-
mon stock............ $ 0.80 $ 0.80 $ 0.75 $ 0.75 $ 0.75 $ 3.10 $ 2.75
</TABLE>
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED
1995 1994 DECEMBER 31
---------------------------------- ------- --------------
FOURTH THIRD SECOND FIRST FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER 1995 1994
------- ------- ------- ------- ------- ------ ------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of
period................. $3,981 $3,869 $3,693 $3,436 $3,550 $3,436 $3,548
Net income.............. 215 238 220 212 211 885 733
Preferred dividends..... (8) (8) (9) (8) (8) (33) (33)
Common dividends........ (61) (61) (57) (57) (57) (236) (218)
Common Stock issued:
Acquisition of Levy
Bancorp.............. -- -- -- 92 -- 92 --
Acquisition of San
Diego Financial
Corporation.......... -- -- -- -- -- -- 62
Other................. 40 11 23 18 16 92 55
Common Stock repur-
chased................. (18) (69) -- -- (277) (87) (712)
Unrealized gain (loss)
on available-for-sale
securities, net of tax. 5 1 (1) -- 1 5 1
------ ------ ------ ------ ------ ------ ------
Balance at end of peri-
od..................... $4,154 $3,981 $3,869 $3,693 $3,436 $4,154 $3,436
====== ====== ====== ====== ====== ====== ======
Book value per share.. $50.10 $41.59
</TABLE>
I-7
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
1995 1994
----------------------------------------- -----------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 DECEMBER 31
----------- ------------ ------- -------- -----------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks.. $ 7,129 $ 5,889 $ 5,898 $ 6,230 $ 6,070
Time deposits, due from
banks................... 14 27 27 27 26
Federal funds sold and
securities purchased un-
der agreements to re-
sell.................... 1,774 470 268 265 179
Trading account securi-
ties.................... 54 116 114 52 64
Investment Securities:
Held-to-maturity secu-
rities................ 88 9,320 10,802 12,204 13,695
Available-for-sale se-
curities.............. 9,010 112 107 127 156
------- ------- ------- ------- -------
Total Investment Se-
curities............ 9,098 9,432 10,909 12,331 13,851
Loans (net).............. 36,673 35,967 35,904 35,096 33,222
Less: Allowance for
credit losses........... 804 847 878 921 934
------- ------- ------- ------- -------
Net Loans............... 35,869 35,120 35,026 34,175 32,288
Bank premises and equip-
ment.................... 1,282 1,277 1,237 1,199 1,147
Customers' liability for
acceptances............. 94 54 57 31 35
Other assets............. 2,757 2,682 2,416 2,646 2,153
------- ------- ------- ------- -------
Total Assets....... $58,071 $55,067 $55,952 $56,956 $55,813
======= ======= ======= ======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing.... $19,083 $17,044 $16,981 $16,644 $16,599
Interest bearing....... 31,102 31,192 31,474 31,720 31,828
------- ------- ------- ------- -------
Total Deposits....... 50,185 48,236 48,455 48,364 48,427
Short term borrowings.... 1,194 376 1,328 2,361 1,574
Acceptances outstanding.. 94 54 57 31 35
Accounts payable and ac-
crued liabilities....... 1,089 1,052 797 1,037 953
Long term debt........... 1,355 1,368 1,446 1,470 1,388
------- ------- ------- ------- -------
Total Liabilities.. 53,917 51,086 52,083 53,263 52,377
Shareholders' equity:
Preferred Stock........ 350 350 350 350 350
Common Stock par value
$2 a share:
(in thousands)
Authorized: 250,000
shares:
Issued: 84,286
shares.............. 169 169 169 169 168
Capital surplus........ 1,682 1,667 1,671 1,683 1,692
Retained earnings...... 2,583 2,436 2,268 2,113 1,967
Unrealized gain on
available-for-sale
securities, net of
tax................... 6 1 -- 1 1
------- ------- ------- ------- -------
4,790 4,623 4,458 4,316 4,178
Less Common Stock in
treasury, at cost:
(in thousands)
December 31, 1995--
8,357 shares
September 30, 1995--
8,559 shares
June 30, 1995--8,000
shares
March 31, 1995--8,452
shares
December 31, 1994--
10,082 shares....... 636 642 589 623 742
------- ------- ------- ------- -------
Total Shareholders'
Equity.............. 4,154 3,981 3,869 3,693 3,436
------- ------- ------- ------- -------
Total Liabilities
and Shareholders'
Equity............ $58,071 $55,067 $55,952 $56,956 $55,813
======= ======= ======= ======= =======
</TABLE>
I-8
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
1995 1994 DECEMBER 31
------------------------------- ------- -----------------
FOURTH THIRD SECOND FIRST FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER 1995 1994
------- ------- ------- ------- ------- -------- --------
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees.. $769.8 $772.3 $779.9 $730.5 $662.4 $3,052.5 $2,303.7
Trading account........ 2.4 2.7 1.7 1.6 1.6 8.4 4.9
Investment Securities:
Held-to-maturity secu-
rities................ 121.6 137.5 157.0 177.4 192.7 593.5 831.0
Available-for-sale se-
curities.............. 7.5 0.8 2.3 5.1 0.9 15.7 13.3
Other Interest Income.. 17.5 9.3 4.1 6.9 4.7 37.8 39.1
------ ------ ------ ------ ------ -------- --------
Total Interest In-
come................ 918.8 922.6 945.0 921.5 862.3 3,707.9 3,192.0
INTEREST EXPENSE
Deposits............... 252.9 251.9 244.7 225.2 205.7 974.7 725.0
Short term borrowings.. 5.4 9.3 27.7 35.2 14.8 77.6 34.2
Long term debt......... 28.4 29.9 31.2 29.4 25.2 118.9 106.3
------ ------ ------ ------ ------ -------- --------
Total Interest Ex-
pense............... 286.7 291.1 303.6 289.8 245.7 1,171.2 865.5
------ ------ ------ ------ ------ -------- --------
NET INTEREST INCOME..... 632.1 631.5 641.4 631.7 616.6 2,536.7 2,326.5
Provision for credit
losses................ -- -- -- -- -- -- --
------ ------ ------ ------ ------ -------- --------
NET INTEREST INCOME AF-
TER PROVISION FOR
CREDIT LOSSES.......... 632.1 631.5 641.4 631.7 616.6 2,536.7 2,326.5
NONINTEREST INCOME
Service charges on de-
posit accounts........ 151.0 151.9 147.3 147.1 143.4 597.3 561.9
Trust fees............. 47.0 43.3 40.6 39.4 49.1 170.3 193.3
Other charges, commis-
sions, and fees....... 46.4 38.5 37.4 34.0 32.5 156.3 132.0
Merchant credit card
fees.................. 16.9 15.4 13.7 12.3 10.6 58.3 39.7
Investment securities
gains................. 4.4 1.5 3.6 0.5 14.1 10.0 21.1
Other income........... 30.6 29.9 31.8 35.1 12.6 127.4 106.3
------ ------ ------ ------ ------ -------- --------
Total Noninterest In-
come................ 296.3 280.5 274.4 268.4 262.3 1,119.6 1,054.3
NONINTEREST EXPENSES
Salaries and benefits.. 256.6 262.4 268.4 273.4 270.3 1,060.8 1,079.9
Net occupancy expenses. 95.9 98.3 95.2 100.1 92.6 389.5 356.6
Communications......... 34.4 35.1 36.2 33.9 30.2 139.6 117.6
Outside contract fees.. 41.5 39.6 29.9 34.0 30.0 145.0 91.8
FDIC assessments....... 6.3 2.7 27.7 27.9 27.8 64.6 102.8
Amortization of intan-
gibles................ 15.3 15.4 15.0 14.9 11.8 60.6 35.2
Office supplies........ 16.4 11.4 11.4 14.0 10.5 53.2 43.6
Advertising............ 13.9 11.9 15.8 10.1 14.6 51.7 46.8
Other real estate...... 0.1 0.5 -- -- (6.1) 0.6 (12.4)
Restructuring.......... 8.7 6.6 4.3 4.8 2.3 24.4 141.3
Merger related......... 27.6 -- -- -- -- 27.6 --
Other expenses......... 58.1 48.8 50.0 38.6 54.2 195.5 194.6
------ ------ ------ ------ ------ -------- --------
Total Noninterest Ex-
penses.............. 574.8 532.7 553.9 551.7 538.2 2,213.1 2,197.8
------ ------ ------ ------ ------ -------- --------
INCOME BEFORE INCOME
TAXES.................. 353.6 379.3 361.9 348.4 340.7 1,443.2 1,183.0
Applicable income tax-
es.................... 138.2 141.5 142.0 136.4 129.4 558.1 449.5
------ ------ ------ ------ ------ -------- --------
NET INCOME.............. $215.4 $237.8 $219.9 $212.0 $211.3 $ 885.1 $ 733.5
====== ====== ====== ====== ====== ======== ========
Net income applicable to
common stock........... $207.1 $229.5 $211.6 $203.7 $203.0 $851.9 $700.2
Average number of common
shares outstanding
(in thousands)......... 77,859 77,516 77,470 76,464 76,656 77,330 80,422
Earnings per common
share:
Net income............. $ 2.66 $ 2.96 $ 2.73 $ 2.66 $ 2.65 $ 11.02 $ 8.71
</TABLE>
- --------
NOTE: Certain prior year balances have been reclassified to conform to current
year classifications.
I-9
<PAGE>
AVERAGE VOLUMES
<TABLE>
<CAPTION>
YEAR ENDED
1995 1994 DECEMBER 31
---------------------------------- ------- ----------------
FOURTH THIRD SECOND FIRST FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER 1995 1994
------- ------- ------- ------- ------- ------- -------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Loans*:
Commercial, financial
and agricultural...... $ 9,786 $ 9,660 $ 9,810 $ 9,559 $ 8,967 $ 9,704 $ 8,287
Real estate construc-
tion.................. 1,115 1,147 1,120 1,035 906 1,105 806
Real estate mortgage... 11,202 11,331 11,480 11,070 9,369 11,271 7,586
Instalment............. 12,719 12,648 12,474 12,367 12,141 12,553 11,660
Other loans and leases. 645 626 611 522 416 602 305
------- ------- ------- ------- ------- ------- -------
Total Loans............ 35,467 35,412 35,495 34,553 31,799 35,235 28,644
Trading account securi-
ties................... 221 180 130 112 120 161 113
Investment Securities:
Held-to-maturity secu-
rities................ 8,697 10,083 11,478 12,974 14,302 10,794 15,624
Avaiable-for-sale secu-
rities................ 588 130 117 314 224 288 324
------- ------- ------- ------- ------- ------- -------
Total Investment Secu-
rities................ 9,285 10,213 11,595 13,288 14,526 11,082 15,948
Federal funds, repur-
chases................. 1,047 479 208 235 215 495 471
Time deposits, due from
banks.................. 21 27 27 47 82 30 380
Other assets held for
sale................... 115 157 60 155 47 122 82
------- ------- ------- ------- ------- ------- -------
Total Earning Assets... 46,156 46,468 47,515 48,390 46,789 47,125 45,638
Interest Bearing Liabil-
ities:
Regular savings........ 5,459 5,627 5,767 6,015 5,880 5,715 5,823
NOW accounts and de-
mand-market interest.. 6,357 6,351 6,531 6,752 6,747 6,496 6,644
Savings-market inter-
est................... 9,955 9,991 10,233 10,882 11,390 10,262 11,427
Other savings and time
under $100,000........ 8,112 8,079 7,633 7,080 6,249 7,730 5,787
------- ------- ------- ------- ------- ------- -------
Total Interest Bearing
Consumer Funds........ 29,883 30,048 30,164 30,729 30,266 30,203 29,681
Large CDs, other money
market funds.......... 1,285 1,266 1,447 1,398 1,397 1,349 1,076
Short term borrowings.. 503 672 1,834 2,467 991 1,362 655
Long term debt......... 1,356 1,382 1,464 1,391 1,327 1,398 1,395
------- ------- ------- ------- ------- ------- -------
Total Corporate Pur-
chased Funds.......... 3,144 3,320 4,745 5,256 3,715 4,109 3,126
------- ------- ------- ------- ------- ------- -------
Total Interest Bear-
ing Liabilities..... 33,027 33,368 34,909 35,985 33,981 34,312 32,807
Demand and noninterest
bearing time deposits.. 17,087 16,460 16,017 15,848 16,101 16,357 15,556
Other liabilities....... 1,216 1,069 1,015 1,005 952 1,076 1,017
Preferred equity capi-
tal.................... 350 350 350 350 350 350 350
Common equity capital... 3,682 3,554 3,422 3,202 3,075 3,467 3,249
------- ------- ------- ------- ------- ------- -------
Total Noninterest Li-
abilities and Equi-
ty.................. 22,335 21,433 20,804 20,405 20,478 21,250 20,172
Cash and due from banks. 6,220 5,534 5,457 5,386 5,420 5,651 5,233
Allowance for credit
losses................. (833) (865) (908) (943) (959) (887) (980)
Bank premises and
equipment ............ 1,278 1,269 1,231 1,198 1,125 1,244 1,065
Other assets........... 2,541 2,395 2,418 2,359 2,084 2,429 2,023
------- ------- ------- ------- ------- ------- -------
Total Noninterest As-
sets................ 9,206 8,333 8,198 8,000 7,670 8,437 7,341
Net from Noninterest
Sources............. 13,129 13,100 12,606 12,405 12,808 12,813 12,831
Total Assets......... $55,362 $54,801 $55,713 $56,390 $54,459 $55,562 $52,979
</TABLE>
- --------
NOTE: Certain prior year balances have been reclassified to conform to current
year classifications.
* Net of unearned income and deferred fees.
I-10
<PAGE>
AVERAGE RATES*
<TABLE>
<CAPTION>
YEAR ENDED
1995 1994 DECEMBER 31
------------------------------- ------- -------------
FOURTH THIRD SECOND FIRST FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER 1995 1994
------- ------- ------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Loans:
Commercial, financial
and agricultural..... 7.90% 8.19% 8.49% 8.13% 7.47% 8.18% 6.79%
Real estate construc-
tion................. 11.52 10.69 9.74 10.77 10.30 10.68 9.42
Real estate mortgage.. 8.24 8.14 8.12 7.87 7.76 8.09 7.63
Instalment............ 9.46 9.53 9.78 9.47 9.30 9.56 9.25
Other loans and
leases............... 7.34 7.23 7.82 7.02 6.93 7.36 6.74
Total Loans......... 8.67 8.72 8.85 8.59 8.33 8.71 8.09
Trading account securi-
ties................... 4.55 6.05 5.23 6.05 5.33 5.35 4.55
Investment Securities:
Held-to-maturity secu-
rities............... 5.64 5.48 5.54 5.55 5.40 5.55 5.37
Available-for-sale se-
curities............. 5.10 5.04 5.70 6.42 1.69 5.51 4.11
Total Investment Se-
curities........... 5.61 5.47 5.54 5.57 5.34 5.55 5.35
Federal funds, repur-
chases................. 5.79 5.92 5.94 5.77 5.50 5.83 3.98
Time deposits, due from
banks.................. 4.72 5.73 7.25 6.19 5.01 6.06 3.61
Other assets held for
sale................... 6.71 3.99 3.90 7.22 5.88 5.63 7.51
Total Earning As-
sets............. 7.97 7.94 8.01 7.73 7.37 7.91 7.04
Interest Bearing Liabil-
ities:
Regular savings....... 2.19 2.19 2.17 2.24 2.15 2.20 2.08
NOW accounts and de-
mand-market interest. 1.26 1.31 1.37 1.33 1.28 1.32 1.25
Savings--market inter-
est.................. 3.04 3.04 3.04 2.89 2.56 3.01 2.35
Other savings and time
under $100,000....... 5.34 5.26 4.97 4.40 3.95 5.02 3.69
Total Interest Bear-
ing Consumer Funds. 3.13 3.11 3.00 2.77 2.48 3.01 2.31
Large CDs, other money
market funds......... 5.19 5.02 4.99 4.51 4.65 4.92 3.63
Short term borrowings. 4.21 5.45 5.98 5.70 5.84 5.62 5.16
Long term debt........ 8.38 8.64 8.52 8.47 7.60 8.50 7.63
Total Corporate Pur-
chased Funds....... 6.41 6.61 6.46 6.12 6.02 6.37 5.74
Total Interest
Bearing Liabili-
ties............. 3.45% 3.46% 3.47% 3.26% 2.87% 3.41% 2.64%
</TABLE>
- --------
* Taxable-equivalent basis
I-11
<PAGE>
SUMMARY OF COMPARATIVE OPERATIONS*
(DOLLAR AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED
1995 1994 DECEMBER 31
------------------------------- ------- -----------------
FOURTH THIRD SECOND FIRST FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER 1995 1994
------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $923.6 $927.5 $951.1 $927.3 $867.4 $3,729.5 $3,213.4
Interest expense........ 286.7 291.1 303.6 289.8 245.7 1,171.2 865.5
------ ------ ------ ------ ------ -------- --------
Net interest income.... 636.9 636.4 647.5 637.5 621.7 2,558.3 2,347.9
Provision for credit -- -- -- -- -- -- --
losses................. ------ ------ ------ ------ ------ -------- --------
Net interest income af-
ter provision for
credit losses......... 636.9 636.4 647.5 637.5 621.7 2,558.3 2,347.9
Noninterest income...... 296.3 280.5 274.4 268.4 262.3 1,119.6 1,054.3
Noninterest expenses.... 574.8 532.7 553.9 551.7 538.2 2,213.1 2,197.8
------ ------ ------ ------ ------ -------- --------
Income before income
taxes................. 358.4 384.2 368.0 354.2 345.8 1,464.8 1,204.4
Income taxes............ 143.0 146.4 148.1 142.2 134.5 579.7 470.9
------ ------ ------ ------ ------ -------- --------
NET INCOME............. $215.4 $237.8 $219.9 $212.0 $211.3 $ 885.1 $ 733.5
====== ====== ====== ====== ====== ======== ========
Memo: Taxable-equivalent $ 4.8 $ 4.9 $ 6.1 $ 5.8 $ 5.1 $ 21.6 $ 21.4
adjustment............. ====== ====== ====== ====== ====== ======== ========
</TABLE>
PERCENT OF EARNING ASSETS*
<TABLE>
<CAPTION>
YEAR ENDED
1995 1994 DECEMBER 31
------------------------------- ------- ------------
FOURTH THIRD SECOND FIRST FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER 1995 1994
------- ------- ------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income.......... 7.97% 7.94% 8.01% 7.73% 7.37% 7.91% 7.04%
Interest expense......... 2.47 2.49 2.56 2.42 2.08 2.48 1.90
---- ---- ---- ---- ---- ----- -----
Net interest income..... 5.50 5.45 5.45 5.31 5.29 5.43 5.14
Provision for credit -- -- -- -- -- -- --
losses.................. ---- ---- ---- ---- ---- ----- -----
Net interest income af-
ter provision for
credit losses.......... 5.50 5.45 5.45 5.31 5.29 5.43 5.14
Noninterest income....... 2.56 2.42 2.32 2.22 2.22 2.38 2.31
Noninterest expenses..... 4.98 4.59 4.66 4.56 4.58 4.70 4.81
---- ---- ---- ---- ---- ----- -----
Income before income
taxes.................. 3.08 3.28 3.11 2.97 2.93 3.11 2.64
Income taxes............. 1.23 1.25 1.25 1.19 1.14 1.23 1.03
---- ---- ---- ---- ---- ----- -----
NET INCOME.............. 1.85% 2.03% 1.86% 1.78% 1.79% 1.88% 1.61%
==== ==== ==== ==== ==== ===== =====
</TABLE>
- --------
* Taxable-equivalent basis
I-12
<PAGE>
NONPERFORMING ASSETS AND PAST DUE LOANS
<TABLE>
<CAPTION>
1995 1994
------------------------------- -------
FOURTH THIRD SECOND FIRST FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- -------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Nonperforming Loans:
Real estate construction............. $ 6 $ 6 $ 7 $ 15 $ 22
Real estate mortgage................. 86 41 67 78 92
Commercial........................... 79 92 105 94 70
Instalment........................... -- 1 1 1 2
---- ---- ---- ---- ----
Total Nonperforming Loans.............. 171 140 180 188 186
Other real estate...................... 61 66 69 74 72
---- ---- ---- ---- ----
Total Nonperforming Assets............. $232 $206 $249 $262 $258
==== ==== ==== ==== ====
Loans Past Due 90 Days or More and
Still Accruing Interest............... $100 $ 98 $ 72 $ 52 $ 51
==== ==== ==== ==== ====
</TABLE>
ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
1995 1994 DECEMBER 31,
--------------------------------- ------- --------------------
FOURTH THIRD SECOND FIRST FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER 1995 1994
------- ------- ------- ------- ------- --------- ----------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of
period................. $846.5 $878.1 $920.7 $934.6 $952.5 $ 934.6 $ 1,001.1
Net credit losses (re-
coveries):
Commercial, financial
and agricultural..... 1.3 (0.2) 4.8 (3.0) (1.5) 2.9 (15.9)
Real estate construc-
tion................. (1.1) (15.0) 0.2 (1.8) (0.1) (17.7) 2.6
Real estate mortgage.. 7.6 16.2 4.1 5.8 10.2 33.7 22.4
Instalment--credit
card................. 19.0 14.0 15.3 14.9 15.7 63.2 54.8
Instalment--other..... 17.0 17.1 17.3 22.4 14.0 73.8 70.0
Other loans and
leases............... (1.0) -- 0.9 (1.1) (0.1) (1.2) (0.9)
------ ------ ------ ------ ------ -------- ----------
Total net credit
losses............. 42.8 32.1 42.6 37.2 38.2 154.7 133.0
Provision for credit
losses................. -- -- -- -- -- -- --
Other changes--acquisi-
tions.................. 0.1 0.5 -- 23.3 20.3 23.9 66.5
------ ------ ------ ------ ------ -------- ----------
Balance at end of peri-
od..................... $803.8 $846.5 $878.1 $920.7 $934.6 $ 803.8 $ 934.6
====== ====== ====== ====== ====== ======== ==========
</TABLE>
I-13
<PAGE>
LOGO
PRINTED ON RECYCLED PAPER
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 102(b)(7) of the DGCL, Article Fifth of the Wells
Fargo Certificate (Exhibit 3.1 hereto) eliminates the monetary liability of a
director to the corporation or its stockholders for breach of fiduciary duty
as a director, with the following exceptions, as required by Delaware law: (i)
breach of the director's duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) payment of
unlawful dividends or the making of unlawful stock purchases or redemptions;
or (iv) any transaction from which the director derived an improper personal
benefit.
In addition, under Section 145 of the DGCL, a corporation may indemnify a
director, officer, employee or agent of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any threatened,
pending or completed Proceeding (other than an action by or in the right of
the corporation) if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. In the case of an action brought by or in
the right of the corporation, the corporation may indemnify a director,
officer, employee or agent of the corporation against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of any threatened, pending or completed action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that a court determines upon application that,
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
Article IV of the Wells Fargo By-laws (Exhibit 3.2 hereto) provides for
indemnification of its directors, officers, employees, and other agents to the
fullest extent permitted by the DGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of January 23, 1996, by and
between Wells Fargo & Company and First Interstate Bancorp (included
in Joint Proxy Statement/Prospectus as Appendix A). The Registrant
agrees to furnish supplementally a copy of omitted schedules to the
Commission upon request.
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as of February
23, 1996, to the Agreement and Plan of Merger, dated as of January 23,
1996, by and between Wells Fargo & Company and First Interstate
Bancorp.
3.1 Restated Certificate of Incorporation of the Registrant dated March 3,
1987 (filed as Exhibit 3(a) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993).*
3.2 Bylaws of the Registrant, as amended April 18, 1995 (filed as Exhibit
3(ii) to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993).*
3.3 Certificate of the Voting Powers, Designation, Preferences and
Relative Participating, Optional or Other Special Rights, and the
Qualifications, Limitations or Restrictions Thereof, Which Have Not
Been Set Forth in the Certificate of Incorporation or in Any Amendment
Thereto, of the Adjustable Rate Cumulative Preferred Stock, Series B
(filed as Exhibit 3(c) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993).*
3.4 Certificate of the Voting Powers, Designation, Preferences and
Relative Participating, Optional or Other Special Rights, and the
Qualifications, Limitations or Restrictions Thereof, Which Have Not
Been Set Forth in the Certificate of Incorporation or in Any Amendment
Thereto, of the 9% Preferred Stock, Series C (filed as Exhibit 3 to
the Registrant's Current Report on Form 8-K dated October 24, 1991).*
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.5 Certificate of the Voting Powers, Designation, Preferences and
Relative Participating, Optional or Other Special Rights, and the
Qualifications, Limitations or Restrictions Thereof, Which Have Not
Been Set Forth in the Certificate of Incorporation or in Any Amendment
Thereto, of the 8 7/8% Preferred Stock, Series D (filed as Exhibit 3
to the Registrant's Current Report on Form 8-K dated March 5, 1992).*
5.1 Opinion of Sullivan & Cromwell.
8.1 Tax opinion of Sullivan & Cromwell.
21.1 Subsidiaries of the Registrant (filed as Exhibits 21 and 22 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1994).*
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Sullivan & Cromwell (included in Exhibit 5.1).
23.4 Consent of Sullivan & Cromwell (included in Exhibit 8.1).
24.1 Powers of Attorney.***
99.1 Form of proxy for Special Meeting of stockholders of Wells Fargo &
Company.
99.2 Form of proxy for Special Meeting of stockholders of First Interstate
Bancorp.
99.3 Certificate of Incorporation of First Interstate Bancorp (incorporated
by reference to Exhibit 3.1 to First Interstate Bancorp's Annual
Report on Form 10-K for the year ended December 31, 1989, File No. 1-
4114).*
99.4 Bylaws of First Interstate Bancorp (incorporated by reference to First
Interstate Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 1-4114).*
99.5 Rights Agreement, dated as of November 11, 1988, between First
Interstate Bancorp and First Interstate Bank Limited, as Rights Agent,
as amended (incorporated by reference to Exhibit 2.1 to First
Interstate Bancorp's Registration Statement on Form 8A, dated November
21, 1988, as amended by First Interstate Bancorp's Registration
Statement on Form 8-A/A, dated November 23, 1995).*
99.6 Termination Fee Agreement, dated as of January 23, 1996, between Wells
Fargo & Company and First Interstate Bancorp (included in Joint Proxy
Statement/Prospectus as Appendix B).
99.7 Termination Fee Agreement, dated as of January 23, 1996, between First
Interstate Bancorp and Wells Fargo & Company (included in Joint Proxy
Statement/Prospectus as Appendix C).
99.8 Settlement Agreement, dated as of January 23, 1996, among First Bank
System, Inc., Eleven Acquisition Corp., First Interstate Bancorp and
Wells Fargo & Company (included in Joint Proxy Statement/Prospectus as
Appendix D).
99.9 Opinion of CS First Boston Corporation (included in Joint Proxy
Statement/Prospectus as Appendix E).
99.10 Consent of CS First Boston Corporation.
99.11 Opinion of Montgomery Securities (included in Joint Proxy
Statement/Prospectus as
Appendix F).
99.12 Consent of Montgomery Securities.
99.13 Opinion of Goldman, Sachs & Co. (included in Joint Proxy
Statement/Prospectus as Appendix G).
99.14 Consent of Goldman, Sachs & Co.
99.15 Opinion of Morgan Stanley & Co. Incorporated (included in Joint Proxy
Statement/Prospectus as Appendix H).
99.16 Consent of Morgan Stanley & Co. Incorporated.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
99.17 Form of Certificate of the Voting Powers, Designation, Preferences and
Relative Participating, Optional or Other Special Rights, and the
Qualifications, Limitations or Restrictions Thereof, Which Have Not
Been Set Forth in the Certificate of Incorporation or in Any Amendment
Thereto, of the New Wells Fargo 9.875% Preferred Stock.
99.18 Form of Certificate of the Voting Powers, Designation, Preferences and
Relative Participating, Optional or Other Special Rights, and the
Qualifications, Limitations or Restrictions Thereof, Which Have Not
Been Set Forth in the Certificate of Incorporation or in Any Amendment
Thereto, of the New Wells Fargo 9.0% Preferred Stock.
99.19 Deposit Agreement, dated as of November 14, 1991, between First
Interstate Bancorp and First Interstate Bank of California, as
depositary (filed as Exhibit 4.4 to First Interstate Bancorp's Pre-
Effective Amendment No. 1 to Form S-3 (File No. 33-42889)).*
99.20 Deposit Agreement, dated as of May 29, 1992, between First Interstate
Bancorp and First Interstate Bank of California, as depositary (filed
as Exhibit 4.4 to First Interstate Bancorp's Pre-Effective Amendment
No. 1 to Form S-3 (File No. 33-47174)).*
</TABLE>
- --------
* Incorporated by reference.
** To be filed by amendment.
*** Previously filed.
(b)Financial Statement Schedules.
None.
(c) Reports, Opinions and Appraisals.
None.
ITEM 22. UNDERTAKINGS
The Undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
II-3
<PAGE>
The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City and County of San Francisco, State of California on February 27, 1996.
WELLS FARGO & COMPANY
By /s/ Rodney L. Jacobs
---------------------------------------
Rodney L. Jacobs Vice Chairman and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, Chief February 27, 1996
______________________________________ Executive Officer and Director
Paul Hazen (Principal Executive Officer)
/s/ Rodney L. Jacobs Vice Chairman and Chief February 27,1996
______________________________________ Financial Officer (Principal
Rodney L. Jacobs Financial Officer)
* Executive Vice President and February 27, 1996
______________________________________ Controller (Principal
Frank A. Moeslein Accounting Officer)
*
______________________________________ Director February 27, 1996
H. Jesse Arnelle
*
______________________________________ Director February 27, 1996
William R. Breuner
*
______________________________________ Director February 27, 1996
William S. Davila
*
______________________________________ Director February 27, 1996
Rayburn S. Dezember
*
______________________________________ Director February 27, 1996
Robert K. Jaedicke
*
______________________________________ Director February 27, 1996
Ellen M. Newman
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
*
______________________________________ Director February 27, 1996
Philip J. Quigley
*
______________________________________ Director February 27, 1996
Carl E. Reichardt
*
______________________________________ Director February 27, 1996
Donald B. Rice
*
______________________________________ Director February 27, 1996
Susan G. Swenson
*
______________________________________ Director February 27, 1996
Chang-Lin Tien
*
______________________________________ Director February 27, 1996
John A. Young
*
______________________________________ Director February 27, 1996
William F. Zuendt
/s/ Rodney L. Jacobs
*By __________________________________
(Rodney L. Jacobs as
Attorney-in-Fact for each
of the persons indicated)
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of January 23, 1996, by
and between Wells Fargo and First Interstate Bancorp. (included
in Joint Proxy Statement/Prospectus as Appendix A). The
Registrant agrees to furnish supplementally a copy of omitted
schedules to the Commission upon request.
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as of
February 23, 1996, to the Agreement and Plan of Merger, dated
as of January 23, 1996, by and between Wells Fargo & Company
and First Interstate Bancorp.
3.1 Restated Certificate of Incorporation of the Registrant dated
March 3, 1987 (filed as Exhibit 3(a) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993).*
3.2 Bylaws of the Registrant, as amended April 18, 1995 (filed as
Exhibit 3(ii) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993).*
3.3 Certificate of the Voting Powers, Designation, Preferences and
Relative Participating, Optional or Other Special Rights, and
the Qualifications, Limitations or Restrictions Thereof, Which
Have Not Been Set Forth in the Certificate of Incorporation or
in Any Amendment Thereto, of the Adjustable Rate Cumulative
Preferred Stock, Series B (filed as Exhibit 3(c) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993).*
3.4 Certificate of the Voting Powers, Designation, Preferences and
Relative Participating, Optional or Other Special Rights, and
the Qualifications, Limitations or Restrictions Thereof, Which
Have Not Been Set Forth in the Certificate of Incorporation or
in Any Amendment Thereto, of the 9% Preferred Stock, Series C
(filed as Exhibit 3 to the Registrant's Current Report on Form
8-K dated October 24, 1991).*
3.5 Certificate of the Voting Powers, Designation, Preferences and
Relative Participating, Optional or Other Special Rights, and
the Qualifications, Limitations or Restrictions Thereof, Which
Have Not Been Set Forth in the Certificate of Incorporation or
in Any Amendment Thereto, of the 8 7/8% Preferred Stock, Series
D (filed as Exhibit 3 to the Registrant's Current Report on
Form 8-K dated March 5, 1992).*
5.1 Opinion of Sullivan & Cromwell.
8.1 Tax opinion of Sullivan & Cromwell.
21.1 Subsidiaries of the Registrant (filed as Exhibits 21 and 22 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994).*
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Sullivan & Cromwell (included in Exhibit 5.1).
23.4 Consent of Sullivan & Cromwell (included in Exhibit 8.1).
24.1 Powers of Attorney.***
99.1 Form of proxy for Special Meeting of stockholders of Wells
Fargo & Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
99.2 Form of proxy for Special Meeting of stockholders of First
Interstate Bancorp.
99.3 Certificate of Incorporation of First Interstate Bancorp.
(Incorporated by reference to Exhibit 3.1 to First Interstate
Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1989, File No. 1-4114).*
99.4 Bylaws of First Interstate Bancorp. (Incorporated by reference
to First Interstate Bancorp's Annual Report on Form 10-K for
the year ended December 31, 1993, File No. 1-4114).*
99.5 Rights Agreement, dated as of November 11, 1988, between First
Interstate Bancorp and First Interstate Bank Limited, as Rights
Agent, as amended (incorporated by reference to Exhibit 2.1 to
First Interstate Bancorp's Registration Statement on Form 8A,
dated November 21, 1988, as amended by First Interstate
Bancorp's Registration Statement on Form 8-A/A, dated November
23, 1995).*
99.6 Termination Fee Agreement, dated as of January 23, 1996,
between Wells Fargo & Company and First Interstate Bancorp.
(Included in Joint Proxy Statement/Prospectus as Appendix B).
99.7 Termination Fee Agreement, dated as of January 23, 1996,
between First Interstate Bancorp and Wells Fargo & Company
(Included in Joint Proxy Statement/Prospectus as Appendix C).
99.8 Settlement Agreement, dated as of January 23, 1996 (Included in
Joint Proxy Statement/Prospectus as Appendix D).
99.9 Opinion of CS First Boston Corporation (Included in Joint Proxy
Statement/Prospectus as Appendix E).
99.10 Consent of CS First Boston Corporation.
99.11 Opinion of Montgomery Securities (Included in Joint Proxy
Statement/Prospectus as
Appendix F).
99.12 Consent of Montgomery Securities.
99.13 Opinion of Goldman, Sachs & Co. (Included in Joint Proxy
Statement/Prospectus as
Appendix G).
99.14 Consent of Goldman, Sachs & Co.
99.15 Opinion of Morgan Stanley & Co. Incorporated (Included in Joint
Proxy Statement/Prospectus as Appendix H).
99.16 Consent of Morgan Stanley & Co. Incorporated.
99.17 Form of Certificate of the Voting Powers, Designation,
Preferences and Relative Participating, Optional or Other
Special Rights, and the Qualifications, Limitations or
Restrictions Thereof, Which Have Not Been Set Forth in the
Certificate of Incorporation or in Any Amendment Thereto, of
the New Wells Fargo 9.875% Preferred Stock.
99.18 Form of Certificate of the Voting Powers, Designation,
Preferences and Relative Participating, Optional or Other
Special Rights, and the Qualifications, Limitations or
Restrictions Thereof, Which Have Not Been Set Forth in the
Certificate of Incorporation or in Any Amendment Thereto, of
the New Wells Fargo 9.0% Preferred Stock.
99.19 Deposit Agreement, dated as of November 14, 1991, between First
Interstate Bancorp and First Interstate Bank of California, as
depositary (filed as Exhibit 4.4 to First Interstate Bancorp's
Pre-Effective Amendment No. 1 to Form S-3 (File No. 33-
42889)).*
99.20 Deposit Agreement, dated as of May 29, 1992, between First
Interstate Bancorp and First Interstate Bank of California, as
depositary (filed as Exhibit 4.4 to First Interstate Bancorp's
Pre-Effective Amendment No. 1 to Form S-3 (File No. 33-
47174)).*
</TABLE>
- --------
* Incorporated by reference.
** To be filed by amendment.
*** Previously filed.
<PAGE>
EXHIBIT 2.2
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1, dated as of February 23, 1996 (this "Amendment"), to the
Agreement and Plan of Merger, dated as of January 23, 1996 (the "Agreement"),
by and between WELLS FARGO & COMPANY, a Delaware corporation ("Parent"), and
FIRST INTERSTATE BANCORP, a Delaware corporation ("Subject Company").
W I T N E S S E T H:
WHEREAS, Parent and Subject Company desire to amend the Agreement; and
WHEREAS, Section 8.3 of the Agreement provides that the Agreement may be
amended by written instrument signed by Parent and Subject Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties hereto agree as follows:
ARTICLE I
AMENDMENTS TO THE AGREEMENT
1.1 Closing. Section 9.1 of the Agreement is hereby amended by deleting the
current text thereof in its entirety and inserting in lieu thereof the
following:
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "Closing") will take place at 12:01 a.m. on the first day of
the month following the month in which the latest to occur of the
conditions set forth in Section 7.1 hereof is satisfied or waived (subject
to applicable law) or on such other date to which the parties hereto shall
mutually agree (the "Closing Date").
ARTICLE II
MISCELLANEOUS
2.1 Definitions. Capitalized terms used in this Amendment and not defined
herein shall have the meanings ascribed to them in the Agreement.
2.2 Entire Agreement; Restatement. Other than as amended by Section 1.1
above, the Agreement shall remain in full force and effect unaffected hereby.
The Agreement, as amended by this Amendment, is hereinafter referred to as the
"Agreement", and the parties hereto hereby agree that the Agreement may be
restated to reflect the amendments provided for in this Amendment.
2.3 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY
APPLICABLE CONFLICTS OF LAWS.
2.4 Counterparts. This Amendment may be executed in counterparts, each of
which shall be an original and all of which shall together constitute one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this Amendment
to be executed as of the date first written above.
WELLS FARGO & COMPANY
/s/ Guy Rounsaville, Jr.
By: ____________________________
Name:Guy Rounsaville, Jr.
Title:Secretary
FIRST INTERSTATE BANCORP
/s/ Edward S. Garlock
By: ____________________________
Name:Edward S. Garlock
Title:Secretary
<PAGE>
EXHIBIT 5.1
February 27, 1996
Wells Fargo & Company,
420 Montgomery Street,
San Francisco, California 94163.
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933 (the
"Act") of 54,175,262 shares of Common Stock, par value $5.00 per share (the
"Securities"), of Wells Fargo & Company, a Delaware corporation (the
"Company"), we, as your special counsel, have examined such corporate records,
certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion. The
Securities are intended to be issued by the Company pursuant to the Agreement
and Plan of Merger, dated as of January 23, 1996 and amended as of February 23,
1996 (the "Merger Agreement"), by and between the Company and First Interstate
Bancorp, a Delaware corporation ("First Interstate"), which provides for the
merger of First Interstate with and into the Company (the "Merger").
Upon the basis of the aforementioned examination, we advise you that, in our
opinion, when the registration statement relating to the Securities (the
"Registration Statement") has become effective under the Act, the Merger has
become effective in accordance with the General Corporation Law of the State of
Delaware and the terms and conditions of the Merger Agreement, the certificates
representing the Securities have been duly signed by the Company and
countersigned by the transfer agent and registrar of the Company, and the
Securities have been issued and delivered as contemplated by the Merger
Agreement and the Registration Statement in exchange for outstanding shares of
Common Stock, par value $2.00 per share, of First Interstate, the Securities
will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the United States
and the General Corporation Law of the State of Delaware, and we are expressing
no opinion as to the effect of the laws of any other jurisdiction.
We have relied as to certain matters on information obtained from public
officials, officers of the Company and First Interstate and other sources
believed by us to be responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Validity
of Wells Fargo Common Stock" in the Joint Proxy Statement/Prospectus included
in the Registration Statement. In giving such consent, we do not thereby admit
that we are in the category of persons whose consent is required under Section
7 of the Act.
Very truly yours,
/s/ Sullivan & Cromwell
<PAGE>
EXHIBIT 8.1
February 27, 1996
Wells Fargo & Company,
420 Montgomery Street,
San Francisco, California 94163.
Ladies and Gentlemen:
We have acted as tax counsel to Wells Fargo & Company ("Wells Fargo") in
connection with the Registration Statement (Registration No. 33-64575) on Form
S-4 of Wells Fargo filed with the Securities and Exchange Commission on
February 27, 1996 (the "Registration Statement") and hereby confirm to you our
opinion as set forth under the heading "The Merger--Certain Federal Income Tax
Consequences" in the Joint Proxy Statement/Prospectus included in the
Registration Statement, subject to the assumptions set forth in this letter.
Capitalized terms used but not defined herein have the meanings specified in
the Agreement and Plan of Merger dated as of January 23, 1996, as amended as
of February 23, 1996 (the "Merger Agreement").
In connection with our opinion, we have assumed the following with your
consent and the consent of First Interstate Bancorp ("First Interstate"):
(1) The Merger will be effected in accordance with the Merger
Agreement.
(2) The facts and representations contained in letters to us from
Wells Fargo and First Interstate dated February 27, 1996, respectively,
were true and correct when made and will remain true and correct through
the date of the Effective Time and, as to representations qualified by
the best knowledge of the management of Wells Fargo or First Interstate,
the underlying facts as of the Effective Time will be consistent with
such knowledge.
We hereby consent to the filing with the Securities and Exchange Commission
of this letter as an exhibit to the Registration Statement and the references
to us under the headings "Summary--Certain Federal Income Tax Consequences"
and "The Merger--Certain Federal Income Tax Consequences". In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Sullivan & Cromwell
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors Wells Fargo & Company:
We consent to the incorporation by reference in the Registration Statement,
as amended, on Form S-4 (No. 33-64575) of Wells Fargo & Company of our report
dated January 17, 1995, incorporated by reference in the Annual Report on Form
10-K of Wells Fargo & Company for the year ended December 31, 1994 and to the
reference to our firm under the headings "Experts" in the Joint Proxy
Statement/ Prospectus.
/s/ KPMG Peat Marwick LLP
San Francisco, CA February 27, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Joint Proxy Statement of Wells Fargo & Company and First Interstate Bancorp
that is made a part of Amendment No. 4 to the Registration Statement (Form S-4
No. 33-64575) and Prospectus of Wells Fargo & Company and to the incorporation
by reference therein of our report dated January 16, 1995, with respect to the
consolidated financial statements of First Interstate Bancorp included in its
Annual Report (Form 10-K) for the year ended December 31, 1994, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Los Angeles, California
February 23, 1996
<PAGE>
EXHIBIT 99.1
PROXY SOLICITED BY WELLS FARGO & COMPANY
P R O X Y
Unless otherwise specified below, the undersigned, a holder of record of
shares of common stock, par value $5.00 per share ("Wells Fargo Common
Stock"), of Wells Fargo & Company ("Wells Fargo") at the close of business
on February 16, 1996 (the "Record Date"), hereby appoints Paul Hazen and
William F. Zuendt, or either of them, the proxy or proxies of the
undersigned, each with full power of substitution, to attend the special
meeting of stockholders of Wells Fargo to be held on March 28, 1996 and any
adjournments or reschedulings thereof at which holders of Wells Fargo
Common Stock will be voting on whether to adopt the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of January 23, 1996, by and
between Wells Fargo and First Interstate Bancorp, a Delaware corporation
("First Interstate"), as amended, providing for the merger (the "Merger")
of First Interstate with and into Wells Fargo, and to approve the
transactions contemplated thereby, including the Merger and the issuance of
shares of Wells Fargo Common Stock and preferred stock pursuant to the
Merger, and to vote as specified in this proxy all the shares of Wells
Fargo Common Stock which the undersigned would otherwise be entitled to
vote if personally present. The undersigned hereby revokes any previous
proxies with respect to the matters covered in this proxy.
THE BOARD OF DIRECTORS OF WELLS FARGO RECOMMENDS A VOTE FOR ADOPTION OF
THE MERGER AGREEMENT AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED THEREBY.
IF RETURNED CARDS ARE SIGNED AND DATED BUT NOT MARKED, YOU WILL BE DEEMED
TO HAVE VOTED TO ADOPT THE MERGER AGREEMENT.
-------------
SEE REVERSE
SIDE
-------------
(FACE OF PROXY CARD)
<PAGE>
+
+
[X] PLEASE MARK YOUR + 7104
VOTES AS IN THIS +++++
EXAMPLE.
THE BOARD OF DIRECTORS OF WELLS FARGO RECOMMENDS A VOTE FOR ADOPTION OF THE
MERGER AGREEMENT AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED THEREBY.
1. Adoption of the Merger Agreement providing for the Merger of First
Interstate with and into Wells Fargo, and approval of the transactions
contemplated thereby.
FOR AGAINST ABSTAIN
[_] [_] [_]
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the special meeting or any adjournments or
reschedulings thereof.
IF RETURNED CARDS ARE SIGNED AND DATED BUT NOT MARKED, THE UNDERSIGNED WILL BE
DEEMED TO HAVE VOTED TO ADOPT THE MERGER AGREEMENT AND TO APPROVE THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER AND THE ISSUANCE OF
SHARES OF COMMON AND PREFERRED STOCK PURSUANT TO THE MERGER, AND TO HAVE
APPOINTED THE PROXIES WHOSE NAMES APPEAR ON THE FACE HEREOF TO VOTE ON SUCH
OTHER MATTERS AS MAY BE PROPERLY BEFORE THEM.
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE, PLEASE CONTACT D.F. KING & CO.,
INC. AT 1-800-431-9646.
Proxies can only be given by stockholders of record on the Record Date. Please
sign your name below exactly as it appears hereon. When shares of Wells Fargo
Common Stock are held of record by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
SIGNATURE(S) ________________________ DATED________________________, 1996
NOTE: PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
(REVERSE OF PROXY CARD)
<PAGE>
EXHIBIT 99.2
FIRST INTERSTATE BANCORP
PROXY
SPECIAL MEETING OF STOCKHOLDERS
MARCH 28, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints William E. B. Siart, Edward S. Garlock and
Ann M. Coons, and each of them, with full power of substitution, attorneys and
proxies, to represent and to vote all shares of Common Stock, par value $2.00
per share ("First Interstate Common Stock"), of First Interstate Bancorp
("First Interstate") which the undersigned is entitled to vote at the Special
Meeting of Stockholders to be held on March 28, 1996 at 8:00 a.m., local time,
at The Sheraton Grande Hotel, 333 South Figueroa Street, Los Angeles,
California and at any adjournments or postponements thereof, upon the item set
forth on the reverse side of this proxy, with all powers the undersigned would
possess if personally present at the meeting.
THE BOARD OF DIRECTORS OF FIRST INTERSTATE RECOMMENDS A VOTE FOR ADOPTION OF
THE MERGER AGREEMENT AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED THEREBY.
IF RETURNED CARDS ARE SIGNED AND DATED BUT NOT MARKED, YOU WILL BE DEEMED TO
HAVE VOTED TO ADOPT THE MERGER AGREEMENT.
THIS PROXY, IF SIGNED AND RETURNED, WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATIONS ARE MADE, YOUR SHARES WILL BE VOTED FOR ADOPTION OF THE
AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT"), DATED AS OF
JANUARY 23, 1996, BY AND BETWEEN FIRST INTERSTATE AND WELLS FARGO &
COMPANY, A DELAWARE CORPORATION ("WELLS FARGO"), AS AMENDED, AND THE
APPROVAL OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER
OF FIRST INTERSTATE WITH AND INTO WELLS FARGO. IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING. A MAJORITY OF SAID PROXIES, OR ANY SUBSTITUTE OR
SUBSTITUTES, WHO SHALL BE PRESENT AND ACT AT THE MEETING (OR IF ONLY ONE
SHALL BE PRESENT AND ACT, THEN THAT ONE) SHALL HAVE ALL THE POWERS OF
SAID PROXIES HEREUNDER.
(PLEASE SIGN ON REVERSE SIDE)
FOLD AND DETACH HERE
[LOGO](R) FIRST INTERSTATE Bancorp
(FRONT OF PROXY CARD)
<PAGE>
- --------------------------------------------------------------------------------
Please mark [X]
your votes
as indicated
in this example
THE BOARD OF DIRECTORS OF FIRST INTERSTATE RECOMMENDS A VOTE FOR THE ADOPTION
OF THE MERGER AGREEMENT.
Item 1--To adopt the Merger Agreement providing for the merger of First
Interstate with and into Wells Fargo, and to approve the transactions
contemplated thereby.
FOR AGAINST ABSTAIN
[_] [_] [_]
IF RETURNED CARDS ARE SIGNED AND DATED BUT NOT MARKED, THE UNDERSIGNED WILL BE
DEEMED TO HAVE VOTED TO ADOPT THE MERGER AGREEMENT AND TO APPROVE THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER OF FIRST INTERSTATE
WITH AND INTO WELLS FARGO, AND TO HAVE APPOINTED THE PROXIES WHOSE NAMES APPEAR
ON THE FACE HEREOF TO VOTE ON SUCH OTHER MATTERS AS MAY BE PROPERLY BEFORE
THEM.
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE, PLEASE CONTACT GEORGESON & CO.
INC. AT 1 (800) 223-2064.
Proxies can only be given by stockholders of record on February 16, 1996.
Please sign your name below exactly as it appears hereon. When shares of First
Interstate Common Stock are held of record by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name
by president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Signature(s) ___________________________ Date _______________________________
NOTE: (Please sign as name appears hereon. Joint Owners should each sign. When
signing as attorney, executor, administrators, trustees, guardian, please give
full title as such.)
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
FOLD AND DETACH HERE
(REVERSE OF PROXY CARD)
<PAGE>
EXHIBIT 99.10
CONSENT
OF
CS FIRST BOSTON CORPORATION
Board of Directors
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94104
Members of the Board:
We hereby consent to the inclusion of (i) our opinion letter to the Board of
Directors of Wells Fargo & Company ("Wells Fargo") as Appendix E to the joint
Proxy Statement/Prospectus of Wells Fargo and First Interstate Bancorp ("First
Interstate") relating to the proposed merger transaction involving Wells Fargo
and First Interstate, and (ii) references made to our firm and such opinion in
such Joint Proxy Statement/Prospectus under the captions entitled "SUMMARY--
Opinions of Wells Fargo Financial Advisors," "THE MERGER--Background of the
Merger," "THE MERGER--Reasons of Wells Fargo for the Merger; Recommendation of
the Wells Fargo Board of Directors" and "THE MERGER--Opinions of Wells Fargo
Financial Advisors--Opinion of CS First Boston." In giving such consent, we do
not admit that we come within the category of persons whose consent is
required under, and we do not admit that we are "experts" for purposes of, the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
/s/ CS First Boston Corporation
By:
----------------------------------
CS FIRST BOSTON CORPORATION
February 27, 1996
<PAGE>
EXHIBIT 99.12
CONSENT
OF
MONTGOMERY SECURITIES
February 27, 1996
Board of Directors
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94104
Members of the Board:
We hereby consent to the inclusion of (i) our opinion letter to the Board of
Directors of Wells Fargo & Company ("Wells Fargo") as Appendix F to the Joint
Proxy Statement/Prospectus of Wells Fargo and First Interstate Bancorp ("First
Interstate") relating to the proposed merger transaction involving Wells Fargo
and First Interstate, and (ii) references made to our firm and such opinion in
such Joint Proxy Statement/Prospectus under the captions entitled "SUMMARY--
Opinions of Wells Fargo Financial Advisors," "THE MERGER--Background of the
Merger," "THE MERGER--Reasons of Wells Fargo for the Merger; Recommendation of
the Wells Fargo Board of Directors" and "THE MERGER--Opinions of Wells Fargo
Financial Advisors--Opinion of Montgomery." In giving such consent, we do not
admit that we come within the category of persons whose consent is required
under, and we do not admit that we are "experts" for purposes of, the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
/s/ Montgomery Securities
By: ____________________________
MONTGOMERY SECURITIES
<PAGE>
EXHIBIT 99.14
PRIVILEGED AND CONFIDENTIAL
February 27, 1996
Board of Directors
First Interstate Bancorp
633 West Fifth Street
Los Angeles, California 90071
Re: Amendment No. 4 to Registration Statement (File No. 33-64575) on
Form S-4 of Wells Fargo & Company, including the Joint Proxy
Statement/Prospectus of Wells Fargo & Company and First Interstate
Bancorp
Gentlemen and Madame:
Reference is made to our opinion letters dated January 23, 1996 and February
27, 1996 with respect to the fairness to the holders of the outstanding shares
of Common Stock, par value $2.00 per share (the "Shares"), of First Interstate
Bancorp (the "Company") of the exchange ratio of two-thirds shares of Common
Stock, par value $5.00 per share, of Wells Fargo & Company ("Wells Fargo") to
be received for each Share pursuant to the merger contemplated by the
Agreement and Plan of Merger dated as of January 23, 1996 by and between Wells
Fargo and the Company, as amended as of February 23, 1996.
The foregoing opinion letters are for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated therein and are not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor are they to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent.
In that regard, we hereby consent to the references to the opinions of our
Firm under the captions "SUMMARY--Opinions of First Interstate Financial
Advisors," "THE MERGER--Background of the Merger," "THE MERGER--Reasons of
First Interstate for the Merger; Recommendation of the First Interstate Board
of Directors" and "THE MERGER--Opinions of First Interstate Financial
Advisors" and to the inclusion of the foregoing opinion dated February 27,
1996 in the Joint Proxy Statement/Prospectus included in the above-mentioned
Registration Statement, as amended. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
<PAGE>
EXHIBIT 99.16
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
February 27, 1996
First Interstate Bancorp
633 West Fifth Street
Los Angeles, California 90071
Dear Sirs:
We hereby consent to the inclusion in this Registration Statement on Form S-
4 and related Joint Proxy Statement/Prospectus with respect to the proposed
merger of First Interstate Bancorp with Wells Fargo & Company, of our opinion
letter appearing as Appendix H to the Joint Proxy Statement/Prospectus which
is part of such Registration Statement, and to the references to our firm name
under the captions "SUMMARY--Opinions of First Interstate Financial Advisors"
and "THE MERGER--Background of the Merger", "--Reasons of First Interstate for
the Merger; Recommendation of First Interstate Board of Directors," "--
Opinions of First Interstate Financial Advisors." In giving such consent, we
do not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations adopted by the Securities and Exchange Commission
thereunder nor do we admit that we are experts with respect to any part of
such Registration Statement within the meaning of the term "experts" as used
in the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
/s/ Donald A. Moore, Jr.
By: ____________________________
Donald A. Moore, Jr.
Managing Director
<PAGE>
EXHIBIT 99.17
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THERETO, OF THE
9 7/8% PREFERRED STOCK, SERIES F
OF
WELLS FARGO & COMPANY
WE, THE UNDERSIGNED, William F. Zuendt and Guy Rounsaville, Jr., the
President and the Secretary, respectively, of Wells Fargo & Company, a
Delaware corporation (the "Company"), DO HEREBY CERTIFY that the following
resolution was duly adopted by the Financing Committee of the Board of
Directors of the Company by unanimous written consent dated as of February ,
1996:
RESOLVED that, pursuant to authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the Company and
delegated to the Financing Committee by resolutions of the Board of
Directors adopted on January 21, 1992, the Financing Committee of the Board
of Directors hereby authorizes the issuance of a series of Preferred Stock
of the Company to consist of l,000,000 shares, the voting powers,
designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof, in addition to those set forth in the Restated Certificate of
Incorporation, are hereby fixed as follows:
1. Number of Shares. The series of preferred stock created hereby shall
comprise 1,000,000 shares designated as the "9 7/8% Preferred Stock, Series
F" (the "9 7/8% Preferred Stock"). The 9 7/8% Preferred Stock has a par
value of $5.00 per share and a liquidation preference of $200.00 per share.
The number of authorized shares of the 9 7/8% Preferred Stock may be
reduced by further resolution duly adopted by or pursuant to authority
conferred by the Board of Directors of the Company and by the filing of a
certificate of designation pursuant to the provisions of the General
Corporation Law of the State of Delaware stating that such reduction has
been so authorized, but the number of authorized shares of the 9 7/8%
Preferred Stock shall not be increased.
2. Dividends.
2.1 Right to Receive Cash Dividends. The holders of shares of the 9 7/8%
Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors of the Company or any duly authorized committee
thereof, out of funds legally available therefor, cumulative cash
dividends, payable quarterly in arrears on the last day of March, June,
September and December of each year, commencing December 31, 1991 (each a
"Dividend Payment Date"), at the rate per annum payable as set forth in
Section 2.2. Each such dividend shall be paid to the holders of record of
the 9 7/8% Preferred Stock as they appear on the stock register of the
Company on such record date, not exceeding 60 calendar days preceding the
Dividend Payment Date thereof, as shall be fixed by the Board of Directors
of the Company or by a committee of said Board of Directors duly authorized
to fix such date.
The amount of dividends per share payable for each quarterly dividend
period shall be computed by dividing the dividend rate for such dividend
period by four and applying such rate against the liquidation preference
per share of the 9 7/8% Preferred Stock. Dividends payable on the 9 7/8%
Preferred Stock for any period less than a full quarterly dividend period,
including the Initial Dividend Period, as defined below, shall be computed
on the basis of a 360-day year of four 90-day quarters and the actual
number of days elapsed in the period for which payable.
2.2. Dividend Rate. The dividend rate on the shares of 9 7/8% Preferred
Stock for the period from the date of original issue thereof to and
including December 31, 1991 (the "Initial Dividend Period"), and for each
quarterly dividend period thereafter shall be 9 7/8% per annum.
<PAGE>
2.3 Dividend Rank.
(a) So long as any shares of the 9 7/8% Preferred Stock are outstanding,
no dividends shall be paid or declared upon any shares of any class or
series of stock of the Company ranking on a parity with the 9 7/8%
Preferred Stock in the payment of dividends for any period unless, at or
prior to the time of such payment or declaration, (i) all dividends payable
on the 9 7/8% Preferred Stock for all dividend periods ended prior to the
date of such payment or declaration shall have been paid, and (ii) a like
proportionate dividend for the same dividend period, ratably in proportion
to the respective annual dividend rates fixed thereupon, shall be paid upon
or declared for the 9 7/8% Preferred Stock then issued and outstanding.
(b) If no shares of the 9 7/8% Preferred Stock are outstanding, no full
dividends shall be declared or paid or set apart for payment on any series
of the preferred stock, $5.00 par value, of the Company (the "Preferred
Stock") ranking, as to dividends, on a parity with or junior to the 9 7/8%
Preferred Stock for any period unless full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the 9 7/8% Preferred
Stock for all dividend periods terminating on or prior to the date of
payment of such full cumulative dividends. In the event that dividends are
not paid in full (or a sum sufficient for such full payment set apart) upon
the shares of the 9 7/8% Preferred Stock or the shares of any other series
of Preferred Stock ranking on a parity as to dividends with the shares of
the 9 7/8% Preferred Stock, dividends upon shares of the 9 7/8% Preferred
Stock and dividends on shares of such other series of Preferred Stock shall
be declared by the Board of Directors or a duly authorized committee
thereof pro rata with respect thereto so that the amount of dividends per
share on the 9 7/8% Preferred Stock and such other series of Preferred
Stock so declared shall in all cases bear to each other the same ratio that
full cumulative dividends on the shares of the 9 7/8% Preferred Stock and
full dividends, including accumulations, if any, on the shares of such
other series of Preferred Stock, bear to each other.
(c) Except as provided in this Section 2.3, if full cumulative dividends
on all outstanding shares of the 9 7/8% Preferred Stock at the rate per
share set out in Section 2.2 shall not have been declared and paid or set
aside for payment, the Company shall not, until full cumulative dividends
have been declared and paid or set aside for payment on all outstanding
shares of the 9 7/8% Preferred Stock, (i) declare or pay or set aside for
payment any dividends (other than a dividend in common stock, $5.00 par
value, of the Company (the "Common Stock") or in any other stock ranking
junior to the 9 7/8% Preferred Stock as to dividends and upon liquidation,
dissolution or winding up of the Company) or make any other distribution on
the Common Stock or any other stock of the Company ranking junior to or on
a parity with shares of the 9 7/8% Preferred Stock, with respect to the
payment of dividends or distribution of assets upon liquidation,
dissolution or winding up of the Company, or (ii) make any payment on
account of the purchase, redemption or other retirement of, or pay or make
available any moneys for a sinking fund for the redemption of, any shares
of Common Stock or such other junior or parity stock except by conversion
into or exchange for stock of the Company ranking junior to the 9 7/8%
Preferred Stock as to dividends and upon liquidation.
(d) Any dividend payment made on shares of the 9 7/8% Preferred Stock
shall first be credited against the earliest accumulated but unpaid
dividend due with respect to such shares.
3. Redemption.
3.1 Redemption Prices and Dates. The shares of the 9 7/8% Preferred Stock
shall not be redeemable prior to November 15, 1996. On or after November
15, 1996, the Company, at its option, may redeem the shares of the 9 7/8%
Preferred Stock as a whole or from time to time in part, at a redemption
price of $200.00 per share, plus, in each case, all accrued and unpaid
dividends thereon (whether or not earned or declared) to the date fixed for
redemption.
3.2 Restrictions. Notwithstanding the foregoing, if full cumulative
dividends on all outstanding shares of 9 7/8% Preferred Stock have not been
paid or contemporaneously declared and paid for all past dividend periods,
no shares of 9 7/8% Preferred Stock shall be redeemed pursuant to this
Section 3 unless all outstanding shares of 9 7/8% Preferred Stock are
simultaneously redeemed, and, unless the full
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cumulative dividends on all outstanding shares of 9 7/8% Preferred Stock
and any other Preferred Stock ranking on a parity therewith as to dividends
and upon liquidation shall have been paid or contemporaneously are declared
and paid for all past dividend periods, the Company shall not purchase or
otherwise acquire any shares of 9 7/8% Preferred Stock or shares of any
other series of Preferred Stock ranking on a parity therewith as to
dividends and upon liquidation (except by conversion into or exchange for
shares of the Company ranking junior to the shares of the 9 7/8% Preferred
Stock); provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of the 9 7/8% Preferred Stock or of
shares of such other series of Preferred Stock pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares
of the 9 7/8% Preferred Stock or of such other series.
3.3 Pro Rata Redemption. In the event that fewer than all the outstanding
shares of the 9 7/8% Preferred Stock are to be redeemed, the number of
shares to be redeemed shall be determined by the Board of Directors or a
duly authorized committee thereof and the shares to be redeemed shall be
redeemed pro rata from the holders of record of such shares in proportion
to the number of such shares held by such holders (with adjustments to
avoid fractional shares).
3.4 Notice. In the event the Company shall redeem shares of the 9 7/8%
Preferred Stock, notice of such redemption (a "Notice of Redemption") shall
be given by first class mail, postage prepaid, mailed not less than 40 nor
more than 70 days prior to the redemption date, to each holder of record of
the shares to be redeemed, at such holder's address as the same appears on
the stock register of the Company. Each such Notice of Redemption shall
state: (i) the redemption date; (ii) the number of shares of the 9 7/8%
Preferred Stock to be redeemed and, if fewer than all the shares held by
such holder are to be redeemed, the number of such shares to be redeemed
from such holder; (iii) the redemption price (specifying the amount of
accrued and unpaid dividends to be included therein); (iv) the place or
places where certificates for such shares are to be surrendered for payment
of the redemption price; (v) that dividends on the shares to be redeemed
will cease to accumulate on such redemption date; and (vi) the provision
hereunder pursuant to which such redemption is being made.
3.5 Cessation of Dividends. If a Notice of Redemption has been given,
from and after the redemption date for the shares of the 9 7/8% Preferred
Stock called for redemption (unless default shall be made by the Company in
providing money for the payment of the redemption price of the shares so
called for redemption plus an amount equal to full cumulative dividends
thereon (whether or not earned or declared) to the date fixed for
redemption) dividends on the shares of the 9 7/8% Preferred Stock so called
for redemption shall cease to accrue and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Company (except the right to receive the redemption
price plus an amount equal to such accumulated and unpaid dividends) shall
cease. Upon surrender in accordance with said Notice of the certificates
for any shares so redeemed (properly endorsed or assigned for transfer, if
the Board of Directors of the Company shall so require and the Notice shall
so state), the redemption price set forth above plus an amount equal to
such accumulated and unpaid dividends shall be paid by the paying agent for
the Company. In the case that fewer than all of the shares represented by
any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder thereof.
3.6 Status of Redeemed Shares. Shares of 9 7/8% Preferred Stock which
have been redeemed shall, after such redemption, have the status of
authorized but unissued shares of Preferred Stock, without designation as
to series, until such shares are once more designated as part of a
particular series by or on behalf of the Board of Directors.
4. Liquidation Rights.
4.1 Payment Upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, the holders of outstanding shares of the 9 7/8% Preferred Stock
shall be entitled, before any payment or distribution shall be made on the
Common Stock or any other class of stock ranking junior to the 9 7/8%
Preferred Stock upon liquidation, to be paid in full an amount equal to
$200.00 per share, plus an amount equal to all accumulated and unpaid
dividends (whether or not earned or
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declared). After payment of the full amount of such liquidation
distribution, the holders of the 9 7/8% Preferred Stock shall not be
entitled to any further participation in any distribution of assets of the
Company.
4.2 Insufficient Assets. If, upon any liquidation, dissolution or winding
up of the Company, the assets of the Company, or proceeds thereof,
distributable among the holders of the shares of the 9 7/8% Preferred Stock
and the holders of shares of all other stock of the Company ranking, as to
liquidation, dissolution or winding up, on a parity with the 9 7/8%
Preferred Stock, shall be insufficient to pay in full the preferential
amount set forth in Section 4.1 and liquidating payments on all such other
stock ranking, as to liquidation, dissolution or winding up, on a parity
with the 9 7/8% Preferred Stock, then such assets, or the proceeds thereof,
shall be distributed among the holders of the 9 7/8% Preferred Stock and
all such other stock ratably in accordance with the respective amounts
which would be payable on such shares of the 9 7/8% Preferred Stock and any
such other stock if all amounts payable thereon were paid in full (which,
in the case of such other stock, may include accumulated dividends).
4.3 Payments on Stock Ranking Junior. In the event of any such
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, unless and until payment in full is made to the holders of all
outstanding shares of the 9 7/8% Preferred Stock of the liquidation
distribution to which they are entitled pursuant to Section 4.1, no
dividend or other distribution shall be made to the holders of the Common
Stock or any other class of stock ranking upon liquidation junior to the
shares of the 9 7/8% Preferred Stock and no purchase, redemption or other
acquisition for any consideration by the Company shall be made in respect
of the shares of the Common Stock or such other class of stock.
4.4 Definition. Neither the consolidation nor merger of the Company into
or with another corporation or corporations shall be deemed to be a
liquidation, dissolution or winding up of the Company within the meaning of
this Section 4.
5. Voting Rights.
5.1 Generally. Holders of the 9 7/8% Preferred Stock shall not have any
voting rights except as hereinafter provided or as otherwise from time to
time required by law. If at the time of any annual meeting of stockholders
for the election of directors of the Company a default in preference
dividends shall exist on the 9 7/8% Preferred Stock, or any series of
Preferred Stock ranking on a parity with the 9 7/8% Preferred Stock as to
dividends or upon liquidation (the 9 7/8% Preferred Stock and any such
series of Preferred Stock being herein referred to as the "Parity Preferred
Stock"), the maximum authorized number of members of the Board of Directors
shall automatically be increased by two. The two vacancies so created shall
be filled at such meeting by the vote of the holders of the 9 7/8%
Preferred Stock and the holders of any other Parity Preferred Stock upon
which like voting rights have been conferred and are then exercisable (the
Preferred Stock and such other Parity Preferred Stock being herein referred
to as "Voting Parity Preferred Stock"), voting together as a single class
without regard to series, to the exclusion of the holders of the Common
Stock and any other class of capital stock of the Company that is not
Voting Parity Preferred Stock. The holders of the Common Stock and any
other class of capital stock of the Company which has the right to vote at
such meeting (other than the Voting Parity Preferred Stock) shall elect the
remaining directors. Such right of the holders of the Voting Parity
Preferred Stock shall continue until there are no preference dividends in
arrears upon the Voting Parity Preferred Stock of any series at which time
such right shall terminate, except as by law expressly provided, subject to
revesting in the event of each and every subsequent default of the
character above mentioned. Upon any such termination of the right of the
holders of shares of Voting Parity Preferred Stock as a class to vote for
directors as herein provided, the term of office of each director then in
office elected by such holders voting as a class (herein called a
"Preferred Director") shall terminate immediately. Any Preferred Director
may be removed by, and shall not be removed except by, the vote of the
holders of record of the outstanding shares of Voting Parity Preferred
Stock, voting together as a single class without regard to series, at a
meeting of the stockholders, or of the holders of shares of Voting Parity
Preferred Stock, called for such purpose. So long as a default in any
preference dividends on the Voting Parity Preferred Stock of any series
shall exist, (A) any vacancy in the office of a Preferred Director may be
filled (except as provided in the following clause (B)) by the person
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appointed by an instrument in writing signed by the remaining Preferred
Director and filed with the Company and (B) in the case of the removal of
any Preferred Director, the vacancy may be filled by the person elected by
the vote of the holders of outstanding shares of Voting Parity Preferred
Stock, voting together as a single class without regard to series, at the
same meeting at which such removal shall be voted or at any subsequent
meeting. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed to be a Preferred Director. Whenever a default in
preference dividends on the Voting Parity Preferred Stock shall no longer
exist: (i) the term of office of the Preferred Directors shall end, (ii)
the special voting powers vested in the holders of the Voting Parity
Preferred Stock as provided in this resolution shall expire, and (iii) the
number of members of the Board of Directors shall be such number as may be
provided for in the Company's By-Laws irrespective of any increase made as
provided in this resolution. A "default in preference dividends" on the
Voting Parity Preferred Stock of any series shall be deemed to have
occurred whenever the amount of unpaid accrued dividends upon such series
through the last preceding dividend period therefor shall be equivalent to
six quarterly dividends (which, with respect to the 9 7/8% Preferred Stock,
shall be deemed to be dividends in respect of a number of dividend periods
containing not less than 540 days) or more, and having so occurred, such
default shall be deemed to exist thereafter until, but only until, full
cumulative dividends on all shares of Voting Parity Preferred Stock of each
and every series then outstanding shall have been paid to the end of the
last preceding dividend period.
5.2 Ranking. So long as any shares of 9 7/8% Preferred Stock remain
outstanding, the Company shall not, without the affirmative vote or consent
of the holders of at least two-thirds of the shares of the 9 7/8% Preferred
Stock outstanding at the time, given in person or by proxy, either in
writing or at a meeting (voting separately as a class together with all
other series of Parity Preferred Stock), (i) authorize, create or issue, or
increase the authorized or issued amount of, any class or series of stock
ranking prior to the 9 7/8% Preferred Stock with respect to payment of
dividends or the distribution of assets on liquidation, or reclassify any
authorized stock of the Company into any such shares, or create, authorize
or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the
provisions of the Company's Restated Certificate of Incorporation or of the
resolution contained in the certificate of designation for the 9 7/8%
Preferred Stock, whether by merger, consolidation or otherwise, so as to
materially and adversely affect any right, preference, privilege or voting
power of the 9 7/8% Preferred Stock or the holders thereof; provided,
however, that any increase in the amount of the authorized Preferred Stock
or the creation or issuance of other series of Preferred Stock, or any
increase in the amount of authorized shares of such series or of any other
series of Preferred Stock, in each case ranking on a parity with or junior
to the 9 7/8% Preferred Stock shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
5.3 Applicability. The foregoing voting provisions will not apply if, at
or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of the 9
7/8% Preferred Stock shall have been redeemed or called for redemption and
sufficient funds shall have been deposited in trust to effect such
redemption.
6. Conversion or Exchange. The holders of shares of the 9 7/8% Preferred
Stock shall not have any right herein to convert such shares into or
exchange such shares for shares of any other class or classes or of any
other series of any class or classes of capital stock of the Company.
7. Ranking. The 9 7/8% Preferred Stock shall rank on a parity as to
dividends and liquidation with each series of Preferred Stock outstanding
on the date of issuance of the 9 7/8% Preferred Stock.
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IN WITNESS WHEREOF, Wells Fargo & Company has caused this Certificate to be
executed by its officers thereunto duly authorized as of this th day of
February 1996.
-------------------------------------
William F. Zuendt
President
Attest:
- ------------------------------------------
Guy Rounsaville, Jr.
Secretary
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EXHIBIT 99.18
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THERETO, OF THE
9% PREFERRED STOCK, SERIES G
OF
WELLS FARGO & COMPANY
WE, THE UNDERSIGNED, William F. Zuendt and Guy Rounsaville, Jr., the
President and the Secretary, respectively, of Wells Fargo & Company, a Delaware
corporation (the "Company"), DO HEREBY CERTIFY that the following resolution
was duly adopted by the Financing Committee of the Board of Directors of the
Company by unanimous written consent dated as of February , 1996:
RESOLVED that, pursuant to authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the Company and
delegated to the Financing Committee by resolutions of the Board of
Directors adopted on January 21, 1992, the Financing Committee of the Board
of Directors hereby authorizes the issuance of a series of Preferred Stock
of the Company to consist of 750,000 shares, the voting powers,
designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof, in addition to those set forth in the Restated Certificate of
Incorporation, are hereby fixed as follows:
1. Number of Shares. The series of preferred stock created hereby shall
comprise 750,000 shares designated as the "9% Preferred Stock, Series G"
(the "9% Preferred Stock"). The 9% Preferred Stock has a par value of $5.00
per share and a liquidation preference of $200.00 per share. The number of
authorized shares of the 9% Preferred Stock may be reduced by further
resolution duly adopted by or pursuant to authority conferred by the Board
of Directors of the Company and by the filing of a certificate of
designation pursuant to the provisions of the General Corporation Law of
the State of Delaware stating that such reduction has been so authorized,
but the number of authorized shares of the 9% Preferred Stock shall not be
increased.
2. Dividends.
2.1 Right to Receive Cash Dividends. The holders of shares of the 9%
Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors of the Company or any duly authorized committee
thereof, out of funds legally available therefor, cumulative cash
dividends, payable quarterly in arrears on the last day of March, June,
September and December of each year, commencing September 30, 1992 (each a
"Dividend Payment Date"), at the rate per annum payable as set forth in
Section 2.2. Each such dividend shall be paid to the holders of record of
the 9% Preferred Stock as they appear on the stock register of the Company
on such record date, not exceeding 60 calendar days preceding the Dividend
Payment Date thereof, as shall be fixed by the Board of Directors of the
Company or by a committee of said Board of Directors duly authorized to fix
such date.
The amount of dividends per share payable for each quarterly dividend
period shall be computed by dividing the dividend rate for such dividend
period by four and applying such rate against the liquidation preference
per share of the 9% Preferred Stock. Dividends payable on the 9% Preferred
Stock for any period less than a full quarterly dividend period, including
the Initial Dividend Period, as defined below, shall be computed on the
basis of a 360-day year of four 90-day quarters and the actual number of
days elapsed in the period for which payable.
2.2. Dividend Rate. The dividend rate on the shares of 9% Preferred
Stock for the period from the date of original issue thereof to and
including September 30, 1992 (the "Initial Dividend Period"), and for each
quarterly dividend period thereafter shall be 9.00% per annum.
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2.3 Dividend Rank.
(a) So long as any shares of the 9% Preferred Stock are outstanding, no
dividends shall be paid or declared upon any shares of any class or series
of stock of the Company ranking on a parity with the 9% Preferred Stock in
the payment of dividends for any period unless, at or prior to the time of
such payment or declaration, (i) all dividends payable on the 9% Preferred
Stock for all dividend periods ended prior to the date of such payment or
declaration shall have been paid, and (ii) a like proportionate dividend
for the same dividend period, ratably in proportion to the respective
annual dividend rates fixed thereupon, shall be paid upon or declared for
the 9% Preferred Stock then issued and outstanding.
(b) If no shares of the 9% Preferred Stock are outstanding, no full
dividends shall be declared or paid or set apart for payment on any series
of the preferred stock, $5.00 par value, of the Company (the "Preferred
Stock") ranking, as to dividends, on a parity with or junior to the 9%
Preferred Stock for any period unless full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the 9% Preferred
Stock for all dividend periods terminating on or prior to the date of
payment of such full cumulative dividends. In the event that dividends are
not paid in full (or a sum sufficient for such full payment set apart) upon
the shares of the 9% Preferred Stock or the shares of any other series of
Preferred Stock ranking on a parity as to dividends with the shares of the
9% Preferred Stock, dividends upon shares of the 9% Preferred Stock and
dividends on shares of such other series of Preferred Stock shall be
declared by the Board of Directors or a duly authorized committee thereof
pro rata with respect thereto so that the amount of dividends per share on
the 9% Preferred Stock and such other series of Preferred Stock so declared
shall in all cases bear to each other the same ratio that full cumulative
dividends on the shares of the 9% Preferred Stock and full dividends,
including accumulations, if any, on the shares of such other series of
Preferred Stock, bear to each other.
(c) Except as provided in this Section 2.3, if full cumulative dividends
on all outstanding shares of the 9% Preferred Stock at the rate per share
set out in Section 2.2 shall not have been declared and paid or set aside
for payment, the Company shall not, until full cumulative dividends have
been declared and paid or set aside for payment on all outstanding shares
of the 9% Preferred Stock, (i) declare or pay or set aside for payment any
dividends (other than a dividend in common stock, $5.00 par value, of the
Company (the "Common Stock") or in any other stock ranking junior to the 9%
Preferred Stock as to dividends and upon liquidation, dissolution or
winding up of the Company) or make any other distribution on the Common
Stock or any other stock of the Company ranking junior to or on a parity
with shares of the 9% Preferred Stock, with respect to the payment of
dividends or distribution of assets upon liquidation, dissolution or
winding up of the Company, or (ii) make any payment on account of the
purchase, redemption or other retirement of, or pay or make available any
moneys for a sinking fund for the redemption of, any shares of Common Stock
or such other junior or parity stock except by conversion into or exchange
for stock of the Company ranking junior to the 9% Preferred Stock as to
dividends and upon liquidation.
(d) Any dividend payment made on shares of the 9% Preferred Stock shall
first be credited against the earliest accumulated but unpaid dividend due
with respect to such shares.
3. Redemption.
3.1 Redemption Prices and Dates. The shares of the 9% Preferred Stock
shall not be redeemable prior to May 29, 1997. On or after May 29, 1997,
the Company, at its option, may redeem the shares of the 9% Preferred Stock
as a whole or from time to time in part, at a redemption price of $200.00
per share, plus, in each case, all accrued and unpaid dividends thereon
(whether or not earned or declared) to the date fixed for redemption.
3.2 Restrictions. Notwithstanding the foregoing, if full cumulative
dividends on all outstanding shares of 9% Preferred Stock have not been
paid or contemporaneously declared and paid for all past dividend periods,
no shares of 9% Preferred Stock shall be redeemed pursuant to this Section
3 unless all outstanding shares of 9% Preferred Stock are simultaneously
redeemed, and, unless the full cumulative
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dividends on all outstanding shares of 9% Preferred Stock and any other
Preferred Stock ranking on a parity therewith as to dividends and upon
liquidation shall have been paid or contemporaneously are declared and paid
for all past dividend periods, the Company shall not purchase or otherwise
acquire any shares of 9% Preferred Stock or shares of any other series of
Preferred Stock ranking on a parity therewith as to dividends and upon
liquidation (except by conversion into or exchange for shares of the
Company ranking junior to the shares of the 9% Preferred Stock); provided,
however, that the foregoing shall not prevent the purchase or acquisition
of shares of the 9% Preferred Stock or of shares of such other series of
Preferred Stock pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding shares of the 9% Preferred Stock or of
such other series.
3.3 Pro Rata Redemption. In the event that fewer than all the outstanding
shares of the 9% Preferred Stock are to be redeemed, the number of shares
to be redeemed shall be determined by the Board of Directors or a duly
authorized committee thereof and the shares to be redeemed shall be
redeemed pro rata from the holders of record of such shares in proportion
to the number of such shares held by such holders (with adjustments to
avoid fractional shares).
3.4 Notice. In the event the Company shall redeem shares of the 9%
Preferred Stock, notice of such redemption (a "Notice of Redemption") shall
be given by first class mail, postage prepaid, mailed not less than 40 nor
more than 70 days prior to the redemption date, to each holder of record of
the shares to be redeemed, at such holder's address as the same appears on
the stock register of the Company. Each such Notice of Redemption shall
state: (i) the redemption date; (ii) the number of shares of the 9%
Preferred Stock to be redeemed and, if fewer than all the shares held by
such holder are to be redeemed, the number of such shares to be redeemed
from such holder; (iii) the redemption price (specifying the amount of
accrued and unpaid dividends to be included therein); (iv) the place or
places where certificates for such shares are to be surrendered for payment
of the redemption price; (v) that dividends on the shares to be redeemed
will cease to accumulate on such redemption date; and (vi) the provision
hereunder pursuant to which such redemption is being made.
3.5 Cessation of Dividends. If a Notice of Redemption has been given,
from and after the redemption date for the shares of the 9% Preferred Stock
called for redemption (unless default shall be made by the Company in
providing money for the payment of the redemption price of the shares so
called for redemption plus an amount equal to full cumulative dividends
thereon (whether or not earned or declared) to the date fixed for
redemption) dividends on the shares of the 9% Preferred Stock so called for
redemption shall cease to accrue and said shares shall no longer be deemed
to be outstanding, and all rights of the holders thereof as stockholders of
the Company (except the right to receive the redemption price plus an
amount equal to such accumulated and unpaid dividends) shall cease. Upon
surrender in accordance with said Notice of the certificates for any shares
so redeemed (properly endorsed or assigned for transfer, if the Board of
Directors of the Company shall so require and the Notice shall so state),
the redemption price set forth above plus an amount equal to such
accumulated and unpaid dividends shall be paid by the paying agent for the
Company. In the case that fewer than all of the shares represented by any
such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder thereof.
3.6 Status of Redeemed Shares. Shares of 9% Preferred Stock which have
been redeemed shall, after such redemption, have the status of authorized
but unissued shares of Preferred Stock, without designation as to series,
until such shares are once more designated as part of a particular series
by or on behalf of the Board of Directors.
4. Liquidation Rights.
4.1 Payment Upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, the holders of outstanding shares of the 9% Preferred Stock
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shall be entitled, before any payment or distribution shall be made on the
Common Stock or any other class of stock ranking junior to the 9% Preferred
Stock upon liquidation, to be paid in full an amount equal to $200.00 per
share, plus an amount equal to all accumulated and unpaid dividends
(whether or not earned or declared). After payment of the full amount of
such liquidation distribution, the holders of the 9% Preferred Stock shall
not be entitled to any further participation in any distribution of assets
of the Company.
4.2 Insufficient Assets. If, upon any liquidation, dissolution or winding
up of the Company, the assets of the Company, or proceeds thereof,
distributable among the holders of the shares of the 9% Preferred Stock and
the holders of shares of all other stock of the Company ranking, as to
liquidation, dissolution or winding up, on a parity with the 9% Preferred
Stock, shall be insufficient to pay in full the preferential amount set
forth in Section 4.1 and liquidating payments on all such other stock
ranking, as to liquidation, dissolution or winding up, on a parity with the
9% Preferred Stock, then such assets, or the proceeds thereof, shall be
distributed among the holders of the 9% Preferred Stock and all such other
stock ratably in accordance with the respective amounts which would be
payable on such shares of the 9% Preferred Stock and any such other stock
if all amounts payable thereon were paid in full (which, in the case of
such other stock, may include accumulated dividends).
4.3 Payments on Stock Ranking Junior. In the event of any such
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, unless and until payment in full is made to the holders of all
outstanding shares of the 9% Preferred Stock of the liquidation
distribution to which they are entitled pursuant to Section 4.1, no
dividend or other distribution shall be made to the holders of the Common
Stock or any other class of stock ranking upon liquidation junior to the
shares of the 9% Preferred Stock and no purchase, redemption or other
acquisition for any consideration by the Company shall be made in respect
of the shares of the Common Stock or such other class of stock.
4.4 Definition. Neither the consolidation nor merger of the Company into
or with another corporation or corporations shall be deemed to be a
liquidation, dissolution or winding up of the Company within the meaning of
this Section 4.
5. Voting Rights.
5.1 Generally. Holders of the 9% Preferred Stock shall not have any
voting rights except as hereinafter provided or as otherwise from time to
time required by law. If at the time of any annual meeting of stockholders
for the election of directors of the Company a default in preference
dividends shall exist on the 9% Preferred Stock, or any series of Preferred
Stock ranking on a parity with the 9% Preferred Stock as to dividends or
upon liquidation (the 9% Preferred Stock and any such series of Preferred
Stock being herein referred to as the "Parity Preferred Stock"), the
maximum authorized number of members of the Board of Directors shall
automatically be increased by two. The two vacancies so created shall be
filled at such meeting by the vote of the holders of the 9% Preferred Stock
and the holders of any other Parity Preferred Stock upon which like voting
rights have been conferred and are then exercisable (the Preferred Stock
and such other Parity Preferred Stock being herein referred to as "Voting
Parity Preferred Stock"), voting together as a single class without regard
to series, to the exclusion of the holders of the Common Stock and any
other class of capital stock of the Company that is not Voting Parity
Preferred Stock. The holders of the Common Stock and any other class of
capital stock of the Company which has the right to vote at such meeting
(other than the Voting Parity Preferred Stock) shall elect the remaining
directors. Such right of the holders of the Voting Parity Preferred Stock
shall continue until there are no preference dividends in arrears upon the
Voting Parity Preferred Stock of any series at which time such right shall
terminate, except as by law expressly provided, subject to revesting in the
event of each and every subsequent default of the character above
mentioned. Upon any such termination of the right of the holders of shares
of Voting Parity Preferred Stock as a class to vote for directors as herein
provided, the term of office of each director then in office elected by
such holders voting as a class (herein called a "Preferred Director") shall
terminate immediately. Any Preferred Director may be removed by, and shall
not be removed except by, the vote of the holders of record of the
outstanding shares of Voting Parity Preferred Stock, voting together as a
single class without regard to series, at a meeting of the stockholders, or
of the holders of shares of Voting Parity
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Preferred Stock, called for such purpose. So long as a default in any
preference dividends on the Voting Parity Preferred Stock of any series
shall exist, (A) any vacancy in the office of a Preferred Director may be
filled (except as provided in the following clause (B)) by the person
appointed by an instrument in writing signed by the remaining Preferred
Director and filed with the Company and (B) in the case of the removal of
any Preferred Director, the vacancy may be filled by the person elected by
the vote of the holders of outstanding shares of Voting Parity Preferred
Stock, voting together as a single class without regard to series, at the
same meeting at which such removal shall be voted or at any subsequent
meeting. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed to be a Preferred Director. Whenever a default in
preference dividends on the Voting Parity Preferred Stock shall no longer
exist: (i) the term of office of the Preferred Directors shall end, (ii)
the special voting powers vested in the holders of the Voting Parity
Preferred Stock as provided in this resolution shall expire, and (iii) the
number of members of the Board of Directors shall be such number as may be
provided for in the Company's By-Laws irrespective of any increase made as
provided in this resolution. A "default in preference dividends" on the
Voting Parity Preferred Stock of any series shall be deemed to have
occurred whenever the amount of unpaid accrued dividends upon such series
through the last preceding dividend period therefor shall be equivalent to
six quarterly dividends (which, with respect to the 9% Preferred Stock,
shall be deemed to be dividends in respect of a number of dividend periods
containing not less than 540 days) or more, and having so occurred, such
default shall be deemed to exist thereafter until, but only until, full
cumulative dividends on all shares of Voting Parity Preferred Stock of each
and every series then outstanding shall have been paid to the end of the
last preceding dividend period.
5.2 Ranking. So long as any shares of 9% Preferred Stock remain
outstanding, the Company shall not, without the affirmative vote or consent
of the holders of at least two-thirds of the shares of the 9% Preferred
Stock outstanding at the time, given in person or by proxy, either in
writing or at a meeting (voting separately as a class together with all
other series of Parity Preferred Stock), (i) authorize, create or issue, or
increase the authorized or issued amount of, any class or series of stock
ranking prior to the 9% Preferred Stock with respect to payment of
dividends or the distribution of assets on liquidation, or reclassify any
authorized stock of the Company into any such shares, or create, authorize
or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the
provisions of the Company's Restated Certificate of Incorporation or of the
resolution contained in the certificate of designation for the 9% Preferred
Stock, whether by merger, consolidation or otherwise, so as to materially
and adversely affect any right, preference, privilege or voting power of
the 9% Preferred Stock or the holders thereof; provided, however, that any
increase in the amount of the authorized Preferred Stock or the creation or
issuance of other series of Preferred Stock, or any increase in the amount
of authorized shares of such series or of any other series of Preferred
Stock, in each case ranking on a parity with or junior to the 9% Preferred
Stock shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
5.3 Applicability. The foregoing voting provisions will not apply if, at
or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of the 9%
Preferred Stock shall have been redeemed or called for redemption and
sufficient funds shall have been deposited in trust to effect such
redemption.
6. Conversion or Exchange. The holders of shares of the 9% Preferred
Stock shall not have any right herein to convert such shares into or
exchange such shares for shares of any other class or classes or of any
other series of any class or classes of capital stock of the Company.
7. Ranking. The 9% Preferred Stock shall rank on a parity as to dividends
and liquidation with each series of Preferred Stock outstanding on the date
of issuance of the 9% Preferred Stock.
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<PAGE>
IN WITNESS WHEREOF, Wells Fargo & Company has caused this Certificate to be
executed by its officers thereunto duly authorized as of this th day of
February 1996.
-------------------------------------
William F. Zuendt
President
Attest:
- ------------------------------------------
Guy Rounsaville, Jr.
Secretary
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