SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
FIRST INTERSTATE BANCORP
(Name of Subject Company)
FIRST INTERSTATE BANCORP
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $2.00 PER SHARE
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
320548100
(CUSIP Number of Class of Securities)
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WILLIAM J. BOGAARD, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
FIRST INTERSTATE BANCORP
633 WEST FIFTH STREET
LOS ANGELES, CA 90071
(213) 614-3001
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
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COPY TO:
FRED B. WHITE III, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is First Interstate Bancorp, a Delaware
corporation ("First Interstate"). The address of the principal executive
offices of First Interstate is 633 West Fifth Street, Los Angeles, California
90071. The title of the class of equity securities to which this Statement
relates is First Interstate's common stock, par value $2.00 per share (the
"First Interstate Common Stock"), including the associated Common Stock
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated
as of November 21, 1988, as amended on November 5, 1995, between First
Interstate and First Interstate Bank, Ltd., as Rights Agent (as so amended,
the "Rights Agreement"). Except where the context otherwise requires, all
references herein to the First Interstate Common Stock shall include the
Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to a proposed exchange offer (the "Wells Offer") to
be disclosed in a Registration Statement on Form S-4 (the "Wells S-4") which
Wells Fargo & Co. ("Wells"), a Delaware corporation, has publicly announced
that it will file with the Securities and Exchange Commission (the "SEC") on
November 20, 1995, to exchange shares of the common stock, par value $5.00
per share, of Wells (the "Wells Common Stock") for all of the outstanding
shares of First Interstate Common Stock. According to a press release (the
"Wells Press Release") issued by Wells on November 13, 1995, in the Wells
Offer, Wells will offer to exchange each share of First Interstate Common
Stock held by First Interstate shareholders for two-thirds of a share of
Wells Common Stock. A copy of the Wells Press Release has been filed as
Exhibit 1 hereto and is incorporated herein by reference, and all
descriptions of the Wells Press Release contained herein are qualified in
their entirety by such reference.
According to the most recent Quarterly Report on Form 10-Q filed by Wells
with the SEC, the principal executive offices of Wells are located at 420
Montgomery Street, San Francisco, California 94163.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of First Interstate, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings between
First Interstate or its affiliates and certain of First Interstate's
directors and executive officers are described on pages 7-37 of the proxy
statement (the "1995 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. A copy of these pages of the
1995 Proxy Statement is filed as Exhibit 2 hereto and is incorporated herein
by reference. Except as described herein or in Exhibit 2 hereto, to the
knowledge of First Interstate, as of the date of this Schedule 14D-9, there
are no material contracts, agreements, arrangements or understandings, or any
actual or potential conflicts of interest, between First Interstate or its
affiliates and (i) First Interstate, its executive officers, directors or
affiliates or (ii) Wells or its executive officers, directors or affiliates.
On November 5, 1995, First Interstate entered into an Agreement and Plan
of Merger (the "Merger Agreement") with First Bank System, Inc., a Delaware
corporation ("FBS"), and Eleven Acquisition Corp. ("Merger Sub"), a Delaware
corporation and a wholly owned subsidiary of FBS, pursuant to which Merger
Sub will merge (the "Merger") with and into First Interstate, with First
Interstate surviving the Merger as a wholly owned subsidiary of FBS. Upon
consummation of the Merger, (i) subject to certain limited exceptions, each
share of First Interstate Common Stock then outstanding will automatically be
converted into 2.6 shares (the "Exchange Ratio") of the common stock, par
value $1.25 per share, of FBS ("FBS Common Stock") and (ii) FBS will change
its name to First Interstate Bancorp (sometimes referred to herein as "New
First Interstate"). Under the terms of the Merger Agreement, ten persons
serving as directors of First Interstate immediately prior to the effective
time of the Merger (the "Effective Time") and selected solely by and at the
absolute discretion of the Board of Directors of First Interstate (the "First
Interstate Board") will serve as directors of New First Interstate. The
remainder of
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the Board of Directors of New First Interstate will consist of 10 persons
selected solely by and at the absolute discretion of the Board of Directors
of FBS from amongst those persons serving as directors of FBS immediately
prior to the Merger. In addition, the Merger Agreement provides that Mr.
William E. B. Siart, Chairman of the Board of Directors and Chief Executive
Officer of First Interstate, will be President and Chief Operating Officer of
New First Interstate.
A copy of the Merger Agreement has been filed as Exhibit 3 hereto and is
incorporated herein by reference, and any descriptions of the terms of the
Merger Agreement contained herein are qualified in their entirety by
reference thereto.
In addition, although not specifically required by the Merger Agreement,
First Interstate and FBS have publicly announced that Ms. Linnet F. Deily,
the Chief Executive Officer, Texas region, of First Interstate, and Mr. Bruce
G. Willison, the Vice Chairman and Chief Executive Officer, California
region, of First Interstate, will serve as the Vice Chairman, Retail Banking,
and the Vice Chairman, Corporate Banking, respectively, of New First
Interstate.
As of the date of this Schedule 14D-9, First Interstate is not aware of
Wells' intentions with respect to the possible retention of any or all of
First Interstate's executive officers following consummation of the Wells
Offer. As more fully described in Item 4 below, according to the Wells Press
Release, Wells intends to seek to cause the removal of all of the members of
the First Interstate Board.
Pursuant to the Merger Agreement, at the Effective Time, each option to
purchase shares of First Interstate Common Stock (each a "First Interstate
Option") issued by First Interstate pursuant to any of its stock option
programs (each a "First Interstate Stock Plan") which is outstanding and
unexercised immediately prior thereto will be converted automatically into an
option to purchase shares of FBS Common Stock with (a) the number of shares
of FBS Common Stock subject to the new FBS option (each a "New First
Interstate Option") equal to the product of the number of shares of First
Interstate Common Stock subject to the First Interstate Option and 2.6,
rounded down to the nearest share, and (b) the exercise price per share of
FBS Common Stock subject to the New First Interstate Option equal to the
exercise price per share of First Interstate Common Stock under the First
Interstate Option divided by 2.6, rounded up to the nearest cent. The
conversion is intended to be effected in a manner such that any First
Interstate Options which are "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
shall remain so. Other than with respect to the acceleration of the
exercisability of such First Interstate Options in connection with the
Merger, the duration and other terms of the New First Interstate Options
shall be the same as the predecessor First Interstate Options.
Pursuant to the terms of the First Interstate Stock Plans, upon a change
in control of First Interstate (a "Change in Control"), each First Interstate
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 shall be immediately
payable in FBS Common Stock, provided in any case that such awards (other
than restricted stock awards) may not be accelerated to a date less than six
months after the date of grant.
First Interstate Options which are currently outstanding and unexercisable
were granted under the First Interstate 1991 Performance Stock Plan and the
First Interstate 1991 Director Option Plan. First Interstate Options which
are currently outstanding and fully exercisable were granted under the First
Interstate 1991 Performance Stock Plan, the First Interstate 1988 Performance
Stock Plan and the First Interstate 1983 Performance Stock Plan. Restricted
shares of First Interstate Common Stock which are currently outstanding were
granted under the First Interstate 1991 Performance Stock Plan and the First
Interstate 1988 Performance Stock Plan. The grants of all such First
Interstate Options were made under terms substantially similar to the terms
contained in the First Interstate 1995 Performance Stock Plan. The grants of
all such restricted shares of First Interstate Common Stock were made under
terms substantially similar to the terms contained in the First Interstate
1995 Performance Stock Plan, except that the restricted period with respect
to such shares expires automatically upon a Change in Control. A description
of the First Interstate 1991 Director Option Plan was included on page 10 of
the 1995 Proxy
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Statement. A description of the First Interstate 1995 Performance Stock Plan
was included on pages 31-37 of the 1995 Proxy Statement. In addition, copies
of the First Interstate 1991 Performance Stock Plan, the First Interstate
1988 Performance Stock Plan and the First Interstate 1983 Performance Stock
Plan are filed as Exhibits 4, 5 and 6 hereto and incorporated herein by
reference.
A description of First Interstate's 1995 Corporate Executive Incentive
Plan (the "Corporate Incentive Plan") was included on page 29 of the 1995
Proxy Statement. The Corporate Incentive Plan provides that within ten days
of a Change in Control, each participant therein shall receive 100% of his or
her target award. In addition, First Interstate maintains for the benefit of
certain of the executive officers of First Interstate and its affiliates the
1995 Management Incentive Plan and the 1995 Regional Executive Incentive
Plan, each of which are substantially similar to the Corporate Incentive
Plan. Copies of each of the 1995 Management Incentive Plan and the 1995
Regional Executive Incentive Plan are attached hereto as Exhibits 7 and 8,
respectively, and are incorporated herein by reference.
A description of the agreements for nine of First Interstate's executive
officers (including Messrs. Siart, Randall, Willison and Curran, each of whom
is one of the executive officers named in the 1995 Proxy Statement) (the
"Tier I Agreements") was included on pages 26 and 27 of the 1995 Proxy
Statement. The terms of the employment agreements with respect to certain
other executive officers (which total approximately thirty agreements) (the
"Tier II Agreements") are substantially similar to the Tier I Agreements,
except that the severance payments under the Tier II Agreements have a
multiplier of two, and include a $20,000 cash payment to cover two years'
health and welfare benefit plan coverage. The Tier I Agreements and the Tier
II Agreements provide for the payment of severance benefits if the employment
of the affected executive officer is terminated under certain circumstances
following a Change in Control. A copy of a form of Tier II Agreement is filed
as Exhibit 9 hereto and is incorporated herein by reference.
Approval of the Merger Agreement by the requisite vote of First
Interstate's shareholders will constitute a Change in Control for purposes of
First Interstate's benefit plans (including without limitation the First
Interstate Stock Plans, the Corporate Incentive Plan, the 1995 Management
Incentive Plan, the 1995 Regional Incentive Plan, the Tier I Agreements and
the Tier II Agreements) and accordingly, certain provisions of First
Interstate's benefit plans which relate to a Change in Control, including,
but not limited to, the accelerated vesting and/or payment of equity-based
awards under the First Interstate Stock Plans, will be triggered if such
approval is obtained.
The consummation of the Wells Offer would constitute a Change in Control
for purposes of First Interstate's benefit plans described above. In
addition, as more fully described in Item 4 below, Wells Fargo has publicly
stated that it intends to commence a solicitation of written consents from
First Interstate's shareholders in order to remove all of the members of the
First Interstate Board and replace them with a slate of directors chosen by
Wells. Such action, if successful, would also constitute a Change in Control
for purposes of First Interstate's benefit plans.
The Merger Agreement provides that FBS will maintain all rights of
indemnification existing in favor of the directors, officers and employees of
First Interstate to the fullest extent permitted under Delaware law and First
Interstate's Certificate of Incorporation and By-laws and will use its best
efforts to provide to the present and former officers and directors of First
Interstate for six years after the Effective Time directors' and officers'
liability insurance with respect to claims against such officers and
directors arising from facts or events which occurred before the Effective
Time on terms no less advantageous than those contained in policies currently
maintained by FBS; provided, however, that the annual premium payments for
such insurance shall not exceed 200% of the annual premiums paid as of the
date of the Merger Agreement by First Interstate; and provided, further,
however, that such coverage will have a single aggregate for such six-year
period in an amount not less than the aggregate annual of such coverage
currently provided by First Interstate.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) AND (B). AS MORE FULLY DESCRIBED BELOW, THE FIRST INTERSTATE BOARD HAS
RECOMMENDED THAT FIRST INTERSTATE SHAREHOLDERS REJECT THE WELLS
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OFFER AND, WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER THEIR SHARES OF
FIRST INTERSTATE COMMON STOCK PURSUANT TO THE WELLS OFFER. THE FIRST
INTERSTATE BOARD HAS ALSO REAFFIRMED ITS DETERMINATION THAT THE TERMS OF THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, FIRST INTERSTATE AND ITS
SHAREHOLDERS.
Background. On February 11, 1994, Wells delivered an unsolicited letter to
First Interstate proposing a merger of the two companies in which each share
of First Interstate Common Stock would be converted into Wells Fargo Common
Stock with a then-current trading value of $90. After carefully considering
that proposal, the First Interstate Board determined to decline to pursue a
merger with Wells and instead to implement strategies aimed at enhancing
shareholder value as an independent company.
During the remainder of 1994 and throughout the first three quarters of
1995, First Interstate took a number of actions aimed at achieving this goal.
These actions included implementing a corporate restructuring program
designed to rationalize First Interstate's corporate structure and achieve
greater operating efficiencies; announcing on March 22, 1994 a repurchase
program for eight million shares of First Interstate Common Stock which was
completed in November 1994; and completing a series of acquisitions designed
to enhance First Interstate's competitive position in certain key markets.
As these various strategies were implemented, First Interstate's business,
financial condition and results of operations all continued to improve. This
improvement was reflected in the market price of the First Interstate Common
Stock, which rose from $63 1/4 on January 3, 1994 to $100 3/4 on September
29, 1995.
Throughout this period, the First Interstate Board considered possible
alternative strategies for enhancing shareholder 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 a 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, as well as the possibility of a
strategic partnership with one of several other companies (including FBS)
which, unlike a strategic partnership with Wells, would serve to further the
First Interstate Board's goal of reducing the risk profile of First
Interstate by achieving even greater geographic diversification.
As part of First Interstate's assessment of which strategy would best
enhance shareholder value, Mr. William E. B. Siart, the Chairman and Chief
Executive Officer of First Interstate, from time to time engaged in
exploratory conversations with his counterparts at various other large
regional bank holding companies, including FBS, concerning the respective
strategic directions of First Interstate and such other company, the degree
to which such strategic directions were compatible, and the level of interest
which such other company might have in a potential strategic partnership with
First Interstate. During the first quarter of 1995, general discussions were
held with Mr. John F. Grundhofer, the Chairman and Chief Executive Officer of
FBS, concerning the strategic advantages of a possible combination. However,
none of the discussions described in this paragraph were conducted with the
aim of generating, and none resulted in, a firm merger proposal being
submitted to First Interstate or any merger proposal being considered by the
First Interstate Board.
As the pace of consolidation in the banking industry reached unprecedented
levels during the first half of 1995, Mr. Siart initiated a series of
discussions at which the First Interstate Board would continue its ongoing
review of the appropriate strategic direction for First Interstate in light
of the significant changes affecting the industry. At the April 28, 1995
meeting of the First Interstate Board, Mr. Siart announced that at future
Board meetings, management would discuss its views concerning the strategic
alternatives available to First Interstate and the critical elements that
would affect the Board's selection of the strategic alternative which would
be in the best interests of First Interstate and its shareholders. The first
such discussion was held at the July 17, 1995 meeting of the First Interstate
Board.
In August 1995, Messrs. Siart and Grundhofer met at Mr. Grundhofer's
request and discussed corporate strategic compatibility and management
philosophy. On September 7, 1995, Mr. Siart met with
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Mr. Paul Hazen, the Chief Executive Officer and Chairman of the Board of
Wells, at Mr. Hazen's request. At this meeting, Mr. Hazen stated his belief
that a merger of First Interstate and Wells was very compelling. He also
stated that after evaluating Wells' strategic alternatives, Wells had
concluded that such a merger was a strategic imperative to Wells and that no
alternative would provide values to Wells' shareholders which were comparable
to the values which could be achieved in such a merger. Mr. Hazen then
suggested that Mr. Siart could serve as the President and Chief Operating
Officer of the combined company, and that the merger would significantly
enhance shareholder value for each company's shareholders. In this regard, he
noted that Wells had performed extensive analyses of the cost savings and
operating efficiencies which could be achieved by consolidating the two
companies' respective California branch systems.
At the conclusion of the meeting, Mr. Hazen suggested a second meeting for
purposes of reviewing Wells' analyses in detail. Mr. Siart responded by
explaining the process for reviewing strategic alternatives previously
commenced by the First Interstate Board. In particular, he summarized the
presentations made at the July Board meeting, his expectations regarding the
subject matter of the presentation which would be made to the First
Interstate Board in October (which presentation was to include an assessment
of potential strategic partners, including Wells), and the additional future
presentations which were expected to be made to the First Interstate Board
concerning, among other matters, developments in technology and non-bank
financial providers. Mr. Hazen then inquired as to Mr. Siart's expectations
concerning how long the Board's process for reviewing strategic alternatives
would take. Mr. Siart responded that although he was not sure, his best guess
was that the process would be complete in approximately six months (although
it could take as few as four and as many as nine months). Mr. Hazen again
suggested a second meeting to discuss Wells' analyses in detail, and Mr.
Siart responded that he believed that it was more important for Mr. Hazen and
him to determine if the two companies' management philosophies and strategic
outlooks were compatible. On the same day as the meeting, Mr. Siart called
Mr. Hazen and scheduled a second meeting for October 30, 1995.
On October 17, 1995, the First Interstate Board met and reviewed possible
strategic partnerships with five large bank holding companies, including
Wells and FBS. The advantages and disadvantages of a transaction with each
company were reviewed.
In a telephone conversation initiated by Mr. Hazen later that day, Mr.
Hazen told Mr. Siart that he intended to deliver and make public the
following morning a letter proposing a merger of the two companies in which
each share of First Interstate Common Stock would be converted into .625
shares of Wells Common Stock (the "Initial Wells Proposal"). In a subsequent
call a short time later, Messrs. Siart and Hazen discussed under what
circumstances Mr. Hazen would agree not to make his letter public. Mr. Hazen
stated that Mr. Siart would have to begin merger negotiations the next day,
which Mr. Siart rejected as inappropriate and inconsistent with both the
strategic process the First Interstate Board had already undertaken and the
interests of the shareholders of First Interstate being served by that
process. Mr. Siart suggested that inasmuch as the Board's process was already
underway, and that Wells was included, it seemed prudent for Wells to wait
for the process to conclude.
On October 18, 1995, Wells publicly announced that it had delivered an
unsolicited letter to Mr. Siart the previous evening proposing a merger of
the two companies. A copy of Wells' October 17 letter is filed as Exhibit 10
hereto and incorporated herein by reference. Later that day, three large
regional bank holding companies, including FBS (each of which had been
considered as a potential strategic partner at the previous day's Board
meeting), 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
Initial Wells Proposal, the need to accelerate the Board's process for
reviewing strategic alternatives and the inquiries received from these 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
"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
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management and the Financial Advisors also continued to explore the values to
shareholders which could be achieved (i) if First Interstate chose to remain
independent rather than pursuing a strategic partnership at the present time
and (ii) if a transaction with Wells were pursued.
The First Interstate Board met to consider the Initial Wells Proposal on
October 25, 1995. At this meeting, First Interstate's management and the
Financial Advisors reviewed with the Board the status of the preliminary
discussions with the three large regional bank holding companies as well as
the Initial Wells Proposal.
On October 26, 1995, Mr. Siart met with Mr. Hazen to discuss the
possibility of pursuing a merger of First Interstate and Wells. Mr. Siart
stated his desire to learn more about the Initial Wells Proposal. At this
meeting, Mr. Hazen discussed Wells' reasons for publicly announcing its
unsolicited proposal. Messrs. Siart and Hazen also discussed the possible
advantages of a combination of First Interstate and Wells, with particular
attention being paid to the cost savings and operating efficiencies which
could be achieved in a merger.
Messrs. Siart and Hazen were joined later that day by William J. Bogaard,
First Interstate's General Counsel, George Roberts of Kohlberg Kravis Roberts
& Co. ("KKR"), First Interstate's largest shareholder, Mr. Rodney L. Jacobs,
the Vice Chairman and Chief Financial Officer of Wells, and Mr. Warren
Buffett, Chairman and Chief Executive Officer of Berkshire Hathaway Inc., the
largest shareholder of Wells. Extensive dialogue ensued concerning the two
companies and their respective strategies, potential cost savings, operating
efficiencies and reductions in revenue, and the consolidation of a
substantial number of First Interstate's and Wells' respective California
branch offices and the revenue loss associated therewith. Mr. Siart asserted
that the reductions in revenue which would result from the transaction would
significantly exceed those estimated by Wells (see paragraph (v) in this Item
4 below).
Mr. Siart stated that he nevertheless believed that a merger of First
Interstate and Wells could enhance shareholder value. Mr. Buffett stated that
he had studied both companies in some detail. He also stated that one could
come up with positives and negatives of one company compared to the other,
but in the end, when evaluating each company, one would conclude that they
were about equal and that accordingly the exchange ratio of .625 made sense
to him.
Mr. Roberts also stated his view, speaking as a major shareholder of First
Interstate and not on behalf of First Interstate's management or the First
Interstate Board, that given the other attractive strategic alternatives
available to First Interstate, the substantial risk created by a merger of
the two companies due to the increased concentration of assets in California,
and the tremendous value of the First Interstate franchise, a minimum
exchange ratio of .70 shares of Wells Common Stock for each share of First
Interstate Common Stock was required in order to make the transaction
equitable. During these discussions, Mr. Hazen stated that although Wells
might consider increasing the exchange ratio offered to First Interstate's
shareholders, the maximum exchange ratio it might be prepared to offer was
.65. However, he emphasized that he and Mr. Buffett viewed an exchange ratio
of .625 as fair to each company's shareholders. Mr. Roberts indicated that
the possible increase of the exchange ratio to .65 seemed inadequate to him.
Mr. Hazen told Mr. Siart that in no way should their conversation be
construed as meaning Wells had raised its offer.
On October 30, 1995, the First Interstate Board met to review the
discussions that had been held with Wells and the three other potential
strategic partners. Mr. Siart reported that FBS had indicated that it would
consider increasing its exchange ratio from the previously stated range of
2.3 to 2.4 shares of FBS Common Stock for each First Interstate share to 2.5.
Management and the Financial Advisors also discussed their views as to the
values which could be achieved if First Interstate remained 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 and FBS. With respect to Wells, it was the sense of the Board
that Mr. Siart should determine if Wells would consider increasing the
exchange ratio significantly above .65.
Messrs. Siart and Hazen again met on the morning of 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
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at their October 26 meeting and was considering carefully all of the
advantages and disadvantages of a potential merger with Wells, as well as the
advantages and disadvantages associated with the other strategic alternatives
available to First Interstate. Extensive discussions concerning potential
cost savings, operating efficiencies and revenue losses also took place, with
Mr. Siart voicing the various concerns of the First Interstate Board in this
regard. Mr. Hazen stated that he believed that the $100 million in revenue
losses estimated by Wells were on the high side. Mr. Siart stated that First
Interstate might consider further exploratory discussions concerning the
value to First Interstate's shareholders of a potential merger with Wells if
Wells would offer an exchange ratio of approximately .68. Mr. Hazen then
excused himself from the meeting. Upon his return, Mr. Hazen stated that he
had consulted with Mr. Buffett, reiterated that the maximum exchange ratio
that Wells and its major shareholder would consider was .65 shares of Wells
Common Stock for each share of First Interstate Common Stock, and stated that
Mr. Buffett fully concurred with this decision. In closing the meeting, Mr.
Siart again stated that Mr. Hazen should bear in mind that First Interstate
had available a number of attractive strategic alternatives.
On November 1, 1995, Mr. Siart contacted Mr. Grundhofer and they agreed to
meet the next day. Messrs. Siart and Hazen also talked by phone that day. Mr.
Siart asked Mr. Hazen if he had reconsidered his position. Mr. Hazen stated
that his position remained unchanged and that .65 was the maximum exchange
ratio that Wells would consider.
On November 2, 1995, Mr. Siart met with Mr. Grundhofer and Mr. Richard A.
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 shareholders to 2.6 from the previous indication
of 2.5 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 Mr. Edward M. 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 to again consider both
the potential merger with FBS and Wells' 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 assuming
for purposes of such presentations that Wells would actually increase its
proposed exchange ratio to .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, the fairness opinion of Morgan Stanley concerning the .65
exchange ratio which might be proposed by Wells and the judgments of the
Financial Advisors that the First Interstate Stock Option Agreement and the
First Interstate Fee Letter (each as defined in Item 7 below) 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 Financial Advisors. Based upon its consideration of
those presentations and other factors more fully described below, the First
Interstate Board unanimously approved and authorized (with two directors
absent) the execution and delivery of the Merger Agreement, the Reciprocal
Stock Option Agreements and the Reciprocal Fee Letters (each as defined
below).
The Merger was publicly announced on November 6, 1995.
On November 13, 1995, Wells issued the Wells Press Release, which stated
that Wells intended to file a registration statement with the SEC with
respect to an exchange offer pursuant to which Wells would offer to exchange
two-thirds of a share of Wells Common Stock for each share of First
Interstate Common Stock. The Wells Press Release also stated that Wells
anticipated (i) filing proxy materials with the SEC
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(a) to solicit written consents from shareholders of First Interstate to
remove the members of the First Interstate Board and to replace them with
nominees of Wells who are committed to removing any impediments to the
consummation of the acquisition of First Interstate by Wells and (b) to
solicit proxies from the shareholders of First Interstate against the
approval of the Merger Agreement and (ii) filing an application with the
Federal Reserve Board seeking its approval of Wells' acquisition of First
Interstate and Wells' election of its board nominees. Finally, the Wells
Press Release stated that Wells had commenced litigation against First
Interstate, the members of the First Interstate Board and FBS in the Chancery
Court of the Commonwealth of Delaware which is described in Item 8 below. A
copy of the Wells Press Release, including a letter from Mr. Hazen to Mr.
Siart included therein, is filed as Exhibit 1 hereto and is incorporated
herein by reference and the foregoing description thereof is qualified in its
entirety by such reference.
On November 19, 1995, the First Interstate Board met to consider both the
Wells Offer and the 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'
indicated maximum exchange ratio from .65 to two-thirds of a share of Wells
Common Stock for each First Interstate share. At its November 19 meeting, the
First Interstate Board determined by a unanimous vote (with two directors
absent) that the Wells Offer is not in the best interests of First Interstate
and its shareholders. Accordingly, the First Interstate Board determined to
recommend that First Interstate shareholders reject the Wells Offer and not
tender their shares of First Interstate Common Stock pursuant to the Wells
Offer.
The First Interstate Board also reaffirmed its determination that the
terms of the Merger are fair to, and in the best interests of, First
Interstate and its shareholders. The factors considered by the First
Interstate Board in making its determinations with respect to the Merger and
the Wells Offer are described below.
THE FIRST INTERSTATE BOARD RECOMMENDS THAT SHAREHOLDERS REJECT THE WELLS
OFFER AND, WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER ANY OF THEIR
SHARES OF FIRST INTERSTATE COMMON STOCK OR RIGHTS PURSUANT THERETO. THE FIRST
INTERSTATE BOARD BELIEVES THAT THE MERGER SHOULD PROVIDE LONG-TERM VALUE TO
FIRST INTERSTATE'S SHAREHOLDERS SUPERIOR TO THAT PROVIDED BY A TRANSACTION
WITH WELLS PURSUANT TO THE TERMS OF THE WELLS OFFER.
A copy of the letter to First Interstate's shareholders communicating the
Board's recommendation and the press release relating thereto are filed as
Exhibits 11 and 12 hereto and incorporated herein by reference. A copy of
such letter is also attached hereto.
In reaching its determination to approve and adopt the Merger Agreement
and in determining to recommend rejection of the Wells Offer, the First
Interstate Board considered the following factors, which, together,
constitute all material factors considered by the First Interstate Board:
(i) the First Interstate Board's familiarity with and review of First
Interstate's business, operations, financial condition and earnings on
both an historical and a prospective basis;
(ii) the First Interstate Board's review, based in part on
presentations by the Financial Advisors and First Interstate management,
of (a) the strategy, business, operations, earnings and financial
condition of FBS on both an historical and a prospective basis and (b) the
historical market price of FBS Common Stock. In this regard, the First
Interstate Board noted that (I) given the geographic continuity of the
regions currently served by each company, the Merger would serve to (x)
further diversify the assets (and thereby reduce the attendant credit
risks), liabilities and operations of First Interstate into eight
additional contiguous states, with the combined institution obtaining a
top three ranking (in terms of deposit market share) in ten states (as
opposed to a top three ranking in only four states in a First
Interstate/Wells merger) and (y) reduce to less than 30% (from in excess
of 40%)
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the total assets of First Interstate located in California, (II) First
Interstate and FBS possess compatible and complementary corporate
philosophies with respect to strategies for enhancing profitability,
business line diversification, asset quality and risk management and (III)
FBS has multiple product lines which are complementary to First
Interstate's product offerings;
(iii) the First Interstate Board's review, based in part on
presentations by the Financial Advisors and First Interstate management,
of (a) the strategy, business, operations, earnings and financial
condition of Wells on both a historical and a prospective basis and (b)
the historical market price of Wells Common Stock. In this regard, the
First Interstate Board noted that although Wells was a highly regarded
institution, its strategies were very different from those of First
Interstate and a merger with Wells would create a company with
significantly different characteristics than both First Interstate
currently and the company to be created in the Merger with FBS. These
differences include (I) substantially greater concentration in the
California market (with 70% of the combined company's total assets and 78%
of its real estate loans being located in California), which concentration
is inconsistent with the First Interstate Board's longstanding desire to
achieve greater geographic diversification, (II) a materially increased
exposure to real estate lending, which exposure is inconsistent with First
Interstate's credit philosophy, (III) the financial impact of a purchase
accounting transaction (see paragraph (xiii) below) and (IV) a narrower
business strategy with fewer product lines and revenue growth
opportunities which, in the view of the First Interstate Board, would
emphasize stock repurchases and other financial strategies rather than
core business growth as a key means of increasing earnings per share;
(iv) the anticipated cost savings and operating efficiencies available
to First Interstate and FBS as a combined institution following the
Merger, the potential for revenue enhancements at the combined institution
and the likelihood of achieving these cost savings, operating efficiencies
and revenue enhancements relative to the likelihood that they could be
achieved in a merger with Wells (see also paragraphs (vi) -- (viii)
below);
(v) the anticipated cost savings and operating efficiencies available
to First Interstate and Wells as a combined institution following an
affiliation of the two institutions and the potential for revenue
enhancements at the combined institution. In this regard, the First
Interstate Board noted its belief that although the cost savings which
might be achieved in connection with a First Interstate/Wells merger could
be as high as the $800 million announced by Wells, it was likely that the
decreases in revenue at the combined institution would significantly
exceed the $100 million level publicly projected by Wells due to (a) the
divestitures which were anticipated to be required in order to obtain
regulatory approval for the transaction, (b) the decreases in the levels
of service and ability to generate revenue (both through branch
consolidations and substantial cuts in employment in the corporate banking
and trust area) which would be required to achieve such cost savings and
(c) the likelihood, based upon First Interstate's experience in acquiring
other California financial institutions, that the branch consolidations
required to achieve such cost savings would result in significant deposit
attrition;
(vi) the fact that the cost savings and operating efficiencies
expected to result from the Merger primarily involve the consolidation of
back office and operating systems, which cost savings and operating
efficiencies are expected to be achieved without corresponding significant
reductions in revenues. In comparison, the cost savings and operating
efficiencies expected to result from a merger of First Interstate and
Wells would, as explained in paragraph (v) above, be accomplished, in
large measure, by reductions in line operations and therefore result in
significant revenue reductions;
(vii) the fact that First Interstate and FBS share common information
systems which should greatly facilitate the integration of the two
companies' operations and the achievement of cost savings and operating
efficiencies at a minimal cost. In contrast, Wells utilizes a system which
is incompatible with First Interstate's, which in turn could greatly
impair the combined company's ability to implement the technology
conversion required in the merger on a timely basis and which would
require significant expenditures before any cost savings and operating
efficiencies could be achieved at a later date;
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<PAGE>
(viii) the significant experience of the senior managements of each of
First Interstate and FBS in managing the operations of a multi-bank,
multi-state network and their proven record of achieving cost savings,
operating efficiencies and revenue enhancements in connection with the
integration of acquired companies. In particular, the First Interstate
Board noted that FBS had successfully integrated 22 acquisitions in the
preceding four years. In contrast, although Wells' senior management has a
good reputation for efficient, low-cost management, their experience has
been limited to the operation of a single bank in the State of California,
and they have not managed the process of consummating a significant bank
acquisition since 1988;
(ix) a comparison, based upon publicly available earnings estimates
for each of First Interstate, FBS and Wells for the fiscal years
1996-1998, of the reported earnings per share and cash earnings per share
attributable to a share of First Interstate Common Stock (a) if First
Interstate remained as a stand-alone entity and (b) on a pro-forma per
share equivalent basis giving effect to each of the Merger and a merger
with Wells, which demonstrates the higher per share values which could be
realized by First Interstate shareholders in the Merger compared to those
which could be realized either in the stand-alone case or a First
Interstate-Wells combination;
(x) the First Interstate Board's assessment, with the assistance of
counsel, concerning the relative likelihood that each of FBS and Wells
would obtain all required regulatory approvals for a transaction with
First Interstate. In this regard, the First Interstate Board determined
that although it was likely that each of FBS and Wells would ultimately
receive all such approvals, because of significant antitrust concerns
raised only in a transaction with Wells, (a) it was possible that Wells
would require a significantly longer period of time than FBS to obtain all
required regulatory approvals and (b) there was significant risk that the
divestitures which the appropriate governmental entities would require as
a condition to granting the required regulatory approvals to Wells would
significantly exceed Wells' estimates of such divestitures, which would in
turn contribute to reductions in revenue at the combined institution in
excess of those estimated by Wells;
(xi) the financial presentations of the Financial Advisors (including
presentations of pro forma financial information with respect to both the
Merger and a merger of First Interstate and Wells) and (a) the oral
opinion of Goldman Sachs rendered on November 5, 1995 (which opinion was
confirmed in writing the following day) that, as of the date of such
opinion, the Exchange Ratio was fair to the shareholders of First
Interstate (which opinion was not amended or withdrawn on November 19,
1995) and (b) the November 5, 1995 opinion of Morgan Stanley that, as of
the date of such opinion, each of the Exchange Ratio, the exchange ratio
of .625 proposed by Wells and the exchange ratio of .65 which might be
proposed by Wells was fair from a financial point of view to the
shareholders of First Interstate (which opinion with respect to the
Exchange Ratio was reaffirmed on November 19, 1995). Copies of such
opinions, setting forth the assumptions made, matters considered and
review undertaken, are filed as Exhibits 13, 14, 15 and 16, respectively,
to this Schedule 14D-9 and are also attached hereto. The full text of each
such opinion is incorporated herein by reference and the foregoing
descriptions thereof are qualified in their entirety by such reference.
First Interstate shareholders are urged to read these opinions carefully
in their entirety;
(xii) the First Interstate Board's concerns, based upon presentations
by the Financial Advisors and First Interstate management, that because
the Wells Common Stock currently is trading at ratios of price to
earnings, price to estimated 1996 earnings, price to book value and price
to tangible book value which are among the highest in the banking
industry, a risk exists that the value of the Wells Common Stock which
would be received by First Interstate's shareholders in the Wells Offer
could decline if these ratios are not sustained;
(xiii) the First Interstate Board's concerns that because the
transaction contemplated by the Wells Offer would be accounted for as a
purchase rather than as a pooling of interests, (a) the combined
institution would have limited flexibility to participate in the
continuing unprecedented consolidation of the banking industry (whether
such participation would consist of seeking to acquire additional
financial institutions or seeking to sell itself and receive a control
premium) due to (x) its inability, absent massive stock reissuances, to
engage in a transaction accounted for as a pooling-of-
10
<PAGE>
interests until the two years following the termination of Wells' stock
repurchases and (y) the fact that no other significant United States bank
holding company currently carries on its books the amount of goodwill
which would be carried by the combined institution (most of which would
result from the combination of First Interstate and Wells) and (b) a risk
existed that the value of the Wells Common Stock received by First
Interstate's shareholders in the Wells Offer would decline if the market
was to reject the view of Wells that, contrary to common practice in the
banking industry, the combined company should be valued with an emphasis
on cash-flows rather than reported earnings. In contrast, neither of these
concerns were raised by the Merger, which will be accounted for as a
pooling of interests;
(xiv) the favorable response of First Interstate's non-shareholder
constituencies (including its customers, communities served and employees)
to the Merger relative to their response to a transaction with Wells, and
the positive effect such response could have on the business, financial
condition and results of operations of the combined company following the
Merger;
(xv) the current and prospective economic, regulatory and competitive
environment facing financial institutions, including First Interstate, FBS
and Wells, including without limitation the unprecedented consolidation
currently underway in the banking industry; and
(xvi) 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 shareholders:
(A) the fact that the combined entity resulting from the Merger
would be the ninth largest banking institution in the United States in
terms of total assets and the fifth largest in terms of market value
(based on total assets and market prices as of September 30, 1995).
The First Interstate Board recognized that such an institution would
be likely to possess the financial resources necessary to compete more
effectively in the rapidly changing marketplace for banking and
financial services and would be effective in fulfilling First
Interstate's long-term objectives of increasing its overall size,
continuing to increase geographic diversification and enhancing its
market presence while maintaining its asset quality and credit
standards;
(B) the expectation that the Merger will generally be a tax-free
transaction to First Interstate and its shareholders; and
(C) the terms of the Merger Agreement, the Reciprocal Option
Agreements and the Reciprocal Fee Letters, which were generally
reciprocal in nature, and certain other information regarding the
Merger, including the terms and structure of the Merger, the proposed
arrangements with respect to the board of the combined institution and
the management structure of the combined institution following the
Merger.
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 recommend rejection
of the Wells Offer, 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. Throughout its deliberations,
the First Interstate Board received the advice of the 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.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
First Interstate has entered into letter agreements with Goldman Sachs and
Morgan Stanley dated October 24, 1995 and October 18, 1995, respectively
(collectively, the "Engagement Letters"). Pursuant to the Engagement Letters,
each of the Financial Advisors received an initial advisory fee of $5,000,000
(collectively, the "Advisory Fees") upon the execution of the Engagement
Letters.
The Engagement Letters further provide that if First Interstate executes a
definitive agreement with respect to certain designated transactions (each a
"Transaction"), First Interstate will pay each Financial
11
<PAGE>
Advisor a fee (collectively, the "Initial Transaction Fees") of $5,000,000.
Such amounts were paid upon execution of the Merger Agreement. If any such
Transaction (including without limitation the Merger or the Wells Offer) is
consummated, First Interstate will pay each Financial Advisor an additional
transaction fee (collectively, the "Secondary Transaction Fees") equal to
.655% of the positive difference between the value of the aggregate
consideration paid or received by First Interstate or its shareholders (the
"Aggregate Value"), as the case may be, and approximately $10,411,186,000.
However, in no event will the sum of the Advisory Fee, the Initial
Transaction Fee and the Secondary Transaction Fee for each Financial Advisor
exceed 0.175% of the Aggregate Value. For purposes of calculating the amount
due to the 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 relevant transactions.
In addition, First Interstate has agreed to reimburse the Financial Advisors
for their reasonable expenses and agreed to indemnify them against certain
liabilities arising out of or in connection with their respective
engagements.
First Interstate has retained Georgeson & Co., Inc. ("Georgeson") to
assist First Interstate in connection with its communications with its
shareholders with respect to, and to provide other services to First
Interstate in connection with, the Merger and the Wells Offer. 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.
First Interstate has retained Kekst & Co. ("Kekst") as its public
relations advisor in connection with the Merger and the Wells Offer. Kekst
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 Kekst against certain liabilities arising
out of or in connection with its engagement.
Except as set forth above, neither First Interstate nor any person acting
on its behalf has employed, retained or compensated any other person to make
any solicitations or recommendations to shareholders on its behalf concerning
the Merger or the Wells Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best knowledge of First Interstate, no transactions in First
Interstate Common Stock have been effected during the past 60 days by First
Interstate or any executive officer, director, affiliate or subsidiary of
First Interstate except (i) the gift of 1000 shares by the Carson Family
Trust (which shares were deemed to be indirectly beneficially owned by Edward
M. Carson, a director of First Interstate) to a charitable organization, (ii)
the gift of 30 shares on November 3, 1995 by Don C. Frisbee, a director of
First Interstate, to a charitable organization and (iii) the repurchases of
shares by First Interstate set forth below:
<TABLE>
<CAPTION>
AVERAGE TOTAL
NUMBER OF PRICE PER PURCHASE
DATE SHARES SHARE PRICE
- - ---------- ----------- ----------- -----------
<S> <C> <C> <C>
09/20/95 4,000 $100.53 $ 402,125
09/21/95 47,000 99.66 4,693,525
09/22/95 25,300 99.24 2,510,863
09/25/95 50,000 99.47 4,973,513
09/26/95 40,000 99.98 3,999,175
09/27/95 35,000 99.15 3,470,413
09/28/95 40,000 99.35 3,974,000
09/29/95 7,300 99.86 729,013
10/02/95 37,400 100.88 3,772,813
10/03/95 31,300 100.70 3,152,038
10/04/95 4,000 100.44 401,750
10/05/95 20,000 103.21 2,064,250
10/06/95 500 103.50 51,750
10/09/95 31,500 106.64 3,359,200
</TABLE>
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<PAGE>
(b) To the best knowledge of First Interstate, its executive officers,
directors, affiliates and subsidiaries do not presently intend to tender,
pursuant to the Wells Offer, any shares of First Interstate Common Stock
which are held of record or are beneficially owned by such persons or to
otherwise sell any such shares.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Item 4 above contains a description of the various meetings of the
First Interstate Board held between the date the Initial Wells Proposal was
received and November 19, 1995 at which the Initial Wells Proposal, the
Merger and/or the Wells Offer were reviewed and considered by the First
Interstate Board with the assistance of First Interstate's management and its
legal and financial advisors. As more fully described in such Item 4, at its
November 19, 1995 meeting, the First Interstate Board unanimously (with two
directors absent) (i) reaffirmed its determination that the terms of the
Merger are fair to, and in the best interests of, First Interstate and its
shareholders and accordingly ratified its prior adoption of the Merger
Agreement and (ii) determined to recommend that First Interstate's
shareholders reject the Wells Offer and not tender their shares of First
Interstate Common Stock pursuant to the Wells Offer. The factors considered
by the First Interstate Board in making its determinations with respect to
the Merger and the Wells Offer are described in Item 4 above.
At its November 19 meeting, the First Interstate Board determined to
postpone the occurrence of a Distribution Date (as defined in the Rights
Agreement) as a result of the public announcement of the Wells Offer until
such later date as determined by the First Interstate Board.
Except as described in this Item 7 and under Item 4 above, First
Interstate is not engaged in any negotiation in response to the Wells Offer
which relates to or would result in (i) an extraordinary transaction, such as
a merger or reorganization, involving First Interstate or any of its
subsidiaries, (ii) a purchase, sale or transfer of a material amount of
assets of First Interstate or any of its subsidiaries, (iii) a tender offer
for or other acquisition of securities by or of First Interstate or (iv) a
material change in the present capitalization or dividend policy of First
Interstate.
(b) THE MERGER.
The full text of the Merger Agreement is included as Exhibit 3 hereto and
is incorporated herein by reference, and the descriptions of the Merger
Agreement contained herein are qualified in their entirety by such reference.
THIS SCHEDULE 14D-9 DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY
MEETING OF FIRST INTERSTATE'S SHAREHOLDERS. SUCH SOLICITATION BY FIRST
INTERSTATE WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS COMPLYING
WITH THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED (THE "EXCHANGE ACT"). IN ADDITION, THIS SCHEDULE 14D-9 IS
NEITHER AN OFFER TO SELL NOR A SOLICITATION OF OFFERS TO BUY ANY SECURITIES
WHICH MAY BE ISSUED IN THE MERGER. THE ISSUANCE OF SUCH SECURITIES WILL HAVE
TO BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND SUCH SECURITIES WILL BE OFFERED ONLY BY MEANS OF A
PROSPECTUS COMPLYING WITH THE REQUIREMENTS OF THE SECURITIES ACT.
The date of the special meeting of First Interstate's shareholders called
to consider the Merger has not been scheduled. A Joint Proxy
Statement/Prospectus of First Interstate and FBS will be filed shortly with
the SEC and, upon its effectiveness, will be mailed to the respective
shareholders of First Interstate and FBS in connection with the special
meeting of each company's shareholders which will be held to vote upon the
matters to be presented to them pursuant to the Merger Agreement.
Consideration. The Merger Agreement provides, subject to the satisfaction
or waiver of certain conditions contained therein, for the merger of Merger
Sub with and into First Interstate, with First Interstate to be the surviving
corporation of the Merger. Upon consummation of the Merger, subject to
certain limited exceptions, each share of First Interstate Common Stock then
outstanding will automatically be converted into 2.6 shares of FBS Common
Stock. No fractional shares of FBS Common Stock will be issued in the Merger.
In lieu thereof, each First Interstate shareholder who would otherwise be
entitled to receive a fraction of a share of FBS Common Stock will receive an
amount of cash equal to the per share market value of FBS Common Stock (based
on the average of the closing sale prices of FBS
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<PAGE>
Common Stock as quoted on the New York Stock Exchange (the "NYSE") during the
five day trading period immediately preceding the closing date of the Merger)
multiplied by the fraction of a share of FBS Common Stock to which the
shareholder would otherwise be entitled.
In addition, at the Effective Time, (i) each share of First Interstate's
9.875% Preferred Stock issued and outstanding immediately prior to the
Effective Time will be converted into the right to receive one share of FBS
9.875% Preferred Stock and (ii) each share of First Interstate's 9.0%
Preferred Stock issued and outstanding immediately prior to the Effective
Time will be converted into the right to receive one share of FBS 9.0%
Preferred Stock. The terms of the FBS 9.875% Preferred Stock and the FBS 9.0%
Preferred Stock will be substantially the same as the terms of the
corresponding series of First Interstate Preferred Stock from which such
shares were converted, except that the FBS preferred shares will have such
voting rights as shall be necessary to ensure that the Merger qualifies as a
tax-free reorganization.
Representations and Covenants. Under the Merger Agreement, FBS and First
Interstate make a number of representations and warranties, including without
limitation representations and warranties regarding their respective capital
structures, operations, financial condition and their authority to enter into
the Merger Agreement and to consummate the Merger.
In the Merger Agreement, each of First Interstate and FBS covenants that
prior to the consummation of the Merger, it will conduct its business in the
ordinary course and it will not take certain material actions outside the
ordinary course without the other's consent. In addition, 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 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 party 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, 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
law. 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 FBS 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, First Interstate or FBS or any of their
respective subsidiaries other than the transactions contemplated or permitted
by the Merger Agreement. The Wells Offer constitutes a Takeover Proposal for
purposes of this provision.
Each of First Interstate and FBS has also agreed to hold a meeting of its
shareholders for the purpose of obtaining the approvals of such shareholders
required in connection with the Merger Agreement and to cause its Board of
Directors to recommend that its shareholders approve the matters to be voted
on by such shareholders in connection with the Merger, except that the Board
of Directors of either party may fail to make such recommendation (or
withdraw, modify or change such recommendation in a manner adverse to the
other party) if such Board of Directors, after having consulted with and
considered the advice of outside counsel, reasonably determines in good faith
that the making of such recommendation (or the failure to so withdraw, modify
or change such recommendation) would constitute a breach of the fiduciary
duties of the members of such Board of Directors under applicable law.
Conditions to the Consummation of the Merger. Each party's obligation to
effect the Merger is subject to, among other things, satisfaction, at or
prior to the Effective Time, of the following conditions: (i) the Merger
Agreement and the transactions contemplated thereby shall have been approved
and adopted by the requisite affirmative votes of the holders of First
Interstate Common Stock entitled to vote thereon
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<PAGE>
and the issuance of the FBS Common Stock in the Merger and the amendments to
the FBS Certificate of Incorporation required in connection with the Merger
(collectively, the "FBS Vote Matters") shall have been approved by the
requisite votes of the holders of FBS Common Stock entitled to vote thereon;
(ii) the shares of FBS capital stock 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 Merger
shall have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired, and no such
approval shall contain any conditions or restrictions which the Board of
Directors of either party reasonably determines in good faith will have or
reasonably be expected to have a Material Adverse Effect (as defined in the
Merger Agreement) on New First Interstate and its subsidiaries taken as a
whole; (iv) the registration statement relating to the FBS capital stock to
be issued in the Merger (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; 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.
Each party's obligation to effect the Merger is also conditioned upon the
accuracy of the representations and warranties made by the other party except
(other than with respect to certain specified representations and warranties)
where the failure of such representations and warranties to be so accurate,
individually or in the aggregate, results or would reasonably be expected to
result in a Material Adverse Effect on such other party; the performance in
all material respects by the other party of its obligations under the Merger
Agreement; the receipt by such party of a letter dated as of the effective
date of the Merger from Ernst & Young LLP, the independent public accountants
for FBS and First Interstate, to the effect that the Merger will qualify for
pooling-of-interests accounting treatment; the receipt by such party of an
opinion of its tax counsel, dated as of the Effective Time, confirming the
tax treatment of the Merger under the Code; and the failure of the rights
issued pursuant to the shareholder rights plan of the other party to become
non-redeemable, exercisable, distributed or triggered.
Waiver; Amendment. At any time prior to the Effective Time, to the extent
legally allowed, FBS or First Interstate, without approval of their
respective shareholders, may waive compliance with any of the agreements
contained in the Merger Agreement. Subject to compliance with applicable law,
the Merger Agreement may be amended by FBS and First Interstate at any time
before or after approval of the matters presented in connection with the
Merger to the shareholders of FBS and First Interstate, except that, after
any approval of the Merger by the shareholders of First Interstate, no
amendment may be made without the further approval of such shareholders which
amendment reduces the amount or changes the form of the consideration to be
delivered to the shareholders of First Interstate in the Merger.
Termination. The Merger Agreement may be terminated by mutual agreement of
both parties, or by either party (i) as a result of a breach by the other
party of a covenant or agreement or any representation or warranty set forth
in the Merger Agreement, in either case which the other party fails to cure
within 30 days following written notice thereof (except that no cure period
is provided for a breach which by its nature cannot be cured prior to the
closing of the Merger) and which would entitle the non-breaching party not to
consummate the transactions contemplated by the Merger Agreement; (ii) if the
required approvals of the shareholders of FBS or First Interstate are not
obtained by reason of the failure to obtain the required vote; (iii) if the
Merger is not consummated on or before December 31, 1996 (subject to
extension under certain circumstances) other than as a result of a breach of
the Merger Agreement by the party seeking termination; (iv) if a permanent
injunction or other order by a governmental entity prohibiting the
consummation of the transactions contemplated by the Merger Agreement is
issued and has become final and nonappealable or any denial by a governmental
entity whose approval of the Merger is required shall have become final and
nonappealable; (v) if, prior to the requisite approval of the shareholders of
FBS (if First Interstate is the terminating party) or First Interstate (if
FBS is the terminating party), there exists a Takeover Proposal for the party
seeking termination and the Board of Directors of such party, after having
consulted with and considered the advice of outside legal counsel,
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reasonably determines in good faith that termination is necessary in the
exercise of its fiduciary duties under applicable law; or (vi) 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 the case of First
Interstate) or the FBS Vote Matters (in the case of FBS).
Stock Option Agreements. As a condition to the execution and delivery of
the Merger Agreement, on November 5, 1995, (i) First Interstate and FBS
entered into a Stock Option Agreement (the "FBS Stock Option Agreement"),
pursuant to which FBS granted First Interstate an option (the "FBS Option")
to purchase up to 25,829,983 authorized but unissued shares of FBS Common
Stock (representing 19.9% of the number of outstanding shares of FBS Common
Stock on October 31, 1995), subject to adjustment, for $50.875 per share (the
closing sales price of the FBS Common Stock on the last NYSE trading day
prior to the grant of the FBS Option), subject to adjustment, and (ii) First
Interstate and FBS entered into a Stock Option Agreement (the "First
Interstate Stock Option Agreement," and together with the FBS Stock Option
Agreement, the "Reciprocal Stock Option Agreements"), pursuant to which First
Interstate granted FBS an option (the "First Interstate Option," and together
with the FBS Option, the "Reciprocal Options") to purchase up to 15,073,106
authorized but unissued shares of First Interstate Common Stock (representing
19.9% of the number of outstanding shares of First Interstate Common Stock on
October 31, 1995), subject to adjustment, for $127.75 per share (the closing
sales price of First Interstate Common Stock on the last NYSE trading day
prior to the grant of the First Interstate Option), subject to adjustment.
Each of the Reciprocal Options will become exercisable in whole or in part at
any time prior to its expiration, if, but only if, both an Initial Triggering
Event (as defined below) and a Subsequent Triggering Event (as defined below)
has occurred prior to the occurrence of an Exercise Termination Event (as
defined below). The purchase of any shares of First Interstate Common Stock
or FBS Common Stock pursuant to the Reciprocal Options is subject to
compliance with applicable law, including the receipt of necessary approvals
under the Bank Holding Company Act (the "BHCA"). For purposes of the
following summary of the Reciprocal Stock Option Agreements, (i) "Issuer"
means First Interstate with respect to the First Interstate Stock Option
Agreement and FBS with respect to the FBS Stock Option Agreement and (ii)
"Grantee" means FBS with respect to the First Interstate Stock Option
Agreement and First Interstate with respect to the FBS Stock Option
Agreement.
For purposes of the Reciprocal Stock Option Agreements, the term "Initial
Triggering Event" means: (i) Issuer or any of its subsidiaries, without
Grantee's prior written consent, shall have entered into an agreement with
any person (other than Grantee or any of its subsidiaries) to engage in, or
the Board of Directors of Issuer shall have recommended that its shareholders
approve any of the following (each an "Acquisition Transaction"): (x) a
merger, consolidation or similar transaction involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated
by the SEC) of Issuer (other than mergers, consolidations or similar
transactions involving solely Issuer and/or one or more of its subsidiaries
and other than a merger or consolidation as to which the common shareholders
of Issuer immediately prior thereto in the aggregate own at least 70% of the
common stock of the publicly held surviving or successor corporation
immediately following consummation thereof), (y) a purchase, lease or other
acquisition of all or substantially all of the assets or deposits of Issuer
or any of its Significant Subsidiaries, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of
Issuer or any of its Significant Subsidiaries; (ii) any person (other than
Grantee or any of its subsidiaries) shall have acquired beneficial ownership
or the right to acquire beneficial ownership of 10% or more of the
outstanding shares of Issuer common stock; (iii) the shareholders of Issuer
shall have voted and failed to approve the matters required to be approved by
such shareholders in connection with the Merger at a meeting held for that
purpose, or such meeting shall not have been held in violation of the Merger
Agreement or shall have been cancelled prior to termination of the Merger
Agreement and, prior to (x) such meeting or (y) if such meeting has not been
held or has been cancelled, such termination, it shall have been publicly
announced that any person (other than Grantee or any of its subsidiaries)
shall have made a proposal to engage in any Acquisition Transaction; (iv)
Issuer's Board of Directors shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) its recommendation that the
shareholders of Issuer approve the matters required to be approved by them in
connection with the Merger, or Issuer or
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any of its subsidiaries, without Grantee's prior written consent, shall have
authorized, recommended or proposed (or publicly announced its intention to
authorize, recommend or propose) an agreement to engage in an Acquisition
Transaction with any person other than Grantee or any of its subsidiaries;
(v) any person other than Grantee or any of its subsidiaries shall have made
a proposal to Issuer or its shareholders to engage in any Acquisition
Transaction and such proposal has been publicly announced; (vi) any person
(other than Grantee or any of its subsidiaries) shall have filed with the SEC
a registration statement with respect to a potential exchange offer that
would constitute an Acquisition Transaction (or filed a preliminary proxy
statement with the SEC with respect to a potential vote by its shareholders
to approve the issuance of shares to be offered in such an exchange offer);
(vii) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in any
Acquisition Transaction, and following such breach Grantee would be entitled
to terminate the Merger Agreement (whether immediately or after the giving of
notice or passage of time or both); or (viii) any person (other than Grantee
or any of its subsidiaries), other than in connection with a transaction to
which Grantee shall have given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board or other federal or
state bank regulatory authority, which application or notice has been
accepted for processing, for approval to engage in any Acquisition
Transaction.
The term "Subsequent Triggering Event" means (i) the acquisition by any
person (other than Grantee or any of its subsidiaries) of beneficial
ownership of 20% or more of the then outstanding Issuer common stock; or (ii)
the occurrence of an Initial Triggering Event described in clause (i) of the
immediately preceding paragraph above, except that the percentage referred to
in clause (z) thereof is 20%.
The term "Exercise Termination Event" means any of the following: (i) the
Effective Time of the Merger; (ii) termination of the Merger Agreement in
accordance with the provisions thereof if such termination occurs prior to
the occurrence of an Initial Triggering Event; (iii) the passage of 18 months
(subject to extension as provided in the Reciprocal Stock Option Agreements)
after termination of the Merger Agreement if such termination is concurrent
with or follows the occurrence of an Initial Triggering Event; (iv) the date
on which the shareholders of Grantee shall have voted and failed to adopt and
approve the matters required to be approved by them pursuant to the Merger
Agreement (unless (A) Issuer is then in material breach of its covenants or
agreements contained in the Merger Agreement or (B) on or prior to such date,
the shareholders of Issuer shall have also voted and failed to approve the
matters required to be approved by them pursuant to the Merger Agreement); or
(v) the date on which the Reciprocal Option granted by Grantee shall have
become exercisable in accordance with its terms. Notwithstanding anything to
the contrary contained in the Reciprocal Stock Option Agreements, neither of
the Reciprocal Options may be exercised at any time when the Grantee
thereunder is in breach of any of its covenants or agreements contained in
the Merger Agreement such that the Issuer thereof shall be entitled (without
regard to any grace period provided therein) to terminate the Merger
Agreement pursuant to the terms thereof, and each of the Reciprocal Stock
Option Agreements shall automatically terminate upon the termination of the
Merger Agreement by the Issuer pursuant to the terms thereof as a result of
the breach by the Grantee of its covenants or agreements contained therein.
Notwithstanding any other provisions of the Reciprocal Stock Option
Agreements, the Total Profit (as hereinafter defined) which Grantee may
realize from the Reciprocal Option granted to it may not exceed $100 million
and, if the Total Profit otherwise would exceed such amount, Grantee, at its
sole election, shall either (a) reduce the number of shares of common stock
of the Issuer subject to such option, (b) deliver to Issuer for cancellation
shares of common stock of the Issuer previously purchased by Grantee through
exercise of such option ("Option Shares"), (c) pay cash to Issuer or (d)
elect to do any combination thereof, such that Grantee's actually realized
Total Profit will not exceed $100 million after taking into account such
actions. For these purposes, the term "Total Profit" means the aggregate
amount (before taxes) of (i) the amount received by Grantee pursuant to
Issuer's repurchase of such option (or any portion thereof) in accordance
with the terms of the applicable Reciprocal Stock Option Agreement; (ii) (x)
the amount received by Grantee pursuant to Issuer's repurchase of Option
Shares in accordance with the terms of the applicable Reciprocal Stock Option
Agreement, less (y) Grantee's purchase price for such Option Shares; (iii)
(x) the net cash amounts received by Grantee pursuant to the
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sale of Option Shares (or any other securities into which such Option Shares
are converted or exchanged) to any unaffiliated party, less (y) Grantee's
purchase price for such Option Shares; and (iv) any amounts received by
Grantee on the transfer of such option (or any portion thereof) to any
unaffiliated party.
The preceding description of the Reciprocal Stock Option Agreements is
qualified in its entirety by reference to the First Interstate Stock Option
Agreement and the FBS Stock Option Agreement, copies of which are set forth
as Exhibits 17 and 18 hereto, respectively, and which are incorporated herein
by reference.
For purposes of the First Interstate Stock Option Agreement, various
actions taken by Wells in connection with the Wells Offer have resulted in
the occurrence of an Initial Triggering Event. In addition, if Wells acquires
more than 20% of the outstanding First Interstate Common Stock pursuant to
the Wells Offer or otherwise, or if the First Interstate Board recommends
that First Interstate shareholders accept the Wells Offer, a Subsequent
Triggering Event will occur for purposes of the First Interstate Stock Option
Agreement.
Termination Fees. As a further condition to the execution and delivery of
the Merger Agreement, First Interstate and FBS executed reciprocal
transaction termination fee letter agreements, each dated as of November 5,
1995 (collectively, the "Reciprocal Fee Letters"). Pursuant to the Reciprocal
Fee Letters, First Interstate (pursuant to the "First Interstate Fee Letter")
and FBS (pursuant to the "FBS Fee Letter") each agreed to pay (as a "Payer")
the other party (as the "Recipient") a cash fee of $25 million in the event
certain First Trigger Events (as defined below) occur prior to or
concurrently with the termination of the Merger Agreement, except where a
Nullifying Event (as defined below) has occurred and is continuing at such
time. Pursuant to the Reciprocal Fee Letters, First Interstate and FBS each
also agreed, subject to certain conditions, to pay the other party an
additional $75 million cash fee 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 below) occurs,
unless a Nullifying Event has occurred and is continuing at the time the
Merger Agreement is terminated.
For purposes of the following summary of the Reciprocal Fee Letters, the
term (i) "Payer" means First Interstate with respect to the First Interstate
Fee Letter and FBS with respect to the FBS Fee Letter and (ii) "Recipient"
means FBS with respect to the First Interstate Fee Letter and First
Interstate with respect to the FBS Fee Letter.
Any of the following events constitutes a First Trigger Event:
(i) Payer's Board of Directors shall have failed to approve or
recommend that its shareholders vote in favor of the requisite matters to
be approved by such shareholders in connection with the Merger, or shall
have withdrawn or modified in a manner adverse to the Recipient its
approval or recommendation of such matters, or shall have resolved or
publicly announced an intention to do either of the foregoing;
(ii) Payer or its Board of Directors shall have recommended that the
shareholders of Payer approve any Acquisition Proposal (as defined below)
or shall have entered into an agreement with respect to, authorized,
approved, proposed or publicly announced its intention to enter into, any
Acquisition Proposal;
(iii) the matters to be voted on by Payer's shareholders in connection
with the Merger shall not have been approved at a meeting of Payer'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 Payer; or
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(v) following the making of an Acquisition Proposal with respect to
Payer, Payer shall have breached any covenant or agreement contained in
the Merger Agreement such that Recipient would be entitled to terminate
the Merger Agreement pursuant to the terms thereof (without regard to any
grace period provided for therein), unless such breach is promptly cured
without jeopardizing consummation of the Merger.
The Reciprocal Fee Letters define the term "Acquisition Proposal" to mean
the occurrence of 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 November 5,
1995, 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 Payer or any of its subsidiaries (other than mergers,
consolidations or similar transactions involving solely Payer and/or one or
more of its subsidiaries and other than a merger or consolidation as to which
the common shareholders of Payer 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
Payer 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 Payer. The
Reciprocal Fee Letters define "Acquisition Event" to mean the consummation of
any Acquisition Proposal, except that for such purposes the percentage
contained in clause (C) above shall be 50% instead of 20%.
The Reciprocal Fee Letters define the term "Nullifying Event" to mean any
of the following events occurring and continuing at a time when Payer 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 Payer is entitled to
terminate the Merger Agreement (without regard to any grace period provided
for therein), (ii) the shareholders of Recipient shall have voted and failed
to approve the matters required to be approved by such shareholders pursuant
to the Merger Agreement (unless the matters to be voted on by the Payer's
shareholders pursuant to the Merger Agreement shall not have been approved at
a meeting of Payer's shareholders which was held on or prior to such date for
the purpose of voting with respect thereto) or (iii) the Board of Directors
of Recipient shall have failed to approve or recommend the matters required
to be approved by Recipient's shareholders pursuant to the Merger Agreement
or shall have withdrawn, modified or changed in any manner adverse to Payer
its approval or recommendation of such matters or shall have resolved or
publicly announced its intention to do any of the foregoing.
For purposes of the First Interstate Termination Fee Letter, various
actions taken by Wells in connection with the Wells Offer constitute the
public announcement of an Acquisition Proposal. In addition, if Wells
acquires more than 50% of the outstanding First Interstate Common Stock
pursuant to the Wells Offer or otherwise, an Acquisition Event shall have
occurred for purposes of the First Interstate Fee Letter.
The description of the Reciprocal Fee Letters is qualified in its entirety
by reference to the First Interstate Fee Letter and the FBS Fee Letter,
copies of which are set forth as Exhibits 19 and 20 hereto, respectively, and
which are incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Litigation. Certain present and former members of the First Interstate
Board have been named as defendants in several purported shareholder class
actions in California, and certain present members of the First Interstate
Board and First Interstate have been named as defendants in several purported
shareholder class actions in Delaware, alleging that the First Interstate
Board will breach or has breached its fiduciary duties to the shareholders of
First Interstate in responding to the Initial Wells Proposal. In Delaware,
the following five actions were filed on October 18 and 19, 1995: Williamson
v. Bryson, et al., Del. Ch., C.A. No. 14623; Shaev v. First Interstate
Bancorp, et al., Del. Ch., C.A. No. 14629; Bernstein v. Carson, et al., Del.
ch., C.A. No. 14630; Katz v. First Interstate Bancorp, et al., Del. Ch., C.A.
No. 14632 and Sachs and Felder v. First Interstate Bancorp, et al., Del. Ch.,
C.A. No. 14633. On October 25, 1995, an
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amended purported class action complaint to consolidate these actions was
filed. On October 27, 1995, these actions were consolidated in an action
captioned In re First Interstate Bancorp Shareholder Litig., Del. Ch.,
Consol. C.A. No. 14623 (the "Delaware Consolidated Action"). The Defendants
in the Delaware Consolidated Action have filed an answer denying the claims.
The parties in the Delaware Consolidated Action have agreed to a schedule of
discovery in an order that was entered on November 8, 1995. On November 13,
1995, the Delaware shareholder plaintiffs sought leave to file a Second
Amended and Supplemental Class Action Complaint (the "Second Amended
Complaint"). Among other things, the proposed Second Amended Complaint seeks
to add FBS and Merger Sub as parties and to assert aiding and abetting claims
against them. Among other claims, the proposed Second Amended Complaint
alleges that the First Interstate defendants breached their fiduciary duties
by failing to conduct a fair bidding contest for the company. In addition, it
alleges that the defendants have implemented certain measures which may
impede any proxy solicitation or consent solicitation that Wells may
undertake. The plaintiffs seek a variety of injunctive and other relief
including an order enjoining the Merger and a declaration that the Reciprocal
Fee Letters and the Reciprocal Stock Option Agreements are null and void. The
defendants intend to defend these claims vigorously.
Six purported class actions have been filed in the Superior Court of the
State of California, County of Los Angeles. Those purported class actions
(the "California Actions") are entitled: Mesko v. Bryson, et al., Case No.
BC137379, Eaves v. Bryson, et al., Case No. BC137380, Grill v. Bryson, et
al., Case No. BC137508, Mondshein v. Bryson, et al., Case No. BC137509,
Kaplan v. Bryson, et al, Case No. BC 138630 and Kaplan v. Bryson, et al.,
Case No. 138369. Defendants in these six actions have moved the Court to stay
the actions pending the resolution of the Delaware Consolidated Action.
The complaints filed in the six California actions are similar and allege
that the directors of First Interstate will breach their fiduciary duty in
responding to the Initial Wells Proposal. In addition, these complaints
allege negligent breach of fiduciary duty, abuse of control and tortious
interference with prospective economic advantage. Plaintiffs in the
California Actions seek declaratory relief as well as permanent and
preliminary injunctive relief enjoining the defendants from taking steps to
prevent or frustrate the sale of First Interstate to Wells. In addition,
Plaintiffs seek monetary damages of an unspecified amount together with
prejudgment interest and attorneys' and experts' fees. The defendants intend
to defend the California Actions vigorously.
In addition, on November 13, 1995, Wells filed in the Delaware Chancery
Court a Verified Complaint for Preliminary and Permanent Injunctive Relief
and Declaratory Judgment (the "Wells Action") against First Interstate, and
the members of the First Interstate Board, FBS and Merger Sub. The Wells
Action alleges, among other things, that First Interstate and its directors
have breached their fiduciary duties by entering into the Merger Agreement
and by agreeing to the First Interstate Fee Letter and the First Interstate
Stock Option Agreement. In addition, it alleges that the defendants have
implemented or may implement certain measures which may impede any proxy
solicitation or consent solicitation that Wells may undertake. For example,
Wells has alleged that the First Interstate defendants could amend the Rights
Agreement to provide that the power to redeem the Rights is exercisable only
by the current members of the First Interstate Board if Wells succeeds in
replacing them with directors nominated by Wells. Wells has also alleged that
if certain provisions of First Interstate's bylaws regarding the nomination
of directors were to apply in the context of a consent solicitation, such
application of these provisions of the bylaws would be inconsistent with the
provisions of the Delaware General Corporation Law. ("DGCL"). The Wells
Action alleges that FBS has aided and abetted First Interstate and its
directors' alleged breaches of fiduciary duty. Among other relief, Wells
seeks to invalidate the First Interstate Fee Letter and First Interstate
Stock Option Agreement and to enjoin First Interstate from consummating the
Merger. Wells also seeks to enjoin the First Interstate defendants from
including any provisions similar to the First Interstate Fee Letter of the
First Interstate Stock Option Agreement in any modified or future agreement
with FBS. In addition, Wells seeks to enjoin any action by defendants which
could interfere with any proxy solicitation or consent solicitation that
Wells may undertake. Wells seeks declaratory relief in the form of an order
declaring, among other things, that its exchange offer, proxy solicitation
and consent solicitation will not constitute tortious interference with the
Merger Agreement or any other business-related tort; that Section 203 of the
DGCL would not apply to any second-step merger with
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Wells; that the Merger Agreement, the First Interstate Fee Letter and the
First Interstate Stock Option Agreement are void and unenforceable; and that
the Wells Offer would be a Qualified Offer (as defined below) within the
meaning of the Rights Agreement. With respect to the Rights Agreement, Wells
seeks an order requiring First Interstate to redeem the Rights, or an order
requiring First Interstate to amend the Rights Agreement so as to make it
inapplicable to the Wells Offer or to any second-step merger which follows
the Wells Offer. The defendants intend to defend vigorously against the
claims asserted by Wells.
A copy of each of the complaints described above and certain materials
filed by First Interstate in response thereto are filed as Exhibits hereto
and incorporated herein by reference. All of the descriptions of such matters
contained herein are qualified in their entirety by reference thereto.
The Rights Agreement. 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 (the
"Record Date") to shareholders 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.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 20% or more of the outstanding
shares of First Interstate Common Stock other than pursuant to a Qualified
Offer (as defined below), or (ii) 10 business days (or such later date as may
be determined by action of the First Interstate Board prior to such time as
any person becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of such outstanding First Interstate Common Stock (the
earlier of such dates being called the "Distribution Date"), the Rights will
be evidenced, with respect to the First Interstate Common Stock certificates
outstanding as of the record date, by such First Interstate Common Stock
certificate.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the shares of First Interstate
Common Stock. Until the Distribution Date (or earlier redemption or
expiration of the Rights) new First Interstate Common Stock certificates
issued after the Record Date upon transfer or new issuance of the First
Interstate Common Stock will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights) the surrender for transfer of any certificates for
First Interstate Common Stock, outstanding as of the Record Date, even
without such notation, will also constitute the transfer of the Rights
associated with the shares of First Interstate Common Stock represented by
such certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the shares of First Interstate Common Stock as
of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on December 31, 1998 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed
by First Interstate, as described below.
A Qualified Offer is a tender offer or exchange offer for all outstanding
shares of First Interstate Common Stock which is determined by the
non-management directors to be fair to and otherwise in the best interests of
First Interstate and its shareholders.
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 at the same or a higher price) or 50% or more of its
consolidated assets or earning power are sold (any such event, a "Flip-Over
Event"), 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 an Acquiring Person (unless such person
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first acquires 20% or more of the outstanding shares of First Interstate
Common Stock by a purchase pursuant to a Qualified Offer) (a "Flip-in
Event"), proper provision shall be made so that each holder of a Right, other
than Rights beneficially owned by the Acquiring Person (which will thereafter
be 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.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
shares of First Interstate Common Stock and prior to the acquisition by such
person or group of 50% or more of such shares, the First Interstate Board may
exchange the Rights (other than Rights owned by such person or group which
have become void), in whole or in part, at an exchange ratio of one share of
First Interstate Common Stock per Right (subject to adjustment).
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
shares of First Interstate Common Stock, the First Interstate Board may
redeem the Rights in whole, but not in part, at a price of $.001 per Right,
rounded upward for each holder to the nearest $.01 (the "Redemption Price").
The redemption of the Rights may be made effective at such time on such basis
and with such conditions as the First Interstate Board in its sole discretion
may establish. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the First Interstate Board
without the consent of the holders of the Rights, including an amendment to
lower the threshold for exercisability of the Rights from 20% to not less
than the greater of (i) any percentage greater than the largest percentage of
the outstanding shares of First Interstate Common Stock then known to First
Interstate to be beneficially owned by any person or group of affiliated or
associated persons and (ii) 10%, except that from and after such time as any
person becomes an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of First Interstate, including, without limitation,
the right to vote or to receive dividends.
The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire First
Interstate in a manner which causes a Triggering Event to occur unless the
offer is conditioned on a substantial number of Rights being acquired. The
Rights should not affect any prospective offeror willing to make an offer for
all outstanding shares of First Interstate Common Stock at a fair price and
otherwise in the best interests of First Interstate and its shareholders as
determined by the First Interstate Board or affect any prospective offeror
willing to negotiate with the First Interstate Board. The Rights should not
interfere with any merger or other business combination approved by the First
Interstate Board since, pursuant to the Rights Agreement, the Rights are not
exercisable in such an event.
In connection with the execution of the Merger Agreement, First Interstate
executed an amendment (the "Amendment") to the Rights Agreement in order to
(x) amend the definition of "Acquiring Person" set forth in the Rights
Agreement to provide that so long as FBS is in compliance with all material
terms, conditions and obligations imposed upon it by the Merger Agreement and
the First Interstate Stock Option Agreement, neither FBS nor any affiliated
or associated party (collectively with FBS, the "FBS Parties") will be deemed
to be an Acquiring Person by virtue of the fact that FBS is the beneficial
owner solely of First Interstate Common Stock (i) of which any FBS Party is
or becomes the Beneficial Owner by reason of the approval, execution or
delivery of the Merger Agreement or the First Interstate Stock Option
Agreement, or by reason of the consummation of any transaction contemplated
in the Merger Agreement and/or the First Interstate Stock Option Agreement,
(ii) of which any FBS Party is the Beneficial Owner on November 5, 1995,
(iii) of which any FBS Party becomes the Beneficial Owner after November 5,
1995, provided, however, that the aggregate number of shares of First
Interstate Common Stock which may be beneficially owned by the FBS Parties
pursuant to this clause (iii) shall not exceed 5% of the Common Shares
outstanding, (iv) acquired in satisfaction of a debt contracted prior to
November 5, 1995, in good faith, (v) held by any FBS Party in a bona fide
fiduciary or depository capacity
22
<PAGE>
or (vi) owned in the ordinary course of business by either (A) an investment
company registered under the Investment Company Act of 1940, as amended, or
(B) an investment account, for either of which any FBS Party acts as
investment advisor and (y) to exclude the transactions contemplated by the
Merger Agreement from constituting a Flip-Over Event.
As more fully described above (see Item 7(a)), the First Interstate Board
has taken action to postpone the Distribution Date.
Based upon public announcements made by Wells, it is anticipated that
consummation of the Wells Offer will be conditioned upon (i) (x) the Rights
having been invalidated or otherwise rendered inapplicable to the Wells Offer
and the second-step merger of First Interstate with Wells, (y) no
Distribution Date having occurred under the Rights Agreement and (z) Wells
not having become an Acquiring Person under the Rights Agreement, or (ii) the
Rights having been validly redeemed by the First Interstate Board prior to
the time a Flip-in Event or a Flip-over Event shall have occurred (which
redemption would be effected by the Board if Wells was successful in removing
all of the members of the First Interstate Board and replacing them with a
slate of directors chosen by Wells).
Delaware Takeover Statute. First Interstate is incorporated under the laws
of the State of Delaware. Section 203 of the DGCL (the "Delaware Takeover
Statute"), in general, prevents an "Interested Stockholder" (defined
generally as a person that is the "owner" (as defined in the Delaware
Takeover Statute) of 15% or more of a corporations's outstanding voting
stock) from engaging in a "Business Combination" (defined as a variety of
transactions, including mergers) with a Delaware corporation for three years
following the date such person became an Interested Stockholder unless: (i)
before such person became an Interested Stockholder, the Board of Directors
of the corporation approved the transaction in which the Interested
Stockholder became an Interested Stockholder or approved the Business
Combination; (ii) upon consummation of the transaction which resulted in the
Interested Stockholder becoming an Interested Stockholder, the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers and employee stock ownership plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer), or (iii) following the transaction in which such person
became an Interested Stockholder, the Business Combination is (x) approved by
the Board of Directors of the corporation and (y) authorized at a meeting of
shareholders by an affirmative vote of the holders of two-thirds of the
outstanding voting stock of the corporation not owned by the Interested
Stockholder.
The Delaware Takeover Statute provides that during the three-year period
following the date a person becomes an Interested Stockholder, the
corporation may not merge or consolidate with an Interested Stockholder or
any affiliate or associate thereof, and also may not engage in certain other
transactions with an Interested Stockholder or any affiliate or associate
thereof, including, without limitation, (i) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets (except
proportionately as a stockholder of the corporation) having an aggregate
market value equal to 10% or more of the aggregate market value of either the
aggregate market value of all of the assets of the corporation or the
aggregate market value of all of the outstanding stock of the corporation,
(ii) any transaction which results in the issuance or transfer by the
corporation or by certain subsidiaries thereof of any stock of the
corporation to the Interested Stockholder, subject to certain exceptions,
(iii) any transaction involving the corporation or any majority owned
subsidiary thereof which has the effect of increasing the proportionate share
of the stock of any class or series, or securities convertible into the stock
of any class or series of the corporation or any such subsidiary which is
owned by the Interested Stockholder (except as a result of immaterial changes
due to fractional share adjustments or as result of any purchase or
redemption of any share of stock not caused, directly or indirectly, by the
Interested Stockholder), or (iv) any receipt by the Interested Stockholder of
the benefit (except proportionately as a shareholder of such corporation) of
any loans, advances, guarantees, pledges or other financial benefits provided
by or through the corporation.
In connection with its approval of the Merger Agreement, the First
Interstate Board took action to ensure that the Delaware Takeover Statute
would not apply to the Merger Agreement, the First Interstate Stock Option
Agreement or the consummation of the transactions contemplated thereby.
23
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
Exhibit 1: Press Release of Wells, dated November 13, 1995
(including the letter from Wells to First Interstate
contained therein).
Exhibit 2: Pages 7 through 37 of First Interstate's 1995 Annual
Meeting Proxy Statement, dated March 20, 1995.
Exhibit 3: Agreement and Plan of Merger, dated as of November 5,
1995, by and among FBS, FBS Merger Sub and First
Interstate.
Exhibit 4: First Interstate 1991 Performance Stock Plan.
Exhibit 5: First Interstate 1988 Performance Stock Plan.
Exhibit 6: First Interstate 1983 Performance Stock Plan.
Exhibit 7: First Interstate 1995 Management Incentive Plan.
Exhibit 8: First Interstate 1995 Regional Executive Incentive
Plan.
Exhibit 9: First Interstate Tier II Employment Agreement.
Exhibit 10: Letter, dated October 17, 1995, from Wells to First
Interstate regarding the Initial Wells Proposal.
Exhibit 11: Letter to Shareholders of First Interstate, dated
November 20, 1995. *
Exhibit 12: Press Release issued by First Interstate dated
November 20, 1995.
Exhibit 13: Opinion of Goldman, Sachs & Co., dated November 6,
1995.*
Exhibit 14: Opinion of Goldman, Sachs & Co., dated November 19,
1995.*
Exhibit 15: Opinion of Morgan Stanley & Co. Incorporated, dated
November 5, 1995.*
Exhibit 16: Opinion of Morgan Stanley & Co. Incorporated, dated
November 19, 1995.*
Exhibit 17: Stock Option Agreement, dated November 5, 1995,
between FBS (as "Grantee") and First Interstate (as
"Issuer").
Exhibit 18: Stock Option Agreement, dated November 5, 1995,
between First Interstate (as "Grantee") and FBS (as
"Issuer").
Exhibit 19: Letter Agreement, dated November 5, 1995, between
First Interstate (as "Payer") and FBS (as
"Recipient") in regard to termination fees.
Exhibit 20: Letter Agreement, dated November 5, 1995, between FBS
(as "Payer") and First Interstate (as "Recipient") in
regard to termination fees.
Exhibit 21: Complaint in Williamson v. Bryson, et al. (Delaware
Chancery Court).
Exhibit 22: Complaint in Shaev v. First Interstate Bancorp, et
al. (Delaware Chancery Court).
Exhibit 23: Complaint in Bernstein v. Carson, et al. (Delaware
Chancery Court).
Exhibit 24: Complaint in Katz v. First Interstate Bancorp, et al.
(Delaware Chancery Court).
Exhibit 25: Complaint in Sachs and Felder v. First Interstate
Bancorp, et al. (Delaware Chancery Court).
Exhibit 26: Amended Class Action Complaint in Williamson, et al.
v. First Interstate Bancorp, et al. (In re First
Interstate Bancorp Shareholder Litig.) (Delaware
Chancery Court).
- - ------------
* Included in copies mailed to shareholders.
24
<PAGE>
Exhibit 27: Answer in In re First Interstate Bancorp Shareholder
Litig. (Delaware Chancery Court).
Exhibit 28: Second Amended and Supplemental Class Action
Complaint in In re First Interstate Bancorp
Shareholder Litig. (Delaware Chancery Court).
Exhibit 29: Complaint in Mesko v. Bryson, et al. (California
Superior Court).
Exhibit 30: Complaint in Eaves v. Bryson, et al. (California
Superior Court).
Exhibit 31: Complaint in Grill v. Bryson, et al. (California
Superior Court).
Exhibit 32: Complaint in Mondshein v. Bryson, et al. (California
Superior Court).
Exhibit 33: Complaint in Deborah Kaplan v. Bryson, et al.
(California Superior Court).
Exhibit 34: Complaint in Theodore N. Kaplan v. Bryson, et al.
(California Superior Court).
Exhibit 35: Complaint in Wells Fargo & Company v. First
Interstate Bancorp, et al. (Delaware Chancery Court).
25
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
FIRST INTERSTATE BANCORP
By: /s/ William J. Bogaard
-----------------------------------
William J. Bogaard
Executive Vice President
and General Counsel
Dated: November 20, 1995
26
BW 9:01 WELLS FARGO INCREASES OFFER FOR FIRST
INTERSTATE; ANNOUNCES EXCHANGE OFFER FOR COMMON STOCK; Intends to begin
consent and proxy solicitations
Business Editors
SAN FRANCISCO--(BUSINESS WIRE)--Nov. 13, 1995--Wells Fargo & Co. (NYSE:
WFC) today announced that it intends to take its offer to acquire First
Interstate Bancorp (NYSE: I) directly to the stockholders of First Inter-
state by beginning an exchange offer. Wells Fargo will offer stockholders of
First Interstate an opportunity to tender their shares in an exchange offer in
which each First Interstate share tendered would be exchanged for two-thirds
of a share of Wells Fargo common stock.
Based on the closing price of Wells Fargo common stock on November 10,
the value of the exchange offer is $143.58 per share of First Interstate
common stock. First Interstate has approximately 75.7 million shares
outstanding, giving the transaction a total value of approximately $10.9
billion.
"Our offer is superior to First Bank System's and we believe it is too
compelling to ignore," said Paul Hazen, chairman of Wells Fargo & Co. "Our
Board and major stockholders are fully supportive of the steps we are
announcing today and are determined that Wells Fargo be successful in
acquiring First Interstate. We are convinced that First Interstate
stockholders will appreciate the extraordinary value of our proposal."
The terms and conditions of the exchange offer are to be set forth in
a registration statement that will be filed promptly with the Securities and
Exchange Commission (SEC). The exchange offer will begin when the registration
statement is declared effective by the SEC. The exchange offer will be
conditioned on, among other things, the acquisition of a majority of First
Interstate common stock, the redemption or invalidation of First Interstate's
"poison pill", receipt of all necessary governmental regulatory approvals and
consents, and approval by Wells Fargo stockholders of the issuance of Wells
Fargo shares in the exchange offer.
<PAGE>
Wells Fargo intends to file an application today with the Federal
Reserve Bank of San Francisco to approve the acquisition by Wells Fargo of
First Interstate under the Bank Holding Company Act of 1956. The Company
anticipates no difficulty in obtaining approval by the Federal Reserve Board
on a timely basis, and is committed to making all appropriate divestitures.
In addition, Wells Fargo said that it anticipates filing preliminary
materials with the SEC for the solicitation of written consents from
stockholders of First Interstate to remove First Interstate's current board of
directors and to replace them with nominees of Wells Fargo who are committed
to removing any impediments to the consummation of the acquisition of First
Interstate by Wells Fargo.
Wells Fargo also intends to file preliminary proxy materials with the
SEC. These would be used in connection with the solicitation of First
Interstate stockholders for proxies to vote against approval of the merger
with First Bank System at any meeting of stockholders of First Interstate to
be called to consider that merger proposal.
Finally, Wells Fargo today is filing a complaint against First
Interstate, First Interstate's Board of Directors and First Bank System in the
Delaware Chancery Court. The complaint seeks to invalidate the break-up fees
and lock-up option granted to First Bank System by First Interstate. In
addition, the complaint seeks injunctive relief requiring the First Interstate
Board to redeem the First Interstate poison pill and to prevent First
Interstate from using anti-takeover devices or taking other actions intended
to impede or delay the acquisition of First Interstate by Wells Fargo.
"We want to do everything we can to keep California banking strong and
to keep banking headquarters in our state, not thousands of miles away," said
Hazen. "We strongly believe that our merger proposal serves the best interests
of California's many constituents. Our combined companies will bolster
competition, bring customers a wider range of products and services and create
the potential for new jobs. We believe stockholders deserve the opportunity to
vote on the merits of each merger proposal."
NOTE TO EDITORS: Following this release is the full text of a letter being
delivered today by Paul Hazen to Wil- liam Siart, Chairman and CEO of First
Interstate Bancorp.
2
<PAGE>
November 13, 1995
Mr. William Siart
Chairman and Chief Executive Officer
First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Dear Bill:
We were disappointed to learn that First Interstate had agreed
to merge with First Bank System in a transaction that would offer First
Interstate stockholders less value than they would receive pursuant to our
then pending merger proposal, which offered .65 of a share of Wells Fargo
common stock for each share of First Interstate common stock. From our prior
conversations you know how determined Wells Fargo is to combine the operations
of our two companies. We remain more determined than ever. Accordingly, Wells
Fargo today announced that it intends to file with the Securities and Exchange
Commission a registration statement with respect to an exchange offer pursuant
to which Wells Fargo will offer to exchange 2/3 of a share of Wells Fargo
common stock for each outstanding share of First Interstate common stock.
We note that your agreement with First Bank System authorized
First Interstate to terminate it if your "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." In light of the higher value of the
proposal we intend to make directly to your stockholders, it is our firm
conviction that the fiduciary duties owed by your Board to First Interstate
stockholders compel your Board to exercise that termination right forthwith.
As you know, our strong preference is to combine our two
companies in a transaction endorsed by First Interstate's Board of Directors.
In that connection, Wells Fargo would be prepared to enter into a merger
agreement with First Interstate providing your stockholders with the same
consideration as offered in our exchange offer, and we would not seek any
break-up fees or lock-up options.
In the event that your Board of Directors would rather not
terminate the agreement with First Bank System, if you and First Bank System
would agree, we would
<PAGE>
agree to a different process by which Wells Fargo and First Bank System would
each be given 10 days to submit its best and final merger proposal, and First
Interstate would agree to submit both proposals promptly to its stockholders
in a manner fair and acceptable to both bidders so that the stockholders would
be able to decide for themselves which proposal is in their best interests.
Your Board would approve each proposal, in the alternative, for Delaware law
purposes.
As you know, the economic benefit to our respective
stockholders that can be generated from the combination of our two companies
is enormous, and far outstrips the benefits of a First Interstate - First Bank
System combination. As a result, we are confident that the First Interstate
Board and its advisors will conclude that our proposal, evaluated on an
impartial basis, offers significantly more value to First Interstate
stockholders than the First Bank System transaction.
We look forward to receiving your prompt response.
Enclosed is a copy of the press release we are issuing today
about our exchange offer and related matters.
Sincerely,
/s/ Paul Hazen
------------------
Paul Hazen
Chairman and CEO
Enclosure
EXHIBIT 2
INFORMATION REGARDING THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
The Corporation's Board of Directors has six standing committees:
Executive, Audit, Compensation, Compliance, Credit and Nominating. Except for
the Executive and Compliance Committees, each of these committees is composed of
members who are not officers or employees of the Corporation or its
subsidiaries. The membership and principal responsibilities of those committees
are described below. The Management Advisory Committee, a standing committee
which met twice during 1994, was dissolved on May 4, 1994. Members of the
Management Advisory Committee during 1994 were William F. Kieschnick (Chairman),
John E. Bryson, George M. Keller and Richard J. Stegemeier.
Executive Committee
Members: Edward M. Carson (Chairman), William F. Kieschnick, William F.
Miller, J. J. Pinola, Forrest N. Shumway and William E. B. Siart.
Between meetings of the Board of Directors, the Executive Committee has
all powers which may be delegated to it under Delaware law. In general, the
Executive Committee may supervise the management of all business of the
Corporation except for matters which by law specifically require the action of
the full Board or the stockholders. The Executive Committee did not meet during
1994.
Audit Committee
Members: Don C. Frisbee (Chairman), John E. Bryson, Ralph P. Davidson,
Thomas L. Lee and Daniel M. Tellep.
The Audit Committee reviews with the independent public accountants the
scope and results of the annual audit, monitors the adequacy of the
Corporation's system of internal controls and procedures, oversees the
Corporation's internal audit activities, recommends the selection of the
independent public accountants subject to approval of the Board and ratification
by the stockholders, and meets periodically with representatives of bank
regulatory agencies to discuss the condition of the Corporation and the
subsidiary banks. Mary M. Gates served as a member of the Audit Committee until
her death in June 1994. During 1994, the Audit Committee met six times.
Compensation Committee
Members: George M. Keller (Chairman), John E. Bryson, William F.
Kieschnick, Richard J. Stegemeier and Daniel M. Tellep.
The Compensation Committee reviews and approves the compensation of all
officers whose salary exceeds $150,000 per year other than officers who are also
Directors, whose salaries are fixed by the Board of Directors. This Committee
administers the several
<PAGE>
performance stock plans of the Corporation, providing for the award of stock,
stock options and other derivative securities. The Committee also administers
and makes awards under the Corporation's Executive Incentive Plan, Regional
Executive Incentive Plan and Management Incentive Plan, and, if approved by the
stockholders at the Annual Meeting of Stockholders, the new Corporate Executive
Incentive Plan and the 1995 Performance Stock Plan. It also approves benefit
plans and programs for the employees of the Corporation and its subsidiaries.
During 1994, the Compensation Committee met seven times.
Compliance Committee
Members: William F. Miller (Chairman), Jewel Plummer Cobb, Myron Du Bain
and William E. B. Siart.
The Compliance Committee reviews the Corporation's compliance program,
the laws and regulations governing its activities, the Corporation's response to
changes in laws and regulations, and management reports on the effectiveness of
subsidiaries' compliance activities. The Compliance Committee met five times
during 1994.
Credit Committee
Members: Myron Du Bain (Chairman), William F. Miller, J. J. Pinola and
Steven B. Sample.
The Credit Committee reviews and approves all appropriate credit
policies and Risk Management standards by which the Corporation's credit process
is managed. This Committee reviews sufficient information on a regular basis to
ensure that the credit process is managed consistent with the Corporation's
policies and regulatory and accounting standards; meets periodically with
representatives of bank regulatory agencies to discuss the condition of the
Corporation and the subsidiary banks; reviews management's evaluation of the
Corporation's credit risk elements and performance objectives; reviews, on a
quarterly basis, management's evaluation of the Corporation's consolidated
Allowance for Credit Losses; and reviews with the Corporation's independent
public accountants any report or opinion related to the credit Risk Management
process of the Corporation, including the adequacy of the Allowance. The
Committee also reviews and approves the Corporation's independent credit review
program and, on a regular basis, receives reports and recommendations made by
the Corporation's Senior Credit Review Officer to ensure that the program is
managed consistent with standards. The Credit Committee met five times during
1994.
Nominating Committee
Members: Richard J. Stegemeier (Chairman), Ralph P. Davidson, Myron Du
Bain, George M. Keller, Steven B. Sample and Forrest N. Shumway.
The Nominating Committee considers and reviews the qualifications of
potential nominees for Director and recommends to the Board of Directors a slate
of nominees for election as
2
<PAGE>
Directors at the Annual Meeting of Stockholders and, when vacancies occur,
candidates for election by the Board of Directors. The Committee will consider
nominees recommended by stockholders. Such recommendations for nominees for
election at the 1996 Annual Meeting should be submitted in writing to the
Committee in care of the Secretary of the Corporation at its address set forth
on the first page of this Proxy Statement. During 1994, the Nominating Committee
met one time.
Under the Corporation's Bylaws, nominations of persons for election to the
Board of Directors may be made at a meeting of stockholders by any stockholder
of the Corporation, provided that the Secretary of the Corporation receives
written notice not less than thirty (30) days nor more than sixty (60) days
prior to the meeting. If less than forty (40) days' notice or prior public
disclosure of the date of the meeting is given or made by the Corporation to
stockholders, the notice of a nomination must be received not later than the
close of business on the 10th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Notices of
nominations must state the nominee's name, age, business and residential
addresses and principal occupation or employment. The notice must also include
the class and number of shares of the Corporation 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 under the Securities Exchange Act of 1934. In addition, the notice must
state the name and record address of the nominating stockholder and the class
and number of shares of the Corporation beneficially owned by the stockholder.
The Board of Directors believes that this notification procedure gives the Board
and the stockholders a better opportunity to consider the qualifications of
nominees for Director.
DIRECTORS' FEES AND OTHER COMPENSATION
Directors who are salaried officers of the Corporation receive no fees as
Directors of the Corporation. All other Directors are paid an annual retainer
for Board service of $20,000, and an attendance fee of $1,000 and $600 for each
Board and committee meeting attended, respectively. Directors are also
reimbursed for any expenses incurred in connection with attendance at regular or
special meetings of the Board or any of its committees. The Chairmen of the
standing committees are paid an additional $5,000 annual retainer. The
Corporation has a standard arrangement pursuant to which Directors may elect to
defer all or part of their Directors' fees. During 1994 Messrs. Bryson, Du Bain,
Keller and Dr. Sample deferred the annual retainer and all attendance fees.
During 1994 the Corporation continued to provide Mr. Pinola, as former
Chairman of the Board and Chief Executive Officer, with certain services and
property, resulting in imputed income to him of approximately $15,511. The
Corporation paid Mr. Pinola a tax gross-up amount of approximately $18,096 in
connection with such imputed income.
3
<PAGE>
DIRECTORS' RETIREMENT PLAN
The Corporation adopted the First Interstate Bancorp Retirement Plan for
Directors, effective January 1, 1988, to provide retirement benefits to eligible
Directors who have not served as while being employed by the Corporation or any
of its subsidiaries, and who retire from Board service with at least five years
of service as a Director. Each eligible Director is entitled to an annual
retirement benefit equal to the annual retainer for Directors as in effect at
the time of the eligible Director's resignation or retirement, or the Director
may elect, not less than one year prior to retirement, to receive a lump sum
payment upon retirement. Upon attainment of the later of age 65 or retirement,
an eligible Director will receive one year of retirement payments for each year
of service as an outside Director, with a maximum payment period of 20 years and
with certain spousal rights in the event of death.
1991 DIRECTOR OPTION PLAN
The First Interstate 1991 Director Option Plan ("Director Plan") was
authorized by the Board of Directors on October 15, 1990, and approved by the
Corporation's stockholders on April 19, 1991. A total of 200,000 shares of
Common Stock has been reserved for issuance under the Director Plan, which
provides for the non-discretionary granting of non-qualified options to purchase
Common Stock to Directors who have not served as Directors while being employed
by the Corporation or any of its subsidiaries. Each option grant is exercisable
in its entirety one year from its date of grant. The Director Plan is designed
to operate automatically and not require administration. To the extent that
administration is necessary, the Director Plan is administered by the
Compensation Committee of the Board of Directors.
The purchase price of the Common Stock covered by each option is 100% of
the fair market value of the stock on the date of the option grant. The options
are generally non-transferable. Each option has a termination date, but in any
event, all options granted under the Director Plan terminate upon the first to
occur of the following events: (i) the expiration of ten years from the date the
option is granted; (ii) the expiration of three months from the date an optionee
ceases to serve as a Director for any reason other than death, disability or
retirement eligibility; (iii) the expiration of one year from the date an
optionee ceases to serve as a Director of the Corporation because of disability
or death; (iv) the expiration of three years from the date an optionee ceases to
serve as a Director of the Corporation if the Director is eligible for
retirement benefits under the First Interstate Bancorp Retirement Plan for
Directors; or (v) the termination of the Director Plan pursuant to its terms.
Upon first being elected, each eligible Director is awarded an option to
purchase 5,000 shares of Common Stock. Thereafter, on the first business day
following each annual stockholders meeting of the Corporation, each eligible
Director is granted an option to purchase 1,000 shares of Common Stock.
4
<PAGE>
INSURANCE AGREEMENTS FOR DIRECTORS
The Corporation Purchased universal life insurance policies on the lives
of outside Directors, except for Messrs. Lee and Davidson and Mrs. Gates. The
death benefits of the policies depend on the length of time a Director has
served and do not exceed $200,000 (except in the case of Mr. Pinola whose death
benefit is $2,000,000). The Corporation will continue to pay the premium on such
policies for the period the Director remains a member of the Board. The
Directors have entered into "split-dollar" life insurance agreements which
provide that a Director will become fully entitled to the Policy upon the
occurrence of certain events, including continuation of service to a future date
and resignation for good reason following a change in control. If a Director
becomes entitled to the policy, the cash value of the policy reduces the payment
of benefits under the Directors; Retirement Plan and deferrals of Director's
fees. During 1994, the Directors covered by these insurance agreements received
imputed income ranging from $30 to $13,160 and tax gross-up amounts ranging from
$28 to $12,463 relating to such imputed income. The varying amounts were due to
factors such as the Director's age and length of service.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During 1994, each incumbent Director of the Corporation attended at least
75% of the meetings of the Board of Directors and the committees on which he or
she served, with the exception of Mr. Frisbee. The Board of Directors held ten
meetings during the year 1994.
5
<PAGE>
BENEFICIAL OWNERSHIP OF THE CORPORATION'S SECURITIES
BY MANAGEMENT
The following table sets forth the number of shares of each class of
equity securities of the Corporation beneficially owned as of February 21, 1995
by each Director and executive officer named in the Summary Compensation Table
and by all Directors and executive officers as a group, with the exception of
shares held in the Employee Savings Plan, which are reported as of December 31,
1994. For the purposes of this Proxy Statement, beneficial ownership is defined
in accordance with the rules of the Securities and Exchange Commission and means
generally the power to vote or dispose of securities, regardless of any economic
interest.
<TABLE>
<CAPTION>
PERCENT
COMMON STOCK TOTAL OF
COMMON OPTION COMMON COMMON
NAME OF BENEFICIAL OWNER(1) STOCK(2) SHARES(3) STOCK STOCK
--------------------------- -------- --------- ----- -----
<S> <C> <C> <C> <C>
John E. Bryson(4)(5)...................... 1,140 6,500 7,640 *
Edward M. Carson(4)(6).................... 31,644 223,750 255,394 *
Dr. Jewel Plummer Cobb.................... 1,776 6,514 8,290 *
James J. Curran(6)(7)..................... 21,891 64,750 86,641 *
Ralph P. Davidson......................... 1,500 8,000 9,500 *
Myron Du Bain(4).......................... 28,939 8,000 36,939 *
Don C. Frisbee............................ 872 3,000 3,872 *
Mary M. Gates(8).......................... 2,335 6,000 8,335 *
George M. Keller(4)....................... 5,896 5,000 10,896 *
William F. Kieschnick(4).................. 7,100 1,000 8,100 *
Thomas L. Lee............................. 1,300 5,000 6,300 *
Dr. William F. Miller(4).................. 2,310 8,000 10,310 *
J. J. Pinola(4)........................... 8,842 0 8,842 *
William S. Randall(5)(6).................. 29,690 86,250 115,940 *
Dr. Steven B. Sample...................... 500 6,500 7,000 *
Forrest N. Shumway(4)..................... 2,000 8,000 10,000 *
William E. B. Siart(6).................... 46,254 168,750 215,004 *
Richard J. Stegemeier(4).................. 4,800 3,000 7,800 *
Daniel M. Tellep.......................... 500 7,000 7,500 *
Bruce G. Willison(5)(6)(7)................ 24,254 91,250 115,504 *
All Directors and executive officers as a
group (30 persons)(4)(5)(6)
(7)(8)(9)(10)(11)........................ 282,327 1,009,739 1,292,066 1.69%
</TABLE>
- - ----------
* Represents less than 1% of the outstanding Common Stock.
6
<PAGE>
(1) Subject to applicable community property and similar statutes, the
persons listed as beneficial owners of the shares have sole voting and
investment power with respect to such shares except as noted.
(2) Fractional shares resulting from participation in the Dividend
Reinvestment and Stock Purchase Plan and the Employee Savings Plan of
First Interstate Bancorp have been rounded to the nearest whole share.
(3) Reflects the number of shares that could be purchased by exercise of
options presently exercis- able or exercisable within 60 days from
February 21, 1995, under the Corporation's stock option plans.
(4) Includes the following shares of Common Stock held by a living or
family trust formed by the named individual in which voting or
investment power may be shared: Mr. Bryson, 500 shares; Mr. Carson,
30,482 shares; Mr. Du Bain, 23,839 shares; Mr. Keller, 5,896 shares;
Mr. Kieschnick, 7,100 shares; Dr. Miller, 2,310 shares; Mr. Pinola,
8,842 shares; Mr. Shumway, 2,000 shares; and Mr. Stegemeier, 4,800
shares. Also includes 4,000 shares of Common Stock held in an
Individual Retirement Account by Mr. Du Bain.
(5) Includes shares held jointly, or in other capacities, as to which in
some cases beneficial ownership may be disclaimed.
(6) Includes the following shares held by the Trustee of the Employee
Savings Plan in the accounts of the named individuals as of December
31, 1994:
Edward M. Carson ................................. 801
William E. B. Siart .............................. 16,527
William S. Randall ............................... 9,830
Bruce G. Willison ................................ 4,972
James J. Curran .................................. 13,338
All executive officers as a group (15 persons) ... 56,479
(7) Includes the following performance units awarded pursuant to the 1991,
1992 and 1993 annual incentive plans and issued under the 1991
Performance Stock Plan (each performance stock unit represents one
share of Common Stock):
Mr. Willison ..................................... 1,777
Mr. Curran ....................................... 1,543
All executive officers as a group (15 persons) ... 7,692
The performance stock units will be paid in Common Stock or cash upon
the occurrence of certain events, at the executive officer's election,
including the first to occur of termination of employment, retirement
or a specified date. Additional performance unit credit will be
received based on the value of dividends paid on the underlying
performance stock units.
(8) Mrs. Gates' stock ownership is reported as of June 9, 1994, the date
of her death.
(9) Includes 97,213 shares of Common Stock held in living or family trusts
in which voting or investment power may be shared.
(10) No Directors or executive officers owned any shares of Series F or
Series G Preferred Stock of the Corporation.
7
<PAGE>
(11) Includes shares of Restricted Stock awarded by the Compensation
Committee pursuant to the Corporation's 1991 Performance Stock Plan.
BY OTHERS
The following entities are the only stockholders known to the Corporation
to be the beneficial owners of more than 5% of the Corporation's equity
securities outstanding at December 31, 1994:
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
- - -------------- ---------------- --------- -----
Common Stock DI Associates and KKR Associates 6,131,693(l) 8.26%
c/o Kohlberg Kravis
Roberts & Co.
9 West 57th Street
New York, NY 10019
Common Stock Oppenheimer Group, Inc. 5,170,191(2) 6.78%(2)
Oppenheimer Tower,
World Financial Center
New York, NY 10281
- - ----------
(1) This information is based upon a Schedule 13D dated February 3, 1993 filed
with the Securities and Exchange Commission ("SEC") jointly by DI Associates
("DI") and KKR Associates ("KKR") DI and KKR have sole voting and
dispositive power as to all of the shares.
(2) This information is based upon a Schedule 13G dated February 1, 1995 filed
with the SEC by Oppenheimer Group, Inc. ("Group"), as a parent holding
company on behalf of Oppenheimer & Co., L.P. and Group's subsidiary
companies and/or certain investment advisory clients or discretionary
accounts of such subsidiaries. Group does not have sole voting and
dispositive power with respect to any of the shares, and has shared voting
and dispositive power as to all of the shares. An investment advisory
subsidiary, Oppenheimer Capital, has shared voting and dispositive power as
to 5,130,281 of such shares, and sole voting and dispositive power as to
none of the shares.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's executive officers and Directors, and persons who own more than
ten percent of a registered class of the Corporation's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission.
The Corporation believes that during 1994 it complied with all Section
16(a) filing requirements applicable to its executive officers, Directors and
greater than ten percent beneficial owners, except for the following reports.
One report on Form 4 was filed late for Mr. Davidson, who inadvertently failed
to
8
<PAGE>
report the sale in 1994 of 500 shares of Common Stock by his wife. An amended
Form 4 reflecting the sale was filed approximately one month after the due date.
An amended Form 4 was also filed in 1994 for Mr. Willison to reflect his gift in
1992 of 50 shares of Common Stock to his son; the amendment was filed
immediately upon his discovery of the omission.
9
<PAGE>
Pursuant to Item 402(a)(9) of Regulation S-K of the Securities and
Exchange Commission ("SEC"), the following Report of the Compensation Committee
on Executive Compensation and the Common Stock Performance Graph on page 21
shall not be deemed to be filed with the SEC for purposes of the Securities
Exchange Act of 1934. In addition, they shall not be deemed to be incorporated
by reference into any of the Corporation's past or future filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The members of the First Interstate Bancorp Compensation Committee are all
non-employee Directors, and no member of the Committee is a former officer or
employee of the Corporation or any of its subsidiaries. Mr. Stegemeier was
selected by the Board of Directors to serve on the Compensation Committee on May
4, 1994, and participated in the modification of existing employment agreements,
the evaluation of corporate and regional performance and the assignment of
incentive awards for 1994.
The Compensation Committee of the Board is committed to providing a total
compensation program which supports the Corporation's business strategy and
enhances shareholder value. The Committee is responsible for the review and
approval of total compensation elements, including the competitive market
posture, the level of pay at risk, and the mixture of pay components for the
Corporation's executives and key management employees. In addition to these
broad responsibilities, the Compensation Committee reviews and approves
employment agreements, base salary increases, annual incentive awards and stock
option grants to executives and other key management employees, including the
five named executives on the Summary Compensation Table in the Proxy Statement.
The base salaries of the Chairman of the Board and Chief Executive Officer and
the President receive final approval from the Board of Directors.
COMPENSATION PHILOSOPHY
The Corporation's overall compensation philosophy, endorsed by the
Compensation Committee, is to encourage and reward financial performance and,
through the encouragement of stock ownership, to align the interests of
management with those of the stockholders. The Committee bases its compensation
decisions on the executives' performance, as defined in this Report, and
experience and on the competitive compensation levels at other banks. The banks
with which the Corporation compares its compensation levels include a group of
superregional banks with similar characteristics as the Corporation and its
subsidiary banks, i.e., retail focus, multi-state operations, with a minimum of
400 branches and $20 billion in assets. Many of these banks are represented in
the KBW 50 Index published by Keefe, Bruyette & Woods, Inc., which is used by
the Corporation as its peer comparison on the Common Stock Performance Graph in
the Proxy Statement.
The decisions of the Compensation Committee are based on the principle
that a substantial portion of annual compensation for the Chairman of the Board
and Chief Executive Officer and the President and other executive officers
should be contingent upon the Corporation's performance and return to
stockholders. Officers and employees participating in the executive incentive
plans have approximately 50% to 55% of their direct compensation (base salary
plus bonus) dependent on measured achievement of corporate and regional goals.
10
<PAGE>
COMPENSATION PROGRAM ELEMENTS
The Corporation's executive compensation program consists of three
elements:
-- Base salary
-- Annual incentive compensation
-- Long-term incentive compensation
Base Salary
Each executive officer's base salary is reviewed annually. When
determining salary levels, the Compensation Committee considers internal equity
(the relationship of an executive's salary to the value of his or her position
to the Corporation as measured by the midpoint of the position's salary grade
and the appropriateness of such salary level compared to the salaries of other
executives), the average of competitive pay practices and the executive's
performance. While all three of these determinants are considered by the
Committee, adjustments to salaries are based on individual performance.
Competitive salary data enables the Compensation Committee to assess the salary
of each executive officer relative to the market, and internal equity
considerations require the differentiation of salaries based on job size,
experience, responsibility level and organizational complexity. The base
salaries of executives range from somewhat below the median to slightly above
the median of the competitive market. The 1994 base salary increases approved
for executive officers, including the five named executives on the Summary
Compensation Table in the Proxy Statement, reflected the Committee's assessment
that these executives contributed substantially to the Corporation's performance
in exceeding its overall goals, as described below.
1994 Annual Incentive Compensation
The Corporate Executive Incentive Plan (the "Executive Incentive Plan"),
the Regional Executive Incentive Plan and the Management Incentive Plan provide
annual incentive compensation opportunities to executive officers based on the
Corporation's performance and the performance of the subsidiary banks.
Incentive awards for Mr. Carson and Mr. Siart are based on the performance
of the entire Corporation against goals established by the Committee at the
start of the year. The awards for the Chief Executive Officers of the
California, Texas, Northwest and Southwest regions are based 50% on the
achievement of specific regional goals, as set at the beginning of each year,
and 50% on the Corporation's performance. The objectives are established by
executive management and reviewed and approved by the Compensation Committee.
The specific goal categories and their weighing for the Corporation and for the
regions are identified below. The actual level of performance required for each
of the goals is confidential for competitive reasons.
The primary goal category for the Corporation for 1994 was return on
equity, with 50% weighing based on the Corporation's performance relative to the
peer bank group median return on equity over an eleven year historical
performance period. The remaining 50% weighing was based on the Corporation's
11
<PAGE>
performance relative to the peer bank group median return on equity in 1994.
Performance against both goals placed the Corporation in the highest performing
quartile of its peer group.
Each of the four regions had their own unique objectives for net income,
revenue and efficiency ratio (which measures expenses relative to revenue). The
weights for the goal categories in all four regions were 60% net income, 20%
revenue and 20% efficiency ratio. Three of the four regions exceeded all of
their goals, while all four exceeded their net income goals.
The incentive awards for the Chairman of the Board and Chief Executive
Officer and the President were directly based on the Corporation's achievement
percentage against its goals applied to the target award percentage for these
two positions. Fifty percent (50%) of the incentive awards for the regional
Chief Executive Officers was directly linked to their own region's performance
against the region's goals described above, and 50% was linked to the
Corporation's performance against its goals, also described above.
The executive officers serving on the Corporation's Executive Operating
Committee, including the five named executives on the Summary Compensation
Table, receive 25% of their annual incentive award in stock. Such executive
officers may elect to defer payment of the stock award in the form of
performance stock units, each of which represents one share of Common Stock. Any
dividends paid on the Common Stock underlying the performance stock units are
credited and converted into additional performance stock units. At the time of
distribution, shares of Common Stock will be issued equal to the number of whole
performance stock units, and any fractional performance stock unit will be
payable in cash.
Executive officers who do not participate in either the Executive
Incentive Plan or Regional Executive Incentive Plan participate in the
Management Incentive Plan. The Management Incentive Plan provides for awards
based on a blend of corporate performance and the performance of the unit by
which the participant is employed. Adjustments are made to the blended awards
based on individual performance.
Long-term Incentive Compensation
The Compensation Committee believes that awards of stock options promote
the interests of the stockholders by providing performance incentives to senior
executives and key employees who are responsible for the management, growth and
financial success of the Corporation. Options are priced at 100% of the market
value on the date of grant, and the Compensation Committee's policy precludes
any subsequent repricing of options. Since recipients of stock options will not
profit from their options until the price of the Corporation's stock exceeds the
grant price, the executives are motivated to manage their businesses in ways
that over the long term will benefit stockholders through increased stock price.
The Chairman of the Board and Chief Executive Officer considers the level
of the optionee's job responsibility, his or her potential impact on the
Corporation's performance and the median to 75th percentile of competitive
practice in arriving at the number of shares to be recommended to the
Compensation Committee. Stock option guidelines have been established using the
Black-Scholes Pricing Model. Each year the Corporation uses compensation surveys
published by various consulting firms and includes the same superregional banks
described above in the section on Compensation Philosophy.
12
<PAGE>
Organizational performance and individual performance are also factors which
serve to increase or decrease option recommendations from the guidelines. The
regional Chief Executive Officers' option grants in 1994 were at the median of
competitive practice as calculated by the Black-Scholes Pricing Model.
The Committee, in granting options, did not consider either the amount and
value of options currently held or the number of shares owned by those
individuals who were granted options in 1994. The Corporation has established
ownership level guidelines for equity holdings in the Corporation by senior
managers.
The Corporation does not grant tandem stock appreciation rights to its
executive officers. In addition, the Corporation currently uses restricted stock
as a compensation vehicle only on a very selective basis.
Compensation of Mr Carson
In assessing the accomplishments of Mr. Carson, the Compensation Committee
considered that, under his direction, the results for 1994 demonstrate continued
significant strengthening in the Corporation's performance. Net income for the
Corporation for 1994 was $733.5 million, compared to income of $561.4 million
for 1993, which is before the cumulative effect of accounting changes and an
extraordinary item. Return on average common equity for the Corporation in 1994
was 21.56%, up from 17.33% in 1993 and significantly higher than the peer bank
group median return on equity of 16.59% for 1994. The Corporation's return on
average assets for 1994 was 1.38%, compared to 1.14% in 1993. In addition, no
provision for credit losses for the Corporation was reported for 1994.
The Compensation Committee believes that Mr. Carson's base salary should
approximate the average of the competitive market and that his total
compensation, including incentive pay, should be related to the Corporation's
performance as compared to its competitive market. The Corporation's performance
for 1994 as compared to its competitive market was in the top quartile for
return on equity.
Mr. Carson's 1994 base salary is slightly above the median base salary of
chief executive officers of the banks identified above as the Corporation's
competitive market. His direct compensation for 1994 is estimated to be between
the 50th and 75th percentiles when compared to the Corporation's competitive
market. In determining his 1994 incentive award, the Committee took into account
Mr. Carson's accomplishments as specified above.
The present value of the 1994 grant to Mr. Carson of 50,000 options, as
determined by the Black- Scholes Pricing Model, was approximately 25% lower than
the competitive market long-term incentive value. In Mr. Carson's case, the
option grant will have an effective term of four years, instead of the normal
ten years, when he retires this year. The Black-Scholes valuation methodology
results in a lower value as the term of the grant shortens.
In addition to the annual incentive compensation awarded to Mr. Carson
under the Executive Incentive Plan and the 1991 Performance Stock Plan, the
Committee made an award to him in recognition of his significant contribution to
the Corporation.
13
<PAGE>
The Tax Deductibility Limitation
As a result of the Omnibus Budget Reconciliation Act of 1993, Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), provides
that any publicly held corporation will be denied a deduction for compensation
paid to a "covered employee" to the extent that the compensation exceeds
$1,000,000. The deduction limit applies to any compensation that could otherwise
be deducted except for specific types of payments. As one of the exclusions, the
deduction limit does not apply to "compensation that meets the requirements for
performance-based compensation".
Under the requirements for performance-based compensation set forth in the
proposed Internal Revenue Service regulations, compensation will not be subject
to the deduction limit if (1) it is payable on account of the attainment of one
or more performance goals; (2) the performance goals are established by a
compensation committee of the board of directors; (3) the material terms of the
compensation and the performance goals are disclosed to and approved by the
stockholders before payment; and (4) the compensation committee certifies that
the performance goals have been satisfied before payment.
Awards issued under First Interstate's 1991 Performance Stock Plan satisfy
the requirements of the regulations, because the 1991 Performance Stock Plan was
approved by the stockholders in accordance with Section 16(b) of the Securities
Exchange Act of 1934 and because the Plan provides for an aggregate limit on the
number of shares with respect to which awards may be made under the Plan. At the
1995 Annual Meeting, the 1995 Performance Stock Plan will be presented to the
stockholders for their approval. If approved by the stockholders, the
Corporation believes that stock options granted under this Plan, and stock
awards issued under this Plan which are based upon the achievement of the
performance goals established under the Executive Incentive Plan, will satisfy
the requirements for performance-based compensation set forth in the proposed
Internal Revenue Service regulations.
The Compensation Committee has decided to introduce in 1995 additional
goal categories to the annual Executive Incentive Plan which should serve to
enhance its qualification as performance-based compensation. The additional goal
categories will affect those executives who are identified in the statute as
"covered employees". Under Section 162(m) of the Code, the term "covered
employees" refers to the Chief Executive Officer and those individuals whose
compensation is required to be reported to the stockholders under the Securities
Exchange Act of 1934 who are employed on the last day of the taxable year.
Therefore, the Proxy Statement contains a detailed description of the
terms and conditions of the Executive Incentive Plan, including the class of
employees eligible to receive compensation under performance goals, a general
description of the terms of the goals and the maximum dollar amount that could
be paid to any one participant for the plan years 1995 through 1999 if the
performance goals are satisfied. At the 1995 Annual Meeting of Stockholders, the
Executive Incentive Plan will be presented to the stockholders for their
approval. The Board of Directors adopted the Executive Incentive Plan on
February 21, 1995, subject to the approval of the stockholders.
14
<PAGE>
EMPLOYMENT AGREEMENTS
In 1994, the Compensation Committee invited an independent outside
compensation consulting firm to assess the appropriateness of the Corporation's
existing executive Employment Agreements. The consultant's review included a
review of current practices with respect to such agreements by employers of
similar size across major industries and within the banking segment peers. The
consultant's report to the Committee suggested that modifications to certain
elements within these Employment Agreements were appropriate in order to ensure
the effectiveness, and to maintain the overall competitiveness, of the
Corporation's Employment Agreements. Amended and Restated Employment Agreements
were therefore reviewed and approved by the Compensation Committee on June
20,1994 and by the Board of Directors on July 18, 1994. It is the Committee's
belief that, upon a termination of employment, a minimum amount of disruption
takes place when the terms and conditions of payments and benefits upon
termination have been incorporated into an agreement. In addition, the
agreements also serve to enhance continuity of management in the event of a
change in control.
Therefore, the Proxy Statement contains a description of the terms and
conditions of the Employment Agreements, as amended and restated, including the
class of employees eligible for these Agreements.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
George M. Keller, Chairman
John E. Bryson
William F. Kieschnick
Richard J. Stegemeier
Daniel M. Tellep
15
<PAGE>
COMMON STOCK PERFORMANCE GRAPH
The following Common Stock Performance Graph compares the yearly
percentage change, on a dividend reinvested basis, in the cumulative total
stockholder return on the Common Stock with the cumulative total return of the
Standard & Poor's 500 Stock Index (which includes the Corporation) and the KBW
50 Index, published by Keefe, Bruyette & Woods, Inc., for the five-year period
commencing December 31, 1989. The stock price performance depicted in the
Performance Graph is not necessarily indicative of future price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN (1)
FIRST INTERSTATE BANCORP, S&P 500 INDEX AND KBW 50 INDEX
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Interstate Bancorp $ 100.00 $ 63.94 $ 85.86 $ 137.40 $ 192.99 $ 211.22
KBW 50 Index $ 100.00 $ 71.81 $ 113.67 $ 144.84 $ 152.86 $ 145.07
S & P 500 Index $ 100.00 $ 96.89 $ 126.41 $ 136.04 $ 149.75 $ 151.73
</TABLE>
- - ----------
(1) Assumes $100 invested on December 31, 1989 in First Interstate Bancorp
Common Stock, S&P 500 Index and KBW 50 Index and assumes quarterly dividend
reinvestment.
16
<PAGE>
EXECUTIVE OFFICERS' COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation for the Chief Executive
Officer of the Corporation and the four most highly compensated executive
officers of the Corporation (other than the Chief Executive Officer) who served
as executive officers on December 31, 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------------------------ -------
ANNUAL RESTRICTED SECURITIES
COMPEN- STOCK UNDERLYING LTIP
SATION AWARDS OPTIONS/ PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) ($)(3) ($)(4) SARS(#)(5) ($) COMPENSATION($)(6)
- - --------------------------- ---- ------------ ----------- ------ ------ ---------- --- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edward M. Carson 1994 $783,333 $1,500,000 -- -0- 50,000 -0- $56,699
Chairman of the 1993 784,133 1,062,000 -- -0- 75,000 -0- 35,229
Board (7) 1992 718,967 1,118,000 -0- 60,000 -0-
William E. B. Siart 1994 629,500 930,000 -- -0- 30,000 -0- 19,638
President and 1993 645,358 836,000 -- -0- 45,000 -0- 18,556
Chief Executive 1992 571,483 884,000 -0- 45,000 -0-
Officer (8)
William S. Randall 1994 440,852 498,400 -- -0- 17,000 -0- 14,530
Executive Vice 1993 453,833 453,000 -- -0- 20,000 -0- 22,839
President and Chief 1992 408,833 491,000 -0- 20,000 -0-
Operating Officer (9)
Bruce G. Willison 1994 430,833 513,300 -- -0- 17,000 -0- 11,420
Chief Executive 1993 405,833 455,000 -- -0- 20,000 -0- 25,057
Officer, California 1992 381,967 484,000 -0- 20,000 -0-
Region (10)
James J. Curran 1994 375,004 444,600 -- -0- 17,000 -0- 12,877
Chief Executive 1993 374,200 395,000 -- -0- 20,000 -0- 11,383
Officer 1992 357,500 415,000 -- -0- 18,000 -0-
Northwest
Region (11)
</TABLE>
- - ----------
(1) Included in this column are salaries and directors' fees paid for services
rendered to the Corporation's subsidiaries before any salary reduction for
contributions to the Corporation's Employee Savings Plan under section
401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), and
salary reductions for contributions for welfare plan coverages under
section 125 of the Code.
(2) The bonus amounts are payable pursuant to the Corporation's Executive
Incentive Plan, Regional Executive Incentive Plan and 1991 Performance
Stock Plan, as applicable. In addition, the bonus for Mr. Carson includes
an award in recognition of his significant contribution to the
Corporation. This column reflects amounts awarded, even if deferred.
(3) "Other Annual Compensation", if any, is only required to be reported for
1993 and 1994; amounts which total the lesser of $50,000 or 10% of the
total annual salary and bonus for the named executive officer have been
omitted.
17
<PAGE>
(4) Of the persons named above, only Mr. Randall had restricted stock holdings
at December 31, 1994, aggregating 3,000 shares with a value of $202,857,
based on a year-end stock price of $67.625. None of the restricted stock
awards vested in less than three years from the date of grant. Holders of
restricted stock accrue dividends at the same time and at the same rate as
other holders of Common Stock. In the event of a change in control of the
Corporation, the restrictions on restricted stock lapse immediately.
Restricted stock awards are valued at the closing stock price on the date
of grant.
(5) No tandem Stock Appreciation Rights ("SARs") have been granted since 1991,
and no freestanding SARs have ever been granted.
(6) "All Other Compensation" is only required to be reported for 1993 and
1994. The total amounts shown in this column for 1994 consist of the
following: (i) Mr. Carson, $23,500 for matching Corporation contributions
under the Employee Savings Plan and Supplemental Savings Plan; $29,955 for
the benefit attributable to payments of premiums on universal life
insurance; of $3,243 relating to brokerage fees on stock option exercises;
(ii) Mr. Siart, $18,450 for matching Corporation contributions under the
Employee Savings Plan and Supplemental Savings Plan; and $1,188 for the
benefit attributable to payments of premiums on universal life insurance;
(iii) Mr. Randall, $13,726 for matching Corporation contributions under
the Employee Savings Plan and Supplemental Savings Plan; and $1,304 for
the benefit attributable to payments of premiums on universal life
insurance; (iv) Mr. Willison, $10,675 for matching Corporation
contributions under the Employee Savings Plan and Supplemental Savings
Plan; and $745 for the -benefit attributable to payments of premiums on
universal life insurance; and (v) Mr. Curran, $11,250 for matching
Corporation contributions under the Employee Savings Plan and Supplemental
Savings Plan; and $1,627 for the benefit attributable to payments of
premiums on universal life insurance. The Corporation has purchased
universal life insurance policies on the lives of the named executives,
who have no immediate right to receive the cash surrender value of the
policies and may never have any right to receive the cash surrender value.
If, and only if, certain conditions are met, will the executives become
vested in the cash surrender value. An executive's benefits under various
deferred compensation plans will be reduced dollar for dollar by the
amount of the cash surrender value of the policy at the time it vests. The
premiums paid on the policies are designed to produce a cash surrender
value which is less than the accrued benefits under the various plans.
(7) Mr. Carson also served as Chief Executive Officer of the Corporation
through December 31, 1994.
(8) Mr. Siart served as President of the Corporation throughout 1994, and was
also named its Chief Executive Officer on January 1, 1995.
(9) Mr. Randall became Executive Vice President and Chief Operating Officer of
the Corporation on January 1, 1995. He was Chief Executive Officer,
Southwest Region, through December 31, 1994, and also served as Chairman
of the Board, President and Chief Executive Officer of First Interstate
Bank of Arizona through December 31, 1994.
(10) Mr. Willison serves as Chairman of the Board, President and Chief
Executive Officer of First Interstate Bank of California.
(11) Mr. Curran's position includes serving as Chairman of the Board, President
and Chief Executive Officer of First Interstate Bank of Oregon, and Chief
Executive Officer and President of First Interstate Banks of Idaho,
Montana and Washington.
STOCK OPTIONS
The following tables summarize grants of options and exercises of options
to purchase Common Stock during 1994 to or by the executive officers of the
Corporation named in the Summary Compensation Table above, and the grant date
present value of options held by such persons at the end of 1994. All
outstanding SARs were surrendered by the executive officers of the Corporation
in 1993, and no SARs were granted during 1994.
18
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1994)
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE OR
UNDERLYING GRANTED TO BASE PRICE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PER SHARE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE VALUE(2)
---- ------------- ----------- ------ ---- --------
<S> <C> <C> <C> <C> <C>
Edward M. Carson........ 50,000 6.0% $66.875 1/2/98 $672,000(3)
William E. B. Siart..... 30,000 3.6 66.875 2/22/04 426,900(4)
William S. Randall...... 17,000 2.0 66.875 2/22/04 241,910(4)
Bruce G. Willison....... 17,000 2.0 66.875 2/22/04 241,910(4)
James J. Curran......... 17,000 2.0 66.875 2/22/04 241,910(4)
</TABLE>
- - ----------
(1) Options were granted under the 1991 Performance Stock Plan, which provides
for the granting of options at an option exercise price of 100% of the fair
market value of the stock on the date of grant. Options granted in 1994 are
exercisable beginning 12 months after the grant date, with 25% of the shares
covered thereby becoming exercisable at that time and with an additional 25%
of the option shares becoming exercisable on each successive anniversary
date, with full vesting occurring on the fourth anniversary date. Mr.
Carson's options vest according to the same schedule, except that any
unexercised options will become immediately exercisable upon his retirement
in 1995. In the event of a change in control of the Corporation, stock
options become immediately exercisable to their full extent.
(2) Present market value determinations were made using the Black-Scholes option
pricing model. There is no assurance that any value realized by optionees
will be at or near the value estimated by that model. The ultimate values of
the options will depend on the future market price of the Common Stock,
which cannot be forecast with reasonable accuracy. The actual value, if any,
an optionee will realize upon exercise of an option will depend upon the
excess, if any, of the market value of the Common Stock on the date the
option is exercised over the exercise price of the option. The assumptions
and calculations used for the model were provided to the Corporation by an
independent consulting firm.
(3) The estimated grant date present value for Mr. Carson under the
Black-Scholes model is based on the following assumptions and adjustments:
an exercise price of $66.875 per share, equal to the fair market value of
the underlying stock on the date of grant; an annual dividend yield of $2.00
per share, representing the annualized dividend paid on a share of Common
Stock at the date of grant; a stock price volatility of 27.898%, based on
daily stock prices for the one-year period prior to the grant date; and an
option term of four years to reflect that he will retire in 1995. In
addition, the calculation was based on an interest rate of 5.12%,
representing the interest rate on a U.S. Treasury security on the date of
grant with a maturity date corresponding to that of the four-year option
term. Reductions of approximately 5.0% were made to reflect the probability
of forfeiture due to termination prior to vesting, and approximately 5.72%
to reflect the probability of a shortened option term due to termination of
employment prior to the option expiration date.
(4) The estimated grant date present value under the Black-Scholes model is
based on the same assumptions and adjustments used to calculate Mr. Carson's
present value as to exercise price, volatility and dividends. Different
assumptions and adjustments were made, however, as follows: an option term
of 10 years; an interest rate of 5.97%, representing the interest rate on a
U.S. Treasury security on the date of grant with a maturity date
corresponding to that of the ten-year option term; and reductions of
approximately 21.70% to reflect the probability of forfeiture due to
termination prior to vesting, and approximately 13.39% to reflect the
probability of a shortened option term due to termination of employment
prior to the option expiration date.
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<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR (1994)
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FISCAL YEAR-END(#)(3) AT FISCAL YEAR-END($)(4)
SHARES ACQUIRED VALUE ------------------------ ---------------------------
NAME ON EXERTS(#)(1) REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward M. Carson ............. 42,000 $1,126,375 132,000 145,000 $3,922,938 $2,235,000
William E. B. Siart .......... 4,000 132,000 132,000 93,000 3,579,313 1,528,313
William S. Randall ........... 7,000 290,125 69,250 44,750 1,810,781 673,469
Bruce G. Willison ............ 1,600 62,000 73,250 45,750 1,951,906 707,594
James J. Curran .............. 3,000 126,875 48,250 43,750 1,463,781 643,219
</TABLE>
- - ----------------
(1) No tandem SARs have been granted since 1991, and no freestanding SARs have
ever been granted. All unexercised SARs were surrendered in 1993.
(2) Value is based upon the difference between the market value at the date of
exercise and the exercise price.
(3) In the event of a change in control of the Corporation, stock options become
immediately exercisable to their full extent.
(4) Value is based upon the difference between the market value at the end of
1994 and the exercise price.
PENSION PLANS
The following table indicates the estimated annual benefit payable to a
covered participant at normal retirement age under The Retirement Plan for
Employees of First Interstate Bancorp and its Affiliates ("Retirement Plan")
based on covered compensation and years of service with the Corporation and its
subsidiaries. The table includes benefits under the Corporation's Excess Benefit
Retirement Plan ("Excess Plan") and Supplemental Executive Retirement Plan
("SERP"), both of which are unfunded. The Excess Plan provides benefits that
would otherwise be denied a participant by reason of certain Internal Revenue
Code limitations on the Retirement Plan. The SERP covers a select group of
management who have attained age 55 and supplements the basic Retirement Plan by
including bonuses in the definition of covered compensation.
PENSION PLAN TABLE
YEARS OF SERVICE(1)
--------------------------------------------------------------
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- - ------------ -------- -------- -------- -------- --------
$ 300,000$ 83,677 $ 111,569 $ 139,461 $ 167,353 $ 195,245
400,000 112,177 149,569 186,961 224,353 261,745
500,000 140,677 187,569 234,461 281,353 328,245
600,000 169,177 225,569 281,961 338,353 394,745
1,200,000 340,177 453,569 566,961 680,353 793,745
1,400,000 397,177 529,569 661,961 794,353 926,745
(1) The maximum number of years of service that may be credited under the
pension plans is 35. Mr. Carson has 43 years of service, of which 35 years
of service are credited.
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The compensation covered by the pension plans for the individuals named in
the Summary Compensation Table includes basic monthly salary or wage rate and
certain bonuses described in the Summary Compensation Table and excludes
director's fees, amounts paid for life insurance premiums, matching amounts
under the Corporation's Employee Savings Plan and imputed income. The
remuneration of a participant is an average of the compensation (as stated in
the Summary Compensation Table) covered by such plans for the five of the last
ten calendar years of the participant's employment with the Corporation for
which such average is highest. The remuneration covered by the pension plans for
Mr. Carson is $1,296,111; Mr. Siart, $549,000; Mr. Randall, $396,004; Mr.
Willison, $372,000; and Mr. Curran, $525,727. The credited service in full years
for Mr. Carson is 35 years; Mr. Siart, 16 years; Mr. Randall, 25 years; Mr.
Willison, 16 years; and Mr. Curran, 17 years. The benefits shown in the table
are computed on a single-life annuity basis and are not reduced or adjusted for
receipt of Social Security benefits or other offset amounts.
EMPLOYMENT AGREEMENTS
In January, 1995, the Corporation entered into amended and restated
employment agreements with certain of its key executives which are designed to
encourage them to remain employees of the Corporation by providing them with
greater security. Similar agreements have been entered into between some of the
Corporation's bank subsidiaries and certain of their key executives. Messrs.
Siart, Randall, Willison and Curran are parties to such agreements.
Absent a change in control as defined in the agreements, the amended and
restated employment agreements are continuous and generally may be terminated
with 14 months' notice. The agreements, as amended, provide for liquidated
damages equal to 24 months' base salary in the event that the executive is
terminated for a non-allowable reason. Unless the Corporation decides otherwise,
such damages are payable at the same time and in the same manner as if the
executive had remained employed by the Corporation.
As defined in the agreements, as amended, a change in control occurs when
any person or group becomes the beneficial owner of the Corporation's securities
having 20% or more of the combined voting power of its then outstanding
securities, when a majority of the Corporation's Board of Directors is replaced
as a result of a contest for the election of Directors, or upon the occurrence
of certain mergers, acquisitions and other events.
In the event of a change in control, the term of the agreements, as
amended, is extended to the date two years following the change in control, and
the duties of executives may not thereafter be modified. In addition, if an
executive is terminated without cause, as defined in the agreements, after a
change in control, such person is entitled to a payment equal to the sum of
three times annual base salary and target bonus for the year in which the
executive's employment terminates, an amount equivalent to three additional
years of participation in the Corporation's retirement plan, and $30,000 to
cover the cost of three years' health and welfare benefit plan coverage. A
prorated portion of any bonus that may be accelerated as a result of a change in
control will be deducted from the payment. Such a payment to an executive is
payable as a cash lump sum within ten days following termination of employment.
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<PAGE>
Mr. Carson remains a party to the original employment agreement entered
into effective January 1, 1990, due to his retirement as Chief Executive Officer
of the Corporation at the end of 1994, and his upcoming retirement in April as
Chairman. Mr. Carson's employment agreement is similar to the amended and
restated employment agreements described above, except that his agreement
provides for liquidated damages equal to 12 months' base salary if he is
terminated for a non-allowable reason, and that upon the attainment of age 65,
no additional amounts would be payable in respect of termination of employment
following a change in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, the Compensation Committee of the Corporation's Board of
Directors
consisted of Messrs. Keller (Chairman), Bryson, Kieschnick, Stegemeier and
Tellep.
The Corporation instituted an executive loan program on January 14, 1991
to provide fixed rate principal residence mortgage loans and general purpose
loans at favorable rates to members of the Managing Committee of the
Corporation. All loan requests under the new executive loan program require the
approval of the Chairman or the President of the Corporation and the
Compensation Committee of the Board of Directors and are documented in
accordance with standard requirements for loans made outside the program. Two of
the individuals named in the Summary Compensation Table had loans under the
program. Mr. Siart had a principal residence mortgage loan, with a principal
balance of $874,502 at December 31, 1994, a maximum balance during 1994 of
$885,221 and an interest rate of 6.34%. Mr. Willison obtained a general purpose
loan in 1994 under the program in the form of a floating rate installment note
in the principal amount of $150,000. The note had a maximum balance during 1994
of $150,000 and an interest rate of 5.76% from the date of origination through
October 27, 1994, and an interest rate of 7.32% from October 28 through December
31, 1994. No other executive officers have loans under the program.
RELATED TRANSACTIONS
During 1994 a number of the Corporation's subsidiary banks had loan
transactions, in the ordinary course of business, with officers and Directors of
the Corporation. There were also, during 1994, a number of loan transactions in
the ordinary course of business between the Corporation's subsidiary banks and
associates of officers and Directors of the Corporation. Except as described in
the Compensation Committee Interlocks and Insider Participation section above,
all of such transactions were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons and did not involve more than a normal risk of
collectibility or present other unfavorable features.
ITEM 2.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
By resolution of the Board of Directors, the firm of Ernst & Young LLP,
Certified Public Accountants, was chosen as the independent public accountants
to examine the accounts of the
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<PAGE>
Corporation for the year 1995. In accordance with that same resolution, this
selection is being presented to the stockholders for ratification. Ernst & Young
LLP has audited the Corporation's books annually since 1958 and is considered
well qualified. Representatives of the firm are expected to be present at the
Annual Meeting of Stockholders on April 28, 1995 with an opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions. If the stockholders do not ratify the employment of
Ernst & Young LLP, the selection of independent accountants will be reconsidered
by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP AS THE CORPORATION'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE YEAR 1995.
ITEM 3.
PROPOSAL FOR APPROVAL OF CORPORATE EXECUTIVE INCENTIVE PLAN
The First Interstate Bancorp Corporate Executive Incentive Plan (the
"Executive Incentive Plan") was authorized by the Corporation's Compensation
Committee and was adopted by the Board of Directors of the Corporation on
February 21, 1995, subject to the affirmative vote of the holders of at least a
majority of the shares of the Corporation's voting stock present in person or by
proxy and entitled to a vote at the 1995 Annual Meeting. The Executive Incentive
Plan is only effective if approved by stockholders.
Commencing in 1995, the Executive Incentive Plan, the 1995 Performance
Stock Plan, if approved by the stockholders at the 1995 Annual Meeting, and the
1991 Performance Stock Plan are the exclusive means for the Corporation's
Chairman of the Board, President and Chief Executive Officer, and Executive Vice
President and Chief Operating Officer to earn annual incentive compensation. The
Chief Executive Officers of each Region will earn Awards under the Executive
Incentive Plan based on achievement of goals established for the Corporation. In
addition to participating in the Executive Incentive Plan, the 1995 Performance
Stock Plan, if approved, and the 1991 Performance Stock Plan, the Chief
Executive Officers of the Regions will also participate in the First Interstate
Bancorp annual Regional Executive Incentive Plan, which rewards the Chief
Executive Officer of each Region for the performance of his or her Region.
SUMMARY OF CORPORATE EXECUTIVE INCENTIVE PLAN
The full text of the Executive Incentive Plan is set forth in Exhibit A to
this Proxy Statement. The following summary of the provisions of the Executive
Incentive Plan is qualified in its entirety by reference to the text of the
Executive Incentive Plan.
Purpose
The purpose of the Executive Incentive Plan is to focus the efforts of
certain key executive employees on the continued improvement in the performance
of the Corporation and to aid the Corporation in attracting, motivating and
retaining superior executives by providing an incentive
23
<PAGE>
and reward to those key employees who contribute most to the operating progress
and performance of the Corporation.
Eligibility
The Chairman of the Board, the President and Chief Executive Officer of
the Corporation, the Executive Vice President and Chief Operating Officer of the
Corporation, and the Chief Executive Officers of the California, Northwest,
Southwest, and Texas Regions are eligible to receive Awards as defined in the
Executive Incentive Plan. At present, these are the seven key employees eligible
to participate in the Executive Incentive Plan.
Administration
The Executive Incentive Plan will be administered by the Compensation
Committee of the Board of Directors of the Corporation (the "Committee"), which
Committee will consist of at least two Directors, each of which is a
"disinterested person" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934 and an "outside director" as defined in Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
Awards
The Executive Incentive Plan authorizes the payment of cash Awards, as
defined therein, based on the attainment of specific goals for the Corporation
with respect to return on equity, revenue, gross income, pretax income,
deposits, assets, non-interest expenses, non-performing assets and total
shareholder return, which goals will be established in writing and approved by
the Committee prior to the beginning of each year (not later than 90 days after
the commencement of the period of service to which the performance goals
relate). Awards are based on a formula of multiplying year-end base salary by a
percentage determined by the level of achievement. The maximum attainable Award
is 135% of year-end base salary for Messrs. Carson and Siart, 123.75% of
year-end base salary for Mr. Randall, and 56.25% of year-end base salary for the
remaining Participants. For purposes of calculating Awards, year-end base salary
shall not be treated as increasing in any Performance Year by more than the
average salary increases for employees at this level at comparable banks, taking
into consideration increases on account of promotions. An Award will be made to
a Participant, as defined in the Executive Incentive Plan, after the completion
of the year based upon the satisfaction of the Corporation's goals under the
Executive Incentive Plan, which achievement has been certified by the Committee,
in writing, as having satisfied such goals. The Committee has the discretion to
reduce an Award that becomes payable upon attainment of the goal. The Committee
or the Board of Directors of the Corporation may neither increase an Award to a
Participant beyond the Award established for a specific level of achievement nor
alter the allocation of the Awards among the Participants. Since any such Awards
will not exceed the Awards which can be earned for specified goals, it is
generally expected that such Awards will be "performance based" and as such the
deduction limitation contained in the Omnibus Budget Reconciliation Act of 1993
will not apply to such compensation.
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<PAGE>
The following chart specifies the maximum Award that can be granted to
each Participant under the Executive Incentive Plan for the 1995 Performance
Year:
NAME AND POSITION DOLLAR VALUE ($)
----------------- ----------------
Edward M. Carson, Chairman of the Board $1,066,500
William E. B. Siart, 972,000
President and Chief Executive Officer of the Corporation
William S. Randall, 643,500
Executive Vice President and Chief Operating Officer
of the Corporation
Bruce G. Willison, 253,125
Chief Executive Officer, California Region
James J. Curran, 222,188
Chief Executive Officer, Northwest Region
Linnet F Deily, 202,500
Chief Executive Officer, Texas Region
John S. Lewis, 154,688
Chief Executive Officer, Southwest Region
The maximum Award that can be paid to a Participant for any one year
during the years 1996 through 1999 is $1,500,000. The actual amount of the Award
will be based on corporate performance. Designation of a maximum amount is
required to satisfy proposed Treasury regulations under Section 162(m) of the
Code.
Change in Control
In the event of a change in control, within ten days after the change in
control of the Corporation, each Participant will be paid 100% of his or her
target Award for the year in which the change in control occurs, based on the
base pay rate then in effect.
Deferrals
Awards are generally payable shortly after the end of the Performance Year
for which the Award has been earned. A Participant may elect, however, to defer
commencement of payment for a period extending until the termination of
employment. Participants may elect that deferred amounts earn interest (at a
rate specified in the Executive Incentive Plan) or, in the alternative, be
invested in the form of Performance Units under the 1995 Performance Stock Plan
(see the discussion of the 1995 Performance Stock Plan under Item 4 of this
Proxy Statement, "Proposal For Approval of 1995 Performance Stock Plan").
Amendments and Discontinuance
The Board of Directors of the Corporation or the Committee may, at any
time, modify, terminate or suspend the provisions of the Executive Incentive
Plan.
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<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL FOR APPROVAL
OF THE CORPORATE EXECUTIVE INCENTIVE PLAN.
ITEM 4
PROPOSAL FOR APPROVAL OF 1995 PERFORMANCE STOCK PLAN
The First Interstate Bancorp 1995 Performance Stock Plan (the "1995
Performance Stock Plan") was authorized by the Corporation's Board of Directors
on February 21, 1995, subject to the affirmative vote of the holders of at least
a majority of the shares of the Corporation's Common Stock present in person or
by proxy and entitled to vote at the 1995 Annual Meeting. The 1995 Performance
Stock Plan authorizes the granting of stock awards, performance units, stock
options, stock appreciation rights and restricted stock awards of up to
5,000,000 shares of Common Stock to key employees of the Corporation and its
subsidiaries who are responsible for the management, growth and financial
success of the Corporation.
The Board of Directors believes that the future success of the Corporation
and its subsidiaries is dependent upon the quality and continuity of management,
and that compensation programs have been important in attracting and retaining
individuals of superior ability and in motivating their efforts on behalf of the
Corporation and its business interests. As of February 21, 1995, approximately
500,000 shares of Common Stock were available to grant additional awards under
the First Interstate Bancorp 1991 Performance Stock Plan (the "1991 Stock
Plan"). Regardless of whether the 1995 Performance Stock Plan is approved by the
stockholders, the Board of Directors intends to continue to grant additional
awards under the 1991 Stock Plan.
SUMMARY OF 1995 PERFORMANCE STOCK PLAN
The full text of the 1995 Performance Stock Plan is set forth in Exhibit B
to this Proxy Statement. The following summary of provisions of the 1995
Performance Stock Plan is qualified in its entirety by reference to the text of
the 1995 Performance Stock Plan.
Shares Subject to the Plan
The 1995 Performance Stock Plan permits the Corporation to grant stock
awards, performance units, accelerated ownership stock options, incentive stock
options, non-qualified stock options, stock appreciation rights and restricted
stock awards. The aggregate number of shares of Common Stock reserved for awards
under the 1995 Performance Stock Plan is 5,000,000 shares.
Eligibility
Key employees of the Corporation and its subsidiaries (including officers,
whether or not directors) are eligible to receive awards under the 1995
Performance Stock Plan. At present there are approximately 1,000 employees
eligible to participate in the 1995 Performance Stock Plan. The Corporation has
full discretion to select those key employees who will receive awards under
26
<PAGE>
the 1995 Performance Stock Plan. Directors who are not officers are not eligible
to participate in the Plan.
Plan Benefits
The nature and amounts of any awards under the 1995 Performance Stock Plan
will be determined by the Committee in its sole discretion, except that special
rules exist under the Plan with respect to the issuance of awards of Common
Stock to participants in the Executive Incentive Plan. See the discussion below
under "Stock Awards." Except in the case of such stock awards, benefits and
amounts are not presently determinable that may be received by each of the
executive officers identified in the Summary Compensation Table of this Proxy
Statement, all executive officers as a group and all other key employees under
the 1995 Performance Stock Plan.
Administration
The 1995 Performance Stock Plan will be administered by the members of the
Compensation Committee (the "Committee") of the Board of Directors, which
Committee will consist of at least two Directors, each of which is a
"disinterested person" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934 and an "outside director" as defined in Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
Adjustments and Other Provisions
The 1995 Performance Stock Plan provides for adjustments in the number of
shares reserved and in option prices in the event of a stock dividend or stock
split and for other equitable adjustments in the event of a recapitalization,
merger or similar occurrence. Any shares of Common Stock or other securities
received by a holder of restricted stock with respect to such restricted stock
by reason of any such change is subject to the same restrictions. Similar
adjustments will be made to performance units.
Stock Awards
An award of Common Stock may be made to an employee at the discretion of
the Committee, and is not subject to any restrictions under the 1995 Performance
Stock Plan. Special rules apply under the Plan however, with regard to stock
awards to participants in the Executive Incentive Plan. In the case of
participants in the 1995 Performance Stock Plan who are also participants in the
Executive Incentive Plan, the award of Common Stock will be based on the
achievement of the performance goals established under the Executive Incentive
Plan for the year in question. For each year that the goals established under
the Executive Incentive Plan are attained, each participant may receive a
maximum stock award based on the achievement of such goals equal to that number
of shares of Common Stock which is equivalent in value to one-third of the
participant's cash award under the Executive Incentive Plan, based on the fair
market value of the Common Stock on the date such award is approved by the
Committee. In 1995, stock awards to participants in the Executive Incentive Plan
will not exceed the following:
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<PAGE>
NAME AND POSITION DOLLAR VALUE($)
----------------- ---------------
Edward M. Carson, Chairman of the Board $355,500
William E. B. Siart, 324,000
President and Chief Executive Officer of the Corporation
William S. Randall, 214,500
Executive Vice President and Chief Operating Officer
of the Corporation
Bruce G. Willison, 84,375
Chief Executive Officer, California Region
James J. Curran, 74,062
Chief Executive Officer, Northwest Region
Linnet F Deily, 67,500
Chief Executive Officer, Texas Region
John S. Lewis, 51,562
Chief Executive Officer, Southwest Region
The maximum value of the stock award to a participant for any one year
during the years 1996 through 1999 is $500,000. The actual amount of a stock
award will be based on corporate performance. Designation of a maximum amount is
required to satisfy proposed Treasury regulations under Section 162(m) of the
Code.
Stock Options
Stock options granted under the 1995 Performance Stock Plan may be either
incentive stock options, qualifying for special tax treatment under Section 422
of the Code, or non-qualified stock options. Each option will be evidenced by a
written document containing such terms and provisions consistent with the 1995
Performance Stock Plan as the Committee approves. The exercise price of each
option will be not less than the fair market value of the shares covered by the
option on the date of grant. As of February 21, 1995, the fair market value of a
share of Common Stock was $79.75. Payment on each option exercised must be made
in cash or in whole shares of Common Stock already owned by the optionee for at
least six months or partly in cash and partly in Common Stock. Common Stock
received by the Corporation in payment of the option price will be valued at its
fair market value on the date of exercise.
Each option will be exercisable in one or more installments within a fixed
option period and during employment, subject to certain restrictions or
extensions in the event of death, retirement or termination, but in no event
more than ten years from the date of grant. Unless otherwise provided in the
employee's stock option agreement, no option will be transferable other than by
will or the laws of descent and distribution. No employee may be issued stock
options (including those containing stock appreciation rights, as described
below) for more than 150,000 shares of Common Stock in any single calendar year
pursuant to the 1995 Performance Stock Plan.
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Accelerated Ownership Stock Option
If an employee's stock option agreement so provides, an employee, in
connection with the grant of stock options, will be granted an accelerated
ownership non-qualified stock option ("AO") to purchase at the fair market
value, as of the date of exercise of the underlying option, additional shares of
Common Stock equal to the number of shares of Common Stock used by the employee
in payment of the purchase price of the underlying option. An AO is only
available during the period that the optionee remains an employee, and, in
addition, the optionee must remain an employee at least six months after the
exercise of the underlying option in order for the AO to vest. The AO may be
exercised once it vests only for the remaining term of the underlying option
agreement.
Stock Appreciation Rights
The Committee may issue stock appreciation rights in tandem with stock
options granted under the 1995 Performance Stock Plan. Employees who are granted
stock options containing stock appreciation rights may elect to surrender,
rather than exercise, such options and to receive the excess of the fair market
value of the Common Stock subject to the options on the date of surrender over
the option price. Such excess may be paid in Common Stock, in cash, or in a
combination of Common Stock and cash, as determined by the Committee.
Performance Units
An award of performance units may be made to an employee. A performance
unit that only requires the passage of time to vest is commonly called a "stock
unit." If performance conditions are also required of an employee, the award is
commonly called a "performance unit." Each stock unit or performance unit
represents one share of Common Stock which, at the time and to the extent
vested, will be payable by the delivery of one share of Common Stock.
Alternatively, as provided in the applicable agreement, cash may be payable to
the employee based upon the fair market value of the Common Stock at the time of
payment. In addition, an employee who has been awarded a stock unit or
performance unit shall receive additional unit credit based on the value of any
dividends which would have been paid to the employee if he or she owned the
Common Stock represented by the units.
Certain performance units may be attributable to an employee's election to
defer compensation under the Management Incentive Plan, the Regional Incentive
Plan, the Executive Incentive Plan, or any successor plans. Performance units
will be payable at the time selected by the employee and permitted by the
Committee. The maximum number of performance units which may be issued to
employees under the 1995 Performance Stock Plan will not exceed 150,000 in any
single calendar year.
Restricted Stock Awards
The Committee may issue restricted stock awards. Each restricted stock
award will be evidenced by a written document containing such terms and
provisions including the price, if any,
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<PAGE>
to be paid by the recipient, consistent with the 1995 Performance Stock Plan as
the Committee approves. The Committee will determine the restricted period
during which the restricted stock and dividends paid with respect to the
restricted stock may not be sold, assigned, transferred, pledged or otherwise
encumbered, except as permitted by the 1995 Performance Stock Plan or the
restricted stock agreement. The Committee may at any time reduce or terminate
the restricted period.
If a holder of restricted stock ceases to be an employee of the
Corporation or a subsidiary during the restricted period for any reason other
than death, disability or retirement, all shares of restricted stock which are
then subject to the restrictions imposed by the Committee will be forfeited and
returned to the Corporation. If a holder of restricted stock ceases to be an
employee of the Corporation or a subsidiary during the restricted period by
reason of death, disability or retirement, shares of the restricted stock shall,
to the extent determined by the Committee, become free of the restriction.
Change in Control
In the event of a change in control as defined in the 1995 Performance
Stock Plan, each option, accelerated ownership stock option and stock
appreciation right will become immediately exercisable, the restricted period
for restricted stock will immediately expire, and, unless otherwise provided in
performance unit agreements, all performance units will be immediately payable
in Common Stock in the maximum amount available under the terms of the
agreement.
Amendments and Discontinuance
The Board of Directors may amend or terminate the 1995 Performance Stock
Plan in any respect, provided no such action shall, without consent of the
participants, affect or impair any award previously granted. In addition, no
such action shall be taken without stockholder approval if required by Rule
16b-3 of the Securities Exchange Act of 1934 or the federal tax rules applicable
to incentive stock options or other applicable law.
Federal Income Tax Consequences
The following is a general summary of the principal federal income tax
consequences of stock options granted under the 1995 Performance Stock Plan. The
summary is based on the Corporation's understanding of the currently applicable
provisions of the Code and Treasury regulations, as well as administrative and
judicial interpretations. State, local and foreign tax consequences of options
granted under the 1995 Performance Stock Plan are not covered in this summary,
which is not intended to cover all tax consequences that may apply to an
optionee or to the Corporation.
Incentive Stock Options. If an optionee holds the shares acquired upon the
exercise of an incentive stock option for more than one year after exercise and
two years after the date of grant of the option, and if at all times from the
date of grant of the option until three months preceding the exercise of the
option (one year in the case of disability) the optionee was an employee of the
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corporation or a subsidiary, (a) the optionee will not be taxed at the time the
option is granted or exercised; (b) the difference between the option price and
the amount realized upon disposition of the shares will constitute long-term
capital gain or loss, as the case may be; and (c) the Corporation will not be
allowed an income tax deduction for granting the option or issuing shares
pursuant to the exercise of the option. If after the exercise of an incentive
stock option the optionee fails to observe the holding rule, the portion of any
gain realized upon disposition of the shares which does not exceed the excess of
the value at date of exercise over the option price will be treated as ordinary
income. The balance of any gain (or any loss) will be treated as capital gain
(or loss), long-term or short-term, depending on the length of time the stock
was held after the option was exercised. To the extent the optionee is subject
to the alternative minimum tax provisions of the Code, the amount by which the
fair market value of the shares at the time the incentive stock option is
exercised exceeds the option price will be an item of tax preference which must
be included when making the alternative minimum tax calculation for the tax year
in which the incentive stock option is exercised. The Corporation will be
entitled to a deduction equal to the amount of ordinary income upon which the
optionee is taxed. If an optionee exercises an incentive stock option at a time
when he or she was not an employee of the Corporation or a subsidiary within the
preceding three months (one year in the case of disability), the option will be
treated as a nonqualified option with the consequences described below.
Non-Qualified Options. Under present Treasury regulations holding that an
option does not have a readily ascertainable fair market value unless it is
freely transferable and meets certain other conditions, an optionee who is
granted a non-qualified option will not realize taxable income at the time the
option is granted. If an optionee exercises the option by paying cash to acquire
the shares subject to option, he or she will be taxed in the year of exercise at
ordinary income tax rates on an amount equal to the excess of the fair market
value of the shares on the date of exercise over the option price. The
Corporation will receive a corresponding deduction. The optionee's basis in the
shares so acquired will be equal to the option price plus the amount of ordinary
income upon which he or she is taxed. Upon subsequent disposition of the shares,
an optionee will realize capital gain or loss, long-term or short-term,
depending upon the length of time he or she has held the shares since the option
was exercised.
Payment of Option Exercise Price With Shares. If an optionee uses existing
shares in full or partial payment of the option exercise price, the optionee
generally will not recognize taxable income with respect to the shares
surrendered. The optionee's tax basis and holding period for the shares
surrendered generally will apply to an equal number of shares issued pursuant to
the exercise. However, if the shares surrendered were originally acquired
through an incentive stock option exercise, an exchange within two years of such
earlier incentive stock option grant or within one year of such earlier
incentive stock option exercise win be a disqualifying disposition of such
shares surrendered. In such case, the holding period for the shares surrendered
cannot be used to meet the one year and two year periods for determining a
disqualifying disposition of the new shares acquired in the exchange.
With an incentive stock option, no taxable income will be recognized by
the optionee on the exercise of the incentive stock option with existing shares
(except as described above with respect to a disqualifying disposition of the
shares surrendered). The shares issued in excess of
31
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the number of shares surrendered will have a tax basis equal to zero (or the
amount of cash, if any, used in the exercise). The holding period for such
excess shares will be measured from the date of exercise.
With a non-qualified option, the optionee will recognize the same amount
of ordinary income on the exercise, as described above (i.e., regardless of
whether the exercise price is paid in cash or in shares). The shares issued in
excess of the number of shares surrendered will have a tax basis equal to the
amount of ordinary income recognized on the exercise plus the amount of cash (if
any) used in the exercise. The holding period for such excess shares will be
measured from the date of exercise.
Deductibility of Benefits. As discussed above, the Corporation generally
will be entitled to a deduction at the time an optionee is subject to ordinary
income tax, and such deduction will be equal to the amount of ordinary income
upon which an optionee is taxed. The Corporation believes that stock options
granted under the 1995 Performance Stock Plan will qualify as
"performance-based" under Section 162(m) of the Code, and therefore,
compensation attributable to such options will be deductible without regard to
the $1,000,000 limitation of Code Section 162(m). (See discussion of Section
162(m) at "Compensation Program Elements - The Tax Deductibility Limitation" in
the Report of the Compensation Committee on Executive Compensation above).
Tax Withholding and Reporting. The Corporation has the right and
obligation to withhold any sums required by federal, state, local and foreign
tax laws to be withheld with respect to the exercise of stock options. Such
withholding may be in cash or in shares, or the Corporation may require the
person exercising the stock option to pay such sums to the Corporation to
satisfy the withholding requirements. The Corporation is also required to file
information returns with the appropriate taxing authorities with respect to the
exercise of stock options as well as with respect to any disqualifying
disposition of an incentive stock option.
THE BOARDS OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL FOR APPROVAL
OF THE 1995 PERFORMANCE STOCK PLAN.
32
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 5, 1995, by and among
First Bank System, Inc., a Delaware corporation ("Parent"), Eleven Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), 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 Merger Sub will, subject to the terms and
conditions set forth herein, merge (the "Merger") with and into Subject Company,
so that Subject Company is the surviving corporation in the Merger; and
WHEREAS, as a condition to, and immediately after the execution of, this
Agreement, Parent and Subject Company are entering into (i) a Parent Stock
Option Agreement (the "Parent Option Agreement") pursuant to which Parent has
granted Subject Company an option exercisable upon the occurrence of certain
events and (ii) the Parent Fee Letter (as defined below); and
WHEREAS, as a condition to, and immediately after the execution of, this
Agreement, Parent and Subject Company are entering into (i) a Subject Company
Stock Option Agreement (the "Subject Company Option Agreement"; and together
with the Parent Option Agreement, the "Option Agreements") pursuant to which
Subject Company has granted Parent an option exercisable upon the occurrence of
certain events and (ii) 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), Merger Sub shall merge
with and into Subject Company. Subject Company 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 Eleven Acquisition
Corp. Upon consummation of the Merger, the separate corporate existence of
Merger Sub 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.
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, Merger Sub,
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 be
converted into the right to receive 2.60 shares (the "Common Exchange Ratio") of
the common stock, par value $1.25 per share, of Parent ("Parent Common Stock"),
together with the number of rights ("Parent Rights") issued pursuant to the
Parent Rights Agreement (as defined in Section 4.2 hereof) associated therewith.
(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, provided,
however, that the terms of such Parent 9.875% Preferred shall have such voting
rights as the parties shall reasonably agree are necessary in order to ensure
that the Merger constitutes a reorganization within the meaning of Section
368(a) of the Code.
(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, provided, however, that
the terms of such Parent 9.0% Preferred shall have such voting rights as the
parties shall reasonably agree are necessary in order to ensure that the Merger
constitutes a reorganization within the meaning of Section 368(a) of the Code.
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 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 Merger Sub Stock. At and after the Effective Time, each share
of Merger Sub common stock issued and outstanding immediately prior to the
Merger shall remain issued and outstanding and shall constitute a share of the
common stock of the Surviving Corporation.
1.7 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 Merger 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.
1.8 Certificates of Incorporation. At the Effective Time, (i) the
Certificate of Incorporation of Subject Company, as in effect at the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation and
(ii) the Certificate of Incorporation of Parent, as amended to reflect the
amendments thereto contemplated by this Agreement and as otherwise in effect at
the Effective Time, shall be the Certificate of Incorporation of Parent.
1.9 Bylaws. At the Effective Time, the Bylaws of Subject Company,
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.
1.10 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.
1.11 Management Succession. At the Effective Time, John F.
Grundhofer shall be Chairman of the Board and Chief Executive Officer of Parent.
At the Effective Time, William E. B. Siart shall be the President and Chief
Operating Officer of Parent.
1.12 Board of Directors. At the Effective Time, the total number of
persons serving on the Board of Directors of Parent shall be 20 (unless
otherwise agreed in writing by the parties hereto prior to the Effective Time),
10 of whom shall be Parent Directors and 10 of whom shall be Subject Company
Directors (as such terms are defined below). The persons to serve initially on
the Board of Directors of Parent at the Effective Time who are Parent Directors
shall be selected solely by and at the absolute discretion of the Board of
Directors of Parent prior to the Effective Time from among persons who are
members of the Board of Directors of Parent prior to the Effective Time; and the
persons to serve on the Board of Directors of Parent at the Effective Time who
are Subject Company Directors shall be selected solely by and at the absolute
discretion of the Board of Directors of Subject Company prior to the Effective
Time from among persons who are members of the Board of Directors of Subject
Company prior to the Effective Time. Thereafter, the Board of Directors of
Parent shall consist of an even number of directors. To the extent practicable,
from and after the Effective Time, and until the third anniversary thereof, each
class of directors of Parent shall contain an equal number of Parent Directors
and Subject Company Directors, and each Committee of the Board of Directors of
Parent shall contain an equal number of Parent Directors and Subject Company
Directors. If at any time during the three-year period following the Effective
Time the number of Parent Directors and Subject Company Directors serving, or
that would be serving following the next annual meeting of stockholders, as
directors of Parent, would not be equal, then, subject to the fiduciary duties
of the directors, the Board of Directors and the Nominating Committee of Parent
shall take such steps as may be requested by the Parent Directors (if the number
of Parent Directors is, or would otherwise become, less than the number of
Subject Company Directors) or the Subject Company Directors (if the number of
Subject Company Directors is, or would otherwise become, less than the number of
Parent Directors) to assure that there shall be an equal number of Parent
Directors and Subject Company Directors, including by nominating and/or electing
a person or persons designated by the Parent Directors or the Subject Company
Directors, as applicable. The term "Parent Directors" means (i) any person
serving as a director of Parent prior to the Effective Time who remains a
director of Parent at the Effective Time and (ii) any person who becomes a
director of Parent pursuant to the immediately preceding sentence and who is
designated by the Parent Directors; and the term "Subject Company Director"
means (i) any person serving as a director of Subject Company prior to the
Effective Time who becomes a director of Parent at the Effective Time and (ii)
any person who becomes a director of Parent pursuant to the immediately
preceding sentence and who is designated by the Subject Company Directors.
1.13 Name. Effective immediately upon the consummation of the
Merger, the name of Parent shall be First Interstate Bancorp.
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 will 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 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 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 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 or 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,
Merger Sub, 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 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, thrifts 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, (iv) any changes in general economic conditions affecting banks,
thrifts or their holding companies generally and (v) in the case of members of
the Savings Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation, the funding of the SAIF. 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 October 31, 1995, there were 75,744,254 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 8,541,742 shares of Subject
Company Common Stock held in Subject Company's treasury. As of October 31,
1995, no shares of Subject Company Common Stock or Subject Company Preferred
Stock were reserved for issuance, except (i) 392,936 shares of Subject Company
Common Stock were reserved for issuance pursuant to Subject Company's dividend
reinvestment and stock purchase plans, (ii) 3,740,384 shares of Subject Company
Common Stock were reserved for issuance upon the exercise of stock options
pursuant to the Subject Company Stock Option Plans, and (iii) 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 Subject Company Disclosure Schedule (as defined below), (ii) for
the Subject Company Option Agreement, (iii) for the Subject Company Rights
Agreement (a true and correct copy of which, including all amendments thereto,
has been made available to Parent) and (iv) 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 disclosure schedule of Subject Company delivered to Parent concurrently
herewith (the "Subject Company Disclosure Schedule"), (ii) for options permitted
by this Agreement to be granted subsequent to the date of this Agreement, and
(iii) for the Subject Company Option Agreement, since October 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.
(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.
Assuming compliance by Parent with Section 1.7 hereof, at the Effective Time,
there will not be any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character by which Subject Company or any of
its Subsidiaries will be bound calling for the purchase or issuance of any
shares of the capital stock of Subject Company or any of its Subsidiaries.
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, the Subject Company Option Agreement and the other
documents 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, the Subject Company Option Agreement 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 this Agreement 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 and Merger Sub) 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 applications
or notices with any state agencies and approval of such applications and notices
(the "State Approvals"), (iv) the filing of any requisite applications with the
Office of Thrift Supervision and the approval of such applications, (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 vote of the stockholders of Subject Company and the approval of
the Parent Vote Matters (as defined below) by the requisite votes of 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
(Form BD), (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, (b) the unaudited consolidated balance sheet of Subject Company and its
Subsidiaries as of June 30, 1994 and June 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 June 30, 1995 filed with the SEC under the Exchange
Act and (c) the unaudited consolidated balance sheet of Subject Company and its
Subsidiaries as of September 30, 1995 and the related unaudited consolidated
statements of operations, shareholders' equity and cash flows for the period
then ended. 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 6.13 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 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 6.13 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 6.13 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, since June 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 June 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 June 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) 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.
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 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 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, 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
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 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 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 June 30,
1995, and for liabilities incurred in the ordinary course of business consistent
with past practice, since June 30, 1995, 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 approved the execution of the Subject Company Option Agreement and
authorized and approved the Merger (prior to the execution by Subject Company of
this Agreement and prior to the execution of the Subject Company Option
Agreement) in accordance with Section 203 of the DGCL, such that Section 203
will not apply to this Agreement, the Subject Company Option Agreement, the
Subject Company Fee Letter or the transactions contemplated hereby and thereby.
The Board of Directors of Subject Company has taken all such action required to
be taken by it to provide that this Agreement, the Subject Company Option
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 Pooling of Interests. As of the date of this Agreement, Subject
Company has no reason to believe that the Merger will not qualify as a pooling
of interests for accounting purposes.
3.20 First Interstate Name. Except as set forth in Section 3.20 of
the Subject Company Disclosure Schedule, Subject Company has the right to use
the First Interstate name in each state of the United States, free and clear of
any Liens, and no other person has the right to use such name in any such state.
3.21 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 in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
3.22 Environmental Liability. Except as set forth in Section 3.22 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, 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. 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.
3.23 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.
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 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.
(b) Each Parent Subsidiary is (i) 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.
(c) Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
4.2 Capitalization. (a) The authorized capital stock of Parent
consists of 200,000,000 shares of Parent Common Stock and 10,000,000 shares of
Preferred Stock, par value $1.00 per share ("Parent Preferred Stock"). At the
close of business on October 31, 1995, there were 129,798,913 shares of Parent
Common Stock outstanding, 3,702,750 shares of Parent Preferred Stock designated
and 2,077,800 shares issued and outstanding as Series 1991A Convertible
Preferred Stock ("Parent Series 1991A Preferred Stock"), 12,750 shares of Parent
Preferred Stock designated and no shares outstanding as Adjustable Rate
Cumulative Preferred Stock Series 1990A ("Parent Series 1990A Preferred Stock"),
1,400,000 shares of Parent Preferred Stock designated and no shares issued and
outstanding as Parent Series A Junior Participating Preferred Stock pursuant to
the Rights Agreement, dated as of December 21, 1988, between Parent and Morgan
Shareholder Services Trust Company, as Rights Agent, as amended (the "Parent
Rights Agreement"), and 5,833,411 shares of Parent Common Stock held in Parent's
treasury. On October 31, 1995, no shares of Parent Common Stock or Parent
Preferred Stock were reserved for issuance, except that (i) 22,718,744 shares of
Parent Common Stock were reserved for issuance pursuant to outstanding options,
warrants, periodic stock purchase rights ("PSPRs"), risk event warrants, the
Parent dividend reinvestment plan, the Parent employee stock purchase plan and
employee benefit plans, (ii) 3,585,452 shares of Parent Common Stock were
reserved for issuance upon conversion of the Parent Series 1991A Preferred
Stock, (iii) 16,950,057 shares of Parent Common Stock were reserved for issuance
upon consummation of the acquisition by Parent of FirsTier Financial, Inc. (the
"FirsTier Acquisition"), (iv) 12,750 shares of Parent Series 1990A Preferred
Stock were reserved for issuance upon exercise of PSPRs or risk event warrants,
and (v) 1,400,000 shares of Parent Series A Junior Participating Preferred Stock
were reserved for issuance upon exercise of the Parent Rights distributed to
holders of Parent Common Stock pursuant to the Parent Rights Agreement. 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), (ii) for the Parent Rights Agreement (a true and correct copy of
which, including all amendments thereto, has been made available to Subject
Company), (iii) for the Parent Option Agreement and (iv) 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 October 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, the exercise of employee stock options granted prior to
such date and as disclosed in Section 4.2(a) of the Parent Disclosure Schedule,
warrants, PSPRs and risk event warrants granted prior to such date and disclosed
in Section 4.2(a) of the Parent Disclosure Schedule, the conversion of shares of
Parent Series 1991A Preferred Stock, the Parent Rights Agreement and the
FirsTier Acquisition. 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, (i) at least 99% of the issued
and outstanding shares of capital stock of each of the material Parent
Subsidiaries (other than Merger Sub) and (ii) all of the issued and outstanding
shares of capital stock of Merger Sub, in each case, 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, the Parent Option Agreement and the other documents contemplated to be
executed and delivered by Parent in connection with the transactions
contemplated hereby (this Agreement, together with the Parent Fee Letter, the
Subject Company Option Agreement and such other documents, 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 issuance of Parent Common Stock
pursuant hereto and an amendment (the "Charter Amendment") to Parent's
Certificate of Incorporation to (i) increase the number of authorized shares of
Parent Common Stock to 500,000,000 and to increase the number of authorized
shares of Parent Preferred Stock to 15,000,000 and (ii) to change the name of
Parent to First Interstate Bancorp (collectively, the "Parent Vote Matters") be
submitted to Parent's stockholders for approval at a meeting of such
stockholders and, except for the approval of the Charter Amendment by the
affirmative vote of the holders of a majority of the outstanding shares of
Parent Common Stock and the approval of the issuance of shares of Parent Common
Stock pursuant hereto by a majority of the shares of Parent Common Stock voting
at the meeting of shareholders called for such purpose at which a quorum was
present, 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) Merger Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Merger Sub and by Parent as the sole stockholder of Merger
Sub, and no other corporate proceedings on the part of Merger Sub are necessary
to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Merger Sub and (assuming due
authorization, execution and delivery by Subject Company) constitutes a valid
and binding obligation of Merger Sub, enforceable against Merger Sub 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.
(c) Except as set forth in Section 4.3(c) of the Parent Disclosure
Schedule, neither the execution and delivery of the Parent Documents by Parent
or Merger Sub, nor the consummation by Parent or Merger Sub of the transactions
contemplated hereby and thereby, nor compliance by Parent or Merger Sub with any
of the terms or provisions hereof or thereof, will (i) violate any provision of
the 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 filing of any requisite applications with the Office
of Thrift Supervision and the approval of such applications, (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 vote of the stockholders of Subject Company and
the approval of the Parent Vote Matters by the requisite votes of the
stockholders of Parent, (x) the filing of the appropriate documents necessary to
cause the Charter Amendment to become effective with the Secretary of State of
the State of Delaware, (xi) the consents and approvals set forth in Section 4.4
of the Parent Disclosure Schedule, and (xii) 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 and Merger Sub of the Parent Documents and (B) the
consummation by Parent and Merger Sub 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 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, shareholders' equity and cash flows
for the fiscal years 1992 through 1994, inclusive, as reported in Parent's
Restated Annual Report as filed on Form 8-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 Ernst & Young LLP, independent public accountants with
respect to Parent, (b) the unaudited consolidated balance sheet of Parent and
its Subsidiaries as of June 30, 1994 and June 30, 1995 and the related unaudited
consolidated statements of income, cash flows and shareholders' equity for the
six month periods then ended as reported in Parent's Quarterly Report on Form
10-Q for the period ended June 30, 1995 filed with the SEC under the Exchange
Act and (c) the unaudited consolidated balance sheet of Parent and its
Subsidiaries as of September 30, 1995 and the related unaudited consolidated
statements of income, shareholders' equity and cash flows for the period then
ended. 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 6.13 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 income 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 6.13 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 6.13 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 June 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 June 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 June 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.
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 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, 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 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 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 10Q for the quarter ended June 30, 1995, and for
liabilities incurred in the ordinary course of business consistent with past
practice, since June 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; Certificate of Incorporation. The Board of
Directors of Parent has approved the execution of the Parent Option Agreement
and authorized and approved the Merger (prior to the execution by Parent of this
Agreement and prior to the execution of the Parent Option Agreement) in
accordance with Section 203 of the DGCL and Article Eight of Parent's
Certificate of Incorporation such that Section 203 and Article Eight will not
apply to this Agreement, the Parent Option Agreement, the Parent Fee Letter or
the transactions contemplated hereby and thereby. The Board of Directors of
Parent has taken all such action required to be taken by it to provide that this
Agreement, the Parent Option 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 Rights Agreement. Subject to the execution of an amendment to
the Parent Rights Agreement which has been approved by Parent's Board of
Directors and shall be executed as promptly as practicable after the date of
this Agreement, Parent has taken all action (including, if required, redeeming
all of the outstanding preferred stock purchase rights issued pursuant to the
Parent Rights Agreement or amending or terminating the Parent Rights Agreement)
so that the entering into of the Parent 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 Parent Rights Agreement or enable or
require the Parent Rights to be exercised, distributed or triggered.
4.19 Pooling of Interests. As of the date of this Agreement, Parent
has no reason to believe that the Merger will not qualify as a pooling of
interests for accounting purposes.
4.20 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 in all material respects with the provisions of
the Securities Act and the rules and regulations thereunder.
4.21 Environmental Liability. Except as set forth in Section 4.21 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. 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 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.
4.22 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, during the period from the date of this Agreement
to the Effective Time, except as expressly contemplated or permitted by this
Agreement or the Option Agreements or as required by applicable law, 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 Option
Agreements 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, during the period from the date of this Agreement
to the Effective Time and, except as expressly contemplated or permitted by this
Agreement or the Option Agreements or as required by applicable law, rule or
regulation, 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 capital stock except pursuant to (A) the exercise of stock options, PSPRs or
risk event warrants outstanding as of the date hereof, (B) the vesting of
Performance Units outstanding as of the date hereof pursuant to Subject Company
Stock Option Plans, (C) the conversion of shares of Parent Series 1991A
Preferred Stock, (D) the Subject Company Rights Agreement, (E) the Parent Rights
Agreement, (F) the FirsTier Acquisition, (G) the Option Agreements and (H)
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;
(g) settle any claim, action or proceeding involving money
damages which is material to Parent or Subject Company, as applicable, except in
the ordinary course of business consistent with past practice;
(h) take any action that would prevent or impede the Merger
from qualifying (i) for pooling of interests accounting treatment or (ii) as a
reorganization within the meaning of Section 368(a) of the Code; provided,
however, that nothing contained herein shall limit the ability of Parent or
Subject Company to exercise its rights under the Subject Company Option
Agreement, the Parent Option Agreement, the Subject Company Fee Letter or the
Parent Fee Letter, as the case may be;
(i) amend its certificate of incorporation, bylaws or
similar governing documents or the Parent Rights Agreement or Subject Company
Rights Agreement, as the case may be, in any case in a manner that would
materially and adversely effect 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 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) Each of Parent and Subject Company shall hold all information
furnished by the other party or any of such party's Subsidiaries or
representatives pursuant to Section 6.2(a) in confidence to the extent required
by, and in accordance with, the provisions of the confidentiality agreement,
dated October 21, 1995 between Parent and Subject Company (the "Confidentiality
Agreement").
(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.
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.
(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. Each of
Parent and 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 and for purposes of qualifying the Merger
for "pooling-of-interests" accounting treatment) of such party to deliver to the
other party hereto, 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(a) hereto (in the case of affiliates of Subject Company) or
Exhibit 6.5(b) hereto (in the case of affiliates of Parent).
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 1.7
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 Parent
and its Subsidiaries (including without limitation 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. Parent and
Subject Company shall use their reasonable best efforts to develop New Parent
Plans which, among other things, treat similarly situated employees of Parent
and its Subsidiaries (including without limitation the Surviving Corporation and
its Subsidiaries) on a substantially equivalent basis, taking into account all
relevant factors, including, without limitation, duties, geographic location,
tenure, qualifications and abilities. Parent agrees that if it establishes or
continues employee benefit plans (including severance plans) under which an
employee's benefit depends, in whole or in part, on length of service with
Subject Company or Parent prior to the Effective Time, credit will be given, to
the extent reasonably practicable, for service credited under similar plans of
Subject Company or Parent or any Subsidiary of either, provided that such
crediting of service does not result in duplication of benefits.
(b) Notwithstanding the foregoing, Parent shall, and shall cause its
Subsidiaries to, honor in accordance with their terms all benefits vested as of
the date hereof under the Parent Plans or Plans or under other contracts,
arrangements, commitments or understandings described in the Parent Disclosure
Schedule and the Subject Company Disclosure Schedule. Parent and Subject
Company hereby acknowledge that the Merger will constitute a "Change in Control"
for purposes of the Parent Plans and the Plans and agree to abide by the
provisions of any Plan or Parent 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 Parent Stock Option Plans and the Subject Company Stock
Option Plans.
(c) 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.
(d) It is the express understanding and intention of Subject
Company, Parent and Merger Sub 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.
6.8 Indemnification; Directors' and Officers' Insurance. (a) Each
of Subject Company and Parent agrees that from and after the Effective Time,
Parent will indemnify and hold harmless each present and former director and
officer of Subject Company and Parent and their respective Subsidiaries,
determined as of the Effective Time (the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that Subject Company, Parent, or such Subsidiary would have been
permitted under Delaware law and the certificate of incorporation or by-laws of
Subject Company, Parent or such Subsidiary in effect on the date hereof to
indemnify such person (and Parent shall also advance expenses as incurred to the
fullest extent permitted under applicable law; provided, that the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification).
(b) To the extent that paragraph (a) shall not serve to indemnify
and hold harmless an Indemnified Party, for a period of six years after the
Effective Time, each of Subject Company and Parent agrees that Parent shall,
subject to the terms set forth herein, indemnify and hold harmless, to the
fullest extent permitted under applicable law (and Parent shall also advance
expenses as incurred to the fullest extent permitted under applicable law,
provided, that the person to whom expenses are advanced provides an undertaking
to repay such advances if it is ultimately determined that such person is not
entitled to indemnification), each Indemnified Party against any Costs incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to the transactions contemplated by this Agreement, the Option Agreements or the
Fee Letters. In the event any claim or claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim or
claims shall continue until final disposition of any and all such claims.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.8(a) or (b), upon learning of any such claim, action, suit, proceeding
or investigation, shall promptly notify Parent thereof, but the failure to so
notify shall not relieve Parent of any liability it may have to such Indemnified
Party except to the extent such failure materially prejudices Parent. In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), Parent shall have the right to
assume the defense thereof and Parent shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that, if Parent elects not to assume such defense or counsel for
the Indemnified Parties advises that there are issues which raise conflicts of
interest between Parent and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and Parent shall pay all reasonable fees
and expense of such counsel for the Indemnified Parties promptly as statements
therefor are received. If such indemnity is not available with respect to any
Indemnified Party, then Parent and the Indemnified Party shall contribute to the
amount payable in such proportion as is appropriate to reflect relative faults
and benefits.
(d) From and after the Effective Time, the directors, officers and
employees of Subject Company and its Subsidiaries who become directors, officers
or employees of Parent or any of its Subsidiaries, except for the
indemnification rights set forth in Section 6.8(a) or 6.8(b) or as otherwise
provided by applicable law, shall have indemnification rights (with respect to
their capacities as directors, officers or employees of Parent or any of its
Subsidiaries at or subsequent to the Effective Time) with prospective
application only. The prospective indemnification rights shall consist of such
rights to which directors, officers and employees of Parent and its Subsidiaries
are entitled under the provisions of the Certificate of Incorporation or similar
governing documents of Parent and its Subsidiaries, as in effect from time to
time after the Effective Time, as applicable, and provisions of applicable law
as in effect from time to time after the Effective Time.
(e) 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
assume the obligations set forth in this section.
(f) For a period of six years from the Effective Time, Parent shall
use its best efforts to provide that portion of directors' and officers'
liability insurance that serves to reimburse the present and former officers and
directors of Parent, Subject Company or any of their respective Subsidiaries
(determined as of the Effective Time) (as opposed to Parent or Subject Company)
with respect to claims against such officers and directors arising from facts or
events which occurred before the Effective Time, which insurance shall contain
at least the same coverage and amounts, and contain terms and conditions no less
advantageous, as that coverage currently provided by Parent; provided, however,
that the annual premiums for such coverage will not exceed 200% of the annual
premiums currently paid by Subject Company for such coverage; provided, further,
that officers and directors of Subject Company or any Subsidiary may be required
to make application and provide customary representations and warranties to
Parent's insurance carrier for the purpose of obtaining such insurance; and
provided, further, that such coverage will have a single aggregate for such six-
year period in an amount not less than the annual aggregate of such coverage
currently provided by Subject Company.
(g) 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 Merger Sub. Parent shall cause Merger Sub to take all necessary
action to complete the transactions contemplated hereby, subject to the terms
and conditions hereof.
6.13 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
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.
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. This Agreement and the
transactions contemplated hereby shall have been approved and adopted by the
requisite affirmative votes of the holders of Subject Company Common Stock
entitled to vote thereon and the Parent Vote Matters shall have been approved by
the requisite affirmative vote of the holders of 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 contain any conditions or restrictions
which the Board of Directors of either Parent or Subject Company reasonably
determines in good faith will have or reasonably be expected to have a Material
Adverse Effect on Parent and its Subsidiaries (including the Surviving
Corporation and its Subsidiaries) taken as a whole.
(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.
(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) Pooling of Interests. Parent shall have received a
letter from Ernst & Young LLP, addressed to Parent, dated as of the Effective
Time, to the effect that the Merger will qualify for "pooling of interests"
accounting treatment.
(e) Federal Tax Opinion. Parent shall have received an
opinion of Dorsey & Whitney P.L.L.P., 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,
Subject Company or Merger Sub 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 allocable to a fractional share interest for which cash is
received).
In rendering such opinion, Dorsey & Whitney P.L.L.P. may require
and rely upon representations and covenants including those contained in
certificates of officers of Parent, Subject Company and Merger Sub 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), 4.3(b), 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.
(c) Parent Rights Agreement. The rights issued pursuant to
the Parent Rights Agreement shall not have become nonredeemable, exercisable,
distributed or triggered pursuant to the terms of such agreement.
(d) Pooling of interests. Subject Company shall have
received a letter from Ernst & Young LLP, addressed to Subject Company, dated as
of the Effective Time, to the effect that the Merger will qualify for "pooling
of interests" accounting treatment.
(e) 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,
Subject Company or Merger Sub 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 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, Subject Company and Merger Sub
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 (or, if at such date the Merger shall not have been
consummated as a result of the failure of the condition set forth in Section
7.1(e) to be satisfied, and such condition shall not have failed to have been
satisfied by reason of the enactment or promulgation of any statute, rule or
regulation which prohibits, restricts or makes illegal consummation of the
Merger, the earlier of (i) the date on which such condition is satisfied and
(ii) June 30, 1997), 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 (x) this Agreement by the
requisite vote of Subject Company's shareholders (if Subject Company is the
terminating party) or (y) the Parent Vote Matters (if Parent is 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; or
(g) 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 (in the case of Subject Company) or the Parent Vote Matters
(in the case of Parent).
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
(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 10:00 a.m. on a
date to be specified by the parties, which shall be no later than two business
days after the satisfaction or waiver (subject to applicable law) of the latest
to occur of the conditions set forth in Article VII hereof (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 Agreement (other than the Option
Agreements and 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 and the Option
Agreements, 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:
First Bank System, Inc.
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Fax: (612) 973-0431
Attn: Lee R. Mitau, Esq.
with a copy to each of:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Fax: (212) 225-3999
Attn: Victor I. Lewkow, Esq.
and
Dorsey & Whitney P.L.L.P.
220 South 6th Street
Minneapolis, Minnesota 55402
Fax: (612) 340-8738
Attn: Jay L. Swanson, Esq.
(b) if to Subject Company, to:
First Interstate Bancorp
633 West Fifth Street, TC 2-10
Los Angeles, California 90071
Fax: (213) 614-3741
Attn: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Fax: (212) 735-2000
Attn: Fred B. White, III, Esq.
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
[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
Confidentiality Agreement, 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. 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, the
Option Agreements 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.
IN WITNESS WHEREOF, Parent, Merger Sub and Subject Company have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
FIRST BANK SYSTEM, INC.
By:
----------------------------
Name:
Title:
ELEVEN ACQUISITION CORP.
By:
----------------------------
Name:
Title:
FIRST INTERSTATE BANCORP
By:
----------------------------
Name:
Title:
TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effects of the Merger. . . . . . . . . . . . . . . . . . . 2
1.4 Conversion of Subject Company Common Stock, Subject Company
Preferred Stock 2
1.5 Parent Common Stock; Parent Preferred Stock. . . . . . . . 4
1.6 Merger Sub Stock.. . . . . . . . . . . . . . . . . . . . . 4
1.7 Options. . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Certificates of Incorporation. . . . . . . . . . . . . . . 5
1.9 Bylaws.. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10 Tax Consequences. . . . . . . . . . . . . . . . . . . . . . 6
1.11 Management Succession. . . . . . . . . . . . . . . . . . . 6
1.12 Board of Directors. . . . . . . . . . . . . . . . . . . . . 6
1.13 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II
EXCHANGE OF SHARES
2.1 Parent to Make Shares Available. . . . . . . . . . . . . . 7
2.2 Exchange of Shares . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III . . . . . . . . . . . . . . 9
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY
3.1 Corporate Organization . . . . . . . . . . . . . . . . . . 9
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Authority; No Violation. . . . . . . . . . . . . . . . . . 11
3.4 Consents and Approvals . . . . . . . . . . . . . . . . . . 12
3.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . 13
3.7 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . 14
3.8 Absence of Certain Changes or Events . . . . . . . . . . . 14
3.9 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 15
3.10 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . 15
3.11 Employees.. . . . . . . . . . . . . . . . . . . . . . . . 16
3.12 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . 17
3.13 Compliance with Applicable Law. . . . . . . . . . . . . . 17
3.14 Certain Contracts . . . . . . . . . . . . . . . . . . . . 17
3.15 Agreements with Regulatory Agencies.. . . . . . . . . . . 18
3.16 Undisclosed Liabilities . . . . . . . . . . . . . . . . . 18
3.17 State Takeover Laws . . . . . . . . . . . . . . . . . . . 18
3.18 Rights Agreement. . . . . . . . . . . . . . . . . . . . . 19
3.19 Pooling of Interests. . . . . . . . . . . . . . . . . . . 19
3.20 First Interstate Name . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT
4.1 Corporate Organization . . . . . . . . . . . . . . . . . . 20
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Authority; No Violation. . . . . . . . . . . . . . . . . . 22
4.4 Consents and Approvals . . . . . . . . . . . . . . . . . . 24
4.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.6 Financial Statements . . . . . . . . . . . . . . . . . . . 25
4.7 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . 25
4.8 Absence of Certain Changes or Events . . . . . . . . . . . 26
4.9 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 26
4.10 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . 26
4.11 Employees . . . . . . . . . . . . . . . . . . . . . . . . 27
4.12 SEC Reports.. . . . . . . . . . . . . . . . . . . . . . . 28
4.13 Compliance with Applicable Law. . . . . . . . . . . . . . 28
4.14 Certain Contracts.. . . . . . . . . . . . . . . . . . . . 28
4.15 Agreements with Regulatory Agencies.. . . . . . . . . . . 29
4.16 Undisclosed Liabilities.. . . . . . . . . . . . . . . . . 29
4.17 State Takeover Laws; Certificate of Incorporation.. . . . 29
4.18 Rights Agreement. . . . . . . . . . . . . . . . . . . . . 30
4.19 Pooling of Interests. . . . . . . . . . . . . . . . . . . 30
4.20 Parent Information. . . . . . . . . . . . . . . . . . . .. 30
4.21 Environmental Liability.. . . . . . . . . . . . . . . . . 30
4.22 Interest Rate Risk Management Instruments.. . . . . . . . 31
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective Time. . . . . 31
5.2 Forbearances . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VI
ADDITIONAL AGREEMENTS. . . . . . . . . . . 34
6.1 Regulatory Matters . . . . . . . . . . . . . . . . . . . . 34
6.2 Access to Information. . . . . . . . . . . . . . . . . . . 35
6.3 Stockholders' Approvals. . . . . . . . . . . . . . . . . . 36
6.4 Legal Conditions to Merger . . . . . . . . . . . . . . . . 36
6.5 Affiliates; Publication of Combined Financial Results. . . 37
6.6 Stock Exchange Listing . . . . . . . . . . . . . . . . . . 37
6.7 Employee Benefit Plans.. . . . . . . . . . . . . . . . . . 38
6.8 Indemnification; Directors' and Officers' Insurance . . . 38
6.9 Additional Agreements. . . . . . . . . . . . . . . . . . . 40
6.10 Advice of Changes.. . . . . . . . . . . . . . . . . . . . 40
6.11 Dividends.. . . . . . . . . . . . . . . . . . . . . . . . 40
6.12 Merger Sub. . . . . . . . . . . . . . . . . . . . . . . . 41
6.13 Subsequent Interim and Annual Financial Statements. . . . 41
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger 41
7.2 Conditions to Obligations of Parent. . . . . . . . . . . . 42
7.3 Conditions to Obligations of Subject Company . . . . . . . 43
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . 45
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . 46
8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . 46
8.4 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . 47
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.2 Nonsurvival of Representations, Warranties and Agreements. 47
9.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.5 Interpretation . . . . . . . . . . . . . . . . . . . . . . 49
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 49
9.7 Entire Agreement.. . . . . . . . . . . . . . . . . . . . . 49
9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 49
9.9 Severability.. . . . . . . . . . . . . . . . . . . . . . . 49
9.10 Publicity.. . . . . . . . . . . . . . . . . . . . . . . . 49
9.11 Assignment; Third Party Beneficiaries. . . . . . . . . . 50
9.12 Alternative Structure . . . . . . . . . . . . . . . . . . 50
FIRST INTERSTATE BANCORP
1991 PERFORMANCE STOCK PLAN
1. PURPOSE. The purpose of the 1991 Performance Stock Plan (the
"Plan") is to promote the interests of First Interstate Bancorp (the
"Company") and its Subsidiaries by providing performance incentives to certain
of its key employees who are responsible for the management, growth and
financial success of the Company. Pursuant to the Plan, stock options, stock
appreciation rights, restricted stock awards, performance units and stock
awards may be granted.
2. ADMINISTRATION. The Plan shall be administered by a Committee (the
"Committee") consisting of those members of the Compensation Committee of the
Board of Directors of the Company who are (a) at least the minimum number of
members required under Rule 16b-3 (or any successor rule) promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange Act
("Rule 16b-3"), and (b) "disinterested" as defined under such rule. The
Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and to adopt
such rules and regulations for administering the Plan as it may deem
necessary. Decisions of the Committee shall be final and binding on all
persons who have an interest in the Plan.
3. ELIGIBILITY. The persons eligible to participate in the Plan shall
be those key employees of the Company and its Subsidiaries selected by the
Committee; provided, however, that no person shall be granted an award under
the Plan who at the time owns more than 5% of the issued and outstanding
common stock of the Company.
4. SHARES SUBJECT TO THE PLAN. The shares subject to the Plan shall be
shares of the Company's $2 par value Common Stock ("Common Stock"). The
aggregate number of shares of Common Stock which may be delivered under the
Plan shall not exceed 5,000,000, subject to adjustment pursuant to Section 9.
If Restricted Stock is forfeited or an option shall terminate for any reason,
except for the surrender thereof upon exercise of a related Stock Appreciation
Right, without having been exercised in full, such Restricted Stock or the
shares applicable to the unexercised portion of such option shall become
available under the Plan for all purposes. If shares of Common Stock already
owned by a Participant are tendered or exchanged under Section 5.3(b) in full
or partial payment of the purchase price of an exercised option, such tendered
or exchanged shares shall be added back to the number of shares available for
issuance or delivery under this Plan; provided that, this sentence shall not
be effective if its operation would cause this Plan to not be considered to be
described under Rule 16b-3. The previous sentence notwithstanding, for
purposes of determining the number of shares available for the granting of
Incentive Options, the aggregate number of shares available for delivery or
issuance under this Plan shall not be increased by the number of shares
tendered or exchanged. Either authorized and unissued shares or treasury
shares may be delivered under the Plan; provided, however, that unissued
shares shall not be awarded as Restricted Stock, or pursuant to Performance
Units, or as Stock Awards to any Participant unless the Committee expressly
determines, after consideration of all other remuneration paid or payable to
the Participant, that the services already rendered to the Company and its
Subsidiaries by the Participant have a value of not less than the par value of
the shares so awarded.
5. STOCK OPTIONS. Stock options granted under the Plan may be either
incentive stock options qualifying under Section 422A of the Internal Revenue
Code of 1986 ("Incentive Options") or non-qualified stock options
("Non-Qualified Options"). The options shall be evidenced by agreements in
such form as the Committee may, from time to time, approve and shall be
subject to the following terms and conditions ("Stock Option Agreement").
5.1 Option Price. The option price of the shares of Common Stock
subject to each option shall be determined by the Committee but shall be not
less than 100% of the Fair Market Value of such shares on the date of granting
of the option.
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5.2 Terms of Exercise. Each option granted under the Plan shall be
exercisable in whole or in part on such term as the Committee may determine,
but in no event shall the option be exercisabe within six months of or more
than 10 years after the date the option is granted.
5.3 Manner of Exercise. The option shall be exercised by giving
written notice to the Company specifying the number of full shares to be
purchased, accompanied by payment of the full price thereof.
Payment methods may include any of the following, as determined by the
Committee at the date of grant and provided for in the Stock Option Agreement:
(a) In cash;
(b) In shares of Common Stock already owned by the holder of
the option ("Optionee") or partly in cash and partly in shares of
Common Stock. If Common Stock is used to pay the purchase price (i.e.,
a "Stock-for-Stock Swap Transaction"), the Common Stock used must have
been owned by the Participant for at least six months prior to the
date of exercise and must not have been used in a Stock-for- Stock
Swap Transaction within the preceding six months (i.e., the Common
Stock must be "mature"). Payments made in Common Stock shall be valued
at the Fair Market Value of the Common Stock on the date of exercise.
Shares of Common Stock used to pay the purchase price pusrsuant to
this subsection (b) need not actually be tendered by the Participant.
Instead, the Participant shall be treated as constructively tendering
such shares (and receiving them back from the Company) if the
Participant provides satisfactory proof to the Committee of current
ownership. The actual shares of Common Stock delivered pursuant to
such an exercise shall be net of the number of shares constructively
tendered;
(c) Subject to such guidelines as may be promulgated by the
Committee, an Optionee may deliver a notice instructing the Company to
deliver the shares being purchased to a broker, subject to the
broker's delivery of cash to the Company equal to the purchase price
and any applicable tax withholding amount.
5.4 Additional Terms of Incentive Options. An Incentive
Option granted pursuant to the Plan:
(a) Must be designated as an Incentive Option by the Committee;
(b) Shall only be an Incentive Option to the extent that the
Aggregate Fair Market Value of the Common Stock (determined as of the
date of grant of the option) with respect to which the option is first
exercisable in any calendar year does not exceed $100,000. For the
purpose of the preceding sentence all options granted after 1986 by
the Company and any Parent or Subsidiary wbich are intended to be
incentive stock options under Section 422A of the Internal Revenue
Code of 1986 shall be taken into account. To the extent the $100,000
limit is exceeded, the $100,000 in options (measured as described
above) granted earliest in time will be treated as incentive stock
options; and
(c) If issuable to an employee who on the date of grant is the
owner of stock (determined with application of the ownership
attribution rules of Section 425(d) of the Internal Revenue Code of
1986) possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the
Incentive Option price shall not be less than 110% of the Fair Market
Value of the Common Stock on the date of grant and the Incentive
Option shall not have a term in excess of five years from the date of
grant.
5.5 Termination of Right to Exercise Options. Each option
granted under this Plan shall set forth a termination date thereof, which date
shall be determined by the Committee. In any event, all options granted
pursuant to the Plan shall terminate upon the first to occur of the following
events:
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<PAGE>
(a) Tne expiration of 10 years from the date such option was
granted, or any earlier termination date specified in the Stock Option
Agreement;
(b) The expiration of three months from the date an Optionee
ceases to be employed by the Company or a Subsidiary other than by
reason of death, Retirement, Disability or termination of employment
for cause as determined by the Committee;
(c) The expiration of one year from the date an Optionee ceases
to be employed by the Company or a Subsidiary by reason of Disability
or death;
(d) The expiration of three years from the date an Optionce
ceases to be employed by the Company or a Subsidiary by reason of
Retirement;
(e) The termination of the Optioncee's employment for cause, as
determined by the Comniittee; or
(f) The termination of the Plan pursuant to Section 10;
provided, that if an Optionee's death occurs after the Optionee ceases to be
employed by the Company or a Subsidiary for a reason other than Retirement but
at a time when the Optionee has a right to exercise any options pursuant to
the foregoing, the right to exercise such option shall not expire prior to one
year from the date of death of the Optionee. Subsequent to termination of the
Optionee's employment for any reason, only that portion of an option which was
exercisable on the date of termination of employment shall be exercisable, and
only during the period, if any, set forth above. Failure to exercise an
Incentive Option within three months of the date Optionee ceases to be
employed by the Company or a Subsidiary by reason of Retirement shall cause an
Incentive Option to cease to be treated as an incentive stock option for
purposes of Section 421 of the Internal Revenue Code of 1986.
5.6 Stock Appreciation Rights. Any option granted pursuant to the Plan
may, in the discretion of the Committee, contain a stock appreciation right
("Stock Appreciation Right"). A Stock Appreciation Right will permit the
holder thereof to exercise such right by the surrender of the option or
portion thereof which is then exercisable and receive in exchange therefor,
upon such terms, restrictions and conditions as the Committee deems advisable,
an amount equal to the excess of the Fair Market Value of the shares of Common
Stock covered by the option surrendered or portion thereof, determined on the
date of surrender, over the aggregate option exercise price of such shares.
Such payment may be made in shares of Common Stock valued at Fair Market
Value, in cash, or partly in cash and partly in shares of Common Stock as the
holder may elect, subject to the consent or disapproval of the Committee in
its sole discretion. If a Stock Appreciation Right extends to less than all
the shares of Common Stock covered by the related option and if a portion of
the related option is thereafter exercised, the number of shares subject to
the unexercised Stock Appreciation Right shall be reduced only if and to the
extent that the remaining number of shares covered by such related option is
less than the remaining number of shares subject to such Stock Appreciation
Right.
The Stock Appreciation Right, in addition to any other restrictions
imposed by the Committee:
(a) shall expire no later than the underlying stock option;
(b) shall not permit the issuance of cash or shares of a value
which exceeds the difference between the exercise price of the
underlying stock option and the Fair Market Value of the Common Stock
subject to the underlying option at the time the Stock Appreciation
Right is exercised;
(c) shall be transferable only when the underlying stock option
is transferable, and under the same conditions;
3
<PAGE>
(d) shall be exercisable only when the underlying stock option
is eligible to be exercised and then only when the Fair Market Value
of the stock subject to the underlying option exceeds the option
exercise price; and
(e) shall contain such conditions upon exercise (including,
without limitation, conditions limiting the time of exercise to
specified periods) as may be required to satisfy applicable regulatory
requirements, including, without limitation, Rule 16b-3 (or any
successor rule) promulgated by the Securities and Exchange Commission.
In the event of the exercise of a Stock Appreciation Right, shares
represented by the option or part thereof surrendered upon such exercise shall
not be available for reissuance under the Plan.
5.7 Award of Accelerated Ownership Stock Option. If the Committee so
provides in the Stock Option Agreement, effective as of the date of exercise
by an Optionee of all or part of an Option using "mature" Common Stock as
defined in Section 5.3 of the Plan as payment for the full purchase price
(except that cash may be used to purchase the nearest whole share of Common
Stock), an Employee shall be granted an accelerated ownership Non-Qualified
Option ("AO") to purchase at the Fair Market Value as of the date of said
exercise and grant, the number of shares of Common Stock equal to the sum of
the number of whole shares used by the Optionee in payment of the purchase
price. An AO shall only be available during the period an Optionee is an
employee of the Company or a Subsidiary. The AO may be exercised between the
date of its grant and the original date of expiration of the underlying option
to which the AO is related. No AO shall vest sooner than six months after its
date of grant. The AO shall be evidenced by any agreement containing such
additional terms and conditions as the Committee shall approve, which
conditions may provide that upon exercise of any AO, an additional AO may be
granted with respect to the number of whole shares used to exercise the AO.
5.8 Options Non-transferable. No option rights shall be assignable or
transferable except by will or by the laws of descent and distribution. During
the lifetime of an Optionee, an option or Stock Appreciation Right shall be
exercisable only by the Optionee or by the Optionee's guardian or legal
representative. After the death of an Optionee, the option or Stock
Appreciation Right may be exercised prior to its termination by the Optionce's
legal representative, heir or legatee.
6. RESTRICTED STOCK AWARDS. The award of restricted stock ("Restricted
Stock") to employees may be made in the discretion of the Committee pursuant
to agreements in such form as the comniittee may, from time to time, approve
("Restricted Stock Agreement"), subject to the following terms and conditions.
6.1 Restricted Period. The Committee shall set a restricted period
during which the Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by this Plan and the
Restricted Stock Agreement (the "Restricted Period"). If a holder of
Restricted Stock ceases to be an employee of the Company or a Subsidiary
during the Restricted Period for any reason other than death, Disability or
Retirement, all shares of Restricted Stock which are then subject to the
restrictions imposed by the Committee shall upon such termination of
employment be immediately forfeited and returned to the Company. If a holder
of Restricted Stock ceases to be an employee of the Company or a Subsidiary
during the Restricted Period by reason of death, Disability or Retirement,
shares of Restricted Stock shall become free of the restrictions imposed by
the Committee only to the extent determined by the Committee, and the Company
will deliver to the holder, or the holder's successor, as the case may be,
within 60 days, such shares of Common Stock as are freed from restrictions,
and all other shares shall be forfeited and returned to the Company. The
Committee may, at any time, reduce or terminate the Restricted Period. Subject
to the foregoing, at the end of the Restricted Period, the holder of
Restricted Stock shall be entitled to receive the Restricted Stock free of
restrictions.
4
<PAGE>
6.2 Restrictive Legend and Deposit of Certificates. Each certificate
issued in respect of shares of Restricted Stock awarded under the Plan shall
be registered in the name of the Participant, shall be deposited by the
Participant with the Company together with a stock power endorsed in blank and
shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained
in an Agreement entered into between the registered owner and First
Interstate Bancorp. A copy of such Agreement is on file in the office
of the Secretary of First Interstate Bancorp, 633 West Fifth Street,
Los Angeles, California 90071."
6.3 Rights as Shareholder. Subject to the terms of the Restricted
Stock Agreement, the holder of Restricted Stock shall have all the rights of a
shareholder with respect to the Restricted Stock, including the right to vote
such shares; provided, however, that dividends paid with respect to the shares
of Restricted Stock shall be deposited with the Company and shall be subject
to forfeiture until the expiration of the Restricted Period, subject to the
condition that the sums so deposited shall be free of restriction and not
subject to forfeiture to the extent applied by Company to satisfy that
employee's withholding obligations with respect to Restricted Stock pursuant
to Section 13 of the Plan, or otherwise released by the Committee in its sole
discretion. The holder of Restricted Stock shall not be entitled to interest
with respect to the dividends so deposited.
6.4 Unless the purchase price of Restricted Stock is its par value, it
shall be at lease equal to 50% of Fair Market Value, unless otherwise allowed
under Rule 16b-3.
7. PERFORMANCE UNITS. The award of performance units ("Performance
Units") to employees shall be made in the discretion of the Committee pursuant
to agreements in such form as the Committee may, from time to time, approve
("Performance Unit Agreement"), subject to the following terms and conditions.
7.1 Payment of Shares and Dividends. Each Performance Unit shall
represent one share of Common Stock and shall, at the time and to the extent
it becomes vested, be payable by the delivery of one share of Common Stock,
subject to the provisions of Section 9 of this Plan, or, if and to the extent
provided in the Performance Unit Agreements, cash based on the Fair Market
Value of the Common Stock at the time of payment. In addition, each
Participant who has been awarded Performance Units shall receive additional
Performance Unit credit based on the value of any dividends which would have
been paid to the Participant if he or she bad owned a number of shares of
Common Stock equal to the number of his or her Performance Units. The amount
of such dividend credit shall be applied towards additional Performance Units
for the Participant at the value of shares of Common Stock on the dividend
date.
7.2 Performance Conditions. The Performance Unit Agreements shall
specify any terms and conditions relating to performance or otherwise which
may be established in the discretion of the Committee.
7.3 Management Incentive Plan Deferrals. Performance Units under this
Plan may be attributable to a Participant's deferral election under the 1991
Management Incentive Plan. Such Performanre Units will be payable at the time
selected by the Participant and permitted by the Committee in the applicable
Performance Unit Agreement (which shall be entered into at the time of the
Participant's deferral election) in shares of Common Stock, one share for each
Performance Unit or, if permitted by the Administrator and provided in the
Performance Unit Agreement in cash based on the Fair Market Value of the
Common Stock at the time of payment.
8. STOCK AWARDS. The award of Common Stock ("Stock Award") to
employees may be made in the discretion of the Committee. Common Stock issued
to a Participant pursuant to a Stock Award shall not be subject to any
restrictions under the Plan.
9. CHANGES IN CAPITALIZATION. If there are any changes in the
capitalization of the Company affecting in any manner the number or kind of
outstanding shares of Common Stock of the Company, whether such changes
5
<PAGE>
have been occasioned by declaration of stock dividends, stock split-ups,
reclassifications or recapitalization of such stock, or because the Company
has merged or consolidated with some other corporation (and provided the
option is not thereby terminated pursuant to Section 10 hereof), or for any
other reason whatsoever, then the number and kind of shares then subject to
this Plan and to outstanding options and the prices to be paid therefor, as
well as any related Stock Appreciation Right, shall be proportionately
adjusted by the Committee whenever and to the extent that the Committee
determines that any such change equitably requires an adjustment. Any shares
of Common Stock or other securities received by a holder of Restricted Stock
with respect to such Restricted Stock by reason of any such change shall be
subject to the same restrictions and shall be deposited with the Company.
10. MERGERS OR CONSOLIDATIONS. If the Company, at any time, should
elect to dissolve, undergo a reorganization, merge or consolidate with any
other corporation and the Company is not the surviving corporation, then
(unless in the case of a reorganization, merger or consolidation, one or more
of the surviving corporations assumes the options under the Plan or issues
substitute options in place thereof) each Optionee holding outstanding options
not yet exercised shall be notified of the Optionee's right to exercise such
options and any related Stock Appreciation Right to the extent then
exercisable prior to such dissolution, reorganization, merger or
consolidation. The Committee may, in its discretion and on such terms and
conditions as it deems appropriate, authorize the exercise of such options and
any related Stock Appreciation Right with respect to all shares covered
thereby. Any option and related Stock Appreciation Right not so exercised
within 30 days of such notification shall thereupon be deemed terminated and
simultaneously the Plan itself shall be deemed terminated.
11. ACCELERATION OF OPTIONS, STOCK APPRECIATION RIGHTS, AND RESTRICTED
STOCK AWARDS. In the event of a Change in Control, (i) each option and each
related Stock Appreciation Right shall become immediately exercisable to the
full extent theretofore not exercisable, (ii) the Restricted Period for
Restricted Stock shall immediately expire, and (iii) urless otherwise provided
in Performance Unit Agreements, all Performance Units shall be immediately
payable in Common Stock in the maximum amount available under the term of such
Performance Unit Agreements; provided, however, that Awards other than
Restricted Stock Awards shall not, in any event, be so accelerated to a date
less than six months after the date of grant. Acceleration of Awards shall
comply with applicable regulatory requirements, including, without limitation,
Rule 16b-3. Notwithstanding the foregoing, any Participant shall be entitled
to decline the acceleration of all or any of his or her options, Stock
Appreciation Rights or Restricted Stock if he or she determines that such
acceleration may result in adverse tax consequences to him or her.
12. EFFECT ON EMPLOYMENT. Nothing herein shall be construed to limit
or restrict the right of the Company or any of its Subsidiaries to terminate
the employment of any Participant in the Plan, at any time, with or without
cause, or to increase or decrease the compensation of such Participant from
the rate of compensation in existence at the time the employee became a
Participant.
13. WITHHOLDING. The Company shall have the right to withhold from
amounts due Participants, or to collect from Participants directly, the amount
which the Company deems necessary to satisfy any taxes required by law to be
withheld by reason of Participation in the Plan but, in the alternative, the
Participant may, prior to the payment of any Award, pay such amounts to the
Company in cash or in shares of Common Stock (which shall be valued at their
Fair Market Value on the date of payment). There is no obligation under this
Plan that any Participant be advised of the existence of the tax or the amount
required to be withheld. Without limiting the generality of the foregoing, in
any case where it determines that a tax is or will be required to be withheld
in connection with the issuance or transfer of shares of Common Stock under
this Plan, the Company may, pursuant to such rules as the Committee may
establish, reduce the number of such shares so issued or transferred by such
number of shares as the Company may deem appropriate in its sole discretion to
accomplish such withholding or make such other arrangements as it deems
satisfactory. Notwithstanding any other provision of this Plan, the Committee
may impose such conditions on the payment of any withholding obligation as may
be required to satisfy applicable regulatory requirements, including, without
limitation, Rule 16b-3 (or any successor rule) promulgated by the Securities
and Exchange Commission.
6
<PAGE>
14. ADDITIONAL DEFINITIONS. "Award" shall mean an Incentive Option, a
Non-Qualified Option, a Stock Appreciation Right, a Restricted Stock Award, a
Performance Unit or a Stock Award.
"Change in Control" of the Company means and shall be deemed to have
occurred if and when (a) any "person" (as such term is used Section 13(d) of
the Exchange Act) becomes a beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; (b) individuals who were
members of the Board of Directors of the Company immediately prior to a
meeting of the stockholders of the Company involving a contest for the
election of Directors do not constitute a majority of the Board of Directors
following such election; (c) the stockholders of the Company approve the
dissolution or liquidation of the Company; (d) the stockholders of the Company
approve an agreement to merge or consolidate, or otherwise reorganize, with or
into one or more entities which are not Subsidiaries, as a result of which
less than 50% of the outstanding voting securities of the surviving or
resulting entity are, or are to be, owned by former stockholders of the
Company (excluding from the term "former stockholders" a stockholder who is,
or as a result of the transaction in question becomes, an "affiliate," as that
term is used in the Exchange Act and the Rules promulgated thereunder, of any
party to such merger, consolidation or reorganization); or (e) the
stockholders of the Company approve the sale of substantially all of the
Company's business and/or assets to a person or entity which is not a
Subsidiary. Notwithstanding an acquisition of voting stock that otherwise
meets the definition of a Change in Control, such transaction shall not
constitute a Change in Control under this Plan if two criteria are met: (1)
subsequent to the transaction and at all times thereafter at least 65% of the
voting power of the Company's then outstanding voting securities remain widely
held by the members of the general public, and (2) the Committee of the
Company, or any successor committee, resolves within 30 days after the
acquisition which would otherwise be treated as a Change in Control that such
event shall not be so treated. For purposes of this Section, securities held
by a company registered under the Investment Company Act of 1940 or by a trust
qualified under Section 401 of the Internal Revenue Code shall be considered
widely held by members of the general public. The resolution of the Committee
shall specify the extent to which future actions by the acquiring person
shall, or shall not, be treated as a Change in Control. Notwithstanding
anything to the contrary contained herein, a Change in Control shall
subsequently be deemed to occur at any time that the first criterion listed
above ceases to be met.
"Disability" shall mean such physical or mental condition affecting
the employee as shall be determined by the Committee in its sole discretion,
to constitute a disability causing a termination of employment.
"Fair Market Value" on a specified day means the closing price on that
day of the Common Stock as reported on New York Stock Exchange-Composite Tape,
or if no sale of the Common Stock was so reported on that date, on the next
preceding day on which there was such a sale.
"Parent" means any corporation owning directly or indirectly 50% or
more of the total combined voting power of all classes of stock of the
Company.
"Participant" means an eligible employee selected by the Comniittee to
participate in the Plan.
"Retirement" means normal or early retirement in accordance with the
provisions of the First Interstate Retirement Plan.
"Subsidiary" means any corporation of which the Company owns, directly
or indirectly, 50% or more of the total combined voting power of all classes
of stock. If an entity ceases to be a Subsidiary, each employee of that entity
shall no longer be deemed employed by the Company or a Subsidiary under the
Plan (unless the employee continues to be employed by the Company or another
entity which is a Subsidiary).
15. AMENDMENT OF PLAN. The Board of Directors of the Company may make
such amendments to this Plan and to any agreements thereunder as it shall deem
advisable, including, but not limited to, accelerating
7
<PAGE>
the time at which an option may be exercised or the time when restrictions on
Restricted Stock shall expire. Such amendments shall be subject to shareholder
approval to the extent such approval is required by Rule 16b-3 or the federal
tax rules applicable to Incentive Options. Without the consent of the
Participant, no amendment shall impair rights of any Participant with respect
to Awards to such Participant under the Plan, except as permitted by the Plan.
16. EFFECTIVE DATE AND TERMINATION OF PLAN. The Plan shall be
effective upon filing with the Securities and Exchange Commission, subject to
receipt of shareholder approval of the Plan at the 1991 Annual Shareholder
Meeting. All Awards pursuant to the Plan prior to the receipt of shareholder
approval shall be subject to receipt of such approval. If such approval is not
received, the Awards shall be forfeited. The Plan shall terminate 10 years
from the effective date; provided, however, that the Board of Directors of the
Company may terminate the PIan at any prior time within its absolute
discretion. No such termination, other than as provided for in Section 10
hereof, shall in any way affect any Award then outstanding.
FIRST INTERSTATE BANCORP
By ____________________________
8
<PAGE>
FIRST AMENDMENT
TO
FIRST INTERSTATE
1991 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate Bancorp 1991
Performance Stock Plan (the "Plan") effective February 7, 1991 as approved by
shareholders on April 19, 1991.
In order to have consistent treatment under First Interstate Bancorp's
various plans in the event that employees become employees of another company,
this amendment is being adopted. This amendment is effective August 17, 1992.
1. New sentences have been added to Section 6.1 of the Plan to
read as follows:
In the event that employees of the Company or its Subsidiaries
become employees of another company pursuant to a stock or
asset sale, merger, or similar transaction or in the event of a
corporate reorganization, reduction in force or similar event,
the Committee shall have the authority, which shall be
exercised in its sole discretion, to continue to credit service
for purposes of satisfying the restricted period requirements
set forth in the Restricted Stock Agreement. Such Committee
authority shall only apply to restricted stock granted to
individuals who are not subject to Section 16 of the Securities
Exchange Act.
2. The following paragraph has been added as a new Section 17:
17. EXPIRATION OF OPTIONS. In the event that employees of the
Company or its Subsidiaries become employees of another company
pursuant to a stock or asset sale, merger or similar
transaction or in the event of a corporate reorganization,
reduction in force or similar event, the Committee shall have
the authority, which shall be exercised in its sole discretion,
to modify the dates upon which options previously granted shall
expire. Such Committee authority, shall only apply to options
granted to individuals who are not subject to Section 16 of the
Securities Exchange Act. Any modification to the terms under
which the option would otherwise expire shall not cause the
option to expire later than the date the option was originally
scheduled to expire pursuant to the terms or the original Stock
Option Agreement.
Executed at Los Angeles, California this 22nd day of August, 1995.
FIRST INTERSTATE BANCORP
By /SIGNED/
-----------------------------
Executive Vice President
By /SIGNED/
-----------------------------
Secretary
<PAGE>
SECOND AMENDMENT
TO
FIRST INTERSTATE BANCORP
1991 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate Bancorp 1991
Performance Stock Plan (the "Plan"), effective February 7, 1991 as approved by
shareholders on April 1, 1991 at the Annual Shareholder's meeting.
In order to have a consistent definition of Change in Control among
First Interstate Bancorp's various plans, this Amendment is being adopted.
This Amendment is effective June 20, 1994.
1.The definition of Change in Control in Section 14, Additional Definitions is
amended by revising it to read as follows:
"Change in Control" of the Company means and shall be deemed to have
occurred if and when any one of the following five events occurs: (a) any
"person" (as such term is used in Section 13(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"')) becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities; (b)
individuals who were members of the Board of Directors of the Company
immediately prior to a meeting of the stockholders of the Company involving a
contest for the election of Directors do not constitute a majority of the
Board of Directors following such election; (c) the stockholders of the
Company approve the dissolution or liquidation of the Company; (d) the
stockholders of the Company approve an agreement to merge or consolidate, or
otherwise reorganize, with or into one or more entities which are not
Subsidiaries, as a result of which less than 50% of the outstanding voting
securities of the surviving or resulting entity are, or are to be, owned by
former stockholders of the Company (excluding from the term "former
stockholders" a stockholder who is, or as a result of the transaction in
question becomes, an "affiliate", as that term is used in the Exchange Act and
the Rules promulgated thereunder, of any party to such merger, consolidation
or reorganization); or (e) the stockholders of the Company approve the sale of
substantially all of the Company's business and/or assets to a person or
entity which is not a Subsidiary.
Executed at Los Angeles, California this 20th day of July, 1994 .
FIRST INTERSTATE BANCORP
By /SIGNED/
-------------------------------
Executive Vice President
By /SIGNED/
-------------------------------
Secretary
<PAGE>
FIRST INTERSTATE BANCORP 1991 PERFORMANCE STOCK PLAN Grant Date
02-22-94
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is between FIRST INTERSTATE BANCORP, a Delaware corporation
(hereinafter called the "Company"), and .....................................
(hereinafter called the "Employee").
RECITALS:
The Company has established the 1991 Performance Stock Plan
(the "Plan"); and
The Committee of the Board of Directors of the Company designated in
the Plan (the "Committee") has approved the execution of this Non-Qualified
Stock Option Agreement containing the grant of the option herein set forth to
the Employee to purchase shares of the Common Stock, $2.00 par value, of the
Company upon the terms and conditions hereinafter set forth.
AGREEMENT:
In consideration of the mutual obligations contained herein, it is
hereby agreed:
1. GRANT OF OPTION. The Company hereby grants to the Employee a
Non-Qualified Option to purchase from the Company all or any part
of ...............(.................) shares of its authorized Common Stock at
the price of $....... per share.
2. TERM OF OPTION. This option may be exercised (unless terminated
prior to such exercise as hereinafter provided) during the periods commencing
after the anniversary and for the number of shares granted as provided below:
Anniversary Following Vesting
The Date Hereof Schedule
------------------ ---------------------
First Anniversary................... 25% of Shares Granted
Second Anniversary.................. 25% of Shares Granted
Third Anniversary................... 25% of Shares Granted
Fourth Anniversary.................. 25% of Shares Granted
provided, however, that this option shall be exercised for full shares only
and shall not be exercised for less than 50 shares at any one time unless the
remaining shares covered hereby is less than 50. In the event that the
Employee shall not in any year purchase all or any part of the shares which
the Employee is entitled to purchase in such year, the Employee's right to
purchase any shares not purchased in such year shall continue until the
expiration or termination of this option, which in no event shall be more than
ten (10) years from the date of grant.
3. EXPIRATION OF OPTION. This option shall expire and all rights to
purchase shares hereunder shall cease at 5:00 o'clock p.m., California time,
on ..............., or prior thereto upon the happening of the first to occur
of the following events: (a) the expiration of ten (10) years from the date
such option was granted, or any earlier termination date specified in the
option agreements; (b) the expiration of three (3) months from the date the
Employee ceases to be employed by the Company or a Subsidiary other than by
reason of death, Retirement, Disability or termination of employment for cause
as determined by the Committee; (c) the expiration of one (1) year from the
date the Employee ceases to be employed by the Company or a Subsidiary by
reason of Disability
<PAGE>
or death; (d) the expiration of three (3) years from the date the Employee
ceases to be employed by the Company or a Subsidiary by reason of Retirement;
(e) the termination of the Employee's employment for cause, as determined bv
the Committee; (f) the termination of the Plan pursuant to Section 10,
provided, that if the Employee's death occurs after the Employee ceases to be
employed by the Company or a Subsidiary for a reason other than Retirement but
at a time when the Employee has a right to exercise any options pursuant to
the foregoing, the right to exercise such option shall be extended for one
year from the date of death of the Employee. Subsequent to termination of the
Employee's employment for any reason, only that portion of an option which was
exercisable on the date of termination of employment shall be exercisable, and
only during the period, if any, set forth above.
4. NONTRANSFERABILITY OF OPTION. This option shall be nonassignable
and nontransferable by the Employee other than by will or the laws of descent
and distribution, and shall be exercisable during the lifetime of the Employee
only by the Employee or by the Employee's guardian or legal representative.
After the death of the Employee, this option may be exercised prior to its
termination by the Employee's legal representative, heir or legatee, to the
extent permitted in the Plan. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option, or of any right or privilege
conferred hereby, contrary to the provision hereof, or upon any attempted sale
under any execution, attachment or similar process upon the rights and
privileges conferred hereby, this option and the rights and privileges
conferred hereby shall immediately become null and void. Until written notice
of any permitted passage of rights under this option shall have been given to
and received by the Secretary of the Company, the Company may, for all
purposes, regard the Employee as the holder of this option.
5. EXERCISE OF OPTION. The rights granted under this Agreement may be
exercised by the Employee, or by the person or persons to whom the Employee's
rights under this Agreement shall have passed (a) under the provisions of
Section 4 hereof, by delivering to the Company in care of its Secretary, at
633 West Fifth Street, Los Angeles, California, 90071, written notice of the
number of shares with respect to which the rights are being exercised,
accompanied by this Agreement for appropriate endorsement by the Company, such
investment letter as may be required by Section 10 hereof, and the
consideration provided in the plan if any, provided that if the Employee
intends to exercise this option by delivery of consideration consisting in
whole or in part of shares of Common Stock already owned by the Employee, the
Employee shall secure the prior consent of the Committee to such delivery.
6. REGULATORY COMPLIANCE. The issue and sale of Shares of stock
pursuant to this Agreement shall be subject to full compliance with all then
applicable requirements of law and the requirements of any stock exchange upon
which Common Stock of the Company may be listed.
7. MODIFICATION AND TERMINATION. The rights of the Employee are
subject to modification, acceleration and termination in certain events as
provided in Sections 9, 10 and 11 of the Plan.
8. WITHHOLDING TAX. The Employee agrees that, in the event the
exercise of any rights granted in this Agreement results in the Employee's
realization of income which for Federal, state or local income tax purposes
is, in the opinion of counsel for the Company, subject to withholding of tax
at source by the Employee's employer, the Employee will pay to the Employee's
employer an amount equal to such withholding, tax (or such employer on behalf
of the Company may withhold such amount from the Employee's salary) prior to
delivery to the Employee of certificates representing the shares purchased or
transferred. The Company may reduce the number of shares issued as the Company
may deem necessary in its sole discretion to cover its withholding obligation.
9. HOLDER OF SHARES. Neither the Employee nor the Employee's legal
representative, legatee or distributee shall be, or be deemed to be, a holder
of any shares of the Company's Common Stock subject to this option unless and
until such person has received a certificate or certificates therefore. No
adjustment will be made for dividends or other rights for which the record
date is prior to the date such stock certificates are so issued.
2
<PAGE>
10.INVESTMENT COVENANT. The Employee represents and agrees that if the
Employee exercises this option in whole or in part at a time when there is not
in effect under the Securities Act of 1933 a registration statement relating
to the shares issued upon exercise hereof and there is not available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of said
Act, (i) the Employee will acquire the shares upon such exercise for the
purpose of investment and not with a view to the distribution thereof, (ii)
that upon each such exercise of this option, the Employee will furnish to the
Company an investment letter in form and substance satisfactory to the
Company, (iii) prior to selling or offering for sale any such shares, the
Employee will furnish the Company with an opinion of counsel satisfactory to
it to the effect that such sale ma,y lawfully be made and will furnish it with
such certificates as to factual matters as it may reasonably request, and (iv)
that certificates representing such shares may be marked with an appropriate
legend describing such conditions precedent to sale or transfer. Any person or
persons entitled to exercise such option under the provision of Section 4
hereof shall furnish to the Company letters, opinions and certificates to the
same effect as would otherwise be required of the Employee.
11. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of California.
12.SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their legal representatives, and permitted
successors and assigns.
13.PLAN. This Agreement is subject to all of the terms and provisions
of the Plan, receipt of a copy of which is hereby acknowledged by the
Employee.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto on ...............
FIRST INTERSTATE BANCORP
By:_____________________________________ ________________________________
Chairman of the Board Employee
________________________________
(Address)
________________________________
________________________________
Social Security No. ____________
Affiliate ______________________
3
<PAGE>
FIRST INTERSTATE BANCORP
1991 PERFORMANCE STOCK PLAN
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is between FIRST INTERSTATE BANCORP, a Delaware
corporation (hereinafter called the "Company"), and _______________
(hereinafter called the "Employee");
RECITALS:
The Company has established the 1991 Performance Stock Plan (the
"Plan"); and
The Committee of the Board of Directors of the Company designated in
the Plan (the "Committee") has approved the execution of this Restricted Stock
Agreement containing the Restricted Stock award herein set forth to the
Employee upon the terms and conditions set forth;
AGREEMENT:
In consideration of the mutual obligations contained herein, it is
hereby agreed:
1. AWARD AND PURCHASE OF RESTRICTED STOCK. The Company hereby awards
to Employee the right to purchase from the Company and Employee hereby agrees
to purchase ____________________, ____________________ (_______________)
shares of the Company's Common Stock, $2.00 par value, receipt of which is
hereby acknowledged.
2. RESTRICTIONS ON TRANSFER. The shares of Common Stock so purchased
and any additional shares attributable thereto received by Employee as a
result of any stock dividend, recapitalization, merger, reorganization or
similar event (collectively the "Restricted Stock") shall be subject to the
restrictions set forth herein and may not be sold, assigned, transferred,
pledged or otherwise encumbered during the "Restricted Period" as hereinafter
defined, except as permitted hereby. The Restricted Period shall commence as
of the date of this Agreement and shall terminate as follows:
PERCENTAGE
DATE SHARES OF SHARES
BECOME FREE FREE FROM
FROM RESTRICTIONS RESTRICTIONS
----------------- ------------
The Committee may, at the time of the granting to Employee of the Restricted
Stock or at any time thereafter, reduce or terminate the Restricted Period
otherwise applicable to all or any portion of the Restricted Stock.
References to the Company in this Section include the Company's
Subsidiaries. A transfer of the Employee's employment between Subsidiaries of
the Company, or between any Subsidiary and the Company shall not be considered
a termination of employment for purposes of this Agreement. Employee hereby
agrees that within ten (10) days after the termination of the Employee's
employment with the Company for any reason whatsoever, Employee shall deliver
to the Secretary of the Company written notice of the termination of the
Employee's
<PAGE>
employment with the Company. If the Employee ceases to be employed for any
reason other than death, Disability or Retirement, all shares of Restricted
Stock which are then subject to restrictions imposed by the Committee shall
upon such termination of employment be forfeited and returned to the Company.
If the Employee terminates by reason of death, Disability or Retirement, such
shares shall be forfeited except to the extent such shares shall be made free
from restrictions by the Committee.
3. STOCK CERTIFICATE. Upon the purchase of the Restricted Stock by
Employee, a stock certificate issued in respect of such shares of Restricted
Stock shall be registered in the name of Employee and shall be deposited by
Employee with the Company together with a stock power endorsed in blank.
All stock certificates for shares of Restricted Stock during the
Restricted Period shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained
in an Agreement entered into between the registered owner and First
Interstate Bancorp. A copy of such Agreement is on file in the Office
of the Secretary of First Interstate Bancorp, 633 W. Fifth Street, Los
Angeles, California 90071."
With regard to any shares of Restricted Stock which cease to be
subject to restrictions pursuant to Section 2, the Company shall, within sixty
(60) days of the date such shares cease to be subject to restrictions,
transfer such shares free of all restrictions set forth in the Plan and this
Agreement to Employee or, in the event of such Employee's death, to Employee's
legal representative, heir or legatee.
4. SHAREHOLDER'S RIGHTS. Subject to the terms of this Agreement,
during the Restricted Period, Employee shall have, with respect to the
Restricted Stock, all rights of a shareholder of the Company, including the
right to vote such shares; provided, however, that all dividends paid with
respect to the shares of Restricted Stock while subject to the restrictions of
Section 2 shall be deposited with the Company, subject to the condition that
the sums so deposited shall be free of restriction and not subject to
forfeiture to the extent applied by the Company to satisfy Employee's Federal,
State or local withholding tax obligations pursuant to Section 6 of this
Agreement and Section 13 of the Plan, or otherwise released by the Committee
in its sole discretion. The Employee shall not be entitled to interest with
respect to the dividends so deposited.
5. REGULATORY COMPLIANCE. The issue and sale of shares of Restricted
Stock shall be subject to full compliance with all then applicable
requirements of law and the requirements of any stock exchange upon which the
Common Stock of the Company may be listed.
6. WITHHOLDING TAX. The Employee agrees that in the event to purchase
of the Restricted Stock or the expiration of restrictions thereon results in
Employee's realization of income which for Federal, State or local income tax
purposes is, in the opinion of counsel for the Company, subject to withholding
of tax at source by Employee's employer, Employee will pay to such Employee's
employer an amount equal to such withholding tax (or such employer on behalf
of the Company may withhold such amount from Employee's salary or from
dividends deposited with the Company with respect to the Restricted Stock),
7. INVESTMENT REPRESENTATION. Employee represents and agrees that if
Employee purchases the Restricted Stock at a time when there is not in effect
under the Securities Act of 1933 a registration statement relating to the
shares and there is not available for delivery a prospectus meeting the
requirements of Section 10(a)(3) of said Act, (i) Employee will acquire the
shares upon such purchase for the purpose of investment and not with a view to
their resale or distribution, (ii) that upon such purchase, Employee will
fumish to the Company an investment letter in form and substance satisfactory
to the Company, (iii) prior to selling or offering for sale any such shares,
Employee will furnish the Company with an opinion of counsel satisfactory to
it to the effect that such sale may lawfully be made and will furnish it with
such certificates as to factual matters as it may reasonably request, and (iv)
2
<PAGE>
that certificates representing such shares may be marked with an appropriate
legend describing such conditions precedent to sale or transfer.
8. FEDERAL INCOME TAX ELECTION. Employee hereby acknowledges receipt
of advice that pursuant to current Federal income tax laws, (i) Employee has
30 days in which to elect to be taxed in the current taxable year on the
difference between the amount paid, if any, for the Restricted Stock and the
Fair Market Value thereof in accordance with the provisions of Intemal Revenue
Code Section 83(b) and, (ii) if no such election is made, the taxable event
will occur when the shares of Restricted Stock cease to be subject to the
Company's right of repurchase, and the tax will be measured by the difference
between the amount paid, if any, for the Restricted Stock and the Fair Market
Value of the Restricted Stock on the date of the taxable event.
9. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of California.
10. SUCCESSORS. The rights under this Agreement are personal to
Employee and are not transferable except in the event of Employee's death to
the Employee's legal representatives, heirs or legatees. This Agreement shall
inure to the benefit of and be binding upon the Company and its successors and
assigns.
11. PLAN. This Agreement is subject to all of the terms and provisions
of the Plan, receipt of a copy of which is hereby acknowledged by Employee.
All terms defined in the Plan shall have the same meanings in this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto on ____________________.
FIRST INTERSTATE BANCORP
By:___________________________________
Chairman of the Board
______________________________________
Employee
______________________________________
(Address)
______________________________________
______________________________________
Social Security No.
______________________________________
Affiliate
3
<PAGE>
FIRST INTERSTATE BANCORP
1991 PERFORMANCE STOCK PLAN
STOCK UNIT AGREEMENT
FOR USE WITH 1994 MIP
(STOCK AWARD DEFERRAL)
IMPORTANT: The First Interstate Bancorp ("Bancorp") Compensation Committee
("Committee") as administrator of the First Interstate Bancorp 1991
Performance Stock Plan ("1991 PSP") has approved your request to defer into
Performance Units as defined in the 1991 PSP ("Stock Units") all or a portion
of the stock awarded to you under the 1991 PSP ("Stock Award") in connection
with your participation in the First Interstate Bancorp 1994 Management
Incentive Plan ("1994 MIP"). This Stock Unit Agreement ("Agreement") contains
the terms and conditions of the grant of Stock Units under the 1991 PSP for
the 1994 Performance Year pursuant to your 1994 MIP Stock Deferral Election
Form ("Election Form"). Please sign, date and return the extra copy of this
Agreement within ten (10) days of receipt to Judy SutterEhrenreich at First
Interstate Bancorp, CA T9-34, 633 West Fifth Street, Los Angeles, California
90071.
I, the undersigned, have made a request for Stock Units under the terms of
Section I of my Election Form. I understand that the Stock Units I am awarded
shall be subject to the following terms and conditions of this Agreement:
1. Award Date. The "Award Date" of the Stock Units is the date I would have
been entitled to receive payment of my Stock Award under the 1991 PSP but for
my deferral election under Section I of the Election Form.
2. Award of Stock Units. The number of Stock Units awarded pursuant to my
Election Form is which is equal in value to the number of shares of First
Interstate Bancorp Common Stock, $2.00 par value ("Common Stock") included in
my Stock Award, multiplied by the percent I have designated under Section I of
the Election Form as the percent to be deferred into Stock Units.
3. Stock Unit Agreement. The number of Stock Units determined in Paragraph 2
above will be credited to an account in my name under the 1991 PSP as of the
Award Date. Thereafter, any dividends paid on Common Stock will be credited to
my account and converted into additional Stock Units in accordance with
Section 7.1 of the 1991 PSP.
4. Terms of Payment. At the time specified in Section II of the Election Form
for payment of my Stock Units, Bancorp will issue shares of Common Stock equal
to the number of whole Stock Units credited to my account, subject to Section
9 of the 1991 PSP. Any fractional Stock Unit will be payable in cash.
5. Death.
(a) If I die before the payment date I have specified in Section II of the
Election Form, any payment of Stock Units due hereunder shall be paid
to my beneficiary in a lump sum as soon as administratively practical.
(b) If I have failed to designate a beneficiary or if my beneficiary does
not survive me, any payment shall be made in accordance with Section
8(d) of the 1994 MIP.
6. No Assignment. The rights under this Agreement are personal to me and are
not transferable except, in the event of my death, to my legal
representatives, heirs or legatees.
<PAGE>
7. Change in Control. In the event of a Change in Control as defined in
Section 14 of the 1991 PSP, as amended, payment of my entire Stock Unit award
under Paragraph 4 hereunder shall be accelerated. However, there shall be no
acceleration to a date less than six months after the Award Date.
8. Withholding. Any required withholding shall be made in accordance with
Section 13 of the 1991 PSP.
9. Regulatory Compliance. Any issuance of shares of Common Stock pursuant to
this Agreement shall be subject to full compliance with all the applicable
requirements of law and the requirements of any stock exchange upon which the
Common Stock may be listed. I represent and agree that such shares, if they
are received at a time when there is not in effect under the Securities Act of
1933 a registration statement relating to such shares and is not available for
delivery a prospectus meeting the requirements of Section 10(a) (3) of said
Act, shall be acquired for the purpose of investment and not with a view to
the distribution thereof. In such event, I, or my beneficiaries, if
applicable, consent: (a) upon receipt of the shares, to furnish Bancorp with
an investment letter in form and substance satisfactory to Bancorp; (b) prior
to selling or offering for sale any such shares, to furnish Bancorp with an
opinion of counsel satisfactory to Bancorp to the effect that such sale may be
lawfully made and to furnish Bancorp with such certificates regarding factual
matters as Bancorp may reasonably request; and (c) to receive certificates for
such shares marked with an appropriate legend describing such conditions
precedent to sale or transfer.
10. Amendment of Agreement. This Agreement shall be subject to amendment by
Bancorp only with my consent; provided, no amendment may have the effect of
causing a change in the time of payout established in the Election Form.
11. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California.
12. Interpretation of Agreement. This Agreement shall be subject to all of the
relevant terms of the 1991 PSP, 1994 MIP and the Election Form as interpreted
by the Committee. Except as otherwise provided in this Agreement, all terms
used herein shall have the same meaning as set forth in these documents. By
executing this Agreement, I acknowledge receipt of a copy of each of these
documents and agree to be bound by their terms.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto on
FIRST INTERSTATE BANCORP
By:____________________________________ ____________________________
[Chairman of the Board] Employee
2
FIRST INTERSTATE BANCORP
1988 PERFORMANCE STOCK PLAN
1. Purpose. The purpose of the 1988 Performance Stock Plan (the
"Plan") is to promote the interests of First Interstate Bancorp (the "Company")
and its Subsidiaries by providing performance incentives to certain of its key
employees who are responsible for the management, growth and financial success
of the Company. Pursuant to the Plan, incentive stock options, non-qualified
stock options and restricted stock awards may be granted.
2. Administration. The Plan shall be administered by a Committee
(the "Committee") consisting of those members of the Compensation Committee of
the Board of Directors of the Company who as of the date of any action by the
Committee are not then, and have not been during the preceding twelve months,
eligible to participate in the Plan. The Committee shall have full authority to
administer the Plan, including authority to interpret and construe any provision
of the Plan and to adopt such rules and regulations for administering the Plan
as it may deem necessary. Decisions of the Committee shall be final and binding
on all persons who have an interest in the Plan.
3. Eligibility. The persons eligible to participate in the Plan
shall be those key employees of the Company and its Subsidiaries selected by the
Committee; provided, however, that no person shall be granted an award under the
Plan who at the time owns more than 5% of the issued and outstanding common
stock of the Company.
4. Shares Subject to the Plan. The shares subject to the Plan
shall be shares of the Company's $2 par value Common Stock ("Common Stock").
The aggregate number of shares of Common Stock which may be delivered under the
Plan shall not exceed 1,500,000, of which not more than 500,000 shares may be
delivered pursuant to Restricted Stock awards, in each case subject to
adjustment pursuant to Section 7. If an option shall terminate for any reason,
except for the surrender thereof upon exercise of a related stock appreciation
right, without having been exercised in full, the shares applicable to the
unexercised portion of such option shall become available under the Plan. If
any shares of Restricted Stock are forfeited in accordance with the provisions
of Section 6, such shares shall again be available under the Plan for all
purposes. Either authorized and unissued shares or treasury shares may be
delivered under the Plan; provided, however, that unissued shares shall not be
awarded as Restricted Stock to any Participant unless the Committee expressly
determines, after consideration of all other remuneration paid or payable to the
Participant, that the services already rendered to the Company and its
Subsidiaries by the Participant have a value of not less than the par value of
the shares so awarded.
5. Stock Options. Stock options granted under the Plan may be
either incentive stock options qualifying under Section 422A of the Internal
Revenue Code of 1986 ("Incentive Options"), or non-qualified stock options
("Non-Qualified Options"). The options shall be evidenced by agreements in such
form as the Committee may, from time to time, approve and shall be subject to
the following terms and conditions.
5.1. Option Price. The option price of the shares of Common Stock
subject to each option shall be determined by the Committee but shall be not
less than 100% of the Fair Market Value of such shares on the date of granting
of the option.
5.2. Terms of Exercise. Each option granted under the Plan shall be
exercisable in whole or in part on such terms as the Committee may determine,
but in no event shall the option be exercisable within six months of or more
than 10 years after the date the option is granted.
5.3. Manner of Exercise. The option shall be exercised by giving
written notice to the Company specifying the number of full shares to be
purchased, accompanied by payment of the full price thereof. Payment for the
shares purchased shall be made in cash or, if permitted by the Committee, in
shares of Common Stock already owned by the holder of the option ("Optionee") or
partly in cash and partly in shares of Common Stock. Payments made in Common
Stock shall be valued at the Market Value of the Common Stock on the date of
exercise.
5.4. Additional Terms of Incentive Options. An Incentive Option
granted pursuant to the Plan:
(a) Must be designated as an Incentive Option by the Committee;
(b) Shall only be an Incentive Stock Option to the extent that
the aggregate Market Value of the Common Stock (determined as of the date of
grant of the option) with respect to which the option is first exercisable in
any calendar year does not exceed $100,000. For the purpose of the preceding
sentence all options granted after 1986 by the Company and any Parent or
Subsidiary which are intended to be incentive stock options under Section 422A
of the Internal Revenue Code of 1986 shall be taken into account. To the extent
the $100,000 limit is exceeded, the $100,000 in options (measured as described
above) granted earliest in time will be treated as incentive stock options; and
(c) If issuable to an employee who on the date of grant is the
owner of stock (determined with application of the ownership attribution rules
of Section 425(d) of the Internal Revenue Code of 1986) possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary, the Incentive Option price shall not be less than 110% of
the Fair Market Value of the Common Stock on the date of grant and the Incentive
Option shall not have a term in excess of five (5) years from the date of grant.
5.5. Termination of Right To Exercise Options. Each option granted
under this Plan shall set forth a termination date thereof, which date shall be
determined by the Committee. In any event, all options granted pursuant to the
Plan shall terminate upon the first to occur of the following events:
(a) The expiration of ten (10) years from the date such option
was granted, or any earlier termination date specified in the option agreement;
(b) The expiration of three (3) months from the date an
Optionee ceases to be employed by the Company or a Subsidiary other than by
reason of death, Retirement, Disability or termination of employment for cause
as determined by the Committee;
(c) The expiration of one (1) year from the date an Optionee
ceases to be employed by the Company or a Subsidiary by reason of Disability or
death;
(d) The expiration of three (3) years from the date an Optionee
ceases to be employed by the Company or a Subsidiary by reason of Retirement;
(e) The termination of the Optionee's employment for cause, as
determined by the Committee;
(f) The termination of the Plan pursuant to Section 8;
provided, that if an Optionee's death occurs after the Optionee ceases to be
employed by the Company or a Subsidiary but at a time when the Optionee has a
right to exercise any options pursuant to the foregoing, the right to exercise
such option shall be extended for one year from the date of death of the
Optionee. Subsequent to termination of the Optionee's employment for any
reason, only that portion of an option which was exercisable on the date of
termination of employment shall be exercisable, and only during the period, if
any, set forth above. Failure to exercise an Incentive Option within three
months of the date Optionee ceases to be employed by the Company or a Subsidiary
by reason of Retirement shall cause an Incentive Option to cease to be treated
as an incentive stock option for purposes of Section 421 of the Internal Revenue
Code of 1986.
5.6. Stock Appreciation Rights. Any option granted pursuant to the
Plan may, in the discretion of the Committee, contain a stock appreciation right
("Stock Appreciation Right"). A Stock Appreciation Right will permit the holder
thereof to exercise such right by the surrender of the option or portion thereof
which is then exercisable and receive in exchange therefor, upon such terms,
restrictions and conditions as the Committee deems advisable, an amount equal to
the excess of the Fair Market Value of the shares of Common Stock covered by the
option surrendered, or portion thereof, determined on the date of surrender,
over the aggregate option exercise price of such shares. Such payment may be
made in shares of Common Stock valued at Fair Market Value, in cash, or partly
in cash and partly in shares of Common Stock as the holder may elect, subject to
the consent or disapproval of the Committee in its sole discretion.
If a Stock Appreciation Right extends to less than all the shares of Common
Stock covered by the related option and if a portion of the related option is
thereafter exercised, the number of shares subject to the unexercised Stock
Appreciation Right shall be reduced only if and to the extent that the remaining
number of shares covered by such related Option is less than the remaining
number of shares subject to such Stock Appreciation Right.
The Stock Appreciation Right, in addition to any other restrictions
imposed by the Committee:
(a) shall expire no later than the underlying stock option;
(b) shall not permit the issuance of cash or shares of a value
which exceeds the difference between the exercise price of the underlying stock
option and the Market Value of the Common Stock subject to the underlying option
at the time the Stock Appreciation Right is exercised;
(c) shall be transferable only when the underlying stock option
is transferable, and under the same conditions;
(d) shall be exercisable only when the underlying stock option
is eligible to be exercised and then only when the Fair Market Value of the
stock subject to the underlying option exceeds the option exercise price; and
(e) shall contain such conditions upon exercise (including,
without limitation, conditions limiting the time of exercise to specified
periods) as may be required to satisfy applicable regulatory requirements,
including, without limitation, Rule 16b-3 (or any successor rule) promulgated by
the Securities and Exchange Commission.
In the event of the exercise of a Stock Appreciation Right, shares
represented by the option or part thereof surrendered upon such exercise shall
not be available for reissuance under the Plan.
5.7. Options Non-transferable. No option rights shall be assignable
or transferable except by will or by the laws of descent and distribution.
During the lifetime of an Optionee, the option or Stock Appreciation Right shall
be exercisable only by the Optionee or by the Optionee's guardian or legal
representative. After the death of an Optionee, the option or Stock
Appreciation Right may be exercised prior to its termination by the Optionee's
legal representative, heir or legatee.
6. Restricted Stock Awards. The award of restricted stock
("Restricted Stock") to employees shall be made in the discretion of the
Committee pursuant to agreements in such form as the Committee may, from time to
time, approve ("Restricted Stock Agreement"), subject to the following terms and
conditions.
6.1. Restricted Period. The Committee shall set a restricted period
during which the Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by this Plan and the
Restricted Stock Agreement (the "Restricted Period"). If a holder of Restricted
Stock ceases to be an employee of the Company or a Subsidiary during the
Restricted Period for any reason other than death, Disability or Retirement, all
shares of Restricted Stock which are then subject to the restrictions imposed by
the Committee shall upon such termination of employment be forfeited and
returned to the Company. If a holder of Restricted Stock ceases to be an
employee of the Company or a Subsidiary during the Restricted Period by reason
of death, Disability or Retirement, shares of Restricted Stock shall become free
of the restrictions imposed by the Committee to the extent determined by the
Committee, and the Company will deliver to the holder, or the holder's
successor, as the case may be, within 60 days, such shares of Common Stock.
Shares of Common Stock which do not become free of restrictions shall be
forfeited and returned to the Company. The Committee may, at any time, reduce
or terminate the Restricted Period. In the event of a Change in Control of the
Company, the Restricted Period shall terminate automatically. Subject to the
foregoing, at the end of the Restricted Period, the holder of Restricted Stock
shall be entitled to receive the Restricted Stock free of restrictions.
6.2. Restrictive Legend and Deposit of Certificates. Each
certificate issued in respect of shares of Restricted Stock awarded under the
Plan shall be registered in the name of the Participant, shall be deposited by
the Participant with the Company together with a stock power endorsed in blank
and shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained
in an Agreement entered into between the registered owner and First
Interstate Bancorp. A copy of such Agreement is on file in the office
of the Secretary of First Interstate Bancorp, 707 Wilshire Boulevard,
Los Angeles, California 90017."
6.3. Rights as Shareholder. Subject to the terms of the Restricted
Stock Agreement, the holder of Restricted Stock shall have all the rights of a
shareholder with respect to the Restricted Stock, including the right to vote
such shares; provided, however, that dividends paid with respect to the shares
of Restricted Stock shall be deposited with the Company and shall be subject to
forfeiture until the expiration of the Restricted Period, subject to the
condition that the sums so deposited shall be free of restriction and not
subject to forfeiture to the extent applied by the Company to satisfy the
employee's obligations with respect to Restricted Stock pursuant to Section 10
of the Plan, or otherwise released by the Committee in its sole discretion. The
holder of Restricted Stock shall not be entitled to interest with respect to the
dividends so deposited.
7. Changes in Capitalization. If there are any changes in the
capitalization of the Company affecting in any manner the number or kind of
outstanding shares of Common Stock of the Company, whether such changes have
been occasioned by declaration of stock dividends, stock split-ups,
reclassifications or recapitalization of such stock, or because the Company has
merged or consolidated with some other corporation (and provided the option is
not thereby termination pursuant to section 8 hereof), or for any other reason
whatsoever, then the number and kind of shares then subject to this Plan and to
outstanding options and the prices to be paid therefor, as well as any related
Stock Appreciation Right, shall be proportionately adjusted by the Committee
whenever and to the extent that the Committee determines that any such change
equitably requires an adjustment. Any shares of Common Stock or other
securities received by a holder of Restricted Stock with respect to such
Restricted Stock by reason of any such change shall be subject to the same
restrictions and shall be deposited with the Company.
8. Mergers or Consolidations. If the Company, at any time, should
elect to dissolve, undergo a reorganization, merge or consolidate with any other
corporation and the Company is not the surviving corporation, then (unless in
the case of a reorganization, merger or consolidation, one or more of the
surviving corporations assumes the options under the Plan or issues substitute
options in place thereof) each Optionee holding outstanding options not yet
exercised shall be notified of the Optionee's right to exercise such options and
any related Stock Appreciation Right to the extent then exercisable prior to
such dissolution, reorganization, merger or consolidation. The Committee may,
in its discretion and on such terms and conditions as it deems appropriate,
authorize the exercise of such options and any related Stock Appreciation Right
with respect to all shares covered thereby. Any option and related Stock
Appreciation Right not so exercised within thirty (30) days of such notification
shall thereupon be deemed terminated and simultaneously the Plan itself shall be
deemed terminated.
9. Acceleration of Options, Stock Appreciation Rights, and
Restricted Stock Awards. Unless, prior to a Change in Control, the Committee
determines that, upon its occurrence, there shall be no acceleration of Awards
or determines those Awards which shall be accelerated and the extent to which
they shall be accelerated, (i) each option and each related Stock Appreciation
Right shall become immediately exercisable to the full extent theretofore not
exercisable and (ii) the Restricted Period for Restricted Stock shall
immediately expire; provided, however, that Awards other than Restricted Stock
Awards shall not, in any event, be so accelerated to a date less than six months
after the date of grant. Acceleration of Awards shall comply with applicable
regulatory requirements, including, without limitation, Rule 16b-3 promulgated
by the Securities and Exchange Commission. For purposes of this Section 9 only,
Committee shall mean the Committee of the Company as constituted immediately
prior to the Change in Control.
10. Effect on Employment. Nothing herein shall be construed to
limit or restrict the right of the Company or any of its Subsidiaries to
terminate the employment of any Participant in the Plan, at any time, with or
without cause, or to increase or decrease the compensation of such Participant
from the rate of compensation in existence at the time the employee became a
Participant.
11. Withholding. The Company shall have the right to withhold from
amounts due Participants, or to collect from Participants directly, the amount
which the Company deems necessary to satisfy any taxes required by law to be
withheld by reason of participation in the Plan but, in the alternative, the
Participant may, prior to the payment of any Award, pay such amounts to the
Company in cash or in shares of Common Stock (which shall be valued at their
Fair Market Value on the date of payment). There is no obligation under this
Plan that any Participant be advised of the existence of the tax or the amount
required to be withheld. Without limiting the generality of the foregoing, in
any case where it determines that a tax is or will be required to be withheld in
connection with the issuance or transfer of shares of Common Stock under this
Plan, the Company may, pursuant to such rules as the Committee may establish,
reduce the number of such shares so issued or transferred by such number of
shares as the Company may deem appropriate in its sole discretion to accomplish
such withholding or make such other arrangements as it deems satisfactory.
Notwithstanding any other provision of this Plan, the Committee may impose such
conditions on the payment of any withholding obligation as may be required to
satisfy applicable regulatory requirements, including, without limitation, Rule
16b-3 promulgated by the Securities and Exchange Commission.
12. Additional Definitions. "Award" shall mean an Incentive Stock
Option, a Non-Qualified Stock Option, a Stock Appreciation Right, or a
Restricted Stock Award.
"Change in Control" of the Company means and shall be deemed to have
occurred if and when (i) any "person" (as such term is used in Section 13(d) of
the Securities Exchange Act of 1934) becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities; (ii)
individuals who were members of the Board of Directors of the Company
immediately prior to a meeting of the stockholders of the Company involving a
contest for the election of Directors do not constitute a majority of the Board
of Directors following such election; (iii) the stockholders of the Company
approve the dissolution or liquidation of the Company; (iv) the stockholders of
the Company approve an agreement to merge or consolidate, or otherwise
reorganize, with or into one or more entities which are not Subsidiaries, as a
result of which less than 50% of the outstanding voting securities of the
surviving or resulting entity are, or are to be, owned by former stockholders of
the Company (excluding from the term "former stockholders" a stockholder who is,
or as a result of the transaction in question becomes, an "affiliate", as that
term is used in the Securities Exchange Act of 1934 and the Rules promulgated
thereunder, of any party to such merger, consolidation or reorganization); or
(v) the stockholders of the Company approve the sale of substantially all of the
Company's business and/or assets to a person or entity which is not a
Subsidiary.
"Disability" shall mean such physical or mental condition affecting the
employee as shall be determined by the Committee, in its sole discretion, to
constitute a disability causing a termination of employment.
"Fair Market Value" or "Market Value" on a specified day means the
closing price on that day of the Common Stock as reported on the New York Stock
Exchange-Composite Tape, or if no sale of the Common Stock was so reported on
that date, on the next preceding day on which there was such a sale.
"Parent" means any corporation owning directly or indirectly 50% or more
of the total combined voting power of all classes of stock of the Company.
"Participant" means an eligible employee selected by the Committee to
participate in the Plan.
"Subsidiary" means any corporation of which the Company owns, directly
or indirectly, 50% or more of the total combined voting power of all classes of
stock. If an entity ceases to be a Subsidiary, each employee of that entity
shall no longer be deemed employed by the Company or a Subsidiary under the Plan
(unless the employee continues to be employed by the Company or another entity
which is a Subsidiary).
"Retirement" means normal or early retirement in accordance with the
provisions of the First Interstate Retirement Plan.
13. Amendment of Plan. The Board of Directors of the Company may
make such amendments to this Plan and to any agreements thereunder as it shall
deem advisable, including, but not limited to, accelerating the time at which an
option may be exercised or the time when restrictions on Restricted Stock shall
expire, but may not, without shareholder approval:
(a) increase the maximum number of shares subject to the Plan,
except pursuant to section 7;
(b) decrease the option price provided for in section 5;
(c) extend the term during which or for which options may be
granted; or
(d) change the designation of the class of employees eligible
to participate in the Plan.
Without the consent of the Participant, no amendment shall impair the rights of
any Participant in any rights awarded to such Participant under the Plan, except
as permitted by the Plan.
14. Effective Date and Termination of Plan. The Plan shall be
effective February 16, 1988, subject to receipt of shareholder approval of the
Plan within one year of that date. All awards pursuant to the Plan prior to the
receipt of shareholder approval shall be subject to receipt of such approval.
If such approval is not received, the award shall be forfeited. The Plan shall
terminate ten years from the effective date; provided, however, that the Board
of Directors of the Company may terminate the Plan at any prior time within its
absolute discretion. No such termination, other than as provided for in section
8 hereof, shall in any way affect any option, Stock Appreciation Right or
Restricted Stock then outstanding.
FIRST AMENDMENT
TO
FIRST INTERSTATE
1988 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate Bancorp 1988
Performance Stock Plan (the "Plan") effective February 16, 1988 as approved by
shareholders on April 29, 1988.
In order to have consistent treatment under First Interstate Bancorp's
various plans in the event that employees become employees of another
company, this amendment is being adopted. This amendment is effective
August 17, 1992.
1. New sentences have been added to Section 6.1 of the Plan to read
as follows:
In the event that employees of the Company or its Subsidiaries
become employees of another company pursuant to a stock or asset sale,
merger, or similar transaction or in the event of a corporate
reorganization, reduction in force or similar event, the Committee
shall have the authority, which shall be exercised in its sole
discretion, to continue to credit service for purposes of satisfying
the restricted period requirements set forth in the Restricted Stock
Agreement. Such Committee authority shall only apply to restricted
stock granted to individuals who are not subject to Section 16 of the
Securities Exchange Act.
2. The following paragraph has been added as a new Section
15:
15. Expiration of Options. In the event that employees
of the Company or its Subsidiaries become employees of another company
pursuant to a stock or asset sale, merger or similar transaction or in
the event of a corporate reorganization, reduction in force or similar
event, the Committee shall have the authority, which shall be
exercised in its sole discretion, to modify the dates upon which
options previously granted shall expire. Such Committee authority
shall only apply to options granted to individuals who are not subject
to Section 16 of the Securities Exchange Act. Any modification to the
terms under which the option would otherwise expire shall not cause
the option to expire later than the date the option was originally
scheduled to expire pursuant to the terms or the original Stock Option
Agreement.
Executed at Los Angeles this 22 day of August, 1995.
FIRST INTERSTATE BANCORP
By: /SIGNED/
--------------------------
Executive Vice President
By: /SIGNED/
--------------------------
Secretary
SECOND AMENDMENT
TO
FIRST INTERSTATE BANCORP
1988 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate Bancorp 1988
Performance Stock Plan (the "Plan") effective February 16, 1988 as approved by
shareholders on April 29, 1988 at the Annual Shareholder's meeting.
In order to have a consistent definition of Change in Control among
First Interstate Bancorp's various plans, this Amendment is being adopted. This
Amendment is effective June 20, 1994.
1. The definition of Change in Control in Section 12 Additional Definitions
is amended by revising it to read as follows:
"Change in Control" of the Company means and shall be deemed to have
occurred if and when any one of the following five events occurs: (i)
any "Person" (as such term is used in Section 13(d) of the Securities
Exchange Act of 1934 (the "Exchange Act")) becomes a beneficial owner,
directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding
securities; (ii) individuals who were members of the Board of
Directors of the Company immediately prior to a meeting of the
stockholders of the Company involving a contest for the election of
Directors do not constitute a majority of the Board of Directors
following such election; (iii) the stockholders of the Company approve
the dissolution or liquidation of the Company; (iv) the stockholders
of the Company approve an agreement to merge or consolidate, or
otherwise reorganize, with or into one or more entities which are not
Subsidiaries, as a result of which less than 50% of the outstanding
voting securities of the surviving or resulting entity are, or are to
be, owned by former stockholders of the Company (excluding from the
term "former stockholders" a stockholder who is, or as a result of the
transaction in question becomes, an "affiliate", as that term is used
in the Exchange Act and the Rules promulgated thereunder, of any party
to such merger, consolidation or reorganization); or (v) the
stockholders of the Company approve the sale of substantially all of
the Company's business and/or assets to a person or entity which is
not a Subsidiary.
Executed at Los Angeles, California this 20th day of July, 1994.
FIRST INTERSTATE BANCORP
By: /SIGNED/
----------------------------
Executive Vice President
By: /SIGNED/
----------------------------
Secretary
FIRST INTERSTATE BANCORP
1988 PERFORMANCE STOCK PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is between FIRST INTERSTATE BANCORP, a Delaware
corporation (hereinafter called the "Company"), and (hereinafter called
the "Employee").
RECITALS:
The Company has established the 1988 Performance Stock Plan (the
"Plan"); and
The Committee of the Board of Directors of the Company designated in the
Plan (the "Committee") has approved the execution of this Non-Qualified Stock
Option Agreement containing the grant of the option herein set forth to the
Employee to purchase shares of the Common Stock, $2.00 par value, of the Company
upon the terms and conditions hereinafter set forth;
AGREEMENT:
In consideration of the mutual obligations contained herein, it is
hereby agreed:
1. Grant of Option. The Company hereby grants to the Employee a
Non-Qualified Option to purchase from the Company all or any part of
( ) shares of its authorized Common Stock at the price of $ per share. It
is understood that such option is not intended to be an "Incentive Stock Option"
within the meaning of Section 422A of the Internal Revenue Code of 1954, as
amended (the "Code").
2. Term of Option. This option may be exercised (unless terminated
prior to such exercise as hereinafter provided) during the periods commencing
after the anniversary and for the percentage of shares granted as provided
below:
Anniversary Following Vesting
The Date Hereof Schedule
First Anniversary . . . . 25% of Shares Granted
Second Anniversary . . . . 25% of Shares Granted
Third Anniversary . . . . 25% of Shares Granted
Fourth Anniversary . . . . 25% of Shares Granted
provided, however, that this option shall be exercised for full shares only and
shall not be exercised for less than 50 shares at any one time unless the
remaining shares covered hereby is less than 50. In the event that the Employee
shall not in any year purchase all or any part of the shares which the Employee
is entitled to purchase in such year, the Employee's right to purchase any
shares not purchased in such year shall continue until the expiration or
termination of this option, which in no event shall be more than ten (10) years
from the date of grant.
3. Expiration of Option. This option shall expire and all
rights to purchase shares hereunder shall cease at 5:00 o'clock p.m., California
time, on or prior thereto upon the happening of the first to occur of
the following events: (a) the expiration of ten (10) years from the date such
option was granted, or any earlier termination date specified in the option
agreement; (b) the expiration of three (3) months from the date the Employee
ceases to be employed by the Company or a Subsidiary other than by reason of
death, Retirement, Disability or termination of employment for cause as
determined by the Committee; (c) the expiration of one (1) year from the date
the Employee ceases to be employed by the Company or a Subsidiary by reason of
Disability or death; (d) the expiration of three (3) years from the date the
Employee ceases to be employed by the Company or a Subsidiary by reason of
Retirement; (e) the termination of the Employee's employment for cause, as
determined by the Committee; (f) the termination of the Plan pursuant to Section
8; provided, that if the Employee's death occurs after the Employee ceases to be
employed by the Company or a Subsidiary but at a time when the Employee has a
right to exercise any options pursuant to the foregoing, the right to exercise
such option shall be extended for one year from the date of death of the
Employee. Subsequent to termination of the Employee's employment for any
reason, only that portion of an option which was exercisable on the date of
termination of employment shall be exercisable, and only during the period, if
any, set forth above.
4. Nontransferability of Option. This option shall be
nonassignable and nontransferable by the Employee other than by will or the laws
of descent and distribution, and shall be exercisable during the lifetime of the
Employee only by the Employee or by the Employee's guardian or legal
representative. After the death of the Employee, this option may be exercised
prior to its termination by the Employee's legal representative, heir or
legatee, to the extent permitted in the Plan. Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of this option, or of any right
or privilege conferred hereby, contrary to the provisions hereof, or upon any
attempted sale under any execution, attachment or similar process upon the
rights and privileges conferred hereby, this option and the rights and
privileges conferred hereby shall immediately become null and void. Until
written notice of any permitted passage of rights under this option shall have
been given to and received by the Secretary of the Company, the Company may, for
all purposes, regard the Employee as the holder of this option.
5. Exercise of Option. The rights granted under this Agreement may
be exercised by the Employee, or by the person or persons to whom the Employee's
rights under this Agreement shall have passed under the provisions of Section 4
hereof, by delivering to the Company in care of its Secretary, at 707 Wilshire
Boulevard, Los Angeles, California 90017, written notice of the number of shares
with respect to which the rights are being exercised, accompanied by this
Agreement for appropriate endorsement by the Company, such investment letter as
may be required by Section 10 hereof, and the consideration provided in the
Plan, if any, provided that if the Employee intends to exercise this option by
delivery of consideration consisting in whole or in part of shares of Common
Stock already owned by the Employee, shall secure the prior consent of the
Committee to such delivery.
6. Regulatory Compliance. The issue and sale of shares of stock
pursuant to this Agreement shall be subject to full compliance with all then
applicable requirements of law and the requirements of any stock exchange upon
which Common Stock of the Company may be listed.
7. Modification and Termination. The rights of the Employee are
subject to modification, acceleration and termination in certain events as
provided in Sections 7, 8 and 9 of the Plan.
8. Withholding Tax. The Employee agrees that, in the event the
exercise of any rights granted in this Agreement results in the Employee's
realization of income which for Federal, state or local income tax purposes is,
in the opinion of counsel for the Company, subject to withholding of tax at
source by the Employee's employer, the Employee will pay to the Employee's
employer an amount equal to such withholding tax (or such employer on behalf of
the Company may withhold such amount from the Employee's salary) prior to
delivery to the Employee of certificates representing the shares purchased or
transferred.
9. Holder of Shares. Neither the Employee nor the Employee's legal
representative, legatee or distributee shall be, or be deemed to be, a holder of
any shares of the Company's Common Stock subject to this option unless and until
such person has received a certificate or certificates therefor. No adjustment
will be made for dividends or other rights for which the record date is prior to
the date such stock certificate or certificates are so issued.
10. Investment Covenant. The Employee represents and agrees that if
the Employee exercises this option in whole or in part at a time when there is
not in effect under the Securities Act of 1933 a registration statement relating
to the shares issuable upon exercise hereof and there is not available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of said Act,
(i) the Employee will acquire the shares upon such exercise for the purpose of
investment and not with a view to the distribution thereof, (ii) that upon each
such exercise of this option, the Employee will furnish to the Company an
investment letter in form and substance satisfactory to the Company, (iii) prior
to selling or offering for sale any such shares, the Employee will furnish the
Company with an opinion of counsel satisfactory to it to the effect that such
sale may lawfully be made and will furnish it with such certificates as to
factual matters as it may reasonably request, and (iv) that certificates
representing such shares may be marked with an appropriate legend describing
such conditions precedent to sale or transfer. Any person or persons entitled
to exercise such option under the provision of Paragraph 4 hereof shall furnish
to the Company letters, opinions and certificates to the same effect as would
otherwise be required of the Employee.
11. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California.
12. Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their legal representatives, and permitted
successors and assigns.
13. Plan. This Agreement is subject to all of the terms and
provisions of the Plan, receipt of a copy of which is hereby acknowledged by the
Employee.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto on.
FIRST INTERSTATE BANCORP
By:______________________________
Chairman of the Board
_________________________________
EMPLOYEE
_________________________________
(Address)
_________________________________
_________________________________
Social Security No.______________
Affiliate _______________________
OPTION EXERCISE ENDORSEMENTS
DATE OF NUMBER OF NOTED FOR FIRST
EXERCISE SHARES INTERSTATE BANCORP
FIRST INTERSTATE BANCORP
1983 PERFORMANCE STOCK PLAN
1. Purpose. The purpose of the 1983 Performance Stock Plan (the
"Plan") is to promote the interests of First Interstate Bancorp (the "Company")
and its Subsidiaries by providing performance incentives to certain of its key
employees who are responsible for the management, growth and financial success
of the Company. Pursuant to the Plan incentive stock options, non-qualified
stock options and restricted stock awards may be granted.
2. Administration. The Plan shall be administered by a Committee
(the "Committee") consisting of those members of the Compensation Committee of
the Board of Directors of the Company who as of the date of any action by the
Committee are not then, and have not been during the preceding twelve months,
eligible to participate in the Plan. The Committee shall have full authority to
administer the Plan, including authority to interpret and construe any provision
of the Plan and to adopt such rules and regulations for administering the Plan
as it may deem necessary. Decisions of the Committee shall be final and binding
on all persons who have an interest in the Plan.
3. Eligibility. The persons eligible to participate in the Plan
shall be those key employees of the Company and its Subsidiaries selected by the
Committee; provided, however, that no person shall be granted an award under the
Plan who at the time owns more than 5% of the issued and outstanding common
stock of the Company.
4. Shares Subject to the Plan. The shares subject to the Plan
shall be shares of the Company's $2 par value Common Stock ("Common Stock").
The aggregate number of shares of Common Stock which may be delivered under the
Plan shall not exceed 1,000,000, of which not more than 300,000 shares may be
delivered pursuant to Restricted Stock awards, in each case subject to
adjustment pursuant to Section 7. If an option shall terminate for any reason,
except for the surrender thereof upon exercise of a related stock appreciation
right, without having been exercised in full, the shares applicable to the
unexercised portion of such option shall become available under the Plan. If
any shares of Restricted Stock are forfeited in accordance with the provisions
of Section 6, such shares shall again be available under the Plan for all
purposes. Either authorized and unissued shares or treasury shares may be
delivered under the Plan; provided, however, that unissued shares shall not be
awarded as Restricted Stock to any Participant unless the Committee expressly
determines, after consideration of all other remuneration paid or payable to the
Participant, that the services already rendered to the Company and its
Subsidiaries by the Participant have a value of not less than the par value of
the shares so awarded.
5. Stock Options. Stock options granted under the Plan may be
either incentive stock options qualifying under Section 422A of the Internal
Revenue Code of 1954, as amended ("Incentive Options"), or non-qualified stock
options ("Non-Qualified Options"). The options shall be evidenced by agreements
in such form as the Committee may, from time to time, approve and shall be
subject to the following terms and conditions.
5.1. Option Price. The option price of the shares of Common Stock
subject to each option shall be determined by the Committee but shall be not
less than 100% of the Fair Market Value of such shares on the date of granting
of the option.
5.2. Terms of Exercise. Each option granted under the Plan shall be
exercisable in whole or in part on such terms as the Committee may determine,
but in no event shall the option be exercisable within one year of, or more than
10 years after, the date the option is granted.
5.3. Manner of Exercise. The option shall be exercised by giving
written notice to the Company specifying the number of full shares to be
purchased, accompanied by payment of the full price thereof. Payment for the
shares purchased shall be made in cash or, if permitted by the Committee, in
shares of Common Stock already owned by the holder of the option ("Optionee") or
partly in cash and partly in shares of Common Stock. Payments made in Common
Stock shall be made bv delivery of the certificates property endorsed for
transfer in negotiable form and shall be valued at the Market Value of the
Common Stock on the date of exercise.
5.4. Additional Terms of Incentive Options. An Incentive Option
granted pursuant to the Plan:
(a) Must be designated as an Incentive Option by the
Committee;
(b) Shall not be exercisable while there is outstanding any
incentive stock option which was granted to the same employee before the
granting of such option with respect to a right to purchase shares of the
Company or a Parent or Subsidiary of the Company or any predecessor of any of
the foregoing. An incentive stock option shall be deemed outstanding for
purposes of the foregoing sentence until such option is exercised in full or
expires by reason of lapse of time;
(c) Shall not be issued for a number of shares which would
cause the aggregate Fair Market Value (determined as of the date the option is
granted) of the shares subject to incentive stock options granted to an employee
in any calendar year by the Company or any Parent or Subsidiary of the Company
to exceed $100,000 plus any unused limit carry-over to such year permitted by
Section 422A(c)(4) of the Internal Revenue Code; and
(d) If issuable to an employee who on the date of grant is
the owner of stock (determined with application of the ownership attribution
rules of Section 425(d) of the Internal Revenue Code) possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary, the Incentive Option price shall not be less than 110% of
the Fair Market Value of the Common Stock on the date of grant and the Incentive
Option shall not have a term in excess of five (5) years from the date of grant.
5.5. Termination of Right To Exercise Options. Each option granted
under this Plan shall set forth a termination date thereof, which date shall be
determined by the Committee. In any event, all options granted pursuant to the
Plan shall terminate upon the first to occur of the following events:
(a) The expiration of ten (10) years from the date such
option was granted, or any earlier termination date specified in the option
agreement;
(b) The expiration of three (3) months from the date an
Optionee ceases to be employed by the Company or a Subsidiary other than by
reason of death, Retirement, Disability or termination of employment for cause
as determined by the Committee;
(c) The expiration of one (1) year from the date an Optionee
ceases to be employed by the Company or a Subsidiary by reason of Retirement,
Disability or death;
(d) The termination of the Optionee's employment for cause,
as determined by the Committee;
(e) The termination of the Plan pursuant to Section 8;
provided, that if an Optionee's death occurs after the Optionee ceases to be
employed by the Company or a Subsidiary but at a time when the Optionee has a
right to exercise any options pursuant to the foregoing, the right to exercise
such option shall be extended for one year from the date of death of the
Optionee. Subsequent to termination of the Optionee's employment for any
reason, only that portion of an option which was exercisable on the date of
termination of employment shall be exercisable, and only during the period, if
any, set forth above. Failure to exercise an Incentive Option within three
months of the date Optionee ceases to be employed by the Company or a Subsidiary
by reason of Retirement shall cause an Incentive Option to cease to be treated
as an incentive stock option for purposes of Section 421 of the Internal Revenue
Code.
5.6. Stock Appreciation Rights. Any option granted pursuant to the
Plan may, in the discretion of the Committee, contain a stock appreciation right
("Stock Appreciation Right"). A Stock Appreciation Right will permit the holder
thereof to exercise such right by the surrender of the option or portion thereof
which is then exercisable and receive in exchange therefor, upon such terms,
restrictions and conditions as the Committee deems advisable, an amount equal to
the excess of the fair market value of the shares of Common Stock covered by the
option surrendered, or portion thereof, determined on the date of surrender,
over the aggregate option exercise price of such shares. Such payment may be
made in shares of Common Stock valued at fair market value, in cash, or parity
in cash and partly in shares of Common Stock as the holder may elect, subject to
the consent or disapproval of the Committee in its sole discretion.
The Stock Appreciation Right, in addition to any other restrictions
imposed by the Committee:
(a) shall expire no later than the underlying stock option;
(b) shall not permit the issuance of cash or shares of a
value which exceeds the difference between the exercise price of the underlying
stock option and the Market Value of the Common Stock subject to the underlying
option at the time the Stock Appreciation Right is exercised;
(c) shall be transferable only when the underlying stock
option is transferable, and under the same conditions; and
(d) shall be exercisable only when the underlying stock
option is eligible to be exercised and then only when the Fair Market Value of
the stock subject to the underlying option exceeds the option exercise price.
In the event of the exercise of a Stock Appreciation Right, shares
represented by the option or part thereof surrendered upon such exercise shall
not be available for reissuance under the Plan.
5.7. Options Non-transferable. No option rights shall be assignable
or transferable except by will or by the laws of descent and distribution.
During the lifetime of an Optionee, the option or Stock Appreciation Right shall
be exercisable only by the Optionee or by the Optionee's guardian or legal
representative. After the death of an Optionee, the option or Stock
Appreciation Right may be exercised prior to its termination by the Optionee's
legal representative, heir or legatee.
6. Restricted Stock Awards. The award of restricted stock
("Restricted Stock") to employees shall be made in the discretion of the
Committee pursuant to agreements in such form as the Committee may, from time to
time, approve ("Restricted Stock Agreement"), subject to the following terms and
conditions.
6.1. Restricted Period. The Committee shall set a restricted period
during which the Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by this Plan and the
Restricted Stock Agreement (the "Restricted Period"). If a holder of Restricted
Stock ceases to be an employee of the Company or a Subsidiary during the
Restricted Period for any reason other than death, Disability or Retirement, all
shares of Restricted Stock which are then subject to the restrictions imposed by
the Committee shall upon such termination of employment be forfeited and
returned to the Company. If a holder of Restricted Stock ceases to be an
employee of the Company or a Subsidiary during the Restricted Period by reason
of death, Disability or Retirement, shares of Restricted Stock shall become free
of the restrictions imposed by the Committee to the extent determined by the
Committee, and the Company will deliver to the holder, or the holder's
successor, as the case may be, within 60 days, such shares of Common Stock.
Shares of Common Stock which do not become free of restrictions shall be
forfeited and returned to the Company. The Committee may, at any time, reduce
or terminate the Restricted Period. In the event of a Change in Control of the
Company, the Restricted Period shall terminate automatically. Subject to the
foregoing, at the end of the Restricted Period, the holder of Restricted Stock
shall be entitled to receive the Restricted Stock free of restrictions.
6.2. Restrictive Legend and Deposit of Certificates. Each
certificate issued in respect of shares of Restricted Stock awarded under the
Plan shall be registered in the name of the Participant, shall be deposited by
the Participant with the Company together with a stock power endorsed in blank
and shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained in an
Agreement entered into between the registered owner and First Interstate
Bancorp. A copy of such Agreement is on file in the office of the Secretary of
First Interstate Bancorp, 707 Wilshire Boulevard, Los Angeles, California
90017."
6.3. Rights as Shareholder. Subject to the terms of the Restricted
Stock Agreement, the holder of Restricted Stock shall have all the rights of a
shareholder with respect to the Restricted Stock, including the right to vote
such shares; provided, however, that dividends paid with respect to the shares
of Restricted Stock shall be deposited with the Company and shall be subject to
forfeiture until the expiration of the Restricted Period, subject to the
condition that the sums so deposited shall be free of restriction and not
subject to forfeiture to the extent applied by the Company to satisfy the
employee's obligations with respect to Restricted Stock pursuant to Section 10
of the Plan, or otherwise released by the Committee in its sole discretion. The
holder of Restricted Stock shall not be entitled to interest with respect to the
dividends so deposited.
7. Changes in Capitalization. If there are any changes in the
capitalization of the Company affecting in any manner the number or kind of
outstanding shares of Common Stock of the Company, whether such changes have
been occasioned by declaration of stock dividends, stock split-ups,
reclassifications or recapitalization of such stock, or because the Company has
merged or consolidated with some other corporation (and provided the option is
not thereby terminated pursuant to section 8 hereof), or for any other reason
whatsoever, then the number and kind of shares then subject to this Plan and to
outstanding options and the prices to be paid therefor, as well as any related
Stock Appreciation Right, shall be proportionately adjusted by the Committee
whenever and to the extent that the Committee determines that any such change
equitably requires an adjustment. Any shares of Common Stock or other
securities received by a holder of Restricted Stock with respect to such
Restricted Stock by reason of any such change shall be subject to the same
restrictions and shall be deposited with the Company.
8. Mergers or Consolidations. If the Company, at any time, should
elect to dissolve, undergo a reorganization, merge or consolidate with any other
corporation and the Company is not the surviving corporation, then (unless in
the case of a reorganization, merger or consolidation, one or more of the
surviving corporations assumes the options under the Plan or issues substitute
options in place thereof) each Optionee holding outstanding options not yet
exercised shall be notified of the Optionee's right to exercise such options and
any related Stock Appreciation Right to the extent then exercisable prior to
such dissolution, reorganization, merger or consolidation. The Committee may,
in its discretion and on such terms and conditions as it deems appropriate,
authorize the exercise of such options and any related Stock Appreciation Right
with respect to all shares covered thereby. Any option and related Stock
Appreciation Right not so exercised within thirty (30) days of such notification
shall thereupon be deemed terminated and simultaneously the Plan itself shall be
deemed terminated.
9. Effect on Employment. Nothing herein shall be construed to
limit or restrict the right of the Company or any of its Subsidiaries to
terminate the employment of any Participant in the Plan, at any time, with or
without cause, or to increase or decrease the compensation of such Participant
from the rate of compensation in existence at the time the employee became a
Participant.
10. Withholding. The Company shall have the right to withhold from
amounts due Participants, or to collect from Participants directly, the amount
which the Company deems necessary to satisfy any taxes required by law to be
withheld by reason of participation in the Plan.
11. Additional Definitions. "Change in Control" of the Company
means and shall be deemed to have occurred if and when (i) any "person" (as such
term is used in Section 13(d) of the Securities Exchange Act of 1934) becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities or (ii) individuals who were members of the Board of
Directors of the Company immediately prior to a meeting of the stockholders of
the Company involving a contest for the election of Directors shall not
constitute a majority of the Board of Directors following such election.
"Disability" shall mean such physical or mental condition affecting the
employee as shall be determined by the Committee, in its sole discretion, to
constitute a disability causing a termination of employment.
"Fair Market Value" or "Market Value" on a specified day means the
closing price on that day of the Common Stock as reported on the New York Stock
Exchange-Composite Tape, or if no sale of the Common Stock was so reported on
that date, on the next preceding day on which there was such a sale.
"Parent" means any corporation owning directly or indirectly 50% or more
of the total combined voting power of all classes of stock of the Company.
"Participant" means an eligible employee selected by the Committee to
participate in the Plan.
"Subsidiary" means any corporation of which the Company owns, directly
or indirectly, 50% or more of the total combined voting power of all classes of
stock.
"Retirement" means normal or early retirement in accordance with the
provisions of the First Interstate Retirement Plan.
12. Amendment of Plan. The Board of Directors of the Company may
make such amendments to this Plan and to any agreements thereunder as it shall
deem advisable, including, but not limited to, accelerating the time at which an
option may be exercised or the time when restrictions on Restricted Stock shall
expire, but may not, without shareholder approval:
(a) increase the maximum number of shares subject to the Plan,
except pursuant to section 7;
(b) decrease the option price provided for in section 5;
(c) extend the term during which or for which options may be
granted; or
(d) change the designation of the class of employees eligible
to participate in the Plan.
Without the consent of the Participant, no amendment shall impair the rights of
any Participant in any rights awarded to such Participant under the Plan, except
as permitted by the Plan.
13. Effective Date and Termination of Plan. The Plan shall be
effective January 1, 1983, subject to receipt of shareholder approval of the
Plan within one year of that date. All awards pursuant to the Plan prior to the
receipt of shareholder approval shall be subject to receipt of such approval.
If such approval is not received, the award shall be forfeited. The Plan shall
terminate ten years from the effective date; provided, however, that the Board
of Directors of the Company may terminate the Plan at any prior time within its
absolute discretion. No such termination, other than as provided for in section
8 hereof, shall in any way affect any option, Stock Appreciation Right or
Restricted Stock then outstanding.
FIRST AMENDMENT
BOARD OF DIRECTORS
AMENDMENT TO 1983 PERFORMANCE STOCK PLAN
RESOLVED, that the Board of Directors of this Corporation, pursuant to
the authority contained in Section 12 of the First Interstate Bancorp 1983
Performance Stock Plan (the "Plan") hereby adopts an amendment to the Plan in
the form as set forth below:
10A. Withholding on Restricted Stock. In addition, with respect to an Award of
Restricted Stock, and in addition to the Company's rights under Section 6.3 of
the Plan, the Company shall have the right to withhold that portion of Shares of
Common Stock otherwise vested as are necessary to satisfy applicable withholding
taxes, provided the Participant complies with the following requirements:
(a) The Participant shall elect, on a date prior to the date
the applicable tax is determined, to have shares apply to the withholding
obligation;
(b) the election shall be irrevocable;
(c) the election shall be subject to the disapproval of the
Compensation Committee;
(d) the election shall be made at least six months after the
Award of Restricted Stock; and
(e) the election shall be made (i) either six months prior
to the date the applicable tax is determined or (ii) within the ten day "window
period" beginning on the third day following the release of quarterly or annual
financial statements.
RESOLVED FURTHER, that the appropriate officers of this
Corporation be, and they hereby are, authorized to take such actions as are
reasonable and appropriate to implement this amendment.
SECOND AMENDMENT
TO
FIRST INTERSTATE
1983 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate Bancorp 1983
Performance Stock Plan (the "Plan") effective November 15, 1982 as approved by
shareholders on April 22, 1983.
In order to have consistent treatment under First Interstate Bancorp's
various plans in the event that employees become employees of another company,
this amendment is being adopted. This amendment is effective August 17, 1992.
1. New sentences have been added to Section 6.1 of the Plan to read
as follows:
In the event that employees of the Company or its Subsidiaries
become employees of another company pursuant to a stock or asset sale, merger,
or similar transaction or in the event of a corporate reorganization, reduction
in force or similar event, the Committee shall have the authority, which shall
be exercised in its sole discretion, to continue to credit service for purposes
of satisfying the restricted period requirements set forth in the Restricted
Stock Agreement. Such Committee authority shall only apply to restricted stock
granted to individuals who are not subject to Section 16 of the Securities
Exchange Act.
2. The following paragraph has been added as a new Section 14:
14. Expiration of Options. In the event that employees of the
Company or its Subsidiaries become employees of another company pursuant to a
stock or asset sale, merger or similar transaction or in the event of a
corporate reorganization, reduction in force or similar event, the Committee
shall have the authority, which shall be exercised in its sole discretion, to
modify the dates upon which options previously granted shall expire. Such
Committee authority shall only apply to options granted to individuals who are
not subject to Section 16 of the Securities Exchange Act. Any modification to
the terms under which the option would otherwise expire shall not cause the
option to expire later than the date the option was originally scheduled to
expire pursuant to the terms or the original Stock Option Agreement.
Executed at Los Angeles this 22 day of August, 1995.
FIRST INTERSTATE BANCORP
By: /SIGNED/
--------------------------
Executive Vice President
By: /SIGNED/
---------------------------
Secretary
THIRD AMENDMENT
TO
FIRST INTERSTATE BANCORP
1983 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate Bancorp 1983
Performance Stock Plan (the "Plan") effective November 15, 1982 as approved by
shareholders on April 29, 1988 at the Annual Shareholder's meeting.
In order to have a consistent definition of Change in Control among
First Interstate Bancorp's various plans, this Amendment is being adopted. This
Amendment is effective June 20, 1994.
1. The definition of Change in Control in Section 11 Additional Definitions
is amended by revising it to read as follows:
"Change in Control" of the Company means and shall be deemed to have
occurred if and when any one of the following five events occurs: (i) any
"person" (as such term is used in Section 13(d) of the Securities Exchange Act
of 1934 (the "Exchange Act")) becomes a beneficial owner,directly or indirectly,
of securities of the Company representing 20% or more of the combined voting
power of the Company's then outstanding securities; (ii) individuals who were
members of the Board of Directors of the Company immediately prior to a meeting
of the stockholders of the Company involving a contest for the election of
Directors do not constitute a majority of the Board of Directors following such
election; (iii) the stockholders of the Company approve the dissolution or
liquidation of the Company; (iv) the stockholders of the Company approve an
agreement to merge or consolidate, or otherwise reorganize, with or into one or
more entities which are not Subsidiaries, as a result of which less than 50% of
the outstanding voting securities of the surviving or resulting entity are, or
are to be, owned by former stockholders of the Company (excluding from the term
"former stockholders" a stockholder who is, or as a result of the transaction in
question becomes, an "affiliate", as that term is used in the Exchange Act and
the Rules promulgated thereunder, of any party to such merger, consolidation or
reorganization); or (v) the stockholders of the Company approve the sale of
substantially all of the Company's business and/or assets to a person or entity
which is not a Subsidiary.
Executed at Los Angeles, California this 20th day of July 1994.
FIRST INTERSTATE BANCORP
By: /SIGNED/
--------------------------
Executive Vice President
By: /SIGNED/
--------------------------
Secretary
FIRST INTERSTATE BANCORP
1983 PERFORMANCE STOCK PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is between FIRST INTERSTATE BANCORP, a Delaware
corporation (hereinafter called the "Company"), and
(hereinafter called the "Employee").
RECITALS:
The Company has established the 1983 Performance Stock Plan (the
"Plan"); and
The Committee of the Board of Directors of the Company designated in the
Plan (the "Committee") has approved the execution of this Non-Qualified Stock
Option Agreement containing the grant of the option herein set forth to the
Employee to purchase shares of the Common Stock, $2.00 par value, of the Company
upon the terms and conditions hereinafter set forth;
AGREEMENT:
In consideration of the mutual obligations contained herein, it is
hereby agreed:
1. Grant of Option. The Company hereby grants to the Employee a
Non-Qualified Option to purchase from the Company all or any part of
( ) shares of its authorized Common Stock at the price of $ per share. It is
understood that such option is not intended to be an "Incentive Stock Option"
within the meaning of Section 422A of the Internal Revenue Code of 1954, as
amended (the "Code").
2. Term of Option. This option may be exercised (unless terminated
prior to such exercise as hereinafter provided) during the periods and for the
number of shares indicated below:
Year Following Number
The Date Hereof Of Shares
--------------- ---------
2nd. . . . . . . . 250 Shares
3rd. . . . . . . . 250 Additional Shares
4th. . . . . . . . 250 Additional Shares
5th. . . . . . . . 250 Additional Shares
provided, however, that this option shall be exercised for full shares only and
shall not be exercised for less than 50 shares at any one time unless the
remaining shares covered hereby is less than 50. In the event that the Employee
shall not in any year purchase all or any part of the shares which the Employee
is entitled to purchase in such year, the Employee's right to purchase any
shares not purchased in such year shall continue until the expiration or
termination of this option, which in no event shall be more than ten (10) years
from the date of grant.
3. Expiration of Option. This option shall expire and all rights
to purchase shares hereunder shall cease at 5:00 o'clock p.m., California time,
on or prior thereto upon the happening of the first to occur of the
following events:
(a) The expiration of ten (10) years from the date such option
was granted, or any earlier termination date specified in the option agreement;
(b) The expiration of three (3) months from the date on which
Optionee ceases to be employed by the Company or a Subsidiary other than by
reason of death, Retirement, Disability or termination of employment for cause
as determined by the Committee. During such period of three months, this option
shall be exercisable only to the extent that the Optionee was entitled to
exercise this option on the date of the happening of such event;
(c) The expiration of one (1) year from the date an Optionee
ceases to be employed by the Company or a Subsidiary by reason of Retirement,
Disability or death. During such period of one year, this option shall be
exercisable only to the extent that the Optionee was entitled to exercise this
option on the date of the happening of such event;
(d) The termination of the Optionee's employment for cause, as
determined by the Committee;
(e) The termination of the Plan pursuant to Section 8.
4. Nontransferability of Option. This option shall be
nontransferable by the Employee other than by will or the laws of descent and
distribution, and shall be exercisable during the lifetime of the Employee only
by the Employee or by the Employee's guardian or legal representative. After
the death of the Employee, this option may be exercised prior to its termination
by the Employee's legal representative, heir or legatee, to the extent permitted
in the Plan. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of this option, or of any right or privilege conferred hereby,
contrary to the provisions hereof, or upon any attempted sale under any
execution, attachment or similar process upon the rights and privileges
conferred hereby, this option and the rights and privileges conferred hereby
shall immediately become null and void. Until written notice of any permitted
passage of rights under this option shall have been given to and received by the
Secretary of the Company, the Company may, for all purposes, regard the Employee
as the holder of this option.
5. Exercise of Option. The rights granted under this Agreement may
be exercised by the Employee, or by the person or persons to whom the Employee's
rights under this Agreement shall have passed under the provisions of Section 4
hereof, by delivering to the Company in care of its Secretary, at 707 Wilshire
Boulevard, Los Angeles, California 90017, written notice of the number of shares
with respect to which the rights are being exercised, accompanied by this
Agreement for appropriate endorsement by the Company, such investment letter as
may be required by Section 10 hereof, and the consideration provided in the
Plan, if any, provided that if the Employee intends to exercise this option by
delivery of consideration consisting in whole or in part of shares of Common
Stock already owned by the Employee, shall secure the prior consent of the
Committee to such delivery.
6. Regulatory Compliance. The issue and sale of shares of stock
pursuant to this Agreement shall be subject to full compliance with all then
applicable requirements of law and the requirements of any stock exchange upon
which Common Stock of the Company may be listed.
7. Modification and Termination. The rights of the Employee are
subject to modification and termination in certain events as provided in
Sections 7 and 8 of the Plan.
8. Withholding Tax. The Employee agrees that, in the event the
exercise of any rights granted in this Agreement results in the Employee's
realization of income which for Federal, state or local income tax purposes is,
in the opinion of counsel for the Company, subject to withholding of tax at
source by the Employee's employer, the Employee shall pay to the Employee's
employer an amount equal to such withholding tax (or such employer on behalf of
the Company may withhold such amount from the Employee's salary) prior to
delivery to the Employee of certificates representing the shares purchased or
transferred.
9. Holder of Shares. Neither the Employee nor the Employee's legal
representative, legatee or distributee shall be, or be deemed to be, a holder of
any shares of the Company's Common Stock subject to this option unless and until
such person has received a certificate or certificates therefor. No adjustment
will be made for dividends or other rights for which the record date is prior to
the date such stock certificate or certificates are so issued.
10. Investment Covenant. The Employee represents and agrees that if
the Employee exercises this option in whole or in part at a time when there is
not in effect under the Securities Act of 1933 a registration statement relating
to the shares issuable upon exercise hereof and there is not available for
delivery a prospectus meeting the requirements of Section 10(a)(3) of said Act,
(i) the Employee will acquire the shares upon such exercise for the purpose of
investment and not with a view to the distribution thereof, (ii) that upon each
such exercise of this option, the Employee will furnish to the Company an
investment letter in form and substance satisfactory to the Company, (iii) prior
to selling or offering for sale any such shares, the Employee will furnish the
Company with an opinion of counsel satisfactory to it to the effect that such
sale may lawfully be made and will furnish it with such certificates as to
factual matters as it may reasonably request, and (iv) that certificates
representing such shares may be marked with an appropriate legend describing
such conditions precedent to sale or transfer. Any person or persons entitled
to exercise such option under the provision of Paragraph 4 hereof shall furnish
to the Company letters, opinions and certificates to the same effect as would
otherwise be required of the Employee.
11. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California.
12. Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their legal representatives, and permitted
successors and assigns.
13. Plan. This Agreement is subject to all of the terms and
provisions of the Plan, receipt of a copy of which is hereby acknowledged by the
Employee.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto on.
FIRST INTERSTATE BANCORP
By:______________________________
Chairman of the Board
______________________________
EMPLOYEE
______________________________
(Address)
______________________________
______________________________
Social Security No.____________________
Affiliate _____________________________
OPTION EXERCISE ENDORSEMENTS
DATE OF NUMBER OF NOTED FOR FIRST
EXERCISE SHARES INTERSTATE BANCORP
FIRST INTERSTATE
1995 MANAGEMENT INCENTIVE PLAN
EFFECTIVE JANUARY 1, 1995
1. OBJECTIVES. The 1995 Management Incentive Plan is designed to focus
the efforts of certain key employees of First Interstate on the continued
improvement in the performance of First Interstate and to aid in attracting,
motivating and retaining superior executives by providing an incentive and
reward for those key employees who contribute most to the operating progress
and performance of First Interstate.
2. DEFINITIONS. The following definitions shall be applica-
ble to the terms used in the Plan:
(a) "Administrator" means the Chief Executive Officer of
Bancorp.
(b) "Award" means a cash distribution to be made to a Participant
for a Performance Year as determined in accordance with the provisions of the
Plan.
(c) "Award Fund" means the total of the Target Awards for each
Participant as determined and approved in accordance with Section 5 hereof.
(d) "Bancorp" means First Interstate Bancorp, a Delaware
corporation.
(e) "Change in Control" shall have the meaning set forth
in Section 17.
(f) "Committee" means the Compensation Committee of the
Board of Directors of Bancorp.
(g) "First Interstate" means the consolidated group of companies
comprising First Interstate Bancorp.
(h) "Fiscal Year" means the customary fiscal year of
Bancorp.
(i) "Offset Value" shall have the meaning set forth in
Section 18(b) and (c).
(j) "Participant" means a person who, pursuant to Section 4
hereof, is designated as a Participant in the Plan for a Fiscal Year.
(k) "Performance Year" means the Fiscal Year.
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(l) "Plan" means this First Interstate 1995
Management Incentive Plan, as set forth herein.
(m) "Policies" shall have the meaning set forth in
Section 18(a).
(n) "PSP" shall have the meaning set forth in Section
7(c).
(o) "Split-Dollar Life Insurance Agreement" shall have the meaning
set forth in Section 18(a).
(p) "Subsidiary" means a bank, corporation, association or similar
organization of which the majority of the outstanding shares of voting stock
is owned directly or indirectly by Bancorp, directly or indirectly.
(q) "Target Award" is determined for each Participant by
multiplying the Participant's base pay rate in effect at the end of the
Performance Year by the Target Award Percentage applicable to the Participant
set forth under Item I of the Target Award Guidelines attached as Table A.
3. ADOPTION AND ADMINISTRATION OF THE PLAN. The Plan shall become
effective as of January 1, 1995 upon adoption by the Committee. Subject to the
provisions of this Plan and in the absence of specific action by the
Committee, this Plan shall be administered by the Administrator. The Plan
shall not be modified except with the consent of the Committee. All decisions
of the Administrator or the Committee shall be final and binding.
4. PARTICIPATION AND TARGET AWARDS.
(a) Determination of Participants and Target Awards. Prior to the
beginning of each Performance Year, or as soon as practicable thereafter, the
Administrator shall prepare a list of proposed Participants in the Plan for
such Performance Year and shall, for each such Participant, establish a
preliminary Target Award Percentage. Each Subsidiary shall be given an
opportunity to make suggestions with respect to both proposed Participants and
their preliminary Target Award Percentages. Any such suggestions shall,
however, not be binding on the Administrator. Additional Participants may be
included during the Performance Year and, as provided in the Plan,
participation for an individual may be terminated. Except as provided in
Section 8(b) and 10, to be considered eligible for an Award, a Participant
must participate in the Plan for at least six months during the Performance
Year.
(b) Notification. Each Participant shall be notified of
his or her participation in the Plan for such Performance Year or
shall be notified of his or her termination, as applicable, by a
letter from the Administrator or his or her designee. A summary of
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this Plan shall be provided to each Participant. A Participant shall have no
right to or interest in an Award unless and until the Participant's Award has
been determined and allocated to the Participant.
5. DETERMINATION OF AWARD FUND.
(a) Performance Review. As soon as practicable after the close of
each Performance Year, a determination of the Corporation's performance and
the performance of each Region participating in this Plan shall be made by the
Administrator. The Administrator's determination shall be subject to approval
by the Committee.
(b) Award Fund. The Committee shall determine the total amount of
the Award Fund authorized for First Interstate for the Performance Year. The
Award Fund shall contain a separate pool of funds for Bancorp and each
participating Subsidiary. The Award Fund amount for Bancorp and each
participating Subsidiary may be determined in any manner the Committee deems
appropriate from time to time. Without limiting the Committee's discretion to
choose other methods to calculate the size of the Award Fund, it is
anticipated that the Award Fund amount for the Participants employed by
Bancorp or a participating Subsidiary will equal the sum of the Target Awards
for each Participant of Bancorp or the participating Subsidiary, as
applicable, multiplied by the following percentage calculated for such a
Participant:
(AxC) + (BxD),
where A is the percentage, if any, of the Participant's Award to be based on
First Interstate's performance, B is the percentage, if any, of the
Participant's Award to be based on a Region's performance, as such percentages
are set forth under Item II of the Target Award Guidelines attached as Table
A, C is a percentage representing the performance of First Interstate
determined by the Administrator, and D is a percentage representing the
performance of the Region determined by the Administrator.
6. ALLOCATION OF AWARD FUND TO PARTICIPANTS. The Award Fund shall be available
for allocation to Participants on a totally discretionary basis in a manner
designed to give the Administrator the flexibility to take into account the
individual performance of each Participant. Based on its evaluation of a
Participant's performance, the Administrator may determine an Award equal to
any percentage of the Participant's Target Award up to the maximum percentage
set forth under Item III of the Target Award Guidelines attached as Table A.
The total Awards determined by the Administrator for Bancorp or a
participating Subsidiary for a Performance Year shall not exceed the amount of
the Award Fund for the particular employer for such Performance Year. In the
event the amount of the Award Fund exceeds the total Awards for a Performance
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<PAGE>
Year, such excess shall not be carried forward for purposes of Awards in
future Performance Years. Award payments will be charged against Bancorp or
the Subsidiary for which the Participant is an employee, as appropriate.
7. TIME OF PAYMENT OF AWARDS, DEFERRALS, HARDSHIPS.
(a) Payment Date. Except as provided in (b) below, as soon as practicable
after the allocation of Awards in respect of Participants, any Award, less any
legally required withholding, shall be paid to the Participant or, in the
event of a Participant's death, in accordance with Section 8 hereof.
(b) Deferrals. In the year prior to the year which the Award is earned, a
Participant may elect, on a form specified by Bancorp, to defer the receipt of
any Award to which he or she may be entitled for such Performance Year until
the earlier of (1) termination of employment (the first to occur of
retirement, death, disability, or termination of employment) or (2) January 1
of a specified calendar year. In such event:
(i) The amount the Participant elects, net of any legally required
withholding, shall become the deferred Award;
(ii) Interest on such deferred Award will be the Moody's Investment Grade
Corporate Bond Yield as shown in Moody's Yield Average for the last full month
of each previous calendar year and will be credited quarterly; and
(iii) Such deferred Award, plus accumulated interest, shall be paid upon the
earlier of (1) or (2) above, in the form of a lump sum, equal annual
installments over not more than 10 years, or such other method as may be
selected by the Participant and agreed to by the Administrator.
(c) Deferrals into Performance Units. As an alternative to a deferral payable
in cash, as described in subsection (b), the deferred Award may, if the
Participant elects and the Committee permits, be invested in Performance Units
under Section 7.3 of the First Interstate Bancorp 1991 Performance Stock Plan
(the "PSP") . The amount deferred shall be deemed to be converted into
Performance Units under Section 7.3 of the PSP as of the date the Award would
have been payable if no deferral had occurred, based on the fair market value,
determined in accordance with the terms of the PSP, of the common stock of
Bancorp on that date. The timing and manner of payment of deferrals shall be
governed by a Performance Unit Agreement entered into by the Participant under
the PSP.
(d) Hardship Withdrawal. A Participant may request in writing,
citing the reasons for the request, that the Committee permit the
early payment of all or part of a deferred Award. Within 90 days
after receipt, the Committee shall rule on the request. The
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Committee shall grant the request only if, in its sole discretion, the
Committee makes a specific finding of financial hardship that is an
unanticipated emergency caused by an event beyond the control of the
Participant. The amount payable hereunder shall not exceed the amount
necessary to avoid such hardship.
(e) Acceleration of Deferrals. Anything in this Plan to the contrary
notwithstanding, the Committee may accelerate the payment of all deferred
Awards with respect to Bancorp or any Subsidiary at any time in its sole
discretion. In addition, the Committee reserves the right to pay any deferred
Awards in the form of a lump sum if the amount is less than $10,000.00.
8. DEATH OF A PARTICIPANT.
(a) Beneficiary Designation. A Participant may file a designation of a
beneficiary or beneficiaries on a form to be provided which designation may be
changed or revoked by the Participant's sole action, provided that such change
or revocation is filed in written form.
(b) Death during Performance Year. In case of the death of a Participant
during a Performance Year, Bancorp or the Subsidiary, as appropriate, may pay
a pro rata portion of the Award to which the Participant would have been
entitled for such Performance Year. Such pro rata portion shall be equal to
(1) the ratio which the Participant's completed calendar months of
participation during the Performance Year bears to 12 multiplied by (2) the
amount the Committee determines the Participant would have been entitled to
had he or she lived.
(c) Death after Performance Year. In case of the death of a Participant after
the end of a Performance Year, but before the delivery of an Award to which he
or she may be entitled, such Award shall be delivered to the Participant's
designated beneficiary.
(d) Failure to Designate Beneficiary. If a Participant dies having failed to
designate any beneficiary, or if no beneficiary survives the Participant or
survives to the date of any payment in question, the amount otherwise payable
to such beneficiary shall be paid to the Participant's surviving spouse, if
any, and otherwise to the Participant's heirs at law, as determined under the
law governing succession to personal property for the state in which the
Participant resided on the day the Participant died.
9. TRANSFER OF A PARTICIPANT. In the event a Participant for any Performance
Year is transferred during such Performance Year from Bancorp or a Subsidiary
to another Subsidiary or Bancorp, such Participant's Award, consistent with
Subsection 4(a), shall normally be calculated as the sum of the following:
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<PAGE>
(a) the Award the Participant would have received under the Plan, had he or
she not been transferred, multiplied by the ratio which his or her completed
months of participation during such Performance Year prior to the transfer
bears to 12, plus
(b) the Award, if any, the Participant is entitled to receive under the Plan
based on service after the transfer determined on a Performance Year basis and
then multiplied by the ratio which his or her completed months of
participation during such Performance Year subsequent to such transfer bears
to 12.
10. RETIREMENT OR DISABILITY OF PARTICIPANT. In case a Participant becomes
totally and permanently disabled during a Performance Year, or retires from
active employment after attaining age 55 during a Performance Year, the
Committee may but need not grant the Participant an Award. Generally, if an
Award is granted, it will be based on a pro rata portion of the Award.
11. TERMINATION OF EMPLOYMENT. If the employment of a Participant with First
Interstate is terminated prior to the approval of the Committee as specified
in Section 5(a) for reasons other than those specified in Sections 8, 9 or 10
hereof, the right to and the amount of an Award shall be forfeited.
12. TERMINATION AND MODIFICATION. No Award shall be granted under the Plan
after any date as of which the Plan shall have been terminated. The Board of
Directors of Bancorp or the Committee may at any time modify, terminate or
from time to time suspend and, if suspended, may reinstate the provisions of
this Plan, including Table A. The Committee may consider but shall not be
bound by suggestions of participating Subsidiaries in connection with its
periodic amendment of relative weights set forth under Item II of Table A.
13. EFFECT OF OTHER PLANS. Eligibility in or the receipt of any Award under
the Plan shall not be affected by or affect any other compensation or benefit
plans in effect for First Interstate; provided, however that the receipt of an
Award under the Corporate Executive Incentive Plan in a Performance year shall
preclude participation in any Award under this Plan for such year.
14. NO EMPLOYMENT RIGHTS. Nothing contained in nor any action under the Plan
will confer upon any individual any right to continue in the employment of
First Interstate and does not constitute any contract or agreement of
employment or interfere in any way with the right of First Interstate to
terminate any individual's employment.
15. WITHHOLDING TAX. As required by law, federal, state or local
taxes that are subject to the withholding of tax at the source
shall be withheld by First Interstate as necessary to satisfy such
requirements.
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16. EFFECTIVE DATE. This Plan shall be effective as of January 1,
1995. The Plan, including Table A, shall remain in effect as
amended from time to time.
17. PROVISIONS APPLICABLE IN THE EVENT OF A CHANGE IN CONTROL.
(a) In the event of a "Change in Control" (as defined below) , notwithstanding
any provisions to the contrary in this Plan, the operation of this Plan shall
be modified as set forth below in this Section 17. These modifications shall
only apply with respect to Target Awards for the Performance Year in which a
Change in Control occurs.
(b) Notwithstanding any provision to the contrary in this Plan, within ten
(10) days after the Change in Control of Bancorp each Participant shall be
paid 100% of his or her Target Award for the year in which the Change in
Control occurs, based on the base pay rate then in effect.
(c) A "Change in Control" of Bancorp means and shall be deemed to have
occurred if and when any one of the following five events occurs: (i) within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, any
person or group becomes a beneficial owner, directly or indirectly, of
securities of First Interstate Bancorp representing 20% or more of the
combined voting power of First Interstate Bancorp's then outstanding
securities; (ii) individuals who were members of the Board of Directors of
First Interstate Bancorp immediately prior to a meeting of the stockholders of
First Interstate Bancorp involving a contest for the election of Directors
shall not constitute a majority of the Board of Directors following such
election; (iii) the stockholders of First Interstate Bancorp approve the
dissolution or liquidation of First Interstate Bancorp; (iv) the stockholders
of First Interstate Bancorp approve an agreement to merge or consolidate, or
otherwise organize, with or into one or more entities which are not
subsidiaries, as a result of which less than 50% of the outstanding voting
securities of the surviving or resulting entity are, or are to be, owned by
former stockholders of First Interstate Bancorp (excluding from the term
"former stockholders" a stockholder who is, or as a result of the transaction
in question becomes, an "affiliate," as that term is used in the Securities
Exchange Act of 1934 and the Rules promulgated thereunder, of any party to
such merger, consolidation or reorganization); or (v) the stockholders of
First Interstate Bancorp approve the sale of substantially all of First
Interstate Bancorp's business and/or assets to a person or entity which is not
a Subsidiary.
(d) Any Participant shall be entitled to refuse all or any portion of any
Target Award under this Plan if he or she determines that receipt of such
payment may result in adverse tax consequences to him or her. First Interstate
Bancorp shall be totally and
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permanently relieved of any obligation to pay any Award which a
Participant explicitly so refuses in writing.
18. PROVISIONS APPLICABLE TO OFFSETS FOR SPLIT-DOLLAR LIFE INSUR-
ANCE AGREEMENTS.
(a) Notwithstanding anything contained herein to the contrary, any benefits
payable under this Plan shall be offset by the value of benefits received by
the Participant under certain life insurance policies as set forth in this
Section. Participants in this Plan may own life insurance policies (the
"Policies") purchased on their behalf by Bancorp ("the Company"). The
ownership of these Policies by each Participant is, however, subject to
certain conditions (set forth in a "Split-Dollar Life Insurance Agreement"
between each Participant and Bancorp) and, if the Participant fails to meet
the conditions set forth in the Split-Dollar Life Insurance Agreement, the
Participant may lose certain rights under the Policy.
(b) In the event that a Participant satisfies the conditions specified in
Section 4 or 5 of the Split-Dollar Life Insurance Agreement, so that the
Participant or his or her beneficiary becomes entitled to benefits under one
of those sections, the value of those benefits shall constitute an offset to
any benefits otherwise payable under this Plan. As the case may be, this
offset (the "Offset Value") shall be equal to the value of benefits payable
under the Split-Dollar Life Insurance Agreement and shall be determined as of
the date that the Participant satisfies the conditions specified in Section 4
or 5 of the Split-Dollar Life Insurance Agreement, that is, the cash value of
the Policy or, in the case of the Participant's death, the death benefit
payable to the beneficiary under the Policy reduced by one times the
Participant's annual base salary (maximum $500,000) at the time of death. The
Offset Value shall then be compared to the Participant's deferred award
(including interest accumulated on such award) under this Plan, and such
amounts shall be reduced, but not to less than zero, by the Offset Value.
(c) If the Policy in subsection (a) is not on the life of the Participant and
the insured dies prior to distribution of benefits under this Plan, then the
value of the benefits received by the Participant under the Policy will offset
the Participant's deferred award (including interest accumulated on such
award) under this Plan. This offset ("Offset Value") shall be equal to the
amount of death benefit payable to the Participant and shall be determined as
of the date of death of the insured. This Offset Value shall then be compared
to the Participant's deferred award (including interest accumulated on such
award) under this Plan, and such amounts shall be reduced, but not to be less
than zero, by the Offset Value.
(d) Notwithstanding anything contained herein to the contrary, if, in addition
to the benefits otherwise payable under this Plan, the Participant or his or
her beneficiary is entitled to benefits under
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(i) the First Interstate Bancorp Annual Incentive Compensation Plans, (ii) the
First Interstate Bancorp Profit Improvement Plans, (iii) the First Interstate
Bancorp Management Incentive Plans, (iv) the Supplemental Employee Savings
Plan of First Interstate Bancorp, (v) the First Interstate Bancorp Excess
Benefit Retirement Plan, (vi) the First Interstate Bancorp Supplemental
Executive Retirement Plan; (vii) the First Interstate Supplemental Retirement
Program or (viii) the First Interstate Executive Incentive Plans, the "Offset
Value" shall be applied to offset the benefits payable under this Plan and
such plans in the following order:
1. The First Interstate Bancorp Excess Benefit Retirement
Plan;
2. The First Interstate Bancorp Supplemental Executive
Retirement Plan;
3. The Supplemental Employee Savings Plan of First Inter-
state Bancorp;
4. The First Interstate Bancorp Management Incentive
Plans;
5. The First Interstate Bancorp Annual Incentive Compen-
sation Plans;
6. The First Interstate Bancorp Profit Improvement Plans.
7. The First Interstate Bancorp Corporate Executive Incen-
tive Plan.
8. The First Interstate Bancorp Regional Executive Incen-
tive Plan.
9. The First Interstate Bancorp Supplemental Retirement
Program.
19.DISPUTE RESOLUTION.
(a) If a Participant who has applied for retirement under the Retirement Plan
for Employees of First Interstate Bancorp and Its Affiliates, or, in the case
of the Participant's death, his or her beneficiary, disagrees with the
Compensation Committee of the Board of Directors of First Interstate Bancorp
(the "Administrator") regarding the interpretation of this Plan, and if the
Participant or his or her beneficiary has exhausted the claims review and
appeal procedure under Section 503 of the Employee Retirement Income Security
Act of 1974 with respect to his or her claim for benefits under this Plan,
then the Participant or his or her beneficiary may, if he or she desires,
submit any claim for benefits under this Plan or dispute regarding the
interpretation of
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this Plan to arbitration; provided that, the request for arbitration must be
brought within the time limit for bringing a judicial proceeding with respect
to such claim for benefits, or if less, within one year after the
Administrator's final denial of such claim for benefits. This right to select
arbitration shall be solely that of Participant or his or her beneficiary and
Participant or his or her beneficiary may decide whether or not to arbitrate
in his or her discretion. The "right to select arbitration" is not mandatory
on Participant or his or her beneficiary and Participant or his or her
beneficiary may choose in lieu thereof to bring an action in an appropriate
civil court. Once an arbitration is commenced, however, it may not be
discontinued without the mutual consent of both parties to the arbitration.
During the lifetime of the Participant only he or she can use the arbitration
procedure set forth in this section.
(b) Any claim for arbitration may be filed in writing with an arbitrator of
Participant's or beneficiary's choice who is selected by the method described
in the next four sentences. The first step of the selection shall consist of
Participant or his or her beneficiary submitting a list of five potential
arbitrators to the Administrator. Each of the five arbitrators must be either
(1) a member of the National Academy of Arbitrators located in the State of
California or (2) a retired California Superior Court or Appellate Court
judge. Within one week after receipt of the list, the Administrator shall
select one of the five arbitrators as the arbitrator for the dispute in
question. If the Administrator fails to select an arbitrator in a timely
manner, Participant or his or her beneficiary shall then designate one of the
five arbitrators as the arbitrator for the dispute in question.
(c) The arbitration hearing shall be held within seven days (or as soon
thereafter as possible) after the picking of the arbitrator. No continuance of
said hearing shall be allowed without the mutual consent of Participant or his
or her beneficiary and the Administrator. Absence from or nonparticipation at
the hearing by either party shall not prevent the issuance of an award.
Hearing procedures which will expedite the hearing may be ordered at the
arbitrator's discretion, and the arbitrator may close the hearing in his or
her sole discretion when he or she decides he or she has heard sufficient
evidence to satisfy issuance of an award.
(d) The arbitrator's award shall be rendered as expeditiously as possible and
in no event later than one week after the close of the hearing. In the event
the arbitrator finds that Bancorp has violated the terms of this Plan, he or
she shall order Bancorp immediately to take the necessary steps to remedy such
violation. The award of the arbitrator shall be final and binding upon the
parties. The award may be enforced in any appropriate court as soon as
possible after its rendition. If an action is brought to confirm the award,
both Bancorp and Participant agree that no
10
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appeal shall be taken by either party from any decision rendered in such
action.
(e) Solely for purposes of determining the allocation of the costs described
in this Section 19(e), the Administrator will be considered the prevailing
party in a dispute if the arbitrator determines (1) that Bancorp has not
violated the terms of this Plan, and (2) the claim by Participant or his or
her beneficiary was not made in good faith. otherwise, Participant or his or
her beneficiary will be considered the prevailing party. In the event that
Bancorp is the prevailing party, the fee of the arbitrator and all necessary
expenses of the hearing (excluding any attorneys, fees incurred by Bancorp)
including stenographic reporter, if employed, shall be paid by the other
party. In the event that Participant or his or her beneficiary is the
prevailing party, the fee of the arbitrator and all necessary expenses of the
hearing (including all attorneys' fees incurred by Participant or his or her
beneficiary in pursuing his or her claim) , including the fees of a
stenographic reporter if employed, shall be paid by Bancorp.
IN WITNESS WHEREOF, Bancorp hereby adopts this Restatement as of January 1,
1995.
FIRST INTERSTATE BANCORP
By ____________________________
11
FIRST INTERSTATE
1995 REGIONAL EXECUTIVE INCENTIVE PLAN
EFFECTIVE JANUARY 1, 1995
1. OBJECTIVES. The 1994 Regional Executive Incentive Plan is designed to
focus the efforts of certain executive employees of selected Subsidiaries on
the continued improvement in the performance of such Subsidiaries, and to aid
in attracting, motivating and retaining superior executives by providing an
incentive and reward for those executive employees who contribute most to the
operating progress and performance of the Corporation's Subsidiaries.
2. DEFINITIONS. The following definitions shall be applica-
ble to the terms used in the Plan:
(a) "Administrator" means the Chief Executive Officer of
Bancorp.
(b) "Award" means a cash distribution to be made to a Participant
for a Performance Year as determined in accordance with the provisions of the
Plan.
(c) "Award Fund" means the total of the Target Awards for each
Participant as determined and approved in accordance with Section 5 hereof.
(d) "Bancorp" means First Interstate Bancorp, a Delaware
Corporation.
(e) "Change in Control" shall have the meaning set forth
in Section 17.
(f) "Committee" means the Compensation Committee of the
Board of Directors of Bancorp.
(g) "First Interstate" means the consolidated group of companies
comprising First Interstate Bancorp.
(h) "Fiscal Year" means the customary fiscal year of
Bancorp.
(i) "Management Incentive Plan" means the First
Interstate Bancorp 1995 Management Incentive Plan.
(j) "Offset Value" shall have the meaning set forth in
Section 18 (b) and (c) .
<PAGE>
(k) "Participant" means an eligible executive who, pursuant to
Section 4 hereof, automatically becomes a Participant in the Plan for a Fiscal
Year.
(l) "Performance Year" means the Fiscal Year.
(m) "Plan" means this First Interstate Bancorp 1995 Regional
Executive Incentive Plan, as set forth herein.
(n) "Policies" shall have the meaning set forth in
Section 18(a) .
(o) "PSP" shall have the meaning set forth in Section
7(c).
(p) "Region" means any of the California, Northwest, Southwest or
Texas regions consisting of First Interstate banks and as defined by First
Interstate Bancorp.
(q) "Split-Dollar Life Insurance Agreement" shall have the meaning
set forth in Section 18(a).
(r) "Subsidiary" means a bank, corporation, association or similar
organization of which the majority of the outstanding shares of voting stock
is owned by Bancorp, directly or indirectly.
(s) "Target Award" is determined for each Participant by
multiplying the Participant's base pay rate in effect at the end of the
Performance Year by the Target Award Percentage applicable to the Participant
set forth under Item I of the Target Award Guidelines attached as Table A.
3. ADOPTION AND ADMINISTRATION OF THE PLAN. The Plan shall become
effective as of January 1, 1995 upon adoption by the Committee. Subject to the
provisions of this Plan and in the absence of specific action by the
Committee, this Plan shall be administered by the Administrator. The Plan
shall not be modified except with the consent of the Committee. All decisions
of the Administrator or the Committee shall be final and binding.
4. PARTICIPATION AND TARGET AWARDS.
(a) Determination of Participants and Target Awards. The Chief
Executive Officer of each Region shall be Participants in the Plan. As
provided in the Plan, participation for an individual may be terminated.
Except as provided in Sections 8(b) and 10, to be considered eligible for an
Award, a Participant must be participating in the Plan or the Management
Incentive Plan for at least six months during the Performance Year.
(b) Notification. Each Participant shall be notified of
his or her eligibility for participation in the Plan for such
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Performance Year or shall be notified of his or her termination, as
applicable, by a letter from the Administrator or his or her designee. A copy
of this Plan shall be provided to each Participant. A Participant shall have
no right to or interest in an Award unless and until the Participant's Award
has been determined and certified by the Committee.
5. DETERMINATION OF AWARD.
(a) Performance Review. As soon as practicable after
the close of each Performance Year, a determination of each
Region's performance shall be made by the Administrator. The
Administrator's determination shall be subject to the approval by
the Committee.
(b) Award Fund. The Committee shall determine the total amount of
the Award Fund authorized under this Plan for the Performance Year. The Award
Fund amount for a Region may be determined in any manner the Committee deems
appropriate from time to time. Without limiting the Committee's discretion to
choose other methods to calculate the size of the Award Fund, it is
anticipated that the Award Fund amount for the Participants will equal the sum
of the Target Awards for each Participant multiplied by a percentage
representing the performance of the Region determined by the Administrator.
The maximum Award Fund amount may not exceed 1.5 times the sum of Target
Awards.
(c) Limitations. The Committee shall have the right to reduce an
Award to an actual award percentage of no less than 0%. Award payments will be
charged against Bancorp or the Subsidiary for which the Participant is an
employee, as appropriate.
6. ALLOCATION OF AWARD FUND TO PARTICIPANTS. The Award Fund shall be
available for allocation to Participants on a totally discretionary basis in a
manner designed to give the Administrator the flexibility to take into account
the individual performance of each Participant. Based on its evaluation of a
Participant's performance, the Administrator may determine an Award equal to
any percentage of the Participant's Target Award up to 150%. In the event the
amount of the Award Fund exceeds the total Awards for a Performance Year, such
excess shall not be carried forward for purposes of Awards in future
Performance Years. Award payments will be charged against the Subsidiary for
which the Participant is an employee, as appropriate.
7. TIME OF PAYMENT OF AWARDS, DEFERRALS, HARDSHIPS.
(a) Payment Date. Except as provided in (b) below, as soon as
practicable after the determination of Awards and approval by the Committee,
any Award, less any legally required withholding, shall be paid to the
Participant or, in the event of a Participant's death, in accordance with
Section 8 hereof.
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(b) Deferrals. In the year prior to the year in which an Award is
earned, a Participant may elect, on a form specified by Bancorp, to defer the
receipt of any Award to which he or she may be entitled for such Performance
Year until the earlier of (1) termination of employment (the first to occur of
retirement, death, disability, or termination of employment) or (2) January 1
of a specified calendar year. In such event:
(i) The amount the Participant elects, net of any
legally required withholding, shall become the deferred Award;
(ii) Interest on such deferred Award will be the Moody's
Investment Grade Corporate Bond Yield as shown in Moody's Yield Average
for the last full month of each previous calendar year and will be
credited quarterly; and
(iii) Such deferred Award, plus accumulated interest, shall
be paid upon the earlier of (1) or (2) above, in the form of a lump sum,
equal annual installments over not more than 10 years, or such other
method as may be selected by the Participant and agreed to by the
Administrator or, in the case of any payment to the Administrator, by
the Committee.
(c) Deferrals into Performance Units. As an alternative to a
deferral payable in cash, as described in subsection (b), the deferred Award
may, if the Participant elects and the Committee permits, be invested in
Performance Units under Section 7.3 of the First Interstate Bancorp 1991
Performance Stock Plan or the 1995 Performance Stock Plan (each, a "PSP"). The
amount deferred shall be deemed to be converted into Performance Units under
Section 7.3 of the PSP as of the date the Award would have been payable if no
deferral had occurred, based on the fair market value, determined in
accordance with the terms of said plan, of the common stock of Bancorp on that
date. The timing and manner of payment of deferrals shall be governed by a
Performance Unit Agreement entered into by the Participant under the PSP.
(d) Hardship Withdrawal. A Participant may request in writing,
citing the reasons for the request, that the Committee permit the early
payment of all or part of a deferred Award. Within 90 days after receipt, the
Committee shall rule on the request. The Committee shall grant the request
only if, in its sole discretion, the Committee makes a specific finding of
financial hardship that is an unanticipated emergency caused by an event
beyond the control of the Participant. The amount payable hereunder shall not
exceed the amount necessary to avoid such hardship.
(e) Acceleration of Deferrals. Anything in this Plan to
the contrary notwithstanding, the Committee may accelerate the
payment of all deferred Awards hereunder at any time in its sole
discretion. In addition, the Committee reserves the right to pay
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any deferred Awards in the form of a lump sum if the amount is less
than $10,000.00.
8. DEATH OF A PARTICIPANT.
(a) Beneficiary Designation. A Participant may file a designation
of a beneficiary or beneficiaries on a form to be provided which designation
may be changed or revoked by the Participant's sole action, provided that such
change or revocation is filed in written form.
(b) Death during Performance Year. In case of the death of a
Participant during a Performance Year, Bancorp or the Subsidiary, as
appropriate, may pay a pro rata portion of the Award to which the Participant
would have been entitled for such Performance Year. Such pro rata portion
shall be equal to (1) the ratio which the Participant's completed calendar
months of participation during the Performance Year bears to 12 multiplied by
(2) the amount the Committee determines the Participant would have been
entitled to had he or she lived.
(c) Death after Performance Year. In case of the death of a
Participant after the end of a Performance Year, but before the delivery of an
Award to which he or she may be' entitled, such Award shall be delivered to
the Participant's designated beneficiary.
(d) Failure to Designate Beneficiary. If a Participant dies having
failed to designate any beneficiary, or if no beneficiary survives the
Participant or survives to the date of any payment in question, the amount
otherwise payable to such beneficiary shall be paid to the Participant's
surviving spouse, if any, and otherwise to the Participant's heirs at law, as
determined under the law governing succession to personal property for the
state in which the Participant resided on the day the Participant died.
9. TRANSFER OF A PARTICIPANT. In the event a Participant for any
Performance Year is transferred during such Performance Year so that they are
no longer eligible to participate in this Plan, such Participant's Award,
consistent with Subsection 4(a), shall normally be calculated as the sum of
the following:
(a) the Award the Participant would have received, had he or she
not been transferred, multiplied by the ratio which his or her completed
months of participation during such Performance Year prior to the transfer
bears to 12, plus
(b) the Award, if any, the Participant is entitled to receive
based on service after the transfer determined on a Performance Year basis and
then multiplied by the ratio which his
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or her completed months of participation during such Performance Year
subsequent to such transfer bears to 12.
10. RETIREMENT OR DISABILITY OF PARTICIPANT. In case a Participant
becomes totally and permanently disabled during a Performance Year, or retires
from active employment after attaining age 55 during a Performance Year, the
Committee may but need not grant the Participant an Award. Generally, if an
Award is granted, it will be based on a pro rata portion of the Award.
11. TERMINATION OF EMPLOYMENT. If the employment of a Participant with a
Subsidiary is terminated prior to the approval of an Award by the Committee as
specified in Section 5(a), for reasons other than those specified in Sections
8, 9 or 10 hereof, the right to and the amount of an Award shall be forfeited.
12. TERMINATION AND MODIFICATION. No Award shall be granted under the
Plan after any date as of which the Plan shall have been terminated. The Board
of Directors of Bancorp or the Committee may at any time modify, terminate or
from time to time suspend and, if suspended, may reinstate the provisions of
this Plan, including Table A. The Committee may consider but shall not be
bound by suggestions of Participants in connection with its periodic amendment
of relative weights of the goals set forth by the Committee.
13. EFFECT OF OTHER PLANS. Eligibility in or the receipt of
any Award under the Plan shall not be affected by or affect any
other compensation or benefit plans in effect for Bancorp or a
Subsidiary.
14. NO EMPLOYMENT RIGHTS. Nothing contained in nor any action under the
Plan will confer upon any individual any right to continue in the employment
of Bancorp or a Subsidiary and does not constitute any contract or agreement
of employment or interfere in any way with the right of Bancorp or a
Subsidiary to terminate any individual's employment.
15. WITHHOLDING TAX. As required by law, federal, state or
local taxes that are subject to the withholding of tax at the
source shall be withheld by Bancorp or a Subsidiary as necessary to
satisfy such requirements.
16. EFFECTIVE DATE. This Plan shall be effective as of
January 1, 1995. The Plan, including Table A, shall remain in
effect as amended from time to time.
17. PROVISIONS APPLICABLE IN THE EVENT OF A CHANGE IN
CONTROL.
(a) In the event of a "Change in Control" (as defined
below), notwithstanding any provisions to the contrary in this
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Plan, the operation of this Plan shall be modified as set forth below in this
Section 17. These modifications shall only apply with respect to Target Awards
for the Performance Year in which a Change in Control takes place.
(b) Notwithstanding any provision to the contrary in this Plan,
within ten (10) days after the Change in Control of Bancorp each Participant
shall be paid loot of his or her Target Award for the year in which the Change
in Control occurs, based on the base pay rate then in effect.
(c) A "Change in Control" of Bancorp means and shall be deemed to
have occurred if and when any one of the following five events occurs: (i)
within the meaning of Section 13(d) of the Securities Exchange Act of 1934,
any person or group becomes a beneficial owner, directly or indirectly, of
securities of Bancorp representing 20% or more of the combined voting power of
Bancorp's then outstanding securities; (ii) individuals who were members of
the Board of Directors of Bancorp immediately prior to a meeting of the
stockholders of Bancorp involving a contest for the election of Directors
shall not constitute a majority of the Board of Directors following such
election; (iii) the stockholders of Bancorp approve the dissolution or
liquidation of Bancorp; (iv) the stockholders of Bancorp approve an agreement
to merge or consolidate, or otherwise organize, with or into one or more
entities which are not subsidiaries, as a result of which less than 50% of the
outstanding voting securities of the surviving or resulting entity are, or are
to be, owned by former stockholders of Bancorp (excluding from the term
"former stockholders" a stockholder who is, or as a result of the transaction
in question becomes, an "affiliate," as that term is used in the Securities
Exchange Act of 1934 and the Rules promulgated thereunder, of any party to
such merger, consolidation or reorganization); or (v) the stockholders of
Bancorp approve the sale of substantially all of Bancorp's business and/or
assets to a person or entity which is not a Subsidiary.
(d) Any Participant shall be entitled to refuse all or any portion
of any Target Award under this Plan if he or she determines that receipt of
such payment may result in adverse tax consequences to him or her. Bancorp
shall be totally and permanently relieved of any obligation to pay any Award
which a Participant explicitly so refuses in writing.
18. PROVISIONS APPLICABLE TO OFFSETS FOR SPLIT-DOLLAR LIFE
INSURANCE AGREEMENTS.
(a) Notwithstanding anything contained herein to the contrary, any
benefits payable under this Plan shall be offset by the value of benefits
received by the Participant under certain life insurance policies as set forth
in this Section. Participants in this Plan may own life insurance policies
(the "Policies") purchased on their behalf by Bancorp. The ownership of these
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Policies by each Participant is, however, subject to certain conditions (set
forth in a "Split-Dollar Life Insurance Agreement" between each Participant
and Bancorp) and, if the Participant fails to meet the conditions set forth in
the Split-Dollar Life Insurance Agreement, the Participant may lose certain
rights under the Policy.
(b) In the event that a Participant satisfies the conditions
specified in Section 4 or 5 of the Split-Dollar Life Insurance Agreement, so
that the Participant or his or her beneficiary becomes entitled to benefits
under one of those sections, the value of those benefits shall constitute an
offset to any benefits otherwise payable under this Plan. As the case may be,
this offset (the "Offset Value") shall be equal to the value of benefits
payable under the Split-Dollar Life Insurance Agreement and shall be
determined as of the date that the Participant satisfies the conditions
specified in Section 4 or 5 of the Split- Dollar Life Insurance Agreement,
that is, the cash value of the Policy or, in the case of the Participant's
death, the death benefit payable to the beneficiary under the Policy reduced
by one times the Participant's annual base salary (maximum $500,000) at the
time of death. The Offset Value shall then be compared to the Participant's
deferred award (including interest accumulated on such award) under this Plan,
and such amounts shall be reduced, but not to less than zero, by the Offset
Value.
(c) If the Policy in subsection (a) is not on the life of the
Participant and the insured dies prior to distribution of benefits under this
Plan, then the value of the benefits received by the Participant under the
Policy will offset the Participant's deferred award (including interest
accumulated on such award) under this Plan. This offset ("Offset Value") shall
be equal to the amount of death benefit payable to the Participant and shall
be determined as of the date of death of the insured. This Offset Value shall
then be compared to the Participant's deferred award (including interest
accumulated on such award) under this Plan, and such amounts shall be reduced,
but not to be less than zero, by the Offset Value.
(d) Notwithstanding anything contained herein to the contrary, if,
in addition to the benefits otherwise payable under this Plan, the Participant
or his or her beneficiary is entitled to benefits under the plans set forth in
Table B. The "Offset Value" shall be applied to offset the benefits payable
under this Plan and such plans in the order set forth in Table B:
19. DISPUTE RESOLUTION.
(a) If a Participant who has applied for retirement under the
Retirement Plan for Employees of First Interstate Bancorp and its Affiliates,
or, in the case of the Participant's death, his or her beneficiary, disagrees
with the Compensation Committee of
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the Board of Directors of First Interstate Bancorp (the "Administrator")
regarding the interpretation of this Plan, and if the Participant or his or
her beneficiary has exhausted the claims review and appeal procedure under
Section 503 of the Employee Retirement Income Security Act of 1974 with
respect to his or her claim for benefits under this Plan, then the Participant
or his or her beneficiary may, if he or she desires, submit any claim for
benefits under this Plan, then the Participant or his or her beneficiary may,
if he or she desires, submit any claim for benefits under this Plan or dispute
regarding the interpretation of this Plan to arbitration; provided that, the
request for arbitration must be brought within the time limit for bringing a
judicial proceeding with respect to such claim for benefits, or if less,
within one year after the Administrator's final denial of such claim for
benefits. This right to select arbitration shall be solely that of Participant
or his or her beneficiary and Participant or his or her beneficiary may decide
whether or not to arbitrate in his or her discretion. The "right to select
arbitration" is not mandatory on Participant or his or her beneficiary and
Participant or his or her beneficiary may choose in lieu thereof to bring an
action in an appropriate civil court. Once an arbitration is commenced,
however, it may not be discontinued without the mutual consent of both parties
to the arbitration. During the lifetime of the Participant only he or she can
use the arbitration procedure set forth in this section.
(b) Any claim for arbitration may be filed in writing with an
arbitrator of Participant's or beneficiary's choice who is selected by the
method described in the next four sentences. The first step of the selection
shall consist of Participant or his or her beneficiary submitting a list of
five potential arbitrators to the Administrator. Each of the five arbitrators
must be either (1) a member of the National Academy of Arbitrators located in
the State of California or (2) a retired California Superior Court or
Appellate Court judge. Within one week after receipt of the list, the
Administrator shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Administrator fails to select an arbitrator in
a timely manner, Participant or his or her beneficiary shall then designate
one of the five arbitrators as the arbitrator for the dispute in question.
(c) The arbitration hearing shall be held within seven days (or as
soon thereafter as possible) after the picking of the arbitrator. No
continuance of said hearing shall be allowed without the mutual consent of
Participant or his or her beneficiary and the Administrator. Absence from or
nonparticipation at the hearing by either party shall not prevent the issuance
of an award. Hearing procedures which will expedite the hearing may be ordered
at the arbitrator's discretion, and the arbitrator may close the hearing in
his or her sole discretion when he or she decides he or she has heard
sufficient evidence to satisfy issuance of an award.
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(d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than one week after the close of the hearing.
In the event the arbitrator finds that Bancorp has violated the terms of this
Plan, he or she shall order Bancorp immediately to take the necessary steps to
remedy such violation. The award of the arbitrator shall be final and binding
upon the parties. The award may be enforced in any appropriate court as soon
as possible after its rendition. If an action is brought to confirm the award,
both Bancorp and Participant agree that no appeal shall be taken by either
party from any decision rendered in such action.
(e) Solely for purposes of determining the allocation of the costs
described in this Section 19(e), the Administrator will be considered the
prevailing party in a dispute if the arbitrator determines (1) that Bancorp
has not violated the terms of this Plan, and (2) the claim by Participant or
his or her beneficiary was not made in good faith. Otherwise, Participant or
his or her beneficiary will be considered the prevailing party. In the event
that Bancorp is the prevailing party, the fee of the arbitrator and all
necessary expenses of the hearing (excluding any attorneys' fees incurred by
Bancorp) including stenographic reporter, if employed, shall be paid by the
other party. In the event that Participant or his or her beneficiary is the
prevailing party, the fee of the arbitrator and all necessary expenses of the
hearing (including all attorneys' fees incurred by Participant or his or her
beneficiary in pursuing his or her claim), including the fees of a
stenographic reporter if employed, shall be paid by Bancorp.
IN WITNESS WHEREOF, First Interstate Bancorp hereby adopts this
1995 Regional Executive Incentive Plan as of January 1, 1995.
FIRST INTERSTATE BANCORP
By _________________________________
10
TIER II
CALIFORNIA
EMPLOYMENT AGREEMENT
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<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement") is
dated as of ____________, 1995, and is entered into by and between
("Employee") and First Interstate Bank of California, a California corporation
("Employer") , and a wholly-owned subsidiary (except for any directors'
qualifying shares) of First Interstate Bancorp, a Delaware corporation ("First
Interstate"). This Agreement terminates and supersedes the Employment
Agreement dated ____________, ____ between Employer and Employee and sets
forth the terms and conditions of Employee's continued employment with
Employer. Employee and Employer hereby agree that Employee will render
services to Employer on the following terms and conditions:
1. Employment. Upon the terms and subject to the conditions
contained herein, during the term of this Agreement, Employer hereby agrees to
employ Employee to provide full-time services for Employer. During the term
hereof, Employee agrees to devote his or her best efforts to the business of
Employer, and shall perform his or her duties in a diligent, trustworthy,
business-like manner, all for the purpose of advancing the business of
Employer.
2. Duties. The duties of Employee shall be those duties which can
reasonably be expected to be performed by a person with the title of ________
_____________________________________________________________________________
___________________________________________________________________. Except as
provided in paragraph 10 of this Agreement, Employee's duties may, from time
to time, be changed or modified at the discretion of the Chief Executive
Officer or the Compensation Committee of Employer.
3. Salary and Benefits. Employer shall, during the term of this
Agreement, pay Employee a base salary, which shall initially be the salary in
effect on the date of this Agreement. Such salary shall be paid in semimonthly
installments less applicable withholding and salary reductions. Employer may,
in its discretion, periodically increase the base salary and/or grant a bonus
or other compensation or benefits to Employee, during the term of this
Agreement. Employer may not, however, reduce Employee's base salary during the
term of this Agreement. Employee shall be entitled to participate in the
employee
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benefit programs generally available to employees of
Employer.
4. Term of Agreement. This Agreement shall be effective beginning
on the date of this Agreement and shall continue until either party, in its
sole discretion and for any reason, provides written notice of termination to
the other party. Such termination will be effective no earlier than the first
day of the 14th month following the notice so that, for example, a notice
delivered on September 1, 1994 could terminate this Agreement no earlier than
November 1, 1995. Notwithstanding the preceding sentences, and except as
otherwise provided in paragraph 9, this Agreement shall terminate on the
Employee's last day of employment if the Employee voluntarily terminates for
any reason or is terminated by Employer for a reason described in paragraph 5.
5. Termination. During the term of this Agreement, and except as
otherwise provided in paragraph 10 of this Agreement, the parties agree that
Employer may terminate the employment of the Employee only for "Cause" or for
breach of the provisions of paragraph 8 or as set forth in paragraph 9. Cause
for termination shall be limited to the following: (1) Employee engages in an
act of dishonesty or moral turpitude (including but not limited to conviction
of a felony) which materially injures or damages Employer, (2) Employee
willfully fails to substantially perform his or her duties hereunder and such
willful failure results in demonstrable material injury and damage to
Employer, (3) it is determined that Employee has misrepresented or concealed a
material fact for the purpose of securing employment or this Employment
Agreement, or (4) Employee's performance is substantially below the standard
of performance which can reasonably be expected from an individual occupying
Employee's position or Employee substantially fails to meet performance
objectives which have been previously agreed to between Employee and Employer,
such as performance objectives relating to profit.
6. Remedy for Breach. In the event that Employer breaches this
Agreement by terminating the employment of Employee other than pursuant to
paragraph 5, and provided that Employee executes a release agreement in the
form attached hereto as Exhibit A, Employer agrees to pay to Employee, as
damages and not as a penalty for such breach, a sum of money equal to
Employee's monthly base salary multiplied by 18. Unless Employer determines in
its complete discretion to pay such amount more quickly,
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damages owed to Employee shall be paid at the same time and in the same manner
as if employment under this Agreement had continued for 18 months past the
date of breach. By signing the Agreement Employee agrees that the payments to
which Employee may become entitled under this paragraph are in lieu of any
other payments to which Employee might be entitled and that Employer's
discharge of its obligations under this paragraph shall constitute full
satisfaction of any and all claims of any nature whatsoever that Employee
might otherwise possess against Employer and its subsidiaries, except (1) such
claims as are specifically provided for in the terms of any generally
applicable employee benefit or executive compensation plans evidenced by
written agreements or (2) any claims for personal injuries (other than claims
that are based on or relate to a contention that Employer has wrongfully
discharged Employee).
7. Successors. The rights and obligations of Employer under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Employer.
8. Non-Disclosure of Confidential Information. Employee agrees
that during the term of this Agreement and thereafter Employee will not
disclose any information or data concerning the business or customers of First
Interstate or Employer that is disclosed to Employee or acquired by Employee
in confidence at any time during the period of his or her employment. Employee
further agrees that he or she will neither publicly disclose the terms of this
Agreement nor publicly discuss First Interstate or Employer in a manner that
tends to portray First Interstate or Employer in an unfavorable light.
Violation of these provisions subsequent to the termination of this Agreement
will cause Employee to immediately forfeit his or her right to any payments
under paragraph 6 that have not yet been paid. Notwithstanding anything
contained in paragraph 14, Employer shall have the right to file a suit to
enjoin any action of Employee which would constitute a breach of this
paragraph 8.
9. Illness, Incapacity, or Death. In the event of illness or
incapacity of Employee, Employer shall continue Employee's salary for six
months and may, at its sole option, continue payment of Employee's salary
until he or she is able to return to work. If Employee is unable to work due
to illness or incapacity for a period greater than six months, Employer may
elect, in its discretion, to terminate this Agreement. If Employee should die
during
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the term of this Agreement, Employee's employment shall be treated as
terminated and Employer's obligations hereunder shall terminate as of the end
of the month in which Employee's death occurs. Employee's death during a
payout period under paragraph 6 of this Agreement shall, however, not be
treated the same as a death during employment, i.e., the obligation to make
payments under paragraph 6 shall not terminate as of the end of the month in
which death occurs.
10. Change in Control. Upon a Change in Control of First
Interstate, as defined herein, Employee and Employer agree that,
notwithstanding any provisions to the contrary in this Agreement, the terms
and conditions of this Agreement will be modified as follows:
(a) The term of this Agreement will automatically be extended to
the date two years following the date of the Change in Control of First
Interstate.
(b) Employee's duties shall remain defined as set forth in
paragraph 2 of this Agreement, or as otherwise modified pursuant to
paragraph 2 prior to the date of the Change in Control. Following the
Change in Control, Employee's duties may not be changed and the Chief
Executive Officer and the Compensation Committee shall no longer have
the power to change, modify, add to, or take away from the scope of
Employee's duties. In addition, Employee shall be entitled to benefits
under Employer's employee benefits programs which are at least as
favorable, in the aggregate, as the most favorable of those benefits
provided to Employee under such programs prior to the Change in Control
or, if more favorable to Employee, those provided generally at any time
after the Change in Control to other peer executives of Employer. Any
breach of this subparagraph (b) (which shall be deemed to include the
transfer of Employee's job location to a site more than 50 miles away
from his or her place of employment prior to the Change in Control), as
determined by Employee in good faith, may be deemed a material breach of
this Agreement, and will entitle Employee, at his or her election, to
terminate this Agreement and receive damages pursuant to paragraph 6 of
this Agreement (as modified by subparagraphs 10(c) and 10(d) below and
without regard to the requirement that Employee execute a release).
(c) Upon a Change in Control, paragraphs 5
and 8 of this Agreement shall have no further force or
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effect, and the employment of Employee may be terminated by Employer
without causing a breach of the Agreement only if (1) Employee engages
in an act of dishonesty or moral turpitude (including but not limited to
conviction of a felony) which materially injures or damages Employer or
(2) Employee willfully fails to substantially perform his or her duties
hereunder and such willful failure results in demonstrable material
injury and damage to Employer. The terms of paragraph 9 shall remain in
full force and effect following a Change in Control. If Employee is
terminated for a reason other than one listed in the second preceding
sentence, Employer shall be treated as having breached this Agreement
and Employee shall be entitled to the payment described in subparagraph
(d) below (as damages and not as a penalty for such breach). Such
payment shall be paid in a lump sum no later than 10 days following the
date of breach and there shall be no excuse for a delay in payment.
(d) The amount Employer agrees to pay Employee under this
paragraph 10 shall equal an amount determined by adding (1) and (2) and,
if Employee's employment is terminated in the same calendar year in
which the Change in Control occurs, by reducing the result by (3), where
(1) is equal to $20,000 plus two times the sum of (A) the
amount of Employee's annual base salary in effect immediately
prior to Employee's termination of employment and (B) the
aggregate of the amounts of Employee's target bonus awards for the
year in which Employee's employment terminates under all of
Employer's or First Interstate's incentive plans or programs in
which Employee was then participating,
(2) is equal to the sum of (A) the aggregate of the increases
in the single sum actuarial equivalents of Employee's vested
accrued benefits under the Retirement Plan for the Employees of
First Interstate Bancorp and its Affiliates or any successor plan
(hereinafter referred to as the "Pension Plan") and each
nonqualified defined benefit pension plan sponsored by Employer or
First Interstate other than the First Interstate Bancorp
Supplemental Executive Retirement Plan (the "SERP") that would
result if Employee were credited with two additional years of
Service and Benefit Service
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(as such terms are defined in the Pension Plan) and two additional
years of age, provided that the additional years of Service shall
in no event alter the determination of Employee's Basic Monthly
Salary (as defined in the Pension Plan), and (B) the aggregate of
the single sum actuarial equivalents of Employee's vested accrued
benefits under all nonqualified employee deferred compensation
plans sponsored by Employer or First Interstate (including the
SERP) deter-mined without regard to the provisions of the
preceding clause (A), and
(3) is an amount equal to the aggregate of the amounts of any
bonus awards paid to Employee under Employer's or First
Interstate's incentive plans or programs that were accelerated
because of the Change in Control, multiplied by a fraction, the
numerator of which is the number of full months between the date
of Employee's termination of employment and January 1 of the year
following the year in which the Change in Control occurred, and
the denominator of which is 12.
The single sum actuarial equivalents described above shall be determined
using the interest rate and mortality table set forth in the Pension
Plan for purposes of converting benefits to lump sum payments. Nothing
contained herein shall affect the application of any provisions
regarding offsets or non-duplication of benefits applicable to any of
the nonqualified deferred compensation plan benefits referred to herein.
Upon payment of the amount described in clause (2)(B) above, no further
benefits shall be payable to Employee under the plans described therein.
(e) Following a Change in Control, Employee's base annual salary
for the remaining term of this Agreement shall be no less than his or
her base salary immediately prior to the date of the Change in Control.
(f) A "Change in Control" of First Interstate means and shall be
deemed to have occurred if and when any one of the following events
occurs: (1) within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, any person or group becomes a beneficial owner,
directly or indirectly, of securities of First Interstate representing
20% or more of the combined
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voting power of First Interstate's then outstanding securities; (2)
individuals who were members of the Board of Directors of First
Interstate immediately prior to a meeting of the stockholders of First
Interstate involving a contest for the election of Directors shall not
constitute a majority of the Board of Directors following such election;
(3) the stockholders of First Interstate approve the dissolution or
liquidation of First Interstate; (4) 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, as a result of which less than 50% of the outstanding
voting securities of the surviving or resulting entity are, or are to
be, owned by former stockholders of First Interstate (excluding from the
term "former stockholders" a stockholder who is, or as a result of the
transaction in question becomes, an "affiliate", as that term is used in
the Securities Exchange Act of 1934 and the Rules promulgated
thereunder, of any party to such merger, consolidation or
reorganization); or (5) the stockholders of First Interstate approve the
sale of substantially all of First Interstate's business and/or assets
to a person or entity which is not a subsidiary.
(g) Paragraph 14 shall no longer apply and the following
arbitration provisions shall apply:
(1) Because it is agreed that time will be of the essence in
determining whether any payments are due to Employee under this
Agreement following a Change in Control, Employee may, if he or
she desires, submit any claim for payment under this Agreement or
dispute regarding the interpretation of this Agreement to
arbitration. This right to select arbitration shall be solely that
of Employee and Employee may decide whether or not to arbitrate in
his or her discretion. The "right to select arbitration" is not
mandatory on Employee and Employee may choose in lieu thereof to
bring an action in an appropriate civil court. Once an arbitration
is commenced, however, it may not be discontinued without the
mutual consent of both parties to the arbitration.
(2) Any claim for arbitration may be filed
in writing with an arbitrator of Employee's
choice who is selected by the method described
7
<PAGE>
in the next four sentences. The first step of the selection shall
consist of Employee submitting a list of five potential
arbitrators to Employer. Each of the five arbitrators must be
either (A) a member of the National Academy of Arbitrators located
in the State of California or (B) a retired California Superior
Court or Appellate Court judge. Within one week after receipt of
the list, Employer shall select one of the five arbitrators as the
arbitrator for the dispute in question. If Employer fails to
select an arbitrator in a timely manner, Employee shall then
designate one of the five arbitrators as the arbitrator for the
dispute in question.
(3) The arbitration hearing shall be held within seven days
(or as soon thereafter as possible) after the picking of the
arbitrator. No continuance of said hearing shall be allowed
without the mutual consent of Employee and Employer. Absence from
or nonparticipation at the hearing by either party shall not
prevent the issuance of an award. Hearing procedures which will
expedite the hearing may be ordered at the arbitrator's
discretion, and the arbitrator may close the hearing in his or her
sole discretion when he or she decides he or she has heard
sufficient evidence to satisfy issuance of an award.
(4) The arbitrator's award shall be rendered as expeditiously
as possible and in no event later than one week after the close of
the hearing. In the event the arbitrator finds that Employer has
breached this Agreement, he or she shall order Employer to
immediately take the necessary steps to remedy the breach. The
award of the arbitrator shall be final and binding upon the
parties. The award may be enforced in any appropriate court as
soon as possible after its rendition. If an action is brought to
confirm the award, both Employer and Employee agree that no appeal
shall be taken by either party from any decision rendered in such
action.
(5) Solely for purposes of determining the allocation of the
costs described in this subsection, Employer will be considered
the prevailing party in a dispute if the arbitrator
8
<PAGE>
determines (A) that Employer has not breached this Agreement and
(B) the claim by Employee was not made in good faith. Otherwise,
Employee will be considered the prevailing party. In the event
that Employer is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any
attorneys' fees incurred by Employer) including stenographic
reporter, if employed, shall be paid by Employee. In the event
that Employee is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (including all
attorneys' fees incurred by Employee in pursuing his or her
claim), including the fees of a stenographic reporter if employed,
shall be paid by Employer.
(h) Paragraph 15 shall be deleted.
(i) Employer agrees that, if Employee is terminated under
circumstances that constitute a breach of this Agreement, Employer will
make no statements with regard to Employee which might be interpreted to
reflect adversely upon his or her job competency.
(j) Employee shall be entitled to refuse all or any portion of any
payment under this Agreement if he or she determines that receipt of
such payment may result in adverse tax consequences to him or her.
Employer shall be totally and permanently relieved of any obligation to
pay any amount which Employee explicitly so refuses in writing.
11. Consultation with Legal Counsel. Employee
acknowledges that he or she has been encouraged to consult
with legal counsel before signing this Agreement.
12. Governing Law. This Agreement is made and
entered into in the State of California, and the laws of
California shall govern its validity and interpretation in
the performance by the parties hereto of their respective
duties and obligations hereunder.
13. Entire Agreement. This Agreement
constitutes the entire agreement between the parties
respecting the employment of Employee, and there are no
representations, warranties or commitments, other than
those set forth herein. This Agreement may be amended or
9
<PAGE>
modified only by an instrument in writing executed by all of the parties
hereto. This is an integrated agreement.
14. Arbitration. Except as otherwise provided in paragraph 8, any
dispute, controversy, or claim arising out of or relating to this Agreement or
breach thereof, or arising out of or relating in any way to the employment of
the Employee or the termination thereof, shall be submitted to arbitration in
accordance with the Voluntary Labor Arbitration Rules of the American
Arbitration Association. Judgment upon the award rendered by the arbitrator
may be entered in any court in the State of California, or in any other court
of competent jurisdiction. In reaching his or her decision, the arbitrator
shall have no authority to ignore, change, modify, add to or delete from any
provision of this Agreement, but instead is limited to interpreting this
Agreement. In the case of any arbitration or subsequent judicial proceeding
arising after a Change in Control, Employee shall be awarded his or her costs,
including attorneys' fees.
15. Assistance in Litigation. Employee shall make himself or
herself available, upon the request of First Interstate or Employer, to
testify or otherwise assist in litigation, arbitration, or other disputes
involving First Interstate or Employer, or any of the directors, officers,
employees, subsidiaries, or parent corporations of either, (1) during the term
of this Agreement at no additional cost and (2) at any time following the
termination of this Agreement so long as Employee receives a reasonable fee
for his or her services plus reimbursement of out-of-pocket expenses.
16. Notices. Any notice or communications required or permitted to
be given to the parties hereto shall be delivered personally or be sent by
United States registered or certified mail, postage prepaid and return receipt
requested, and addressed or delivered as follows, or to such other address as
the party addressed may have substituted by notice pursuant to this section:
(a) If to Employer:
First Interstate Bank of California
633 West 5th Street
Los Angeles, California 90071
Attention: Corporate Secretary
10
<PAGE>
(b) If to Employee:
___________________________
___________________________
___________________________
17. Captions. The captions of this Agreement
are inserted for convenience and do not constitute a part
hereof.
18. Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid,
illegal or unenforceable in any other respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein and there shall be deemed
substituted therefor such other provision as will most nearly accomplish the
intent of the parties to the extent permitted by the applicable law. In case
this Agreement, or any one or more of the provisions hereof, shall be held to
be invalid, illegal or unenforceable within any governmental jurisdiction or
subdivision thereof, this Agreement or any such provision thereof shall not as
a consequence thereof be deemed to be invalid, illegal or unenforceable in any
other governmental jurisdiction or subdivision thereof.
19. Counterparts. This Agreement may be
executed simultaneously in two or more counterparts, each
of which shall be deemed an original, but all of which
shall together constitute one and the same Agreement.
11
<PAGE>
IN WITNESS HEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first written above
in Los Angeles, California.
EXECUTED: ____________, 19__.
First Interstate Bank of California
By _____________________________________________
EXECUTED: ____________, 19__.
______________________________
(Name of Employee)
12
<PAGE>
EXHIBIT A
RESIGNATION AND GENERAL RELEASE AGREEMENT
In consideration of the covenants undertaken and releases
contained in this Resignation and General Release Agreement (the "Agreement"),
(" ") and First Interstate Bank of California ("First Interstate"), agree as
follows:
_________________ hereby resigns, effective _____________________
,199_, from his or her position as ________________ of First Interstate, and
as an officer, director, employee, or in any other capacity with First
Interstate or any of First Interstate's divisions, subsidiaries, parent or
affiliates. First Interstate shall as severance continue to and including
_______________, 199_, to pay to his or her monthly base salary of $ , less
standard withholding and authorized deductions. Such severance payment is for
and in lieu of all accrued but unpaid wages including vacation pay and any
bonus, and any other payments or benefits and none shall accrue beyond
_________________, 199_, provided, however, that First Interstate shall pay to
____________________ on or before ______________, 199_, his or her accrued but
unused vacation to that date. shall have the option to convert and continue
his or her health insurance after ________________, 199_, as may be required
or authorized by law under the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA").
Except for those obligations created by or arising out of this
Agreement and any benefits specifically provided for in the terms of any
employee pension benefit plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) evidenced by written agreements,
hereby acknowledges full and complete satisfaction of and releases and
discharges and covenants not to sue First Interstate, its divisions,
subsidiaries, parent, affiliated corporations, past and present, and each of
them, as well as their directors, officers, shareholders, representatives,
assignees, successors, agents and employees, past and present, and each of
them (individually and collectively, "Releasees") from and with respect to any
and all claims, wages, agreements, obligations, demands and causes of action,
known or unknown, suspected or unsuspected, arising out of or in
13
<PAGE>
any way connected with his or her employment relationship with, or his or her
separation or resignation from, First Interstate, including, without limiting
the generality of the foregoing, any claim for severance pay, bonus or similar
benefit, sick leave, vacation pay, life insurance, health or medical insurance
or any other fringe benefit, workers' compensation or disability, or any other
occurrences, acts or omissions whatever, known or unknown, suspected or
unsuspected, resulting from any act or omission by or on the part of Releasees
committed or omitted prior to the date of this Agreement, including, without
limiting the generality of the foregoing, any claim under Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, the Family and Medical Leave Act, the
California Fair Employment and Housing Act, the California Family Rights Act,
or any other federal, state or local law, regulation or ordinance.
This Agreement is intended to be effective as a bar to every claim,
demand and cause of action stated above. Accordingly, _______________ hereby
expressly waives any rights and benefits conferred by Section 1542 of the
California Civil Code, which provides that, "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."
If any provision of this Agreement or its application is held
invalid, the invalidity shall not affect other provisions or applications of
the Agreement which can be given effect without the invalid provisions or
application and, therefore, the provisions of this Agreement are declared to
be severable. ____________ agrees to keep the terms of this Agreement
confidential.
_______________ acknowledges that he or she has
been encouraged to consult with legal counsel before signing this Agreement.
[FOR EMPLOYEES 40 OR OLDER] ________ will be provided ample time and
opportunity to consider the terms of this Agreement and to consult with an
attorney if he or she chooses to do so. If ______ agrees to all the provisions
of this Agreement, he or she shall return the executed original of this
Agreement to ____________________. ______ shall have twenty-one (21) days from
the date he or she receives this Agreement in which to sign this
14
<PAGE>
Agreement. He or she shall have seven (7) days from the
date he or she signs the Agreement within which to revoke
it.
The undersigned have read and understand the consequences of this
Agreement and voluntarily sign it. The undersigned declare under penalty of
perjury that the foregoing is true and correct.
EXECUTED this day of _______ 199 , at __________ County, California.
FIRST INTERSTATE BANK ______________________
OF CALIFORNIA [Name]
By _________________________________ ______________________
[Signature]
Title ______________________________
15
October 17, 1995
Mr. William E. B. Siart
Chairman and CEO
First Interstate Bancorp
633 West Fifth Street
Los Angeles, California 90071
Dear Bill:
I appreciate your setting a date for us to continue discussions
while you and your board review your strategic alternatives over the course of
the next year. As I stated during our last meeting, I believe that every day
we delay results in a substantial loss in value for both our shareholders.
Since our last meeting, we have decided to act on this belief.
Therefore, we are submitting for your consideration a tax-free merger proposal
in which each First Interstate Bancorp shareholder would receive 0.625 shares
of Wells Fargo & Co. common stock for each share of First Interstate Bancorp
common stock. This exchange ratio would represent a price of $133.50 for each
First Interstate Bancorp share based on Wells Fargo & Co.'s current market
price, for a total of about $10 billion for your shareholders. (Before the
close of this transaction, Wells Fargo would expect to raise its dividend to
maintain the present dollar level of dividend income per share to your
shareholders.)
As we have discussed, the economic benefit of the proposed merger
is enormous, with between $4 and $5 billion of present value to be shared by
our respective shareholders. Not only will your shareholders gain a
substantial market premium, representing a large share of the present value
generated, but they will also have the opportunity to share in the stock
appreciation of the
<PAGE>
Mr. William E. B. Siart
October 17, 1995
Page 2
resulting company which will be the most efficient and dynamic major banking
company in the U.S.
I strongly believe there is no other way to generate this level of
shareholder value. Although we intend to make this proposal public before the
markets open tomorrow, we are not attempting to pre-empt or preclude
negotiations between us. To the contrary, we would welcome the opportunity to
begin a negotiation process immediately. Based on the outcome of these
negotiations, we might be able to increase our offer if you can demonstrate
greater value than is indicated by publicly available data.
The synergies which would result from the combination of First
Interstate and Wells Fargo are substantial. Not only are there significant
cost savings to be derived from a merger, there are also opportunities for
revenue growth through the combination of our mutual reputations for excellent
customer service, technological strengths and innovations in the delivery of
banking services and your broad geographical base. We recognize all that you
and your management team have accomplished, and that the market has rewarded
your performance. However, it is time now to consider the sources of future
value creation for your shareholders (as we are doing for ours). We believe
that far greater rewards would be available if we combined the strengths and
values of our two companies.
The combination of two large banking institutions will,
inevitably, lead to some job losses and elimination of redundant branches or
facilities in both our organizations, as has been the case in all bank
consolidations. In this instance, we believe such measures would be justified
by the creation of a more competitive California-based institution that can
best serve the needs of its customers and communities. We are committed to the
fair treatment of employees whose jobs may be lost as a result of this
transition. As each of us has done in past mergers, we would expect to freeze
hiring at the combined organization, and to fill from
<PAGE>
Mr. William E. B. Siart
October 17, 1995
Page 3
within whatever vacancies are created by normal attri-
tion.
Each of our organizations has a strong record of commitment to our
respective communities. The combined organization will be even better
positioned to continue that performance. In particular, we are convinced that
the State of California, our headquarter cities and other California
communities will benefit from retaining in California the headquarters of what
will be one of the country's ten largest banks. If our banks instead merge
with or are acquired by large out-of-state banks, the State's economic and
social fabric will be diminished.
We have the highest regard for your board, and we trust that this
respect is reciprocal. In order to take full advantage of the significant
resource represented by the members of your boards, as well as to provide
added assurances to your employees, customers and communities, we propose that
the board of the combined company be comprised of existing directors of both
companies, many of whom are already well-acquainted. We also propose
maintaining headquarters locations in both the north and the south.
Our merger proposal is subject to the execution and approval of a
mutually acceptable definitive agreement by our respective boards, and we
anticipate no difficulty in quickly reaching full agreement. I have received
approval from our board for this proposal, and they are unanimous in their
enthusiasm for the merger.
We anticipate no difficulty in obtaining all regulatory approvals
on a timely basis. In fact, we expect that the regulators will be totally
supportive, as we have an outstanding CRA rating and are very well
capitalized. Our review of competitive considerations demonstrates that the
relevant issues can be readily resolved.
In closing, I want to assure you that my enthusiasm for the
proposal is shared by my entire board, and
<PAGE>
Mr. William E. B. Siart
October 17, 1995
Page 4
they join me in emphasizing how much we want to work together with your team
to forge what would truly be the premier banking organization in the country.
We have an extraordinary opportunity to create value for shareholders and
benefits for our other constituencies, and we should not let it pass. I hope
that we can begin negotiations to address any issues that may concern you and
your board.
Sincerely,
/s/ Paul Hazen
------------------
Paul Hazen
Chairman and CEO
[First Interstate Bancorp letterhead]
Dear First Interstate Shareholder:
On November 6, 1995, First Interstate announced that it had entered into a
merger agreement with First Bank System, Inc. ("FBS") pursuant to which First
Interstate would merge with a subsidiary of FBS and each of your shares of
First Interstate common stock would be converted into 2.6 shares of FBS
common stock.
On November 13, 1995, Wells Fargo & Co. announced that it intended to
commence an unsolicited exchange offer in which holders of First Interstate
common stock would have the right to exchange each of their shares for
two-thirds of a share of Wells common stock. (The Wells exchange offer has
not yet commenced and it may be several weeks or longer before you receive
any materials with respect to it.) This announcement followed the First
Interstate Board's rejection of Wells' earlier unsolicited proposal to merge
with First Interstate in a transaction in which First Interstate's
shareholders would receive .625 (or possibly .65) shares of Wells common
stock for each First Interstate share.
Your Board of Directors believes that the merger with FBS is in the best
interests of First Interstate and its shareholders. ACCORDINGLY, THE BOARD
RECOMMENDS THAT YOU REJECT THE WELLS FARGO & CO. EXCHANGE OFFER
AND, WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER ANY OF YOUR SHARES TO
WELLS FARGO.
Your Board's consideration of Wells Fargo's revised proposal and the FBS
Merger follows an extensive process of evaluating the company's strategic
alternatives for enhancing shareholder value. This process began several
months prior to Wells' initial unsolicited bid and included discussions and
evaluations of several potential merger possibilities, including one with
Wells Fargo. The record is clear. After Wells made its initial takeover
proposal public on October 18, on behalf of your Board I engaged in extensive
discussions with Wells Fargo, as well as with other potential merger
candidates. A full account of that process is contained in the Schedule 14D-9
filed today by First Interstate with the Securities and Exchange Commission
and enclosed with this letter.
The First Interstate Board believes that the strategic combination of First
Interstate and FBS creates a dynamic, lower risk, multi-state banking
alliance that will provide substantial near-term and long-range value to you.
Your Board and management believe that this combination offers better value
to First Interstate's shareholders than the Wells offer.
<PAGE>
In reaching its determination to reaffirm the FBS Merger and recommend
rejection of the Wells Offer, the First Interstate Board relied upon a number
of factors, including:
o the greater earnings per share and cash flow per share of an FBS
combination compared to a Wells Fargo combination;
o the higher dividends per share to be received by First Interstate
shareholders as a result of the FBS merger than with a Wells Fargo
combination;
o the reduced credit risk resulting from operations in 21 states under the
FBS merger as contrasted with the substantially greater exposure to the
California market that would result from a merger with Wells;
o the superior market position created by an FBS merger--a top three
ranking, in terms of deposit market share, in ten states--as opposed to
increasing First Interstate's top three ranking in only one state in a
Wells merger;
o the substantial loss of revenue, as compared to Wells' public statements,
that would result from Wells' proposed branch closings, other cost saving
measures and antitrust divestitures (revenue losses not present in the
FBS merger);
o the dependence of the value of the Wells offer on Wells' sustaining its
high price-to-earnings ratio relative to other high quality bank stocks,
including FBS;
o Wells' use of purchase accounting for the transaction, which creates
additional goodwill in excess of $7 billion, which would substantially
reduce future earnings and returns on equity; and
o the opinions of First Interstate's independent financial advisors,
Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, that the
exchange ratio of the FBS Merger is fair to First Interstate
shareholders.
We understand very well why our highly successful multi-state franchise,
with its operating scope and strengths, is attractive to Wells Fargo. Our
concern is not with Wells' interests, but the strategic alternative that is
best for you.
We expect the First Interstate/FBS combined company to achieve 1997 EPS
accretion of 23% and a return on equity of 27.5%, with virtually no tangible
book value dilution. Because cost reductions would be achieved through back
office and staff cuts and systems integration, they can be accomplished
quickly and with minimal impact to our customers and revenue. Under pooling
accounting, the combined company will avoid the creation of goodwill and
still be able to continue returning excess capital to shareholders through
share repurchases. The company will have a reduced risk profile and an
expanded foundation for future business growth across our 21-state service
territory. It will have an exceptional, low-cost deposit base and be a leader
in pioneering alternative delivery systems. And the combined company will be
the number one ranked bank in the country in corporate cards, purchasing
cards, corporate trust and ATM/POS, in addition to being among the top five
banks in merchant card processing and asset management.
<PAGE>
Your Board and management are convinced that the FBS merger is a winning
combination for the long-term benefit of our shareholders. It is unfortunate
that a respected institution like Wells Fargo would jeopardize its reputation
by ignoring your Board of Directors' carefully considered decision and
choosing instead to recklessly pursue its hostile takeover proposal. We will
not be deterred or distracted from completing our pending merger with First
Bank on your behalf.
A more detailed description of the factors considered by your Board of
Directors is contained in the Schedule 14D-9. We urge you to read it
carefully and in its entirety so that you will be fully informed as to the
Board's recommendation.
The date of the special meeting of First Interstate's shareholders which
will be called to consider the proposed merger with FBS has not yet been set.
First Interstate is not soliciting proxies from shareholders with respect to
the FBS merger at this time. A Joint Proxy Statement/Prospectus of First
Interstate and FBS will be mailed to the Company's shareholders in connection
with the special meeting of each company's shareholders which will be
called to vote upon the merger.
On behalf of the Board of
Directors,
/s/ William E. B. Siart
William E. B. Siart
Chairman and Chief Executive
Officer
FIRST INTERSTATE BOARD REJECTS WELLS FARGO'S
REVISED TAKEOVER PROPOSAL
-- SAYS FIRST BANK MERGER OFFERS BEST ALTERNATIVE
FOR CREATING NEAR- AND LONG-TERM SHAREHOLDER VALUE --
LOS ANGELES, NOVEMBER 20, 1995 -- First Interstate Bancorp (NYSE:I)
said today its Board of Directors, by unanimous vote, rejected Wells Fargo &
Company's revised acquisition proposal as not in the best interests of First
Interstate and its shareholders and recommended that shareholders reject the
Wells offer and not tender their shares of First Interstate Common Stock
pursuant to the Wells offer. The Board also reaffirmed its determination that
the terms of its announced merger with First Bank System (FBS) are fair to,
and in the best interests of, First Interstate and its shareholders.
The Board's consideration of Wells Fargo's revised proposal and the
FBS merger follows an extensive process of evaluating the company's strategic
alternatives for enhancing shareholder value. After Wells made its initial
takeover proposal public on October 18, First Interstate chairman and CEO,
William E. B. Siart, engaged in extensive discussions with Wells Fargo, as
well as with other potential merger candidates. A full account of that process
is contained in the Schedule 14D-9 filed today by First Interstate with the
Securities and Exchange Commission.
Mr. Siart said: "First Interstate believes that the strategic
combination of First Interstate and FBS will create a dynamic, lower risk,
multi-state banking alliance that will provide substantial near-term and
long-range value.
"We are convinced that this merger is a winning combination for the
long-term benefit of our shareholders and the communities we serve. We believe
it is unfortunate that a respected institution like Wells Fargo would
jeopardize its reputation by ignoring our Board of Directors' carefully
considered decision and choosing instead to recklessly pursue its hostile
takeover proposal. We will not be deterred or distracted from completing our
pending merger with First Bank on your behalf," concluded Mr. Siart.
The First Interstate Banks in 13 western states provide financial
products and services to customers through 1,148 offices. These banks serve
individuals, small businesses, middle market companies and selected large
corporations and financial institutions primarily in the West. Working
together with Standard Chartered Bank of London, First Interstate provides a
variety of international banking services and extends its reach to companies
around the world. First Interstate provides quality financial products and
services marketed at the local level to nearly five million households in over
500 western communities.
# # #
(The full text of a letter to First Interstate shareholders from William
E. B. Siart, on behalf of the Board of Directors, is attached.)
<PAGE>
Dear First Interstate Shareholder:
On November 6, 1995, First Interstate announced that it had entered
into a merger agreement with First Bank System, Inc. ("FBS") pursuant to which
First Interstate would merger with a subsidiary of FBS and each of your shares
of First Interstate common stock would be converted into 2.6 shares of FBS
common stock.
On November 13, 1995, Wells Fargo & Company announced that it intended
to commence an unsolicited exchange offer in which holders of First Interstate
common stock would have the right to exchange each of their shares for
two-thirds of a share of Wells common stock. (The Wells exchange offer has not
yet commenced and it may be several weeks or longer before you receive any
materials with respect to it.) This announcement followed the First Interstate
Board's rejection of Wells' earlier unsolicited proposal to merge with First
Interstate in a transaction in which First Interstate's shareholders would
receive .625 (or possibly .65) shares of Wells common stock for each First
Interstate share.
Your Board of Directors believes that the merger with FBS is in the
best interests of First Interstate and its shareholders. ACCORDINGLY, THE
BOARD RECOMMENDS THAT YOU REJECT THE WELLS FARGO & COMPANY EXCHANGE OFFER AND,
WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER ANY OF YOUR SHARES TO WELLS
FARGO.
Your Board's consideration of Wells Fargo's revised proposal and the
FBS merger follows an extensive process of evaluating the company's strategic
alternatives for enhancing shareholder value. This process began several
months prior to Wells' initial unsolicited bid and included discussions and
evaluations of several potential merger possibilities, including one with
Wells Fargo. The record is clear. After Wells made its initial takeover
proposal public on October 18, on behalf of your Board I engaged in extensive
discussions with Wells Fargo, as well as with other potential merger
candidates. A full account of that process is contained in the Schedule 14D-9
filed today by First Interstate with the Securities and Exchange Commission
and enclosed with this letter.
The First Interstate Board believes that the strategic combination of
First Interstate and FBS creates a dynamic, lower risk, multi-state banking
alliance that will provide substantial near-term and long-range value to you.
Your Board and management believe that this combination offers better value to
First Interstate's shareholders than the Wells offer.
In reaching its determination to reaffirm the FBS merger and recommend
rejection of the Wells offer, the First Interstate Board relied upon a number
of factors, including:
o the greater earnings per share and cash flow per share of an FBS
combination compared to a Wells Fargo combination;
o the higher dividends per share to be received by First Interstate
shareholders as a result of the FBS merger than with a Wells Fargo
combination;
o the reduced credit risk resulting from operations in 21 states under the
FBS merger as contrasted with the substantially greater exposure to the
California market that would result from a merger with Wells;
o the superior market position created by an FBS merger -- a top three
ranking, in terms of deposit market share, in ten states -- as opposed to
increasing First Interstate's top three ranking in only one state in a
Wells merger;
<PAGE>
o the substantial loss of revenue, as compared to Wells' public statements,
that would result from Wells' proposed branch closings, other cost saving
measures and antitrust divestitures (revenue losses not present in the
FBS merger);
o the dependence of the value of the Wells offer on Wells' sustaining its
high price-to- earnings ratio relative to other high quality bank stocks,
including FBS;
o Wells' use of purchase accounting for the transaction, which creates
additional goodwill in excess of $7 billion, which would substantially
reduce future earnings and returns on equity; and
o the opinions of First Interstate's independent financial advisors,
Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, that the
exchange ratio of the FBS Merger is fair to First Interstate
shareholders.
We understand very well why our highly successful multi-state
franchise, with its operating scope and strengths, is attractive to Wells
Fargo. Our concern is not with Wells' interests, but the strategic alternative
that is best for you.
We expect the First Interstate/FBS combined company to achieve 1997
EPS accretion of 23% and a return on equity of 27.5%, with virtually no
tangible book value dilution. Because cost reductions would be achieved
through back office and staff cuts and systems integration, they can be
accomplished quickly and with minimal impact to our customers and revenue.
Under pooling accounting, the combined company will avoid the creation of
goodwill and still be able to continue returning excess capital to
shareholders through share repurchases. The company will have a reduced risk
profile and an expanded foundation for future business growth across our
21-state service territory. It will have an exceptional, low-cost deposit base
and be a leader in pioneering alternative delivery systems. And the combined
company will be the number one ranked bank in the country in corporate cards,
purchasing cards, corporate trust and ATM/POS, in addition to being among the
top five banks in merchant card processing and asset management.
Your Board and management are convinced that the FBS merger is a
winning combination for the long-term benefit of our shareholders. It is
unfortunate that a respected institution like Wells Fargo would jeopardize its
reputation by ignoring your Board of Directors' carefully considered decision
and choosing instead to recklessly pursue its hostile takeover proposal. We
will not be deterred or distracted from completing our pending merger with
First Bank on your behalf.
A more detailed description of the factors considered by your Board of
Directors is contained in the Schedule 14D-9. We urge you to read it carefully
and in its entirety so that you will be fully informed as to the Board's
recommendation.
The date of the special meeting of First Interstate's shareholders
which will be called to consider the proposed merger with FBS has not yet been
set. First Interstate is not soliciting proxies from shareholders with respect
to the FBS merger at this time. A joint Proxy Statement/Prospectus of First
Interstate and FBS will be mailed to the Company's
2
<PAGE>
shareholders in connection with the special meeting of each company's
shareholders which will be called to vote upon the merger.
On behalf of the Board of Directors,
William E. B. Siart
Chairman and Chief Executive Officer
3
PRIVILEGED AND CONFIDENTIAL
November 6, 1995
Board of Directors
First Interstate Bancorp
633 West Fifth Street
Los Angeles, California 90071
Gentlemen and Madame:
You have requested that we confirm our oral opinion as of November 5, 1995 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 2.6 shares of Common Stock, par value
$1.25 per share, of First Bank System, Inc. ("FBS") 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 Novem- ber 5,
1995 among FBS, Eleven Acquisition Corp., a whol- ly-owned subsidiary of FBS,
and the Company (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 FBS from time to time and may
provide investment banking services to 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
<PAGE>
Board of Directors
November 6, 1995
Page 2
customers, and hold positions in securities or options on
securities of the Company and FBS.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company and FBS for the five years ended December 31, 1994; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of the
Company and FBS; certain other communications from the Company and FBS to
their respective stockholders; and certain internal financial analyses and
forecasts for the Company and FBS prepared by their respective managements,
including analyses and forecasts of certain cost savings, operating
efficiencies, revenue effects and financial synergies (collectively, the "Syn-
ergies") expected by the Company and FBS to be achieved as a result of the
Merger. We have also reviewed, and considered in our analysis, information
prepared by senior managements of the Company and FBS relating to the relative
contributions of the Company and FBS to the combined company and the estimated
pro forma impact of the Merger on earnings per share, consolidated
capitalization and certain other financial ratios for the combined company as
compared to the Company and FBS. We also have held discussions with members of
the senior management of the Company and FBS 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 FBS. In addition, we
have reviewed the reported price and trading activity for the Shares and FBS
Common Stock, compared certain financial and stock market information for the
Company and FBS 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 FBS
for purposes of this opinion. In that regard, we have assumed, with your
consent, that the financial
<PAGE>
Board of Directors
November 6, 1995
Page 3
forecasts, including, without limitation, the Synergies and projections
regarding under-performing and non-per- forming assets and net charge-offs
have been reasonably prepared on a basis reflecting the best currently
available judgments and estimates of the Company and FBS 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 FBS 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 FBS 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 FBS or any of their respective subsidiaries
and we have not been furnished with any such evaluation or appraisal. You have
informed us, and we have assumed, that the Merger is of long-term strategic
importance to the Company. 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,
FBS 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. We also have assumed with your consent that the Merger will be
accounted for as a pooling of interests under generally accepted accounting
principles.
Our opinion is directed to the Board of Directors of the
Company and does not constitute a recommendation to any
<PAGE>
Board of Directors
November 6, 1995
Page 4
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, we hereby confirm our oral opinion as of November 5,
1995 that the Exchange Ratio pursuant to the Agreement is fair to the holders
of Shares.
Very truly yours,
GOLDMAN, SACHS & CO.
November 19, 1995
Board of Directors
First Interstate Bancorp
633 West Fifth Street
Los Angeles, California 90071
Gentlemen and Madame:
On November 5, 1995, First Interstate Bancorp (the "Company") and First Bank
System, Inc. ("FBS") entered into an Agreement and Plan of Merger (the "Merger
Agreement"), which provides, among other things, for the merger of the Company
with Eleven Acquisition Corp., a wholly owned subsidiary of FBS (the "Merger").
Pursuant to the Merger, each outstanding share of Common Stock, par value $2.00
per share (the "Shares"), of the Company will be converted into 2.6 shares (the
"Exchange Ratio") of Common Stock, par value $1.25 per share, of FBS.
We have delivered to you, on November 5, 1995, our oral opinion as to the
fairness of the Exchange Ratio to the holders of Shares. We also have confirmed
our oral opinion in our written opinion dated November 6, 1995. The
information, analyses, assumptions and limitations contained or referred to in
our November 6, 1995 written option are made a part of this letter and are
incorporated herein by reference.
It is understood that this letter is for the information of the Board of
Director of the Company only and does not constitute a recommendation to
stockholders of the Company as to the voting of their shares on the proposed
Merger or any other transaction.
This is to advise you that, as of the date hereof, nothing has come to our
attention that would cause us to withdraw or amend either our oral opinion
delivered to you on November 5, 1995, or the confirmation thereof delivered to
you in our written opinion dated November 6, 1995.
Very truly yours,
GOLDMAN, SACHS & CO.
November 5, 1995
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 "Company")
and First Bank System, Inc. ("First Bank") are proposing to enter into an
Agreement and Plan of Merger (the "Proposed Merger Agreement"), which will
provide, among other things, for the merger of First Interstate with First
Bank (the "Merger"). Pursuant to the Merger, each outstanding share of common
stock of First Interstate (the "First Interstate Common Stock"), other than
shares held in treasury or held by First Bank or any affiliate of First Bank
or as to which dissenters' rights have been perfected, will be converted into
2.60 shares (the "First Bank Exchange Ratio") of common stock of First Bank
(the "First Bank Common Stock"). Based on the closing price of First Bank
Common Stock on November 3, 1995, the indicated value of the First Bank
Exchange Ratio wold be $132.28 per share of First Interstate Common Stock.
You have asked for our opinion as to whether the First Bank Exchange Ratio
pursuant to the Proposed Merger Agreement is fair from a financial point of
view to holders of First Interstate Common Stock (other than First Bank 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 First Bank, respectively;
(ii) analyzed internal financial statements and other financial and
operating data concerning First Interstate and First Bank
prepared by the management of First Interstate and First Bank,
respectively;
(iii) analyzed financial projections prepared by the managements of
First Interstate and First Bank, respectively;
(iv) discussed the past and current operations and financial
condition and the prospects of First Interstate and First Bank
with senior executives of First Interstate and First Bank,
respectively;
(v) reviewed and reported prices and trading activity for the First
Interstate Common Stock and the First Bank Common Stock;
<PAGE>
(vi) compared the financial performance of First Interstate and First
Bank and the prices, trading activity and trading multiples of
the First Interstate Common Stock and the First Bank 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 First
Interstate and First Bank;
(viii) analyzed certain pro forma financial projections for the combined
company prepared by First Interstate and First Bank;
(ix) reviewed and discussed with the senior managements of First
Interstate and First Bank certain estimates of the potential
cost savings, and anticipated revenue enhancements 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 First Bank and their financial and legal advisors;
(xii) reviewed the Proposed Merger Agreement and certain related
agreements; and
(xiii) performed such other analyses as we have deemed appropriate.
We are aware of the proposal by Wells Fargo & Company ("Wells Fargo") to
combine with First Interstate at an exchange ratio of .625 of a share of Wells
Fargo Common Stock for each share of First Interstate Common Stock ( the ".625
Wells Fargo Ratio"). We also have been advised by senior management of First
Interstate that senior management of Wells Fargo has orally indicated that
under certain conditions it might be willing to consider raising the proposed
exchange ratio to no higher than .650 of a share of Wells Fargo Common Stock
for each share of First Interstate Common Stock (the ".650 Wells Fargo
Ratio"). Based on the closing price of Wells Fargo Common Stock on November 3,
1995, the indicated value of the .625 Wells Fargo Ratio and the .650 Wells
Fargo Ratio would be $132.66 and $137.96, respectively, per share of First
Interstate Common Stock. We note that based on closing prices on November 3,
1995, the indicated values of both the Wells Fargo Ratios were higher than the
indicated value of the First Bank Exchange Ratio.
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 estimates of
cost savings and revenue
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<PAGE>
enhancements 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 First Bank, respectively. We have also assumed that off-balance
sheet activities of First Interstate and First Bank, 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 First Bank, nor have we been furnished with
any such appraisals and we have not examined any individual loan credit files
of First Interstate and First Bank. We have also assumed with your consent
that the Merger will be accounted for as a pooling of interests under
generally accepted accounting principals. 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 First Bank and have received fees for the rendering of these services. We
have also provided financial advisory and financing services for Wells Fargo
in the past, 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 only and does not constitute a recommendation to
stockholders of First Interstate as to the voting of their shares on the
proposed Merger or any other transaction.
Based on the foregoing, we are of the opinion on the date hereof that the
First Bank Exchange Ratio is fair from a financial point of view to holders of
First Interstate Common Stock (other than First Bank and its affiliates).
We note that it is also our view on the date hereof, based upon publicly
available information in the case of Wells Fargo, that each of the .625 and
.650 Wells Fargo Ratios would be fair from a financial point of view to the
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
3
November 19, 1995
Board of Directors
First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Members of the Board:
On November 5, 1995, First Interstate Bancorp ("First Interstate") and
First Bank System, Inc. ("First Bank") entered into an Agreement and Plan of
Merger (the "Merger Agreement") which provides, among other things, for the
merger of First Interstate with First Bank (the "Merger"). Pursuant to the
Merger, each outstanding share of First Interstate Common Stock, other than
shares held in treasury or held by First Bank or any affiliate of First Bank or
as to which dissenters' rights have been perfected, will be converted into 2.60
shares (the "First Bank Exchange Ratio") of First Bank Common Stock. Based on
the closing price of First Bank Common Stock on November 17, 1995, the indicated
value of the First Bank Exchange Ratio would be $137.80 per share of First
Interstate Common Stock.
We have been informed of the revised offer by Wells Fargo & Company
("Wells Fargo") on November 13, 1995 to combine with First Interstate at an
exchange ratio of two-thirds of a share of Wells Fargo Common Stock for each
share of First Interstate Common Stock (the "Two-Thirds Wells Fargo Ratio").
Based on the closing price of Wells Fargo Common Stock on November 17, 1995 the
indicated value of the Two-Thirds Wells Fargo Ratio would be $141.17 per share
of First Interstate Common Stock.
You have asked us to reaffirm our opinion dated November 5, 1995 as to
the fairness from a financial point of view of the First Bank Exchange Ratio.
For purposes of the opinion set forth herein, we have:
(i) reviewed the reported prices and trading activity for the First
Interstate Common Stock and the First Bank Common Stock from November 3, 1995 to
the date hereof;
(ii) confirmed with senior managements of First Interstate and First
Bank that there have been no material changes or developments in the information
previously provided to us by the respective managements in connection with our
November 5, 1995 opinion, except for information relating to the revised offer
by Wells Fargo; and
(iii) performed such other analyses as we have deemed appropriate.
The information, analyses, assumptions and limitations contained or
referred to in our November 5, 1995 opinion letter are made a part of this
letter and are incorporated herein by reference.
It is understood that this letter is for the information of the Board of
Directors of First Interstate only and does not constitute a recommendation to
stockholders of First Interstate as to the voting of their shares on the
proposed Merger or any other transaction.
Based on the foregoing, this is to advise you that on the date hereof we
reaffirm our opinion of November 5, 1995 that the First Bank Exchange Ratio is
fair from a financial point of view to holders of First Interstate Common Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:/s/ Donald A. Moore, Jr.
---------------------------
Donald A. Moore, Jr.
Managing Director
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated November 5, 1995, between FIRST BANK
SYSTEM, INC., a Delaware corporation ("Grantee"), and FIRST INTERSTATE
BANCORP, a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger immediately prior to the execution and delivery hereof (the
"Merger Agreement"); and
WHEREAS, as a condition and inducement to Grantee's pursuit of the
transactions contemplated by the Merger Agreement and in consideration
therefor and in consideration of the grant of the Reciprocal Option (as
hereinafter defined), Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 15,073,106 fully paid and nonassessable shares of the common stock, $2.00
par value, of Issuer ("Common Stock") at a price per share equal to the last
reported sale price per share of Common Stock as reported on the consolidated
tape for New York Stock Exchange issues on November 3, 1995; provided,
however, that in the event Issuer issues or agrees to issue any shares of
Common Stock at a price less than such last reported sale price per share (as
adjusted pursuant to subsection (b) of Section 5) other than as permitted by
the Merger Agreement, such price shall be equal to such lesser price (such
price, as adjusted if applicable, the "Option Price"); provided further that
in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common Stock. The
<PAGE>
number of shares of Common Stock that may be received upon the exercise of the
Option and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event described
in Section 5(a) hereof), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, such number together
with any shares of Common Stock previously issued pursuant hereto, equals
19.9% of the number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer or Grantee to breach any provision of the Merger
Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, if, but only if, both an Initial Triggering Event
(as hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall
have sent the written notice of such exercise (as provided in subsection (e)
of this Section 2) within 6 months following such Subsequent Triggering Event
(or such later period as provided in Section 10). Each of the following shall
be an Exercise Termination Event: (i) the Effective Time of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof
if such termination occurs prior to the occurrence of an Initial Triggering
Event; (iii) the passage of 18 months (or such longer period as provided in
Section 10) after termination of the Merger Agreement if such termination is
concurrent with or follows the occurrence of an Initial Triggering Event; (iv)
the date on which the shareholders of the Grantee shall have voted and failed
to approve the Parent Vote Matters (as defined in the Merger Agreement)
(unless (A) Issuer shall then be in material breach of its covenants or
agreements contained in the Merger Agreement or (B) on or prior to such date,
the shareholders of the Issuer shall have also voted and failed to approve and
adopt the Merger Agreement and the Merger); or (v) the date on which the
Reciprocal Option shall have
2
<PAGE>
become exercisable in accordance with its terms. The term "Holder" shall mean
the holder or holders of the Option. Notwithstanding anything to the contrary
contained herein, (i) the Option may not be exercised at any time when Grantee
shall be in breach of any of its covenants or agreements contained in the
Merger Agreement such that Issuer shall be entitled (without regard to any
grace period provided therein) to terminate the Merger Agreement pursuant to
Section 8.1(d) thereof and (ii) this Agreement shall automatically terminate
upon the termination of the Merger Agreement by Issuer pursuant to Section
8.1(d) thereof as a result of the breach by Grantee of its covenants or
agreements contained in the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Subsidiaries (as hereinafter
defined) (each an "Issuer Subsidiary"), without having received
Grantee's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as hereinafter defined) with any
person (the term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934 (the "1934 Act"), and the rules and
regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall
have recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction other than as contemplated by the Merger
Agreement or this Agreement. For purposes of this Agreement, (a)
"Acquisition Transaction" shall mean (x) a merger or consolidation, or
any similar transaction, involving Issuer or any Significant Subsidiary
(as defined in Rule 1-02 of Regulation S-X promulgated by the Securities
and Exchange Commission (the "SEC")) of Issuer (other than mergers,
consolidations or similar transactions involving solely Issuer and/or
one or more wholly-owned Issuer Subsidiaries and other than a merger or
consolidation as to which the common shareholders of the Issuer
immediately prior thereto in the aggregate own at least 70% of the
common stock of the publicly held
3
<PAGE>
surviving or successor corporation immediately following consummation
thereof), (y) a purchase, lease or other acquisition of all or
substantially all of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, or (z) a purchase or other acquisition (including
by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any
Significant Subsidiary of Issuer, and (b) "Subsidiary" shall have the
meaning set forth in Rule 12b-2 under the 1934 Act;
(ii) Any person other than Grantee or any Grantee Subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act,
and the rules and regulations thereunder);
(iii) The shareholders of the Issuer shall have voted and
failed to approve the transactions contemplated by the Merger Agreement
at a meeting which has been held for that purpose or any adjournment or
postponement thereof, or such meeting shall not have been held in
violation of the Merger Agreement or shall have been cancelled prior to
termination of the Merger Agreement if, prior to (x) such meeting or (y)
if such meeting shall not have been held or shall have been cancelled,
such termination, 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, a proposal to engage in an Acquisition
Transaction;
(iv) Issuer's Board of Directors shall have withdrawn or
modified (or publicly announced its intention to withdraw or modify) its
recommendation that the shareholders of Issuer approve the transactions
contemplated by the Merger Agreement, or Issuer or any Issuer
Subsidiary, without having received Grantee's prior written consent,
shall have authorized, recommended, proposed (or publicly announced its
intention to authorize, recommend or propose) an agreement to engage in
an Acquisition
4
<PAGE>
Transaction with any person other than Grantee or a
Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) Any such person shall have filed with the SEC a
registration statement with respect to a potential exchange offer that
would constitute an Acquisition Transaction (or filed a preliminary
proxy statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered in such an
exchange offer);
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of engaging
in an Acquisition Transaction, and following such breach Grantee would
be entitled to terminate the Merger Agreement (whether immediately or
after the giving of notice or passage of time or both); or
(viii) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which Grantee
has given its prior written consent, shall have filed an application or
notice with the Federal Reserve Board or other federal or state bank
regulatory authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
Notwithstanding the foregoing, the proposal made prior to the date hereof by
Wells Fargo & Company ("Wells") to enter into a business combination with
Issuer shall be deemed, for purposes of this Agreement, to constitute a
proposal to engage in an Acquisition Transaction that has been publicly
announced; provided, however, that solely for purposes of the foregoing clause
(v), such proposal shall not constitute a publicly announced proposal to
engage in an Acquisition Transaction if Wells shall have publicly announced
the withdrawal of such proposal prior to the time Issuer mails to its
stockholders a proxy
5
<PAGE>
statement in connection with its stockholder meeting called to approve and
adopt the Merger Agreement. Nothing contained in the proviso to the
immediately preceding sentence shall imply that any proposal made by Wells
after the date hereof does not constitute a proposal to engage in an
Acquisition Transaction for purposes of the foregoing clause (v).
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 20% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 2, except that
the percentage referred to in clause (z) shall be 20%.
(d) The term "Reciprocal Option" shall mean the option granted
pursuant to the option agreement dated the date hereof between the Grantee, as
issuer of such option, and the Issuer, as grantee of such option.
(e) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(f) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided
that if prior notification to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval,
shall promptly notify the Issuer of such
6
<PAGE>
filing, and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date
on which any required notification periods have expired or been terminated or
such approvals have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed to occur on the
Notice Date relating thereto.
(g) At the closing referred to in subsection (f) of this Section
2, the Holder shall (i) pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option and (ii)
present and surrender this Agreement to the Issuer at its principal executive
offices.
(h) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (g) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the
Option should be exercised in part only, a new Option evidencing the rights of
the Holder thereof to purchase the balance of the shares purchasable
hereunder.
(i) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933 (the "1933 Act") in the above legend shall be
removed by
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delivery of substitute certificate(s) without such reference if the Holder
shall have delivered to Issuer a copy of a letter from the staff of the SEC,
or an opinion of counsel, in form and substance reasonably satisfactory to
Issuer, to the effect that such legend is not required for purposes of the
1933 Act; (ii) the reference to the provisions of this Agreement in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law.
(j) Upon the giving by the Holder to Issuer of the written notice
of exercise of the Option provided for under subsection (f) of this Section 2
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered
to the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares
of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may
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from time to time be required (including (x) complying with all premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
(S)18a and regulations promulgated thereunder and (y) in the event, under the
Bank Holding Company Act of 1956, as amended, or any state or other federal
banking law, prior approval of or notice to the Federal Reserve Board or to
any state or other federal regulatory authority is necessary before the Option
may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state or other federal regulatory authority as they may require)
in order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of the Issuer, for
other Agreements providing for Options of different denominations entitling
the holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1
of this Agreement, the number of shares of Common Stock purchas- able upon the
exercise of the Option shall be subject to
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adjustment from time to time as provided in this Section
5.
(a) In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any additional
shares of Common Stock are to be issued or otherwise become outstanding as a
result of any such change (other than pursuant to an exercise of the Option),
the number of shares of Common Stock that remain subject to the Option shall
be increased so that, after such issuance and together with shares of Common
Stock previously issued pursuant to the exercise of the Option (as adjusted on
account of any of the foregoing changes in the Common Stock), it equals 19.9%
of the number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 12 months (or such later period as provided in
Section 10) of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a registration statement under the 1933 Act covering any shares
issued and issuable pursuant to this Option and shall use its reasonable best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of
Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition
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requested by Grantee. Issuer will use its reasonable best efforts to cause
such registration statement first to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee shall
have the right to demand two such registrations. The Issuer shall bear the
costs of such registrations (including, but not limited to, Issuer's
attorneys' fees, printing costs and filing fees, except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto). The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of Option Shares as provided
above, Issuer is in registration with respect to an underwritten public
offering of shares of Common Stock, and if in the good faith judgment of the
managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the inclusion of the Option
Shares would interfere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to be covered
in the registration statement contemplated hereby may be reduced; provided,
however, that after any such required reduction the number of Option Shares to
be included in such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder and Issuer in
the aggregate; and provided further, however, that if such reduction occurs,
then the Issuer shall file a registration statement for the balance as
promptly as practicable thereafter as to which no reduction pursuant to this
Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for
Issuer. Upon receiving any request under this Section 6 from any Holder,
Issuer agrees to send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each
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case by promptly mailing the same, postage prepaid, to the address of record
of the persons entitled to receive such copies. Notwithstanding anything to
the contrary contained herein, in no event shall Issuer be obligated to effect
more than two registrations pursuant to this Section 8 by reason of the fact
that there shall be more than one Holder as a result of any assignment or
division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in Section 10),
Issuer shall repurchase the Option from the Holder at a price (the "Option
Repurchase Price") equal to (x) the amount by which (A) the market/offer price
(as defined below) exceeds (B) the Option Price, multiplied by the number of
shares for which this Option may then be exercised and (ii) at the request of
the owner of Option Shares from time to time (the "Owner"), delivered prior to
an Exercise Termination Event (or such later period as provided in Section
10), Issuer shall repurchase such number of the Option Shares from the Owner
as the Owner shall designate at a price (the "Option Share Repurchase Price")
equal to (x) the market/offer price multiplied by the number of Option Shares
so designated. The term "market/offer price" shall mean the highest of (i) the
price per share of Common Stock at which a tender or exchange offer therefor
has been made, (ii) the price per share of Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares,
as the case may be, or (iv) in the event of a sale of all or substantially all
of Issuer's assets or deposits, the sum of the net price paid in such sale for
such assets or deposits and the current market value of the remaining net
assets of Issuer as determined by a nationally recognized investment banking
firm selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to Issuer, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm
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<PAGE>
selected by the Holder or Owner, as the case may be, and reasonably acceptable
to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant o this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares,
as applicable, accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. As promptly as practicable, and in any event
within five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or the Option Shares in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as appropriate,
the portion of the Option Repurchase Price and the Option Share Repurchase
Price, respectively, that it is no longer prohibited from delivering, within
five business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price, respectively, in full
(and Issuer hereby undertakes to use its reasonable best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), the Holder or
Owner may revoke its notice of repurchase of the Option or the Option Shares
whether in whole or to
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<PAGE>
the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Purchase Price or the Option Share Repurchase Price that
Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder
to purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, or (B) to the Owner, a certificate for the Option Shares it
is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 50% or more of the then
outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction
described in Section 2(b)(i) hereof, except that the percentage referred
to in clause (z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or a Grantee Subsidiary, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
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<PAGE>
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its or any Significant Subsidiary's
assets or deposits to any person, other than Grantee or a Grantee Subsidiary,
then, and in each such case, the agreement governing such transaction shall
make proper provision so that the Option shall, upon the consummation of any
such transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option (the "Substitute Option"), at the
election of the Holder, of either (x) the Acquiring Corporation (as
hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings
indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing
or surviving person, and (iii) the transferee of all or substantially
all of Issuer's assets or deposits (or the assets or deposits of a
Significant Subsidiary of Issuer).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of
a share of the Substitute Common Stock for one year immediately
preceding the consolidation, merger or sale in question, but in no event
higher than the closing price of the shares of Substitute Common Stock
on the day preceding such consolidation, merger or sale; provided that
if
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Issuer is the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by the person
merging into Issuer or by any company which controls or is controlled by
such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Option shall also enter into an agreement with the then Holder or Holders of
the Substitute Option in substantially the same form as this Agreement (after
giving effect for such purpose to the provisions of Section 9), which
agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then exercisable and
the denominator of which shall be the number of shares of Substitute Common
Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercis- able for more than 19.9% of the shares
of Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option
after giving effect to the limitation in this clause (e). This difference in
value shall be determined by a nationally recognized investment banking firm
selected by the Holder.
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(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied
by the number of shares of Substitute Common Stock for which the Substitute
Option may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the
extent not previously reimbursed), and at the request of the owner (the
"Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal
to (x) the Highest Closing Price multiplied by the number of Substitute Shares
so designated plus (y) Grantee's Out-of-Pocket Expenses (to the extent not
previously reimbursed). The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the
six-month period immediately preceding the date the Substitute Option Holder
gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner,
as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such purpose
to the Substitute Option Issuer, at its principal office, the agreement for
such Substitute Option (or, in the absence of such an agreement, a copy of
this Agreement) and certificates for Substitute Shares accompanied by a
written notice or notices stating that the Substitute Option Holder or the
Substitute Share Owner, as the case may be, elects to require the Substitute
Option Issuer to repurchase the Substitute Option
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and/or the Substitute Shares in accordance with the provisions of this Section
9. As promptly as practicable and in any event within five business days after
the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited
under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the Substitute Option and/or the Substitute Shares
in part or in full, the Substitute Option Issuer shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; provided, however,
that if the Substitute Option Issuer is at any time after delivery of a notice
of repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to receive all required regulatory
and legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Substitute Shares
either in whole or to the extent of prohibition, whereupon, in the latter
case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not prohibited from
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delivering; and (ii) deliver, as appropriate, either (A) to the Substitute
Option Holder, a new Substitute Option evidencing the right of the Substitute
Option Holder to purchase that number of shares of the Substitute Common Stock
obtained by multiplying the number of shares of the Substitute Common Stock
for which the surrendered Substitute Option was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Substitute Option Repurchase Price less the portion thereof theretofore
delivered to the Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a
certificate for the Substitute Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to
the date of the notice by the Substitute Option Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month or 18-month periods for exercise
of certain rights under Sections 2, 6, 7, 9 and 12 shall be extended: (i) to
the extent necessary to obtain all regulatory approvals for the exercise of
such rights (for so long as the Holder is using commercially reasonable
efforts to obtain such regulatory approvals), and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to
Grantee as follows:
(a) Issuer has full corporate power and au-
thority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consum-
mation of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of
Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agree-
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ment has been duly and validly executed and delivered by
Issuer.
(b) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly issued, fully
paid, nonassess- able, and will be delivered free and clear of all claims,
liens, encumbrance and security interests and not subject to any preemptive
rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 12
months following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 30 days
following the date on which the Federal Reserve Board has approved
applications by Grantee to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution
on Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
13. Each of Grantee and Issuer will use its best efforts to make
all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation applying to the
Federal Reserve Board under the Bank
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Holding Company Act for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
14. (a) Notwithstanding any other provision of this Agreement, in
no event shall the Grantee's Total Profit (as hereinafter defined) exceed $100
million and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (a) reduce the number of shares of Common Stock
subject to this Option, (b) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (c) pay cash to the Issuer, or (d) any
combination thereof, so that Grantee's actually realized Total Profit shall
not exceed $100 million after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) of more than
$100 million; provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by
Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 7, (ii) (x) the amount received by Grantee pursuant to
Issuer's repurchase of Option Shares pursuant to Section 7, less (y) the
Grantee's purchase price for such Option Shares, (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares (or any
other securities into which such Option Shares are converted or exchanged) to
any unaffiliated party, less (y) the Grantee's purchase price of such Option
Shares, (iv) any amounts received by Grantee on the transfer of the Option (or
any portion thereof) to any unaffiliated party, and (v) any equivalent amount
with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect
to any number of shares as to which Grantee may propose to exercise this
Option shall be the Total Profit determined as of the date of such proposed
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<PAGE>
exercise assuming that this Option were exercised on such date for such number
of shares and assuming that such shares, together with all other Option Shares
held by Grantee and its affiliates as of such date, were sold for cash at the
closing market price for the Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
(e) The Grantee agrees, promptly following any exercise of all or
any portion of the Option, and subject to its rights under Section 7 hereof,
to use commercially reasonable efforts promptly to maximize the value of
Option Shares purchased taking into account market conditions, the number of
Option Shares, the potential negative impact of substantial sales on the
market price for Issuer Common Stock, and the availability of an effective
registration statement to permit public sale of Option Shares.
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is
not permitted to repurchase pursuant to Section 7, the full number of shares
of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and
other communications hereunder shall be deemed to have
been duly given when delivered in person, by fax,
22
<PAGE>
telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) at the respective addresses of the parties set forth in the Merger
Agreement.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
19. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contain the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assignees. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assignees, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
22. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
23
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all of
the date first above written.
FIRST BANK SYSTEM, INC.
By /s/ John F. Grundhofer
--------------------------------
Its Chairman, President
and Chief Executive
Officer
FIRST INTERSTATE BANCORP
By /s/ William E. B. Siart
---------------------------------
Its Chairman and Chief
Executive Officer
24
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated November 5, 1995, between FIRST
INTERSTATE BANCORP, a Delaware corporation ("Grantee"), and FIRST BANK SYSTEM,
INC., a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger immediately prior to the execution and delivery hereof (the
"Merger Agreement"); and
WHEREAS, as a condition and inducement to Grantee's pursuit of the
transactions contemplated by the Merger Agreement and in consideration
therefor and in consideration of the grant of the Reciprocal Option (as
hereinafter defined), Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 25,829,983 fully paid and nonassessable shares of the common stock, $1.25
par value, of Issuer ("Common Stock") at a price per share equal to the last
reported sale price per share of Common Stock as reported on the consolidated
tape for New York Stock Exchange issues on November 3, 1995; provided,
however, that in the event Issuer issues or agrees to issue any shares of
Common Stock at a price less than such last reported sale price per share (as
adjusted pursuant to subsection (b) of Section 5) other than as permitted by
the Merger Agreement, such price shall be equal to such lesser price (such
price, as adjusted if applicable, the "Option Price"); provided further that
in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the
<PAGE>
issued and outstanding shares of Common Stock. The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event described
in Section 5(a) hereof), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, such number together
with any shares of Common Stock previously issued pursuant hereto, equals
19.9% of the number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer or Grantee to breach any provision of the Merger
Agreement.
(c) Notwithstanding anything else to the contrary contained in the
Agreement, in no event shall (i) the number of shares of Common Stock for
which this Option is then exercisable, plus (ii) the number of Option Shares
(as hereinafter defined) theretofore purchased hereunder, plus (iii) the
number of other shares of Common Stock of which the Grantee is the Beneficial
Owner (as such term is defined in the Rights Agreement dated as of December
21, 1988 (as amended to date, the "Rights Agreement"), between the Issuer and
the Rights Agent (as such term is defined in the Rights Agreement)) exceed
19.9% of the issued and outstanding shares of Common Stock (computed in
accordance with the procedures set forth in the Rights Agreement) until after
such time as the Rights Agreement is amended to provide that neither the
execution of this Agreement or the Merger Agreement nor the exercise of the
Option shall result in the Grantee becoming an Acquiring Person (as such term
is defined in the Rights Agreement). Issuer's Board has duly authorized such
an amendment and Issuer agrees promptly to take all steps necessary to enter
into such an amendment with the Rights Agent.
2. (a) The Holder (as hereinafter defined)
may exercise the Option, in whole or part, if, but only
if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinaf-
2
<PAGE>
ter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall
have sent the written notice of such exercise (as provided in subsection (e)
of this Section 2) within 6 months following such Subsequent Triggering Event
(or such later period as provided in Section 10). Each of the following shall
be an Exercise Termination Event: (i) the Effective Time of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof
if such termination occurs prior to the occurrence of an Initial Triggering
Event; (iii) the passage of 18 months (or such longer period as provided in
Section 10) after termination of the Merger Agreement if such termination is
concurrent with or follows the occurrence of an Initial Triggering Event; (iv)
the date on which the shareholders of the Grantee shall have voted and failed
to adopt and approve the Merger Agreement and the Merger (unless (A) Issuer
shall then be in material breach of its covenants or agreements contained in
the Merger Agreement or (B) on or prior to such date, the shareholders of the
Issuer shall have also voted and failed to approve the Parent Vote Matters (as
defined in the Merger Agreement); or (v) the date on which the Reciprocal
Option shall have become exercisable in accordance with its terms. The term
"Holder" shall mean the holder or holders of the Option. Notwithstanding
anything to the contrary contained herein, (i) the Option may not be exercised
at any time when Grantee shall be in breach of any of its covenants or
agreements contained in the Merger Agreement such that Issuer shall be
entitled (without regard to any grace period provided therein) to terminate
the Merger Agreement pursuant to Section 8.1(d) thereof and (ii) this
Agreement shall automatically terminate upon the termination of the Merger
Agreement by Issuer pursuant to Section 8.1(d) thereof as a result of the
breach by Grantee of its covenants or agreements contained in the Merger
Agreement.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Subsidiaries (as
hereinafter defined) (each an "Issuer Subsidiary"),
without having received Grantee's prior
3
<PAGE>
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the
"1934 Act"), and the rules and regulations thereunder) other than Grantee or
any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the shareholders of Issuer
approve or accept any Acquisition Transaction other than as contemplated by
the Merger Agreement or this Agreement. For purposes of this Agreement, (a)
"Acquisition Transaction" shall mean (x) a merger or consolidation, or any
similar transaction, involving Issuer or any Significant Subsidiary (as
defined in Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) of Issuer (other than mergers, consolidations
or similar transactions involving solely Issuer and/or one or more
wholly-owned Issuer Subsidiaries and other than a merger or consolidation as
to which the common shareholders of the Issuer immediately prior thereto in
the aggregate own at least 70% of the common stock of the publicly held
surviving or successor corporation immediately following consummation
thereof), (y) a purchase, lease or other acquisition of all or substantially
all of the assets or deposits of Issuer or any Significant Subsidiary of
Issuer, or (z) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10% or
more of the voting power of Issuer or any Significant Subsidiary of Issuer,
and (b) "Subsidiary" shall have the meaning set forth in Rule 12b-2 under the
1934 Act;
(ii) Any person other than Grantee or any Grantee Subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act,
and the rules and regulations thereunder);
(iii) The shareholders of the Issuer shall have voted and
failed to approve the Parent Vote Matters at a meeting which has been
held for that purpose or any adjournment or postponement
4
<PAGE>
thereof, or such meeting shall not have been held in violation of the
Merger Agreement or shall have been cancelled prior to termination of
the Merger Agreement if, prior to (x) such meeting or (y) if such
meeting shall not have been held or shall have been cancelled, such
termination, 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, a proposal to engage in an Acquisition
Transaction;
(iv) Issuer's Board of Directors shall have withdrawn or
modified (or publicly announced its intention to withdraw or modify) its
recommendation that the shareholders of Issuer approve the Parent Vote
Matters, or Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed (or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) Any such person shall have filed with the SEC a
registration statement with respect to a potential exchange offer that
would constitute an Acquisition Transaction (or filed a preliminary
proxy statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered in such an
exchange offer);
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of engaging
in an Acquisition Transaction, and following such breach Grantee would
be entitled to terminate the Merger Agreement (whether immediately or
after the giving of notice or passage of time or both); or
5
<PAGE>
(viii) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which Grantee
has given its prior written consent, shall have filed an application or
notice with the Federal Reserve Board or other federal or state bank
regulatory authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 20% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 2, except that
the percentage referred to in clause (z) shall be 20%.
(d) The term "Reciprocal Option" shall mean the option granted
pursuant to the option agreement dated the date hereof between the Grantee, as
issuer of such option, and the Issuer, as grantee of such option.
(e) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(f) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided
that if prior notification to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such purchase, the
Holder
6
<PAGE>
shall promptly file the required notice or application for approval, shall
promptly notify the Issuer of such filing, and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification periods
have expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(g) At the closing referred to in subsection (f) of this Section
2, the Holder shall (i) pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option and (ii)
present and surrender this Agreement to the Issuer at its principal executive
offices.
(h) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (g) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the
Option should be exercised in part only, a new Option evidencing the rights of
the Holder thereof to purchase the balance of the shares purchasable
hereunder.
(i) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
7
<PAGE>
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933 (the "1933 Act") in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
Holder shall have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel, in form and substance reasonably satisfactory
to Issuer, to the effect that such legend is not required for purposes of the
1933 Act; (ii) the reference to the provisions of this Agreement in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law.
(j) Upon the giving by the Holder to Issuer of the written notice
of exercise of the Option provided for under subsection (f) of this Section 2
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered
to the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares
of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the
8
<PAGE>
observance or performance of any of the covenants, stipulations or conditions
to be observed or performed hereunder by Issuer; (iii) promptly to take all
action as may from time to time be required (including (x) complying with all
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. (S)18a and regulations promulgated thereunder and (y) in the event,
under the Bank Holding Company Act of 1956, as amended, or any state or other
federal banking law, prior approval of or notice to the Federal Reserve Board
or to any state or other federal regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state or other federal regulatory authority as they may require)
in order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of the Issuer, for
other Agreements providing for Options of different denominations entitling
the holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the
number of shares of Common Stock that are purchasable
9
<PAGE>
upon exercise of the Option pursuant to Section 1 of this Agreement, the
number of shares of Common Stock purchas- able upon the exercise of the Option
shall be subject to adjustment from time to time as provided in this Section
5.
(a) In the event of any change in Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Common Stock purchas- able upon exercise hereof
shall be appropriately adjusted and proper provision shall be made so
that, in the event that any additional shares of Common Stock are to be
issued or otherwise become outstanding as a result of any such change
(other than pursuant to an exercise of the Option), the number of shares
of Common Stock that remain subject to the Option shall be increased so
that, after such issuance and together with shares of Common Stock
previously issued pursuant to the exercise of the Option (as adjusted on
account of any of the foregoing changes in the Common Stock), it equals
19.9% of the number of shares of Common Stock then issued and
outstanding.
(b) Whenever the number of shares of Common Stock
purchasable upon exercise hereof is adjusted as provided in this Section
5, the Option Price shall be adjusted by multiplying the Option Price by
a fraction, the numerator of which shall be equal to the number of
shares of Common Stock pur- chasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of Common
Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 12 months (or such later period as provided in
Section 10) of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a registration statement under the 1933 Act covering any shares
issued and issuable pursuant to this Option and shall use its reasonable best
efforts
10
<PAGE>
to cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement first to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations.
The Issuer shall bear the costs of such registrations (including, but not
limited to, Issuer's attorneys' fees, printing costs and filing fees, except
for underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the inclusion of
the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction
pursuant to this Section 6 shall be permitted or occur and the Holder shall
thereafter be entitled to one additional registration. Each such Holder shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If requested by any such Holder
in connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agree-
11
<PAGE>
ments customarily included in such underwriting agreements for Issuer. Upon
receiving any request under this Section 6 from any Holder, Issuer agrees to
send a copy thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained
herein, in no event shall Issuer be obligated to effect more than two
registrations pursuant to this Section 8 by reason of the fact that there
shall be more than one Holder as a result of any assignment or division of
this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in Section 10),
Issuer shall repurchase the Option from the Holder at a price (the "Option
Repurchase Price") equal to (x) the amount by which (A) the market/offer price
(as defined below) exceeds (B) the Option Price, multiplied by the number of
shares for which this Option may then be exercised and (ii) at the request of
the owner of Option Shares from time to time (the "Owner"), delivered prior to
an Exercise Termination Event (or such later period as provided in Section
10), Issuer shall repurchase such number of the Option Shares from the Owner
as the Owner shall designate at a price (the "Option Share Repurchase Price")
equal to (x) the market/offer price multiplied by the number of Option Shares
so designated. The term "market/offer price" shall mean the highest of (i) the
price per share of Common Stock at which a tender or exchange offer therefor
has been made, (ii) the price per share of Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares,
as the case may be, or (iv) in the event of a sale of all or substantially all
of Issuer's assets or deposits, the sum of the net price paid in such sale for
such assets or deposits and the current market value of the remaining net
assets of Issuer as determined by a nationally recognized investment banking
firm selected by the Holder or the Owner, as the case may be, and reason-
12
<PAGE>
ably acceptable to Issuer, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or Owner,
as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares,
as applicable, accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. As promptly as practicable, and in any event
within five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or the Option Shares in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as appropriate,
the portion of the Option Repurchase Price and the Option Share Repurchase
Price, respectively, that it is no longer prohibited from delivering, within
five business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price, respectively, in full
(and Issuer hereby undertakes to use its reasonable best
13
<PAGE>
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares whether in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver
to the Holder and/or the Owner, as appropriate, that portion of the Option
Purchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to
the Holder, a new Agreement evidencing the right of the Holder to purchase
that number of shares of Common Stock obtained by multiplying the number of
shares of Common Stock for which the surrendered Agreement was exercisable at
the time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option Repurchase
Price, or (B) to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Holder shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 50% or more of the then
outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction
described in Section 2(b)(i) hereof, except that the percentage referred
to in clause (z) shall be 50%.
8. (a) In the event that prior to an Exer-
cise Termination Event, Issuer shall enter into an agree-
14
<PAGE>
ment (i) to consolidate with or merge into any person, other than Grantee or a
Grantee Subsidiary, and shall not be the continuing or surviving corporation
of such consolidation or merger, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other person or cash or any other property or
the then outstanding shares of Common Stock shall after such merger represent
less than 50% of the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or substantially all of
its or any Significant Subsidiary's assets or deposits to any person, other
than Grantee or a Grantee Subsidiary, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an
option (the "Substitute Option"), at the election of the Holder, of either (x)
the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings
indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing
or surviving person, and (iii) the transferee of all or substantially
all of Issuer's assets or deposits (or the assets or deposits of a
Significant Subsidiary of Issuer).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the
average closing price of a share of the Substitute
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<PAGE>
Common Stock for one year immediately preceding the consolidation,
merger or sale in question, but in no event higher than the closing
price of the shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or
by any company which controls or is controlled by such person, as the
Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Option shall also enter into an agreement with the then Holder or Holders of
the Substitute Option in substantially the same form as this Agreement (after
giving effect for such purpose to the provisions of Section 9), which
agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then exercisable and
the denominator of which shall be the number of shares of Substitute Common
Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercis- able for more than 19.9% of the shares
of Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limi-
16
<PAGE>
tation in this clause (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm
selected by the Holder.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied
by the number of shares of Substitute Common Stock for which the Substitute
Option may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the
extent not previously reimbursed), and at the request of the owner (the
"Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal
to (x) the Highest Closing Price multiplied by the number of Substitute Shares
so designated plus (y) Grantee's Out-of-Pocket Expenses (to the extent not
previously reimbursed). The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the
six-month period immediately preceding the date the Substitute Option Holder
gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner,
as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such purpose
to the Substitute Option Issuer, at its principal office, the agreement for
such Substitute
17
<PAGE>
Option (or, in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as
the case may be, elects to require the Substitute Option Issuer to repurchase
the Substitute Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable and in any event
within five business days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of such notice or
notices relating thereto, the Substitute Option Issuer shall deliver or cause
to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the Substitute Option and/or the Substitute Shares
in part or in full, the Substitute Option Issuer shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; provided, however,
that if the Substitute Option Issuer is at any time after delivery of a notice
of repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to receive all required regulatory
and legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Substitute Shares
either in whole or to the
18
<PAGE>
extent of prohibition, whereupon, in the latter case, the Substitute Option
Issuer shall promptly (i) deliver to the Substitute Option Holder or
Substitute Share Owner, as appropriate, that portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price that the Substitute
Option Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to purchase that
number of shares of the Substitute Common Stock obtained by multiplying the
number of shares of the Substitute Common Stock for which the surrendered
Substitute Option was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the
Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month or 18-month periods for exercise
of certain rights under Sections 2, 6, 7, 9 and 12 shall be extended: (i) to
the extent necessary to obtain all regulatory approvals for the exercise of
such rights (for so long as the Holder is using commercially reasonable
efforts to obtain such regulatory approvals), and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to
Grantee as follows:
(a) Issuer has full corporate power and au-
thority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consum-
19
<PAGE>
mation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement or
to consummate the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly issued, fully
paid, nonassess- able, and will be delivered free and clear of all claims,
liens, encumbrance and security interests and not subject to any preemptive
rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 12
months following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 30 days
following the date on which the Federal Reserve Board has approved
applications by Grantee to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution
on Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
20
<PAGE>
13. Each of Grantee and Issuer will use its best efforts to make
all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation applying to the
Federal Reserve Board under the Bank Holding Company Act for approval to
acquire the shares issuable hereunder, but Grantee shall not be obligated to
apply to state banking authorities for approval to acquire the shares of
Common Stock issuable hereunder until such time, if ever, as it deems
appropriate to do so.
14. (a) Notwithstanding any other provision of this Agreement, in
no event shall the Grantee's Total Profit (as hereinafter defined) exceed $100
million and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (a) reduce the number of shares of Common Stock
subject to this Option, (b) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (c) pay cash to the Issuer, or (d) any
combination thereof, so that Grantee's actually realized Total Profit shall
not exceed $100 million after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) of more than
$100 million; provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by
Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 7, (ii) (x) the amount received by Grantee pursuant to
Issuer's repurchase of Option Shares pursuant to Section 7, less (y) the
Grantee's purchase price for such Option Shares, (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares (or any
other securities into which such Option Shares are converted or exchanged) to
any unaffiliated party, less (y) the Grantee's purchase price of such Option
Shares, (iv) any amounts received by Grantee on the transfer of the Option (or
any portion
21
<PAGE>
thereof) to any unaffiliated party, and (v) any equivalent amount with respect
to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect
to any number of shares as to which Grantee may propose to exercise this
Option shall be the Total Profit determined as of the date of such proposed
exercise assuming that this Option were exercised on such date for such number
of shares and assuming that such shares, together with all other Option Shares
held by Grantee and its affiliates as of such date, were sold for cash at the
closing market price for the Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
(e) The Grantee agrees, promptly following any exercise of all or
any portion of the Option, and subject to its rights under Section 7 hereof,
to use commercially reasonable efforts promptly to maximize the value of
Option Shares purchased taking into account market conditions, the number of
Option Shares, the potential negative impact of substantial sales on the
market price for Issuer Common Stock, and the availability of an effective
registration statement to permit public sale of Option Shares.
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is
not permitted to repurchase pursuant to Section 7, the full number of shares
of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the
Holder to
22
<PAGE>
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in person, by fax, telecopy, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
19. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contain the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assignees. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assignees, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
23
<PAGE>
22. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
24
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all of
the date first above written.
FIRST INTERSTATE BANCORP
By /s/ William E. B. Siart
--------------------------------
Its Chairman and Chief
Executive Officer
FIRST BANK SYSTEM, INC.
By /s/ John F. Grundhofer
--------------------------------
Its Chairman, President
and Chief Executive
Officer
25
First Interstate Bancorp
633 West Fifth Street
Los Angeles, California 90071
November 5, 1995
First Bank System, Inc.
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: John F. Grundhofer
Chairman, President and
Chief Executive Officer
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger (the "Merger
Agreement") of even date herewith among First Interstate Bancorp ("Subject
Company"), First Bank System, Inc. ("Parent") and Eleven Acquisition Corp.
("Merger Sub"). Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Merger Agreement.
In order to induce Parent and Merger Sub 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 Subject Company.
This Agreement has been duly executed and delivered by Subject Company.
<PAGE>
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 $25 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) $100 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
2
<PAGE>
recommended that the stockholders of Subject Company approve any
Acquisition Proposal (as such term is defined below) or shall have
entered into an agreement with respect to, authorized, approved,
proposed or publicly announced its intention to enter into, any
Acquisition Proposal;
(iii) the Merger Agreement 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 a 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
3
<PAGE>
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 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. Notwithstanding the foregoing, Subject Company
confirms that the proposal made by Wells Fargo & Company ("Wells") prior to
the date hereof to enter into a business combination with Subject Company
shall also constitute an Acquisition Proposal which has been publicly
announced; provided, however, that solely for purposes of Paragraph 2(c)(iii)
hereof, such proposal shall not constitute a publicly announced Acquisition
Proposal if Wells shall have publicly announced the withdrawal of such
proposal prior to the time Subject Company mails to its stockholders a proxy
statement in connection with the stockholder meeting called to approve and
adopt the Merger Agreement. Nothing contained in the proviso to the
immediately preceding sentence shall imply that any proposal made by Wells
after the date hereof does not constitute an Acquisition Proposal for purposes
of Paragraph 2(c)(iii) hereof.
4
<PAGE>
(f) As used herein, "Nullifying Event" shall mean 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 Parent Vote
Matters 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 the Parent Vote Matters or shall have
withdrawn, modified or changed in any manner adverse to Subject Company its
approval or recommendation of the Parent Vote Matters or shall have resolved
or publicly announced its intention to do any of the foregoing.
(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.
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 it is no longer prohibited from paying,
within five business days after the date on which the 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 reason-
5
<PAGE>
able 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.
6
<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,
FIRST INTERSTATE BANCORP
By /s/ William E.B. Siart
----------------------
Name: William E.B. Siart
Title: Chairman and Chief
Executive Officer
Accepted and agreed to as of the date first above written:
FIRST BANK SYSTEM, INC.
By /s/ John F. Grundhofer
----------------------
Name: John F. Grundhofer
Title: Chairman, President and
Chief Executive Officer
7
First Bank System, Inc.
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
November 5, 1995
First Interstate Bancorp
633 West Fifth Street
Los Angeles, California 90071
Attention: William E.B. Siart
Chairman, President and
Chief Executive Officer
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger (the
"Merger Agreement") of even date herewith among First Interstate
Bancorp ("Subect Company"), First Bank System, Inc. ("Parent")
and Eleven Acquisition Corp. ("Merer Sub"). 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 $25 million. Such fee shall be payable in immediately
<PAGE>
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) $100 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 such Acquisition Event.
(c) As used herein, a "First Triger 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 Parent Vote Matters, or shall have withdrawn or
modified in a manner adverse to Subject Company its approval or
recommendation of the Parent Vote Matters, 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 Acquisition Proposal (as such term is defined below) or shall
have entered into an agreement with respect to, authorized, approved,
proposed or publicly announced its intention to enter into, any
Acquisition Proposal;
(iii) the Parent Vote Matters 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
<PAGE>
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 a
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 Proosal" 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 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 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
<PAGE>
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
Parent Vote Matters 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 Parent Vote Matters) 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
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.
(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 it 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.
<PAGE>
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.
7. 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 BANK SYSTEM, INC.
By /s/ John F. Grundhofer
----------------------
Name: John F. Grundhofer
Title: Chairman, President and
Chief Executive Officer
Accepted and agreed to as of the date first above written:
FIRST INTERSTATE BANCORP
By /s/ William E. B. Siart
-----------------------
Name: William E. B. Siart
Title:Chairman and Chief
Executive Officer
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - ------------------------------------------------x
:
JAMES T. WILLIAMSON, :
: Civil Action No. 14623
Plaintiff, :
:
v. :
:
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 F. RANDALL, STEVEN B. :
SAMPLE, FORREST N. SHUMWAY, WILLIAM :
E.B. SIART, RICHARD J. STEGEMEIER, :
DANIEL M. TELLEP and FIRST INTERSTATE :
BANCORP, :
:
Defendants. :
:
- - ------------------------------------------------x
Plaintiff, by his attorneys, alleges upon information and belief,
excepts with respect to his ownership of First Interstate Bancorp ("FIB" or
the "Company") common stock as follows:
PARTIES
1. Plaintiff is the owner of common stock of FIB.
2. Defendant FIB is a Delaware corporation with
executive offices at 633 West Fifth Street, Los Angeles, California 90071. FIB
is a bank holding company with subsidiaries which perform commercial banking
operations, investment advisory services, mortgage banking services,
international banking services and other related
<PAGE>
financial activities. As of July 31, 1995, FIB had approximately 75,985,361
shares of common stock outstanding held by approximately 24,976 shareholders
of record.
3. Defendant Edward B. Carson is Chairman of the
Board of Directors of FIB.
4. Defendant William E.B. Siart is President, Chief
Executive Officer, and a director of FIB.
5. Defendant William S. Randall is Chief Operating officer
and a director of FIB.
6. Defendants John E. Bryson, Jewel Plummer Cobb, Ralph P.
Davidson, Myron Du Bain, Don C. Frisbee, George M. Keller, Thomas L.
Lee, William F. Miller, Steven B. Sample, Forrest N. Shumway, Richard
J. Stegemeier, and Daniel M. Tellep are directors of FIB.
7. The foregoing individual directors of FIB (collectively the
"Director Defendants"), owe fiduciary duties to FIB and its shareholders.
8. Wells Fargo & Co. ("Wells Fargo") is a Delaware corporation
with executive offices at 420 Montgomery Street, San Francisco, California
94163-0001. Wells Fargo is a bank holding company with subsidiaries that
perform commercial banking operations, investment advisory services,
international and mortgage banking services, credit card services and other
related financial activities. As of July 31, 1995, Wells Fargo had
approximately 48,259,136 shares of common stock outstanding.
2
<PAGE>
CLASS ACTION ALLEGATIONS
9. Plaintiff bring this action on their own behalf and as
a class action on behalf of all shareholders of defendant FIB (except
defendants herein and any person, firm, trust, corporation or other entity
related to or affiliated with any of the defendants) or their successors in
interest, who have been or will be adversely affected by the conduct of
defendants alleged herein.
10. This action is properly maintainable as a class action
for the following reasons:
(a) The class of shareholders for whose benefit this action
is brought is so numerous that joinder of all class members is impracticable.
As of July 31, 1995, there were over 75 million shares of defendant FIB's
common stock outstanding owned by over 24,000 shareholders of record scattered
throughout the United States.
(b) There are questions of law and fact which are common to
members of the Class and which predominate over any questions affecting any
individual members. The common questions include, inter alia, the following:
i. Whether the Defendant Directors have breached their
fiduciary duties owed by them to plaintiff and members of the Class, and/or
have aided and abetted in such breach, by virtue of their participation and/or
acquiescence and by their other conduct complained of herein;
3
<PAGE>
ii. Whether the Defendant Directors have wrongfully
failed to act in the best interests of FIB and its shareholders;
iii. Whether plaintiff and the other members of the
Class will be irreparably damaged by the transactions
complained of herein; and
iv. Whether defendants have breached or aided and abetted
the breaches of the fiduciary and other common law duties owed by them to
plaintiff and the other members of the Class.
11. Plaintiff are committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The
claims of plaintiff are typical of the claims of the other members of the
Class and plaintiff have the same interest as the other members of the Class.
Accordingly, plaintiff are adequate representatives of the Class and will
fairly and adequately protect the interests of the Class.
12. Defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunc- tive relief with
respect to the Class as a whole.
13. The prosecution of separate actions by individual members of
the Class could create a risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for defendants or adjudications with respect to
individual members of the Class which
4
<PAGE>
would as a practical matter be dispositive of the interests of the
other members not parties to the adjudications.
14. Plaintiff anticipate that there will not be any diffi-
culty in the management of this litigation.
15. For the reasons stated herein, a class action is superior to
other available methods for the fair and efficient adjudication of this
action.
SUBSTANTIVE ALLEGATIONS
16. On October 18, 1995 Wells Fargo announced that it had
submitted a merger proposal to the FIB Board, pursuant to which Wells Fargo
would exchange .625 of a Wells Fargo common share for each FIB share. On
October 17, 1995, FIB stock closed at $106 per share, and Wells Fargo stock
closed at $213-5/8 per share. Thus, the proposal has an implied value of
$133.52 per FIB share based upon the October 17, 1995 closing prices. It was
also reported that Wells Fargo sees raising its dividend 5% to satisfy FIB
stockholders.
17. In response to the Wells Fargo proposal, the FIB Board stated
in a press release that Wells Fargo's proposal was unsolicited and that FIB is
"deeply disappointed that Wells Fargo would take this uninvited action." The
Board also stated that it would consider Wells Fargo's proposal and respond to
it "when appropriate". However, Carl E. Reichardt, Wells Fargo's Chief
Executive Officer, reportedly stated that FIB wants six months to mull the
Wells Fargo offer. Further, Wells Fargo reportedly publicized the offer due to
FIB's stance.
5
<PAGE>
18. The Director Defendants, acting in concert, have violated and
are violating fiduciary duties owed to the public shareholders of FIB. The
Director Defendants were and are obligated to act in the best interests of FIB
and its shareholders, including the consideration of whether all bona fide
offers or proposals to acquire the Company or its assets are in the best
interests of the shareholders.
19. The conduct of the Director Defendants in connection with the
Wells Fargo proposal is, and unless corrected, will continue to be, wrongful,
unfair and harmful to FIB's public shareholders.
20. In contemplating, planning and/or effecting the foregoing
actions and inactions, the Director Defendants are not acting in good faith
and with due care and loyalty toward plaintiff and the Class, and have
breached, and are breaching, fiduciary duties to plaintiff and the Class.
21. Because the Defendant Directors (and those acting in concert
with them) dominate and control the business and corporate affairs of FIB and
because they are in possession of private corporate information concerning
FIB's businesses and future prospects, there exists an imbalance and disparity
of knowledge and economic power between the Director Defendants.
22. As a result of the wrongful actions and inactions of the
Director Defendants, plaintiff and the Class have been and will be damaged.
6
<PAGE>
23. Unless enjoined by this Court, the Director Defendants will
continue to breach their fiduciary duties owed to plaintiff and the Class, all
to the irreparable harm of the Class.
24. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring that this action may be maintained as a
class action;
(b) Enjoining preliminarily and permanently the Director
Defendants to consider and negotiate with respect to all bona fide offers or
proposals for the Company or its assets, in the best interests of FIB
shareholders;
(d) Requiring defendants to compensate plaintiff and the
members of the Class for all losses and damages suffered and to be suffered by
them as a result of the wrongful conduct complained of herein, together with
prejudgment and post-judgment interest;
(e) Awarding plaintiff the costs and disbursements of
this action, including reasonable attorneys', accountants', and
experts' fees; and
7
<PAGE>
(f) Granting such other and further relief as may be
just and proper.
Dated: October 18, 1995
CHIMICLES, JACOBSEN & TIKELLIS
------------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
OF COUNSEL:
Charles J. Piven, Esquire
The Legg Mason Tower
Suite 2700
Baltimore, Maryland 21202
8
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - - - -X
VICTORIA SHAEV, individually and
on behalf of all others similarly : Civil Action No. 14629
situated,
: CLASS ACTION
Plaintiff, COMPLAINT
:
- against -
:
FIRST INTERSTATE BANCORP, JOHN E.
BRYSON, EDWARD M. CARSON, DR. :
JEWEL PLUMMER COBB, RALPH P.
DAVIDSON, MYRON DuBAIN, DON C. :
FRISBEE, GEORGE M. KELLER, THOMAS
L. LEE, DR. WILLIAM F. MILLER, :
WILLIAM S. RANDALL, DR. STEVEN B.
SAMPLE, FORREST N. SHUMWAY, WIL- :
LIAM E.B. SIART, RICHARD J.
STEGEMEIER, and DANIEL M. TELLEP, :
Defendants. :
- - - - - - - - - - - - - - - - - - - - -X
Plaintiff alleges upon information and belief except as to
paragraph 1, which is alleged on knowledge, as follows:
THE PARTIES
1. Plaintiff Victoria Shaev is and was at all times relevant
hereto the owner of shares of the common stock of First Interstate Bancorp
("FIB" or the "Company").
2. FIB is a bank holding company organized and
existing under the laws of the State of Delaware with offices in
Los Angeles, California. FIB operates approximately 1,000
offices in 13 states. FIB has approximately 77 million shares of
<PAGE>
common stock issued and outstanding which trade on the NASDAQ over-the-counter
quotation system.
3. (a) Defendant Edward M. Carson ("Carson") is and
was at all relevant times Chairman of the Board.
(b) Defendant William S. Randall ("Randall") is and was at
all relevant times Executive Vice President and Chief Operating Officer of
FIB.
(c) Defendant William E.B. Siart ("Siart") is and
was at all relevant times President and Chief Executive Officer
of FIB.
(d) Defendants John E. Bryson ("Bryson"), Dr.
Jewel Plummer Cobb ("Cobb"), Ralph P. Davidson ("Davidson"),
Myron DuBain ("DuBain"), Don C. Frisbee ("Frisbee"), George M.
Keller ("Keller"), Nomas L. Lee ("Lee"), Dr. William F. Miller
("Miller"), Dr. Steven S. Sample ("Sample"), Forrest N. Shumway
("Shumway"), Richard J. Stegemeier ("Stegemeier") and Daniel M.
Tellep ("Tellep").
4. The Individual Defendants set forth in paragraph 3 above are
officers and/or directors of FIB and as such, are in a fiduciary relationship
with plaintiff and the other public stockholders of FIB and owe to plaintiff
and other members of the Class the highest obligations of good faith, fair
dealing and full disclosure.
2
<PAGE>
CLASS ACTION ALLEGATIONS
5. Plaintiff brings this case on her own behalf and
as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery,
on behalf of all public stockholders of FIB, and their successors in interest,
who are or will Be threatened with injury arising from defendants, actions as
more fully described herein (the "Class"). Excluded from the Class are
defendants herein and any person, firm, trust, corporation, or other entity
related to or affiliated with any of the defendants.
6. This action is property maintainable as a class
action.
7. The class is so numerous that joinder of all members is
impracticable. There are over 25,000 stockholders of record located throughout
the United States.
8. There are questions of law and fact which are common to the
class and which predominate over questions affecting any individual class
member.
9. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The
claims of the plaintiff are typical of the claims of other members of the
class and plaintiff has the same interests as the other members of the class.
Accordingly, plaintiff is an adequate representative of the class and will
fairly and adequately protect the interests of the class.
3
<PAGE>
BACKGROUND AND CLAIM FOR RELIEF
10. On or about October 18, 1995, Wells-Fargo & Co.
("Wells-Fargo") announced in a press release that it had submitted an
unsolicited merger proposal to FIB (the "proposal"). Pursuant to the terms of
the proposal, FIB shareholders would receive .625 a share of Wells-Fargo,
representing a price of $133.50 for each FIB share based on its current
trading price. The total transaction is valued at approximately $10 billion.
11. The proposal contemplates a merger of FIB and
Wells-Fargo into a new company.
12. FIB has in place a shareholder rights plan (commonly known as
a "poison pill") which makes an unwelcome takeover of the company
prohibitively more expensive. The poison pill is triggered by the acquisition
of 20% or more of FIB's common stock by a group or person.
13. FIB has previously been approached by Wells-Fargo and has been
spurned; in February, 1994, FIB rejected a tentative merger proposal from
Wells-Fargo valued at approximately $90 per share, which was rejected.
According to The New York Times, Wells-Fargo's Chairman, Paul Hazen, met with
defendant Siart in the last few weeks to discuss a possible transaction, and
which was once again rejected.
14. In response to Wells-Fargo's announcement of the
proposal, defendant Siart stated "I am deeply disappointed that
4
<PAGE>
Wells-Fargo would take this uninvited action." From FIB's prior course of
dealing with Wells-Fargo, it is likely that FIB will rebuff Wells-Fargo yet
again.
FIRST CLAIM FOR RELIEF
15. At all times herein, defendants were and are obli-
gated to adequately consider, in a timely fashion and on an informed basis,
any reasonable proposal from any party, not to place their own self-interests
and personal considerations ahead of the interests of the stockholders, and to
make corporate decisions in good faith.
16. Defendants' fiduciary obligations require
them to:
(a) arrange for the sale of FIB to the highest bidder,
including obligating them to undertake an appropriate evaluation of any bona
fide offers, provide nonpublic information to such offerors to enable them to
make the highest possible bid for the Company and take such other appropriate
steps to solicit the highest possible bid for the Company; and
(b) act independently, including appointing a
disinterested committee so that the interests of FIB's public
stockholders would be protected; and
(c) utilize the poison pill in a manner designed
to maximize shareholder value.
5
<PAGE>
17. By virtue of the acts and conduct alleged herein, the
Individual Defendants, who direct the actions of the Company, are carrying out
a preconceived plan and scheme to entrench themselves in office and to protect
and advance their own parochial interests at the expense of FIB. Defendants'
conduct has been a breach of their fiduciary obligation and has violated the
mandate of the Company's shareholders to maximize value.
18. As a result of the foregoing, the Individual Defendants have
breached and/or aided and abetted breaches of fiduciary duties owed to FIB and
its stockholders.
19. Unless enjoined by this Court, defendants will breach their
fiduciary duties owed to plaintiff and the other members of the class and may
benefit themselves in their corporate offices, all to the irreparable harm of
the class, as aforesaid.
20. Plaintiff and the other members of the Class have
no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this to be a proper class action;
(b) ordering the individual Defendants to carry
out their fiduciary duties to plaintiff and the other members of the Class by
taking all steps necessary to arrange for the sale of FIB to the highest
bidder;
6
<PAGE>
(c) ordering defendants, jointly and severally, to account
to plaintiff and the other members of the Class for all damages suffered and
to be suffered by them as a result of the acts and transactions alleged
herein;
(d) requiring defendants to utilize the poison
pill in a manner consistent with maximizing shareholder value;
(e) awarding plaintiff the costs and disbursements of the
action, including a reasonable allowance for plaintiff's attorney's fees and
experts' fees; and
(f) granting such other and further relief as this court may
deem to be just and proper.
Dated: October 19, 1995
ROSENTHAL MONHAIT GROSS &
GODDESS, P.A.
By: _________________________________
Joseph A. Rosenthal
First Federal Plaza, Suite 214
Box 1070
Wilmington, DE 19899
(302) 656-4433
OF COUNSEL:
GOODKIND LABATON RUDOFF &
SUCHAROW LLP
100 Park Avenue
New York, New York 10017
(212) 907-0700
7
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - ------------------------------------------------x
JULES BERNSTEIN, :
Plaintiff, :
against : C.A. No. 146.30
EDWARD M. CARSON, WILLIAM E. SIART :
WILLIAM F. RANDALL, JOHN E. BRYSON,
JEWEL PLUMMER COBB, RALPH P. DAVIDSON, :
MYRON DUBAIN, DON C. FRISBEE, GEORGE M.
KELLER, THOMAS L. LEE, WILLIAM P. :
MILLER, FORREST M. SHUMWAY, STEVEN B.
SAMPLE, RICHARD N. STEGEMEYER, DANIEL :
L. TELLEP, AND FIRST INTERSTATE BANCORP.
:
Defendants.
- - ------------------------------------------------x
CLASS ACTION COMPLAINT
Plaintiff, by his attorneys, Rosenthal, Monhait, Gross & Goddess,
P.A., for his complaint against defendants, alleges upon information and
belief, except for paragraph 2 hereof which is alleged upon knowledge, as
follows:
1. Plaintiff brings this action pursuant to Rule
231 of the Rules of the Court of Chancery on his behalf and
as a class action on behalf of all persons, other than
defendants and those in privity with them, who own the
common stock of First Interstate Bancorp. ("First Interstate
or the "Company").
<PAGE>
2. Plaintiff has been the owner of the common stock of the Company
since prior to the transaction herein complained of and continuously to date.
3. Defendant First Interstate is a corporation duly organized and
existing under the laws of the State of Delaware. The Company is a bank
holding company with subsidiaries which perform commercial banking operations.
The Company also offers investment advisory services, mortgage banking
services, international banking services and other related financial
activities.
4. The following individual defendants (the
"Individual Defendants") constitute the entire Board of
Directors of First Interstate:
Name Position
- - ---- --------
Edward M. Carson Chairman
William E. Siart Director, President and C.E.O.
William F. Randall Director, C.O.O.
John E. Bryson Director
Jewel Plummer Cobb Director
Ralph P. Davidson Director
Myron Dubain Director
Don C. Frisbee Director
George M. Keller Director
Thomas F. Lee Director
2
<PAGE>
William F. Miller Director
Steven B. Sample Director
Forrest N. Shumway Director
Richard J. Stegemeyer Director
Daniel L. Tellep Director
5. The Individual Defendants named in paragraph 4 are in a
fiduciary relationship with the plaintiff and the other public stockholders of
First Interstate and owe them the highest obligations of good faith, due dare,
candor and fair dealing.
CLASS ACTION ALLEGATIONS
6. Plaintiff brings this action on his own
behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of
Chancery, on behalf of all holders of common stock of the Company (except the
defendants herein and any person, firm, trust, corporation, or other entity
related to or affiliated with any of the defendants) and their successors in
interest, who are or will be threatened with injury arising from defendants'
actions as more fully described herein.
7. This action is properly maintainable as a
class action.
8. The class is so numerous that joinder of all
members is impracticable. There are approximately
3
<PAGE>
75,985,361 shares of First Interstate common stock outstanding, owned by over
24,976 record shareholders scattered throughout the country.
9. There are questions of law and fact which are common to the
class including, inter alia, the following: (a) whether defendants have
breached their fiduciary and other common law duties owed by them to plaintiff
and the members of the class; (b) whether defendants are unlawfully impeding a
takeover attempt; (c) whether defendants' actions hereinafter described,
constitute a breach of the duty of fair dealing with respect to the plaintiff
and the other members of the class, a failure to maintain a level playing
field and a failure to maximize shareholder value; and (d) whether the class
is entitled to injunctive relief or damages as a result of defendants'
wrongful conduct.
10. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The
claims of the plaintiff are typical of the claims of other members of the
class and plaintiff has the same interests as the other members of the class.
Plaintiff will fairly and adequately represent the class.
11. The prosecution of separate actions by indi-
vidual members of the Class would create the risk of incon-
4
<PAGE>
sistent or varying adjudications with respect to individual members of the
Class which would establish incompatible standards of conduct for defendants,
or adjudications with respect to individual members of the Class which would
as a practical matter be dispositive of the interests of the other members not
parties to the adjudications or substantially impair or impede their ability
to protect their interests.
12. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to, the Class and, therefore,
preliminary and final injunctive relief on behalf of the Class as a whole is
appropriate.
SUBSTANTIVE ACTIONS
13. Wells Fargo & Co. ("Wells Fargo") has long
been interested in acquiring First Interstate. Wells Fargo offered to purchase
the Company for $90 per share in Febru- ary 1994. This offer was rebuffed by
First Interstate. Paul Hazen, the chairman of Wells Fargo, met once in recent
weeks with Defendant Siart to discuss a possible merger and was again
rejected.
14. On October 18, 1995, Wells Fargo & Co.
("Wells Fargo") announced that it had made an unsolicited
merger proposal to First Interstate providing for the acqui-
sition of 100 percent of the common stock of First Inter-
5
<PAGE>
state Bancorp. Pursuant to the terms of the merger proposal, Wells Fargo
offered to exchange .625 of a share of its common stock for every share of
First Interstate common stock. Based an the closing price of $213.62 per share
of Wells Fargo common stock on October 17, 1995, each share of First
interstate is valued at $133.50. The total value of the transaction is
approximately $10.17 billion.
15. The reaction of the investment community to the proposed
acquisition of First Interstate has been emphatically positive. In response to
Wells Fargo's announcement, First Interstate's stock price soared from $106
per share to over $140 per share. Additionally, the price of Wells Fargo stock
increased to $229 per share in response to this news.
16. Defendants owe fundamental fiduciary obligations to the First
Interstate shareholders to take all necessary and appropriate steps to
maximize the value of their shares. In addition, the individual Defendants
have the responsibility to act independently so that the interests of First
Interstate public stockholders will be protected, to seriously consider all
bona fide offers for the company, and to conduct fair and active bidding
procedures or other mechanisms for checking the market to assure that the
highest possible price is achieved. Further, the direc-
6
<PAGE>
tors of the Company must adequately insure that no conflict of interest exists
between defendants' own interests and their fiduciary obligations to maximize
stockholder value or, if such conflicts exist, to insure that all such
conflicts will be resolved in the best interests of the company's public
stockholders.
17. The Individual Defendants have breached their fiduciary and
other common law duties owed to Plaintiff and other members of the Class in
that they have not exercised and are not exercising independent business
judge- ment and have acted and are acting to the detriment of the Class. The
defendants' rejection of Wells Fargo's offer is an uninformed knee jerk
reaction made without adequate information as to what Wells Fargo would be
prepared to offer in a fully negotiated transaction, so that defendants can
maintain their positions in control of the company.
18. Moreover, Defendants have refused to take those steps
necessary to ensure that the Company's public shareholders will receive
maximum value for their shares of First Interstate common stock. Defendants'
failure to accept Wells Fargo's offer to enter into a definitive merger
agreement is clearly the result of the desire by the Individual defendants to
protect their own substantial salaries, perquisites and positions with the
company.
7
<PAGE>
19. The Individual Defendants have breached their fiduciary duties
by reason of the acts and transactions complained of herein, including their
failure to negotiate the possible acquisition of First Interstate.
20. Unless enjoined by this Court, the Individual Defendants will
continue to breach their fiduciary duties owed to Plaintiff and the other
members of the class.
21. Plaintiff and the class have no adequate
remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
A. declaring this to be a proper class action;
B. ordering the Individual Defendants to carry
out their fiduciary duties to plaintiff and the other members of the class by
announcing their intention to:
(1) cooperate fully with any person or entity, having a bona
fide interest in proposing any transaction which would maximize shareholder
value, including, but not limited to, a buyout or takeover of the Company by
Wells Fargo;
(2) undertake an appropriate evaluation of
First Interstate's worth as a merger/acquisition candidate;
(3) take all appropriate steps to enhance
First Interstate value and attractiveness as a merg-
er/acquisition candidate;
8
<PAGE>
(4) take all appropriate steps to effectively expose First
Interstate to the marketplace in an effort to create an active auction for
First Interstate;
(5) act independently so that the interests
of First Interstate's public stockholders will be protected;
and
(6) adequately ensure that no conflicts of interest exist
between the Individual Defendant's interests and their fiduciary obligation to
maximize stockholder value or, if such conflicts exist, to ensure that all
conflicts are resolved in the best interests of First Interstate's public
stockholders;
C. ordering the Individual Defendants, jointly
and severally, to account to plaintiff and the class for all
damages suffered and to be suffered by them as a result of
the acts and transactions alleged herein;
D. preliminarily and permanently enjoining the
implementation or enforcement of any poison pill or other
device to thwart Wells Fargo's or any other person's bid for
First Interstate;
E. awarding plaintiff the costs and disburse-
ments of this action, including a reasonable allowance for
plaintiff's attorneys' and experts' fees; and
9
<PAGE>
F. granting such other and further relief as may
be just and proper in the premises.
Dated: October 19, 1995
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By:_________________________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LIEBHARD & LIPSHITZ
274 Madison Avenue
New York, NY 10016
10
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - ------------------------------------------------x
:
MOISE KATZ, :
: C.A. No. 14632
Plaintiff, :
:
- against - :
: CLASS ACTION
FIRST INTERSTATE BANCORP, : COMPLAINT
JOHN E. BRYSON, EDWARD M. :
CARSON, JEWEL P. COBB, RALPH :
P. DAVIDSON, MYRON DUBAIN, DON :
C. FRISBEE, GEORGE M. KELLER, :
THOMAS L. LEE, WILLIAM F. :
MILLER, WILLIAM F. MILLER, :
STEVEN B. SAMPLE, FORREST N. :
SHUMWAY, WILLIAM E. B. SIART, :
RICHARD J. STEGEMEIER, and DANIEL :
M. TELLEP, :
:
Defendants. :
:
- - ------------------------------------------------x
Plaintiff, by his attorneys, alleges upon personal knowledge as to
himself and his own acts, and upon information and belief based upon the
investigation conducted by counsel, as follows:
SUMMARY OF THE ACTION
1. Plaintiff brings this action individually and as a
class action on behalf of all persons, other than defendants, who own the
securities of First Interstate Bancorp ("First Interstate" or the "Bank"), and
who are similarly situated, and who have been deprived of the opportunity to
maximize the value of
<PAGE>
their shares by defendants' breach of fiduciary duty (the
"Class") in relation to the proposed acquisition by Wells Fargo &
Co. (as defined below).
PARTIES
2. Plaintiff Moise Katz is the owner of shares of
First Interstate common stock.
3. Defendant First Interstate is a corporation duly organized and
existing under the laws of the State of Delaware. First Interstate is a bank
holding company with subsidiaries which perform commercial banking operations,
investment advisory services, and mortgage banking. The Bank maintains its
principal executive offices at 633 West Fifth Street, Los Angeles, CA 90071.
First Interstate has, according to its latest Form 10-Q, approximately
75,985,361 shares of stock outstanding and thousands of stockholders of
record. First Interstate stock trades on the New York Stock Exchange.
4. Defendant Edward M. Carson ("Carson") is the
Chairman of the Board of Directors of the Bank.
5. Defendant William E.B. Siart ("Siart") is a direc-
tor and the Chief Executive Officer of the Bank.
6. Defendants John E. Bryson, Jewel P. Cobb, Ralph P.
Davidson, Myron DuBain, Don C. Frisbee, George M. Keller, Thomas
L. Lee, William F. Miller, William F. Randall, Steven B. Sample,
2
<PAGE>
Forrest N. Shumway, Richard Stegemeier, and Daniel M. Tellep are
directors of First Interstate.
7. Because of their positions as directors of the Bank, the
director defendants owe a fiduciary duty of loyalty and due care to plaintiff
and the other members of the Class.
8. Each defendant herein is sued individually and as a conspirator
and aider and abettor, as well as, where applicable, in his/her capacity as a
director of the Bank. The liability of each arises from the fact that each has
engaged in all or part of the unlawful acts, plans, schemes, or transactions
complained of herein.
CLASS ACTION ALLEGATIONS
9. Plaintiff brings this action on his own behalf and
as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery,
on behalf of all stockholders of the Bank, except defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated
with any of the defendants, who will be threatened with injury arising from
defendants' actions described more fully below.
10. This action is properly maintainable as a class
action.
11. The Class is so numerous that joinder of all
members is impracticable. The Bank has thousands of stockhold-
ers.
3
<PAGE>
12. There are questions of law and fact common to the Class that
predominate over questions affecting any individual class member. The common
questions include, inter alia, whether:
(a) defendants have engaged in conduct constituting unfair
dealing and have engaged in a plan and scheme which harms the Bank's public
stockholders;
(b) defendants have prevented and are continuing to prevent
plaintiff and the Class from receiving the maximum value per share that could
be received;
(c) defendants have breached or aided and abetted the breach
of the fiduciary and other common law duties owed by them to plaintiff and the
members of the Class;
(d) the director defendants, as directors of First
Interstate, have fulfilled, and are capable of fulfilling, their fiduciary
duties to plaintiff and the Class, including their duties of entire fairness,
loyalty, due care, and candor;
13. Plaintiff is an adequate representative of the Class.
Plaintiff is committed to prosecuting the action and has retained competent
counsel experienced in litigation of this nature. Plaintiff's claims are
typical of the claims of the other members of the Class and plaintiff has the
same interests as the other members of the class.
4
<PAGE>
THE ACQUISITION OFFER
14. On October 18, 1995, Wells Fargo & Co. ("Wells
Fargo") made an offer to purchase the Bank in a proposed $10.84 billion deal
(the "Bid"). The Bid was unsolicited or "hostile." Paul Hazen, the chairman of
Wells Fargo, had met in recent weeks with Siart to discuss a possible merger,
but was snubbed.
15. As reported in The Wall Street Journal on October 19, 1995,
Wells Fargo is offering to exchange 0.625 of its common shares for each First
Interstate share.
16. As also reported in The Wall Street Journal, the Bid, which
offers a huge premium to the Bank's public shareholders, will meet with
"fierce resistance" from the Bank. The Wall Street Journal reported that
earlier this year, Siart was "determined to keep the [B]ank independent."
17. The Wall Street Journal quoted Carole Berger, a Salomon
Brothers Inc. analyst, as stating that "[c]onceptually, this is an
extraordinary transaction in the creation of shareholder value." Also quoted
in the article was Raphael Soifer, an analyst at Brown Brothers Harriman & Co.
who stated that "I don't think First Interstate has any options for its
shareholders other than Wells, and no one else is in a better position than
Wells to achieve the cost savings."
5
<PAGE>
18. The New York Times reported on October 19, 1995
that "Wells's bid is so high that it would be hard for any other
company to match it."
CAUSE OF ACTION FOR BREACH OF FIDUCIARY
DUTY AGAINST ALL DEFENDANTS
19. Plaintiff reavers and incorporates by reference
all previous allegations.
20. By reason of all of the foregoing, defendants herein have
willfully participated in unfair dealing toward plaintiff and the other
members of the Class and have engaged in and substantially assisted and aided
and abetted each other in breach of the fiduciary duties owed by them to the
Class.
21. By the acts, transactions and courses of conduct alleged
herein, defendants, individually and as part of a common plan and scheme in
breach of their fiduciary duties to plaintiff and the Class, are attempting
unfairly to deprive plaintiff and other members of the Class of consideration
of a transaction which could provide them with the opportunity to maximize
their investment in First Interstate.
22. In refusing to adequately consider the Bid, defendants have
violated the fiduciary duties owed to the public shareholders of the Bank and
have placed their personal interests ahead of the interests of the Bank's
public shareholders. Defendants are using their positions as directors for the
purpose of
6
<PAGE>
pursuing their own agenda, all to the detriment of plaintiff and
the Class.
23. The defendants have not, in accordance with their
fiduciary duties:
(a) acted independently so that the interests of
the Bank's public shareholders would be protected;
(b) adequately ensured that no conflicts of interest exist
or if such conflicts exist to ensure that all conflicts would be resolved in
the best interests of the Bank's public shareholders; and
(c) taken all appropriate steps to enhance the Bank's value
and attractiveness as a merger acquisition, restructuring or recapitalization
candidate.
24. Because the director defendant dominate the business affairs
of the Bank, and are in possession of private banking information concerning
the Bank's assets, business and future prospects, there exists an imbalance of
knowledge and economic power between them and the public stockholders of the
Bank which makes it inherently unfair for them to reject any proposed
transaction simply to entrench themselves in their positions as directors of
First Interstate, at the expense of their duty to maximize stockholder value
for the Bank's public shareholders.
7
<PAGE>
25. As a result of the actions of defendants, plaintiff and the
Class have been and will be damaged in that they have not and will not receive
their fair proportion of the value of the Bank's assets and business. As a
practical matter, no third party will bid for the Bank when Wells Fargo's bid
has been met with such resistance.
26. Because the Bid is so valuable, there is an only a very slight
likelihood that a so-called "white knight" will enter the picture to "save"
the Bank from Wells Fargo.
27. Plaintiff and the Class have no adequate remedy of
law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
(a) declaring that this action is properly maintainable as a
class action and certifying plaintiff as representative of the Class;
(b) ordering the director defendants to discharge their
fiduciary duties to plaintiff and the other members of the Class by announcing
their intentions to:
(1) act independently on a fully informed
basis in the best interests of the Bank's public shareholders;
(2) undertake an appropriate evaluation of
First Interstate as a merger or acquisition candidate;
8
<PAGE>
(3) take all appropriate steps to enhance
the Bank's value and attractiveness as a merger or acquisition
candidate;
(4) cooperate with all persons having a bona
fide interest in proposing any transaction which would maximize
shareholder value;
(5) take all steps to create an active
auction for the Bank in order to maximize shareholder value;
(7) adequately ensure that no conflicts of
interest exist between defendants' own interests and their fiduciary
obligation to maximize shareholder value or, if such conflicts exist, to
ensure that all such conflicts are resolved in favor of the Bank's public
shareholders.
(c) declaring that the Defendants and each of them have
committed or aided and abetted a gross abuse of trust and have breached their
fiduciary duties to plaintiff and the other members of the Class;
(d) ordering defendants to permit a stockholders' committee
consisting of class members and their representatives to participate in any
process undertaken in connection with the sale of the Bank in order to ensure
a fair procedure, adequate procedural safeguards, and independent input by
plaintiff and the Class in connection with any transaction for the public
shares of First Interstate;
9
<PAGE>
(e) awarding compensatory damages against defendants, jointly and
severally, in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
(f) awarding plaintiff and the Class their costs and
disbursements and reasonable allowances for plaintiff's counsel
and experts' fees and expenses; and
(g) granting such other and further relief as may be
just and proper.
Dated: October 19, 1995
ROSENTHAL MONHAIT GROSS
& GODDESS
By:_______________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
WECHSLER HARWOOD
HALEBIAN & FEFFER LLP
Robert I. Harwood, Esq.
Jorn A. Holl, Esq.
805 Third Avenue
New York, New York 10022
10
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - ---------------------------------------------------
HAROLD SACHS and KEN FELDER, :
: Civil Action No.
Plaintiffs, :
: CLASS ACTION
-against- : COMPLAINT
:
FIRST INTERSTATE BANCORP, JOHN E. :
BRYSON, JEWEL PLUMMER COBB, RALPH P. :
DAVIDSON, MYRON DU BAIN, DON C. :
FRISBEE, GEORGE M. KELLER, THOMAS L. :
LEE, WILLIAM F. RANDALL, STEVEN B. :
SAMPLE, FORREST N. SHUMWAY, WILLIAM :
E. B. SIART, RICHARD J. STEGEMEIER and :
DANIEL M. TELLEP, :
:
Defendants. :
- - ----------------------------------------------------
Plaintiffs, by their attorneys, allege upon information and belief
(said information and belief being based, in part, upon the investigation
conducted by and through their), except with respect to their ownership of
First Interstate Bancorp ("First Interstate" or the "Company") common stock,
which is alleged upon his personal knowledge as follows:
THE PARTIES
1. Each plaintiff is the owner of shares of defendant First
Interstate.
<PAGE>
2. Defendant First Interstate is a corporation organized and
existing under the laws of the State of Delaware. First Interstate maintains
its principal offices at 633 West Fifth Street, Los Angeles, California. First
Interstate is a bank holding company.
3. Defendant William E. B. Siart ("Siart") is a director and the
Chairman of the Board of First Interstate.
4. The remaining individual defendants John E. Bryson, Jewel
Plummer Cobb, Ralph P. Davidson, Myron Du Bain, Don C. Frisbee, George M.
Keller, Thomas L. Lee, William F. Randall, Steven B. Sample, Forrest N.
Shumway, Richard J. Stegemeier and Daniel M. Tellep are directors of First
Interstate.
5. The foregoing individual defendants (collectively referred to
herein as the "Director Defendants") are in a fiduciary relationship with
plaintiffs and the public stockholders of First Interstate, and owe plaintiffs
and the First Interstate public stockholders the highest obligations of good
faith, fair dealing, due care, loyalty and full and candid disclosure.
CLASS ACTION ALLEGATIONS
6. Plaintiffs bring this action on their own behalf and as a class
action on behalf of all shareholders of defendant First Interstate (except
defendants herein and any person, firm, trust, corporation or other entity
related to or affiliated with any of the defendants) or their successors in
interest, who have been or will be adversely affected by the conduct of
defendants alleged herein.
2
<PAGE>
7. This action is properly maintainable as a class action for the
following reasons:
(a) the class of shareholders for whose benefit this action
is brought is so numerous that joinder of all Class members is impracticable.
As of July 31, 1995, there were almost 76 million shares of First Interstate
common stock outstanding, owned by nearly 25,000 shareholders of record
scattered throughout the United States.
(b) there are questions of law and fact which are common to
members of the class including, inter alia, the following:
(i) whether the Director Defendants have breached
their fiduciary duties owed by them to plaintiffs and members of the class
and/or have aided and abetted in such breach, by virtue of their participation
and/or acquiescence and by their other conduct complained of herein;
(ii) whether the Director Defendants have wrongfully
failed and refused to fully consider a purchase of First Interstate and/or any
and all of its various assets or divisions at the best price obtainable and to
take all steps to maximize shareholder value;
(iii) whether plaintiffs and the other members of the
Class will be irreparably damaged by defendants' failure to explore all
reasonable alternatives to maximize shareholder value; and
3
<PAGE>
(iv) whether defendants have breached or aided and
abetted the breaches of the fiduciary and other common law duties owed by them
to plaintiffs and the other members of the Class.
8. Plaintiffs are committed to prosecuting this action and have
retained competent counsel experienced in litigation of this nature. The
claims of plaintiffs are typical of the claims of the other members of the
Class and plaintiffs have the same interest as the other members of the Class.
Accordingly, plaintiffs are adequate representatives of the Class and will
fairly and adequately protect the interests of the Class.
9. Plaintiffs anticipate that there will not be any difficulty in
the management of this litigation.
10. The prosecution of separate actions by individual members of
the Class would create the risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for defendants, or adjudications with respect to
individual members of the Class which would as a practical matter be
dispositive of the interests of the other members not parties to the
adjudications or substantially impair or impede their ability to protect their
interests.
11. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to, the Class and, therefore,
preliminary and final injunctive relief on behalf of the Class as a whole is
appropriate.
4
<PAGE>
SUBSTANTIVE ALLEGATIONS
12. On October 18, 1995, Well Fargo & Co. ("Wells Fargo")
announced a hostile offer to buy First Interstate for 0.625 Wells Fargo shares
per First Interstate share, equal to approximately $10.90 billion or $140.75
per First Interstate share based on Wells Fargo's current market price of $229
per share. The market price of First Interstate stock immediately prior to the
offer was only $105 per share, and it had traded as low as $85 3/8 as recently
as August 4, 1995.
13. First Interstate had already rejected an offer from Wells
Fargo during 1994 and it has given no indication that it intends to take all
steps possible to maximize shareholder value. In fact, defendant Siart
responded to the offer by stating, "I am deeply disappointed that Wells Fargo
would take this uninvited action." First Interstate failed to commit to
consummate any alternatives which would result in the maximization of
stockholder value.
14. Defendants' conduct amounts to a breach of the fiduciary
duties owed to plaintiffs and the Class in that plaintiffs and the Class are
being deprived of their right to share in the valuable assets and businesses
of First Interstate and to receive the maximum possible value for their
shares.
15. Under the circumstances, the Director Defendants are obligated
to explore all alternatives to maximize shareholder value. The Director
Defendants will be in breach of their fiduciary duties owed to First
Interstate's public shareholders if they fail to fully explore
5
<PAGE>
and negotiate with respect to the Wells Fargo offer and to explore any other
bona fide offers by potential acquirors for the purchase of the Company.
16. The Wells Fargo proposal represents an opportunity to effect a
change in control of First Interstate, its business and affairs. In a change
of control transaction, the Director Defendants necessarily and inherently
suffer from a conflict of interest between their own personal desires to
retain their offices in First Interstate, with the emoluments and prestige
which accompany those offices, and their fiduciary obligation to maximize
shareholder value in a change of control transaction. Because of such conflict
of interest, it is unlikely that defendants will be able to represent the
interests of First Interstate's public stockholders with the impartiality that
their fiduciary duties require, nor will they be able to ensure that their
conflicts of interest will be resolved in the best interests of First
Interstate's public stockholders.
17. Plaintiffs and the Class will suffer irreparable damage unless
defendants are enjoined from breaching their fiduciary duties to maximize
shareholder value.
18. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgement as follows:
A. Declaring this to be a proper class action;
B. Ordering defendants to carry out their fiduciary duties to
plaintiffs and the other members of the Class by announcing their intention
to:
6
<PAGE>
(i) undertake an appropriate evaluation of alternatives
designed to maximize value for First Interstate's public stockholders;
(ii) adequately ensure that no conflicts of interests exist
between defendants' own interests and their fiduciary obligation to the public
stockholders or, if such conflicts exist, to ensure that all of the conflicts
would be resolved in the best interests of First Interstate's public
stockholders; and
(iii) act independently, by, among other things, appointing
a disinterested committee so that the interests of First Interstate's public
stockholders would be protected, or alternatively, appointing a shareholder
committee to review all bona fide offers.
C. Directing that defendants pay to plaintiffs and the Class all
damages caused to them and account for all profits and any special benefits
obtained as a result of their unlawful conduct;
D. Awarding to plaintiffs the costs and disbursements of this
action, including a reasonable allowance for the fees and expenses of
plaintiff's attorneys and expert; and
7
<PAGE>
E. Granting such other and further relief as may be just and
proper in the premises.
Dated: October 19, 1996
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: _________________________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
ABBEY & ELLIS
212 East 39th Street
New York, New York 10016
Telephone: (212) 889-3700
Faruqui & Faruqui, LLP
415 Madison Avenue
New York, New York 10017
Telephone: (212)
Robert C. Susser, P.C.
6 East 43rd Street, Ste 1900
New York, New York 10017
Telephone: (212) 808-0298
8
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - ----------------------------------x
JAMES T. WILLIAMSON, VICTORIA
SHAEV, JULES BERNSTEIN, MOISE : Civil Action No.
KATZ, HAROLD SACHS and KEN 14623
FELDER, :
Plaintiffs, :
AMENDED CLASS
-against- : ACTION COMPLAINT
FIRST INTERSTATE BANCORP, 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, STEVEN B. SAMPLE, :
FORREST N. SHUMWAY, WILLIAM E.B.
SIART, RICHARD J STEGEMEIER, and :
DANIEL M. TELLEP,
:
Defendants.
:
- - ----------------------------------x
Plaintiffs allege upon information and belief
except as to paragraph 1, which is alleged on knowledge,
as follows:
THE PARTIES
1. Plaintiffs James T, Williamson, Victoria Shaev, Jules
Bernstein, Moise Katz, Harold Sachs and Ken Felder are and were, at all times
relevant hereto, the owners of shares of the common stock of First Interstate
Bancorp ("First Interstate" or the "Company").
<PAGE>
2. First Interstate is a bank holding company organized and
existing under the laws of the State of Delaware. First Interstate operates
approximately 1,000 offices in 13 states. It has approximately 76 million
shares of common stock issued and outstanding, held by approximately 25,000
shareholders of record. Its shares are traded on various stock exchanges,
including the New York Stock Exchange.
3. (a) Defendant Edward M. Carson ("Carson") is and was at all
relevant times Chairman of the Board of Directors of First Interstate.
(b) Defendant William S. Randall ("Randall") is and was at all
relevant times a Director and Executive Vice President and Chief Operating
Officer of First Interstate.
(c) Defendant William E.B. Siart ("Siart") is and was at all
relevant times a Director and President and Chief Executive Officer of First
Interstate.
(d) Defendants John E. Bryson ("Bryson"), Jewel Plummer Cobb
("Cobb"), Ralph P. Davidson ("Davidson") , Myron DuBain ("DuBain"), Don C.
Frisbee ("Frisbee"), George M. Keller ("Keller"), Thomas L. Lee ("Lee"),
William F. Miller ("Miller"), Steven B. Sample ("Sample"), Forrest N. Shumway
("Shumway"), Richard J. Stegemeier ("Stegemeier") and Daniel M. Tellep
2
<PAGE>
("Tellep") (together with defendants Carson, Randall, and Siart "the
Individual Defendants") are and were at all relevant times directors of the
Company.
4. The Individual Defendants are in a fiduciary relationship with
plaintiffs and the other public stockholders of First Interstate and owe to
plaintiffs and other members of the class (as hereinafter defined) the highest
obligations of good faith, fair dealing and full and candid disclosure.
CLASS ACTION ALLEGATIONS
5. Plaintiffs bring this case on their own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf
of all public stockholders of First Interstate, and their successors in
interest who are or will be threatened with injury arising from defendants'
actions as more fully described herein. Excluded from the class are defendants
herein and any person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants.
6. This action is properly maintainable as a class action.
7. The class is so numerous that joinder of all members is
impracticable. There are approximately 25,000 stockholders of record located
throughout the United States.
3
<PAGE>
8. There are questions of law and fact which are common to the
class and which predominate over questions affecting any individual class
member, including whether the Individual Defendants have breached their
fiduciary duties owed to plaintiffs and other members of the class.
9. The Plaintiffs are committed to prosecuting this action and
have retained competent counsel experienced in litigation of this nature. The
claims of plaintiffs are typical of the claims of other members of the class
and plaintiffs have the same interests as the other members of the class.
Accordingly, plaintiffs are adequate representatives of the class and will
fairly and adequately protect the interests of the class.
10. The prosecution of separate actions by
individual members of the class would create the risk of
inconsistent or varying adjudications with respect to individual members of
the class which would establish incompatible standards of conduct for
defendants, or adjudications with respect to individual members of the class
which would as a practical matter be dispositive of the interests of the other
members not parties to the adjudications or substantially impair or impede
their ability to protect their interests.
11. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing
4
<PAGE>
injury to, the class and, therefore, preliminary and final injunctive relief
on behalf of the class as a whole is appropriate.
BACKGROUND AND CLAIM FOR RELIEF
12. Wells Fargo & Company ("Wells Fargo") is a Delaware
corporation with executive offices at 420 Montgomery Street, San Francisco,
California. Wells Fargo is a bank holding company with subsidiaries that
perform commercial banking operations, investment advisory services,
internatonal and mortgage banking services, credit card services and other
related financial activities.
13. Wells Fargo has long been interested in acquiring First
Interstate. In February 1994, Wells Fargo offered to purchase the Company,
which offer was rebuffed by First Interstate. Moreover, Paul Hazen, Chairman
of Wells Fargo met with defendant Siart in the last few weeks to discuss a
possible transaction, and was once again rebuffed.
14. On or about October 18, 1995, Wells Fargo announced in a press
release that it had submitted an unsolicited merger proposal to First
Interstate to acquire 100 percent of the Company's common stock (the
"proposal") . Pursuant to the terms of the proposal, First Interstate
shareholders would receive .625 of a share of Wells Fargo, representing a
value of $133.50 for
5
<PAGE>
each First Interstate share based on the current trading price of Wells Fargo
stock. The total transaction is valued at approximately $10 billion. The
proposal contemplates a merger of First Interstate and Wells Fargo into a new
company.
15. The reaction of the investment community to the proposal has
been extremely positive. Analysts noted that the proposal was nearly three
times First Interstate's book value, and that most recent bank mergers were
priced closer to 2 or 2-1/2 times book value. Analysts referred to the
proposal as "a knockout bid" (Bert Ely, an Alexandria, Virginia banking
consultant); an "excellent" potential combination (Jeff Simons of Mackay
Shields Financial Corp., which owns 1.4 million Company shares); and a "super
deal" (Paul McKey of Dean Witter Reynolds). It was further reported that
Kohlberg Kravis Roberts & Co., which owns approximately 9% of the Company's
stock, supports the proposal.
16. In response to Wells Fargo's announcement, the Company's stock
price soared from $106 per share to over $140 per share. Additionally, the
price of Wells Fargo stock increased approximately 7% to $229 per share.
17. In contrast to the positive reaction of the investment
community, the Company promptly reacted negatively to the proposal. On or
about October 18, 1995, defendant Siart stated "I am deeply disappointed
6
<PAGE>
that Wells Fargo would take this uninvited action." Siart reportedly also
stated that it was in First Interstate's best interest to take six months to
consider the Company's other options.
18. First Interstate has in place a shareholder rights plan
(commonly known as a "poison pill") which makes an unwelcome takeover of the
Company prohibitively expensive. The poison pill is triggered by the
acquisition of 20% or more of First Interstate's common stock by a group or
person unfavored by First Interstate's management.
CLAIM FOR RELIEF
19. The Individual Defendants are obligated to carefully consider,
in a timely fashion and on an informed basis, bona fide proposals from third
parties to engage in transactions which will maximize value for First
Interstate shareholders; not to place their own self-interests and personal
considerations ahead of the interests of the public stockholders, and to make
corporate decisions in good faith.
20. The Individual Defendants' fiduciary obligations require them
to:
(a) undertake an appropriate evaluation of all bona fide offers,
and take appropriate steps to consider all potential bids for the Company or
its assets or explore strategic alternatives;
7
<PAGE>
(b) act independently, including appointing a disinterested
committee so that the interests of First Interest's public stockholders will
be protected;
(c) adequately ensure that no conflicts of interest exist between
the Individual Defendants' own interests and their fiduciary obligations to
the public stockholders of First Interstate; and
(d) utilize the poison pill in a manner designed to maximize
shareholder value.
21. The Wells Fargo proposal represents an opportunity to effect a
change of control of First Interstate, its business and affairs. In a change
of control transaction, the Individual Defendants necessarily and inherently
suffer from a conflict of interest between their own personal desires to
retain their offices in First Interstate, with the emoluments and prestige
which accompany those offices, and their fiduciary obligation to maximize
shareholder value in a change of control transaction. Because of such conflict
of interest, the Individual Defendants are unable to represent the interests
of First Interstate's public stockholders with the impartiality that their
fiduciary duties require, nor are they able to ensure that their conflicts of
interest will be resolved in the best interests of First Interstate's public
stockholders.
8
<PAGE>
22. By virtue of the acts and conduct alleged herein, the
Individual Defendants have breached their fiduciary duties owed to plaintiffs
and other class members by carrying out a preconceived plan and scheme to
entrench themselves in office and to protect and advance their own parochial
interests at the expense of First Interstate's public shareholders. The
Individual Defendants have not exercised and are not exercising independent
business judgment and have acted and are acting to the detriment of the class.
The Individual Defendants' negative response to Wells Fargo's proposal is an
uninformed knee jerk reaction made without adequate information as to what
Wells Fargo would be prepared to offer in a fully negotiated transaction.
23. The Individual Defendants have refused to take the steps
necessary to ensure that the Company's public shareholders will receive
maximum value for their shares of First Interstate common stock. The
Individual Defendants' failure to meaningfully respond to Wells Fargo's
proposal in a timely manner and to pursue negotiations regarding a value
maximizing transaction with Wells Fargo or any other company is clearly the
result of a desire by the Individual Defendants to protect their own
substantial salaries, perquisites and positions with the Company.
9
<PAGE>
24. As a result of the foregoing, the Individual Defendants have
breached their fiduciary duties owed to First Interstate's stockholders.
25. Unless enjoined by this Court, the Individual Defendants will
continue to breach their fiduciary duties owed to plaintiffs and the other
members of the Class in order to benefit themselves at the expense and to the
irreparable harm of the Class.
26. Plaintiffs and the other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiffs demand judgment as follows:
1. declaring this to be a proper class action;
2. ordering the Individual Defendants to carry out their fiduciary
duties to plaintiffs and the other members of the Class by:
(a) cooperating fully with any person or entity having a bona fide
interest in proposing a transaction which would maximize shareholder value,
including, but not limited to, a buyout or takeover of the Company by Wells
Fargo;
(b) undertaking an appropriate evaluation of First Interstate's
worth as a merger/acquisition candidate;
10
<PAGE>
(c) taking all appropriate steps to enhance First Interstate's
value and attractiveness as a merger/acquisition candidate;
(d) taking all appropriate steps to effectively expose First
Interstate to the marketplace in an effort to create an active auction for
First Interstate;
(e) acting independently so that the interests of First
Interstate's public stockholders will be protected; and
(f) adequately ensuring that no conflicts of interest exist
between the Individual Defendant's selfish interests and their fiduciary
obligation to maximize stockholder value or, if such conflicts exist, ensuring
that all conflicts are resolved in the best interests of First Interstate's
public stockholders;
3. ordering the Individual Defendants, jointly and severally, to
account to plaintiffs and the other members of the Class for all damages
suffered and to be suffered by them as a result of the wrongs complained of
herein;
4. directing the Individual Defendants to employ the poison pill
in a manner consistent with maximizing shareholder value;
5. awarding plaintiffs the costs and disbursements of this action,
including a reasonably
11
<PAGE>
allowance for plaintiffs' attorneys' and experts' fees; and
6. granting such other and further relief as this Court may deem
to be just and proper.
CHIMICLES, JACOBSEN & TIKELLIS
By:________________________
Pamela S. Tikellis
James C. Strum
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
Attorneys for Plaintiffs
ROSENTHAL MONHAIT GROSS &
GODDESS, P.A.
By:________________________
Joseph A. Rosenthal
First Federal Plaza, Suite 214
Box 1070
Wilmington, DE 19899
(302) 656-4433
OF COUNSEL:
ABBEY & ELLIS
212 East 39th Street
New York, New York 10016
(212) 889-3700
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, New York 10016
(212) 779-1414
12
<PAGE>
FARUQI & FARUQI
415 Madison Avenue
New York, New York 10017
(212) 986-1074
GOODKIND LABATON RUDOFF &
SUCHAROW LLP
100 Park Avenue
New York, New York 10017
(212) 907-0700
CHARLES PIVEN, ESQUIRE
The Legg Mason Tower
Suite 2700
Baltimore, MD 21202
ROBERT C. SUSSER, P.C.
6 East 43rd Street
New York, New York 10017
(212) 808-0298
WECHSLER HARWOOD HALEBIAN
& FEFFER, LLP
805 Third Avenue
New York, New York 10022
(212) 935-7400
13
<PAGE>
CERTIFICATE OF SERVICE
I, James C. Strum, do hereby certify that I caused to be served
two copies of the foregoing Amended Class Action Complaint upon the following
counsel this 25th day of October, 1995, by hand delivery.
Karen Valihura, Esquire
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
P.O. Box 636
Wilmington, DE 19801
------------------------
James C. Strum
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - ----------------------------------
IN RE FIRST INTERSTATE BANCORP | CONSOLIDATED
BANCORP SHAREHOLDER LITIGATION | C.A. No. 14623
- - ----------------------------------
ANSWER
Defendants First Interstate Bancorp ("First
Interstate"), 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, Steven B. Sample, Forrest N.
Shumway, William E.G. Siart, Richard J. Stegemeier, and
Daniel M. Tellep (collectively, the "Defendants"), by
their counsel, respond to the Amended Class Action Com-
plaint (the "Amended Complaint") dated October 25, 1995 as
follows.
1. The Defendants are without knowledge or information sufficient
to form a belief as to the truth of the allegations contained in paragraph 1
of the Amended Complaint.
2. Admitted.
3. The Defendants admit that Mr. Siart is Chief
Executive Officer and a director of First Interstate; and
that Messrs. Bryson, Carson, Davidson, Du Bain, Frisbee,
Keller, Lee, Randall, Shumway, Stegemeier and Tellep and
<PAGE>
Drs. Cobb, Miller and Sample are members of the Board of
Directors of First Interstate. The balance of the
allegations contained in paragraph 3 of the Amended
Complaint is denied.
4. Paragraph 4 of the Amended Complaint states
conclusions of law as to which no responsive pleading is
required.
5. The Defendants admit that the plaintiffs purport to bring this
action on their own behalf and purport to bring the action on behalf of all
public stockholders of First Interstate, and their successors in interest,
excluding the Defendants and any person, firm, trust, corporation, or other
entity related to or affiliated with any of the Defendants. The balance of the
allegations contained in paragraph 5 of the Amended Complaint is denied.
6. Paragraph 6 of the Amended Complaint states
conclusions of law as to which no responsive pleading is
required.
7. The Defendants admit that there are approximately 25,000
stockholders of record of First Interstate. The balance of the allegations
contained in paragraph 7 of the Amended Complaint states conclusions of law as
to which no responsive pleading is required.
2
<PAGE>
8. Paragraph 8 of the Amended Complaint states
of law as to which responsive pleading is required.
9. The Defendants admit that plaintiffs' counsel are experienced
and competent. The balance of the allegations contained in paragraph 9 of the
Amended Complaint states conclusions of law as to which no responsive pleading
is required.
10. Paragraph 10 of the Amended Complaint
states conclusions of law as to which no responsive
pleading is required.
11. Denied.
12. Admitted.
13. The Defendants are without knowledge or information sufficient
to form a belief as to the truth of the allegations contained in the first
sentence of paragraph 13 of the Amended Complaint. The Defendants admit that
Wells Fargo proposed discussions regarding a combination with First Interstate
in the spring of 1994, which did not result in the commencement of any
negotiations on the part of First Interstate and Wells Fargo; and that Paul
Hazen, Chairman of Wells Fargo has contacted Mr. Siart in the last few weeks
regarding a possible transaction involving the two companies. The balance of
the allegations contained in paragraph 13 of the Amended Complaint is denied.
3
<PAGE>
14. The Defendants admit that on or about October 18, 1995, Wells
Fargo issued a press release (the "Wells Fargo Press Release"), and
respectfully refer the Court to the Wells Fargo Press Release for an accurate
and complete description of its contents.
15. The Defendants are without knowledge or information sufficient
to form a belief as to the truth of the allegations contained in paragraph 15
of the Amended Complaint.
16. The Defendants admit that the closing price of shares of First
Interstate common stock on the New York Stock Exchange on October 17, 1995 was
$105 1/4 per share; that the closing price of shares of First Interstate
common stock on the New York Stock Exchange on October 18, 1995 was $140 1/4
per share; that the closing price of shares of Wells Fargo common stock on the
New York Stock Exchange on October 17, 1995 was $207 per share; and that the
closing price of shares of Wells Fargo common stock on the New York Stock
Exchange on October 18, 1995 was $229 per share. The balance of the
allegations contained in paragraph 16 of the Amended Complaint is denied.
17. With regard to the allegations contained in the second
sentence of paragraph 17 of the Amended Complaint, the Defendants admit that
on or about October 18, 1995, First Interstate issued a press release (the
4
<PAGE>
"First Interstate Press Release"), and respectfully refer the Court to the
First Interstate Press Release for an accurate and complete description of its
contents. The balance of the allegations contained in paragraph 17 of the
Amended Complaint is denied.
18. The Defendants admit that First Interstate has a shareholder
rights plan and that certain provisions of the plan are contingent upon the
acquisition of 20% or more of First Interstate's common stock by a person or
group. The balance of the allegations contained in paragraph 18 of the Amended
Complaint is denied.
19. Paragraph 19 of the Amended complaint
states conclusions of law as to which no responsive
pleading is required.
20. Paragraph 20 of the Amended complaint
states conclusions of law as to which no responsive
pleading is required.
21. Denied.
22. Denied.
23. Denied.
24. Denied.
25. Denied.
26. Denied.
5
<PAGE>
FIRST AFFIRMATIVE DEFENSE
Pursuant to 8 Del. C. ss. 102(b) (7), certain of
the claims herein are barred by Article XIV of the Composite Certificate of
Incorporation of First Interstate.
SECOND AFFIRMATIVE DEFENSE
The Amended Complaint fails to state a claim
upon which relief may be granted.
Therefore, the Defendants respectfully request that the Court
enter judgment against the plaintiffs dismissing the Amended Complaint,
awarding the defendants their cost and attorneys' fees, and awarding such
other and further relief as is lust and appropriate.
------------------------------------
Steve J. Rothschild
Karen L. Valihura
Robert S. Saunders
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
P.O. Box 636
Wilmington, Delaware 19899
(302) 651-3000
Attorneys for Defendants
DATED: November 1, 1995
6
<PAGE>
CERTIFICATE OF SERVICE
I, Robert S. Saunders, do hereby certify that I caused to be
served two copies of the foregoing Answer upon the following counsel this 1st
day of November, 1995 by hand delivery:
---------------------------------
Pamela S. Tikellis
Chimicles, Jacobsen &
Tikellis
One Rodney Square
P.O. Box 1035
Wilmington, Delaware 19899
Joseph A. Rosenthal
Rosenthal, Monhait, Gross
& Goddess, P.A.
First Federal Plaza
Suite 214
P.O. Box 1070
Wilmington, Delaware 19899
---------------------------------
Robert S. Saunders
7
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - ----------------------------------------------------------x Consolidated C.A.
: No. 14623
:
IN RE FIRST INTERSTATE BANCORP : SECOND AMENDED AND
SHAREHOLDER LITIGATION : SUPPLEMENTAL CLASS
: ACTION COMPLAINT
:
- - ----------------------------------------------------------x
Plaintiffs allege upon information and belief except as to
paragraph 1, which is alleged on knowledge, as follows:
THE PARTIES
1. Plaintiffs are and have been at all relevant times, the
owners of shares of the common stock of First Interstate Bancorp ("First
Interstate" or the "Company") .
2. First Interstate is a bank holding company organized and
existing under the laws of the State of Delaware. First Interstate operates
approximately 1,000 offices in 13 states. It has approximately 76 million
shares of common stock issued and outstanding, held by approximately 25,000
shareholders of record. Its shares are traded on various stock exchanges,
including the New York Stock Exchange.
3. (a) Defendant Edward M. Carson ("Carson") is and was at
all relevant times Chairman of the Board of Directors of First Interstate.
(b) Defendant William S. Randall ("Randall") is and was
at all relevant times a Director and Executive Vice President and Chief
Operating Officer of First Interstate.
(c) Defendant William E.B. Siart ("Siart") is and was at
all relevant times a Director and President and Chief Executive Officer of First
Interstate.
(d) Defendants John E. Bryson ("Bryson"), Jewel Plummer
Cobb ("Cobb"), Ralph P. Davidson ("Davidson"), Myron Du Bain ("Du Bain"), Don C.
Frisbee ("Frisbee"), George M. Keller ("Keller"), Thomas L. Lee ("Lee"), William
F. Miller ("Miller"), Steven B. Sample ("Sample"), Forrest N. Shumway
("Shumway"), Richard J. Stegemeier ("Stegemeier") and Daniel M. Tellep
("Tellep") (together with defendants Carson, Randall and Siart "the Individual
Defendants") are and were at all relevant times directors of the Company.
4. The Individual Defendants are in a fiduciary relationship
with plaintiffs and the other public stockholders of First Interstate and owe to
plaintiffs and other members of the class (as hereinafter defined) the highest
obligations of good faith, fair dealing and full and candid disclosure.
5. Defendant First Bank System, Inc. ("First Bank") is a
Delaware bank holding corporation headquartered in Minneapolis, Minnesota.
First Bank is named herein as an aider and abettor to the breaches of fiduciary
duty alleged herein.
6. Defendant Eleven Acquisition Corporation is a Delaware
corporation formed by First Bank for the purpose of effecting the First Bank
Merger (defined below).
CLASS ACTION ALLEGATIONS
7. Plaintiffs bring this case on their own behalf and as a
class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on
behalf of all public stockholders of First Interstate, and their successors in
interest, who are or will be threatened with injury arising from defendants'
actions as more fully described herein. Excluded from the class are defendants
herein and any person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants.
8. This action is properly maintainable as a class action.
9. The class is so numerous that joinder of all members is
impracticable. There are approximately 25,000 stockholders of record located
throughout the United States.
10. There are questions of law and fact which are common to the
class and which predominate over questions affecting any individual class
member, including whether the Individual Defendants have breached their
fiduciary duties owed to plaintiffs and other members of the class.
11. Plaintiffs are committed to prosecuting this action and
have retained competent counsel experienced in litigation of this nature. The
claims of plaintiffs are typical of the claims of other members of the class and
plaintiffs have the same interests as the other members of the class.
Accordingly, plaintiffs are adequate representatives of the class and will
fairly and adequately protect the interests of the class.
12. The prosecution of separate actions by individual members
of the class would create the risk of inconsistent or varying adjudications with
respect to individual members of the class which would establish incompatible
standards of conduct for defendants, or adjudications with respect to individual
members of the class which would as a practical matter be dispositive of the
interests of the other members not parties to the adjudications or substantially
impair or impede their ability to protect their interests.
13. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to, the class and, therefore,
preliminary and final injunctive relief on behalf of the class as a whole is
appropriate.
BACKGROUND AND CLAIM FOR RELIEF
The Original Wells Fargo Proposal
14. Wells Fargo & Company ("Wells Fargo") is a Delaware
corporation with executive offices at 420 Montgomery Street, San Francisco,
California. Wells Fargo is a bank holding company with subsidiaries that
perform commercial banking operations, investment advisory services,
international and mortgage banking services, credit card services and other
related financial activities.
15. Wells Fargo has long been interested in acquiring First
Interstate. In February 1994, Wells Fargo offered to purchase the Company,
which offer was rebuffed by First Interstate. However, Paul Hazen, Chairman of
Wells Fargo, met with defendant Siart in or around the first two weeks of
October, 1995 to discuss a possible transaction, and was once again rebuffed.
16. On or about October 18, 1995, Wells Fargo announced in a
press release that it had submitted an unsolicited merger proposal to First
Interstate to acquire 100 percent of the Company's common stock (the "original
WF proposal"). Pursuant to the terms of the original WF proposal, First
Interstate shareholders would receive .625 of a share of Wells Fargo,
representing a value of $133.50 for each First Interstate share based on the
then-current trading price of Wells Fargo stock. The transaction, valued at
approximately $10 billion, contemplated a merger of First Interstate and Wells
Fargo into a new company.
17. The reaction of the investment community to the original WF
proposal was positive. Analysts noted that the proposal was nearly three times
First Interstate's book value, and that most recent bank mergers were priced
closer to 2 to 2-1/2 times book value. Analysts referred to the proposal as "a
knockout bid" (Bert Ely, an Alexandria, Virginia banking consultant); an
"excellent" potential combination (Jeff Simons of Mackay Shields Financial
Corp., which owns 1.4 million Company shares); and a "super deal" (Paul McKey of
Dean Witter Reynolds). It was further reported that Kohlberg Kravis Roberts &
Co., which owns approximately 9% of the Company's stock, supported the original
WF proposal.
18. In response to Wells Fargo's announcement on October 18,
1995, the Co-mpany's stock price soared from $106 per share to over $140 per
share. Additionally, the price of Wells Fargo stock increased immediately after
the announcement of the original WF proposal approximately 7%, to $229 per
share.
First Interstate's Response and The First Bank Merger
19. In contrast to the positive reaction of the investment
community, the Company promptly reacted negatively to the original WF proposal.
On October 18, 1995, defendant Siart stated "I am deeply disappointed that Wells
Fargo would take this uninvited action." Siart reportedly also stated that it
was in First Interstate's best interest to take six months to consider the
Company's other options.
20. Moreover, in response to Wells Fargo's offer to increase
its proposal to .65 shares of Wells Fargo stock per First Interstate share, the
First Interstate Board initiated an active bidding process seeking to sell First
Interstate. First Interstate met and shared confidential information with at
least three banks, including First Bank, Norwest Corporation and Banc One
Corporation. However, in breach of fiduciary duties to First Interstate's
public shareholders, the First Interstate Board wrongfully failed duly to
explore, consider and evaluate the available alternatives, and to proceed in
good faith to negotiate with respect to the alternatives to obtain the best
transaction reasonably available for First Interstate shareholders.
21. Nevertheless, less than three weeks later, on or about
November 6, 1995, First Interstate announced that it had agreed to be acquired
by First Bank ("First Bank Merger") in a transaction which would give the First
Interstate stockholders lower consideration than in the original WF proposal.
Pursuant to the terms of the First Bank Merger, First Bank will exchange 2.6
shares of its common stock for each First Interstate share of common stock,
valuing the Company's stock at $129.68 per share, for a total value of $10.05
billion.
22. Prior to November 6, 1995, Wells Fargo had offered to
increase its offer to .65 shares of Wells Fargo common stock per First
Interstate share. Based on the closing price of Wells Fargo common stock on
November 3, 1995, the last trading date prior to announcement of the First Bank
Merger, the .65 shares of Wells Fargo stock had an implied value of $137.96 per
First Interstate share.
23. In connection with the First Bank Merger, First Interstate
and First Bank agreed to a $100 million termination fee in the event a third
party offer were accepted by First Interstate. Moreover, as a condition to the
First Bank Merger, First Interstate and First Bank entered into reciprocal stock
option agreements as of November 5, 1995 pursuant to which First Interstate
granted First Bank an option to purchase up to 15,073,106 shares of the
Company's common stock at a price of $127.75 per share and First Bank granted
First Interstate an option to purchase up to 25,829,983 shares of First Bank
common stock at a price of $50.875 per share. First Bank could reap profits of
as much as $100,000,000 from the option granted to it. As a consequence of the
termination fee and option agreement, Wells Fargo or any other interested bidder
might have to pay First Bank as much as $200,000,000 if the First Bank Merger
were terminated.
24. As a special enticement to the Individual Defendants to
accept the First Bank Merger, First Bank agreed that the combined company would
be called First Interstate and, although it would maintain principal offices in
Minneapolis, its "core businesses" would be run from California, an obvious
effort to placate First Interstate executives. Thus, the First Bank Merger
assures that defendant Siart (who will be second in command in the combined
company) and other First Interstate executives will maintain their positions and
the valuable perquisites which flow therefrom. In addition, the Board of
Directors of the combined entity will be evenly divided between First Bank and
First Interstate directors. Not surprisingly, as a result, one analyst labeled
the First Bank Merger as "a senior management job preservation act" for First
Interstate executives.
25. In addition, the Individual Defendants, in agreeing to the
First Bank Merger, failed to effectively conduct a fair bidding contest for the
sale of the Company. Indeed, they agreed to the First Bank Merger to thwart
spirited bidding by Wells Fargo or anyone other than First Bank desirous of
acquiring First Interstate in a value maximizing transaction. The Individual
Defendants failed to take all steps to ensure that First Interstate's
shareholders had the benefit of the most advantageous transaction, including but
not limited to, failing to negotiate for Wells Fargo's highest and best offer.
Moreover, it has been reported that other potential First Interstate bidders,
including Norwest Corp. or Banc One Corp., might have offered a higher bid, but
did not because of Siart's and the other Individual Defendants' requirements
that First Interstate keep its name and California headquarters.
26. In response to the announcement of the First Bank Merger,
the prices of the common stock of both First Bank and First Interstate both
declined.
27. Executives at First Bank and First Interstate quickly
sought to justify time attractiveness of the deal, asserting that the companies
would be able to save $500 million in expense reductions through overlapping
operations. However, the only overlap between the companies is in Montana,
Colorado and Wyoming. If the First Bank Merger were consummated, elimination of
this redundancy would generate a mere one-time $80 million in savings. In
contrast, a merger between Wells Fargo and First Interstate would create dozens
of duplicate branches, which, when eliminated, would contribute substantially to
the $800 million cost cuts forecast by Wells Fargo.
28. As announced, the consideration offered by the First Bank
Merger on its face is lower than that offered even in the original WF proposal.
29. Evidencing the fact that the Individual Defendants acted
precipitously and recklessly in agreeing to the First Bank Merger with knowledge
that other and higher bids were available, on or about November 13, 1995, Wells
Fargo announced that it would commence a tender offer for First Interstate
stock. Pursuant to the terms of its tender offer Wells Fargo will give First
Interstate stockholders two-thirds of a share of Wells Fargo common stock for
each First Interstate share. Based upon the closing price of Wells Fargo on
November 10, 1995, the value of the exchange offer is $143.58 per First
Interstate share, or approximately $10.9 billion in total.
30. In addition, Wells Fargo announced that it intends to file
preliminary proxy materials with the SEC in connection with the solicitation of
First Interstate shareholders to vote against approval of the First Bank Merger,
and announced that it will file with the SEC preliminary materials to solicit
written consents from First Interstate stockholders to remove the First
Interstate board and replace it with Wells Fargo nominees who are committed to
removing any impediments to the consummation of the acquisition of First
Interstate by Wells Fargo. Moreover, on November 13, 1995, Wells Fargo filed
suit in this Court seeking declaratory and injunctive relief against First
Interstate and its Board, and First Bank and Eleven Acquisition Corporation.
31. First Interstate also has in place a shareholder rights
plan (commonly known as a "poison pill") which makes an unwelcome takeover of
the Company prohibitively expensive. The poison pill is triggered by the
acquisition of 20% or more of First Interstate's common stock by a group or
persons unfavored by First Interstate's management. The poison pills effects a
fundamental shift of power from the shareholders of First Interstate to the
Individual Defendants. The poison pill permits the Individual Defendants to act
as the prime negotiators of -- and, in effect, totally to preclude -- any and
all acquisition offers which they disfavor through their power to redeem or to
refuse to redeem the rights.
32. Further, By-law 4(b) of First Interstate's By-laws require
that notice of a nomination of a candidate for director "delivered to or mailed
and received at the principal executive offices of the Corporation not less than
thirty days nor more than sixty days prior to the meeting. . . ". The By-law
further states that "[o]nly persons who are nominated in accordance with [such]
procedures shall be eligible for election as directors of [First Interstate]."
The By-law wrongfully purports to restrict the power of First Interstate
stockholders to act by written consent to elect or remove directors.
33. This fundamental shift of control of the Company's destiny
from the hands of its shareholders to the hands of the Individual Defendants
results in a heightened fiduciary duty on their part to consider, in good faith,
a third-party bid, and further requires the Individual Defendants to pursue a
third-party's interest in acquiring the Company and to negotiate in good faith
on behalf of the Company's shareholders with a bidder such as Wells Fargo. In
violation of their heightened fiduciary duties, the individual Defendants have
used the poison pill to favor one bidder -- First Bank -- over another -- Wells
Fargo. The First Bank Merger is exempt from the poison pill, whereas the
poison pill still bars Wells Fargo from proceeding with its superior offer
without the consent of the Individual Defendants.
CLAIM FOR RELIEF
34. The Individual Defendants are obligated to carefully
consider, in a timely fashion and on an informed basis, bona fide proposals from
third parties to engage in transactions which will maximize value for First
Interstate shareholders; not to place their own self-interests and personal
considerations ahead of the interests of the public stockholders; and to make
corporate decisions in good faith.
35. The Individual Defendants' fiduciary obligations require
them to:
(a) undertake an appropriate evaluation of all bona
fide offers, and take appropriate steps to consider all potential bids for the
Company or its assets or explore strategic alternatives, in order to maximize
shareholder value;
(b) act independently, including appointing a
disinterested committee so that the interests of First Interstate's public
stockholders will be protected;
(c) adequately ensure that no conflicts of interest
exist between the Individual Defendants' own interests and their fiduciary
obligations to the public stockholders of First Interstate;
(d) utilize the poison pill in a manner designed to
maximize shareholder value; and
(e) avoid implementing any procedures which would
impede the maximum bona fide offer for First Interstate.
36. In effect, the Individual Defendants have initiated a
process which has placed the Company up for sale, including initiating an active
bidding contest seeking to sell the Company, obligating them to maximize
shareholder value. Nevertheless, the Individual Defendants necessarily and
inherently suffer from a conflict of interest between their own personal desires
to retain their offices in First Interstate, with the emoluments and prestige
which accompany those offices, and their fiduciary obligation to maximize
shareholder value in a transaction. Because of such conflict of interest, the
Individual Defendants have been and remain unable to represent the interests of
First Interstate's public stockholders with the impartiality that their
fiduciary duties require, nor have they been able to ensure that their conflicts
of interest will be resolved in the best interests of First Interstate's public
stockholders.
37. By virtue of the acts and conduct alleged herein, the
individual Defendants have breached their fiduciary duties owed to plaintiffs
and other class members by carrying out a preconceived plan and scheme to
entrench themselves in office and to protect and advance their own parochial
interests at the expense of First Interstate's public shareholders. The
Individual Defendants have not exercised and are not exercising independent
business judgment and have acted and are acting to the detriment of the class.
The Individual Defendants' negative response to Wells Fargo, the hasty
acceptance of the First Bank Merger which provides less consideration than the
WF initial and amended proposals, and their failure to adequately consider other
offers, was an uninformed knee-jerk reaction designed to advance their own
interests and was made without adequate information as to what a third party
would be prepared to offer in a fully negotiated transaction.
38. The Individual Defendants have refused to take the steps
necessary to ensure that the Company's public shareholders will receive maximum
value for their shares of First Interstate common stock. The Individual
Defendants' agreement to the inferior First Bank Merger rather than meaningfully
responding to Wells Fargo's proposals or pursuing a value maximizing transaction
with other bona fide companies is clearly the result of a desire by the
Individual Defendants to protect their own substantial salaries, perquisites and
positions with the Company.
39. As a result of the foregoing, the Individual Defendants
have breached their fiduciary duties owed to First Interstate's stockholders.
40. Defendants First Bank and Eleven Acquisition Corporation
have knowingly and substantially participated in and are benefiting by breaches
of fiduciary duties by the Individual Defendants and, therefore, are liable as
aided and abettors thereof. Indeed the First Bank Merger could not proceed
without the willing and active participation of First Bank and Eleven
Acquisition Corporation.
41. Unless enjoined by this Court, defendants will continue to
breach their fiduciary duties owed to plaintiffs and the other members of the
Class and/or aid and abet such breaches in order to benefit themselves at the
expense and to the irreparable harm of the Class.
42. Plaintiffs and the other members of the Class have no
adequate remedy at law.
WHEREFORE, plaintiffs demand judgment as follows:
1. declaring this to be a proper class action;
2. enjoining the First Bank Merger until all value maximizing
alternatives are fully explored;
3. in the event the First Bank Merger is consummated,
rescinding it or awarding rescissory damages to the class;
4. declaring null and void the termination fee and stock option
agreements in the First Bank Merger agreement and bylaw 4(b) to the extent it
obstructs shareholders action by written consent;
5. ordering the Individual Defendants to carry out their
fiduciary duties to plaintiffs and the other members of the Class by:
(a) cooperating fully with any person or entity having
a bona fide interest in proposing a transaction which would maximize shareholder
value;
(b) undertaking an appropriate evaluation of First
Interstate's worth as a merger/acquisition candidate;
(c) taking all appropriate steps to enhance First
Interstate's value and attractiveness as a merger/acquisition candidate;
(d) taking all appropriate steps to effectively expose
First Interstate to the marketplace in an effort to create an active auction for
First Interstate;
(e) acting independently so that the interests of First
Interstate's public stockholders will be protected; and
(f) adequately ensuring that no conflicts of interest
exist between the Individual Defendants' own interests and their fiduciary
obligation to maximize stockholder value or, if such conflicts exist, ensuring
that all conflicts are resolved in the best interests of First Interstate's
public stockholders;
6. ordering defendants, jointly and severally, to account to
plaintiffs and the other members of the Class for all damages suffered and to be
suffered by then as a result of the wrongs complained of herein;
7. directing the Individual Defendants to employ the poison
pill in a manner consistent with maximizing shareholder value;
8. awarding plaintiffs the costs and disbursements of this
action, including a reasonable allowance for plaintiffs attorneys' and experts'
fees; and
9. granting such other and further relief as this Court may
deem to be just and proper.
CHIMICLES, JACOBSEN & TIKELLIS
-------------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
Co-Lead and Co-Liaison
Counsel for Plaintiffs
ROSENTHAL MONHAIT GROSS
& GODDESS, P.A.
-------------------------------
Joseph A. Rosenthal
First Federal Plaza
Suite 214
Box 1070
Wilmington, DE 19899
(302) 656-4433
Co-Liaison Counsel for Plaintiffs
OF COUNSEL:
ABBEY & ELLIS
212 East 39th Street
New York, New York 10016
(212) 889-3700
GOODKIND LABATON RUDOFF
& SUCHAROW LLP
100 Park Avenue
New York, New York 10017
(212) 907-0700
BERNSTEIN LIEBHARD & LIPSHITZ
274 Madison Avenue
New York, New York 10016
(212) 779-1414
FARQUI & FARQUI
415 Madison Avenue
New York, New York 10017
(212) 779-1414
CHARLES PIVEN, ESQUIRE
The Legg Mason Tower
Suite 2700
Baltimore, MD 21202
ROBERT C. SUSSER, P.C.
6 East 43rd Street
New York, New York 10017
(212) 808-0298
WECHSLER HARWOOD HALEBIAN
& FEFFER, LLP
805 Third Avenue
New York, New York 10022
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH (68581)
600 West Broadway, Suite 1900
San Diego, California 92101
Telephone: 619/231-1058
- and -
MILBERG WEISS BERSHAD
HYNES & LERACH
JEFF S. WESTERMAN (94559)
355 South Grand Avenue
Suite 4170
Los Angeles, California 90071
Telephone: 213/617-9007
WEISS & YOURMAN
JOSEPH WEISS
KEVIN J. YOURMAN (147159)
10940 Wilshire Blvd.
24th Floor
Los Angeles, California 90024
Telephone: 310/208-2800
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
(213) 687-5000
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
CHARLES MESKO, On Behalf of Himself ) Case No. 11C137379
and All Others Similarly Situated, )
) CLASS ACTION
Plaintiff, )
)
vs. )
) CLASS ACTION COMPLAINT
JOHN E. BRYSON, DON C. FRISBEE, ) FOR BREACH OF FIDUCIARY
STEVEN B. SAMPLE, EDWARD M. CARSON, ) DUTY, ABUSE OF CONTROL,
GEORGE M. KELLER, FORREST N. SHUMWAY, ) UNJUST ENRICHMENT,
JEWEL PLUMMER COBB, W.F. KIESCHNICK, ) INTERFERENCE WITH
WILLIAM B. START, RALPH P. DAVIDSON, ) PROSPECTIVE ECONOMIC
<PAGE>
THOMAS L. LEE, RICHARD J. STEGEMEIER, ) ADVANTAGE AND EQUITABLE
MYRON DuBAIN, WILLIAM F. MILLER, DAN- ) RELIEF AND DAMAGES
IEL M. TELLEP and J.J. PINOLA, )
)
Defendants. ) Plaintiff Demands A
) Trial By Jury
- - -------------------------------------------
2
<PAGE>
Plaintiff, as and for his complaint, alleges as follows upon information
and belief except as to paragraph 5, which is alleged upon knowledge.
Plaintiff's information and belief is based upon, inter alia, the
investigation made by plaintiff by and through his counsel.
INTRODUCTION AND OVERVIEW
1. This is a shareholder class action seeking equitable
relief and compensatory damages on behalf of all shareholders of First
Interstate Bancorp ("First Interstate" or the "Company") against First
Interstate's top officers and the members of the Board of Directors of First
Interstate, seeking to remedy violations of state law arising out of these
defendants' actions and conduct undertaken to defeat a highly favorable
acquisition offer for First Interstate stock by Wells Fargo & Co. ("Wells
Fargo"). First Interstate's Board of Directors has pursued a course of conduct
intended to and having the effect of making it extremely difficult for any
outside party to successfully acquire First Interstate, even at prices well in
excess of First Interstate stock's historical price range. This course of
conduct has been undertaken by the defendants to secure and retain their
lucrative positions of power, prestige and profit with respect to First
Interstate and to enhance and aggrandize their own interests at the expense of
First Interstate's other shareholders.
3
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2. On October 18, 1995, Wells Fargo, a highly successful, profitable and
well-capitalized bank, made an offer to acquire First Interstate at a price
far in excess of First Interstate's then-market price, by exchanging in a
tax-free exchange .625 shares of Wells Fargo stock for each share of First
Interstate stock, an offer worth $133.50 per share based on the October 17,
1995 closing price of Wells Fargo stock of $213.62 per share. First
Interstate's stock jumped from $106 per share to $140 per share upon this
announcement. While Wells Fargo's stock increased to $228.65 per share, making
the offer worth $142.65 per First Interstate share. However, the defendants
are rejecting such offer and have refused to negotiate an acquisition of the
Company at any higher price, even though Wells Fargo has told First
Interstate's Board it is willing to negotiate a higher price and thus to offer
a fair and reasonable price for First Interstate stock, well above the levels
at which the stock has traded historically.
3. In recent years, defendants have consistently refused to entertain
highly favorable acquisition offers or overtures for First Interstate, thus
preventing an acquisition of the Company at a favorable price for the
shareholders. Defendants have done this to retain their positions of prestige,
power and profit, as they know they will lose those positions in the event
First Interstate is acquired. Defendants' interests in
4
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holding on to their positions of power, prestige and profit as officers and
directors of First Interstate far exceeds their interests as shareholders in
First Interstate, as they collectively own only about 144,000 of First
Interstate's 75.7 million shares -- a minuscule .001% of its outstanding
stock.
PARTIES AND ACTORS
4. Plaintiff Roger Mondschein, the owner of shares of First Interstate,
is and was at all times relevant hereto a common shareholder of First
Interstate. Plaintiff brings this action on behalf of the holders of the
common stock of First Interstate for injunctive and other relief in connection
with the proposed acquisition of First Interstate by Wells Fargo.
5. (a) First Interstate is a corporation with its principal executive
offices in Los Angeles, California and which operates principally in
California, as well as several other western states. First Interstate is a
bank holding company.
(b) At December 31, 1994, it owned 16 banks (the "Subsidiary
Banks") which operated approximately 1,100 banking offices in 13 states,
including California. Ranked according to assets, the Company was the
fourteenth largest commercial banking organization in the United States at
December 31, 1994, having total deposits of $48.4 billion and total assets of
$55.8 billion.
5
<PAGE>
(c) The Subsidiary Banks accept checking, savings and other time
deposit accounts and employ these funds principally by making consumer, real
estate and commercial loans and investing in securities and other
interest-bearing assets.
(d) The Company 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 both through
non-bank subsidiaries of the Company and through the Subsidiary Banks and
their subsidiaries.
(e) The larger Subsidiary Banks provided international banking
services on a limited basis through the international departments of their
domestic offices. They also maintain correspondent relationships with major
banks throughout the world.
6. (a) Defendant John E. Bryson ("Bryson") was a direc-
tor of First Interstate and Board Chairman and Chief Executive
Officer or SCECorp and Southern Edison Company at all times
relevant hereto.
(b) Defendant Don C. Frisbee ("Frisbee") was a First Interstate
director and Chairman Emeritus PacifiCorp at all times relevant hereto.
6
<PAGE>
(c) Defendant Steven B. Sample ("Sample") was a
First Interstate director and President University of Southern
California at all times relevant hereto.
(d) Defendant Edward M. Carson ("Carson") was Chair-
man of the Board of First Interstate at all times relevant
hereto.
(e) Defendant George M. Keller ("Keller") was a director of First
Interstate and the retired Chairman and Chief Executive Officer of Chevron
Corporation at all times relevant hereto.
(f) Defendant Forrest N. Shumway ("Shumway") was a
director of First Interstate and former Vice-Chairman of the
Board Allied-Signal, Inc. at all times relevant hereto.
(g) Defendant Jewel Plummer Cobb ("Cobb") was a director of First
Interstate and President Emeritus California State University, Fullerton at
all times relevant hereto.
(h) Defendant W.F. Kieschnick ("Kieschnick") was a
director of First Interstate and retired President and Chief
Executive Officer Atlantic Richfield Company at all times
relevant hereto.
(i) Defendant William B. Siart ("Siart") was Presi-
dent and Chief Executive Officer First Interstate and a direc-
tor at all times relevant hereto.
7
<PAGE>
(j) Defendant Ralph P. Davidson ("Davidson") was a director of
First Interstate and former Chairman of The John F. Kennedy Center for the
Performing Arts at all times relevant hereto.
(k) Defendant Thomas L. Lee ("Lee") was a director
of First Interstate and Chairman and Chief Executive Officer of
The Newhall Land and Farming Company at all times relevant
hereto.
(l) Defendant Richard J. Stegemeier ("Stegemeier") was a director
of First Interstate and Chairman of the Board Unocal Corporation at all times
relevant hereto.
(m) Defendant Myron DuBain ("DuBain") was a director of First
Interstate and retired Chairman and Chief Executive Officer Fireman's Fund
Corporation at all times relevant hereto.
(n) Defendant William F. Miller ("Miller") was a
director of First Interstate and President Emeritus SRI Inter-
national at all times relevant hereto.
(o) Defendant Daniel M. Tellap ("Tellap") was a director of First
Interstate and Chairman and Chief Executive Officer Lockheed Corporation at
all times relevant hereto.
(p) Defendant J.J. Pinola ("Pinola"), was the retired Chairman and
Chief Executive Officer of First Interstate and a director at all times
relevant hereto.
8
<PAGE>
7. Defendants (hereinafter collectively referred to as the "Individual
Defendants") are each members of First Interstate's Board of Directors.
8. The Individual Defendants owed and owe First Interstate's public
shareholders fiduciary obligations and were and are required to: (i) use their
ability to manage First Interstate in a fair, just and equitable manner; (ii)
act in furtherance of the best interests of First Interstate and its
shareholders; (iii) act to maximize shareholder value; (iv) govern First
Interstate in such a manner as to head the expressed views of its public
shareholders; (v) refrain from abusing their positions of control, power,
prestige and profit; and (vi) not favor their own interests at the expense of
First Interstate and its shareholders. By reason of their fiduciary
relationships, these defendants owed and owe plaintiff and other members of
the Class the highest obligation of good faith, fair dealing, loyalty and due
care.
9. Wells Fargo is a corporation with its principal executive offices in
San Francisco, California. Wells Fargo is a huge bank holding company and one
of the most well-managed, profitable and well-capitalized banks in the United
States. With more than 600 branch outlets, 1,900 round-the-clock Wells Fargo
Express(TM) ATMs and a popular 24-hour telephone banking service, Wells Fargo
operates one of the largest and busiest
9
<PAGE>
consumer banking businesses in the United States. Besides serving as banker to
some 3.5 million California households, Wells Fargo provides a full range of
banking services to commercial, agribusiness, real estate and small-business
customers, mainly in California. It is one of the nation's leading managers of
personal trust accounts, corporate 401(k) plans and mutual funds, with
approximately $57 billion in assets under its management and administration.
10. Each defendant herein is sued individually as a conspirator and
aider and abettor, as well as in his capacity as a director of the Company,
and the liability of each arises from the fact that he has engaged in all or
part of the unlawful acts, plans, schemes, or transactions complained of
herein.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this lawsuit on behalf of himself
and all other common shareholders of First Interstate (except defendants
herein and any person, firm, trust, corporation or other entity related to,
controlled by or affiliated with any of the defendants and any of their
successors in interest (the "Class").
12. This action is properly maintainable as a class
action for the following reasons:
(a) The Class is so numerous that joinder of all
Class members is impracticable. As of January 31, 1995, First
10
<PAGE>
Interstate had over 75 million shares of common stock outstanding owned by
over 20,000 shareholders. Members of the Class are scattered throughout the
United States and are so numerous as to make it impracticable to bring them
all before this Court.
13. There are questions of law and fact which are common to members of
the Class and which predominate over any questions affecting only individual
members. The common questions include, inter alia, the following:
(a) Whether the Individual Defendants have breached their
fiduciary duties owed by them to plaintiff and the other members of the Class;
(b) Whether the Individual Defendants have failed, in violation of
their fiduciary duties, to hold a fair auction of the Company or its assets or
to sell the Company on the favorable terms;
(c) Whether the Individual Defendants have failed,
in violation of their fiduciary duties, to provide for a mail
of First Interstate;
(d) Whether plaintiff and the other members of the
Class will be irreparably damaged if the Wells Fargo acquisi-
tion is not completed;
(e) Whether the Individual Defendants have breached
or aided and abetted the breach of the fiduciary and other
11
<PAGE>
common law duties owed by them to plaintiff and other members
of the Class; and
(f) Whether plaintiff and other members of the Class are being and
will continue to be injured by the wrongful conduct alleged herein and, if so,
what is the proper remedy and/or measure of damages.
14. The claims of plaintiff are typical of the claims of other members
of the Class and plaintiff has no interests that are adverse and antagonistic
to the interests of the Class.
15. Plaintiff is committed to the vigorous prosecution of this action
and has retained competent counsel experienced in litigation of this nature.
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
16. Plaintiff anticipates that there will not be any
difficulty in the management of this litigation as a class
action.
17. For the reasons stated herein, a class action is superior to any
other method available for the fair and efficient adjudication of this
controversy since it would be impractical and undesirable for each of the
members of the class who has suffered or will suffer damages to bring separate
actions in various parts of the country. Classwide remedies
12
<PAGE>
will assure uniform standards of conduct for the Individual Defendants and
avoid the risk of inconsistent judgments.
SUBSTANTIVE ALLEGATIONS
18. As pleaded earlier, First Interstate is an interstate banking
corporation. First Interstate's stock performed poorly in 1994 through
mid-1995, due to First Interstate's lackluster performance and perceptions
that it was poorly managed. For instance, First Interstate's stock traded at a
high of $85 per share and then fell, falling to a low of $67 per share in
December 1994. First Interstate did not reach $85 per share again until
mid-1995. After June 1995, First Interstate's stock performed better, reaching
over $100 per share in late September 1995, due to an increase in the prices
in bank stocks generally and because of rumors that a favorable acquisition
offer for First Interstate would be forthcoming as part of the waive of bank
acquisitions and mergers now sweeping the United States. However, even with
this increase, First Interstate's stock has been relatively poor performer
when compared to other bank stocks. Because in recent years First Interstate
has not been viewed to be well-managed as many other large banks and thus has
not performed as well in terms of many of its key ratios and measurements of
success as other banks, its stock has not performed well and thus,
shareholders in First Interstate have, in recent years, obtained a
below-industry
13
<PAGE>
trendline or industry average return. The chart below shows the price action
of First Interstate stock in 1994-1995:
[The hardcopy Complaint filed with the Court contains a
line graph showing the daily common stock price for First Inter-
state for the period December 31, 1993 through October 17, 1995.
Because the document for which this Complaint is an Exhibit has
been filed with the Securities and Exchange Commission by elec-
tronic transmission, this graph is not contained herein. The
following information summarizes the First Interstate daily
closing stock price, plotted along the graph's vertical axis,
for the dates indicated on the horizontal axis of the graph:
Date Common Stock Price
- - ---- ------------------
December 31, 1993 64 1/8
March 25, 1994 77 7/8
June 17, 1994 75 3/4
September 9, 1994 79 1/4
December 2, 1994 69 3/8
February 24, 1995 81 3/8
May 19, 1995 81
August 11, 1995 87 1/2
October 17, 1995 106]
19. In recent years, certain other large financial institutions have
approached First Interstate with favorable acquisition inquiries and offers.
Some years ago, Bank of America approached First Interstate about a possible
acquisition. Approximately a year ago, Wells Fargo approached First Interstate
about a possible acquisition of First Interstate at a premium price. First
Interstate's Board and its top management have rejected and frustrated all of
these prior acquisition overtures and offers, even though those offers would
have resulted in First Interstate shareholders receiving a substantial premium
over the then-market price of First Interstate stock. Defendants have done
this because they know that in the event First Interstate is acquired by
another bank, most or all of the directors of First Interstate will, either in
connection with the acquisition or shortly thereafter, be removed from the
board of the surviving bank because their services will not be necessary and
they will be mere surplusage and thus such an
14
<PAGE>
acquisition would bring an end to their positions of power, prestige and
profit as directors of this huge bank. At the same time, top managers at First
Interstate have caused these prior acquisition overtures and offers to be
rejected and/or frustrated, because they also know that, in the event of an
acquisition, they will also lose their prestigious positions of power,
prestige and profit as officers of a major banking institution. In so acting,
these defendants have been aggrandizing their own personal positions and
interests over that of First Interstate and its broader shareholder community
to whom they owe fiduciary duties to bring about a sales of First Interstate
on favorable terms to all the shareholders, even if it results in them losing
their lucrative positions.
20. Shortly prior to October 18, 1995, Wells Fargo approached First
Interstate and offered to negotiate an acquisition of First Interstate for a
price far in excess of First Interstate's current stock price. First
Interstate's Chairman refused this offer and told Wells Fargo that First
Interstate would not negotiate to sell the bank and would resist any offer by
Wells Fargo to buy the bank. On October 18, 1995, Wells Fargo made an
unsolicited acquisition offer for First Interstate offering to exchange .625
shares of its stock for each share of First Interstate stock, a $133.50 per
share offer based on the October 17, 1995 closing price of Wells Fargo
15
<PAGE>
stock of $213.62 per share. Upon the announcement of this favorable
acquisition offer, First Interstate's stock instantly skyrocketed from $106
per share to over $140 per share, reflecting the extremely large premium being
offered to First Interstate shareholders in this tax-free exchange, and the
increase in Wells Fargo's stock price to $228 per share making the offer worth
$142 per First Interstate share. Wells Fargo's offer to acquire First
Interstate is approximately three times First Interstate's book value, which
is a high offer compared to recent bank acquisition prices. The acquisition
price is also approximately 12.1 times First Interstate's estimated 1995
earnings per share of $11.29 per share, which is also reasonable in light of
other recent bank acquisitions, although it is lower than 15 times the
estimated next year's earnings paid in other bank acquisitions.
21. Wells Fargo has privately indicated to First Inter- state's officers
and directors that they are willing and will increase the price of their offer
to acquire First Interstate if First Interstate's Board will cooperate in
bringing about a consensual acquisition. However, First Interstate's top
officers and its Board are resisting and are going to continue to resist this
acquisition offer so that they can, as they have in the past, retain
themselves in their positions or power, prestige and profit. For instance,
members of First Interstate's
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Board of Directors own only a minuscule portion of First Inter- state's
outstanding common stock. They actually own only 144,000 shares of First
Interstate's 75.7 million shares of outstanding common stock, or just .001% of
the stock. Thus, whatever interest the defendants have as shareholders in
First Interstate based on their minuscule holdings of the Company's stock is
far outweighed by their interest in retaining their lucrative positions of
power, prestige and profit as directors and/or officers of the Company from
which they receive lucrative fees, prestige in the community, large salaries,
and other emoluments of office, which they will lose if First Interstate is
acquired.
22. The rejection of the Wells Fargo offer is a breach of defendants'
fiduciary duties, an abuse of control, provides unjust enrichment to all
defendants, is an unfair business practice and has been perpetrated through
tortious interference with the class members' prospective economic interests
and opportunities and through material misrepresentations and the failure by
defendants to disclose material information to the members of the Class.
23. Unless defendants are enjoined from refusing to negotiate a sale of
First Interstate, plaintiff and the members of the Class will continue to
suffer injury. Plaintiff and the members of the Class have no adequate remedy
at law.
17
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FIRST CAUSE OF ACTION
BREACH OF FIDUCIARY DUTIES
24. Plaintiff incorporates by reference P. P. 1-23 above.
25. The Individual Defendants engaged in the aforesaid
conduct in intentional breach and/or reckless disregard of their fiduciary
duties to plaintiff and the members of the Class.
26. Defendants, at the time they rejected Wells Fargo's offer, knew that
the market price of First Interstate stock reflected both the intrinsic value
of First Interstate and a premium which resulted from market expectations that
Wells Fargo's efforts to acquire control of First Interstate would produce
greater returns for investors.
27. As a proximate result, the plaintiff and other members of the Class
have been substantially injured and request compensatory damages.
SECOND CAUSE OF ACTION
NEGLIGENT BREACH OF FIDUCIARY DUTIES
28. Plaintiff incorporates by reference P. P. 1-23 above.
29. The Individual Defendants engaged in the aforesaid
conduct without exercising the reasonable and ordinary care which directors
and officers owe to their shareholders, and thereby breached their fiduciary
duties to plaintiff and other members of the Class.
18
<PAGE>
30. Defendants, at the time they rejected Wells Fargo's offer, knew or
should have known, that the market price of First Interstate stock at the time
reflected both the intrinsic value of First Interstate and a premium which
resulted from market expectations that Wells Fargo's efforts to acquire
control of First Interstate would produce a greater return for investors.
31. As a proximate result, the plaintiff and other members of the Class
have been substantially injured and request compensatory damages.
32. Defendants did the things alleged herein without exercising the
reasonable and ordinary care owed by corporate directors and officers.
THIRD CAUSE OF ACTION
ABUSE OF CONTROL
33. Plaintiff incorporates by reference P. P. 1-23 above.
34. The Individual Defendants owed duties as controlling
persons and/or as controlling or dominant directors to plaintiff and the other
members of the Class not to use their positions of control of First Interstate
for their own personal interests and contrary to the interests of First
Interstate's remaining shareholders.
35. The foregoing conduct by the director defendants
amount to an abuse of their abilities to control First Inter-
19
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state in violation of their obligations to plaintiff and the
other members of the Class.
36. As a proximate result, plaintiff and the other members of the Class
have been damaged and will continue to be damaged unless defendants are
enjoined, and defendants are each jointly and severally liable to plaintiff
and the other members of the Class for all loss and damage they have suffered
reflect in from the matters set forth herein.
FOURTH CAUSE OF ACTION
UNJUST ENRICHMENT
37. Plaintiff incorporates by reference P. P. 1-23 above.
38. As a proximate result of the tortious conduct de-
scribed above, all of the defendants have been and will be unjustly enriched
at the expense of the members of the Class. The director defendants will
retain control of First Interstate and their positions of power, prestige and
profit. Defendants have obtained these unjust benefits at the expense of the
members of the Class by rejecting the Wells Fargo offer and refusing to
negotiate a beneficial sale of First Interstate.
FIFTH CAUSE OF ACTION
TORTIOUS INTERFERENCE WITH
PROSPECTIVE ECONOMIC ADVANTAGE
39. Plaintiff incorporates by reference P. P. 1-23 above.
20
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40. By reason, inter alia, of Wells Fargo's announced offer to purchase
First Interstate stock at $133+ a share, plaintiff and the members of the
Class had an expectancy that they could tender their shares and realize at
least the $133+ per share offer. Moreover, all class members had the
expectancy of sharing in any premium that results from acquisition attempts.
41. Defendants knew of these prospective advantages presented to
plaintiff and the members of the Class and defendants intended to interfere
and did interfere with those advantages when they rejected the Wells Fargo
offer.
42. Plaintiff and the members of the Class were prevented from obtaining
the foregoing advantages as a result of the conduct of all defendants
described above.
43. The defendants, and each of them, did the things alleged in this
Complaint with the intent to injure plaintiff and the members of the Class.
WHEREFORE, plaintiff and members of the Class demand judgment against
defendants as follows:
1. Declaring that this action is properly maintainable
as a class action and certifying plaintiff as the representa-
tive of the Class;
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2. Declaring that the defendants have breached and are
breaching their fiduciary and other duties to plaintiff and
other members of the Class;
3. Preliminary and permanently enjoining the defendants and their
counsel, agents, employees and all persons acting under, in concert with, or
for them, from taking to prevent or frustrate the sale to Wells Fargo or
refusing to proceed with negotiations with Wells Fargo to increase the offered
price;
4. Awarding compensatory damages against defendants individually and
severally in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law, arising from the proposed
transaction;
5. Awarding plaintiff his costs and disbursements and
reasonable allowances of fees for plaintiff's counsel and
experts and reimbursement of expenses; and
6. Granting plaintiff and the Class such other and
further relief as the Court may deem just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: October 19, 1995
WILBERG WEISS BERSHAD
HYNES & LERACH
---------------------------------
WILLIAM S. LERACH
22
<PAGE>
600 West Broadway, Suite 1800
San Diego, California 92101
Telephone: 619/231-1058
-and-
JEFF S. WESTERMAN
355 South Grand Avenue
Suite 4170
Los Angeles, California 90071
Telephone: 213/617-9007
WEISS & YOURMAN
JOSEPH WEISS
KEVIN J. YOURMAN (147159)
10940 Wilshire Blvd.
24th Floor
Los Angeles, CA 90024
Telephone: 310/208-2800
Attorneys for Plaintiff
23
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH (68581)
600 West Broadway, Suite 1900
San Diego, California 92101
Telephone: 619/231-1058
- and -
MILBERG WEISS BERSHAD
HYNES & LERACH
JEFF S. WESTERMAN (94559)
355 South Grand Avenue
Suite 4170
Los Angeles, California 90071
Telephone: 213/617-9007
BLUMENTHAL & OSTROFF SULLIVAN, HILL,
LEWIN & MARKHAM
A Partnership of DAVID MARKHAM
Professional Law Corporations 550 West "C" Street
NORMAN BLUMENTHAL Suite 1500
1420 Kettner Boulevard San Diego, California 92101
Seventh floor Telephone: 619/233-4100
San Diego, California 92101
Telephone: 619/239-7373
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
(213) 687-5000
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
BERT L. EAVES, IRA, On Behalf of Himself ) Case No. 11C137380
and All Others Similarly Situated, )
) CLASS ACTION
Plaintiff, )
)
vs. ) CLASS ACTION COMPLAINT
) FOR BREACH OF FIDUCIARY
JOHN E. BRYSON, DON C. FRISBEE, ) DUTY, ABUSE OF CONTROL,
STEVEN B. SAMPLE, EDWARD M. CARSON, ) UNJUST ENRICHMENT,
GEORGE M. KELLER, FORREST N. SHUMWAY, ) INTERFERENCE WITH
<PAGE>
JEWEL PLUMMER COBB, W.F. KIESCHNICK, ) PROSPECTIVE ECONOMIC
WILLIAM B. START, RALPH P. DAVIDSON, ) ADVANTAGE AND EQUITABLE
THOMAS L. LEE, RICHARD J. STEGEMEIER, ) RELIEF AND DAMAGES
MYRON DuBAIN, WILLIAM F. MILLER, DAN- )
IEL M. TELLEP and J.J. PINOLA, )
)
Defendants. ) Plaintiff Demands A
) Trial By Jury
- - ------------------------------------------- ---------------------------
<PAGE>
Plaintiff, as and for his complaint, alleges as follows upon information
and belief except as to paragraph 5, which is alleged upon knowledge.
Plaintiff's information and belief is based upon, inter alia, the
investigation made by plaintiff by and through his counsel.
INTRODUCTION AND OVERVIEW
1. This is a shareholder class action seeking equitable
relief and compensatory damages on behalf of all shareholders of First
Interstate Bancorp ("First Interstate" or the "Company") against First
Interstate's top officers and the members of the Board of Directors of First
Interstate, seeking to remedy violations of state law arising out of these
defendants' actions and conduct undertaken to defeat a highly favorable
acquisition offer for First Interstate stock by Wells Fargo & Co. ("Wells
Fargo"). First Interstate's Board of Directors has pursued a course of conduct
intended to and having the effect of making it extremely difficult for any
outside party to successfully acquire First Interstate, even at prices well in
excess of First Interstate stock's historical price range. This course of
conduct has been undertaken by the defendants to secure and retain their
lucrative positions of power, prestige and profit with respect to First
Interstate and to enhance and aggrandize their own interests at the expense of
First Interstate's other shareholders.
3
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2. On October 18, 1995, Wells Fargo, a highly successful, profitable and
well-capitalized bank, made an offer to acquire First Interstate at a price
far in excess of First Interstate's then-market price, by exchanging in a
tax-free exchange .625 shares of Wells Fargo stock for each share of First
Interstate stock, an offer worth $133.50 per share based on the October 17,
1995 closing price of Wells Fargo stock of $213.62 per share. First
Interstate's stock jumped from $106 per share to $140 per share upon this
announcement. While Wells Fargo's stock increased to $228.65 per share, making
the offer worth $142.65 per First Interstate share. However, the defendants
are rejecting such offer and have refused to negotiate an acquisition of the
Company at any higher price, even though Wells Fargo has told First
Interstate's Board it is willing to negotiate a higher price and thus to offer
a fair and reasonable price for First Interstate stock, well above the levels
at which the stock has traded historically.
3. In recent years, defendants have consistently refused to entertain
highly favorable acquisition offers or overtures for First Interstate, thus
preventing an acquisition of the Company at a favorable price for the
shareholders. Defendants have done this to retain their positions of prestige,
power and profit, as they know they will lose those positions in the event
First Interstate is acquired. Defendants' interests in
4
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holding on to their positions of power, prestige and profit as officers and
directors of First Interstate far exceeds their interests as shareholders in
First Interstate, as they collectively own only about 144,000 of First
Interstate's 75.7 million shares -- a minuscule .001% of its outstanding
stock.
PARTIES AND ACTORS
4. Plaintiff Roger Mondschein, the owner of shares of First Interstate,
is and was at all times relevant hereto a common shareholder of First
Interstate. Plaintiff brings this action on behalf of the holders of the
common stock of First Interstate for injunctive and other relief in connection
with the proposed acquisition of First Interstate by Wells Fargo.
5. (a) First Interstate is a corporation with its principal executive
offices in Los Angeles, California and which operates principally in
California, as well as several other western states. First Interstate is a
bank holding company.
(b) At December 31, 1994, it owned 16 banks (the "Subsidiary
Banks") which operated approximately 1,100 banking offices in 13 states,
including California. Ranked according to assets, the Company was the
fourteenth largest commercial banking organization in the United States at
December 31, 1994, having total deposits of $48.4 billion and total assets of
$55.8 billion.
5
<PAGE>
(c) The Subsidiary Banks accept checking, savings and other time
deposit accounts and employ these funds principally by making consumer, real
estate and commercial loans and investing in securities and other
interest-bearing assets.
(d) The Company 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 both through
non-bank subsidiaries of the Company and through the Subsidiary Banks and
their subsidiaries.
(e) The larger Subsidiary Banks provided international banking
services on a limited basis through the international departments of their
domestic offices. They also maintain correspondent relationships with major
banks throughout the world.
6. (a) Defendant John E. Bryson ("Bryson") was a direc-
tor of First Interstate and Board Chairman and Chief Executive
Officer or SCECorp and Southern Edison Company at all times
relevant hereto.
(b) Defendant Don C. Frisbee ("Frisbee") was a First Interstate
director and Chairman Emeritus PacifiCorp at all times relevant hereto.
6
<PAGE>
(c) Defendant Steven B. Sample ("Sample") was a
First Interstate director and President University of Southern
California at all times relevant hereto.
(d) Defendant Edward M. Carson ("Carson") was Chair-
man of the Board of First Interstate at all times relevant
hereto.
(e) Defendant George M. Keller ("Keller") was a director of First
Interstate and the retired Chairman and Chief Executive Officer of Chevron
Corporation at all times relevant hereto.
(f) Defendant Forrest N. Shumway ("Shumway") was a
director of First Interstate and former Vice-Chairman of the
Board Allied-Signal, Inc. at all times relevant hereto.
(g) Defendant Jewel Plummer Cobb ("Cobb") was a director of First
Interstate and President Emeritus California State University, Fullerton at
all times relevant hereto.
(h) Defendant W.F. Kieschnick ("Kieschnick") was a
director of First Interstate and retired President and Chief
Executive Officer Atlantic Richfield Company at all times
relevant hereto.
(i) Defendant William B. Siart ("Siart") was Presi-
dent and Chief Executive Officer First Interstate and a direc-
tor at all times relevant hereto.
7
<PAGE>
(j) Defendant Ralph P. Davidson ("Davidson") was a director of
First Interstate and former Chairman of The John F. Kennedy Center for the
Performing Arts at all times relevant hereto.
(k) Defendant Thomas L. Lee ("Lee") was a director
of First Interstate and Chairman and Chief Executive Officer of
The Newhall Land and Farming Company at all times relevant
hereto.
(l) Defendant Richard J. Stegemeier ("Stegemeier") was a director
of First Interstate and Chairman of the Board Unocal Corporation at all times
relevant hereto.
(m) Defendant Myron DuBain ("DuBain") was a director of First
Interstate and retired Chairman and Chief Executive Officer Fireman's Fund
Corporation at all times relevant hereto.
(n) Defendant William F. Miller ("Miller") was a
director of First Interstate and President Emeritus SRI Inter-
national at all times relevant hereto.
(o) Defendant Daniel M. Tellap ("Tellap") was a director of First
Interstate and Chairman and Chief Executive Officer Lockheed Corporation at
all times relevant hereto.
(p) Defendant J.J. Pinola ("Pinola"), was the retired Chairman and
Chief Executive Officer of First Interstate and a director at all times
relevant hereto.
8
<PAGE>
7. Defendants (hereinafter collectively referred to as the "Individual
Defendants") are each members of First Interstate's Board of Directors.
8. The Individual Defendants owed and owe First Interstate's public
shareholders fiduciary obligations and were and are required to: (i) use their
ability to manage First Interstate in a fair, just and equitable manner; (ii)
act in furtherance of the best interests of First Interstate and its
shareholders; (iii) act to maximize shareholder value; (iv) govern First
Interstate in such a manner as to head the expressed views of its public
shareholders; (v) refrain from abusing their positions of control, power,
prestige and profit; and (vi) not favor their own interests at the expense of
First Interstate and its shareholders. By reason of their fiduciary
relationships, these defendants owed and owe plaintiff and other members of
the Class the highest obligation of good faith, fair dealing, loyalty and due
care.
9. Wells Fargo is a corporation with its principal executive offices in
San Francisco, California. Wells Fargo is a huge bank holding company and one
of the most well-managed, profitable and well-capitalized banks in the United
States. With more than 600 branch outlets, 1,900 round-the-clock Wells Fargo
Express(TM) ATMs and a popular 24-hour telephone banking service, Wells Fargo
operates one of the largest and busiest
9
<PAGE>
consumer banking businesses in the United States. Besides serving as banker to
some 3.5 million California households, Wells Fargo provides a full range of
banking services to commercial, agribusiness, real estate and small-business
customers, mainly in California. It is one of the nation's leading managers of
personal trust accounts, corporate 401(k) plans and mutual funds, with
approximately $57 billion in assets under its management and administration.
10. Each defendant herein is sued individually as a conspirator and
aider and abettor, as well as in his capacity as a director of the Company,
and the liability of each arises from the fact that he has engaged in all or
part of the unlawful acts, plans, schemes, or transactions complained of
herein.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this lawsuit on behalf of himself
and all other common shareholders of First Interstate (except defendants
herein and any person, firm, trust, corporation or other entity related to,
controlled by or affiliated with any of the defendants and any of their
successors in interest (the "Class").
12. This action is properly maintainable as a class
action for the following reasons:
(a) The Class is so numerous that joinder of all
Class members is impracticable. As of January 31, 1995, First
10
<PAGE>
Interstate had over 75 million shares of common stock outstanding owned by
over 20,000 shareholders. Members of the Class are scattered throughout the
United States and are so numerous as to make it impracticable to bring them
all before this Court.
13. There are questions of law and fact which are common to members of
the Class and which predominate over any questions affecting only individual
members. The common questions include, inter alia, the following:
(a) Whether the Individual Defendants have breached their
fiduciary duties owed by them to plaintiff and the other members of the Class;
(b) Whether the Individual Defendants have failed, in violation of
their fiduciary duties, to hold a fair auction of the Company or its assets or
to sell the Company on the favorable terms;
(c) Whether the Individual Defendants have failed,
in violation of their fiduciary duties, to provide for a mail
of First Interstate;
(d) Whether plaintiff and the other members of the
Class will be irreparably damaged if the Wells Fargo acquisi-
tion is not completed;
(e) Whether the Individual Defendants have breached
or aided and abetted the breach of the fiduciary and other
11
<PAGE>
common law duties owed by them to plaintiff and other members
of the Class; and
(f) Whether plaintiff and other members of the Class are being and
will continue to be injured by the wrongful conduct alleged herein and, if so,
what is the proper remedy and/or measure of damages.
14. The claims of plaintiff are typical of the claims of other members
of the Class and plaintiff has no interests that are adverse and antagonistic
to the interests of the Class.
15. Plaintiff is committed to the vigorous prosecution of this action
and has retained competent counsel experienced in litigation of this nature.
Accordingly, plaintiff is an adequate representative of the class and will
fairly and adequately protect the interests of the Class.
16. Plaintiff anticipates that there will not be any
difficulty in the management of this litigation as a class
action.
17. For the reasons stated herein, a class action is superior to any
other method available for the fair and efficient adjudication of this
controversy since it would be impractical and undesirable for each of the
members of the class who has suffered or will suffer damages to bring separate
actions in various parts of the country. Classwide remedies
12
<PAGE>
will assure uniform standards of conduct for the Individual Defendants and
avoid the risk of inconsistent judgments.
SUBSTANTIVE ALLEGATIONS
18. As pleaded earlier, First Interstate is an interstate banking
corporation. First Interstate's stock performed poorly in 1994 through
mid-1995, due to First Interstate's lackluster performance and perceptions
that it was poorly managed. For instance, First Interstate's stock traded at a
high of $85 per share and then fell, falling to a low of $67 per share in
December 1994. First Interstate did not reach $85 per share again until
mid-1995. After June 1995, First Interstate's stock performed better, reaching
over $100 per share in late September 1995, due to an increase in the prices
in bank stocks generally and because of rumors that a favorable acquisition
offer for First Interstate would be forthcoming as part of the waive of bank
acquisitions and mergers now sweeping the United States. However, even with
this increase, First Interstate's stock has been relatively poor performer
when compared to other bank stocks. Because in recent years First Interstate
has not been viewed to be well-managed as many other large banks and thus has
not performed as well in terms of many of its key ratios and measurements of
success as other banks, its stock has not performed well and thus,
shareholders in First Interstate have, in recent years, obtained a
below-industry
13
<PAGE>
trendline or industry average return. The chart below shows the price action
of First Interstate stock in 1994-1995:
[The hardcopy Complaint filed with the Court contains a
line graph showing the daily common stock price for First Inter-
state for the period December 31, 1993 through October 17, 1995.
Because the document for which this Complaint is an Exhibit has
been filed with the Securities and Exchange Commission by elec-
tronic transmission, this graph is not contained herein. The
following information summarizes the First Interstate daily
closing stock price, plotted along the graph's vertical axis,
for the dates indicated on the horizontal axis of the graph:
Date Common Stock Price
- - ---- ------------------
December 31, 1993 64 1/8
March 25, 1994 77 7/8
June 17, 1994 75 3/4
September 9, 1994 79 1/4
December 2, 1994 69 3/8
February 24, 1995 81 3/8
May 19, 1995 81
August 11, 1995 87 1/2
October 17, 1995 106]
19. In recent years, certain other large financial institutions have
approached First Interstate with favorable acquisition inquiries and offers.
Some years ago, Bank of America approached First Interstate about a possible
acquisition. Approximately a year ago, Wells Fargo approached First Interstate
about a possible acquisition of First Interstate at a premium price. First
Interstate's Board and its top management have rejected and frustrated all of
these prior acquisition overtures and offers, even though those offers would
have resulted in First Interstate shareholders receiving a substantial premium
over the then-market price of First Interstate stock. Defendants have done
this because they know that in the event First Interstate is acquired by
another bank, most or all of the directors of First Interstate will, either in
connection with the acquisition or shortly thereafter, be removed from the
board of the surviving bank because their services will not be necessary and
they will be mere surplusage and thus such an
14
<PAGE>
acquisition would bring an end to their positions of power, prestige and
profit as directors of this huge bank. At the same time, top managers at First
Interstate have caused these prior acquisition overtures and offers to be
rejected and/or frustrated, because they also know that, in the event of an
acquisition, they will also lose their prestigious positions of power,
prestige and profit as officers of a major banking institution. In so acting,
these defendants have been aggrandizing their own personal positions and
interests over that of First Interstate and its broader shareholder community
to whom they owe fiduciary duties to bring about a sales of First Interstate
on favorable terms to all the shareholders, even if it results in them losing
their lucrative positions.
20. Shortly prior to October 18, 1995, Wells Fargo approached First
Interstate and offered to negotiate an acquisition of First Interstate for a
price far in excess of First Interstate's current stock price. First
Interstate's Chairman refused this offer and told Wells Fargo that First
Interstate would not negotiate to sell the bank and would resist any offer by
Wells Fargo to buy the bank. On October 18, 1995, Wells Fargo made an
unsolicited acquisition offer for First Interstate offering to exchange .625
shares of its stock for each share of First Interstate stock, a $133.50 per
share offer based on the October 17, 1995 closing price of Wells Fargo
15
<PAGE>
stock of $213.62 per share. Upon the announcement of this favorable
acquisition offer, First Interstate's stock instantly skyrocketed from $106
per share to over $140 per share, reflecting the extremely large premium being
offered to First Interstate shareholders in this tax-free exchange, and the
increase in Wells Fargo's stock price to $228 per share making the offer worth
$142 per First Interstate share. Wells Fargo's offer to acquire First
Interstate is approximately three times First Interstate's book value, which
is a high offer compared to recent bank acquisition prices. The acquisition
price is also approximately 12.1 times First Interstate's estimated 1995
earnings per share of $11.29 per share, which is also reasonable in light of
other recent bank acquisitions, although it is lower than 15 times the
estimated next year's earnings paid in other bank acquisitions.
21. Wells Fargo has privately indicated to First Inter- state's officers
and directors that they are willing and will increase the price of their offer
to acquire First Interstate if First Interstate's Board will cooperate in
bringing about a consensual acquisition. However, First Interstate's top
officers and its Board are resisting and are going to continue to resist this
acquisition offer so that they can, as they have in the past, retain
themselves in their positions or power, prestige and profit. For instance,
members of First Interstate's
16
<PAGE>
Board of Directors own only a minuscule portion of First Inter- state's
outstanding common stock. They actually own only 144,000 shares of First
Interstate's 75.7 million shares of outstanding common stock, or just .001% of
the stock. Thus, whatever interest the defendants have as shareholders in
First Interstate based on their minuscule holdings of the Company's stock is
far outweighed by their interest in retaining their lucrative positions of
power, prestige and profit as directors and/or officers of the Company from
which they receive lucrative fees, prestige in the community, large salaries,
and other emoluments of office, which they will lose if First Interstate is
acquired.
22. The rejection of the Wells Fargo offer is a breach of defendants'
fiduciary duties, an abuse of control, provides unjust enrichment to all
defendants, is an unfair business practice and has been perpetrated through
tortious interference with the class members' prospective economic interests
and opportunities and through material misrepresentations and the failure by
defendants to disclose material information to the members of the Class.
23. Unless defendants are enjoined from refusing to negotiate a sale of
First Interstate, plaintiff and the members of the Class will continue to
suffer injury. Plaintiff and the members of the Class have no adequate remedy
at law.
17
<PAGE>
FIRST CAUSE OF ACTION
BREACH OF FIDUCIARY DUTIES
24. Plaintiff incorporates by reference P. P. 1-23 above.
25. The Individual Defendants engaged in the aforesaid
conduct in intentional breach and/or reckless disregard of their fiduciary
duties to plaintiff and the members of the Class.
26. Defendants, at the time they rejected Wells Fargo's offer, knew that
the market price of First Interstate stock reflected both the intrinsic value
of First Interstate and a premium which resulted from market expectations that
Wells Fargo's efforts to acquire control of First Interstate would produce
greater returns for investors.
27. As a proximate result, the plaintiff an other members of the Class
have been substantially injured and request compensatory damages.
SECOND CAUSE OF ACTION
NEGLIGENT BREACH OF FIDUCIARY DUTIES
28. Plaintiff incorporates by reference P. P. 1-23 above.
29. The Individual Defendants engaged in the aforesaid
conduct without exercising the reasonable and ordinary care which directors
and officers owe to their shareholders, and thereby breached their fiduciary
duties to plaintiff and other members of the Class.
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<PAGE>
30. Defendants, at the time they rejected Wells Fargo's offer, knew or
should have known, that the market price of First Interstate stock at the time
reflected both the intrinsic value of First Interstate and a premium which
resulted from market expectations that Wells Fargo's efforts to acquire
control of First Interstate would produce a greater return for investors.
31. As a proximate result, the plaintiff and other members of the Class
have been substantially injured and request compensatory damages.
32. Defendants did the things alleged herein without exercising the
reasonable and ordinary care owed by corporate directors and officers.
THIRD CAUSE OF ACTION
ABUSE OF CONTROL
33. Plaintiff incorporates by reference P. P. 1-23 above.
34. The Individual Defendants owed duties as controlling
persons and/or as controlling or dominant directors to plaintiff and the other
members of the Class not to use their positions of control of First Interstate
for their own personal interests and contrary to the interests of First
Interstate's remaining shareholders.
35. The foregoing conduct by the director defendants
amount to an abuse of their abilities to control First Inter-
19
<PAGE>
state in violation of their obligations to plaintiff and the
other members of the Class.
36. As a proximate result, plaintiff and the other members of the Class
have been damaged and will continue to be damaged unless defendants are
enjoined, and defendants are each jointly and severally liable to plaintiff
and the other members of the Class for all loss and damage they have suffered
reflect in from the matters set forth herein.
FOURTH CAUSE OF ACTION
UNJUST ENRICHMENT
37. Plaintiff incorporates by reference P. P. 1-23 above.
38. As a proximate result of the tortious conduct de-
scribed above, all of the defendants have been and will be unjustly enriched
at the expense of the members of the Class. The director defendants will
retain control of First Interstate and their positions of power, prestige and
profit. Defendants have obtained these unjust benefits at the expense of the
members of the Class by rejecting the Wells Fargo offer and refusing to
negotiate a beneficial sale of First Interstate.
FIFTH CAUSE OF ACTION
TORTIOUS INTERFERENCE WITH
PROSPECTIVE ECONOMIC ADVANTAGE
39. Plaintiff incorporates by reference P. P. 1-23 above.
20
<PAGE>
40. By reason, inter alia, of Wells Fargo's announced offer to purchase
First Interstate stock at $133+ a share, plaintiff and the members of the
Class had an expectancy that they could tender their shares and realize at
least the $133+ per share offer. Moreover, all class members had the
expectancy of sharing in any premium that results from acquisition attempts.
41. Defendants knew of these prospective advantages presented to
plaintiff and the members of the Class and defendants intended to interfere
and did interfere with those advantages when they rejected the Wells Fargo
offer.
42. Plaintiff and the members of the Class were prevented from obtaining
the foregoing advantages as a result of the conduct of all defendants
described above.
43. The defendants, and each of them, did the things alleged in this
Complaint with the intent to injure plaintiff and the members of the Class.
WHEREFORE, plaintiff and members of the Class demand judgment against
defendants as follows:
1. Declaring that this action is properly maintainable
as a class action and certifying plaintiff as the representa-
tive of the Class;
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<PAGE>
2. Declaring that the defendants have breached and are
breaching their fiduciary and other duties to plaintiff and
other members of the Class;
3. Preliminary and permanently enjoining the defendants and their
counsel, agents, employees and all persons acting under, in concert with, or
for them, from taking to prevent or frustrate the sale to Wells Fargo or
refusing to proceed with negotiations with Wells Fargo to increase the offered
price;
4. Awarding compensatory damages against defendants individually and
severally in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law, arising from the proposed
transaction;
5. Awarding plaintiff his costs and disbursements and
reasonable allowances of fees for plaintiff's counsel and
experts and reimbursement of expenses; and
6. Granting plaintiff and the Class such other and
further relief as the Court may deem just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: October 19, 1995
WILBERG WEISS BERSHAD
HYNES & LERACH
---------------------------------
WILLIAM S. LERACH
22
<PAGE>
600 West Broadway, Suite 1800
San Diego, California 92101
Telephone: 619/231-1058
-and-
JEFF S. WESTERMAN
255 South Grand Avenue
Suite 4170
Los Angeles, California 90071
Telephone: 213/617-9007
BLUMENTHAL & OSTROFF
A Partnership of
Professional Law Corporations
NORMAN BLUMENTHAL
1420 Kettner Boulevard
Seventh Floor
San Diego, California 92101
Telephone: 619/239-7373
SULLIVAN, HILL, LEWIN
& MARKHAM
DAVID MARKHAM
500 West "C" Street
Suite 1500
San Diego, California 92101
Telephone: 619/233-4100
Attorneys for Plaintiff
23
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH (68581)
600 West Broadway, Suite 1900
San Diego, California 92101
Telephone: 619/231-1058
- and -
JEFF S. WESTERMAN (94559)
355 South Grand Avenue
Suite 4170
Los Angeles, California 90071
Telephone: 213/617-9007
STULL, STULL & BRODY
JULES BRODY
6 East 45th Street
4th Floor
New York, New York 10017
Telephone: 212/687-7230
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
(213) 687-5000
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
MAX GRILL, On Behalf of Himself and ) Case No.
All Others Similarly Situated, )
) CLASS ACTION
Plaintiff, )
)
vs. )
) CLASS ACTION COMPLAINT
JOHN E. BRYSON, DON C. FRISBEE, ) FOR BREACH OF FIDUCIARY
STEVEN B. SAMPLE, EDWARD M. CARSON, ) DUTY, ABUSE OF CONTROL,
GEORGE M. KELLER, FORREST N. SHUMWAY, ) UNJUST ENRICHMENT,
JEWEL PLUMMER COBB, W.F. KIESCHNICK, ) INTERFERENCE WITH
WILLIAM B. SIART, RALPH P. DAVIDSON, ) PROSPECTIVE ECONOMIC
THOMAS L. LEE, RICHARD J. STEGEMEIER, ) ADVANTAGE AND EQUITABLE
) RELIEF AND DAMAGES
<PAGE>
MYRON DuBAIN, WILLIAM F. MILLER, DAN- )
IEL M. TELLEP and J.J. PINOLA, ) Plaintiff Demands A
) Trial By Jury
Defendants. )
)
- - ---------------------------------------------
2
<PAGE>
Plaintiff, as and for his complaint, alleges as follows upon information
and belief except as to paragraph 5, which is alleged upon knowledge.
Plaintiff's information and belief is based upon, inter alia, the
investigation made by plaintiff by and through his counsel.
INTRODUCTION AND OVERVIEW
1. This is a shareholder class action seeking equitable
relief and compensatory damages on behalf of all shareholders of First
Interstate Bancorp ("First Interstate" or the "Company") against First
Interstate's top officers and the members of the Board of Directors of First
Interstate, seeking to remedy violations of state law arising out of these
defendants' actions and conduct undertaken to defeat a highly favorable
acquisition offer for First Interstate stock by Wells Fargo & Co. ("Wells
Fargo"). First Interstate's Board of Directors has pursued a course of conduct
intended to and having the effect of making it extremely difficult for any
outside party to successfully acquire First Interstate, even at prices well in
excess of First Interstate stock's historical price range. This course of
conduct has been undertaken by the defendants to secure and retain their
lucrative positions of power, prestige and profit with respect to First
Interstate and to enhance and aggrandize their own interests at the expense of
First Interstate's other shareholders.
3
<PAGE>
2. On October 18, 1995, Wells Fargo, a highly successful, profitable and
well-capitalized bank, made an offer to acquire First Interstate at a price
far in excess of First Interstate's then-market price, by exchanging in a
tax-free exchange .625 shares of Wells Fargo stock for each share of First
Interstate stock, an offer worth $133.50 per share based on the October 17,
1995 closing price of Wells Fargo stock of $213.62 per share. First
Interstate's stock jumped from $106 per share to $140 per share upon this
announcement. While Wells Fargo's stock increased to $228.65 per share, making
the offer worth $142.65 per First Interstate share. However, the defendants
are rejecting such offer and have refused to negotiate an acquisition of the
Company at any higher price, even though Wells Fargo has told First
Interstate's Board it is willing to negotiate a higher price and thus to offer
a fair and reasonable price for First Interstate stock, well above the levels
at which the stock has traded historically.
3. In recent years, defendants have consistently refused to entertain
highly favorable acquisition offers or overtures for First Interstate, thus
preventing an acquisition of the Company at a favorable price for the
shareholders. Defendants have done this to retain their positions of prestige,
power and profit, as they know they will lose those positions in the event
First Interstate is acquired. Defendants' interests in
4
<PAGE>
holding on to their positions of power, prestige and profit as officers and
directors of First Interstate far exceeds their interests as shareholders in
First Interstate, as they collectively own only about 144,000 of First
Interstate's 75.7 million shares -- a minuscule .001% of its outstanding
stock.
PARTIES AND ACTORS
4. Plaintiff Roger Mondschein, the owner of shares of First Interstate,
is and was at all times relevant hereto a common shareholder of First
Interstate. Plaintiff brings this action on behalf of the holders of the
common stock of First Interstate for injunctive and other relief in connection
with the proposed acquisition of First Interstate by Wells Fargo.
5. (a) First Interstate is a corporation with its principal executive
offices in Los Angeles, California and which operates principally in
California, as well as several other western states. First Interstate is a
bank holding company.
(b) At December 31, 1994, it owned 16 banks (the "Subsidiary
Banks") which operated approximately 1,100 banking offices in 13 states,
including California. Ranked according to assets, the Company was the
fourteenth largest commercial banking organization in the United States at
December 31, 1994, having total deposits of $48.4 billion and total assets of
$55.8 billion.
5
<PAGE>
(c) The Subsidiary Banks accept checking, savings and other time
deposit accounts and employ these funds principally by making consumer, real
estate and commercial loans and investing in securities and other
interest-bearing assets.
(d) The Company 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 both through
non-bank subsidiaries of the Company and through the Subsidiary Banks and
their subsidiaries.
(e) The larger Subsidiary Banks provided international banking
services on a limited basis through the international departments of their
domestic offices. They also maintain correspondent relationships with major
banks throughout the world.
6. (a) Defendant John E. Bryson ("Bryson") was a direc-
tor of First Interstate and Board Chairman and Chief Executive
Officer or SCECorp and Southern Edison Company at all times
relevant hereto.
(b) Defendant Don C. Frisbee ("Frisbee") was a First Interstate
director and Chairman Emeritus PacifiCorp at all times relevant hereto.
6
<PAGE>
(c) Defendant Steven B. Sample ("Sample") was a
First Interstate director and President University of Southern
California at all times relevant hereto.
(d) Defendant Edward M. Carson ("Carson") was Chair-
man of the Board of First Interstate at all times relevant
hereto.
(e) Defendant George M. Keller ("Keller") was a director of First
Interstate and the retired Chairman and Chief Executive Officer of Chevron
Corporation at all times relevant hereto.
(f) Defendant Forrest N. Shumway ("Shumway") was a
director of First Interstate and former Vice-Chairman of the
Board Allied-Signal, Inc. at all times relevant hereto.
(g) Defendant Jewel Plummer Cobb ("Cobb") was a director of First
Interstate and President Emeritus California State University, Fullerton at
all times relevant hereto.
(h) Defendant W.F. Kieschnick ("Kieschnick") was a
director of First Interstate and retired President and Chief
Executive Officer of Atlantic Richfield Company at all times
relevant hereto.
(i) Defendant William B. Siart ("Siart") was Presi-
dent and Chief Executive Officer First Interstate and a direc-
tor at all times relevant hereto.
7
<PAGE>
(j) Defendant Ralph P. Davidson ("Davidson") was a director of
First Interstate and former Chairman of The John F. Kennedy Center for the
Performing Arts at all times relevant hereto.
(k) Defendant Thomas L. Lee ("Lee") was a director
of First Interstate and Chairman and Chief Executive Officer of
The Newhall Land and Farming Company at all times relevant
hereto.
(l) Defendant Richard J. Stegemeier ("Stegemeier") was a director
of First Interstate and Chairman of the Board Unocal Corporation at all times
relevant hereto.
(m) Defendant Myron DuBain ("DuBain") was a director of First
Interstate and retired Chairman and Chief Executive Officer Fireman's Fund
Corporation at all times relevant hereto.
(n) Defendant William F. Miller ("Miller") was a
director of First Interstate and President Emeritus SRI Inter-
national at all times relevant hereto.
(o) Defendant Daniel M. Tellap ("Tellap") was a director of First
Interstate and Chairman and Chief Executive Officer Lockheed Corporation at
all times relevant hereto.
(p) Defendant J.J. Pinola ("Pinola"), was the retired Chairman and
Chief Executive Officer of First Interstate and a director at all times
relevant hereto.
8
<PAGE>
7. Defendants (hereinafter collectively referred to as the "Individual
Defendants") are each members of First Interstate's Board of Directors.
8. The Individual Defendants owed and owe First Interstate's public
shareholders fiduciary obligations and were and are required to: (i) use their
ability to manage First Interstate in a fair, just and equitable manner; (ii)
act in furtherance of the best interests of First Interstate and its
shareholders; (iii) act to maximize shareholder value; (iv) govern First
Interstate in such a manner as to head the expressed views of its public
shareholders; (v) refrain from abusing their positions of control, power,
prestige and profit; and (vi) not favor their own interests at the expense of
First Interstate and its shareholders. By reason of their fiduciary
relationships, these defendants owed and owe plaintiff and other members of
the Class the highest obligation of good faith, fair dealing, loyalty and due
care.
9. Wells Fargo is a corporation with its principal executive offices in
San Francisco, California. Wells Fargo is a huge bank holding company and one
of the most well-managed, profitable and well-capitalized banks in the United
States. With more than 600 branch outlets, 1,900 round-the-clock Wells Fargo
Express(TM) ATMs and a popular 24-hour telephone banking service, Wells Fargo
operates one of the largest and busiest
9
<PAGE>
consumer banking businesses in the United States. Besides serving as banker to
some 3.5 million California households, Wells Fargo provides a full range of
banking services to commercial, agribusiness, real estate and small-business
customers, mainly in California. It is one of the nation's leading managers of
personal trust accounts, corporate 401(k) plans and mutual funds, with
approximately $57 billion in assets under its management and administration.
10. Each defendant herein is sued individually as a conspirator and
aider and abettor, as well as in his capacity as a director of the Company,
and the liability of each arises from the fact that he has engaged in all or
part of the unlawful acts, plans, schemes, or transactions complained of
herein.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this lawsuit on behalf of himself
and all other common shareholders of First Interstate (except defendants
herein and any person, firm, trust, corporation or other entity related to,
controlled by or affiliated with any of the defendants and any of their
successors in interest (the "Class").
12. This action is properly maintainable as a class
action for the following reasons:
(a) The Class is so numerous that joinder of all
Class members is impracticable. As of January 31, 1995, First
10
<PAGE>
Interstate had over 75 million shares of common stock outstanding owned by
over 20,000 shareholders. Members of the Class are scattered throughout the
United States and are so numerous as to make it impracticable to bring them
all before this Court.
13. There are questions of law and fact which are common to members of
the Class and which predominate over any questions affecting only individual
members. The common questions include, inter alia, the following:
(a) Whether the Individual Defendants have breached their
fiduciary duties owed by them to plaintiff and the other members of the Class;
(b) Whether the Individual Defendants have failed, in violation of
their fiduciary duties, to hold a fair auction of the Company or its assets or
to sell the Company on the favorable terms;
(c) Whether the Individual Defendants have failed,
in violation of their fiduciary duties, to provide for a mail
of First Interstate;
(d) Whether plaintiff and the other members of the
Class will be irreparably damaged if the Wells Fargo acquisi-
tion is not completed;
(e) Whether the Individual Defendants have breached
or aided and abetted the breach of the fiduciary and other
11
<PAGE>
common law duties owed by them to plaintiff and other members
of the Class; and
(f) Whether plaintiff and other members of the Class are being and
will continue to be injured by the wrongful conduct alleged herein and, if so,
what is the proper remedy and/or measure of damages.
14. The claims of plaintiff are typical of the claims of other members
of the class and plaintiff has no interests that are adverse and antagonistic
to the interests of the Class.
15. Plaintiff is committed to the vigorous prosecution of this action
and has retained competent counsel experienced in litigation of this nature.
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
16. Plaintiff anticipates that there will not be any
difficulty in the management of this litigation as a class
action.
17. For the reasons stated herein, a class action is superior to any
other method available for the fair and efficient adjudication of this
controversy since it would be impractical and undesirable for each of the
members of the class who has suffered or will suffer damages to bring separate
actions in various parts of the country. Classwide remedies
12
<PAGE>
will assure uniform standards of conduct for the Individual Defendants and
avoid the risk of inconsistent judgments.
SUBSTANTIVE ALLEGATIONS
18. As pleaded earlier, First Interstate is an interstate banking
corporation. First Interstate's stock performed poorly in 1994 through
mid-1995, due to First Interstate's lackluster performance and perceptions
that it was poorly managed. For instance, First Interstate's stock traded at a
high of $85 per share and then fell, falling to a low of $67 per share in
December 1994. First Interstate did not reach $85 per share again until
mid-1995. After June 1995, First Interstate's stock performed better, reaching
over $100 per share in late September 1995, due to an increase in the prices
in bank stocks generally and because of rumors that a favorable acquisition
offer for First Interstate would be forthcoming as part of the wave of bank
acquisitions and mergers now sweeping the United States. However, even with
this increase, First Interstate's stock has been relatively poor performer
when compared to other bank stocks. Because in recent years First Interstate
has not been viewed to be well-managed as many other large banks and thus has
not performed as well in terms of many of its key ratios and measurements of
success as other banks, its stock has not performed well and thus,
shareholders in First Interstate have, in recent years, obtained a
below-industry
13
<PAGE>
trendline or industry average return. The chart below shows the price action
of First Interstate stock in 1994-1995:
[The hardcopy Complaint filed with the Court contains a
Line graph showing the daily common stock price for First Inter-
state for the period December 31, 1993 through October 17, 1995.
Because the document for which this Complaint is an Exhibit has
been filed with the Securities and Exchange Commission by elec-
tronic transmission, this graph is not contained herein. The
following information summarizes the First Interstate daily
closing stock price, plotted along the graph's vertical axis,
for the dates indicated on the horizontal axis of the graph:
Date Common Stock Price
- - ---- ------------------
December 31, 1993 64 1/8
March 25, 1994 77 7/8
June 17, 1994 75 3/4
September 9, 1994 79 1/4
December 2, 1994 69 3/8
February 24, 1995 81 3/8
May 19, 1995 81
August 11, 1995 87 1/2
October 17, 1995 106]
19. In recent years, certain other large financial institutions have
approached First Interstate with favorable acquisition inquiries and offers.
Some years ago, Bank of America approached First Interstate about a possible
acquisition. Approximately a year ago, Wells Fargo approached First Interstate
about a possible acquisition of First Interstate at a premium price. First
Interstate's Board and its top management have rejected and frustrated all of
these prior acquisition overtures and offers, even though those offers would
have resulted in First Interstate shareholders receiving a substantial premium
over the then-market price of First Interstate stock. Defendants have done
this because they know that in the event First Interstate is acquired by
another bank, most or all of the directors of First Interstate will, either in
connection with the acquisition or shortly thereafter, be removed from the
board of the surviving bank because their services will not be necessary and
they will be mere surplusage and thus such an
14
<PAGE>
acquisition would bring an end to their positions of power, prestige and
profit as directors of this huge bank. At the same time, top managers at First
Interstate have caused these prior acquisition overtures and offers to be
rejected and/or frustrated, because they also know that, in the event of an
acquisition, they will also lose their prestigious positions of power,
prestige and profit as officers of a major banking institution. In so acting,
these defendants have been aggrandizing their own personal positions and
interests over that of First Interstate and its broader shareholder community
to whom they owe fiduciary duties to bring about a sales of First Interstate
on favorable terms to all the shareholders, even if it results in them losing
their lucrative positions.
20. Shortly prior to October 18, 1995, Wells Fargo approached First
Interstate and offered to negotiate an acquisition of First Interstate for a
price far in excess of First Interstate's current stock price. First
Interstate's Chairman refused this offer and told Wells Fargo that First
Interstate would not negotiate to sell the bank and would resist any offer by
Wells Fargo to buy the bank. On October 18, 1995, Wells Fargo made an
unsolicited acquisition offer for First Interstate offering to exchange .625
shares of its stock for each share of First Interstate stock, a $133.50 per
share offer based on the October 17, 1995 closing price of Wells Fargo
15
<PAGE>
stock of $213.62 per share. Upon the announcement of this favorable
acquisition offer, First Interstate's stock instantly skyrocketed from $106
per share to over $140 per share, reflecting the extremely large premium being
offered to First Interstate shareholders in this tax-free exchange, and the
increase in Wells Fargo's stock price to $228 per share making the offer worth
$142 per First Interstate share. Wells Fargo's offer to acquire First
Interstate is approximately three times First Interstate's book value, which
is a high offer compared to recent bank acquisition prices. The acquisition
price is also approximately 12.1 times First Interstate's estimated 1995
earnings per share of $11.29 per share, which is also reasonable in light of
other recent bank acquisitions, although it is lower than 15 times the
estimated next year's earnings paid in other bank acquisitions.
21. Wells Fargo has privately indicated to First Inter- state's officers
and directors that they are willing and will increase the price of their offer
to acquire First Interstate if First Interstate's Board will cooperate in
bringing about a consensual acquisition. However, First Interstate's top
officers and its Board are resisting and are going to continue to resist this
acquisition offer so that they can, as they have in the past, retain
themselves in their positions or power, prestige and profit. For instance,
members of First Interstate's
16
<PAGE>
Board of Directors own only a minuscule portion of First Inter- state's
outstanding common stock. They actually own only 144,000 shares of First
Interstate's 75.7 million shares of outstanding common stock, or just .001% of
the stock. Thus, whatever interest the defendants have as shareholders in
First Interstate based on their minuscule holdings of the Company's stock is
far outweighed by their interest in retaining their lucrative positions of
power, prestige and profit as directors and/or officers of the Company from
which they receive lucrative fees, prestige in the community, large salaries,
and other emoluments of office, which they will lose if First Interstate is
acquired.
22. The rejection of the Wells Fargo offer is a breach of defendants'
fiduciary duties, an abuse of control, provides unjust enrichment to all
defendants, is an unfair business practice and has been perpetrated through
tortious interference with the class members' prospective economic interests
and opportunities and through material misrepresentations and the failure by
defendants to disclose material information to the members of the Class.
23. Unless defendants are enjoined from refusing to negotiate a sale of
First Interstate, plaintiff and the members of the Class will continue to
suffer injury. Plaintiff and the members of the Class have no adequate remedy
at law.
17
<PAGE>
FIRST CAUSE OF ACTION
BREACH OF FIDUCIARY DUTIES
24. Plaintiff incorporates by reference P. P. 1-23 above.
25. The Individual Defendants engaged in the aforesaid
conduct in intentional breach and/or reckless disregard of their fiduciary
duties to plaintiff and the members of the Class.
26. Defendants, at the time they rejected Wells Fargo's offer, knew that
the market price of First Interstate stock reflected both the intrinsic value
of First Interstate and a premium which resulted from market expectations that
Wells Fargo's efforts to acquire control of First Interstate would produce
greater returns for investors.
27. As a proximate result, the plaintiff an other members of the Class
have been substantially injured and request compensatory damages.
SECOND CAUSE OF ACTION
NEGLIGENT BREACH OF FIDUCIARY DUTIES
28. Plaintiff incorporates by reference P. P. 1-23 above.
29. The Individual Defendants engaged in the aforesaid
conduct without exercising the reasonable and ordinary care which directors
and officers owe to their shareholders, and thereby breached their fiduciary
duties to plaintiff and other members of the Class.
18
<PAGE>
30. Defendants, at the time they rejected Wells Fargo's offer, knew or
should have known, that the market price of First Interstate stock at the time
reflected both the intrinsic value of First Interstate and a premium which
resulted from market expectations that Wells Fargo's efforts to acquire
control of First Interstate would produce a greater return for investors.
31. As a proximate result, the plaintiff and other members of the Class
have been substantially injured and request compensatory damages.
32. Defendants did the things alleged herein without exercising the
reasonable and ordinary care owed by corporate directors and officers.
THIRD CAUSE OF ACTION
ABUSE OF CONTROL
33. Plaintiff incorporates by reference P. P. 1-23 above.
34. The Individual Defendants owed duties as controlling
persons and/or as controlling or dominant directors to plaintiff and the other
members of the Class not to use their positions of control of First Interstate
for their own personal interests and contrary to the interests of First
Interstate's remaining shareholders.
35. The foregoing conduct by the director defendants
amount to an abuse of their abilities to control First Inter-
19
<PAGE>
state in violation of their obligations to plaintiff and the
other members of the Class.
36. As a proximate result, plaintiff and the other members of the Class
have been damaged and will continue to be damaged unless defendants are
enjoined, and defendants are each jointly and severally liable to plaintiff
and the other members of the Class for all loss and damage they have suffered
reflect in from the matters set forth herein.
FOURTH CAUSE OF ACTION
UNJUST ENRICHMENT
37. Plaintiff incorporates by reference P. P. 1-23 above.
38. As a proximate result of the tortious conduct de-
scribed above, all of the defendants have been and will be unjustly enriched
at the expense of the members of the Class. The director defendants will
retain control of First Interstate and their positions of power, prestige and
profit. Defendants have obtained these unjust benefits at the expense of the
members of the Class by rejecting the Wells Fargo offer and refusing to
negotiate a beneficial sale of First Interstate.
FIFTH CAUSE OF ACTION
TORTIOUS INTERFERENCE WITH
PROSPECTIVE ECONOMIC ADVANTAGE
39. Plaintiff incorporates by reference P. P. 1-23 above.
20
<PAGE>
40. By reason, inter alia, of Wells Fargo's announced offer to purchase
First Interstate stock at $133+ a share, plaintiff and the members of the
Class had an expectancy that they could tender their shares and realize at
least the $133+ per share offer. Moreover, all class members had the
expectancy of sharing in any premium that results from acquisition attempts.
41. Defendants knew of these prospective advantages presented to
plaintiff and the members of the Class and defendants intended to interfere
and did interfere with those advantages when they rejected the Wells Fargo
offer.
42. Plaintiff and the members of the Class were prevented from obtaining
the foregoing advantages as a result of the conduct of all defendants
described above.
43. The defendants, and each of them, did the things alleged in this
Complaint with the intent to injure plaintiff and the members of the Class.
WHEREFORE, plaintiff and members of the Class demand judgment against
defendants as follows:
1. Declaring that this action is properly maintainable
as a class action and certifying plaintiff as the representa-
tive of the Class;
21
<PAGE>
2. Declaring that the defendants have breached and are
breaching their fiduciary and other duties to plaintiff and
other members of the Class;
3. Preliminary and permanently enjoining the defendants and their
counsel, agents, employees and all persons acting under, in concert with, or
for them, from taking to prevent or frustrate the sale to Wells Fargo or
refusing to proceed with negotiations with Wells Fargo to increase the offered
price;
4. Awarding compensatory damages against defendants individually and
severally in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law, arising from the proposed
transaction;
5. Awarding plaintiff his costs and disbursements and
reasonable allowances of fees for plaintiff's counsel and
experts and reimbursement of expenses; and
6. Granting plaintiff and the Class such other and
further relief as the Court may deem just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: October 19, 1995
WILBERG WEISS BERSHAD
HYNES & LERACH
---------------------------------
WILLIAM S. LERACH
22
<PAGE>
600 West Broadway, Suite 1800
San Diego, California 92101
Telephone: 619/231-1058
-and-
JEFF S. WESTERMAN
355 South Grand Avenue
Suite 4170
Los Angeles, California 90071
Telephone: 213/617-9007
STULL, STULL & BRODY
JULES BRODY
6 East 45th Street
4th Floor
New York, New York 10017
Telephone: 212/687-7230
Attorneys for Plaintiff
23
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH (68581)
600 West Broadway, Suite 1900
San Diego, California 92101
Telephone: 619/231-1058
- and -
MILBERG WEISS BERSHAD
HYNES & LERACH
JEFF S. WESTERMAN (94559)
355 South Grand Avenue
Suite 4170
Los Angeles, California 90071
Telephone: 213/617-9007
WOLF HALDENSTEIN ADLER
FREEMAN & HERZ, L.L.P.
FRANCIS M. GREGOREK (144785)
600 West Broadway, Suite 1800
San Diego, California 92101
Telephone: 619/338-4599
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
(213) 687-5000
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
ROGER MONDSCHEIN, On Behalf of Him- ) Case No. 11C137379
self and All Others Similarly Situ- )
ated, ) CLASS ACTION
)
Plaintiff, )
)
vs. ) CLASS ACTION COMPLAINT
) FOR BREACH OF FIDUCIARY
JOHN E. BRYSON, DON C. FRISBEE, ) DUTY, ABUSE OF CONTROL,
STEVEN B. SAMPLE, EDWARD M. CARSON, ) UNJUST ENRICHMENT,
GEORGE M. KELLER, FORREST N. SHUMWAY, ) INTERFERENCE WITH
JEWEL PLUMMER COBB, W.F. KIESCHNICK, ) PROSPECTIVE ECONOMIC
WILLIAM B. SIART, RALPH P. DAVIDSON, )
<PAGE>
THOMAS L. LEE, RICHARD J. STEGEMEIER, ) ADVANTAGE AND EQUITABLE
MYRON DuBAIN, WILLIAM F. MILLER, DAN- ) RELIEF AND DAMAGES
IEL M. TELLEP and J.J. PINOLA, )
)
Defendants. ) Plaintiff Demands A
) Trial By Jury
- - ------------------------------------------------
2
<PAGE>
Plaintiff, as and for his complaint, alleges as follows upon information
and belief except as to paragraph 5, which is alleged upon knowledge.
Plaintiff's information and belief is based upon, inter alia, the
investigation made by plaintiff by and through his counsel.
INTRODUCTION AND OVERVIEW
1. This is a shareholder class action seeking equitable
relief and compensatory damages on behalf of all shareholders of First
Interstate Bancorp ("First Interstate" or the "Company") against First
Interstate's top officers and the members of the Board of Directors of First
Interstate, seeking to remedy violations of state law arising out of these
defendants' actions and conduct undertaken to defeat a highly favorable
acquisition offer for First Interstate stock by Wells Fargo & Co. ("Wells
Fargo"). First Interstate's Board of Directors has pursued a course of conduct
intended to and having the effect of making it extremely difficult for any
outside party to successfully acquire First Interstate, even at prices well in
excess of First Interstate stock's historical price range. This course of
conduct has been undertaken by the defendants to secure and retain their
lucrative positions of power, prestige and profit with respect to First
Interstate and to enhance and aggrandize their own interests at the expense of
First Interstate's other shareholders.
3
<PAGE>
2. On October 18, 1995, Wells Fargo, a highly successful, profitable and
well-capitalized bank, made an offer to acquire First Interstate at a price
far in excess of First Interstate's then-market price, by exchanging in a
tax-free exchange .625 shares of Wells Fargo stock for each share of First
Interstate stock, an offer worth $133.50 per share based on the October 17,
1995 closing price of Wells Fargo stock of $213.62 per share. First
Interstate's stock jumped from $106 per share to $140 per share upon this
announcement. While Wells Fargo's stock increased to $228.65 per share, making
the offer worth $142.65 per First Interstate share. However, the defendants
are rejecting such offer and have refused to negotiate an acquisition of the
Company at any higher price, even though Wells Fargo has told First
Interstate's Board it is willing to negotiate a higher price and thus to offer
a fair and reasonable price for First Interstate stock, well above the levels
at which the stock has traded historically.
3. In recent years, defendants have consistently refused to entertain
highly favorable acquisition offers or overtures for First Interstate, thus
preventing an acquisition of the Company at a favorable price for the
shareholders. Defendants have done this to retain their positions of prestige,
power and profit, as they know they will lose those positions in the event
First Interstate is acquired. Defendants' interests in
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holding on to their positions of power, prestige and profit as officers and
directors of First Interstate far exceeds their interests as shareholders in
First Interstate, as they collectively own only about 144,000 of First
Interstate's 75.7 million shares -- a minuscule .001% of its outstanding
stock.
PARTIES AND ACTORS
4. Plaintiff Roger Mondschein, the owner of shares of First Interstate,
is and was at all times relevant hereto a common shareholder of First
Interstate. Plaintiff brings this action on behalf of the holders of the
common stock of First Interstate for injunctive and other relief in connection
with the proposed acquisition of First Interstate by Wells Fargo.
5. (a) First Interstate is a corporation with its principal executive
offices in Los Angeles, California and which operates principally in
California, as well as several other western states. First Interstate is a
bank holding company.
(b) At December 31, 1994, it owned 16 banks (the "Subsidiary
Banks") which operated approximately 1,100 banking offices in 13 states,
including California. Ranked according to assets, the Company was the
fourteenth largest commercial banking organization in the United States at
December 31, 1994, having total deposits of $48.4 billion and total assets of
$55.8 billion.
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(c) The Subsidiary Banks accept checking, savings and other time
deposit accounts and employ these funds principally by making consumer, real
estate and commercial loans and investing in securities and other
interest-bearing assets.
(d) The Company 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 both through
non-bank subsidiaries of the Company and through the Subsidiary Banks and
their subsidiaries.
(e) The larger Subsidiary Banks provided international banking
services on a limited basis through the international departments of their
domestic offices. They also maintain correspondent relationships with major
banks throughout the world.
6. (a) Defendant John E. Bryson ("Bryson") was a direc-
tor of First Interstate and Board Chairman and Chief Executive
Officer or SCECorp and Southern Edison Company at all times
relevant hereto.
(b) Defendant Don C. Frisbee ("Frisbee") was a First Interstate
director and Chairman Emeritus PacifiCorp at all times relevant hereto.
6
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(c) Defendant Steven B. Sample ("Sample") was a
First Interstate director and President University of Southern
California at all times relevant hereto.
(d) Defendant Edward M. Carson ("Carson") was Chair-
man of the Board of First Interstate at all times relevant
hereto.
(e) Defendant George M. Keller ("Keller") was a director of First
Interstate and the retired Chairman and Chief Executive Officer of Chevron
Corporation at all times relevant hereto.
(f) Defendant Forrest N. Shumway ("Shumway") was a
director of First Interstate and former Vice-Chairman of the
Board Allied-Signal, Inc. at all times relevant hereto.
(g) Defendant Jewel Plummer Cobb ("Cobb") was a director of First
Interstate and President Emeritus California State University, Fullerton at
all times relevant hereto.
(h) Defendant W.F. Kieschnick ("Kieschnick") was a
director of First Interstate and retired President and Chief
Executive Officer Atlantic Richfield Company at all times
relevant hereto.
(i) Defendant William B. Siart ("Siart") was Presi-
dent and Chief Executive Officer First Interstate and a direc-
tor at all times relevant hereto.
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(j) Defendant Ralph P. Davidson ("Davidson") was a director of
First Interstate and former Chairman of The John F. Kennedy Center for the
Performing Arts at all times relevant hereto.
(k) Defendant Thomas L. Lee ("Lee") was a director
of First Interstate and Chairman and Chief Executive Officer of
The Newhall Land and Farming Company at all times relevant
hereto.
(l) Defendant Richard J. Stegemeier ("Stegemeier") was a director
of First Interstate and Chairman of the Board Unocal Corporation at all times
relevant hereto.
(m) Defendant Myron DuBain ("DuBain") was a director of First
Interstate and retired Chairman and Chief Executive Officer Fireman's Fund
Corporation at all times relevant hereto.
(n) Defendant William F. Miller ("Miller") was a
director of First Interstate and President Emeritus SRI Inter-
national at all times relevant hereto.
(o) Defendant Daniel M. Tellap ("Tellap") was a director of First
Interstate and Chairman and Chief Executive Officer Lockheed Corporation at
all times relevant hereto.
(p) Defendant J.J. Pinola ("Pinola"), was the retired Chairman and
Chief Executive Officer of First Interstate and a director at all times
relevant hereto.
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7. Defendants (hereinafter collectively referred to as the "Individual
Defendants") are each members of First Interstate's Board of Directors.
8. The Individual Defendants owed and owe First Interstate's public
shareholders fiduciary obligations and were and are required to: (i) use their
ability to manage First Interstate in a fair, just and equitable manner; (ii)
act in furtherance of the best interests of First Interstate and its
shareholders; (iii) act to maximize shareholder value; (iv) govern First
Interstate in such a manner as to head the expressed views of its public
shareholders; (v) refrain from abusing their positions of control, power,
prestige and profit; and (vi) not favor their own interests at the expense of
First Interstate and its shareholders. By reason of their fiduciary
relationships, these defendants owed and owe plaintiff and other members of
the Class the highest obligation of good faith, fair dealing, loyalty and due
care.
9. Wells Fargo is a corporation with its principal executive offices in
San Francisco, California. Wells Fargo is a huge bank holding company and one
of the most well-managed, profitable and well-capitalized banks in the United
States. With more than 600 branch outlets, 1,900 round-the-clock Wells Fargo
Express(TM) ATMs and a popular 24-hour telephone banking service, Wells Fargo
operates one of the largest and busiest
9
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consumer banking businesses in the United States. Besides serving as banker to
some 3.5 million California households, Wells Fargo provides a full range of
banking services to commercial, agribusiness, real estate and small-business
customers, mainly in California. It is one of the nation's leading managers of
personal trust accounts, corporate 401(k) plans and mutual funds, with
approximately $57 billion in assets under its management and administration.
10. Each defendant herein is sued individually as a conspirator and
aider and abettor, as well as in his capacity as a director of the Company,
and the liability of each arises from the fact that he has engaged in all or
part of the unlawful acts, plans, schemes, or transactions complained of
herein.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this lawsuit on behalf of himself
and all other common shareholders of First Interstate (except defendants
herein and any person, firm, trust, corporation or other entity related to,
controlled by or affiliated with any of the defendants and any of their
successors in interest (the "Class").
12. This action is properly maintainable as a class
action for the following reasons:
(a) The Class is so numerous that joinder of all
Class members is impracticable. As of January 31, 1995, First
10
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Interstate had over 75 million shares of common stock outstanding owned by
over 20,000 shareholders. Members of the Class are scattered throughout the
United States and are so numerous as to make it impracticable to bring them
all before this Court.
13. There are questions of law and fact which are common to members of
the Class and which predominate over any questions affecting only individual
members. The common questions include, inter alia, the following:
(a) Whether the Individual Defendants have breached their
fiduciary duties owed by them to plaintiff and the other members of the Class;
(b) Whether the Individual Defendants have failed, in violation of
their fiduciary duties, to hold a fair auction of the Company or its assets or
to sell the Company on the favorable terms;
(c) Whether the Individual Defendants have failed,
in violation of their fiduciary duties, to provide for a mail
of First Interstate;
(d) Whether plaintiff and the other members of the
Class will be irreparably damaged if the Wells Fargo acquisi-
tion is not completed;
(e) Whether the Individual Defendants have breached
or aided and abetted the breach of the fiduciary and other
11
<PAGE>
common law duties owed by them to plaintiff and other members
of the Class; and
(f) Whether plaintiff and other members of the Class are being and
will continue to be injured by the wrongful conduct alleged herein and, if so,
what is the proper remedy and/or measure of damages.
14. The claims of plaintiff are typical of the claims of other members
of the Class and plaintiff has no interests that are adverse and antagonistic
to the interests of the Class.
15. Plaintiff is committed to the vigorous prosecution of this action
and has retained competent counsel experienced in litigation of this nature.
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
16. Plaintiff anticipates that there will not be any
difficulty in the management of this litigation as a class
action.
17. For the reasons stated herein, a class action is superior to any
other method available for the fair and efficient adjudication of this
controversy since it would be impractical and undesirable for each of the
members of the class who has suffered or will suffer damages to bring separate
actions in various parts of the country. Classwide remedies
12
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will assure uniform standards of conduct for the Individual Defendants and
avoid the risk of inconsistent judgments.
SUBSTANTIVE ALLEGATIONS
18. As pleaded earlier, First Interstate is an interstate banking
corporation. First Interstate's stock performed poorly in 1994 through
mid-1995, due to First Interstate's lackluster performance and perceptions
that it was poorly managed. For instance, First Interstate's stock traded at a
high of $85 per share and then fell, falling to a low of $67 per share in
December 1994. First Interstate did not reach $85 per share again until
mid-1995. After June 1995, First Interstate's stock performed better, reaching
over $100 per share in late September 1995, due to an increase in the prices
in bank stocks generally and because of rumors that a favorable acquisition
offer for First Interstate would be forthcoming as part of the waive of bank
acquisitions and mergers now sweeping the United States. However, even with
this increase, First Interstate's stock has been relatively poor performer
when compared to other bank stocks. Because in recent years First Interstate
has not been viewed to be well-managed as many other large banks and thus has
not performed as well in terms of many of its key ratios and measurements of
success as other banks, its stock has not performed well and thus,
shareholders in First Interstate have, in recent years, obtained a
below-industry
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trendline or industry average return. The chart below shows the price action
of First Interstate stock in 1994-1995:
[The hardcopy Complaint filed with the Court contains a
line graph showing the daily common stock price for First Inter-
state for the period December 31, 1993 through October 17, 1995.
Because the document for which this Complaint is an Exhibit has
been filed with the Securities and Exchange Commission by elec-
tronic transmission, this graph is not contained herein. The
following information summarizes the First Interstate daily
closing stock price, plotted along the graph's vertical axis,
for the dates indicated on the horizontal axis of the graph:
Date Common Stock Price
- - ---- ------------------
December 31, 1993 64 1/8
March 25, 1994 77 7/8
June 17, 1994 75 3/4
September 9, 1994 79 1/4
December 2, 1994 69 3/8
February 24, 1995 81 3/8
May 19, 1995 81
August 11, 1995 87 1/2
October 17, 1995 106]
19. In recent years, certain other large financial institutions have
approached First Interstate with favorable acquisition inquiries and offers.
Some years ago, Bank of America approached First Interstate about a possible
acquisition. Approximately a year ago, Wells Fargo approached First Interstate
about a possible acquisition of First Interstate at a premium price. First
Interstate's Board and its top management have rejected and frustrated all of
these prior acquisition overtures and offers, even though those offers would
have resulted in First Interstate shareholders receiving a substantial premium
over the then-market price of First Interstate stock. Defendants have done
this because they know that in the event First Interstate is acquired by
another bank, most or all of the directors of First Interstate will, either in
connection with the acquisition or shortly thereafter, be removed from the
board of the surviving bank because their services will not be necessary and
they will be mere surplusage and thus such an
14
<PAGE>
acquisition would bring an end to their positions of power, prestige and
profit as directors of this huge bank. At the same time, top managers at First
Interstate have caused these prior acquisition overtures and offers to be
rejected and/or frustrated, because they also know that, in the event of an
acquisition, they will also lose their prestigious positions of power,
prestige and profit as officers of a major banking institution. In so acting,
these defendants have been aggrandizing their own personal positions and
interests over that of First Interstate and its broader shareholder community
to whom they owe fiduciary duties to bring about a sales of First Interstate
on favorable terms to all the shareholders, even if it results in them losing
their lucrative positions.
20. Shortly prior to October 18, 1995, Wells Fargo approached First
Interstate and offered to negotiate an acquisition of First Interstate for a
price far in excess of First Interstate's current stock price. First
Interstate's Chairman refused this offer and told Wells Fargo that First
Interstate would not negotiate to sell the bank and would resist any offer by
Wells Fargo to buy the bank. On October 18, 1995, Wells Fargo made an
unsolicited acquisition offer for First Interstate offering to exchange .625
shares of its stock for each share of First Interstate stock, a $133.50 per
share offer based on the October 17, 1995 closing price of Wells Fargo
15
<PAGE>
stock of $213.62 per share. Upon the announcement of this favorable
acquisition offer, First Interstate's stock instantly skyrocketed from $106
per share to over $140 per share, reflecting the extremely large premium being
offered to First Interstate shareholders in this tax-free exchange, and the
increase in Wells Fargo's stock price to $228 per share making the offer worth
$142 per First Interstate share. Wells Fargo's offer to acquire First
Interstate is approximately three times First Interstate's book value, which
is a high offer compared to recent bank acquisition prices. The acquisition
price is also approximately 12.1 times First Interstate's estimated 1995
earnings per share of $11.29 per share, which is also reasonable in light of
other recent bank acquisitions, although it is lower than 15 times the
estimated next year's earnings paid in other bank acquisitions.
21. Wells Fargo has privately indicated to First Inter- state's officers
and directors that they are willing and will increase the price of their offer
to acquire First Interstate if First Interstate's Board will cooperate in
bringing about a consensual acquisition. However, First Interstate's top
officers and its Board are resisting and are going to continue to resist this
acquisition offer so that they can, as they have in the past, retain
themselves in their positions or power, prestige and profit. For instance,
members of First Interstate's
16
<PAGE>
Board of Directors own only a minuscule portion of First Inter- state's
outstanding common stock. They actually own only 144,000 shares of First
Interstate's 75.7 million shares of outstanding common stock, or just .001% of
the stock. Thus, whatever interest the defendants have as shareholders in
First Interstate based on their minuscule holdings of the Company's stock is
far outweighed by their interest in retaining their lucrative positions of
power, prestige and profit as directors and/or officers of the Company from
which they receive lucrative fees, prestige in the community, large salaries,
and other emoluments of office, which they will lose if First Interstate is
acquired.
22. The rejection of the Wells Fargo offer is a breach of defendants'
fiduciary duties, an abuse of control, provides unjust enrichment to all
defendants, is an unfair business practice and has been perpetrated through
tortious interference with the class members' prospective economic interests
and opportunities and through material misrepresentations and the failure by
defendants to disclose material information to the members of the Class.
23. Unless defendants are enjoined from refusing to negotiate a sale of
First Interstate, plaintiff and the members of the Class will continue to
suffer injury. Plaintiff and the members of the Class have no adequate remedy
at law.
17
<PAGE>
FIRST CAUSE OF ACTION
BREACH OF FIDUCIARY DUTIES
24. Plaintiff incorporates by reference P. P. 1-23 above.
25. The Individual Defendants engaged in the aforesaid
conduct in intentional breach and/or reckless disregard of their fiduciary
duties to plaintiff and the members of the Class.
26. Defendants, at the time they rejected Wells Fargo's offer, knew that
the market price of First Interstate stock reflected both the intrinsic value
of First Interstate and a premium which resulted from market expectations that
Wells Fargo's efforts to acquire control of First Interstate would produce
greater returns for investors.
27. As a proximate result, the plaintiff an other members of the Class
have been substantially injured and request compensatory damages.
SECOND CAUSE OF ACTION
NEGLIGENT BREACH OF FIDUCIARY DUTIES
28. Plaintiff incorporates by reference P. P. 1-23 above.
29. The Individual Defendants engaged in the aforesaid
conduct without exercising the reasonable and ordinary care which directors
and officers owe to their shareholders, and thereby breached their fiduciary
duties to plaintiff and other members of the Class.
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<PAGE>
30. Defendants, at the time they rejected Wells Fargo's offer, knew or
should have known, that the market price of First Interstate stock at the time
reflected both the intrinsic value of First Interstate and a premium which
resulted from market expectations that Wells Fargo's efforts to acquire
control of First Interstate would produce a greater return for investors.
31. As a proximate result, the plaintiff and other members of the Class
have been substantially injured and request compensatory damages.
32. Defendants did the things alleged herein without exercising the
reasonable and ordinary care owed by corporate directors and officers.
THIRD CAUSE OF ACTION
ABUSE OF CONTROL
33. Plaintiff incorporates by reference P. P. 1-23 above.
34. The Individual Defendants owed duties as controlling
persons and/or as controlling or dominant directors to plaintiff and the other
members of the Class not to use their positions of control of First Interstate
for their own personal interests and contrary to the interests of First
Interstate's remaining shareholders.
35. The foregoing conduct by the director defendants
amount to an abuse of their abilities to control First Inter-
19
<PAGE>
state in violation of their obligations to plaintiff and the
other members of the Class.
36. As a proximate result, plaintiff and the other members of the Class
have been damaged and will continue to be damaged unless defendants are
enjoined, and defendants are each jointly and severally liable to plaintiff
and the other members of the Class for all loss and damage they have suffered
reflect in from the matters set forth herein.
FOURTH CAUSE OF ACTION
UNJUST ENRICHMENT
37. Plaintiff incorporates by reference P. P. 1-23 above.
38. As a proximate result of the tortious conduct de-
scribed above, all of the defendants have been and will be unjustly enriched
at the expense of the members of the Class. The director defendants will
retain control of First Interstate and their positions of power, prestige and
profit. Defendants have obtained these unjust benefits at the expense of the
members of the Class by rejecting the Wells Fargo offer and refusing to
negotiate a beneficial sale of First Interstate.
FIFTH CAUSE OF ACTION
TORTIOUS INTERFERENCE WITH
PROSPECTIVE ECONOMIC ADVANTAGE
39. Plaintiff incorporates by reference P. P. 1-23 above.
20
<PAGE>
40. By reason, inter alia, of Wells Fargo's announced offer to purchase
First Interstate stock at $133+ a share, plaintiff and the members of the
Class had an expectancy that they could tender their shares and realize at
least the $133+ per share offer. Moreover, all class members had the
expectancy of sharing in any premium that results from acquisition attempts.
41. Defendants knew of these prospective advantages presented to
plaintiff and the members of the Class and defendants intended to interfere
and did interfere with those advantages when they rejected the Wells Fargo
offer.
42. Plaintiff and the members of the Class were prevented from obtaining
the foregoing advantages as a result of the conduct of all defendants
described above.
43. The defendants, and each of them, did the things alleged in this
Complaint with the intent to injure plaintiff and the members of the Class.
WHEREFORE, plaintiff and members of the Class demand judgment against
defendants as follows:
1. Declaring that this action is properly maintainable
as a class action and certifying plaintiff as the representa-
tive of the Class;
21
<PAGE>
2. Declaring that the defendants have breached and are
breaching their fiduciary and other duties to plaintiff and
other members of the Class;
3. Preliminary and permanently enjoining the defendants and their
counsel, agents, employees and all persons acting under, in concert with, or
for them, from taking to prevent or frustrate the sale to Wells Fargo or
refusing to proceed with negotiations with Wells Fargo to increase the offered
price;
4. Awarding compensatory damages against defendants individually and
severally in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law, arising from the proposed
transaction;
5. Awarding plaintiff his costs and disbursements and
reasonable allowances of fees for plaintiff's counsel and
experts and reimbursement of expenses; and
6. Granting plaintiff and the Class such other and
further relief as the Court may deem just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: October 19, 1995
WILBERG WEISS BERSHAD
HYNES & LERACH
---------------------------------
WILLIAM S. LERACH
22
<PAGE>
600 West Broadway, Suite 1800
San Diego, California 92101
Telephone: 619/231-1058
-and-
JEFF S. WESTERMAN
355 South Grand Avenue
Suite 4170
Los Angeles, California 90071
Telephone: 213/617-9007
WOLF HALDENSTEIN, ADLER
FREEMAN & HERZ, L.L.P.
FRANCIS M. GREGOREK
600 West Broadway, Suite 1800
San Diego, California 92101
Telephone: 619/338-4599
Attorneys for Plaintiff
23
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH (68581)
SALLIE A. BLACKMAN (141830)
ERIN C. WARD (147063)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
- and -
JEFF S. WESTERMAN (94559)
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
KAPLAN, KILSHEIMER & FOX, LLP
FEDERIC S. FOX
685 Third Avenue, 26th Floor
New York, NY 10017
Telephone: 212/687-1980
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
DEBORAH KAPLAN, On Behalf of ) Case No.
Herself and All Others Similarly )
Situated, ) CLASS ACTION
)
Plaintiff, )
)
vs. )
)
JOHN E. BRYSON, DON C. FRISBEE, ) CLASS ACTION COMPLAINT
STEVEN B. SAMPLE, EDWARD M. CARSON,) FOR BREACH OF FIDUCIARY
GEORGE M. KELLER, FORREST N. ) DUTY, ABUSE OF CONTROL,
SHUMWAY, JEWEL PLUMMER COBB, W.F. ) UNJUST ENRICHMENT,
KIESCHNICK, WILLIAM B. SIART, RALPH) INTERFERENCE WITH
P. DAVIDSON, THOMAS L. LEE, RICHARD) PROSPECTIVE ECONOMIC
J. STEGEMEIER, MYRON DuBAIN, ) ADVANTAGE AND EQUITABLE
WILLIAM F. MILLER, DANIEL M. TELLEP) RELIEF AND DAMAGES
AND J.J. PINOLA, )
)
Defendants. ) Plaintiff Demands A
) Trial By Jury
Plaintiff, as and for her complaint, alleges as follows
upon information and belief except as to paragraph 5, which is
alleged upon knowledge. Plaintiff's information and belief is
based upon, inter alia, the investigation made by plaintiff by
and through her counsel.
INTRODUCTION AND OVERVIEW
1. This is a shareholder class action seeking equitable
relief and compensatory damages on behalf of all shareholders of
First Interstate Bancorp ("First Interstate" or the "Company")
against First Interstate's top officers and the members of the
Board of Directors of First Interstate, seeking to remedy viola-
tions of state law arising out of these defendants' actions and
conduct undertaken to defeat a highly favorable acquisition
offer for First Interstate stock by Wells Fargo & Co. ("Wells
Fargo"). First Interstate's Board of Directors has pursued a
course of conduct intended to and having the effect of making it
extremely difficult for any outside party to successfully ac-
quire First Interstate, even at prices well in excess of First
Interstate stock's historical price range. This course of
conduct has been undertaken by the defendants to secure and
retain their lucrative positions of power, prestige and profit
with respect to First Interstate and to enhance and aggrandize
their own interests at the expense of First Interstate's other
shareholders.
2. On October 18, 1995, Wells Fargo, a highly successful,
profitable and well-capitalized bank, made an offer to acquire
First Interstate at a price far in excess of First Interstate's
then-market price, by exchanging in a tax-free exchange .625
shares of Wells Fargo stock for each share of First Interstate
stock, an offer worth $133.50 per share based on the October 17,
1995 closing price of Wells Fargo stock of $213.62 per share.
First Interstate's stock jumped from $106 per share to $140 per
share upon this announcement, while Wells Fargo's stock in-
creased to $228.65 per share, making the offer worth $142.65 per
First Interstate share. However, the defendants are rejecting
such offer and have refused to negotiate an acquisition of the
Company at any higher price, even though Wells Fargo has told
First Interstate's Board it is willing to negotiate a higher
price and thus to offer a fair and reasonable price for First
Interstate stock, well above the levels at which the stock has
traded historically.
3. In recent years, defendants have consistently refused
to entertain highly favorable acquisition offers or overtures
for First Interstate, thus preventing an acquisition of the
Company at a favorable price for the shareholders. Defendants
have done this to retain their positions of prestige, power and
profit, as they know they will lose those positions in the event
First Interstate is acquired. Defendants' interests in holding
on to their positions of power, prestige and profit as officers
and directors of First Interstate far exceeds their interests as
shareholders in First Interstate, as they collectively own only
about 144,000 of First Interstate's 75.7 million shares -- a
minuscule .001% of its outstanding stock.
PARTIES AND ACTORS
4. Plaintiff Deborah Kaplan, the owner of shares of First
Interstate, is and was at all times relevant hereto a common
shareholder of First Interstate. Plaintiff brings this action
on behalf of the holders of the common stock of First Interstate
for injunctive and other relief in connection with the proposed
acquisition of First Interstate by Wells Fargo.
5. (a) First Interstate is a corporation with its prin-
cipal executive offices in Los Angeles, California and which
operates principally in California, as well as several other
western states. First Interstate is a bank holding company.
(b) At December 31, 1994, it owned 16 banks (the
"Subsidiary Banks") which operated approximately 1,100 banking
offices in 13 states, including California. Ranked according to
assets, the Company was the fourteenth largest commercial bank-
ing organization in the United States at December 31, 1994,
having total deposits of $48.4 billion and total assets of $55.8
billion.
(c) The Subsidiary Banks accept checking, savings and
other time deposit accounts and employ these funds principally
by making consumer, real estate and commercial loans and invest-
ing in securities and other interest-bearing assets.
(d) The Company also provides banking-related finan-
cial services and products. These include asset-based commer-
cial financing, asset management and investment counseling, bank
card operations, mortgage banking, venture capital and invest-
ment products. It engages in these activities both through non-
bank subsidiaries of the Company and through the Subsidiary
Banks and their subsidiaries.
(e) The larger Subsidiary Banks provide international
banking services on a limited basis through the international
departments of their domestic offices. They also maintain
correspondent relationships with major banks throughout the
world.
6. (a) Defendant John E. Bryson ("Bryson") was a direc-
tor of First Interstate and Board Chairman and Chief Executive
Officer of SCEcorp and Southern California Edison Company at all
times relevant hereto.
(b) Defendant Don C. Frisbee ("Frisbee") was a First
Interstate director and Chairman Emeritus PacifiCorp at all
times relevant hereto.
(c) Defendant Steven B. Sample ("Sample") was a First
Interstate director and President University of Southern Cali-
fornia at all times relevant hereto.
(d) Defendant Edward M. Carson ("Carson") was Chair-
man of the Board of First Interstate at all times relevant here-
to.
(e) Defendant George M. Keller ("Keller") was a
director of First Interstate and the retired Chairman and Chief
Executive Officer of Chevron Corporation at all times relevant
hereto.
(f) Defendant Forrest N. Shumway ("Shumway") was a
director of First Interstate and former Vice-Chairman of the
Board Allied-Signal, Inc. at all times relevant hereto.
(g) Defendant Jewel Plummer Cobb ("Cobb") was a
director of First Interstate and President Emeritus California
State University, Fullerton at all times relevant hereto.
(h) Defendant W.F. Kieschnick ("Kieschnick") was a
director of First Interstate and retired President and Chief
Executive Officer Atlantic Richfield Company at all times rele-
vant hereto.
(i) Defendant William B. Siart ("Siart") was Presi-
dent and Chief Executive Officer First Interstate and a director
at all times relevant hereto,
(j) Defendant Ralph P. Davidson ("Davidson") was a
director of First Interstate and former Chairman of The John F.
Kennedy Center for the Performing Arts at all times relevant
hereto.
(k) Defendant Thomas L. Lee ("Lee") was a director of
First Interstate and Chairman and Chief Executive Officer The
Newhall Land and Farming Company at all times relevant hereto.
(l) Defendant Richard J. Stegemeier ("Stegemeier")
was a director of First Interstate and Chairman of the Board
Unocal Corporation at all times relevant hereto.
(m) Defendant Myron DuBain ("DuBain") was a director
of First Interstate and retired Chairman and Chief Executive
officer Fireman's Fund Corporation at all times relevant hereto.
(n) Defendant William F. Miller ("Miller") was a
director of First Interstate and President Emeritus SRI Inter-
national at all times relevant hereto.
(o) Defendant Daniel M. Tellep ("Tellep") was a
director of First Interstate and Chairman and Chief Executive
Officer Lockheed Corporation at all times relevant hereto.
(p) Defendant J.J. Pinola ("Pinola") was the retired
Chairman and Chief Executive Officer of First Interstate and a
director at all times relevant hereto.
7. Defendants (hereinafter collectively referred to as
the "Individual Defendants") are each members of First Intersta-
te's Board of Directors.
8. The Individual Defendants owed and owe First Intersta-
te's public shareholders fiduciary obligations and were and are
required to: (i) use their ability to manage First Interstate in
a fair, just and equitable manner; (ii) act in furtherance of
the best interests of First Interstate and its shareholders;
(iii) act to maximize shareholder value; (iv) govern First
Interstate in such a manner as to heed the expressed views of
its public shareholders; (v) refrain from abusing their posi-
tions of control, power, prestige and profit; and (vi) not favor
their own interests at the expense of First Interstate and its
shareholders. By reason of their fiduciary relationships, these
defendants owed and owe plaintiff and other members of the Class
the highest obligation of good faith, fair dealing, loyalty and
due care.
9. Wells Fargo is a corporation with its principal execu-
tive offices in San Francisco, California. Wells Fargo is a
huge bank holding company and one of the most well-managed,
profitable and well-capitalized banks in the United States.
With more than 600 branch outlets, 1,900 round-the-clock Wells
Fargo Express ATMs and a popular 24-hour telephone banking
service, Wells Fargo operates one of the largest and busiest
consumer banking businesses in the United States. Besides
serving as banker to some 3.5 million California households,
Wells Fargo provides a full range of banking services to commer-
cial, agribusiness, real estate and small-business customers,
mainly in California. It is one of the nation's leading manag-
ers of personal trust accounts, corporate 401(k) plans and
mutual funds, with approximately $57 billion in assets under its
management and administration.
10. Each defendant herein is sued individually as a con-
spirator and aider and abettor, as well as in his capacity as a
director of the Company, and the liability of each arises from
the fact that he has engaged in all or part of the unlawful
acts, plans, schemes, or transactions complained of herein.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this lawsuit on behalf of herself and
all other common shareholders of First Interstate (except defen-
dants herein and any person, firm, trust, corporation or other
entity related to, controlled by or affiliated with any of the
defendants and any of their successors in interest (the "Class").
12. This action is properly maintainable as a class action
for the following reasons:
(a) The Class is so numerous that joinder of all
class members is impracticable. AS of January 31, 1995, First
Interstate had over 75 million shares of common stock outstand-
ing owned by over 20,000 shareholders. Members of the Class are
scattered throughout the United States and are so numerous as to
make it impracticable to bring them all before this Court.
13. There are questions of law and fact which are common
to members of the Class and which predominate over any questions
affecting only individual members. The common questions in-
clude, inter alia, the following:
(a) Whether the Individual Defendants have breached
their fiduciary duties owed by them to plaintiff and the other
members of the Class;
(b) Whether the Individual Defendants have failed, in
violation of their fiduciary duties, to held a fair auction of
the Company or its assets or to sell the Company on the favor-
able terms;
(c) Whether the Individual Defendants have failed, in
violation of their fiduciary duties, to provide for a sale of
First Interstate;
(d) Whether plaintiff and the other members of the
Class will be irreparably damaged if the Wells Fargo acquisition
is not completed;
(e) Whether the Individual Defendants have breached
or aided and abetted the breach of the fiduciary and other
common law duties owed by them to plaintiff and other members of
the Class; and
(f) Whether plaintiff and other members of the Class
are being and will continue to be injured by the wrongful con-
duct alleged herein and, if so, what is the proper remedy and/or
measure of damages.
14. The claims of plaintiff are typical of the claims of
other members of the Class and plaintiff has no interests that
are adverse or antagonistic to the interests of the Class.
15. Plaintiff is committed to the vigorous prosecution of
this action and has retained competent counsel experienced in
litigation of this nature. Accordingly, plaintiff is an ade-
quate representative of the Class and will fairly and adequately
protect the interests of the Class.
16. Plaintiff anticipates that there will not be any
difficulty in the management of this litigation as a class
action.
17. For the reasons stated herein, a class action is supe-
rior to any other method available for the fair and efficient
adjudication of this controversy since it would be impractical
and undesirable for each of the members of the class who has
suffered or will suffer damages to bring separate actions in
various parts of the country. Classwide remedies will assure
uniform standards of conduct for the Individual Defendants and
avoid the risk of inconsistent judgments.
SUBSTANTIVE ALLEGATIONS
18. As pleaded earlier, First Interstate is an interstate
banking corporation. First Interstate's stock performed poorly
in 1994 through mid-1995, due to First Interstate's lackluster
performance and perceptions that it was poorly managed. For
instance, First Interstate's stock traded at a high of $85 per
share and then fell, falling to a low of $67 per share in Decem-
ber 1994. First Interstate did not reach $85 per share again
until mid-1995. After June 1995, First Interstate's stock
performed better, reaching over $100 per share in late September
1995, due to an increase in the prices in bank stocks generally
and because of rumors that a favorable acquisition offer for
First Interstate would be forthcoming as part of the wave of
bank acquisitions and mergers now sweeping the United States.
However, even with this increase, First Interstate's stock has
been a relatively poor performer when compared to other bank
stocks. Because in recent years First Interstate has not been
viewed to be as well-managed as many other large banks and thus
has not performed as well in terms of many of its key ratios and
measurements of success as other banks, its stock has not per-
formed well and thus, shareholders in First Interstate have, in
recent years, obtained a below-industry trendline or industry
average return. The chart below shows the price action of First
interstate stock in 1994-1995:
[The hardcopy Complaint filed with the Court contains a
line graph showing the daily common stock price for First Inter-
state for the period December 31, 1993 through October 17, 1995.
Because the document for which this Complaint is an Exhibit has
been filed with the Securities and Exchange Commission by elec-
tronic transmission, this graph is not contained herein. The
following information summarizes the First Interstate daily
closing stock price, plotted along the graph's vertical axis,
for the dates indicated on the horizontal axis of the graph:
Date Common Stock Price
- - ---- ------------------
December 31, 1993 64 1/8
March 25, 1994 77 7/8
June 17, 1994 75 3/4
September 9, 1994 79 1/4
December 2, 1994 69 3/8
February 24, 1995 81 3/8
May 19, 1995 81
August 11, 1995 87 1/2
October 17, 1995 106]
19. In recent years, certain other large financial insti-
tutions have approached First Interstate with favorable acquisi-
tion inquiries and offers. Some years ago, Bank of America ap-
proached First Interstate about a possible acquisition.
Approximately a year ago, Wells Fargo approached First inter-
state about a possible acquisition of First Interstate at a
premium price. First Interstate's Board and its top management
have rejected and frustrated all of these prior acquisition
overtures and offers, even though those offers would have re-
sulted in First Interstate shareholders receiving a substantial
premium over the then-market price of First Interstate stock.
Defendants have done this because they know that in the event
First Interstate is acquired by another bank, most or all of the
directors of First Interstate will, either in connection with
the acquisition or shortly thereafter, be removed from the Board
of the surviving bank because their services will not be neces-
sary and they will be mere surplusage and thus such an acquisi-
tion would bring an end to their positions of power, prestige
and profit as directors of this huge bank. At the same time,
top managers at First Interstate have caused these prior acqui-
sition overtures and offers to be rejected and/or frustrated,
because they also know that, in the event of an acquisition,
they will also lose their lucrative jobs and their prestigious
positions of power, prestige and profit as office-s of a major
banking institution. In so acting, these defendants have been
aggrandizing their own personal positions and interests over
that of First Interstate and its broader shareholder community
to whom they owe fiduciary duties to bring about a sale of First
Interstate on favorable terms to all the shareholders, even if
it results in them losing their lucrative positions.
20. Shortly prior to October 18, 1995, Wells Fargo ap-
proached First Interstate and offered to negotiate an acquisi-
tion of First Interstate for a price far in excess of First
Interstate's current stock price. First Interstate's Chairman
refused this offer and told Wells Fargo that First Interstate's
Board would not negotiate to sell the bank and would resist any
offer by Wells Fargo to buy the bank. On October 18, 1995,
Wells Fargo made an unsolicited acquisition offer for First
Interstate offering to exchange .625 shares of its stock for
each share of First interstate stock, a $133.50 per share offer
based on the October 17, 1995 closing price of Wells Fargo stock
of $213.62 per share. Upon the announcement of this favorable
acquisition offer, First Interstate's stock instantly skyrocket-
ed from $106 per share to over $140 per share, reflecting the
extremely large premium being offered to First Interstate share-
holders in this tax-free exchange, and the increase in Wells
Fargo's, stock price to $228 per share making the offer worth
$142 per First interstate share. Wells Fargo's offer to acquire
First Interstate is approximately three times First Interstat-
e's book value, which is a high offer compared to recent bank
acquisition prices. The acquisition price is also approximately
12.1 times First Interstate's estimated 1995 earnings per share
of $11.29 per share, which is also reasonable in light of other
recent bank acquisitions, although it is lower than 15 times the
estimated next year's earnings paid in other bank acquisitions.
21. Wells Fargo has privately indicated to First Intersta-
te's officers and directors that they are willing and will
increase the price of their offer to acquire First Interstate if
First Interstate's Board will cooperate in bringing about a
consensual acquisition. However, First Interstate's top offi-
cers and its Board are resisting and are going to continue to
resist this acquisition offer so that they can, as they have in
the past, retain themselves in their positions of power, pres-
tige and profit. For instance, members of First Interstate's
Board of Directors own only a minuscule portion of First Inters-
tate's outstanding common stock. They actually own only 144,000
shares of First Interstate's 75.7 million shares of outstanding
common stock, or just .001% of the stock. Thus, whatever inter-
est the defendants have as shareholders in First Interstate
based on their minuscule holdings of the Company's stock is far
outweighed by their interest in retaining their lucrative posi-
tions of power, prestige and profit as directors and/or officers
of the company from which they receive lucrative fees, prestige
in the community, large salaries, and other emoluments of of-
fice, which they will lose if First Interstate is acquired.
22. The rejection of the Wells Fargo offer is a breach of
defendants' fiduciary duties, an abuse of control, provides
unjust enrichment to all defendants, is an unfair business
practice and has been perpetrated through tortious interference
with the class members, prospective economic interests and
opportunities and through material misrepresentations and the
failure by defendants to disclose material information to the
members of the class.
23. Unless defendants are enjoined from refusing to nego-
tiate a sale of First Interstate or taking other actions to
avoid maximizing shareholder value, plaintiff and the members of
the Class will continue to suffer injury. Plaintiff and the
members of the Class have no adequate remedy at law.
FIRST CAUSE OF ACTION
BREACH OF FIDUCIARY DUTIES
24. Plaintiff incorporates by reference P.P. 1-23 above.
25. The individual Defendants engaged in the afore-
said conduct in intentional breach and/or reckless disregard of
their fiduciary duties to plaintiff and the members of the Class.
26. Defendants, at the time they rejected Wells Fargo's
offer, knew that the market price of First interstate stock
reflected both the intrinsic value of First Interstate and a
premium which resulted from market expectations that Wells
Fargo's efforts to acquire control of First interstate would
produce greater returns for investors.
27. As a proximate result, the plaintiff and other members
of the Class have been substantially injured and request compen-
satory damages.
SECOND CAUSE OF ACTION
NEGLIGENT BREACH OF FIDUCIARY DUTIES
28. Plaintiff incorporates by reference P. P. 1-23 above.
29. The Individual Defendants engaged in the aforesaid
conduct without exercising the reasonable and ordinary care
which directors and off officers owe to their shareholders, and
thereby breached their fiduciary duties to plaintiff and other
members of the class.
30. Defendants, at the time they rejected Wells Fargo's
offer, knew or should have known, that the market price of First
Interstate stock at the time reflected both the intrinsic value
of First Interstate and a premium which resulted from market
expectations that Wells Fargo's efforts to acquire control of
First Interstate would produce greater returns for investors.
31. As a proximate result, the plaintiff and other members
of the Class have been substantially injured and request compen-
satory damages.
32. Defendants did the things alleged herein without exer-
cising the reasonable and ordinary care owed by corporate direc-
tors and officers.
THIRD CAUSE OF ACTION
ABUSE OF CONTROL
33. Plaintiff incorporates by reference P. P. 1-23 above.
34. The Individual Defendants owed duties as controlling
persons and/or as controlling or dominant directors to plaintiff
and the other members of the Class not to use their positions of
control of First Interstate for their own personal interests and
contrary to the interests of First Interstate's remaining share-
holders.
35. The foregoing conduct by the director defendants
amounted to an abuse of their abilities to control First Inter-
state in violation of their obligations to plaintiff and the
other members of the Class.
36. As a proximate result, plaintiff and the other members
of the Class have been damaged and will continue to be damaged
unless defendants are enjoined, and defendants are each jointly
and severally liable to plaintiff and the other members of the
Class for all loss and damage they have suffered resulting from
the matters set forth herein.
FOURTH CAUSE OF ACTION
UNJUST ENRICHMENT
37. Plaintiff incorporates by reference P.P. 1-23 above.
38. As a proximate result of the tortious conduct de-
scribed above, all of the defendants have been and will be
unjustly enriched at the expense of the members of the Class.
The director defendants will retain control of First Interstate
and their positions of power, prestige and profit. Defendants
have obtained these unjust benefits at the expense of the mem-
bers of the Class by rejecting the Wells Fargo offer and refus-
ing to negotiate a beneficial sale of First Interstate.
FIFTH CAUSE OF ACTION
TORTIOUS INTERFERENCE WITH
PROSPECTIVE ECONOMIC ADVANTAGE
39. Plaintiff incorporates by reference P.P. 1-23 above.
40. By reason, inter alia, of Wells Fargo's announced
offer to purchase First Interstate stock at $133+ a share,
plaintiff and the members of the Class had an expectancy that
they could tender their shares and realize at least the $133+
per share offer. Moreover, all class members had the expectancy
of sharing in any premium that results from acquisition at-
tempts.
41. Defendants knew of these prospective advantages pre-
sented to plaintiff and the members of the class and defendants
intended to interfere and did interfere with those advantages
when they rejected the Wells Fargo offer.
42. Plaintiff and the members of the Class were prevented
from obtaining the foregoing advantages as a result of the
conduct of all defendants described above.
43. The defendants, and each of them, did the things al-
leged in this Complaint with the intent to injure plaintiff and
the members of the Class,
WHEREFORE, plaintiff and members of the Class demand judg-
ment against defendants as follows:
1. Declaring that this action is properly maintainable an
a class action and certifying plaintiff as the representative of
the Class;
2. Declaring that the defendants have breached and are
breaching their fiduciary and other duties to plaintiff and
other members of the Class;
3. Preliminarily and permanently enjoining the defendants
and their counsel, agents, employees and all persons acting
under, in concert with, or for them, from taking steps to pre-
vent or frustrate the sale to Wells Fargo or refusing to proceed
with negotiations with Wells Fargo to increase the offered price
and/or failing or refusing to auction the Company and/or from
taking defensive steps which do not maximize shareholder value;
4. Awarding compensatory damages against defendants indi-
vidually and severally in an amount to be determined at trial,
together with prejudgment interest at the maximum rate allowable
by law, arising from their wrongful conduct;
5. Awarding plaintiff his costs and disbursements and
reasonable allowances of fees for plaintiff's counsel and ex-
perts and reimbursement of expenses; and
6. Granting plaintiff and the Class such other and fur-
ther relief as the Court may deem just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: November 6, 1995
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH
SALLIE A. BLACKMAN
ERIN C. WARD
___________________________
WILLIAM S. LERACH
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
MILBERG WEISS BERSHAD
HYNES & LERACH
JEFF S. WESTERMAN
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
KAPLAN, KILSHEIMER & FOX, LLP
FREDERIC S. FOX
685 Third Avenue, 26th Floor
Now York, NY 10017
Telephone: 212/687-1980
Attorneys for Plaintiff
Daniel C. Girard (SBN 114826)
Robert S. Green (SBN 136183)
GIRARD & GREEN, P.C.
160 Sansome Street, Suite 300
San Francisco, California 94104
Telephone: (415) 981-4800
Facsimile: (415) 981-4846
Attorneys for Individual
and Representative Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE COUNTY OF LOS ANGELES
- - - - - - - - - - - - - - - - - - - - - -
THEODORE N. KAPLAN, on behalf of
himself and all others similarly
situated, Case No.
Plaintiff, CLASS ACTION
v. CLASS ACTION COMPLAINT
FOR BREACH OF FIDUCIARY
JOHN E. BRYSON, DON C. FRISBEE, DUTY, ABUSE OF CONTROL,
STEVEN B. SAMPLE, GEORGE M. AND EQUITABLE RELIEF AND
KELLER, FORREST N. SHUMWAY, JEWEL DAMAGES
PLUMMER COBB, W. F. KIESCHNICK,
WILLIAM E. B. SIART, RALPH P. Plaintiff Demands a
DAVIDSON, THOMAS L. LEE, RICHARD Trial By Jury
J. STEGEMEIER, MYRON Du BAIN,
WILLIAM F. MILLER, DANIEL M.
TELLEP AND J. J. PINOLA,
Defendants.
- - - - - - - - - - - - - - - - - - - - - -
Daniel C. Girard (SBN 114826)
Robert S. Green (SBN 136183)
GIRARD & GREEN, P.C.
160 Sansome Street, Suite 300
San Francisco, California 94104
Telephone: (415) 981-4800
Facsimile: (415) 981-4846
Attorneys for Individual
and Representative Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE COUNTY OF LOS ANGELES
- - - - - - - - - - - - - - - - - - - - - - x
THEODORE N. KAPLAN, on behalf of
himself and all others similarly :
situated, Case No.
:
Plaintiff, CLASS ACTION
:
v. CLASS ACTION COMPLAINT
: FOR BREACH OF FIDUCIARY
JOHN E. BRYSON, DON C. FRISBEE, DUTY, ABUSE OF CONTROL,
STEVEN B. SAMPLE, GEORGE M. : AND EQUITABLE RELIEF AND
KELLER, FORREST N. SHUMWAY, JEWEL DAMAGES
PLUMMER COBB, W. F. KIESCHNICK, :
WILLIAM E. B. SIART, RALPH P. Plaintiff Demands a
DAVIDSON, THOMAS L. LEE, RICHARD : Trial By Jury
J. STEGEMEIER, MYRON Du BAIN,
WILLIAM F. MILLER, DANIEL M. :
TELLEP AND J. J. PINOLA,
:
Defendants.
:
- - - - - - - - - - - - - - - - - - - - - - x
Plaintiff, as and for his complaint, alleges as follows
upon information and belief except as to paragraph 4, which is
alleged upon knowledge. Plaintiff's information and belief is
based upon, inter alia, the investigation made by Plaintiff by
and through his counsel.
INTRODUCTION AND OVERVIEW
1. This is a shareholder class action seeking
equitable relief and compensatory damages on behalf of all
shareholders of First Interstate Bancorp ("First Interstate" or
the "Company") against First Interstate's top officers and the
members of the Board of Directors of First Interstate, seeking to
remedy violations of state law arising out of these Defendants'
actions and conduct undertaken to defeat a highly favorable
acquisition offer for First Interstate stock by Wells Fargo & Co.
("Wells Fargo"). First Interstate's Board of Directors has
pursued a course of conduct intended to and having the effect of
making it extremely difficult for any outside party unacceptable
to Defendants to successfully acquire First Interstate, even at
prices well in excess of First Interstate stock's historical
price range. This course of conduct has been undertaken by the
Defendants to secure and retain their lucrative positions of
power, prestige and profit with First Interstate and to enhance
and aggrandize their own interests at the expense of First
Interstate's shareholders.
2. On October 18, 1995, Wells Fargo, a highly
successful profitable and well-capitalized bank, made an offer to
acquire First Interstate at a price far in excess of First
Interstate's then-market price, by exchanging in a tax-free
exchange .625 shares of Wells Fargo stock for each share of First
Interstate stock, an offer worth $133.50 per share based on the
October 17, 1995 closing price of Wells Fargo stock of $213.62
per share. First Interstate's stock jumped from $106 per share
to $140.25 per share upon this announcement, while Wells Fargo's
stock increased to $229 per share, making the offer worth over
$143 per First Interstate share. Defendants immediately
expressed hostility to Wells Fargo's offer and have refused to
negotiate with Wells Fargo, even though Wells Fargo has told
First Interstate's Board it is willing to negotiate a higher
price and thus to offer a fair and reasonable price for First
Interstate stock, well above the levels at which the stock has
traded historically. Instead, Defendants have undertaken to
attract a "white knight" by offering to make available financial
information to certain favored bidders while refusing to
negotiate with Wells Fargo, despite Wells Fargo's continuing
offer to negotiate a higher price. The bidders favored by
Defendants are based outside California, and accordingly, are
more likely to permit Defendants to retain highly compensated
executive positions following the consummation of a strategic
business combination.
3. In recent years, Defendants have consistently
refused to entertain highly favorable acquisition offers or
overtures for First Interstate, thus preventing an acquisition of
the Company at a favorable price for the shareholders.
Defendants, who collectively own only about 144,000 of First
Interstate's 75.7 million shares -- a minuscule .001% of its
outstanding stock, have done this to retain highly compensated
positions they consider themselves likely to lose if First
Interstate is acquired.
PARTIES AND ACTORS
4. Plaintiff Theodore N, Kaplan is and was at all
times relevant hereon a common shareholder of First Interstate.
Plaintiff brings this action on behalf of the holders of the
common stock of First Interstate for injunctive and other relief
in connection with the proposed acquisition of First Interstate
by Wells Fargo.
5. (a) First Interstate is a corporation with its
principal executive offices in Los Angeles, California and which
operates principally in California, as well as several other
western states. First Interstate is a bank holding company.
(b) At December 31, 1994, it owned 16 banks (the
"Subsidiary Banks") which operated approximately 1,100 banking
offices in 13 states, including California. Ranked according to
assets, the Company was the fourteenth largest commercial banking
organization in the United States at December 31, 1994, having
total deposits of $48.4 billion and total assets of $55.8
billion.
(c) The Subsidiary Banks accept checking, savings
and other time deposit accounts and employ these funds
principally by making consumer, real estate and commercial loans
and investing in securities and other interest-bearing assets.
(d) The Company 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 both through
non-bank subsidiaries of the Company and through the Subsidiary
Banks and their subsidiaries.
(e) The larger Subsidiary Banks provide
international banking services on a limited basis through the
international departments of their domestic offices. They also
maintain correspondence relationships with major banks throughout
the world.
6. (a) Defendant John E. Bryson ("Bryson") was a
director of First Interstate and Board Chairman and Chief
Executive Officer of SCEcorp and Southern California Edison
Company at all times relevant hereto.
(b) Defendant Don C. Frisbee ("Frisbee") was a
First Interstate director and Chairman Emeritus of PacificCorp at
all times relevant hereto.
(c) Defendant Steven S. Sample ("Sample") was a
First Interstate director and President of the University of
Southern California at all times relevant hereto.
(d) Defendant George M. Keller ("Keller") was a
director of First Interstate and the retired Chairman and Chief
Executive Officer of Chevron Corporation at all times relevant
hereto.
(e) Defendant Forrest N. Shumway ("Shumway") was
a director of First Interstate and former Vice-Chairman of the
Board of Allied-Signal, Inc. at all times relevant hereto.
(f) Defendant Jewel Plummer Cobb ("Cobb") was a
director of First Interstate and President Emeritus of California
State University, Fullerton at all times relevant hereto.
(g) Defendant W. F. Kieschnick ("Kieschnick") was
a director of First Interstate and retired President and Chief
Executive Officer of Atlantic Richfield Company at all times
relevant hereto.
(h) Defendant William E. B. Siart ("Siart") was
Chairman of the Board and Chief Executive Officer at First
Interstate at all times relevant hereto.
(i) Defendant Ralph P. Davidson ("Davidson") was
a director of First Interstate and former Chairman of The John F.
Kennedy Center for the Performing Arts at all times relevant
hereto.
(j) Defendant Thomas L. Lee ("Lee") was a
director of First Interstate and Chairman and Chief Executive
Officer of the Newhall Land and Farming Company at all times
relevant hereto.
(k) Defendant Richard J, Stegemeier
("Stegemeier") was a director of First Interstate and Chairman of
the Board of Unocal Corporation at all times relevant hereto.
(l) Defendant Myron Du Bain ("Du Bain") was a
director of First Interstate and retired Chairman and Chief
Executive Officer of Fireman's Fund Corporation at all times
relevant hereto.
(m) Defendant William F. Miller ("Miller") was a
director of First Interstate and President Emeritus of SRI
International at all times relevant hereto.
(n) Defendant Daniel M. Tellep ("Tellep") was a
director of First Interstate and Chairman and Chief Executive
Officer of Lockheed Corporation at all times relevant hereto.
(o) Defendant J. J. Pinola ("Pinola") was the
retired Chairman and Chief Executive Officer of First Interstate
and a director at all times relevant hereto.
7. Defendants (hereinafter collectively referred to
as the "Individual Defendants") are each members of First
Interstate's Board of Directors.
8. The Individual Defendants owed and owe First
Interstate's public shareholders fiduciary obligations and were
and are required to: (i) use their ability to manage First
Interstate in a fair, just and equitable manner; (ii) act in
furtherance of the best interests of First Interstate and its
shareholders; (iii) act to maximize shareholder value; (iv)
govern First Interstate in such a manner as to heed the expressed
views of its public shareholders; (v) refrain from abusing their
positions; and (vi) refrain from favoring their own interests at
the expense of First Interstate and its shareholders. By reason
of their fiduciary relationships, these defendants owed and owe
plaintiff and other members of the Class the highest obligation
of good faith, fair dealing, loyalty and due care.
9. Wells Fargo & Co. ("Wells Fargo") is a corporation
with its principal executive offices in San Francisco,
California. Wells Fargo is a huge bank holding company and is
generally viewed as one of the most well-managed, profitable and
well-capitalized banks in the United States. With more than 600
branch outlets, 1,900 round-the-clock Wells Fargo Express ATMs
and a popular 24-hour telephone banking service, Wells Fargo
operates one of the largest and busiest consumer banking
businesses in the United States. Besides serving as banker to
some 3.5 million California households, Wells Fargo provides a
full range of banking services to commercial, agribusiness, real
estate and small-business customers, mainly in California. It is
one of the nation's leading managers of personal trust accounts,
corporate 401(k) plans and mutual funds, with approximately $57
billion in assets under its management and administration.
10. Each defendant herein is sued individually as a
conspirator and aider and abettor, as well as in his capacity as
a director of the Company, and the liability of each arises from
the fact that he has engaged in all or part of the unlawful acts,
plans, schemes, or transactions complained of herein.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this lawsuit on behalf of himself
and all other common shareholders of First Interstate (except
defendants herein and any person, firm, trust, corporation or
other entity related to, controlled by or affiliated with any of
the defendants and any of their successors in interest) (the
"Class").
12. This action is properly maintainable as a class
action for the following reasons:
(a) The class is so numerous that joinder of all
class members is impracticable. As of February 28, 1995, First
Interstate had over 75 million shares of common stock outstanding
owned by over 24,000 shareholders. Members of the Class are
scattered throughout the United States and are so numerous as to
make it impracticable to bring them all before this Court.
13. There are questions of law and fact which are
common to members of the Class and which predominate over any
questions affecting only individual members. The common
questions include, inter alia, the following:
(a) Whether the Individual Defendants have
breached fiduciary duties owed by them to plaintiff and the other
members of the Class by interfering with Wells Fargo's efforts to
acquire First Interstate;
(b) Whether the Individual Defendants have
failed, in violation of their fiduciary duties, to hold a fair
auction of the Company or its assets or to sell the Company on
the most favorable terms;
(c) Whether the Individual Defendants have
failed, in violation of their fiduciary duties, to provide for a
sale of First Interstate;
(d) Whether plaintiff and the other members of
the Class will be irreparably damaged if the Individual
Defendants are not enjoined from impeding Wells Fargo's tender
offer;
(e) Whether the Individual Defendants have
breached or aided and abetted the breach of their fiduciary
duties and other common law duties owed by them to plaintiff and
other members of the Class; and
(f) Whether plaintiff and other members of the
Class are being and will continue to be injured by the wrongful
conduct alleged herein and, if so, what is the proper remedy
and/or measure of damages.
14. The claims of plaintiff are typical of the claims
of other members of the Class and plaintiff has no interests that
are adverse or antagonistic to the interests of the Class.
15. Plaintiff is committed to the vigorous prosecution
of this action and has retained competent counsel experienced in
litigation of this nature. Accordingly, plaintiff is an adequate
representative of the Class and will fairly and adequately
protect the interests of the Class.
16. Plaintiff anticipates that there will not be any
difficulty in the management of this litigation as a class
action.
17. For the reasons stated herein, a class action is
superior to any other method available for the fair and efficient
adjudication of this controversy since it would be impractical
and undesirable for each of the members of the Class who has
suffered or will suffer damages to bring separate actions in
various parts of the country. Classwide remedies will assure
uniform standards of conduct for the Individual Defendants and
avoid the risk of inconsistent judgments.
SUBSTANTIVE ALLEGATIONS
18. As pleaded earlier, First Interstate is an
interstate banking corporation. First Interstate's stock
performed poorly in 1994 through mid-1995, due to First
Interstate's lackluster performance and perceptions that it was
poorly managed. For instance, First Interstate's stock traded at
a high of $85 per share and then fell, falling to a low of $67
per share in December 1994. First Interstate did not reach $85
per share again until mid-1995. After June 1995, First
Interstate's stock performance improved, reaching over $100 per
share in late September 1995, due to increase in the prices in
bank stocks generally and because of rumors that a favorable
acquisition offer for First Interstate would be forthcoming as
part of the wave of bank acquisitions and mergers now sweeping
the United States. However, even with this increase, First
Interstate's stock has been a relatively poor performer when
compared to other bank stocks. Because in recent years First
Interstate has not been considered as well-managed as many other
large banks and has not performed as well in terms of many of its
key ratios and measurements of success as other banks, its stock
has not performed well and thus, shareholders in First Interstate
have, obtained a below-industry trendline or industry average
return.
19. In recent years, certain other large financial
institutions, including Bank of America, have approached First
Interstate with acquisition inquiries and offers. Approximately
one year ago, Wells Fargo approached First Interstate about a
possible acquisition of First Interstate at a premium price.
First Interstate's Board and its top management have rejected and
frustrated all of these prior acquisition overtures and offers,
even though those offers would have resulted in First Interstate
shareholders receiving a substantial premium over the then-market
price of First Interstate stock. Defendants know that if First
Interstate is acquired by another bank, most or all of the
directors of First Interstate will, either in connection with the
acquisition or shortly thereafter, be removed from the Board of
the surviving bank because their services will be mere
surplusage. Thus, such an acquisition would bring an end to
their positions as directors of one of the country's largest
banks. At the same time, top executives at First Interstate have
caused these prior acquisition overtures and offers to be
rejected and/or frustrated, because they also know that, in the
event of an acquisition, they will also lose their lucrative jobs
and positions as officers of a major banking institution. In so
acting, the defendants have been aggrandizing their own personal
positions and interests over those of First Interstate
shareholders to whom they owe fiduciary duties to bring about a
sale of First Interstate on favorable terms even if the sale
results in First Interstate's directors and officers losing their
lucrative positions.
20. Shortly prior to October 18, 1995, Wells Fargo
approached First Interstate and offered to negotiate an
acquisition of First Interstate for a price far in excess of
First Interstate's current stock price. First Interstate's
Chairman refused this offer and told Wells Fargo that First
Interstate's Board would not negotiate to sell the bank and would
resist any offer by Wells Fargo to buy the bank. On October 18,
1995, Wells Fargo made an unsolicited acquisition offer for First
Interstate to exchange .625 shares of Wells Fargo stock for each
share of First Interstate stock, a $133.50 per share offer based
on the October 17, 1995 closing price of Wells Fargo stock of
$213.62 per share. Upon the announcement of this favorable
acquisition offer, First Interstate's stock price instantly
increased from $106 per share to $140.25 per share, reflecting
the extremely large premium being offered to First Interstate
shareholders in this tax-free exchange, plus the increase in
Wells Fargo's stock price to $229 per share making the offer
worth over $143 per First Interstate share.
21. Wells Fargo's offer to acquire First Interstate is
approximately three times First Interstate's book value, which is
a high offer compared to recent bank acquisition prices. The
acquisition price is also approximately 12.1 times First
Interstate's estimated 1995 earnings per share of $11.29 per
share, which is also reasonable in light of other recent bank
acquisitions, although it is lower than 15 times the estimated
next year's earnings paid in some bank acquisitions.
22. Wells Fargo has privately indicated to First
Interstate's officers and directors that they are willing and
will increase the price of their offer to acquire First
Interstate if First Interstate's Board will cooperate in bringing
about a consensual acquisition. However, First Interstate's top
officers and its Board are resisting and intend to continue to
resist this acquisition offer. Members of First Interstate's
Board of Directors own very little of First Interstate's
outstanding common stock. As a group, they own only 144,000
shares of First Interstate's 75.7 million shares of outstanding
common stock, or just .001% of the stock. Thus, whatever
interest the defendants have as shareholders in First Interstate
based on their minuscule holdings of the Company's stock is far
outweighed by their interest in retaining their positions as
directors and/or officers of the Company which provides them with
lucrative fees, prestige in the community, large salaries, and
other emoluments of office, which they will lose if First
Interstate is acquired.
23. In an effort to attract a "white knight" and
retain their lucrative positions, Defendants have invited certain
bidders to discuss an acquisition of, or a merger with First
Interstate, which is putting the Company up for sale now that the
sale or breakup of First Interstate is inevitable, while refusing
to negotiate with Wells Fargo. In so doing, Plaintiff alleges on
information and belief that the Individual Defendants have made
confidential financial information available to certain favored
bidders, but have refused to provide the same information to
Wells Fargo.
24. The Individual Defendants' refusals to consider
the Wells Fargo offer breaches defendants' fiduciary duties and
is an abuse of control.
25. Unless defendants are enjoined from refusing to
negotiate a sale of First Interstate in which all potential
bidders are given equal consideration, plaintiff and the members
of the Class will continue to suffer injury. Plaintiff and the
members of the Class have no adequate remedy at law.
FIRST COURSE OF ACTION
26. Plaintiff incorporates by reference Paragraph Paragraph 1-25
above.
27. The Individual Defendants engaged in the aforesaid
conduct in intentional breach and/or reckless disregard of their
fiduciary duties to plaintiff and the members of the Class.
28. Defendants, at the time they rejected Wells
Fargo's offer, knew that the market price of First Interstate
Stock reflected both the intrinsic value of First Interstate and
a premium which resulted from market expectations that Wells
Fargo's efforts to acquire control of First Interstate would
produce greater returns for investors. Regardless, Defendants
have refused to negotiate with Wells Fargo and chosen instead to
attempt to attract other possible suitors to defeat Wells Fargo,
rather than engage in efforts to maximize the value received for
shareholders.
29. As a proximate result, the plaintiff and other
members of the Class have been substantially injured and request
compensatory damages.
SECOND CAUSE OF ACTION
NEGLIGENT BREACH OF FIDUCIARY DUTIES
30. Plaintiff incorporates by reference Paragraph Paragraph 1-29
above.
31. The Individual Defendants engaged in the aforesaid
conduct without exercising the reasonable and ordinary care which
directors and officers owe to their shareholders, and thereby
breached their fiduciary duties to plaintiff and other members of
the Class.
32. Defendants, at the time they rejected Wells
Fargo's offer, knew or should have known, that the market price
of First Interstate stock at the time reflected both the
intrinsic value of First Interstate and a premium which resulted
from market expectations that Wells Fargo's efforts to acquire
control of First Interstate would produce greater returns for
investors. Regardless, Defendants refused to negotiate with
Wells Fargo, or act in a neutral manner to obtain the highest
value for the shareholder class members.
33. As a proximate result, the plaintiff and other
members of the Class have been substantially injured and request
compensatory damages.
34. Defendants did the things alleged herein without
exercising the reasonable and ordinary care owed by corporate
directors and officers.
THIRD CAUSE OF ACTION
ABUSE OF CONTROL
35. Plaintiff incorporates by reference Paragraph Paragraph 1-34
above.
36. The Individual Defendants owed duties as
controlling persons and/or as controlling or dominant directors
to plaintiff and the other members of the Class not to use their
positions of control of First Interstate for their own personal
interests and contrary to the interests of First Interstate's
remaining shareholders.
37. The foregoing conduct by the director defendants
amounted to an abuse of their abilities to control First
Interstate in violation of their obligations to plaintiff and the
other members of the Class.
38. As a proximate result, plaintiff and the other
members of the Class have been damaged and will continue to be
damaged unless defendants are enjoined, and defendants are each
jointly and severally liable to plaintiff and the other members
of the Class for all loss and damage they have suffered resulting
from the matters set forth herein.
WHEREFORE, plaintiff and members of the Class demand
judgment against defendants as follows:
1. Declaring that this action is property
maintainable as a class action and certifying plaintiff as the
representative of the Class;
2. Declaring that the defendants have breached and
are breaching their fiduciary and other duties to plaintiff and
other members of the Class;
3. Preliminarily and permanently enjoining the
defendants and their counsel, agents, employees and all person
acting under, in concert with, or for them, from caking any
actions which are not designed to maximize the value attainable
by all shareholders, and/or from refusing to proceed with
negotiations with Wells Fargo on an equal footing with other
potential bidders viewed more favorably by Individual Defendants;
4. Awarding compensatory damages against defendants
individually and severally in an amount to be determined at
trial, together with prejudgment interest at the maximum rate
allowable by law, arising from their wrongful conduct;
5. Awarding plaintiff his costs and disbursements and
reasonable allowances of fees for plaintiff's counsel and experts
and reimbursement of expenses; and
6. Granting plaintiff and the Class such other and
further relief as the Court may deem just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
Dated: November 2, 1995 GIRARD & GREEN, P.C.
By:_____________________________
Robert S. Green
160 Sansome Street, Suite 300
San Francisco, CA 94104
Telephone: (415) 981-4800
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - ---------------------------------------------X
WELLS FARGO & COMPANY, a Delaware :
corporation,
: C.A. No. 14696
Plaintiff,
:
-against-
:
FIRST INTERSTATE BANCORP, a Delaware
corporation, FIRST BANK SYSTEM, INC., a :
Delaware corporation, ELEVEN
ACQUISITION CORPORATION, a Delaware :
corporation, 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,
Defendants. :
- - ---------------------------------------------X
VERIFIED COMPLAINT FOR PRELIMINARY AND PERMANENT
INJUNCTIVE RELIEF AND DECLARATORY JUDGMENT
Wells Fargo & Company ("Wells Fargo"), as and for its complaint,
alleges upon knowledge with respect to itself and its own acts, and upon
information and belief as to all other matters, as follows:
<PAGE>
Nature of the Action
1. Plaintiff brings this action for injunctive
and/or declaratory relief:
(a) to prevent First Interstate Bancorp ("First Interstate") and its
directors from breaching their fiduciary duty to their stockholders by
entering into or consummating an unfair, inadequate and unlawful proposed
merger (the "First Bank Proposed Merger") with First Bank System, Inc. ("First
Bank") and to prevent First Bank from aiding and abetting that breach;
(b) to prevent the anti-takeover devices of defendant First interstate
from being utilized to impede or delay Wells Fargo's proxy solicitation to
solicit proxies in opposition to the First Bank Proposed Merger, its proposed
exchange offer which is considerably more favorable to First Interstate's
stockholders than the First Bank Proposed Merger, and Wells Fargo's consent
solicitation, which is designed to elect new directors to the First Interstate
Board of Directors, in violation of the fiduciary duties of First Interstate's
Board of Directors; and
(c) to prevent First Interstate from otherwise taking actions that
impede or delay Wells Fargo's higher exchange offer, its proposed proxy
solicitation and consent solicita-
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tion, all of which will be made in compliance with all applicable laws,
obligations and agreements.
The Parties
2. Plaintiff Wells Fargo is a Delaware corpora-
tion with its principal place of business in California. Wells Fargo is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended. Based on assets as of December 31, 1994, it was the 15th largest bank
holding company in the United States. Wells Fargo's subsidiary banks provide a
full range of banking services to commercial, agribusiness, real estate and
small business customers and consumers. It is one of the nation's leading
managers of personal trust accounts, corporate 401(k) plans and mutual funds.
Wells Fargo is the beneficial owner for its own account of 100 shares of
common stock of First Interstate.
3. Defendant First Interstate is a Delaware corporation with its
principal place of business in Califor- nia. First Interstate is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended. Its subsidiary banks accept checking, savings and other time deposit
accounts and employ those funds principally by making consumer, real estate
and commercial loans and investing in securities and other interest-bearing
assets.
3
<PAGE>
First Interstate also provides banking-related financial services and products
both through non-bank subsidiaries and through its bank subsidiary and the
bank subsidiary's subsidiaries.
4. Defendant First Bank is a Delaware corporation with its
principal place of business in Minnesota. First Bank is a bank holding company
registered under the Bank Holding Company Act of 1956, as amended.
5. Defendant Eleven Acquisition Corporation is a Delaware
corporation. Eleven Acquisition Corporation is a corporation created by First
Bank solely for the purposes of effecting the Proposed Merger. For the
purposes of this Complaint, all references to defendant First Bank include
Eleven Acquisition Corporation.
6. Defendant William E. B. Siart is Chairman of
the Board of Directors, President and Chief Executive Offi-
cer of First Interstate. Defendant William S. Randall is
Executive Vice President, Chief Operating Officer and a
director of First Interstate. Edward M. Carson, John E.
Bryson, Dan C. Frisbee, Steven B. Sample, George M. Keller,
Forrest N. Shumway, Jewel Plummer Cobb, Ralph P. Davidson,
Thomas L. Lee, Richard J. Stegemeier, Myron Du Bain, William
F. Miller, and Daniel M. Tellep are all directors of First
Interstate. The foregoing individual directors of First
4
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Interstate (collectively the "defendant directors"), owe fiduciary duties to
First Interstate and its stockholders.
Factual Background
7. On October 17, 1995, Wells Fargo delivered a
letter to First Interstate submitting for its consideration a proposal for a
tax-free merger (the "letter") in which each First Interstate stockholder
would receive 0.625 shares of Wells Fargo common stock for each share of First
Interstate common stock. Based on the price of Wells Fargo's common stock at
the time the letter was delivered, that exchange ratio represented a price of
$133.50 for each First Interstate share, a 26% premium over the market value
of First Interstate common stock at the time of the letter.
8. Despite the immediate premium to the stockholders of First
Interstate and the extraordinary long-term economic benefits to the
stockholders of both companies that would accrue under the merger described in
the letter, Siart asked for six months to consider the Wells Fargo proposal.
Siart also publicly responded negatively, saying that he was "deeply
disappointed" by Wells Fargo's unsolicited proposal.
9. Following Wells Fargo's letter, the press reported that Siart
was actively soliciting other offers from, and sharing First Interstate's
confidential information with, other suitors. Press reports indicated that
First
5
<PAGE>
Interstate invited Bank One Corporation and Norwest Corporation to review its
loan and financial books. During the same time, First Interstate also
conducted merger negotiations with, at least, First Bank.
10. On November 6, 1985, First Interstate announced that it had
entered into an agreement with First Bank to merge the two corporations. First
Bank agreed to exchange 2.6 shares of its common stock for each share of First
Interstate's common stock. Based on the closing price of First Bank stock on
November 3, 1995, the last trading day prior to announcement of the Proposed
Merger, that exchange ratio represented a price of $132.28 per share of First
Interstate stock. First Interstate also agreed to pay a break-up fee of $100
million and granted First Bank a lock-up stock option to purchase First
Interstate stock that would yield it a profit of up to $100 million in the
event the First Bank merger agreement was not consummated.
11. The market reacted negatively to the news of the Proposed
Merger. Public reactions by analysts and stockholders were negative. The deal
has been called "a senior management job preservation act" for First
Interstate executives and Siart has been accused of failing to "show"[] a lot
of interest in the shareholder." In addition, immediately following the public
announcement of the First Bank
6
<PAGE>
Proposed Merger, more than 50% of the purchases of First Bank stock (an amount
aggregating more than $90 million) were in large blocks of stock purchased by
or through a single broker. Although the identity of the person or company for
whom those purchases were made was not disclosed, the size of those purchases,
coupled with the fact that they were all made through the same broker, has had
the effect of supporting the price of the First Bank stock, thus making the
First Bank Proposed Merger appear to be more attractive than it would have
appeared in the absence of those large block purchases.
12. Before First Interstate entered into its agreement with First
Bank, Wells Fargo had offered to increase the exchange ratio of its offer to
0.65 shares of Wells Fargo common stock for each share of First Interstate
common stock, a ratio that would have continued to offer more value than the
First Bank Proposed Merger. Based on the closing price of Wells Fargo common
stock on November 3, 1995, the last trading day prior to announcement of the
First Bank Proposed Merger, that bid increased the value of the Wells Fargo
proposal to $137.96 per share of First Interstate common stock, considerably
in excess of the consideration to be received in the First Bank Proposed
Merger. Despite the clear superiority of that Wells Fargo
7
<PAGE>
proposal, First Interstate rejected it in favor of the inferior First Bank
Proposed Merger and granted the break-up fee and lock-up stock option to First
Bank.
13. By meeting and sharing confidential information with at least
three banks (First Bank, Norwest Corporation and Banc One Corporation) in
response to the letter from Wells Fargo and Wells Fargo's subsequent offer to
improve its bid, First Interstate's directors initiated an active bidding
process seeking to sell the company.
14. As a result, the defendant directors had the duty (a) to be
diligent and vigilant in examining critically all alternative offers; (b) to
act in good faith; (c) to obtain, and act with due care on all material
information reasonably available, including information necessary to compare
all offers to determine which of them would provide the best value reasonably
available to the stockholders; and (d) to negotiate actively and in good faith
with all bidders to that end.
15. The fiduciary duties of the defendant directors require them
to assess whether each anti-takeover device or contractual provision
(separately and in the aggregate) under the facts and circumstances prevailing
at the time (a) adversely affects the value provided to First Interstate
stockholders; (b) inhibits or encourages alterna-
8
<PAGE>
tive bids; (c) is an enforceable contractual obligation in light of the
directors' fiduciary duties; and (d) in the end would advance or retard the
First Interstate directors' obligation to secure for the First Interstate
stockholders the best value reasonably available under the circumstances. To
the extent such devices or provisions are inconsistent with the defendant
directors' fiduciary duties, as they are here, they are invalid and
unenforceable.
16. On November 13, 1995, Wells Fargo announced that it intends to
commence an exchange offer for all outstanding shares of common stock of First
Interstate Bancorp (the "Exchange Offer"). Wells Fargo will offer to exchange
two-thirds of a share of Wells Fargo common stock for each outstanding share
of First Interstate common stock. Based on the closing price of Wells Fargo
common stock on November 10, 1995, the last trading day before the
announcement of the Exchange Offer, the value of the Exchange Offer is $143.58
per share of First Interstate common stock. First Interstate has approximately
76 million shares outstanding, giving the transaction a total equity value of
approximately $11 billion. Wells Fargo's offer is therefore considerably
higher than the current value of the consideration offered to First
Interstate's stockholders in the First Bank Proposed Merger.
9
<PAGE>
17. Also on November 13, 1995, Wells Fargo announced that it
intends to file preliminary proxy materials with the Securities and Exchange
Commission ("SEC") for use in connection with the solicitation of First
Interstate stockholders to vote against the approval of a merger with First
Bank at any meeting of stockholders of First Interstate to be called to
consider the First Bank Proposed Merger (the "Proxy Solicitation").
18. Concurrently, Wells Fargo announced that it will file with the
SEC preliminary materials for the solicitation of written consents from
stockholders of First Interstate to remove First Interstate's current board of
directors and to replace them with nominees of Wells Fargo who are committed
to removing any impediments to the consummation of the acquisition of First
Interstate by Wells Fargo (the "Consent Solicitation").
19. Wells Fargo's Exchange Offer clearly will be in the best
interests of First Interstate's stockholders. It will be available to all
First Interstate stockholders for all outstanding shares. It will not be
"front-end loaded" or otherwise coercive in nature. Moreover, the Exchange
Offer will provide First Interstate's stockholders with the opportunity to
realize a substantial premium over the market price of their shares
immediately prior to the public an-
10
<PAGE>
nouncement of Wells Fargo's October 17 letter. The closing price of First
Interstate's common stock on October 17, 1995, the last full trading day prior
to the public announcement of that letter, was $106 per share and the average
closing price of First Interstate's common stock for the 20 consecutive
trading days immediately preceding October 17, 1995, was $102.59 per share.
20. In addition to the greater immediate financial value of the
Wells Fargo Exchange Offer, a combination of Wells Fargo and First Interstate
also will result in greater savings than can be realized through the First
Bank Proposed Merger. Despite having overlapping operations only in Colorado,
Montana and Wyoming, First Bank claims that $500 million in savings will
result from the First Bank Proposed Merger. Due to the greater geographical
overlap between Wells Fargo and First Interstate, a merger of the two
companies would result in an estimated $700 million in net cost savings,
approximately $30 per share based on the present value of the projected future
savings.
21. The Exchange Offer will give First Interstate stockholders an
opportunity to participate in the future performance of the combined company,
and to benefit from the synergies expected to result from the combination of
the two
11
<PAGE>
companies, through the equity interest in the combined company that would
continue to be held by such stockholders.
22. The Exchange Offer will not pose any threat to the interests
of First Interstate's stockholders or to First Interstate's corporate policy
and effectiveness.
23. The Exchange Offer, Proxy Solicitation and Consent
Solicitation will comply with all applicable laws, obligations and agreements
including, without limitation, the securities laws and all other legal
obligations to which plaintiff is subject, including any contractual and
common law obligations that may be owed by plaintiff to First Interstate. The
Exchange Offer, Proxy Solicitation and Consent Solicitation will not
constitute tortious interference with, or any other business-related tort in
connection with, the First Bank Proposed Merger. The Exchange Offer, Proxy
Solicitation and Consent Solicitation materials will fully disclose all
required information in compliance with plaintiff's obligations under the
securities laws.
24. Unless modified, First Interstate's anti-takeover devices will
interfere with the Exchange Offer and may have the effect of preventing or
impeding the consummation of the Proxy Solicitation and the Consent
Solicitation. Given the nature of the Exchange Offer and its benefits to First
Interstate stockholders, First Interstate should not
12
<PAGE>
be permitted to erect impediments to it. Nor should First Interstate be
permitted to impede or delay plaintiff's, efforts to conduct its Proxy
Solicitation and Consent Solicitation, activities to which plaintiff has a
right under Delaware law.
25. First Interstate's anti-takeover devices and other defensive
measures will adversely affect the value available to First Interstate
stockholders, will inhibit alternative bids to the First Bank Proposed Merger,
are (in the case of the break-up fee and lock-up stock option granted to First
Bank and described infra) not enforceable contractual obligations in light of
the breach of the defendant directors' fiduciary duties, and will retard the
defendant directors in carrying out their obligation to secure for the First
Interstate stockholders the best value reasonably available under the
circumstances. First Interstate's anti-takeover devices and other defensive
measures are therefore invalid and unenforceable.
First Interstate's Anti-Takeover Devices
and Other Defensive Measures
Break-Up Fee and Lock-Up Stock Option
26. As a stated inducement to First Bank to enter
into the First Bank Proposed Merger agreement, First Bank is
13
<PAGE>
to be paid a $100 Million fee (the "Break-up Fee) and First Bank was granted
an option to purchase up to 15,073,106 shares of First Interstate stock at a
price of $127.75 per share, a price that will yield it a profit of up to $100
million in the event the Proposed merger is not consummated (the "Lock-Up
Stock Option").
27. The Break-Up Fee and the Lock-Up Stock Option were designed
not to induce a higher bid, but to compel First Interstate stockholders to
accept a lower bid for their stock. First Interstate's Board had, at the time
the Break-Up Fee and the Lock-Up Stock Option were agreed to, already received
and rejected a bid from wells Fargo that would have been worth at least $200
million more to the stockholders of First Interstate than the offer made by
First Bank.
28. The Break-Up Fee and Lock-Up Stock Option thus signal the
Board's support for, and increase the expense of offering alternatives to, the
First Bank Proposed Merger, which will serve the interests of the entrenched
management of First Interstate over those of the company's stockholders.
29. The Break-Up Fee and Lock-Up stock option
violate the fiduciary duties owed to First Interstate stock-
holders because they promote the self-interest of First
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<PAGE>
Interstate's directors at the expense of its stockholders, and are intended to
coerce First Interstate's stockholders into approving the Proposed Merger.
30. To the extent that First Interstate modifies
the First Bank Proposed Merger in response to the Wells
Fargo Exchange Offer or enters into any modified or future
agreement with First Bank, the defendant directors will have
a duty to eliminate the Break-Up Fee, the Look-Up Stock
Option and any similar provision in order to fulfill their
obligation to seek the best value reasonably available on
the stockholders' behalf and in order to avoid further
breaching their fiduciary duties.
Poison Pill
31. On November 21, 1988, First Interstate's Board adopted a
stockholder rights plan (the "Poison Pill") that allows the Board to prevent
the consummation of any tender or exchange offer, even one providing
substantial benefits to First Interstate's stockholders. The Board declared a
dividend of one common stock purchase right (a "Right"), payable to each of
First Interstate's stockholders of record as of December 30, 1988. Each Right
entitles the holder to purchase one share of First Interstate common stock at
a price of $170.00 per share (the "exercise price"), subject to adjustment.
15
<PAGE>
32. Until the earlier to occur of (a) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 20% or more of the
outstanding common stock other than pursuant to a Qualified Offer (as defined
below), or (b) 10 business days (or such later date as may be determined by
action of the Board of Directors prior to such time as any person becomes an
Acquiring Person) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 20% or more
of such outstanding common stock (the earlier of such dates, being called the
"Distribution Date"), the Rights are evidenced by the common stock
certificates. However, unless the First Interstate Board takes specific action
to delay the "Distribution Date" under the Poison Pill, on the tenth business
day after the announcement of the Wells Fargo Exchange offer the "Distribution
Date" will occur, resulting in the distribution of separately tradeable and
exercisable Rights certificates.
33. In the event that any person becomes an Acquiring Person
(other than pursuant to a Qualified Offer), each holder of a Right (other than
Rights beneficially owned
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by the Acquiring Person (which will thereafter be void)) will thereafter have
the right to receive upon exercise a number of shares of First Interstate
common stock having a market value of two times the exercise price of the
Right.
34. A "Qualified offer" is defined as a tender offer or exchange
offer for all outstanding common stock that is determined by the
non-management directors to be adequate and otherwise in the best interests of
the Company and its stockholders.
35. First Interstate's Board can redeem the Rights at a redemption
price of $.001 per Right or can amend the Poison Pill to make the Rights
inapplicable to the Wells Fargo Exchange Offer.
36. Due to the prohibitive costs the Poison Pill imposes on an
Acquiring Person, any tender offer or exchange offer (such as the Wells Fargo
Exchange Offer) that would trigger the Rights cannot practically be
consummated unless First Interstate's Board redeems or amends the Pill or
declares the offer to be a Qualified Offer. Accordingly, First Interstate's
Board can block any proposed tender or exchange offer regardless of the
interests of First Interstate's stockholders. The triggering of the Poison
Pill would be particularly unjustified in this case given
17
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the non-coercive nature of Wells Fargo's Exchange Offer and the substantial
benefits it would generate.
37. In light of the nature and value of Wells Fargo's Exchange
Offer, the First Interstate Board should declare that the Offer is
"Qualified". Alternatively, the Board should redeem the Rights under the
Poison Pill or amend it to make it inapplicable to Wells Fargo's Exchange
Offer and the second-step merger with Wells Fargo or a subsidiary that would
be expected to be consummated following the successful completion of the Wells
Fargo Exchange offer. Only when the Exchange Offer is deemed to be a Qualified
Offer or the Poison Pill has been redeemed, amended or invalidated so that it
is inapplicable to the Exchange Offer will First Interstate's stockholders be
able to benefit from the Exchange Offer.
38. The failure of First Interstate's Board to declare Wells
Fargo's Exchange Offer a "Qualified Offer" or to redeem or amend the Poison
Pill violates the fiduciary duties owed to plaintiff because it will deny
plaintiff meaningful access to or control over the assets of First Interstate
and will hinder or prevent plaintiff from exercising its fundamental
stockholder rights under Delaware law. Plaintiff will suffer irreparable
injury as a result
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of the loss of the unique opportunity to acquire control of
First Interstate.
Amendments to the Poison Pill
39. First Interstate's current Board could frustrate the power of
any future Board, such as one that might be elected pursuant to the Consent
solicitation, to redeem the Poison Pill by, for example, adding a "Dead Hand"
provision. Under a "Dead Hand" provision, if a company's board is replaced
pursuant to a stockholder consent solicitation, the power to redeem a pill is
exercisable only by the former directors. Accordingly, the newly-elected board
would be powerless to redeem a poison pill, even if it believed that it was in
the best interests of the stockholders to do so. Similarly, First Interstate's
Board might attempt to amend the Poison Pill to make it non-redeemable by
anyone.
40. Because any such amendment would purport to prevent future
directors from exercising certain corporate powers and to limit the ability of
future directors to direct the management of the business and affairs of the
corporation, any such amendment would violate Delaware law.
41. The adoption of any such amendment would vio-
late First Interstate's Board's fiduciary duties because it
would be designed to prevent future directors from acting in
the best interests of the company and its stockholders. Any
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such provision or amendment would represent an intentional
effort by the current Board to nullify the effectiveness of
a stockholder vote pursuant to the Consent Solicitation,
thereby preventing plaintiff from exercising its fundamental
stockholder rights under Delaware law.
Bylaw 4(b)--the "Nominating Restriction"
42. First Interstate's Bylaws require that notice of a nomination
of a candidate for director be "delivered to or mailed and received at the
principal executive offices of the Corporation not less than thirty days nor
more than sixty days prior to the meeting . . ." (the "Nominating
Restriction"). The Nominating Restriction further states that "[o]nly persons
who are nominated in accordance with [these] procedures shall be eligible for
election as Directors of [First Interstate]". As there is no meeting in the
consent solicitation context, the Nominating Restriction, if applied to a
consent solicitation, would effectively prohibit the election of directors by
written consent.
43. The Nominating Restriction, if applied to a
consent solicitation, would impose an arbitrary restraint on
stockholders that would frustrate their ability to exercise
effectively the consent solicitation power given to than
under Delaware law. 8 Del. C. S 228. The requirement of
prior notification is clearly inconsistent with section 228
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in that, among other things, Section 228 expressly permits stockholder action
without prior notice. Accordingly, the Nominating Restriction cannot lawfully
be applied to election of directors by consent solicitation.
Delaware business Combination statute, Section 203
44. Section 203, entitled "Business Combinations
with Interested Stockholders" (8 Del. C. ss. 203), applies to
any Delaware corporation that has not opted out of the
statute's coverage. First Interstate has not opted out of
the statute's coverage.
45. Section 203 was designed to impede coercive and inadequate
tender offers. Section 203 provides that if a person acquires 15% or more of a
corporation's voting stock (thereby becoming an "interested stockholder"),
such interested stockholder may not engage in a "business combination"
(defined to include a merger or consolidation) with the corporation for three
years after the interested stockholder becomes such, unless: (i) prior to the
15% acquisition, the Board of Directors has approved either the acquisition or
the business combination, (ii) the interested stockholder acquires 85% of the
corporation's voting stock in the same transaction in which it crosses the 15%
threshold or (iii) on or subsequent to the date of the 15% acquisition, the
business combination is approved by the Board of
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Directors and authorized at an annual or special meeting of stockholders (and
not by written consent) by the affirmative vote of at least 66-2/3% of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 does not apply if the business combination is proposed prior to
the consummation or abandonment of and subsequent to the announcement of a
proposed merger with another party.
46. Plaintiff anticipates that First Interstate will assert that
Section 203 would apply to block any merger between Wells Fargo and First
Interstate. Section 203 should not be applicable because Wells Fargo's
Exchange offer and the second-step merger with wells Fargo or a subsidiary
that would be expected to be consummated following successful completion of
the Exchange offer has been proposed subsequent to announcement of the First
Bank Proposed Merger, but before consummation or abandonment of the First Bank
Proposed Merger, and is thus exempt from the section's restrictions under
Section 203(b)(6).
47. Even if a merger between First Interstate and Wells Fargo is
found not to fall within the Section 203(b)(6) exemption, the Court should
conclude that under the circumstances, section 203 should not be applied to
this transaction. Should the Court decline to do so, First Interstate's
Board's fiduciary duties require the Board to
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approve the Wells Fargo Exchange offer under Section 203(a)(1).
Declaratory Relief
48. The Court may grant the declaratory relief
sought herein pursuant to 10 Del, C. ss. 6501. First Interstate's Board's
rejection of Wells Fargo's offers and its hasty decision to accept the First
Bank Proposed Merger clearly demonstrate that there is a substantial
controversy between the parties. The adverse legal interests of the parties
are real and immediate in light of First Interstate's announced deal with
First Bank. Moreover, First Interstate's unreasonable anti-takeover devices
and other defensive measures will interfere with plaintiff's Proxy
Solicitation, Exchange Offer and Consent Solicitation.
49. The granting of the requested declaratory relief will serve
the public interest by affording relief from uncertainty and by avoiding delay
and will conserve judicial resources by avoiding piecemeal litigation.
Irreparable Injury
50. First Interstate's agreement to pay a Break-
Up Fee to First Bank and to grant the Lock-Up Stock Option to First Bank will
inhibit future bids to acquire or merge with First Interstate and will deny
First Interstate's stockholders their right to receive maximum value for their
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stock. First Interstate's use of or reliance upon its anti-takeover devices
and other defensive measures to obstruct plaintiff's Exchange Offer, Proxy
Solicitation and Consent Solicitation will hinder and prevent plaintiff from
exercising its fundamental stockholder rights under Delaware law including,
but not limited to, the right to conduct a proxy solicitation and consent
solicitation. Plaintiff's resulting injury will not be compensable in money
damages and plaintiff has no adequate remedy at law.
COUNT ONE
(INJUNCTIVE AND DECLARATORY RELIEF AGAINST
FIRST INTERSTATE AND DEFENDANT DIRECTORS: THE, FIRST BANK
PROPOSED MERGER, THE BREAK-UP FEE AND THE LOCK-UP STOCK
OPTION ARE VOID AND UNENFORCEABLE)
51. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 50 here-
of.
52. Wells Fargo's Exchange Offer is substantially superior to the
First Bank Proposed Merger. Wells Fargo's Exchange Offer will give First
Interstate's stockholders considerably more for their shares than they would
receive under the First Bank Proposed Merger. In addition, a combination of
wells Fargo and First interstate will result in greater combined savings than
the First Bank Proposed Merg-
24
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er, and thus will provide greater long-term value to First
Interstate stockholders.
53. First Interstate's decision to enter into the First Bank
Proposed Merger was unreasonable and was in breach of the fiduciary duties
owed to the First Interstate stockholders. In addition, First Interstate's
decision to agree to pay First Bank a Break-Up Fee and to grant to First Bank
a Lock-Up stock Option was also unreasonable under the circumstances. Neither
the Break-Up Fee nor the Look-Up Stock Option was granted in order to induce
higher bidding. Rather, the Break-Up Fee and Lock-Up Stock Option were
intended to compel First Interstate's stockholders to accept an inferior price
for their shares so that current management could be entrenched. Accordingly,
the Break-Up Fee and Lock-Up Stock Option granted to First Bank are a breach
of the fiduciary duties owed to First Interstate's stockholders.
54. Plaintiff seeks declaratory relief declaring the First Bank
Proposed Merger, the Break-Up Fee and the Lock-Up Stock Option to be void and
unenforceable and in- junctive relief enjoining the consummation of the First
Bank Proposed Merger, the payment of any such Break-Up Fee and the issuance of
First Interstate stock (or any payment of money) to First Bank pursuant to the
Lock-up Stock Option.
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In the alternative, plaintiff seeks an injunction compelling the defendant
directors to terminate the First Bank Proposed Merger and invalidating the
Break-Up Fee and Lock-Up Stock Option.
55. Plaintiff has no adequate remedy at law.
COUNT TWO
[INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE AND THE DEFEN-
DANT DIRECTORS: CONTINUING VIOLATION OF FIDUCIARY DUTIES)
56. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs I through 54 here-
of.
57. If First Interstate modifies the First Bank Proposed Merger,
considers any future merger or enters into any future agreement with First
Bank, the First Interstate defendant directors will have the duty to eliminate
the Break-up Fee, the Lock-Up Stock Option and any similar provision from such
agreement in order to fulfill their obligation to seek the best value
reasonably available on the stockholders' behalf.
58. The retention of the Break-Up Fee and-the Lock-Up Stock Option
in any modified agreement or future agreement with First Bank would constitute
an additional violation of the First Interstate Board's fiduciary duties.
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59. Plaintiff therefore seeks injunctive relief enjoining First
Interstate and the defendant directors from, including the Break-Up Fee, the
Lock-Up Stock Option or any similar provision in any modified or future
agreement with First Bank.
60. Plaintiff has no adequate remedy at law.
COUNT THREE
(INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE
AND THE DEFENDANT DIRECTORS; REDEEM THE POISON PILL
61. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 59 here-
of.
62. Wells Fargo's Exchange offer is non-coercive and
non-discriminatory; it is fair to First Interstate stockholders; and it
represents a substantial premium over the market price of First Interstate
shares prior to the public announcement of the Wells Fargo October 17 letter
and the First Bank Proposed Merger.
63. The Poison Pill is not proportionate to any threat posed by,
or within the range of reasonable responses to, the Exchange offer. In
addition, the Board's failure to determine that plaintiff's Exchange Offer is
fair and in the best interests of First Interstate and its stockholders will
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constitute a violation of its fiduciary duties to First
Interstate stockholders.
64. Plaintiff seeks injunctive relief compelling First Interstate
and the defendant directors to declare Wells Fargo's Exchange Offer to be a
"Qualified Offer," to redeem the Rights under the Poison Pill, or otherwise to
amend the Poison Pill to make it inapplicable to the Exchange Offer or to any
follow-on merger.
65. Plaintiff has no adequate remedy at law.
COUNT FOUR
(INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE AND DEFENDANT
DIRECTORS: NO DEFENSIVE MEASURES)
66. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 64 here-
of.
67. Wells Fargo's Exchange offer is fair to First Interstate
stockholders and it represents a substantial premium over the market price of
First Interstate shares prior to the public announcement of Wells Fargo's
October 17 letter and the First Bank Proposed Merger.
68. The Exchange Offer complies with all applicable laws,
obligations and agreements including, without limitation, the securities laws,
and all other legal obligations to which plaintiff is subject, including any
con-
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tractual and common law obligations that may be owed by plaintiff to
First Interstate.
69. The Exchange Offer poses no threat to the interests of First
Interstate's stockholders or to First Interstate's corporate policy and
effectiveness.
70. Adoption of any provision or amendment of the Poison Pill (by
a "Dead Hand" amendment or otherwise) or any other defensive measure against
the Exchange Offer, Proxy Solicitation or Consent Solicitation that would have
the effect of impeding that offer or solicitation or that would prevent a
future Board of Directors from exercising its fiduciary duties would itself be
a violation of the current Board's fiduciary duties to First Interstate
stockholders.
71. Plaintiff seeks injunctive relief against any such defensive
measure by First Interstate and the defendant directors to thwart the Exchange
Offer, Proxy Solicitation or Consent Solicitation or the consummation of any
subsequent merger in violation of their fiduciary duties.
72. Plaintiff has no adequate remedy at law.
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COUNT FIVE
(INJUNCTIVE AND DECLARATORY RELIEF AGAINST FIRST INTERSTATE
AND DEFENDANT DIRECTORS: DELAWARE BUSINESS COMBINATION
STATUTE, SECTION 203)
73. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 71 here-
of.
74. The Delaware Business Combination Statute, Section 203, if
sought to be enforced against a merger between Wells Fargo and First
Interstate, should be found inapplicable because any such merger would fall
within the Section 203(b)(6) exemption.
75. Plaintiff seeks a declaratory judgment that any merger between
Wells Fargo and First Interstate would fall within the Section 203(b)(6)
exemption, or if it does not, that under the circumstances, section 203 should
not be applied to prohibit such a merger.
76. Alternatively, plaintiff seeks injunctive relief to require
First Interstate and the defendant directors to approve Wells Fargo's becoming
an interested stockholder pursuant to the Exchange Offer or to approve any
merger between Wells Fargo and First Interstate that is found not to fall
within the 203(b)(6) exemption.
77. Plaintiff has no adequate remedy at law.
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COUNT SIX
(INJUNCTIVE AND DECLARATORY RELIEF AGAINST FIRST INTERSTATE
AND DEFENDANT DIRECTORS: THE NOMINATING RESTRICTION
78. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 76,
hereof.
79. The Nominating Restriction in First Interstate's Bylaws, if
applied to consent solicitations, effectively prohibits First Interstate
stockholders from exercising their right to elect directors by written consent
or though a consent solicitation.
80. The Nominating Restriction can be applied lawfully only to the
nomination of directors prior to a stockholders' meeting and, as a matter of
law, cannot be applied to the election of directors pursuant to plaintiff's
Consent Solicitation.
81. Plaintiff is entitled to a declaration that the Nominating
Restriction violates Delaware law if applied to consent solicitations and is,
to that extent, void. Alternatively, plaintiff is entitled to a declaration
that the Nominating Restriction does not apply to plaintiff's Consent
Solicitation.
82. Plaintiff seeks injunctive relief against any
attempt by First Interstate or the defendant directors to
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apply the Nominating Restriction to the Consent Solicita-
tion.
83. Plaintiff has no adequate remedy at law.
COUNT SEVEN
(INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE AND DEFENDANT
DIRECTORS: DUTY TO CONDUCT SALE ON A LEVEL PLAYING FIELD)
84. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 82 here-
of.
85. By meeting and sharing confidential information with at least
three banks (First Bank, Norwest Corporation and Banc One corporation) in
response to the letter from Wells Fargo offering a bid for First Interstate,
First Interstate's directors initiated an active bidding process seeking to
sell the company. Moreover, given the size of the proposed combination of
First Interstate and First Bank, that combination, unless enjoined, would be
the last practical opportunity for the First Interstate stockholders to obtain
a control premium for their stock. Under those circumstances, the defendant
directors had the duty (a) to be diligent and vigilant in examining critically
the First Bank Proposed Merger and all alternative offers; (b) to act in good
faith; (c) to obtain, and act with due care on, all material information
reasonably available, including infor-
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mation necessary to compare all offers to determine which of the transactions
would provide the best value reasonably available to the stockholders; and (d)
to negotiate actively and in good faith with Wells Fargo to that end.
86. By refusing to share the same confidential information with
plaintiff that it shared with First Bank and other suitors, by entering into
the First Bank Proposed Merger, by granting the Break-Up Fee and the Lock-Up
Stock Option to First Bank, by adopting and/or refusing to redeem or amend the
Poison Pill or to declare the Exchange Offer to be a Qualified Offer and by
applying the Nominating Restriction to the Consent Solicitation, the defendant
directors will breach or have already wilfully breached their fiduciary duties
as fair and neutral stewards of First Interstate.
87. Those breaches of fiduciary duties have injured plaintiff and
all other First Interstate stockholders and will continue to injure then by
depriving them of the benefits of a fair and evenhanded bidding process and
have put the sale of the company on an uneven playing field.
88. Plaintiff seeks injunctive relief enjoining the consummation
of the First Bank Proposed Merger and the payment of any such Break-Up Fee or
the issuance of First Interstate stock (or any payment of money) to First Bank
pursuant to the Lock-Up Stock Option. In the alternative,
33
<PAGE>
plaintiff seeks an injunction compelling the defendant directors to terminate
the First Bank Proposed Merger and invalidating the Break-Up Fee and Lock-Up
Stock Option.
89. Plaintiff has no adequate remedy at law.
COUNT EIGHT
(INJUNCTIVE AND DECLARATORY RELIEF AGAINST FIRST BANK:
AIDING AND ABETTING BREACHES OF FIDUCIARY DUTY)
90. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 88 here-
of.
91. First Bank, with knowledge of the breaches of fiduciary duties
alleged herein on the part of First Interstate and the defendant directors,
substantially assisted in such breaches by agreeing to the Break-Up Fee and
Lock-Up Stock Option and the First Bank Proposed Merger, thereby aiding and
abetting First Interstate and the defendant directors in such breaches.
92. Plaintiff seeks a declaration that First Bank aided and
abetted First Interstate and the defendant directors in their breach of
fiduciary duty and injunctive relief against First Bank's participation in
First Interstate's and the defendant directors' breaches of their fiduciary
duties, including, but not limited to, an injunction prohibiting the
acceptance of a Break-Up Fee or the receipt of any First
34
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Interstate stock (or receipt of any money) from First Interstate pursuant to
the Lock-Up Stock Option.
93. Plaintiff has no adequate remedy at law.
COUNT NINE
(DECLARATORY JUDGMENT AGAINST FIRST BANK:
THE WELLS FARGO EXCHANGE OFFER, PROXY SOLICITATION AND
CONSENT SOLICITATION DO NOT CONSTITUTE TORTIOUS INTERFERENCE
WITH OR ANY OTHER BUSINESS-RELATED TORT IN CONNECTION WITH
THE FIRST INTERSTATE-FIRST BANK PROPOSED MERGER)
94. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 93 here-
of.
95. First Interstate stockholders benefit from free, open and
unfettered competitive bidding in the face of a proposed merger and will be
the beneficiaries if permitted to consider the Wells Fargo Exchange Offer.
Indeed, the First Bank Proposed Merger contemplates the possibility of a
higher offer since it may be terminated by First Interstate following tile
receipt of another takeover proposal. Moreover, the stockholders of First
Interstate are entitled to know what offers are available to them at the time
they vote. Accordingly, Wells Fargo's Exchange Offer, Proxy Solicitation and
Consent Solicitation do not constitute and should not be deemed to be tortious
interference with, or
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any other business-related tort in connection with, the
First Bank Proposed Merger.
96. Plaintiff seeks a declaratory judgment that neither the
Exchange Offer, the Proxy Solicitation nor the Consent Solicitation
constitutes tortious interference with, or any other business-related tort in
connection with, the First Bank Proposed Merger.
97. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff respectfully requests that this Court enter
judgment against all defendants, and all persons in active concert or
participation with them, as follows:
A. Declaring that the First Bank Proposed Merger, the Break-Up Fee
and the Lock-Up Stock Option breach the fiduciary duties that the defendant
directors owe to First Interstate's stockholders and are, therefore, void and
unenforceable.
B. Permanently enjoining First Interstate and the
defendant directors from:
(i) consummating the First Bank Proposed Merger;
(ii) making any payments to First Bank pursuant
to the Break-Up Fee or issuing any stock (or making any
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payment of money) to First Bank pursuant to the Lock-Up
Stock Option;
(iii) taking any action that would interfere with the Exchange
Offer, or entering into any agreement or arrangement or using any device
that would interfere with, restrict or that would have the effect of
restricting consummation of the Exchange offer,
(iv) employing any defensive device to interfere
with the Proxy Solicitation,
(v) employing any defensive device or taking any steps to
interfere with the Consent Solicitation or to interfere with, or limit
the power of, directors elected pursuant to the Consent Solicitation to
execute fully their fiduciary duties;
(vi) permitting the "Distribution Date" to occur
under the Poison Pill; and
(vii) applying the Nominating Restriction to the
Consent Solicitation.
C. Permanently enjoining First Bank and all persons in active
concert or participation with it from anticipating in the consummation of the
Proposed Merger and the payment of the Break-Up Fee or issuance of First
Interstate Stock (or any payment of money) to First Bank pursuant to the
Lock-Up Stock Option.
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D. Declaring that First Bank aided and abetted
First Interstate and the defendant directors' breaches of
their fiduciary duties.
E. Compelling First Interstate and its defendant directors to
declare Wells Fargo's Exchange Offer to be a "Qualified Offer," to redeem the
Rights under the Poison Pill or otherwise to amend the Poison Pill to make it
inapplicable to the Exchange Offer or to any follow-on merger.
F. Declaring that the Nominating Restriction has no application to
the Consent Solicitation or, in the alternative, that it violates Delaware law
if applied to the Consent Solicitation and is, to that extent, void.
G. Declaring that the Exchange Offer and any subsequent merger are
exempt from Section 203 of the Delaware Corporation Law pursuant to Section
203(b)(6), or that Section 203 is otherwise inapplicable to the Exchange Offer
and any subsequent merger or, in the alternative, compelling First Interstate
and the defendant directors to approve the Wells Fargo Exchange Offer under
Section 203.
H. Declaring that the Wells Fargo Exchange offer, Proxy
Solicitation and Consent Solicitation do not constitute tortious interference
with, or any other business-related tort in connection with, the Proposed
Merger.
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I. Granting damages for all incidental injuries
suffered as a result of defendants' unlawful conduct.
J. Awarding plaintiff the costs and disbursements
of this action, including attorneys' fees.
K. Granting plaintiff such other and further
relief as the Court deems just and proper.
----------------------------------
Jesse A. Finkelstein
Todd C. Schiltz
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
(302) 658-6541
Attorneys for Plaintiff
Of counsel:
CRAVATH, SWAINE & MOORE
Worldwide Plaza
825 Eighth Avenue New York, NY 10019
(212) 474-1000
39
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - -------------------------------------------X
WELLS FARGO & COMPANY, a Delaware cor- :
poration, C.A. No.
Plaintiff, :
-against- :
FIRST INTERSTATE BANCORP, a Delaware :
corporation, FIRST BANK SYSTEM, INC., a
Delaware corporation,, ELEVEN :
ACQUISITION CORPORATION, a Delaware
corporation, JOHN E. BRYSON, EDWARD M. :
CARSON, JEWEL PLUMMER COBB, RALPH P.
DAVIDSON, MYRON DU BAIN, DON C. FRIS- :
BEE, 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,
:
Defendants.
- - -------------------------------------------X
STATE OF CALIFORNIA )
) ss.:
COUNTY OF SAN FRANCISCO )
GUY ROUNSAVILLE, JR., being duly sworn, deposes and says:
I am Executive Vice President and Chief Counsel of plaintiff,
Wells Fargo & Company, and I know the allegations of the foregoing Verified
Complaint to be true of my own
40
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knowledge, except as to matters alleged upon information and belief. As to
those matters, I believe them to be true.
Sworn to before me this
______ day of November 1995
Notary Public
41
