<PAGE>
As filed with the Securities and Exchange Commission on October 27, 1994
Registration No. 033-_____
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------
NORWEST CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 6711 41-0449260
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of incorporation Industrial Classification Identification No.)
or organization) Code Number)
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1000
612-667-1234
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------
Stanley S. Stroup, Esq.
Executive Vice President and General Counsel Copy to :
Norwest Corporation H. Bernt von Ohlen, Esq.
Norwest Center Norwest Corporation
Sixth and Marquette Norwest Center
Minneapolis, Minnesota 55479-1026 Sixth and Marquette
612-667-8858 Minneapolis, Minnesota 55479-1026
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of the Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Title of Securities Amount Proposed Maximum Proposed Maximum Amount of
to Be to Be Offering Price Aggregate Registration
Registered Registered Per Share Offering Price Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 400,000 N/A $3,781,326 (3) $1,303.91
(par value $1 2/3 per share) (1) Shares (2)
- -----------------------------------------------------------------------------------------------
<FN>
(1) Each share of the registrant's common stock includes one preferred stock
purchase right.
(2) Based upon the maximum number of shares that may be issued in the
transaction described herein.
(3) Estimated solely for purpose of computing the registration fee, in
accordance with Rule 457(f), based upon the book value, as of June 30,
1994, of all shares of common stock to be acquired by the registrant in the
transaction described herein.
</TABLE>
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE>
NORWEST CORPORATION
Cross Reference Sheet
Pursuant to Regulation S-K, Item 501(b)
Form S-4 Item Prospectus Heading
------------- ------------------
1. Forepart of Registration Statement Outside Front Cover Page
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Available Information;
Pages of Prospectus Incorporation of Certain
Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Summary Information
Charges, and Other Information
4. Terms of the Reorganization The Reorganization
5. Pro Forma Financial Information *
6. Material Contracts with the Company The Reorganization
Being Acquired
7. Additional Information Required for *
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Counsel Legal Opinion
9. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
10. Information with Respect to S-3 Summary Information--
Registrants Comparative Unaudited Per
Share Data; Summary
Information--Selected
Financial Data; Certain
Regulatory Considerations
11. Incorporation of Certain Information Incorporation of Certain
by Reference Documents by Reference;
Management and Additional
Information
<PAGE>
NORWEST CORPORATION
Cross Reference Sheet
Pursuant to Regulation S-K, Item 501(b)
Form S-4 Item Prospectus Heading
------------- ------------------
12. Information with Respect to S-2 or *
S-3 Registrants
13. Incorporation of Certain Documents *
by Reference
14. Information with Respect to *
Registrants Other Than S-2 or S-3
Registrants
15. Information with Respect to S-3 *
Companies
16. Information with Respect to *
S-2 or S-3 Companies
17. Information with Respect to Companies Summary Information--
Other Than S-2 or S-3 Companies Comparative Unaudited Per
Share Data; Summary
Information--Selected
Financial Data;
Information About
Alexandria and the Bank
18. Information If Proxies, Consents, Meeting Information;The
or Authorizations Are to Be Solicited Reorganization--Interests
of Certain Persons in the
Reorganization; The
Reorganization--Rights of
Dissenting Shareholders
19. Information If Proxies, Consents, or *
Authorizations Are Not to Be Solicited
in an Exchange Offer
- -------------------------
*Item is omitted because answer is negative or item is inapplicable.
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
P.O. BOX 519
ALEXANDRIA, MINNESOTA 56308
November __, 1994
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Alexandria Securities and Investment Company ("Alexandria") to be held at
_______________, _______________, Alexandria, Minnesota, on _________, December
__, 1994, at __:__ _.m., local time. At the Special Meeting you will be asked
to consider and vote upon the Amended and Restated Agreement and Plan of
Reorganization, dated as of July 21, 1994, among Alexandria, Community State
Bank of Alexandria (the "Bank"), and Norwest Corporation ("Norwest"), and the
related Agreement and Plan of Merger (together, the "Reorganization Agreement"),
providing for (a) the merger of a wholly owned subsidiary of Norwest into
Alexandria (the "Merger") and (b) subsequent to the Merger, the merger of the
Bank with a wholly owned banking subsidiary of Norwest (the "Bank Merger," and
together with the Merger, the "Reorganization").
Under the terms of the Reorganization Agreement, the Merger will result in
the conversion of each share of Alexandria Common Stock outstanding immediately
prior to the time the Merger becomes effective into a number of shares of
Norwest Common Stock determined in accordance with the provisions of the
Reorganization Agreement, which are described in the accompanying Proxy
Statement-Prospectus for the Special Meeting.
The enclosed Proxy Statement-Prospectus contains a more complete
description of the terms of the Reorganization. You are urged to read the Proxy
Statement-Prospectus carefully.
The Board of Directors has approved the Reorganization Agreement as being
in the best interest of Alexandria's shareholders and recommends that you vote
in favor of the Merger. In making this recommendation, the Board of Directors
has considered numerous factors including the consideration offered by Norwest
and the structure of the proposed Merger, which is designed to enhance the value
of the Alexandria shareholders' investment and to be tax-free for federal income
tax purposes to Alexandria shareholders receiving Norwest Common Stock.
Lindquist & Vennum P.L.L.P., special tax counsel, is providing its opinion to
the Board of Directors that the Merger will be treated as a tax-free
reorganization for federal income tax purposes. YOU SHOULD CONSULT YOUR OWN TAX
ADVISOR CONCERNING THE FEDERAL, AND ANY APPLICABLE FOREIGN, STATE, AND LOCAL,
INCOME TAX CONSEQUENCES OF THE MERGER.
In order to ensure that your vote is represented at the Special Meeting,
PLEASE DATE, SIGN, AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. If
you attend the meeting, you may vote in person if you wish, even though you have
previously returned your proxy.
E. C. Beliveau
PRESIDENT
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
P.O. Box 519
Alexandria, Minnesota 56308
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
ON DECEMBER __, 1994
------------------------
A special meeting of shareholders (the "Special Meeting") of Alexandria
Securities and Investment Company ("Alexandria"), a Minnesota corporation, will
be held at _______________, _______________, Alexandria, Minnesota, on
_________, December __, 1994, at __:__ _.m., local time, for the following
purposes:
1. To consider and vote upon the Amended and Restated Agreement and
Plan of Reorganization, dated as of July 21, 1994, (including the Agreement
and Plan of Merger attached thereto) by and among Alexandria, Community
State Bank of Alexandria (the "Bank"), A Minnesota state bank, and Norwest
Corporation ("Norwest"), a Delaware corporation, a copy of which is
included in the accompanying Proxy Statement-Prospectus as Appendix A,
under the terms of which (a) a wholly owned subsidiary of Norwest would be
merged with Alexandria (the "Merger"), with Alexandria as the surviving
corporation, and each outstanding share of common stock, par value $25.00
per share, of Alexandria would be converted into shares of common stock,
par value $1 2/3 per share, of Norwest, and (b) subsequent to the
consummation of the Merger, the Bank would be merged with a wholly owned
banking subsidiary of Norwest (the "Bank Merger," and together with the
Merger, the "Reorganization"); and to authorize such further action by the
Board of Directors and proper officers of Alexandria as may be necessary or
appropriate to carry out the intent and purposes of the Reorganization.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record on the books of Alexandria at the close of
business on November __, 1994, will be entitled to receive notice of and to vote
at the Special Meeting or any adjournment thereof.
Your attention is directed to the Proxy Statement-Prospectus accompanying
this notice for a more complete statement regarding the matters to be acted upon
at the Special Meeting.
By Order of the Board of Directors
Micheal L. Lillehaugen
SECRETARY AND TREASURER
November __, 1994
HOLDERS OF ALEXANDRIA COMMON STOCK ARE URGED TO COMPLETE, SIGN, DATE, AND MAIL
THE ENCLOSED PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU
MAY, IF YOU WISH, REVOKE YOUR PROXY AND VOTE IN PERSON. THE PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN THE PROXY
STATEMENT-PROSPECTUS.
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
P.O. BOX 519
ALEXANDRIA, MINNESOTA 56308
November __, 1994
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Special Meeting") of Community State Bank of Alexandria (the "Bank") to be held
at _______________, _______________, Alexandria, Minnesota, on _________,
December __, 1994, at __:__ _.m., local time. At the Special Meeting you will
be asked to consider and vote upon the merger (the "Bank Merger") of the Bank
with Norwest State Bank of Alexandria ("NSBA"), a wholly owned subsidiary of
Norwest Corporation ("Norwest"), pursuant to the terms of an Agreement and Plan
of Merger (the "Bank Merger Agreement") to be entered into by the Bank and NSBA
and the related Amended and Restated Agreement and Plan of Reorganization, dated
as of July 21, 1994, among Alexandria Securities and Investment Company, the
Bank, and Norwest (the "Reorganization Agreement").
Pursuant to the terms of the Bank Merger Agreement and the Reorganization
Agreement, the Bank Merger will result in the conversion of each share of Bank
Common Stock outstanding prior to the Bank Merger, other than shares owned by
Alexandria, into a number of shares of Norwest Common Stock determined in
accordance with the provisions of the Reorganization Agreement, which are
described in the enclosed Proxy Statement-Prospectus.
Please read the enclosed Proxy Statement-Prospectus for further information
concerning the Bank Merger and related transactions, and the parties involved.
Approval of the Bank Merger requires the affirmative vote of at least
two-thirds of the outstanding shares of Bank Common Stock. YOUR BOARD OF
DIRECTORS BELIEVES THAT THE TERMS OF THE PROPOSED REORGANIZATION ARE FAIR AND IN
THE BEST INTERESTS OF BANK STOCKHOLDERS, AND THEREFORE RECOMMENDS APPROVAL OF
THE BANK MERGER.
Micheal L. Lillehaugen
PRESIDENT
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
P.O. BOX 519
ALEXANDRIA, MINNESOTA 56308
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
ON DECEMBER __, 1994
------------------------
A special meeting of stockholders (the "Special Meeting") of Community
State Bank of Alexandria (the "Bank"), a Minnesota state bank, will be held at
_______________, _______________, Alexandria, Minnesota, on _________, December
__, 1994, at __:__ _.m., local time, for the following purposes:
1. To consider and vote upon whether the merger (the "Bank Merger")
of the Bank with Norwest State Bank of Alexandria ("NSBA"), a wholly owned
subsidiary of Norwest Corporation, a Delaware corporation, pursuant to the
terms of an Agreement and Plan of Merger (the "Bank Merger Agreement") to
be entered into by the Bank and NSBA (the form of which is attached as
Appendix B to the accompanying Proxy Statement-Prospectus), under the laws
of the Minnesota, shall be ratified and confirmed; and to vote upon any
other matters incidental to the Bank Merger.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record on the books of the Bank at the close of
business on November __, 1994, will be entitled to receive notice of and to vote
at the Special Meeting or any adjournment thereof.
Your attention is directed to the Proxy Statement-Prospectus accompanying
this notice for a more complete statement regarding the matters to be acted upon
at the Special Meeting.
By Order of the Board of Directors
Carol J. Meyer
VICE PRESIDENT AND CASHIER
November __, 1994
HOLDERS OF THE BANK COMMON STOCK ARE URGED TO READ
THE ENCLOSED PROXY STATEMENT-PROSPECTUS CAREFULLY AND COMPLETELY.
THE BANK IS NOT ASKING YOU FOR A PROXY,
AND YOU ARE REQUESTED NOT TO SEND A PROXY TO THE BANK.
<PAGE>
PROXY STATEMENT OF
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER __, 1994
------------------------
INFORMATION STATEMENT OF
COMMUNITY STATE BANK OF ALEXANDRIA
FOR A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER __, 1994
------------------------
PROSPECTUS
OF
NORWEST CORPORATION
COMMON STOCK
This Prospectus of Norwest Corporation ("Norwest") relates to up to 400,000
shares of the common stock, par value $1 2/3 per share, of Norwest ("Norwest
Common Stock") issuable to (i) the shareholders of Alexandria Securities and
Investment Company ("Alexandria") upon consummation of the proposed merger (the
"Merger") of a wholly owned subsidiary of Norwest with Alexandria, with
Alexandria as the surviving corporation, pursuant to the terms of the Amended
and Restated Agreement and Plan of Reorganization, dated as of July 21, 1994, by
and among Alexandria, Community State Bank of Alexandria (the "Bank"), and
Norwest (together with the Agreement and Plan of Merger attached thereto, the
"Reorganization Agreement"), and (ii) the stockholders, other than Norwest, of
the Bank upon consummation of the proposed merger (the "Bank Merger") of the
Bank with Norwest State Bank of Alexandria ("NSBA"), a wholly owned subsidiary
of Norwest, pursuant to the terms of an Agreement and Plan of Merger to be
entered into by the Bank and NSBA (the "Bank Merger Agreement"). The Merger and
the Bank Merger are sometimes hereinafter referred to collectively as the
"Reorganization." The Reorganization Agreement and the form of the Bank Merger
Agreement are set forth in Appendix A and Appendix B, respectively, to this
Proxy Statement-Prospectus and are incorporated by reference herein.
This Prospectus also serves as the Proxy Statement of Alexandria for a
special meeting of its shareholders to be held on December __, 1994 (the
"Alexandria Special Meeting"), and the Information Statement of the Bank for a
special meeting of its stockholders to be held on December __, 1994 (the "Bank
Special Meeting," and together with the Alexandria Special Meeting, the "Special
Meetings").
Except as described herein, upon consummation of the Merger, each
outstanding share of common stock of Alexandria ("Alexandria Common Stock") and,
upon consummation of the Bank Merger, each outstanding share of common stock of
the Bank ("Bank Common Stock"), other than shares owned by Norwest, will be
converted into shares of common stock, par value $1 2/3 per share, of Norwest
("Norwest Common Stock"). Based on the conversion factor which would have been
applicable if the closing of the Reorganization had occurred on November __,
1994, approximately 60.94 shares of Norwest Common Stock would have been issued
for each outstanding share of Alexandria Common Stock and approximately 29.32
shares of Norwest Common Stock would have been issued for each outstanding share
of Bank Common Stock, other than shares owned by Alexandria immediately prior to
the Bank Merger.
For a more complete description of the Reorganization Agreement and the
Bank Merger Agreement and the terms of the Reorganization, see "THE
REORGANIZATION."
This Proxy Statement-Prospectus and the form of proxy for the Alexandria
Special Meeting are first being mailed to shareholders of Alexandria and to
stockholders of the Bank on or about November __, 1994.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Proxy Statement-Prospectus is November __, 1994.
<PAGE>
AVAILABLE INFORMATION
Norwest is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance therewith,
Norwest files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission").
Reports, proxy statements, and other information concerning Norwest can be
inspected and copied at the public reference facilities of the Commission, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at Seven World Trade Center, Suite 1300, New
York, New York 10048, and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained at prescribed
rates by writing to the Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549. Reports, proxy statements, and other information
filed by Norwest also may be inspected at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005 and at the offices of the
Chicago Stock Exchange at One Financial Place, 440 South LaSalle Street,
Chicago, Illinois 60605.
This Proxy Statement-Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4 and the exhibits thereto (the
"Registration Statement") covering the securities offered hereby that Norwest
has filed with the Commission. Certain portions of the Registration Statement
have been omitted pursuant to the rules and regulations of the Commission.
Reference is hereby made to such omitted portions for further information with
respect to Norwest, Alexandria, and the securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS RELATING TO NORWEST,
EXCLUDING EXHIBITS, UNLESS SPECIFICALLY INCORPORATED THEREIN, ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST TO LAUREL A. HOLSCHUH, SECRETARY,
NORWEST CORPORATION, NORWEST CENTER, SIXTH AND MARQUETTE, MINNEAPOLIS, MINNESOTA
55479-1026, TELEPHONE (612) 667-8655. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY NOVEMBER__, 1994.
The following documents filed by Norwest with the Commission are
incorporated by reference in and made a part of this Proxy Statement-Prospectus:
(i) Annual Report on Form 10-K for the year ended December 31, 1993, as amended
by Amendment No. 1 on Form 10-K/A dated May 13, 1994; (ii) Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1994, and June 30, 1994; and (iii)
Current Reports on Form 8-K dated February 15, 1994, and July 21, 1994.
All documents filed by Norwest with the Commission pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the Special Meetings shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of such filing. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes hereof to the
extent that a statement contained herein or in any other subsequently filed
document which also is, or is deemed to be, incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part hereof.
2
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . 2
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Terms of the Reorganization . . . . . . . . . . . . . . . . . . . . . . 6
Special Meetings and Vote Required. . . . . . . . . . . . . . . . . . . 6
Reasons for the Reorganization. . . . . . . . . . . . . . . . . . . . . 7
Recommendation of the Boards of Directors . . . . . . . . . . . . . . . 8
Effective Date and Time of the Merger and of the Bank Merger. . . . . . 8
Conditions and Termination. . . . . . . . . . . . . . . . . . . . . . . 8
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Management and Operations After the Reorganization. . . . . . . . . . . 9
Interests of Certain Persons in the Reorganization. . . . . . . . . . . 9
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . 9
Certain Federal Income Tax Considerations . . . . . . . . . . . . . . . 9
Markets and Market Prices . . . . . . . . . . . . . . . . . . . . . . . 10
Certain Differences in Rights of Shareholders . . . . . . . . . . . . . 10
Comparative Unaudited Per Share Data. . . . . . . . . . . . . . . . . . 11
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . 13
MEETING INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Date, Place, and Time . . . . . . . . . . . . . . . . . . . . . . . . . 18
Record Date; Vote Required. . . . . . . . . . . . . . . . . . . . . . . 18
Principal Shareholders and Security Ownership of Management of
Alexandria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Principal Stockholders and Security Ownership of Management of the Bank 21
Voting and Revocation of Proxies. . . . . . . . . . . . . . . . . . . . 21
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . 22
THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Background of and Reasons for the Reorganization. . . . . . . . . . . . 22
Terms of the Merger and the Bank Merger . . . . . . . . . . . . . . . . 23
Effective Date and Time of the Merger and of the Bank Merger. . . . . . 24
Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . . 24
Conditions to the Merger and to the Bank Merger . . . . . . . . . . . . 25
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . 27
Business Pending the Reorganization . . . . . . . . . . . . . . . . . . 27
Waiver, Amendment, and Termination. . . . . . . . . . . . . . . . . . . 28
Management and Operations After the Reorganization. . . . . . . . . . . 29
Interests of Certain Persons in the Reorganization. . . . . . . . . . . 29
Certain Differences in Rights of Shareholders . . . . . . . . . . . . . 29
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . 35
Certain Federal Income Tax Considerations . . . . . . . . . . . . . . . 38
Resale of Norwest Common Stock. . . . . . . . . . . . . . . . . . . . . 40
Dividend Reinvestment and Optional Cash Payment Plan. . . . . . . . . . 41
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 41
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3
<PAGE>
INFORMATION ABOUT ALEXANDRIA AND THE BANK. . . . . . . . . . . . . . . . . 42
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Markets and Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 42
Management's Discussion and Analysis of Financial Condition and Results
of Operations of Alexandria . . . . . . . . . . . . . . . . . . . . . 44
Management's Discussion and Analysis of Financial Condition and Results
of Operations of the Bank . . . . . . . . . . . . . . . . . . . . . . 72
CERTAIN REGULATORY CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . 100
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Dividend Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 100
Holding Company Structure . . . . . . . . . . . . . . . . . . . . . . . 100
Capital Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . 101
Federal Deposit Insurance Corporation Improvement Act of 1991 . . . . . 102
FDIC Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
MANAGEMENT AND ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . 104
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
APPENDIX A AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION, AND
AGREEMENT AND PLAN OF MERGER
APPENDIX B FORM OF AGREEMENT AND PLAN OF MERGER
APPENDIX C MINNESOTA STATUTES, SECTIONS 302A.471 AND 302A.473
APPENDIX D MINNESOTA STATUTES, SECTION 49.41
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE NORWEST COMMON STOCK
OFFERED BY THIS PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN
ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF NORWEST, ALEXANDRIA, OR THE BANK SINCE THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS.
4
<PAGE>
SUMMARY
The following summary is not intended to be complete and is qualified in
all respects by the more detailed information included in this Proxy
Statement-Prospectus, the Appendices hereto, and the documents incorporated by
reference herein. As used in this Proxy Statement-Prospectus, the terms
"Norwest" and "Alexandria" refer to such entities, respectively, and where the
context requires, such entities and their respective subsidiaries. All
information concerning Norwest included in this Proxy Statement-Prospectus has
been furnished by Norwest, and all information concerning Alexandria included in
this Proxy Statement-Prospectus has been furnished by Alexandria to Norwest for
incorporation herein.
THE COMPANIES
NORWEST CORPORATION
Norwest Corporation is a regional bank holding company organized under the
laws of Delaware in 1929 and registered under the Bank Holding Company Act of
1956, as amended (the "BHC Act"). As a diversified financial services
organization, Norwest operates through subsidiaries engaged in banking and in
related businesses. Norwest provides retail, commercial, and corporate banking
services to its customers through banks located in Arizona, Colorado, Illinois,
Indiana, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Ohio,
South Dakota, Texas, Wisconsin, and Wyoming. Norwest provides additional
financial services to its customers through subsidiaries engaged in various
businesses, principally mortgage banking, consumer finance, equipment leasing,
agricultural finance, commercial finance, securities brokerage and investment
banking, insurance, computer and data processing services, trust services, and
venture capital investments.
At June 30, 1994, Norwest had consolidated total assets of $55.8 billion,
total deposits of $34.7 billion, and total stockholders' equity of $3.8 billion.
Based on total assets at June 30, 1994, Norwest was the 13th largest commercial
banking organization in the United States.
Norwest regularly explores opportunities for acquisitions of financial
institutions and related businesses. Generally, management of Norwest does not
make a public announcement about an acquisition until a definitive agreement has
been signed. Norwest has entered into definitive agreements for the acquisition
of various financial institutions, including Alexandria, having aggregate total
assets at June 30, 1994, of approximately $3.3 billion. Certain of these
acquisitions were consummated subsequent to June 30, 1994, and the others remain
subject to regulatory approval and are expected to be completed by the end of
the first quarter of 1995. None of these acquisitions are significant for the
financial statements of Norwest, either individually or in the aggregate.
Norwest's principal executive offices are located at Norwest Center, Sixth
and Marquette, Minneapolis, Minnesota 55479-1000, and its telephone number is
612-667-1234.
Additional information concerning Norwest is included in the Norwest
documents incorporated by reference herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
5
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
Alexandria is a bank holding company organized under the laws of Minnesota
in 1979. Its principal executive offices are located at 304 Maple Street,
Alexandria, Minnesota 56308, and its telephone number is 612-782-2181. It holds
88.15% of the issued and outstanding capital stock of Community State Bank of
Alexandria, a full service commercial bank chartered under the laws of the State
of Minnesota. The Bank offers a full range of commercial and consumer banking
services in the area. At June 30, 1994, the Bank had total assets of $58.2
million, while Alexandria had total assets on a consolidated basis of $58.3
million and total shareholders' equity of $3.8 million. See "INFORMATION ABOUT
ALEXANDRIA AND THE BANK."
TERMS OF THE REORGANIZATION
The Reorganization Agreement provides for the merger of a wholly owned
subsidiary of Norwest with Alexandria, with Alexandria as the surviving
corporation. Upon consummation of the Merger, the outstanding shares of
Alexandria Common Stock (other than shares as to which statutory dissenters'
rights have been exercised and not forfeited) will be converted into a number of
shares of Norwest Common Stock determined in accordance with the provisions of
the Reorganization Agreement. The exact number of shares of Norwest Common
Stock into which each outstanding share of Alexandria Common Stock will be
converted will be determined using a conversion factor (the "Alexandria
Conversion Factor") calculated by (i) multiplying 337,255 shares, subject to
upward adjustment if the closing of the Reorganization occurs after December 31,
1994, by a factor of .8815, and then (ii) dividing the result by the number of
shares of Alexandria Common Stock outstanding immediately prior to the Merger.
The Reorganization Agreement also provides for the merger of the Bank with
NSBA, under the charter of NSBA (the "Bank Merger"). Upon consummation of the
Bank Merger, the outstanding shares of Bank Common Stock (other than shares
owned by Alexandria and shares as to which statutory dissenters' rights have
been exercised and not forfeited) will be converted into shares of Norwest
Common Stock in accordance with the provisions of the Bank Merger Agreement.
The exact number of shares of Norwest Common Stock into which each outstanding
share of Bank Common Stock will be converted will be determined using a
conversion factor (the "Bank Conversion Factor") calculated by (i) multiplying
337,255 shares, subject to upward adjustment if the closing of the
Reorganization occurs after December 31, 1994, by a factor of .1185, and then
(ii) dividing the result by the number of shares of Bank Common Stock
outstanding and owned by stockholders other than Alexandria immediately prior to
the Bank Merger. See "THE REORGANIZATION--Terms of the Merger and of the Bank
Merger."
SPECIAL MEETINGS AND VOTE REQUIRED
ALEXANDRIA SPECIAL MEETING
The special meeting of Alexandria shareholders to consider and vote on the
Merger will be held on _________, December __, 1994, at __:__ _.m., local time,
at _______________, _______________, Alexandria, Minnesota. Only holders of
record of Alexandria Common Stock at the close of business on November __, 1994,
will be entitled to vote at the Alexandria Special Meeting. At such date, there
were 4,878 shares of Alexandria Common Stock
6
<PAGE>
outstanding. Each share of Alexandria Common Stock is entitled to one vote.
For additional information relating to the Alexandria Special Meeting, see
"MEETING INFORMATION."
Approval of the Reorganization Agreement requires the affirmative vote of
the holders of a majority of the outstanding shares of Alexandria Common Stock.
As of the record date for the Alexandria Special Meeting, directors and officers
of Alexandria and their affiliates owned beneficially or controlled the voting
of 100% of the shares of Alexandria Common Stock outstanding on that date.
Alexandria's directors and officers have informed Alexandria that they intend to
vote all of their shares in favor of the Reorganization Agreement. At the
record date, directors and executive officers of Norwest did not own
beneficially any shares of Alexandria Common Stock. See "MEETING
INFORMATION--Record Date; Vote Required" and "MEETING INFORMATION--Principal
Shareholders and Security Ownership of Management of Alexandria."
BANK SPECIAL MEETING
The special meeting of Bank stockholders to consider and vote on the Bank
Merger will be held on _________, December __, 1994, at __:__ _.m., local time,
at _______________, _______________, Alexandria, Minnesota. Only holders of
record of Bank Common Stock at the close of business on November __, 1994, will
be entitled to vote at the Bank Special Meeting. At such date, there were
11,500 shares of Bank Common Stock outstanding. Each share of Bank Common Stock
is entitled to one vote. For additional information relating to the Bank
Special Meeting, see "MEETING INFORMATION."
Approval of the Bank Merger Agreement requires the affirmative vote of the
holders of two-thirds of the outstanding shares of Bank Common Stock. AS OF THE
RECORD DATE FOR THE BANK SPECIAL MEETING, ALEXANDRIA HELD 10,137, OR
APPROXIMATELY 88.15%, OF THE OUTSTANDING SHARES OF BANK COMMON STOCK.
ACCORDINGLY, WITHOUT THE VOTE OF THE REMAINING BANK STOCKHOLDERS, ALEXANDRIA
WILL HAVE THE ABILITY TO EFFECTUATE THE BANK MERGER. As of the record date for
the Bank Special Meeting, directors and officers of the Bank and their
affiliates did not own beneficially or control the voting of any of the shares
of Bank Common Stock. At the record date, directors and executive officers of
Norwest did not own beneficially any shares of Bank Common Stock. See "MEETING
INFORMATION--Record Date; Vote Required" and "MEETING INFORMATION--Principal
Stockholders and Security Ownership of Management of the Bank."
REASONS FOR THE REORGANIZATION
The Board of Directors of Alexandria has concluded that the Reorganization
is in the best interests of the holders of Alexandria Common Stock, who will
receive, in a tax-free exchange, stock of a much larger and a more diversified
enterprise that is actively traded on national exchanges. In addition to the
greater liquidity provided to shareholders, the Reorganization will provide
customers of the Bank with access to a broader range of services and will
provide the Bank with increased financial strength. This should allow the Bank
to compete more effectively with its competitors in the Central Minnesota market
area, several of which are part of larger, multibank holding companies. See
"THE REORGANIZATION--Background of and Reasons for the Reorganization."
7
<PAGE>
RECOMMENDATION OF THE BOARDS OF DIRECTORS
THE BOARD OF DIRECTORS OF ALEXANDRIA UNANIMOUSLY RECOMMENDS THAT ALEXANDRIA
SHAREHOLDERS VOTE FOR THE MERGER. For information concerning the interests of
certain members of the Alexandria Board of Directors and management in the
Reorganization, see "THE REORGANIZATION--Interests of Certain Persons in the
Reorganization."
THE BOARD OF DIRECTORS OF THE BANK UNANIMOUSLY RECOMMENDS THAT THE BANK
STOCKHOLDERS VOTE FOR THE BANK MERGER. For information concerning the interests
of certain members of the Bank Board of Directors and management in the
Reorganization, see "THE REORGANIZATION--Interests of Certain Persons in the
Reorganization."
EFFECTIVE DATE AND TIME OF THE MERGER AND OF THE BANK MERGER
Subject to the terms and conditions of the Reorganization Agreement, the
Merger will be effective on the date on which the appropriate filing is made
with the Secretary of State of the State of Minnesota (the "Effective Date of
the Merger") at 11:59 p.m., Minneapolis, Minnesota time (the "Effective Time of
the Merger"). That filing will be made within ten business days following the
satisfaction or waiver of all conditions set forth in the Reorganization
Agreement or on such other date upon which the parties may agree. The closing
of the Merger and the Bank Merger will occur on the Effective Date of the Merger
(the "Closing Date"). The parties expect the Reorganization to become effective
in the fourth quarter of 1994. The Bank Merger will be effective as of 12:01
a.m. on the date specified in the Bank Merger Agreement (the "Effective Date of
the Bank Merger"). See "THE REORGANIZATION--Effective Date and Time of the
Merger and of the Bank Merger" and "THE REORGANIZATION--Conditions to the Merger
and to the Bank Merger."
CONDITIONS AND TERMINATION
The respective obligations of Norwest and Alexandria to consummate the
Merger are subject to certain conditions, including the receipt of regulatory
approvals without unduly burdensome conditions; approval of the Reorganization
Agreement and the Bank Merger Agreement by the shareholders of Alexandria and
the stockholders of the Bank, respectively; receipt by Alexandria of certain tax
opinions; and certain other conditions customary in transactions of this nature.
See "THE REORGANIZATION--Conditions to the Merger" and "THE
REORGANIZATION--Regulatory Approvals."
The Reorganization Agreement may be terminated at any time prior to the
Effective Date of the Merger, whether prior to or after approval by Alexandria's
shareholders, by either party under specified conditions, including if the
Merger shall not have been consummated by January 31, 1995, unless such failure
of consummation shall be due to the failure of the party seeking termination to
perform its respective covenants and agreements under the Reorganization
Agreement. See "THE REORGANIZATION--Waiver, Amendment, and Termination."
8
<PAGE>
ACCOUNTING TREATMENT
Management of Norwest anticipates that the Reorganization will be accounted
for as a purchase under generally accepted accounting principles. See "THE
REORGANIZATION--Accounting Treatment."
REGULATORY APPROVALS
The Merger has been approved by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board").
The Bank Merger is subject to the approval of the Federal Deposit Insurance
Corporation ("FDIC"). On September 28, 1994, Norwest filed an application for
approval with the FDIC. The Bank Merger is also subject to the approval of the
Minnesota Department of Commerce (the "MDC"), and receipt of such approval is a
condition to consummation of the Reorganization. On September 28, 1994, Norwest
filed an application for approval with the MDC. See "THE
REORGANIZATION--Regulatory Approvals."
MANAGEMENT AND OPERATIONS AFTER THE REORGANIZATION
Following the Reorganization, the Bank will continue to operate at its
present locations and will offer products and services offered by Norwest
affiliates. See "THE REORGANIZATION--Management and Operations After the
Reorganization."
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
All of the current directors and executive officers of Alexandria are
shareholders of Alexandria and the Bank and can be expected, upon consummation
of the Merger, to receive shares of Norwest Common Stock in exchange for their
shares of Alexandria Common Stock or Bank Common Stock. Effective as of the
Effective Time of the Merger, Micheal L. Lillehaugen, who is Secretary-Treasurer
of Alexandria and president and a director of the Bank, will enter into an
employment agreement with Alexandria. See "THE REORGANIZATION--Interests of
Certain Persons in the Reorganization."
RIGHTS OF DISSENTING SHAREHOLDERS
Under Minnesota law Alexandria shareholders who dissent from the Merger are
entitled to obtain payment of the fair value of their shares instead of
receiving Norwest Common Stock in the Merger. Bank stockholders who dissent
from the Bank Merger will have the right under Minnesota law to receive an
appraised value of their shares. With respect to both shareholders of
Alexandria and stockholders of the Bank, failure to comply with statutory
procedures in the exercise of dissenters' rights may nullify such rights. See
"THE REORGANIZATION--Rights of Dissenting Shareholders."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The consummation of the Merger is conditioned upon, among other things, the
opinion of Lindquist & Vennum P.L.L.P., counsel to Alexandria, that the Merger
will qualify as a "tax free" reorganization for federal income tax purposes.
Accordingly, no gain or loss (other than
9
<PAGE>
with respect to cash received in lieu of fractional shares or in satisfaction of
dissenters' rights) generally will be recognized by Alexandria shareholders upon
the exchange of their Alexandria Common Stock for Norwest Common Stock.
However, the federal income tax considerations related to the Merger may be
different to particular types of Alexandria shareholders or in light of each
Alexandria shareholder's personal investment circumstances. CONSEQUENTLY,
ALEXANDRIA SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS CONCERNING
THE FEDERAL INCOME TAX CONSIDERATIONS THAT MAY BE RELEVANT TO THEM IN CONNECTION
WITH THE MERGER, AS WELL AS THE APPLICATION TO THEM OF ANY STATE, LOCAL,
FOREIGN, OR OTHER TAX LAWS. NO OPINION OF COUNSEL WAS REQUESTED, OR WILL BE
PROVIDED, WITH RESPECT TO THE FEDERAL INCOME TAX CONSEQUENCES OF THE BANK
MERGER. AS SUCH, BANK STOCKHOLDERS ARE ALSO URGED TO CONSULT THEIR OWN TAX
ADVISERS CONCERNING THE FEDERAL INCOME TAX CONSIDERATIONS THAT MAY BE RELEVANT
TO THEM IN CONNECTION WITH THE BANK MERGER, AS WELL AS THE APPLICATION TO THEM
OF ANY STATE, LOCAL, FOREIGN, OR OTHER TAX LAWS. See "THE
REORGANIZATION--Certain Federal Income Tax Considerations."
MARKETS AND MARKET PRICES
Norwest Common Stock is listed on the New York Stock Exchange (the "NYSE")
and the Chicago Stock Exchange (the "CHX"). On May 23, 1994, the last trading
day preceding public announcement of the proposed Reorganization, the closing
price per share of Norwest Common Stock was $25.125 and on November __, 1994,
the price was $__.__. There is no public market for Alexandria Common Stock or
Bank Common Stock. Shareholders of Alexandria and stockholders of the Bank are
advised to obtain current market quotations for Norwest Common Stock. The
market price for Norwest Common Stock will fluctuate between the date of this
Proxy Statement-Prospectus and the Closing Date, which may be a period of
several weeks. As a result, the market value of the Norwest Common Stock that
shareholders of Alexandria and stockholders of the Bank ultimately receive in
the Reorganization could be more or less than its market value on the date of
this Proxy Statement-Prospectus. No assurance can be given concerning the
market price of Norwest Common Stock before or after the Closing.
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
Upon consummation of the Reorganization, shareholders of Alexandria and
stockholders of the Bank will become stockholders of Norwest. As a result, such
shareholders' rights will change significantly. See "THE
REORGANIZATION--Certain Differences in Rights of Shareholders."
10
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table presents selected comparative unaudited per share data
for Norwest Common Stock on a historical and pro forma combined basis and for
Alexandria Common Stock and Bank Common Stock on a historical and a pro forma
equivalent basis giving effect to the Reorganization using the purchase method
of accounting. See "THE REORGANIZATION--Accounting Treatment." This
information is derived from the consolidated historical financial statements of
Norwest, including the related notes thereto, incorporated by reference into
this Proxy Statement-Prospectus and the consolidated historical financial
statements of Alexandria and the Bank, including the notes thereto, appearing
elsewhere in this Proxy Statement-Prospectus. This information should be read
in conjunction with such historical financial statements and the related notes
thereto. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "INFORMATION
ABOUT ALEXANDRIA AND THE BANK."
This data is not necessarily indicative of the results of the future
operations of the combined entity or the actual results that would have occurred
had the Reorganization been consummated prior to the periods indicated.
11
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
<TABLE>
<CAPTION>
Norwest Common Stock Alexandria Common Stock Bank Common Stock
--------------------- ----------------------- ----------------------
Pro Forma Pro Forma Pro Forma
Historical Combined Historical Equivalent Historical Equivalent
---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BOOK VALUE (1):
June 30, 1994 $11.07 11.07 775.18 674.64 419.14 324.94
December 31, 1993 11.00 11.00 777.89 670.62 417.40 323.01
DIVIDENDS DECLARED (2):
Six Months Ended
June 30, 1994 0.370 0.370 60.000 22.550 34.000 10.849
Year Ended
December 31, 1993 0.640 0.640 50.000 39.005 30.000 18.766
NET INCOME (3):
Six Months Ended
June 30, 1994 1.17 1.18 84.55 71.62 47.30 34.50
Year Ended
December 31, 1993 1.86 1.86 142.24 113.12 71.88 54.48
<FN>
(1) The pro forma combined book values per share of Norwest Common Stock are
based upon the historical total common equity for Norwest and Alexandria divided
by total pro forma common shares of the combined entities assuming (i)
conversion of the outstanding Alexandria Common Stock at a conversion factor of
60.94506 and (ii) conversion of the outstanding Bank Common Stock (other than
shares owned indirectly by Norwest as a result of the Merger) at a conversion
factor of 29.32135 The difference between the historical total common equity of
Alexandria and the total market value of Norwest Common Stock to be issued in
the Merger is not material. The pro forma equivalent book values per share of
Alexandria Common Stock and per share of Bank Common Stock represent the pro
forma combined amounts multiplied by the assumed conversion factors. The
assumed conversion factors used in this table, which are based on an assumed
aggregate number of shares of Norwest Common Stock to be issued in the Merger of
337,255 would result in the issuance of 297,290 shares of Norwest Common Stock
upon conversion of all outstanding shares of Alexandria Common Stock in the
Merger and of 39,965 shares upon conversion of all outstanding shares of Bank
Common Stock (other than shares owned indirectly by Norwest as a result of the
Merger) in the Bank Merger. See "THE REORGANIZATION--Terms of the Merger and of
the Bank Merger."
(2) Assumes no changes in cash dividends per share. The pro forma equivalent
dividends per share of Alexandria Common Stock and per share of Bank Common
Stock represent cash dividends declared per share of Norwest Common Stock
multiplied by 60.94506 and 29.32135, respectively.
(3) The pro forma combined net income per share (based on fully diluted net
income and weighted average shares outstanding) is based upon the combined
historical net income for Norwest and Alexandria divided by the average pro
forma common shares of the combined entities, assuming conversion factors for
Alexandria and the Bank of 60.94506 and of 29.32135, respectively. The pro
forma equivalent net income per share of Alexandra Common Stock and Bank Common
Stock represents the pro forma combined net income per share multiplied by
60.94506 and 29.32135, respectively.
</TABLE>
12
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial information for Norwest, Alexandria, and the Bank. The income
statement and balance sheet data included in the selected financial data for the
five years ended December 31, 1993, are derived from audited consolidated
financial statements of Norwest for such five-year period, the audited
consolidated financial statements of Alexandria and the unaudited financial
statements of the Bank for the year ended December 31, 1993, and the unaudited
consolidated financial statements of Alexandria and the Bank for the four years
ended December 31, 1992. The financial data for the six-month periods ended
June 30, 1994 and 1993, are derived from the unaudited historical financial
statements of Norwest, Alexandria, and the Bank. All financial information
derived from unaudited financial statements reflects, in the respective opinions
of management of Norwest, Alexandria, and the Bank, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of such
data. Results for the six months ended June 30, 1994, are not necessarily
indicative of the results that may be expected for any other interim period or
for the year as a whole. This information should be read in conjunction with
the consolidated financial statements of Norwest and the related notes thereto,
included in documents incorporated herein by reference, and in conjunction with
consolidated financial statements of Alexandria and the Bank, including the
notes thereto, appearing elsewhere in this Proxy Statement-Prospectus. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "INFORMATION ABOUT
ALEXANDRIA AND THE BANK."
13
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30 YEAR ENDED DECEMBER 31
------------------ -------------------------------------------------
1994 1993 1993(1) 1992(2) 1991 1990(3) 1989(4)
---- ---- ------- ------- ---- ------- -------
(In millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
NORWEST:
Interest income $2,066.6 1,939.1 3,946.3 3,806.4 4,025.9 3,885.7 3,624.5
Interest expense 719.4 714.2 1,442.9 1,610.6 2,150.3 2,320.0 2,210.1
-------- -------- -------- -------- -------- -------- --------
Net interest income 1,347.2 1,224.9 2,503.4 2,195.8 1,875.6 1,565.7 1,414.4
Provision for credit losses 60.0 77.5 158.2 270.8 406.4 433.0 233.5
Non-interest income 821.0 770.8 1,585.0 1,273.7 1,064.0 896.3 728.5
Non-interest expense 1,528.1 1,439.4 3,050.4 2,553.1 2,041.5 1,744.5 1,525.9
-------- -------- -------- -------- -------- -------- --------
Income before income taxes 580.1 478.8 879.8 645.6 491.7 284.5 383.5
Income tax expense 187.6 151.6 266.7 175.6 73.4 115.1 99.0
-------- -------- -------- -------- -------- -------- --------
Income before cumulative effect
of a change in accounting method 392.5 327.2 613.1 470.0 418.3 169.4 284.5
Cumulative effect on years prior
to 1992 of change in
accounting method -- -- -- (76.0) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income $392.5 327.2 613.1 394.0 418.3 169.4 284.5
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Net income per share:
Primary:
Before cumulative effect of a
change in accounting method $1.20 1.01 1.89 1.44 1.33 0.59 1.00
Cumulative effect on years prior
to 1992 of change in
accounting method -- -- -- (0.25) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income $1.20 1.01 1.89 1.19 1.33 0.59 1.00
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Fully diluted:
Before cumulative effect of a
change in accounting method $1.17 0.99 1.86 1.42 1.32 0.59 1.00
Cumulative effect on years prior
to 1992 of change in
accounting method -- -- -- (0.23) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income $1.17 0.99 1.86 1.19 1.32 0.59 1.00
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Dividends declared per
common share $0.370 0.310 0.640 0.540 0.470 0.423 0.380
At period end:
Total assets $55,756.8 51,203.2 54,665.0 50,037.0 45,974.5 43,523.0 38,322.0
Long-term debt 7,255.2 5,678.1 6,850.9 4,553.2 3,686.6 3,066.0 2,720.0
Total stockholders' equity 3,836.6 3,592.1 3,760.9 3,371.8 3,192.3 2,434.0 2,288.2
14
<PAGE>
<FN>
(1) On January 14, 1994, First United Bank Group, Inc. ("First United"), a $3.9
billion bank holding company headquartered in Albuquerque, New Mexico, was
acquired in a pooling transaction. Norwest's historical results have been
restated to include the historical results of First United. Appropriate Norwest
items reflect an increase in First United's provision for credit losses of $16.5
million to conform with Norwest's credit loss reserve practices and methods and
$83.2 million in accruals and reserves for merger-related expenses, including
termination costs, systems and operations costs, and investment banking, legal,
and accounting expenses.
(2) On February 9, 1993, Lincoln Financial Corporation ("Lincoln"), a $2.0
billion bank holding company headquartered in Fort Wayne, Indiana, was acquired
in a pooling transaction. Norwest's historical results have been restated to
include the historical results of Lincoln. Appropriate Norwest items reflect an
increase in Lincoln's provision for credit losses of $60.0 million and $33.5
million in Lincoln's provisions and expenditures for costs related to
restructuring activities.
(3) On April 19, 1991, United Banks of Colorado, Inc. ("United"), a $5.5
billion financial institution headquartered in Denver, Colorado, merged with
Norwest in a pooling transaction. Norwest's historical results have been
restated to include the historical results of United. Appropriate Norwest items
reflect United's special provisions for credit losses and writedowns for other
real estate owned, which together totaled $165 million, and $31 million of
accruals for expected reorganization and restructuring costs for the year ended
December 31, 1990. The special provisions were due to deterioration of several
large commercial loan relationships, the anticipated results of the then recent
examination by the Office of the Comptroller of the Currency, and the
anticipated impact of the Resolution Trust Corporation's accelerated efforts to
liquidate foreclosed properties at deep discounts.
(4) On May 1, 1990, First Interstate Corporation of Wisconsin ("FIWI"), a $2.0
billion financial institution headquartered in Sheboygan, Wisconsin, merged with
Norwest in a pooling transaction. Norwest's historical results have been
restated to include the historical results of FIWI. Appropriate Norwest items
reflect $12.0 million in charges resulting from FIWI's decision to sell its
portfolio of stripped mortgage-backed securities, an increase in FIWI's
provision for credit losses of $16.2 million, and $24.5 million in FIWI's
provisions and expenditures for costs related to restructuring activities.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 31 YEAR ENDED DECEMBER 31
-------------- ----------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
(In millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
ALEXANDRIA:
Interest income $2.1 2.1 4.2 4.4 4.5 4.5 4.2
Interest expense 0.9 0.9 1.8 2.1 2.5 2.6 2.5
------ ------ ------ ------ ------ ------ ------
Net interest income 1.2 1.2 2.4 2.3 2.0 1.9 1.7
Provision for credit losses -- 0.1 0.1 0.1 0.1 0.1 0.1
Non-interest income 0.4 0.4 0.9 0.8 0.5 0.5 0.4
Non-interest expenses 1.0 0.9 2.1 2.0 1.8 1.7 1.7
------ ------ ------ ------ ------ ------ ------
Income before income taxes 0.6 0.6 1.1 1.0 0.6 0.6 0.3
Income tax expense 0.2 0.2 0.4 0.4 0.2 0.2 0.1
------ ------ ------ ------ ------ ------ ------
Income before cumulative effect
of a change in accounting method 0.4 0.4 0.7 0.6 0.4 0.4 0.2
Cumulative effect on years prior to 1991
of change in accounting method -- -- -- -- 0.1 -- --
------ ------ ------ ------ ------ ------ ------
Net income $0.4 0.4 0.7 0.6 0.5 0.4 0.2
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Net income per share:
Primary:
Before cumulative effect of a
change in accounting method $84.55 80.34 142.24 129.91 88.17 71.64 36.34
Cumulative effect on years prior
to 1991 of change in
accounting method -- -- -- -- 10.25 -- --
------ ------ ------ ------ ------ ------ ------
Net income $84.55 80.34 142.24 129.91 98.42 71.64 36.34
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Fully diluted:
Before cumulative effect of a
change in accounting method $84.55 80.34 142.24 129.91 88.17 71.64 36.34
Cumulative effect on years prior
to 1991 of change in
accounting method -- -- -- -- 10.25 -- --
------ ------ ------ ------ ------ ------ ------
Net income $84.55 80.34 142.24 129.91 98.42 71.64 36.34
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Dividends declared per
common share $60.00 50.00 50.00 31.00 25.00 15.00 20.00
At period end:
Total assets $58.3 56.8 58.2 56.2 50.9 47.6 45.5
Long-term debt 0.5 0.5 0.5 0.6 -- -- --
Total stockholders' equity 3.8 3.4 3.8 3.3 3.3 2.9 2.6
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 31 YEAR ENDED DECEMBER 31
-------------- ----------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
(In millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
THE BANK:
Interest income $2.1 2.1 4.2 4.4 4.5 4.5 4.2
Interest expense 0.9 0.9 1.7 2.1 2.5 2.6 2.5
------ ------ ------ ------ ------ ------ ------
Net interest income 1.2 1.2 2.5 2.3 2.0 1.9 1.7
Provision for credit losses -- 0.1 0.1 0.1 0.1 0.1 0.1
Non-interest income 0.4 0.4 0.9 0.8 0.5 0.5 0.4
Non-interest expense 0.8 0.9 2.1 1.9 1.7 1.6 1.6
------ ------ ------ ------ ------ ------ ------
Income before income taxes 0.8 0.6 1.2 1.1 0.7 0.7 0.4
Income tax expense 0.3 0.2 0.4 0.4 0.2 0.2 0.1
------ ------ ------ ------ ------ ------ ------
Income before cumulative effect
of a change in accounting method 0.5 0.4 0.8 0.7 0.5 0.5 0.3
Cumulative effect on years prior to 1991
of change in accounting method -- -- -- -- 0.1 -- --
------ ------ ------ ------ ------ ------ ------
Net income $0.5 0.4 0.8 0.7 0.6 0.5 0.3
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Net income per share:
Primary:
Before cumulative effect of a
change in accounting method $47.30 36.84 71.87 63.52 45.88 41.77 26.15
Cumulative effect on years prior
to 1991 of change in
accounting method -- -- -- -- 4.34 -- --
------ ------ ------ ------ ------ ------ ------
Net income $47.30 36.84 71.87 63.52 50.22 41.77 26.15
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Fully diluted:
Before cumulative effect of a
change in accounting method $47.30 36.84 71.87 63.52 45.88 41.77 26.15
Cumulative effect on years prior
to 1991 of change in
accounting method -- -- -- -- 4.34 -- --
------ ------ ------ ------ ------ ------ ------
Net income $47.30 36.84 71.87 63.52 50.22 41.77 26.15
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Dividends declared per
common share $34.00 30.00 30.00 20.00 20.00 15.00 18.00
At period end:
Total assets $58.2 56.8 58.1 56.1 50.7 47.4 45.2
Long-term debt -- -- -- -- -- -- --
Total stockholders' equity 4.8 4.4 4.8 4.3 3.8 3.4 3.1
</TABLE>
17
<PAGE>
MEETING INFORMATION
GENERAL
This Proxy Statement-Prospectus is being furnished to holders of Alexandria
Common Stock in connection with the solicitation of proxies by the Board of
Directors of Alexandria for use at the Alexandria Special Meeting to be held on
_________, December __, 1994, and any adjournments thereof, to consider and take
action upon a proposal to approve the Reorganization Agreement and such other
business as may properly come before the Alexandria Special Meeting or any
adjournments thereof. Each copy of this Proxy Statement-Prospectus mailed to
holders of Alexandria Common Stock is accompanied by a form of proxy for use at
the Alexandria Special Meeting.
This Proxy Statement-Prospectus is also being furnished by the Bank to
holders of Bank Common Stock in connection with the Bank Special Meeting to be
held on _________, December __, 1994, and any adjournments thereof, to consider
and take action upon a proposal to approve the Bank Merger Agreement and such
other business as may properly come before the Bank Special Meeting or any
adjournments thereof.
This Proxy Statement-Prospectus is also being furnished by Norwest to the
shareholders of Alexandria and the stockholders of the Bank as a prospectus in
connection with the issuance by Norwest of shares of Norwest Common Stock upon
consummation of the Reorganization.
This Proxy Statement-Prospectus, the attached Notices of Special Meeting,
and the form of proxy for Alexandria shareholders enclosed herewith are first
being mailed to shareholders of Alexandria and stockholders of the Bank on or
about November __, 1994.
DATE, PLACE, AND TIME
The Alexandria Special Meeting will be held at ____________,
______________, Alexandria, Minnesota, on _________, December __, 1994, at __:__
_.m., local time. The Bank Special Meeting will be held at _______________,
_______________, Alexandria, Minnesota, on _________, December __, 1994, at
__:__ _.m., local time.
RECORD DATE; VOTE REQUIRED
ALEXANDRIA SPECIAL MEETING
The Board of Directors of Alexandria has fixed the close of business on
November __, 1994, as the record date for the determination of shareholders of
Alexandria entitled to receive notice of and to vote at the Alexandria Special
Meeting. On the record date there were 4,878 shares of Alexandria Common Stock
outstanding. Approval of the Reorganization Agreement requires the affirmative
vote of the holders of a majority of the outstanding shares of Alexandria Common
Stock. The Reorganization cannot be consummated without shareholder approval of
the Reorganization Agreement.
As of the record date for the Alexandria Special Meeting, directors and
officers of Alexandria and their affiliates owned beneficially or controlled the
voting of an aggregate of 100% of the shares of Alexandria Common Stock
outstanding on that date. Alexandria's directors and officers have informed
Alexandria that they intend to vote all of their shares in favor of the
Reorganization Agreement. Information regarding the shares of Alexandria Common
Stock beneficially owned, directly or indirectly, by certain shareholders, by
each
18
<PAGE>
director and executive officer of Alexandria, and by all directors and officers
as a group is set forth in the table under the heading "Principal Shareholders
and Security Ownership of Management of Alexandria" below.
BANK SPECIAL MEETING
The Board of Directors of the Bank has fixed the close of business on
November __, 1994, as the record date for the determination of stockholders of
the Bank entitled to receive notice of and to vote at the Bank Special Meeting.
On the record date there were 11,500 shares of Bank Common Stock outstanding.
Approval of the Bank Merger Agreement requires the affirmative vote of the
holders of two-thirds of the outstanding shares of Bank Common Stock. The
Reorganization cannot be consummated without stockholder approval of the Bank
Merger Agreement.
As of the record date for the Bank Special Meeting, directors and officers
of the Bank and their affiliates did not own beneficially or control the voting
of any shares of Bank Common Stock outstanding on that date. Information
regarding the shares of Bank Common Stock beneficially owned, directly or
indirectly, by certain stockholders, by each director and executive officer of
the Bank, and by all directors and officers as a group is set forth in the table
under the heading "Principal Stockholders and Security Ownership of Management
of the Bank" below. AS OF THE RECORD DATE FOR THE BANK SPECIAL MEETING,
ALEXANDRIA HELD 10,137, OR APPROXIMATELY 88.15%, OF THE OUTSTANDING SHARES OF
BANK COMMON STOCK. ACCORDINGLY, WITHOUT THE VOTE OF THE REMAINING BANK
STOCKHOLDERS, ALEXANDRIA WILL HAVE THE ABILITY TO EFFECTUATE THE BANK MERGER.
At the record date, directors and executive officers of Norwest did not own
beneficially any shares of Alexandria Common Stock or Bank Common Stock.
19
<PAGE>
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT OF ALEXANDRIA
Set forth below are the names and addresses of and the number of shares
held as of the record date for the Alexandria Special Meeting by each holder of
record of the outstanding shares of Alexandria Common Stock and by all directors
and executive officers as a group. Each shareholder named below has sole voting
and investment power over the shares shown in the table, unless otherwise
indicated.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Percent of
Name and Address Owned Total Shares
-------------------- ---------------- ------------
<S> <C> <C>
E.C. Beliveau (1) 799 16.38%
810 Winona Drive
Alexandria, MN 56308
Micheal L. Lillehaugen (2) 799 16.38%
2744 County Road 120 N.W.
Alexandria, MN 56308
Lloyd E. Andrews (3) 732 15.01%
2508 Latoka Drive S.W.
Alexandria, MN 56308
Leroy A. Meyer (4) 732 15.01%
508 Irving
Alexandria, MN 56308
Glenn W. Flint (4) 729 14.94%
1211 Cedar
Alexandria, MN 56308
Roger B. Perry (6) 721 14.78%
P.O. Box 2
Alexandria, MN 56308
Julian O. Newhouse (7) 366 7.50%
1207 Bryant
Alexandria, MN 56308
Directors and officers as a group 4,878 100%
(7 persons)
<FN>
- -------------------------
(1) Mr. Beliveau is President and a director of Alexandria, and also Executive
Vice President and Security Officer and a director of the Bank.
(2) Mr. Lillehaugen is Secretary-Treasurer and a director of Alexandria, and
also President and a director of the Bank.
(3) Mr. Andrews is a director of both Alexandria and the Bank.
(4) Mr. Meyer is a director of both Alexandria and the Bank.
(5) Mr. Flint is Vice President and a director of Alexandria, and also a
director of the Bank.
(6) Mr. Perry is a director of both Alexandria and the Bank.
(7) Mr. Newhouse is a director of both Alexandria and the Bank.
</TABLE>
20
<PAGE>
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT OF THE BANK
Set forth below are the names and addresses of and the number of shares
held as of the record date for the Bank Special Meeting by those persons who may
be deemed to own beneficially, either directly or indirectly, 5% or more of the
outstanding shares of Bank Common Stock and by all directors and executive
officers as a group. Each stockholder named below has sole voting and
investment power over the shares shown in the table, unless otherwise indicated.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Percent of
Name and Address Owned Total Shares
-------------------- ---------------- ------------
<S> <C> <C>
Alexandria Securities and 10,137 88.15%
Investment Company
P.O. Box 519
Alexandria, MN 56308
Directors and officers as a group -0- 0.00%
(10 persons)
</TABLE>
VOTING AND REVOCATION OF PROXIES
Shares of Alexandria Common Stock represented by a proxy properly signed
and received at, or prior to, the Alexandria Special Meeting, unless
subsequently revoked, will be voted at the Alexandria Special Meeting in
accordance with the instructions thereon. If a proxy is signed and returned
without indicating any voting instructions, shares of Alexandria Common Stock
represented by such proxy will be voted FOR approval of the Reorganization
Agreement. Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before the proxy is voted by filing either an
instrument revoking it or a duly executed proxy bearing a later date with the
Secretary of Alexandria prior to or at the Alexandria Special Meeting or by
voting the shares subject to the proxy in person at the Alexandria Special
Meeting. Attendance at the Alexandria Special Meeting will not in and of itself
constitute a revocation of a proxy.
A proxy may indicate that all or a portion of the shares represented
thereby are not being voted with respect to a specific proposal. This could
occur, for example, when a broker is not permitted to vote shares held in street
name on certain proposals in the absence of instructions from the beneficial
owner. Shares that are not voted with respect to a specific proposal will be
considered as not present for such proposal, even though such shares will be
considered present for purposes of determining a quorum and voting on other
proposals. Abstentions on a specific proposal will be considered as present,
but not as voting in favor of such proposal. The proposal to adopt the
Reorganization Agreement must be approved by the holders of a majority of the
outstanding Alexandria Common Stock. Because this proposal requires the
affirmative vote of a specified percentage of outstanding shares, the nonvoting
of shares or abstentions with regard to this proposal will have the same effect
as votes against the proposal.
The Board of Directors of Alexandria is not aware of any business to be
acted upon at the Alexandria Special Meeting other than the business described
herein. If, however, other matters are properly brought before the Alexandria
Special Meeting, or any adjournments thereof, the persons appointed as proxies
will have discretion to vote or act on such matters according to their best
judgment.
21
<PAGE>
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers, and employees of
Alexandria may solicit proxies from the shareholders of Alexandria, either
personally or by telephone, telegram, or other form of communication. None of
the foregoing persons who solicit proxies will be specifically compensated for
such services. Nominees, fiduciaries, and other custodians will be requested to
forward soliciting materials to beneficial owners and will be reimbursed for
their reasonable expenses incurred in sending proxy material to beneficial
owners. Alexandria will bear its own expenses in connection with any
solicitation of proxies for the Special Meeting. See "THE
REORGANIZATION--Expenses." NO SOLICITATION OF PROXIES WILL BE CONDUCTED IN
CONNECTION WITH THE BANK SPECIAL MEETING.
HOLDERS OF ALEXANDRIA COMMON STOCK ARE REQUESTED TO COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO ALEXANDRIA IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
THE REORGANIZATION
This section of the Proxy Statement-Prospectus describes certain aspects of
the Reorganization. The following description does not purport to be complete
and is qualified in its entirety by reference to the Reorganization Agreement
and the form of the Bank Merger Agreement, which are attached as Appendix A and
Appendix B, respectively, to this Proxy Statement-Prospectus and are
incorporated by reference herein. ALL SHAREHOLDERS ARE URGED TO READ THE
REORGANIZATION AGREEMENT AND THE BANK MERGER AGREEMENT IN THEIR ENTIRETY.
BACKGROUND OF AND REASONS FOR THE REORGANIZATION
During the summer of 1992, representatives of Norwest approached Alexandria
regarding Norwest's interest in acquiring Alexandria. After a number of
discussions, the Board of Directors of Alexandria concluded that a merger with
Norwest was in the best interest of the shareholders of Alexandria. This
conclusion was based upon the amount of consideration to be paid by Norwest in
the Merger, the tax-free nature of the Merger to the shareholders of Alexandria,
and the increased liquidity associated with receiving stock of a company that is
publicly traded on national exchanges. Accordingly, Alexandria and Norwest
proceeded to negotiate the terms of the Merger and initially entered into the
Reorganization Agreement on May 24, 1994. In order to clarify certain matters,
the parties subsequently amended and restated the Reorganization Agreement as of
July 21, 1994.
The Board of Directors of Alexandria has concluded that the Merger is in
the best interest of the holders of Alexandria Common Stock. The holders of
Alexandria Common Stock will receive, in a tax-free exchange, stock of a much
larger and more diversified enterprise, which is listed on the NYSE and CHX,
freely tradable (subject to certain restrictions described herein), and much
more widely held than Alexandria Common Stock. See "SUMMARY--Comparative
Unaudited Per Share Data," "SUMMARY--Markets and Market Prices," and "Certain
Federal Income Tax Considerations."
Further, after the Reorganization, the Bank will have access to a broader
range of services to provide to its customers and to the greater resources of
Norwest in several important operational areas. The Directors believe that
affiliation with Norwest will increase the Bank's financial strength and provide
greater geographic diversity. In addition, employees
22
<PAGE>
of the Bank will have the opportunity for career advancement in a larger
organization. See "Management and Operations After the Reorganization."
THE BOARD OF DIRECTORS OF ALEXANDRIA UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF ALEXANDRIA VOTE FOR APPROVAL OF THE REORGANIZATION AGREEMENT.
TERMS OF THE MERGER AND OF THE BANK MERGER
THE MERGER
At the Effective Time of the Merger, a wholly owned subsidiary of Norwest
will merge into Alexandria, with Alexandria as the surviving corporation, and
the outstanding shares of Alexandria Common Stock (other than shares as to which
statutory dissenters' rights have been exercised and not forfeited) will be
converted into a number of shares of Norwest Common Stock determined in
accordance with the provisions of the Reorganization Agreement. The Alexandria
Conversion Factor, used to determine the number of shares of Norwest Common
Stock into which each outstanding share of Alexandria Common Stock will be
converted, will be calculated by (i) multiplying the Norwest Shares (as defined
below) by a factor of .8815, and then (ii) dividing the result by the number of
shares of Alexandria Common Stock outstanding immediately prior to the Merger.
The "Norwest Shares" is 337,225. If the Closing Date is after November 31,
1994, the Norwest Shares will be increased by adding to 337,225 a sum equal to
98 times the number of days between November 31, 1994, and the Closing Date.
Based on the pricing provisions of the Reorganizaton Agreement and assuming that
the Merger closes on or before November 31, 1994, each share of outstanding
Alexandria Common Stock would be converted into approximately 60.94 shares of
Norwest Common Stock. The foregoing information is provided solely for purposes
of illustration. No assurance can be given concerning the actual conversion
factor that will apply on the Closing Date.
THE BANK MERGER
The Reorganization Agreement also provides that, following the Effective
Time of the Merger and subject to the terms and conditions of the Reorganization
Agreement and the Bank Merger Agreement, the Bank will merge with NSBA, which is
a wholly owned subsidiary of Norwest organized under Minnesota law, under the
charter of NSBA. The resulting bank will change its name to "Community State
Bank of Alexandria." The Articles of Incorporation of the resulting bank are
attached as an appendix to the Bank Merger Agreement. A vote in favor of the
proposal to approve the Bank Merger Agreement will constitute a vote in favor of
the Articles of Incorporation of the resulting bank. Under applicable law,
consummation of the Bank Merger requires the affirmative vote of the holders of
two-thirds of the outstanding shares of Bank Common Stock. If the Merger is
approved, Norwest will own indirectly 88.15% of the outstanding Bank Common
Stock upon consummation of the Merger. The Bank Conversion Factor, used to
determine the number of shares of Norwest Common Stock into which each share of
Bank Common Stock outstanding immediately prior to the Bank Merger owned by
stockholders other than Alexandria (other than shares with respect to which
statutory dissenters' rights have been exercised and not forfeited) will be
converted, will be calculated by (i) multiplying the Norwest Shares by a factor
of .1185, and then (ii) dividing the result by the number of shares of Bank
Common Stock owned by stockholders of the Bank other than Alexandria outstanding
immediately prior to the Bank Merger. Based on the pricing provisions of the
Reorganization Agreement and assuming that the Closing Date is on or before
November 31, 1994, each share of outstanding Bank Common Stock owned by
stockholders of
23
<PAGE>
the Bank other than Alexandria would be converted into approximately 29.32
shares of Norwest Common Stock. The foregoing information is provided solely
for purposes of illustration. No assurance can be given concerning the actual
Bank Conversion Factor that will apply on the Closing Date.
The market price for Norwest Common Stock will fluctuate between the date
of this Proxy Statement-Prospectus and the Effective Date of the Merger, which
may be a period of several weeks. As a result, the market value of the Norwest
Common Stock that shareholders of Alexandria and stockholders of the Bank
ultimately receive in the Reorganization could be more or less than its market
value on the date of this Proxy Statement-Prospectus.
The Reorganization Agreement and the Bank Merger Agreement provide that if,
between the date of the Reorganization Agreement and the Effective Time of the
Merger, shares of Norwest Common Stock are changed into a different number or
class of shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares, or readjustment, or if a stock dividend thereon
is declared with a record date within the same period, the conversion factors
provided for in the Reorganization Agreement and the Bank Merger Agreement will
be adjusted accordingly.
No fractional shares of Norwest Common Stock will be issued in the Merger
or the Bank Merger. Instead, Norwest will pay to each holder of Alexandria
Common Stock or Bank Common Stock who would otherwise be entitled to a
fractional share an amount of cash equal to the fraction of a share of Norwest
Common Stock to which the shareholders of Alexandria or stockholders of the Bank
would otherwise be entitled multiplied by the average of the closing prices of a
share of Norwest Common Stock on the NYSE for the five trading days immediately
preceding the Effective Date of the Merger.
Shares of Norwest Common Stock issued and outstanding immediately prior to
the Effective Time of the Merger will remain issued and outstanding.
EFFECTIVE DATE AND TIME OF THE MERGER AND OF THE BANK MERGER
Subject to the terms and conditions of the Reorganization Agreement, the
Effective Date of the Merger will be the date on which Articles of Merger are
filed with the Secretary of State of the State of Minnesota. That filing will
be made within ten business days following the satisfaction or waiver of all
conditions of the Reorganization Agreement or on such other date upon which the
parties agree, and the time at which such filing will be made is hereinafter
referred to as the "Time of Filing." The "Effective Time of the Merger" will be
11:59 p.m., Minneapolis, Minnesota time, on the Effective Date of the Merger.
The "Effective Time of the Bank Merger" will be 12:01 a.m. on the date specified
in the Bank Merger Agreement. Norwest and Alexandria anticipate that the
closing of the Reorganization will occur in the fourth quarter of 1994. See
"Conditions to the Merger and to the Bank Merger" and "Regulatory Approvals."
SURRENDER OF CERTIFICATES
As soon as practicable after the Effective Time of the Merger or the
Effective Time of the Bank Merger, as the case may be, Norwest Bank Minnesota,
National Association, acting in the capacity of exchange agent for Norwest (the
"Exchange Agent"), will mail to each former holder of record of shares of
Alexandria Common Stock or of Bank Common Stock a form of letter of transmittal,
together with instructions for the exchange of such holder's stock certificates
for a certificate representing Norwest Common Stock.
24
<PAGE>
SHAREHOLDERS OF ALEXANDRIA AND STOCKHOLDERS OF THE BANK SHOULD NOT SEND IN
THEIR CERTIFICATES UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND
INSTRUCTIONS.
Upon surrender to the Exchange Agent of one or more certificates for
Alexandria Common Stock or Bank Common Stock, together with a properly completed
letter of transmittal, there will be issued and mailed to the holder a
certificate representing the number of whole shares of Norwest Common Stock to
which such holder is entitled and, where applicable, a check for the amount
representing any fractional share. A certificate for Norwest Common Stock may
be issued in a name other than the name in which the surrendered certificate is
registered only if (i) the certificate surrendered is properly endorsed and
otherwise in proper form for transfer and (ii) the person requesting the
issuance of such certificate either pays to the Exchange Agent any transfer or
other taxes required by reason of the issuance of a certificate for such shares
in a name other than the registered holder of the certificate surrendered or
establishes to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable.
All Norwest Common Stock issued pursuant to the Reorganization will be
deemed issued as of the Effective Time of the Merger or the Effective Time of
the Bank Merger, as the case may be. No dividends with a record date after the
Effective Time of the Merger or the Effective Time of the Bank Merger, as the
case may be, will be paid to shareholders of Alexandria or stockholders of the
Bank entitled to receive certificates for shares of Norwest Common Stock until
such shareholders surrender their certificates representing shares of Alexandria
Common Stock or Bank Common Stock. Upon such surrender, there shall be paid to
the holder in whose name the certificates representing such shares of Norwest
Common Stock are issued any dividends the record and payment dates of which
shall have been after the Effective Time of the Merger or the Effective Time of
the Bank Merger, as the case may be, and before the date of such surrender.
After such surrender, there shall be paid to the person in whose name the
certificate representing such shares of Norwest Common Stock is issued, on the
appropriate dividend payment date, any dividend on such shares of Norwest Common
Stock which shall have a record date after the Effective Time of the Merger or
Effective Time of the Bank Merger, as the case may be, and prior to the date of
surrender, but a payment date subsequent to the surrender. In no event shall
the persons entitled to receive such dividends be entitled to receive interest
on amounts payable as dividends.
CONDITIONS TO THE MERGER AND TO THE BANK MERGER
THE MERGER
The Reorganization will occur only if the Reorganization Agreement and the
Bank Merger Agreement are approved by the requisite vote of the shareholders of
Alexandria and the stockholders of the Bank, respectively. Consummation of the
Merger is subject to the satisfaction of certain other conditions, any of which
may be waived to the extent waiver is permitted by applicable law. Such
conditions to the obligations of both parties to consummate the Merger include,
but are not limited to, (i) the receipt of all necessary regulatory approvals,
including the approval of the Merger by the Federal Reserve Board and the
approval of the Bank Merger by the Minnesota Department of Commerce, and the
expiration of all applicable waiting and approval periods, (ii) the continued
effectiveness of the Registration Statement of which this Proxy
Statement-Prospectus is a part and receipt by Norwest of all state securities
law or blue sky authorizations necessary for the Reorganization, (iii) the
absence of any order of a court or agency of competent jurisdiction restraining,
enjoining, or otherwise prohibiting consummation of the Merger or the Bank
Merger, (iv) the continued accuracy of
25
<PAGE>
representations and warranties by the other party, (v) the performance by the
other party of its obligations under the Reorganization Agreement, and (vi) the
receipt of certain certificates from the other party.
Alexandria's obligation to consummate the Reorganization is also subject to
(i) authorization for listing on the NYSE and CHX upon official notice of
issuance of the shares of Norwest Common Stock issuable pursuant to the
Reorganization and (ii) the receipt of an opinion of counsel to Alexandria to
the effect that for federal income tax purposes the Merger will be a tax-free
reorganization.
Norwest's obligation to consummate the Reorganization is also subject to
(i) the receipt by Alexandria and its subsidiaries of any and all material
consents or waivers from third parties to loan agreements, leases, or other
material contracts required for the consummation of the Reorganization, and the
receipt by Alexandria and its subsidiaries of any and all material permits,
authorizations, consents, waivers, and approvals required for the consummation
of the Reorganization; (ii) the total number of shares of Alexandria Common
Stock outstanding and subject to issuance upon exercise of all warrants,
options, conversion rights, phantom shares, or other share equivalents not
having exceeded 4,878; (iii) the receipt of a certificate signed by Alexandria's
Chief Executive Officer and Chief Financial Officer concerning the accuracy and
completeness of certain of Alexandria's financial statements and related
information as of a date subsequent to the date of such financial statements;
(iv) the absence since December 31, 1993, of any material loss or interference
with the business of Alexandria and its subsidiaries considered as a whole from
any civil disturbance or any fire, explosion, flood, or other calamity, whether
or not covered by insurance; (v) the absence of any reasonable basis for the
imposition on Alexandria or any of its subsidiaries of any liability arising
from the release of hazardous substances under any local, state, or federal
environmental statute, regulation, or ordinance which has had or could
reasonably be expected to have a material adverse effect upon Alexandria and it
subsidiaries taken as a whole; (vi) the absence of any change which might
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business, or prospects of Alexandria and its
subsidiaries taken as a whole, other than changes in banking laws or
regulations, or interpretations thereof, that affect the banking industry
generally or changes in the general level of interest rates; (vii) none of the
stockholders of the Bank shall have exercised statutory dissenters' rights with
respect to the Bank Merger; (viii) the establishment of such additional accruals
and reserves as may be necessary to conform Alexandria's accounting and credit
loss reserve practices and methods to those of Norwest and Norwest's plans for
the conduct of Alexandria's business after the Reorganization and to provide for
the costs and expenses of consummating the Reorganization contemplated by the
Reorganization Agreement; (ix) the correction by Alexandria and the Bank of
certain regulatory problems identified in Norwest's due diligence examination of
Alexandria and the Bank; and (x) the receipt by the Bank of certification of the
absence of default with respect to certain Small Business Administration loans.
See "Interests of Certain Persons in the Reorganization."
THE BANK MERGER
The Bank Merger will occur only if (i) the Bank Merger Agreement is
approved by the requisite vote of the stockholders of the Bank and of NSBA; (ii)
the Bank Merger is approved by all appropriate banking and regulatory
authorities, and all conditions prescribed by law for the consummation of the
Bank Merger have been satisfied; and (iii) the Merger has been consummated.
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REGULATORY APPROVALS
Transactions such as the Merger are subject to prior approval by the
Federal Reserve Board under the Bank Holding Company Act of 1956, as amended,
(the "BHC Act") which requires that the Federal Reserve Board take into
consideration the financial and managerial resources and future prospects of the
existing and proposed institutions and the convenience and needs of the
communities to be served. By letter dated September 8, 1994, the Federal
Reserve Board informed Norwest that it had approved the Merger.
Under Section 18(c) of the Federal Deposit Insurance Act, the Bank Merger
is subject to the approval of the FDIC, and receipt of such approval is a
condition to consummation of the Reorganization. The Bank Merger may not be
consummated before the 30th calendar day following approval by the FDIC. On
September 28, 1994, Norwest submitted an application for approval to the FDIC.
The Bank Merger is also subject to the approval of the Minnesota Department
of Commerce, and receipt of such approval is a condition to consummation of the
Reorganization. On September 28, 1994, Norwest submitted an application for
approval to the MDC.
The approval of any application merely implies satisfaction of regulatory
criteria for approval, which do not include review of the Reorganization from
the standpoint of the adequacy of the consideration to be received by, or
fairness to, shareholders. Regulatory approvals do not constitute an
endorsement or recommendation of the proposed Reorganizations.
Neither Norwest nor Alexandria is aware of any governmental approvals or
compliance with banking laws and regulations that are required for consummation
of the Reorganization other than those described above. Should any other
approval or action be required, it is presently contemplated that such approval
or action would be sought. There can be no assurance that any such approval or
action, if needed, could be obtained and, if such approvals or actions are
obtained, there can be no assurance as to the timing thereof. Neither the
Merger nor the Bank Merger can proceed in the absence of all requisite
regulatory approvals. See "Conditions to the Merger and to the Bank Merger,"
"Effective Date and Time of the Merger and to the Bank Merger," and "Waiver,
Amendment, and Termination."
BUSINESS PENDING THE REORGANIZATION
Under the Reorganization Agreement, each of Alexandria and its subsidiaries
is generally obligated to maintain its corporate existence in good standing; to
maintain the general character of its business and conduct its business in the
ordinary and usual manner; extend credit in accordance with existing lending
policies; maintain proper business and accounting records in accordance with
generally accepted principles; maintain its properties in good repair and
condition, ordinary wear and tear excepted; maintain in all material respects
presently existing insurance coverage; use its best efforts to preserve its
business organization intact, to keep the services of its present principal
employees, and to preserve its goodwill and the goodwill of its suppliers,
customers, and others having business relationships with it; use its best
efforts to obtain any approvals or consents required to maintain existing leases
and other contracts in effect following the Reorganization; comply in all
material respects with all laws, regulations, ordinances, codes, orders,
licenses, and permits applicable to the properties and operations of Alexandria
and each of its subsidiaries the noncompliance with which reasonably could be
expected to have a material adverse effect on Alexandria and its subsidiaries
taken as a whole; and permit Norwest and its representatives to examine its and
its subsidiaries' books,
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records, and properties, and to interview officers, employees, and agents at all
reasonable times when it is open for business. The Reorganization Agreement
also provides that, prior to the Closing Date, neither Alexandria nor the Bank
may, without the prior written consent of Norwest, among other things: (i) make
any new loan or modify, restructure, or renew any existing loan (except pursuant
to commitments made prior to the date of the Reorganization Agreement) to any
borrower if the amount of the resulting loan, when aggregated with all other
loans or extensions of credit to such person, would exceed $100,000, provided,
however, that renewal of any existing loan on its existing terms for periods of
up to 12 months if interest on such loan is not in arrears shall not require
such written approval; (ii) amend or otherwise change its articles of
incorporation or association or bylaws; (iii) issue or sell, or authorize for
issuance or sale, or grant any options or make other agreements with respect to
the issuance or sale, or conversion of, any shares of its capital stock, phantom
shares, or other share equivalents, or any other of its securities; (iv)
authorize or incur any long-term debt (other than deposit liabilities); (v)
mortgage, pledge, or subject to lien or other encumbrance any of its properties,
except in the ordinary course of business; (vi) enter into any material
agreement, contract, or commitment in excess of $10,000 except banking
transactions in the ordinary course of business and in accordance with policies
and procedures in effect on the date of the Reorganization Agreement; (vii) make
any investments except investments made by bank subsidiaries in the ordinary
course of business for terms of up to one year and in amounts of $100,000 or
less; (viii) amend or terminate any "employee benefit plan" within the meaning
of the Employee Retirement Income Security Act of 1974, as amended, except as
required by law; (ix) make any contributions to any such plan except as required
by the terms of such plan in effect as of the date of the Reorganization
Agreement, subject to certain enumerated exceptions; (x) declare, set aside,
make, or pay any dividend or other distribution with respect to its capital
stock; (xi) redeem, purchase, or otherwise acquire, directly or indirectly, any
of the capital stock of Alexandria; (xii) increase the compensation of any
officers, directors, or executive employees, except pursuant to existing
compensation plans and practices; (xiii) sell or otherwise dispose of any shares
of the capital stock of any subsidiary; or (xiv) sell or otherwise dispose of
any of its assets or properties other than in the ordinary course of business.
Neither Alexandria nor any of its subsidiaries, nor any director, officer,
or representative thereof, will, directly or indirectly, solicit, authorize the
solicitation of, or enter into any discussions with any party or group (other
than Norwest) concerning any offer or possible offer (i) to purchase any shares
of Alexandria Common Stock, any option or warrant to purchase any shares of
Alexandria Common Stock, any securities convertible into any shares of
Alexandria Common Stock, or any other equity security of Alexandria or any of
its subsidiaries; (ii) to make a tender or exchange offer for any shares of
Alexandria Common Stock or other equity security; (iii) to purchase, lease, or
otherwise acquire the assets of Alexandria or any of its subsidiaries, except in
the ordinary course of business; or (iv) to merge, consolidate, or otherwise
combine with Alexandria or any of its subsidiaries. Any offer or inquiry to
Alexandria or any of its subsidiaries concerning any of the foregoing must be
promptly disclosed, along with the terms thereof, to Norwest.
WAIVER, AMENDMENT, AND TERMINATION
The parties may, in writing, waive any inaccuracies in the representations
and warranties of the other party or compliance by the other party with any of
the covenants and conditions in the Reorganization Agreement.
At any time before the Time of Filing the parties may amend the
Reorganization Agreement by action of their respective Boards of Directors or
pursuant to authority delegated
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by their respective Boards of Directors; provided, however, that no such
amendment occurring after approval of the Merger by the Alexandria shareholders
may adversely affect the consideration to be received by the Alexandria
shareholders.
The Reorganization Agreement provides that it may be terminated at any time
prior to the Time of Filing (i) by mutual written consent of the parties; (ii)
by either party by written notice to the other if the Reorganization shall not
have been consummated by January 31, 1995, unless such failure of consummation
is due to the failure of the party seeking termination to perform or observe in
all material respects the covenants and agreements to be performed or observed
by it under the Reorganization Agreement; or (iii) by either party by written
notice to the other if any court or governmental authority of competent
jurisdiction shall have issued a final order restraining, enjoining, or
otherwise prohibiting the consummation of the transactions contemplated by the
Reorganization Agreement.
The Bank Merger Agreement provides that it may be terminated at any time
prior to the Effective Date of the Bank Merger by mutual written consent of the
parties or by action of the Board of Directors of either party if the
Reorganization Agreement is terminated.
MANAGEMENT AND OPERATIONS AFTER THE REORGANIZATION
As of the Effective Time of the Reorganization, the Bank will become an
indirect subsidiary of Norwest. As a result of the Bank Merger, subsequent to
the Merger, the Bank will be merged with another subsidiary of Norwest, NSBA,
under the charter of NSBA, and will cease to exist as a separate entity. NSBA
will operate at the Bank's present locations, providing products and services
offered by Norwest affiliates. See "Terms of the Merger and of the Bank
Merger."
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
Micheal L. Lillehaugen, Secretary-Treasurer and a director of Alexandria
and President and a director of the Bank, has an interest in the Reorganization
separate from his interest as a holder of Alexandria Common Stock. Mr.
Lillehaugen and Norwest have entered into an employment agreement, dated as of
July 21, 1994, under the terms of which Mr. Lillehaugen is to serve as the
president of the Bank until January 31, 1999, or the earlier termination of the
employment agreement in accordance with its terms. As compensation for his
services Mr. Lillehaugen is to receive an annual base compensation of $100,000
and a cash bonus of $10,000 for the year 1995, plus benefits available to
regular, full-time employees of Norwest, as well as perquisites comparable to
those given to employees of Norwest holding similar positions. The employment
agreement also includes a noncompete provision whereby Mr. Lillehaugen has
agreed not to engage in the business of banking within a 25-mile radius of
Alexandria, Minnesota, for the eight calendar quarters following the earlier of
the date of termination of the employment agreement or the Effective Date of the
Merger. In consideration of the agreement not to compete, Mr. Lillehaugen is to
receive a payment of $3,750 for each of the eight quarters.
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
Alexandria is incorporated as a corporation in the State of Minnesota, and
Norwest is incorporated as a corporation in the State of Delaware. Shareholders
of Alexandria, whose rights are governed by Alexandria's Articles of
Incorporation and Bylaws and by the Minnesota Business Corporation Act, will,
upon
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consummation of the Merger, become stockholders of Norwest. Stockholders of the
Bank, whose rights are governed by the Bank's Certificate of Incorporation and
Bylaws and by Minnesota banking statutes, will, upon consummation of the Bank
Merger, also become stockholders of Norwest. The rights of former shareholders
of Alexandria and former stockholders of the Bank as Norwest stockholders will
then be governed by Norwest's Certificate of Incorporation and By-Laws and by
the Delaware General Corporation Law. The following is a summary of certain
significant differences between the rights of shareholders of Alexandria,
stockholders of the Bank, and stockholders of Norwest.
CAPITAL STOCK
ALEXANDRIA. Alexandria's Articles of Incorporation authorize the issuance
of 10,000 shares of common stock, with a par value of $25.00 per share, of which
4,878 were outstanding as of the date of this Proxy Statement-Prospectus; and
200,000 shares of preferred stock, with a par value of $1.00 per share, none of
which are outstanding at the date of this Proxy Statement-Prospectus.
Accordingly, all of Alexandria shareholders have equal rights and preferences
with respect to dividends and distributions upon liquidation.
THE BANK. The Bank's Certificate of Incorporation authorizes the issuance
of 11,500 shares of capital stock, par value $25.00 per share, all of which were
outstanding as of the date of this Proxy Statement-Prospectus. Under Minnesota
banking law, with the approval of the Minnesota Commissioner of Commerce and a
majority vote of its stockholders, the Bank may issue one or more classes of
preferred stock, with such rights and privileges as determined by the Board of
Directors, provided that the amount of such preferred stock may not exceed 50%
of the Bank's common stock and surplus.
NORWEST. Norwest's Certificate of Incorporation authorizes the issuance of
500,000,000 shares of Common Stock, par value $1 2/3 per share, and 5,000,000
shares of preferred stock, without par value ("Preferred Stock"). At June 30,
1994, 323,084,474 shares of Common Stock were issued, of which 315,457,227 were
outstanding and 7,627,247 were held as treasury shares, and 2,306,000 shares of
Preferred Stock were outstanding consisting of 1,127,125 shares of 10.24%
Cumulative Preferred Stock, 1,143,750 shares of Cumulative Convertible Preferred
Stock, Series B, and 35,125 shares of ESOP Cumulative Convertible Preferred
Stock. In addition, 1,000,000 shares of Preferred Stock are reserved for
issuance under the Rights Agreement dated as of November 22, 1988, between
Citibank, N.A. as Rights Agent, and Norwest (the "Rights Agreement"). Norwest
has also authorized for issuance from time to time and registered with the
Commission an additional 1,700,000 shares of Preferred Stock. Norwest has also
authorized for issuance from time to time and registered with the SEC pursuant
to two universal shelf registration statements, an indeterminate number of
securities (the "Shelf Securities") with an aggregate initial offering price not
to exceed $2,225,000,000. The Shelf Securities may be issued as Preferred Stock
or as securities convertible into shares of Preferred Stock or Common Stock.
Based on the current number of shares of Preferred Stock authorized for issuance
under Norwest's Certificate of Incorporation, the maximum number of shares of
Preferred Stock and Common Stock, respectively, that could be issued pursuant to
the effective shelf registration statements, when added to shares of Preferred
Stock and Common Stock already reserved for issuance, issued, or outstanding,
could not exceed respectively, 5,000,000 shares of Preferred Stock and
500,000,000 shares of Common Stock. All or any portion of the authorized but
unissued Preferred Stock or Shelf Securities issuable as Preferred Stock or
convertible into Preferred Stock or Common Stock, may be issued by the Board of
Directors of Norwest without further action by stockholders. Holders of
Preferred Stock have certain rights and preferences with respect to dividends
and upon liquidation that are superior to those of holders of Common Stock. The
relative rights and preferences of any Preferred Stock issued in the future may
be established by Norwest's Board of Directors without stockholder action.
Although management has no current plans for the issuance of any shares of
Preferred
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Stock, except as disclosed in this Prospectus, such shares, when and if issued,
could have dividend, liquidation, voting and other rights superior to those of
the Common Stock.
Subject to any prior rights of any Preferred Stock then outstanding,
holders of Common Stock are entitled to receive such dividends as are declared
by Norwest's Board of Directors out of funds legally available for that purpose.
For information concerning legal limitations on the ability of Norwest's banking
subsidiaries to supply funds to Norwest, see "CERTAIN REGULATORY
CONSIDERATIONS." Subject to the rights, if any, of any Preferred Stock then
outstanding, all voting rights are vested in the holders of Common Stock, each
share being entitled to one vote. Subject to any prior rights of any Preferred
Stock, in the event of liquidation, dissolution, or winding up of Norwest,
holders of shares of Common Stock are entitled to receive pro rata any assets
distributable to stockholders in respect of shares held by them. Holders of
shares of Common Stock do not have any preemptive right to subscribe for any
additional securities which may be issued by Norwest. The outstanding shares of
Common Stock, including the Shares offered hereby, are fully paid and
nonassessable. The transfer agent and registrar for the Common Stock is Norwest
Bank Minnesota, N.A. Each share of Common Stock also includes, and each share
offered hereby will include, a right to purchase certain Preferred Stock. See
"Rights to Purchase Norwest Preferred Stock" below.
The foregoing description of the material terms of the Common Stock does
not purport to be complete and is qualified in its entirety by reference to
Article Fourth of Norwest's Certificate of Incorporation.
RIGHTS TO PURCHASE NORWEST PREFERRED STOCK. On November 22, 1988, the
Board of Directors of Norwest declared a dividend of one preferred share
purchase right (collectively, the "Rights") for each outstanding share of
Norwest Common Stock. The dividend was paid on December 9, 1988, to
stockholders of record on that date. Holders of shares of Norwest Common Stock
issued subsequent to that date, including those to be issued in connection with
the Reorganization, will receive the Rights with their shares. The Rights trade
automatically with shares of Norwest Common Stock and become exercisable only
under certain circumstances. The Rights are designed to protect the interests
of Norwest and its stockholders against coercive takeover tactics. The purpose
of the Rights is to encourage potential acquirors to negotiate with Norwest's
Board of Directors prior to attempting a takeover and to give the Board leverage
in negotiating on behalf of all stockholders the terms of any proposed takeover.
The Rights may, but are not intended to, deter takeover proposals.
Until a Right is exercised, the holder of a Right, as such, will have no
rights as a stockholder of Norwest including, without limitation, the right to
vote or receive dividends. Upon becoming exercisable, each Right will entitle
the registered holder to purchase from Norwest one four-hundredth of a share of
Norwest Series A Junior Participating Preferred Stock (collectively, the "Junior
Preferred Shares"). The stated purchase price for each one one-hundredth of a
Junior Preferred Share is $175.00. The purchase price is subject to adjustment
upon the occurrence of certain events, including stock dividends on the Junior
Preferred Shares or issuance of warrants for, or securities convertible on
certain terms into, Junior Preferred Shares. The number of Rights outstanding
and the number of Junior Preferred Shares issuable upon exercise of the Rights
are subject to adjustment in the event of a stock split of, or a stock dividend
on, Norwest Common Stock.
The Rights will become exercisable only if a person or group acquires or
announces an offer to acquire 25% or more of the outstanding shares of Norwest
Common Stock. This triggering percentage may be reduced to no less than 15% by
the Board of Directors prior to
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the time the Rights become exercisable. The Rights have certain additional
features that will be triggered upon the occurrence of specified events:
(1) If a person or group acquires at least the triggering percentage of
Norwest Common Stock, the Rights permit holders of the Rights, other than
such person or group, to acquire Norwest Common Stock at 50% of market
value. However, this feature will not apply if a person or group which
owns less than the triggering percentage acquires at least 85% of the
outstanding shares of Norwest Common Stock pursuant to a cash tender offer
for 100% of the outstanding Norwest Common Stock.
(2) After a person or group acquires at least the triggering percentage
and before the acquiror owns 50% of the outstanding shares of Norwest
Common Stock, the Board of Directors may exchange each Right, other than
Rights owned by such acquiror, for one share of Norwest Common Stock or one
four-hundredth of a Junior Preferred Share.
(3) In the event of certain business combinations involving Norwest or the
sale of 50% or more of the assets or earning power of Norwest, the Rights
permit holders of the Rights to purchase the stock of the acquiror at 50%
of market value.
The Junior Preferred Shares will not be redeemable. Each Junior Preferred
Share will be entitled to a minimum preferential quarterly dividend payment of
$1.00 per share but will be entitled to an aggregate dividend of 400 times the
dividend declared per share of Norwest Common Stock. In the event of
liquidation, the holders of the Junior Preferred Shares will be entitled to a
minimum preferential liquidation payment of $400.00 per share but will be
entitled to an aggregate payment of 400 times the payment made per share of
Norwest Common Stock. Each Junior Preferred Share will have 400 votes, voting
together with the Norwest Common Stock. Finally, in the event of any
Reorganization, Bank Merger, or other Reorganization in which Norwest Common
Stock is exchanged, each Junior Preferred Share will be entitled to receive 400
times the amount received per share of Norwest Common Stock. These rights are
protected by customary antidilution provisions.
At any time prior to the acquisition by a person or group of the triggering
percentage or more of the outstanding shares of Norwest Common Stock, the Board
of Directors may redeem the Rights in whole, but not in part, at a price of
$.0025 per Right (the "Redemption Price"). The redemption of the Rights may be
made effective at such time, on such basis, and with such conditions as the
Board of Directors in its sole discretion may establish. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and
the only remaining right of the holders of Rights will be to receive the
Redemption Price.
The Rights will expire on November 23, 1998, unless extended or earlier
redeemed by Norwest. Generally, the terms of the Rights may be amended by the
Board of Directors without the consent of the holders of the Rights.
PREEMPTIVE RIGHTS
ALEXANDRIA. Alexandria shareholders have no preemptive rights to acquire
treasury stock and previously unissued shares of Alexandria stock upon their
issuance.
THE BANK. Bank stockholders have the preemptive right to subscribe for
previously unissued shares of the Bank's capital stock.
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NORWEST. Norwest stockholders have no preemptive rights or other purchase
rights other than the Rights.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
ALEXANDRIA. Under Minnesota law the affirmative vote of the holders of a
majority of the voting power of all shares entitled to vote is required to
approve a merger or consolidation. However, with respect to a merger, no vote
of the shareholders of Alexandria is required if (1) Alexandria is the surviving
corporation, (2) each holder of Alexandria shares outstanding before the
effective date of the merger will hold the same number of shares with identical
rights after the merger, and (3) the shares of Alexandria entitled to vote or
entitled to participate without limitation in distributions to be issued or
delivered in such merger do not exceed 20% of the shares of Alexandria entitled
to vote or entitled to participate without limitation in distributions,
respectively, outstanding immediately prior to the merger.
THE BANK. Under Minnesota law the affirmative vote of the holders of at
least a majority of the outstanding stock is required to approve a merger or
consolidation with another Minnesota state bank. The Bank may convert into a
national banking association or merge or consolidate with one or more national
banking associations upon the affirmative vote of not less than two-thirds of
the voting power of all stockholders entitled to vote.
NORWEST. Under Delaware law the vote of a simple majority of the
outstanding shares of Norwest Common Stock entitled to vote thereon is required
to approve a merger or consolidation, or the sale, lease, or exchange of
substantially all of Norwest's corporate assets. With respect to a merger, no
vote of the stockholders of Norwest is required if Norwest is the surviving
corporation and (1) the related agreement of merger does not amend Norwest's
Certificate of Incorporation, (2) each share of stock of Norwest outstanding
immediately before the merger is an identical outstanding or treasury share of
Norwest after the merger, and (3) the number of shares of Norwest stock to be
issued in the merger (or to be issuable upon conversion of any convertible
instruments to be issued in the merger) does not exceed 20% of the shares of
Norwest Common Stock outstanding immediately before the merger.
AMENDMENT OF CORPORATE CHARTER
ALEXANDRIA. Under Minnesota law amendment of Alexandria's Articles
requires the affirmative vote of the holders of a majority of the voting power
of the shares present and entitled to vote at a meeting of shareholders, unless
the articles require a larger proportion or number to transact a specified type
of business at a meeting. The affirmative vote of that larger proportion or
number is required to decrease that proportion or number.
THE BANK. Under Minnesota law amendment of the Bank's Certificate requires
the affirmative vote of a majority of its voting capital stock and the approval
of the Minnesota Department of Commerce.
NORWEST. Delaware law requires the vote of a simple majority of the
outstanding shares of Norwest Common Stock in order to amend Norwest's
Certificate.
APPRAISAL RIGHTS
ALEXANDRIA. Under Minnesota law a shareholder of Alexandria is generally
entitled to exercise dissenters' rights and be paid the fair value of such
shareholder's shares. See the more detailed discussion below under "Rights of
Dissenting Shareholders."
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THE BANK. Under Minnesota law a stockholder of the Bank who dissents from
a conversion, merger, or consolidation is entitled to receive the par value or
the book value of such stockholder's stock, whichever is greater, or, under
certain circumstances, an appraised value of such stockholder's stock. In
certain circumstances, a stockholder may also have rights under federal law.
See the more detailed discussion below under "Rights of Dissenting
Shareholders."
NORWEST. Under Delaware law a stockholder is generally entitled to receive
payment of the appraised value of such stockholder's shares if the stockholder
dissents from a merger or consolidation. However, appraisal rights are not
available to holders of (a) shares listed on a national securities exchange or
held of record by more than 2,000 persons or (b) shares of the corporation
surviving a merger, if the merger did not require the approval of the
stockholders of such corporation, unless in either case, the holders of such
stock are required by the terms of the merger to accept anything other than (i)
shares of stock of the surviving corporation, (ii) shares of stock of another
corporation which are also listed on a national securities exchange or held by
more than 2,000 holders, or (iii) cash in lieu of fractional shares of such
stock. Appraisal rights are not available for a sale of assets or an amendment
to the Certificate of Incorporation. Because shares of Norwest Common Stock are
listed on both the NYSE and the CHX, and Norwest has more than 2,000
stockholders of record, its stockholders are not, subject to the aforementioned
exceptions, entitled to any rights of appraisal in connection with mergers or
consolidations involving Norwest.
SPECIAL MEETINGS
ALEXANDRIA. Under Minnesota law and Alexandria's Bylaws, a special meeting
of shareholders may be called by Alexandria's President and must be called upon
the written request of two or more of its directors or of the holders of ten
percent of the outstanding shares of Alexandria Common Stock.
THE BANK. Under the Bank's By-Laws a special meeting of stockholders may
be called by the President or the Cashier and must be called on the majority
vote of the directors, or on the written request of any three or more
stockholders owning in the aggregate not less than ten percent of the capital
stock of the Bank.
NORWEST. Under Delaware law and the By-Laws of Norwest, a special meeting
of stockholders may be called only by the Chairman of the Board, a Vice
Chairman, the President, or a majority of the Board of Directors.
ANTITAKEOVER STATUTES
ALEXANDRIA. Minnesota has in force both a control share acquisition
statute, which regulates the accumulation of shares of voting stock of Minnesota
corporations, and a business combination statute, which restricts business
combinations with Minnesota corporations. The control share acquisition statute
precludes an acquiror of the voting shares of a Minnesota corporation who
crosses one of three thresholds (20%, 33 1/3%, or 50% of the voting power) from
obtaining voting control with respect to such shares unless both a majority of
all voting shares and a majority of all disinterested voting shares vote to
accord voting power to the control shares. The statute further provides that
the corporation may redeem the control shares if the acquiror has not complied
with certain procedural requirements or if the control shares are not accorded
full voting rights by the shareholders. The business combination statute
regulates business combinations such as mergers, consolidations, and asset
purchases with public corporations where the acquiror became an interested
shareholder of the public
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corporation before either the purchase resulting in such acquiror becoming an
interested shareholder or the business combination received the prior approval
of a majority of the disinterested directors of the public corporation. An
"interested shareholder" is any person that is either the beneficial owner,
directly or indirectly, of ten percent or more of the voting stock of the public
corporation or an affiliate or associate of the public corporation and was at
any time within the preceding four years the beneficial owner, directly or
indirectly, of ten percent or more of the voting stock of the public
corporation. A "disinterested" director is a person who is not currently nor
has been within five years an officer or employee of the public corporation or a
related corporation. The statute prohibits business combinations with an
unapproved interested shareholder for a period of four years after the date of
the interested shareholder's share acquisition. The business combination
statute is designed to inhibit unfriendly acquisitions, but it does not apply to
corporations whose articles of incorporation or bylaws contain a provision
electing not to be covered by law. Neither Alexandria's articles of
incorporation nor its bylaws contain such a provision.
THE BANK. The merger or consolidation of the Bank is subject to the
approval of the Minnesota Commissioner of Commerce. The Minnesota Reciprocal
Interstate Banking Act permits the acquisition of the Bank by a bank holding
company whose principal operations are conducted in one of 16 enumerated states.
Any such acquisition must be approved by the Minnesota Commissioner of Commerce.
NORWEST. The Delaware antitakeover statute governs business combinations
between a publicly held Delaware corporation having certain numbers of
stockholders or listed on certain exchanges and an interested stockholder. This
statute is designed primarily to regulate the second step of a two-tiered
takeover attempt. Delaware law broadly defines a "business combination" as
including a merger, sale of assets, issuance of voting stock, and various other
types of transactions with an interested stockholder and other related parties.
An "interested stockholder" is defined as any person who beneficially owns,
directly or indirectly, 15% or more of the outstanding voting stock of a
corporation. Delaware law prohibits a corporation from engaging in a business
combination with an interested stockholder for a period of three years following
the date on which the stockholder became an interested stockholder, unless (a)
the board of directors approved the business combination before the stockholder
became an interested stockholder, (b) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, such stockholder
owned at least 85% of the voting stock outstanding when the merger began,
excluding in computing such percentage shares held by certain types of
stockholders, or (c) the board of directors approved the business combination
after the stockholder became an interested stockholder and the business
combination was approved by at least two-thirds of the outstanding voting stock
not owned by such stockholder.
In addition to being subject to the laws of Minnesota and Delaware,
respectively, both Alexandria and Norwest, as bank holding companies, are
subject to various provisions of federal law with respect to mergers,
consolidations, and certain other corporate transactions.
RIGHTS OF DISSENTING SHAREHOLDERS
ALEXANDRIA
All shareholders of Alexandria are entitled to exercise dissenters' rights
pursuant to the provisions of Sections 302A.471 and 302A.473 of the Minnesota
Business Corporation Act. In accordance with these sections, such shareholders
have the right to dissent from the Merger and to be paid the fair value of their
shares. The term "fair value" means the value of a
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<PAGE>
shareholder's stock immediately before the Effective Date of the Reorganization.
Under Section 302A.473, where a transaction is to be submitted for approval at a
meeting of shareholders, the corporation must notify each of its shareholders of
the right to dissent and include in such notice a copy of Sections 302A.471 and
302A.473. This Proxy Statement-Prospectus shall constitute such notice to the
shareholders of Alexandria.
The following discussion is not a complete statement of the laws pertaining
to a dissenting shareholder's rights under Minnesota law and is qualified in its
entirety by the full text of Sections 302A.471 and 302A.473 attached as
Appendix C to this Proxy Statement-Prospectus. Any shareholder who wishes to
exercise the right to dissent and demand the fair value of such shareholder's
shares, or who wishes to preserve the right to do so, should review the
following discussion and Appendix C carefully. DISSENTERS' RIGHTS WILL BE LOST
IF THE PROCEDURAL REQUIREMENTS ARE NOT FULLY AND PRECISELY SATISFIED.
A holder of Alexandria Common Stock wishing to exercise the right to demand
the fair value of such shareholder's shares must first file, BEFORE the vote of
shareholders is taken at the Special Meeting, a written notice of intent to
demand the fair value of such shareholder's shares and must, in addition, not
vote in favor of the Reorganization Agreement. Because a proxy which does not
contain voting instructions will, unless revoked, be voted FOR approval of the
Reorganization Agreement, a shareholder of Alexandria who votes by proxy and who
wishes to exercise dissenters' rights must (i) vote AGAINST approval of the
Reorganization Agreement or (ii) ABSTAIN from voting on approval of the
Reorganization Agreement. A vote against the Reorganization Agreement, whether
in person or by proxy, will not in and of itself satisfy the requirement of a
written notice of intent to demand the fair value of a shareholder's common
stock.
A demand for fair value must be executed by or for the shareholder of
record, fully and correctly, as such shareholder's name appears on the
certificate or certificates representing such shareholder's shares. If the
common stock is owned of record in a fiduciary capacity, such as by a trustee,
guardian, or custodian, such demand must be executed by the fiduciary. If the
common stock is own of record by more than one person, as in a joint tenancy or
tenancy in common, such demand must be executed by all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for a shareholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in making the demand, the
agent is acting as agent for the record owner.
A record owner who holds shares as a nominee for others, such as a broker,
may demand fair value of the shares held for all, or fewer than all, of the
beneficial owners of such shares. In such a case, the written demand should set
forth the number of shares to which it relates. When no number of shares is
expressly mentioned, the demand will be presumed to cover all shares standing in
the name of the record owner. Beneficial owners of common stock who are not
record owners and who intend to exercise dissenters' rights should instruct the
record owner to comply with the statutory requirements with respect to the
exercise of dissenters' rights before the date of the Special Meeting.
Shareholders of Alexandria who elect to exercise dissenters' rights and
demand fair value should mail or deliver their written demand to Alexandria
Securities and Investment Company, P.O. Box 519, Alexandria, Minnesota 56308,
Attention: Michael L. Lillehaugen, Secretary and Treasurer. The written demand
should specify the shareholder's name and mailing address, the number of shares
owned, and that the shareholder is thereby demanding the fair value of such
shareholder's shares.
36
<PAGE>
After the Effective Date of the Merger, Norwest, as the surviving entity,
will cause to be mailed to each of the shareholders of Alexandria who has
properly asserted dissenters' rights a notice that contains (i) the address to
which a demand for payment and stock certificates must be sent in order to
receive payment and the date by which they must be received; (ii) a form to be
used to certify the date on which the shareholder, or the beneficial owner on
whose behalf the shareholder dissents, acquired the shares or an interest in
them, and to demand payment; and (iii) another copy of Sections 302A.471 and
302A.473, together with a brief description of these sections. To receive the
fair value of common stock a dissenting shareholder must demand payment and
deposit the certificates representing such shares within 30 days after the
notice is given.
After Norwest receives a valid demand for payment, it will cause to be
remitted to each dissenting shareholder who has properly asserted dissenters'
rights the fair value of the shares of Common Stock with interest at the
judgment rate computed from the Effective Date of the Reorganization. Such
payment will be accompanied by (i) the audited financial statements of Norwest
for its most recently completed fiscal year, together with the latest available
interim financial statements; (ii) an estimate of the fair value of the shares
with respect to which dissenters' rights have been exercised and a brief
description of the method used to reach the estimate; and (iii) additional
copies of Sections 302A.471 and 302A.473 along with a brief description of the
procedures to be followed to demand the supplemental payment discussed below.
If Norwest fails to remit payment within 60 days after receiving shares from a
dissenting shareholder, it is obligated to return any certificates for such
shares to the dissenting shareholder.
If a dissenting shareholder believes that the amount remitted by Norwest is
less than the fair value of the shares plus interest, such dissenting
shareholder may give written notice to Norwest of such shareholder's own
estimate of the fair value for the shares plus interest and demand a
supplemental payment for the difference. Any written demand for supplemental
payment must be made within 30 days after Norwest has mailed its original
remittance.
Within 60 days after receiving a demand for supplemental payment, Norwest,
as the surviving entity, must either pay the amount of the supplemental payment
demanded (or agreed to between the dissenting shareholder and Norwest) or file a
petition in the state courts of Minnesota requesting that the court determine
the fair value of the shares plus interest. Any petition so filed must name as
parties all dissenting shareholders who have demanded supplemental payments and
who have been unable to reach an agreement with Norwest concerning the fair
value of their shares. The court may appoint appraisers, with such power and
authority as the court deems proper, to receive evidence on and recommend the
amount of fair value of the shares. The jurisdiction of the court is plenary
and exclusive, and the fair value as determined by the court is binding on all
shareholders, wherever located. A dissenting shareholder, if successful, is
entitled to a judgment for the amount by which the fair value of such
shareholder's shares as determined by the court exceeds the amount originally
remitted by Norwest.
Generally, the costs and expenses associated with a court proceeding to
determine the fair value of the shares will be borne by the surviving entity,
unless the court finds that a dissenting shareholder has demanded supplemental
payment in a manner which is arbitrary, vexatious, or not in good faith.
Similar costs and expenses may also be assessed in instances where Norwest has
failed to comply with the procedures in Section 302A.473 pertaining to
dissenters' rights discussed above. The court may, in its discretion, award
attorneys' fees to an attorney representing dissenting shareholders out of any
amount awarded to such dissenters.
37
<PAGE>
Failure to follow the steps required by Section 302A.473 for asserting
dissenters' rights may result in the loss of a shareholder's rights to demand
the fair value of such shareholder's shares of common stock. Shareholders
considering seeking appraisal should realize that the fair value of their
shares, as determined under Section 302A.473 in the manner outlined above, could
be more than, the same as, or less than the value of the Norwest Common Stock
they would be entitled to as a result of the Reorganization if they did not seek
appraisal of their shares.
THE BANK
Stockholders of the Bank have dissenters' appraisal rights under Minnesota
law. Section 49.41 of the Minnesota Statutes entitles any stockholder of the
Bank who objects to the proposed Bank Merger to receive payment of an appraised
value of such stockholder's Bank Common Stock if the stockholder (i) does not
vote in favor of the Bank Merger at the Bank Special Meeting and (ii) objects to
the Bank Merger at the Bank Special Meeting or within 20 days thereafter and
demands payment for such stockholder's stock. If the Bank Merger becomes
effective after such a demand, the dissenting stockholder may, at any time
within 60 days thereafter, apply to the district court in Douglas County,
Minnesota, for the appointment of three persons to appraise the value of such
stockholder's stock. The court shall appoint three appraisers and designate the
time and place of their first meeting, with such directions in regard to their
proceedings as shall be deemed proper, and shall direct the time and manner in
which payment to the stockholder shall be made of the value of such
stockholder's stock. The three appraisers shall meet at the time and place
designated by the court, shall make and certify an estimate of the value of the
stock at the time of the appraisal, and shall deliver a copy of the appraisal to
NSBA and a copy to the stockholder. The charges and expenses of the appraisers
shall be paid one-half by the stockholder and one-half by NSBA. Upon payment by
NSBA of the appraised value of the stock, the stock shall be canceled, the
dissenting stockholder shall cease to have any interest in the stock, the Bank
or NSBA, or in NSBA's property. The canceled stock may be held and disposed of
by NSBA for its own benefit.
The foregoing summary does not purport to be a complete statement of
Section 49.41 and is qualified in its entirety by reference to the provisions of
Section 49.41, the text of which is attached to this Proxy Statement-Prospectus
as Appendix D. Any stockholder who desires to exercise dissenters' rights
should review carefully the relevant provisions of Section 49.41. DISSENTERS'
RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF SECTION 49.41 ARE NOT
FULLY AND PRECISELY SATISFIED.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary contains a description of the material United States
federal income tax considerations for Alexandria and Alexandria shareholders
with respect to the Merger. This summary is set forth in reliance upon the
opinion of Lindquist & Vennum P.L.L.P, counsel for Alexandria. The conclusions
discussed herein are based, in part, on certain representations made by the
managements of Alexandria and Norwest. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), regulations, rulings and
decisions in effect on the date of this Proxy Statement-Prospectus, all of which
are subject to change. All section references herein are to the Code, unless
stated otherwise. This summary does not discuss any aspect of state, local, or
foreign taxation and does not discuss all the tax considerations that may be
relevant to particular Alexandria shareholders in light of their personal
investment circumstances, or to certain types of shareholders that may be
subject to special tax rules, such as financial institutions, tax-exempt
organizations, insurance
38
<PAGE>
companies, dealers in stock or securities, foreign corporations, and individuals
who are not citizens or residents of the United States. The discussion with
respect to Alexandria shareholders is limited to those shareholders who have
held Alexandria Common Stock and who will hold the Norwest Common Stock received
in the Merger as "capital assets" within the meaning of section 1221 of the
Code.
ALEXANDRIA SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS IN
DETERMINING THE TAX CONSIDERATIONS THAT MAY BE RELEVANT IN CONNECTION WITH THE
PROPOSED MERGER, INCLUDING THE APPLICATION TO THEIR PARTICULAR SITUATION OF THE
TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE APPLICATION OF STATE, LOCAL,
FOREIGN, OR OTHER TAX LAWS.
LINDQUIST & VENNUM P.L.L.P. HAS NOT, AND WILL NOT, PROVIDE AN OPINION OF
COUNSEL RELATED TO THE TAX TREATMENT OF THE PROPOSED BANK MERGER. BANK
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE TAX
CONSIDERATIONS THAT MAY BE RELEVANT IN CONNECTION WITH THE PROPOSED BANK MERGER
INCLUDING THE APPLICATION TO THEIR PARTICULAR SITUATIONS OF THE TAX
CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE APPLICATION OF STATE, LOCAL
FOREIGN, OR OTHER TAX LAWS.
THE PROPOSED REORGANIZATION
The merger of a wholly owned subsidiary of an acquiring corporation, such
as Norwest, with another corporation that will survive the merger, such as
Alexandria, in exchange for voting stock of the acquiring corporation, will be
treated as a "tax-free" reverse triangular merger for federal income tax
purposes under section 368(a)(1)(A) and 368(a)(2)(E) of the Code, provided the
transaction meets the requirements of a valid reverse triangular merger. The
two most significant requirements of a valid reverse triangular merger are (i)
that after the transaction the surviving corporation holds substantially all its
properties and the properties of the merged corporation and (ii) that in the
transaction former shareholders of the surviving corporation exchange at least
80% of the stock of the surviving corporation for voting stock of the acquiring
corporation. Based on the information contained in this Proxy
Statement-Prospectus, the Reorganization Agreement, and certain representations
made by the management of Norwest and the management of Alexandria, the merger
of Norwest's wholly owned subsidiary with Alexandria will constitute a
"tax-free" reverse triangular merger under sections 368(a)(1)(A) and
368(a)(2)(E) of the Code.
EFFECT OF THE REORGANIZATION ON ALEXANDRIA
For purposes of a reverse triangular merger, the surviving corporation is
treated as having received the stock of the acquiring corporation and any
additional money or property distributed by the acquiring corporation. If the
surviving corporation distributes all the stock, money, and other property
received in the reorganization to its shareholders in exchange for their stock
of the surviving corporation, section 361 of the Code provides that the
surviving corporation will not recognize any gain or loss pursuant to the
reorganization. Accordingly, Alexandria will be treated as having received the
Norwest Common Stock and any cash paid in satisfaction of dissenters' rights,
and as having distributed the stock and cash received to Alexandria
shareholders, so that Alexandria will recognize no gain or loss pursuant to the
Reorganization.
39
<PAGE>
EFFECT OF THE REORGANIZATION ON ALEXANDRIA SHAREHOLDERS
Alexandria shareholders will recognize no gain or loss upon the receipt of
the Norwest Common Stock (including fractional share interests, if any, to which
they are entitled) in exchange for their Alexandria Common Stock. Section
354(a)(1). The basis of the Norwest Common Stock (including fractional share
interests, if any) received by the Alexandria shareholders will be the same as
the basis of the Alexandria Common Stock surrendered in exchange therefor.
Section 358(a)(1). The holding period of the Norwest Common Stock (including
fractional share interests, if any) received by Alexandria shareholders will
include the holding period of the Alexandria Common Stock surrendered in
exchange therefor, provided that such stock was held as a capital asset in the
hands of Alexandria shareholders on the date of the Reorganization. Section
1223(1).
The receipt of cash in lieu of fractional share interests of Norwest Common
Stock will be treated as if the fractional shares were distributed as part of
the exchange and then were redeemed by Norwest. Depending on the personal
investment circumstances of each shareholder, such cash payments will be treated
as either having been received as a distribution in full payment in exchange for
the stock redeemed or as having been received as a dividend, as provided in
section 302 of the Code. If the cash payment is treated as having been received
by an Alexandria shareholder as a distribution in full payment in exchange for
the fractional share redeemed, such shareholder will recognize gain or loss to
the extent that the amount of cash received exceeds, or is less than, the basis
allocable to the fractional share. Such gain or loss will be capital gain or
loss, provided that the fractional share is a capital asset in the hands of the
Alexandria shareholder. If the cash payment is treated as having been received
by an Alexandria shareholder as a dividend, the shareholder generally will
recognize ordinary income in the amount of the cash payment received.
Alexandria shareholders who exercise dissenters' rights and receive cash in
the Reorganization in lieu of Norwest Common Stock will be treated as having
received the cash as a distribution in redemption of their Alexandria Common
Stock as provided in section 302 of the Code. Such shareholders generally will
recognize capital gain or loss measured by the difference between the amount of
cash received and their aggregate adjusted tax basis in the Alexandria Common
Stock, provided the Alexandria Common Stock was a capital asset in the hands of
the shareholder. Shareholders exercising dissenters' rights who also own
Norwest Common Stock, or who are deemed for federal income tax purposes to own
constructively Norwest Common Stock actually owned by other persons or entities,
may recognize dividend income, taxable as ordinary income, equal to the amount
of the cash received.
ALEXANDRIA SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS IN
DETERMINING THE TAX CONSIDERATIONS THAT MAY BE RELEVANT TO THEM IN CONNECTION
WITH THE MERGER, INCLUDING THE APPLICATION TO THEIR PARTICULAR SITUATION OF THE
RECEIPT OF CASH IN LIEU OF FRACTIONAL SHARES OR THE EXERCISE OF DISSENTERS'
RIGHTS, AS WELL AS THE OTHER TAX CONSIDERATIONS DISCUSSED ABOVE, AND THE
APPLICATION OF ANY STATE, LOCAL, FOREIGN, OR OTHER TAX LAWS.
RESALE OF NORWEST COMMON STOCK
The shares of Norwest Common Stock issuable to shareholders of Alexandria
and to stockholders of the Bank upon consummation of the Reorganization have
been registered under the Securities Act of 1933 (the "Securities Act"). Such
shares may be traded freely and without restriction by those shareholders not
deemed to be "affiliates" of Alexandria or
40
<PAGE>
Norwest as that term is defined in the rules under the Securities Act. Norwest
Common Stock received by those shareholders of Alexandria who are deemed to be
"affiliates" of Alexandria may be resold without registration as provided for by
Rule 145, or as otherwise permitted under the Securities Act. In the
Reorganization Agreement, Alexandria has agreed to use its best efforts to cause
each Alexandria shareholder who is an executive officer or director of
Alexandria or who may otherwise reasonably be deemed to be an affiliate of
Alexandria to enter into an agreement with Norwest providing that such affiliate
will not sell, transfer, or otherwise dispose of the shares of Norwest Common
Stock to be received by such person in the Merger except in compliance with the
applicable provisions of the Securities Act and the rules and regulations
promulgated thereunder. This Proxy Statement-Prospectus does not cover any
resales of Norwest Common Stock received by affiliates of Alexandria.
The Reorganization Agreement provides for the filing by Norwest of listing
applications with the NYSE and the CHX covering the shares of Norwest Common
Stock issuable upon consummation of the Reorganization. It is a condition to
the consummation of the Reorganization that such shares of Norwest Common Stock
shall have been authorized for listing on the NYSE and the CHX effective upon
official notice of issuance.
DIVIDEND REINVESTMENT AND OPTIONAL CASH PAYMENT PLAN
Norwest currently has an automatic Dividend Reinvestment and Optional Cash
Payment Plan which provides in substance, for those stockholders who elect to
participate, that dividends on Norwest Common Stock will be reinvested in shares
of Norwest Common Stock at market price (as defined). The plan also permits
participants to invest through voluntary cash payments, within certain dollar
limitations, in additional shares of Norwest Common Stock at the market price
(as defined) of such stock at the time of purchase. It is anticipated that
after the Effective Time of the Reorganization, Norwest will continue to offer
its Dividend Reinvestment and Optional Cash Payment Plan and that shareholders
of Alexandria who receive Norwest Common Stock in the Reorganization will have
the right to participate therein.
ACCOUNTING TREATMENT
Notwithstanding any provision in the Reorganization Agreement to the
contrary, management of Norwest anticipates that the Merger will be accounted
for as a "purchase" in accordance with generally accepted accounting principles.
EXPENSES
Norwest and Alexandria will each pay their own expenses in connection with
the Reorganization, including fees and expenses of their respective accountants
and counsel.
41
<PAGE>
INFORMATION ABOUT ALEXANDRIA AND THE BANK
GENERAL
Alexandria is a bank holding company organized in 1979 as a Minnesota
corporation and headquartered in Alexandria, Minnesota. The sole business
activity of Alexandria is holding 88.15% of the issued and outstanding capital
stock of the Bank. Alexandria has no other direct subsidiaries. At June 30,
1994, the Bank had total assets of $58.2 million, while Alexandria had total
assets on a consolidated basis of $58.3 million and total shareholders' equity
of $3.8 million.
BUSINESS
The Bank is a full service commercial bank chartered under the laws of the
State of Minnesota. It provides general commercial and retail banking services
to its customers in the Alexandria area.
The Bank offers all forms of commercial and consumer lending, including
lines of credit, term loans, real estate financing, and mortgage lending. Loans
outstanding at June 30, 1994, were $38.4 million, net of loan loss reserves. As
of that date, the Bank's lending limit was $600,000 per borrower. No material
portion of the Bank's loans is concentrated in a single industry or customer.
In addition, the bank offers a full range of personal banking services,
including checking accounts and savings and time accounts. As of June 30, 1994,
the Bank had 20 full-time employees (including 9 officers) and 13 part-time
employees. It owns its facilities located at 304 Maple Street, Alexandria,
Minnesota, and both buildings are in good condition.
The Bank has active competition in all areas of business in which it
presently engages. It competes with the smaller independent financial
institutions in the general Alexandria area for commercial and individual
deposits and loans.
MARKETS AND DIVIDENDS
MARKET INFORMATION; SHAREHOLDERS
There has been no public market for shares of Alexandria Common Stock or
Bank Common Stock since both entities have had a relatively small number of
shareholders throughout their existence. As of the date of this Proxy
Statement-Prospectus, there are issued and outstanding 4,878 shares of
Alexandria Common Stock, held by 7 holders of record, and 11,500 shares of Bank
Common Stock, held by 76 holders of record.
42
<PAGE>
DIVIDENDS
<TABLE>
<CAPTION>
ALEXANDRIA THE BANK
Date Paid Amount per Share Date Paid Amount per Share
--------- ---------------- --------- ----------------
<S> <C> <C> <C>
January 31, 1994 $60.00 January 30, 1994 $34.00
February 1, 1993 $50.00 January 29, 1993 $30.00
February 19, 1992 $25.00 January 31, 1992 $20.00
January 30, 1991 $25.00 January 30, 1991 $20.00
January 30, 1990 $15.00 January 30, 1990 $15.00
February 3, 1989 $20.00 February 3, 1989 $18.00
</TABLE>
43
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF ALEXANDRIA
FINANCIAL REVIEW
GENERAL
The following is management's discussion and analysis of the significant factors
affecting Alexandria's results of operations and financial condition. This
analysis should be read in conjunction with Alexandria's audited and unaudited
financial statements and accompanying footnotes and other selected financial
data presented elsewhere in this document. Alexandria is a one bank holding
company which owns 88.1% of the common stock of the Bank.
FINANCIAL CONDITION
Total assets increased by $127,000 during the first half of 1994 to $58,282,000
following an increase of $1,944,000 during 1993 to $58,155,000 at December 31,
1993. The limited first half increase was primarily due to a decrease in
Federal Funds sold. The increase from 1992 to 1993 was the result of increases
in loans and leases and federal funds sold, partially offset by a decrease in
securities.
TOTAL ASSETS (in thousands)
---------------------------
<TABLE>
<S> <C>
December 31, 1992 $56,211
December 31, 1993 $58,155
June 30, 1994 $58,282
</TABLE>
Average Federal Funds sold decreased from $3,165,000 for the year ended December
31, 1993 to $2,120,000 for the six months ended June 30, 1994 caused by an
overall decrease of $472,000 in average interest bearing deposits as depositors
sought other investment opportunities due to lower deposit interest rates and
the general interest rate environment, plus the increase of $738,000 in
securities held by Alexandria.
AVERAGE FEDERAL FUNDS SOLD (in thousands)
-----------------------------------------
<TABLE>
<S> <C>
December 31, 1992 $2,881
December 31, 1993 $3,165
June 30, 1994 $2,120
</TABLE>
44
<PAGE>
AVERAGE SECURITIES (in thousands)
---------------------------------
<TABLE>
<S> <C>
December 31, 1992 $11,336
December 31, 1993 $11,047
June 30, 1994 $11,785
</TABLE>
During 1993 average loans and leases increased $2,883,000 from $36,339,000 for
the year ended December 31, 1992 to $39,222,000 for the year ended December 31,
1993 due to increased loan demand which was funded partially by aggressive
pricing on certain deposit accounts which increased average interest bearing
deposits by $1,515,000. As loan demand decreased during the first half of 1994,
the pricing on deposits was eased.
AVERAGE LOANS AND LEASES (in thousands)
---------------------------------------
<TABLE>
<S> <C>
December 31, 1992 $36,339
December 31, 1993 $39,222
June 30, 1994 $38,934
</TABLE>
AVERAGE INTEREST BEARING DEPOSITS (in thousands)
------------------------------------------------
<TABLE>
<S> <C>
December 31, 1992 $43,115
December 31, 1993 $44,630
June 30, 1994 $44,158
</TABLE>
Total stockholders' equity has shown a steady increase due to sustained earnings
as illustrated below:
STOCKHOLDERS' EQUITY (in thousands)
-----------------------------------
<TABLE>
<S> <C>
December 31, 1992 $3,300,000
December 31, 1993 $3,795,000
June 30, 1994 $3,781,000*
<FN>
* After payment of $292,680 dividend January 31, 1994.
</TABLE>
The changes in other balance sheet accounts over the past one and one-half year
period have been insignificant.
45
<PAGE>
COMPARISONS OF SIX MONTHS ENDED
JUNE 30, 1994 AND 1993
EARNINGS PERFORMANCE
Alexandria earned net income after taxes and minority interest of $412,000 and
$392,000 for the six months ended June 30, 1994 and 1993, respectively. The
increase in net earnings of $20,000 consists of a $56,000 decrease in expenses
and a $36,000 decrease in earnings. Provision for income taxes was up $29,000
in 1994, however there was no provision for loan losses during 1994, as it was
management's opinion that the reserve was adequate. There was a $60,000 loan
loss provision in 1993. There was also a $13,000 increase in minority interest.
Interest received decreased $47,000 which was offset by a decrease of $41,000 in
interest expense due to a lower interest rate environment during the first six
months of 1994 versus first half of 1993.
Operating income decreased $30,000 which consisted primarily of a decrease in
service charge income of $17,000, decreased gain on sale of securities of
$4,500, and an insurance commission decrease of $4,700. In addition a gain of
$11,000 was realized during the first six months of 1993 on the sale of other
real estate owned and there was $2,700 of income from lock box services.
Neither of these sources of income were present for the six month period ended
June 30, 1994. The preceding decreases in operating income were partially
offset by increases of approximately $9,000 in other operating income accounts.
Operating expense decreased $38,000 from $956,000 for the six months ended on
June 30, 1993 to $918,000 for the six months ended June 30, 1994. Salaries and
employee benefits increased $23,000 during the first six months of 1994 due
primarily to increased salaries and benefits for existing employees. However,
this increase was offset by decreases in other expense areas consisting
primarily of a $12,000 decrease in data processing fees, $13,335 in investment
center expenses due to a vendor and contractual changes, $8,600 in mortality
expenses, a $6,000 decrease in FDIC insurance premiums and $4,257 less in
foreclosure expenses.
The annualized return on average assets was 2.18% for the first six months of
1994 compared to 1.79% for the same period of 1993. On a per share basis, net
income for the first six months of 1994 and 1993 were $84.55 and $80.34,
respectively.
46
<PAGE>
The following is a condensed summary of the consolidated statements of
operations (dollars in thousands):
<TABLE>
<CAPTION>
Six Months Ended
--------------------
June 30,
--------------------
1994 1993
---- ----
<S> <C> <C>
Net Interest Income $1,215 $1,221
Provision for Loan Losses 0 60
Operating Income 390 420
Operating Expense 918 956
Provision for Income Taxes 210 181
Minority Interest 65 52
Net Income After Taxes $ 412 $ 392
</TABLE>
NET INTEREST INCOME
Net interest income was affected by changes in interest rates and the volume of
average earning assets and interest-bearing liabilities in the two six month
periods being compared.
47
<PAGE>
The following table is provided to show the percentage of change in interest
income and expense of significant interest-bearing assets and liabilities
(dollars in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
Percentage Increase
-------------------
1994 1993 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Interest Income:
Loans $1,677 $1,704 (1.6)%
Securities 310 343 (9.6)%
Federal Funds Sold 41 20 105.0%
Cash Value Life Insurance 43 51 (15.7)%
Total Interest Income $2,071 $2,118 (2.2)%
Interest Expense:
Deposits $ 834 $ 874 (4.6)%
TT & L 7 8 (12.5)%
Notes Payable 16 15 6.7%
Total Interest Expense $ 857 $ 897 (4.5)%
Net Interest Income $1,214 $1,221 (.6)%
</TABLE>
48
<PAGE>
The following table is provided to show changes in interest income and expense
attributable to changes in volume and interest rates of significant interest-
earning assets and interest-bearing liabilities:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1994-1993
-----------------------------------
Total Attributable to Change
----- ----------------------
Change In Volume In Rate
------ --------- -------
<S> <C> <C> <C>
Interest Earning Assets:
Loans and Leases $(27,000) $(12,851) $(14,149)
Securities (33,000) 27,790 (60,790)
CVLI (8,000) 177 (8,177)
Federal Funds Sold 21,000 3,460 17,540
Total Interest Income $(47,000) $ 18,576 $(65,576)
Interest Bearing Liabilities:
Deposits $(40,000) $ (8,748) $(31,252)
TT & L Notes (1,000) (1,000) 0
Notes Payable 1,000 1,000 0
Total Interest Expense $(40,000) $ (8,748) $(31,252)
</TABLE>
The change in interest income/expense attributable to volume reflects the change
in volume times the prior period's rate and the change in interest
income/expense attributable to rate reflects the change in rates times the prior
period's volume.
49
<PAGE>
The following table presents average asset and liability balances (dollars in
thousands) and percentage changes:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
Percentage Increase
-------------------
1994 1993 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Loans and Leases $38,934 $39,788 (2.1)%
Securities 11,785 10,224 15.3%
CVLI 1,365 1,360 .4%
Federal Funds Sold 2,120 1,420 49.3%
Total Average Interest Earning Assets $54,204 $52,792 2.7%
Deposits
Non-Interest Bearing Demand $ 8,206 $ 7,879 4.2%
Interest Bearing Demand 5,259 5,366 (2.0)%
Savings 12,496 12,539 (.3)%
Time 26,403 25,818 2.3%
Total Average Interest Bearing Deposits $44,158 $43,723 1.0%
TT & L Notes 273 562 (51.4)%
Notes Payable 500 550 (9.0)%
Total Average Interest Bearing Liabilities $44,931 $44,835 .2%
</TABLE>
50
<PAGE>
The following table shows the annualized tax equivalent average interest yield
on interest-earning assets and the annualized average interest rate paid on
interest-bearing liabilities:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Average Yield Earned:
Loans and Leases 8.78 8.99
Securities 6.13 6.77
CVLI 6.41 7.06
Federal Funds Sold 3.54 2.86
Total Interest Earning Assets 7.93 8.19
Average Rates Paid:
Interest Bearing Deposits 3.78 4.00
TT & L Notes 3.31 2.87
Notes Payable 6.50 5.70
Total Interest-Bearing Liabilities 3.81 4.00
Interest Rate Spread 4.12 4.19
</TABLE>
The following table shows the annualized net yield on interest-earning assets
for the six months ended June 30, 1994 and 1993:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Average Yield Earned 7.93 8.19
Interest Expense to Average Earnings Assets 3.45 3.56
Net Yield on Interest-Earning Assets 4.48 4.63
</TABLE>
Net interest income was $1,215,000 for the first six months of 1994, compared
with $1,221,000 for the same period of 1993; an insignificant decrease of
approximately one-half of one percent.
Total interest income decreased to $2,071,000 for the first half of 1994 as
compared to $2,118,000 for the first half of 1993. Average interest-earning
assets increased by 2.7% from $52,792,000 on June 30, 1993 to $54,204,000 on
June 30, 1994. Earning asset yields decreased to 7.93% in 1994 as compared to
8.19% in 1993.
Total interest expense for the first six months of 1994 decreased by 4.5% from
$897,000 on June 30, 1993 to $857,000 on June 30, 1994. The rate on interest-
bearing liabilities decreased from 4.00% to 3.81% because of aggressive deposit
rate pricing during a portion of the period.
51
<PAGE>
PROVISION FOR LOAN LOSSES
Alexandria's provision for loan losses was $60,000 for the first six months of
1993, but management deemed the reserve for loan losses was adequate on June 30,
1994 and no additional provision was made. The first six months of 1994 showed
net recoveries of $375 and the same period of 1993 had net losses of $11,143.
The loan loss reserve as a percentage of loans was 1.15% and 1.08% at June 30,
1994 and 1993, respectively.
OPERATING INCOME (Non-Interest)
The following table presents a summary of operating income (dollars in
thousands) and percentage changes as of June 30, 1994 and 1993:
<TABLE>
<CAPTION>
Percentage Increase
-------------------
1994 1993 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Service Charge on Deposit Accounts $101 $112 (9.8)%
Other Loan Income 161 165 (2.4)%
Other 128 143 (10.5)%
Total $390 $420 (7.1)%
</TABLE>
The decrease in service charge income was due to one large retailer moving from
the area and closing its account and other commercial customers utilizing
compensating balances to offset service charges. The decrease in other income
was due to decreased insurance commissions, discontinuance of lock box services
and subsequent fee income loss and a decrease in investment center income.
OPERATING EXPENSES (Non-Interest)
The following table presents a summary of operating expenses (dollars in
thousands) and percentage changes as of June 30, 1994 and 1993:
<TABLE>
<CAPTION>
Percentage Increase
-------------------
1994 1993 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Salaries and Employee Benefits $454 $430 5.6%
Net Occupancy and Equipment Expense 129 121 6.6%
Other Expenses 335 405 (17.3)%
Total $918 $956 (4.0)%
</TABLE>
Total operating expenses decreased 4.0% to $918,000 for the first six months of
1994 as compared to $956,000 for the same period in 1993. Three items accounted
for the majority of the decrease, including a $12,275 reduction in data
processing fees, a $13,335 decrease in investment center expenses due to
contractual and vendor changes and a $8,600 decrease in mortality expense due to
the discontinuation of the program. There were a few insignificant increases or
decreases in various other operating expenses.
52
<PAGE>
COMPARISONS OF YEARS ENDED
DECEMBER 31, 1993, 1992 AND 1991
EARNINGS PERFORMANCE
Alexandria earned net income of $694,000 in 1993, $634,000 in 1992 and $480,000
in 1991. The increase of $154,000 from 1991 to 1992 consists of a $246,000
increase in net interest income, a $263,000 increase in other operating income,
a $1,000 decrease in loan loss provision and a $149,000 increase in other
operating expenses. The 1991 income reflects a $50,000 increase in income due
to the cumulative effect of the change in accounting standards for income taxes.
The $60,000 increase in net income from 1992 to 1993 resulted from a $179,000
increase in net interest income, a $108,000 increase in other operating income,
a $17,000 decrease in the loan loss provision, a $169,000 increase in other
operating expense and $75,000 increase in taxes and minority interest.
The return on average assets was 1.40% in 1993 compared to 1.31% in 1992 and
1.00% in 1991. Return on average shareholder's equity was 18.53% in 1993
compared to 18.12% in 1992 and 14.14% in 1991. On a per share basis, net income
for the years 1993, 1992 and 1991 was $142.24, $129.91 and $98.42, respectively.
The following is a condensed summary of the statements of operation (dollars in
thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net Interest Income $2,448 $2,269 $2,023
Provision for Loan/Bond Losses 90 107 108
Operating Income 878 770 507
Operating Expense 2,048 1,879 1,730
Net Income Before Income Taxes $1,188 $1,053 $ 692
</TABLE>
NET INTEREST INCOME
Net interest income is affected by changes in both interest rates and the volume
of average earning assets and interest-bearing liabilities.
53
<PAGE>
The following table is provided to show the percentage of change in interest
income and expense of significant interest-bearing assets and liabilities:
<TABLE>
<CAPTION>
Dollars Percentage
------- ----------
(in thousands) Increase (Decrease)
-------------- -------------------
1993 1992 1991 1993/92 1992/91
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Interest Income:
Loans & Leases $3,431 $3,408 $3,554 .7% (4.1)%
Securities 623 785 737 (20.6)% 6.5%
CVLI 96 103 105 (6.8)% (2.0)%
Federal Funds Sold 77 80 153 (3.8)% (47.7)%
Total Interest Income $4,227 $4,376 $4,549 (3.4)% (3.8)%
Interest Expense:
Deposits $1,735 $2,058 $2,476 (15.7)% (16.8)%
TT & L Notes 14 15 30 (6.7)% (50.0)%
Notes Payable 30 34 20 (11.8)% 70.0%
Total Interest Expense $1,779 $2,107 $2,526 (15.6)% (16.6)%
Net Interest Income $2,448 $2,269 $2,023 7.9% 12.2%
</TABLE>
54
<PAGE>
The following table is provided to show changes in interest income and expense
attributable to changes in volume and interest rates of significant interest
earning assets and interest-bearing liabilities:
<TABLE>
<CAPTION>
1993-1992
---------
Attributable to Change
----------------------
Total Change In Volume In Rate
------------ --------- -------
<S> <C> <C> <C>
Interest Earning Assets:
Loans and Leases $ 23,000 $270,425 $(247,425)
Securities (162,000) (19,970) (142,030)
CVLI (7,000) 209 (7,209)
Federal Funds Sold (3,000) 7,980 (10,980)
Total Interest Income $(149,000) $258,644 $(407,644)
Interest Bearing Liabilities:
Deposits $(323,000) $ 41,356 $(364,356)
TT & L Notes (1,000) (4,305) 3,305
Notes Payable (4,000) (690) (3,310)
Total Interest Expense $(328,000) $ 36,361 $(364,361)
<CAPTION>
1992-1991
---------
Attributable to Change
----------------------
Total Change In Volume In Rate
------------ --------- -------
<S> <C> <C> <C>
Interest Earning Assets:
Loans and Leases $(146,000) $ 314,125 $(460,125)
Securities 48,000 123,225 (75,225)
CVLI (2,000) 2,388 (4,388)
Federal Funds Sold (73,000) (5,774) (67,226)
Total Interest Income $(173,000) $ 433,964 $(606,964)
Interest Bearing Liabilities:
Deposits $(418,000) $ 156,079 $(574,079)
TT & L Notes (15,000) 12,785 (27,785)
Notes Payable 14,000 1,210 12,790
Total Interest Expense $(419,000) $ 170,074 $(589,074)
</TABLE>
55
<PAGE>
The change in interest income/expense attributable to volume reflects the change
in volume times the prior year's rate and the change in interest income/expense
attributable to rate reflects the change in rates times the current year's
volume.
The following table presents average asset and liability balances and percentage
changes:
<TABLE>
<CAPTION>
Dollars Percentage
------- ----------
(in thousands) Increase (Decrease)
-------------- -------------------
1993 1992 1991 1993/92 1992/91
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Loans & Leases $39,222 $36,339 $33,395 7.93% 8.81%
Securities 11,047 11,336 9,693 (2.55)% 16.95%
CVLI 1,365 1,349 1,319 1.19% 2.27%
Federal Funds Sold 3,165 2,881 2,994 9.86% (3.77)%
Total Average Interest
Earning Assets $54,799 $51,905 $47,401 5.58% 9.50%
Deposits
Non-Interest Bearing
Demand $ 7,782 $ 7,388 $ 6,337 5.33% 16.59%
Interest Bearing Demand 5,318 5,920 4,889 (10.17)% 21.08%
Savings 13,655 12,389 11,560 10.21% 7.17%
Time 25,657 24,806 24,124 3.43% 2.83%
Total Average Interest
Bearing Deposits $44,630 $43,115 $40,573 3.51% 6.27%
TT & L Notes 260 365 197 (28.77)% 85.28%
Notes Payable 482 526 230 (8.36)% 128.70%
Total Average Interest
Bearing Liabilities $45,372 $44,006 $41,000 3.10% 7.33%
</TABLE>
56
<PAGE>
The following table shows the average interest yield on interest earning assets
and the average interest rate paid on interest bearing liabilities:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Average Yield Earned:
Loans & Leases 8.75 9.38 10.67
Securities 5.63 6.91 7.50
CVLI 7.03 7.64 7.96
Federal Funds Sold 2.43 2.81 5.11
Total Interest Earning Assets 7.71 8.43 9.60
Average Rates Paid:
Interest Bearing Deposits 3.89 4.77 6.14
TT & L Notes 5.38 4.10 7.61
Notes Payable 6.01 6.46 8.69
Total Interest Bearing Liabilities 3.91 4.79 6.16
Interest Rate Spread 3.80 3.64 3.44
</TABLE>
The following table shows the net yield on interest earning assets:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Average Yield Earned 7.71 8.43 9.60
Interest Expense to Average Earning Assets 3.19 3.99 5.29
Net Yield on Interest Earning Assets 4.52 4.44 4.31
</TABLE>
Net interest income was $2,448,000 in 1993, compared with $2,269,000 in 1992 and
$2,023,000 in 1991; which is an increase each year despite the fact that total
interest income decreased from $4,549,000 in 1991 to $4,376,000 in 1992 and
$4,227,000 in 1993.
Average interest-earning assets increased to $54,799,000 in 1993 from
$51,905,000 in 1992 and $47,401,000 in 1991. Earning asset yield decreased to
7.71% in 1993 as compared to 8.43% and 9.60% in 1992 and 1991, respectively.
Total interest expense declined to $1,779,000 in 1993 compared to $2,107,000 in
1992 and $2,526,000 in 1991 even though interest-bearing liabilities increased
by 3.10% from 1992 to 1993 and 7.33% from 1991 to 1992.
The decreases in interest expense and interest income in a period of increasing
interest earning assets and interest bearing liabilities was caused by general
economic market conditions which moved interest rates lower in 1992.
57
<PAGE>
PROVISION FOR LOAN LOSSES
The allowance for loan losses is determined based on management's evaluation of
the loan portfolio, economic conditions, prior loss experience, review of
specific problem loans and other pertinent factors. Actual losses on loans are
charged against this allowance and recoveries on charged-off loans are credited
to this allowance.
In 1992, there were charge-offs of $56,028 and recoveries of $2,768 plus a
provision of $107,170 to bring the reserve for loan losses to $375,000. $24,578
was charged off in 1993, $5,541 was recovered and there was an additional
provision of $90,000 to end 1993 with a loan loss reserve of $445,963.
Based on the information from the 1993 Uniform Bank Performance Report,
Alexandria's net loan loss to average loans and leases was .05% and .15% for
years 1993 and 1992, respectively, while Alexandria's peer group was .12% and
.23%, respectively.
OPERATING INCOME (Non-Interest)
The following table represents a summary of operating income and percentage
changes:
<TABLE>
<CAPTION>
Dollars Percentage
------- ----------
(in thousands) Increase (Decrease)
-------------- -------------------
1993 1992 1991 1993/92 1992/91
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Service Charge Deposit Accounts $221 $221 $168 0.0% 31.5%
Other Income Loans 373 266 81 40.2% 228.4%
Other Operating Income 284 283 258 .3% 9.7%
Total Operating Income $878 $770 $507 14.0% 51.9%
</TABLE>
Fee income is a significant source of revenue for Alexandria. Income increased
51.9% from 1991 to 1992 followed by a 14.0% increase from 1992 to 1993. One
factor in the increase was a revision of deposit service charges in early 1992.
Another factor was the creation of a real estate department in 1992 which
generated $190,445 and $288,065 in origination fees in 1992 and 1993,
respectively.
58
<PAGE>
OPERATING EXPENSES (Non-Interest)
The following table presents a summary of operating expenses and percentage
changes:
<TABLE>
<CAPTION>
Dollars Percentage
------- ----------
(in thousands) Increase (Decrease)
-------------- -------------------
1993 1992 1991 1993/92 1992/91
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Salaries and Benefits $ 999 $ 903 $ 812 10.6% 11.2%
Net Occupancy and Equipment
Expense 248 227 205 9.3% 10.7%
Other Expenses 801 749 713 6.9% 5.1%
Total Operating Expenses $2,048 $1,879 $1,730 9.0% 8.6%
</TABLE>
Total operating expenses increased to $2,048,000 in 1993 compared to $1,879,000
in 1992 and $1,730,000 in 1991. The increases in 1992 and 1993 are partially
attributable to increased staff and salary increases for existing staff. In
addition, discretionary payments in the form of a cash bonus and profit sharing
equal to 18.33% of annual salary were paid.
Other increases occurring from 1991 to 1992 were as follows: $6,000
attributable to the investment center, $13,000 attributable to the travel and
convention expense, employee training and miscellaneous expenses which can be
attributed to increased staffing and expanded services. Other minimal increases
or decreases were routine changes. There was an increase of $26,000 in
investment center expenses from 1992 to 1993 which was created when a contract
was bought out and a different brokerage firm was utilized. Dues and
memberships increased by $7,000 from 1992 to 1993.
Fees for accounting and auditing decreased by $26,000 from 1991 to 1992 and
increased by $20,000 from 1992 to 1993. These changes resulted from the method
in which the bank was accruing for anticipated expenditures.
59
<PAGE>
ACCOUNTING AND REGULATORY GUIDELINES
INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME TAXES.
Alexandria adopted SFAS No. 109 during 1993 and has elected to apply the
provisions retroactively beginning January 1, 1991. As a result, the financial
statements for 1992 and 1991 have been restated to apply the new method of
accounting retroactively.
SFAS No. 109 requires the use of the asset and liability method of accounting
for income taxes. Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
cumulative effect of the change in the method of accounting for income taxes as
of January 1, 1991 was a $50,000 tax asset, due to differences in the
deductibility of the allowance for loan losses.
STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In June 1993, the Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 114, ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN, which requires that certain impaired loans be measured to
reflect the time value of money. SFAS No. 114 is required to be adopted for
fiscal years beginning after December 15, 1994. The impact of adoption of the
new accounting standard on Alexandria's financial statements has not yet been
determined.
In June 1993, the FASB issued SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS
IN DEBT AND EQUITY SECURITIES. This statement addressed the accounting and
reporting for investments by classifying them into three categories; securities
held to maturity, trading securities and available for sale. Alexandria adopted
SFAS No. 115 effective December 31, 1993. Alexandria has classified its
approximately $11,900,000 portfolio as follows:
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
------------ -----------------
<S> <C> <C>
Investments available for sale $7,382,265 $6,668,238
Trading Securities $ 0 $ 0
Securities held to maturity $4,475,370 $4,695,067
</TABLE>
As of December 31, 1993, investments available for sale had an unrealized gain
of $80,000 which decreased by $228,000 to an unrealized loss of $148,000 as of
June 30, 1994. The decrease in this portion of the portfolio was mainly due to
interest rate increases by the Federal Reserve during the first six months of
1994 which had a negative effect on the value of the securities. SFAS No. 115
has not been applied retroactive prior to December 31, 1993.
60
<PAGE>
FUNDING SOURCES AND LIQUIDITY MANAGEMENT
The assets of Alexandria are funded primarily through the use of borrowings in
the form of deposits and Treasury Tax and Loan Notes. The maintenance of an
adequate level of liquidity is necessary to ensure that sufficient funds are
available to meet Bank customers' loan demand and deposit withdrawals. The
sources of asset liquidity consist of federal funds sold, maturing loans and
investment securities.
Alexandria's Funds Management Policy outlines minimum liquidity standards which
are reviewed monthly by the Funds Management Committee and quarterly by the
Board of Directors. The Funds Management Committee is charged with the
responsibility of maintaining an adequate level of liquidity and managing the
risks associated with interest rate changes while sustaining stable growth in
net interest income. Alexandria's basic strategy is to minimize rate risk
through matching the repricing periods of earning assets and interest-bearing
liabilities.
CAPITAL MANAGEMENT OF COMMUNITY STATE BANK
Bank regulatory agencies measure capital adequacy through standardized risk-
based capital guidelines which compare different levels of capital (as defined
by such guidelines) to risk-weighted assets and off-balance sheet obligations.
Under the rules effective December 31, 1992, all financial institutions are
required to maintain a level of core capital (known as TIER 1 capital) which
must be at least 4.0% of risk weighted assets, and a minimum level of total
capital of at least 8.0% of risk-weighted assets. TIER 1 capital consists
principally of stockholders' equity less goodwill. Total capital is comprised
of TIER 1 capital, certain debt instruments and a portion of the allowance for
loan losses. The Bank's actual risk-based capital requirement and excess risk-
based capital at June 30, 1994, December 31, 1993 and 1992 (dollars in
thousands) are summarized below:
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1994 1993 1992
---- ---- ----
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(1) (1) (1)
--- --- ---
<S> <C> <C> <C> <C> <C> <C>
TIER 1 Capital $4,762 $4,800 $4,273
Allowable portion of reserve for loan losses $ 446 $ 446 $ 375
Total Risk-Based Capital $5,208 9.12% $5,246 10.36% $4,648 9.89%
Risk-Based Capital Requirements $4,568 8.10% $4,052 8.00% $3,760 8.00%
Excess Risk-Based Capital $ 640 1.12% $1,194 2.36% $ 888 1.89%
<FN>
(1) Percentage based on risk-weighted assets of $57,105,000, $50,654,000 and
$47,000,000 at June 30, 1994, December 31, 1993 and 1992, respectively.
</TABLE>
61
<PAGE>
As a supplement to the risk-based capital guidelines, the Federal Reserve Board
has also adopted a minimum ratio of TIER 1 capital to total assets known as the
TIER 1 leverage ratio. The principal objective of this measure is to place a
constraint on the maximum degree to which a banking organization can leverage
its equity capital base. This regulation has established a minimum level of
TIER 1 capital to total assets of 3.0%. The Bank's actual TIER 1 leverage ratio
was 7.98% and 7.53% as of December 31, 1993 and 1992, respectively.
62
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
SELECTED STATISTICAL INFORMATION
AVERAGE BALANCE SHEETS, AVERAGE YIELDS EARNED AND RATES PAID
The following table sets forth certain selected statistical information and
should be read in conjunction with the financial statements of Alexandria
(dollars in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30, 1994 Six Months Ended June 30, 1993
---------------------------------------- ----------------------------------------
Average Average Average Average
Balance Interest Yield/Rate (1)(2) Balance Interest Yield/Rate (1)(2)
-------- -------- ----------------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and leases $38,934 $1,677 8.78% $39,788 $1,704 8.99%
Securities 11,785 310 6.13% 10,224 343 6.77%
CVLI 1,365 43 6.41% 1,360 51 7.06%
Federal funds sold 2,120 41 3.54% 1,420 20 2.86%
------- ------ ------- ------
Total Earning Assets $54,204 $2,071 7.93% $52,792 $2,118 8.19%
Allowance for loan losses (446) (422)
Cash and due from banks 2,168 2,550
Other assets 2,292 2,263
------- ------ ------- ------
Total Assets $58,218 $2,071 $57,183 $2,118
------- ------ ------- ------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits $ 5,259 $ 46 1.74% $ 5,366 $ 55 2.04%
Savings deposits 12,496 166 2.65% 12,539 176 2.80%
Time deposits 26,403 622 4.71% 25,818 643 4.98%
Treasury tax and loan notes 273 7 3.31% 562 7 2.87%
Notes payable 500 16 6.50% 550 16 5.82%
------- ------ ------- ------
Total Interest-Bearing Liabilities $44,931 $ 857 3.81% $44,835 $ 897 4.00%
Non-interest bearing deposits 8,206 7,879
Other liabilities 720 387
Minority interest 573 535
Stockholders' equity 3,788 3,547
------- ------ ------- ------
Total Liabilities and
Stockholders' Equity $58,218 $ 857 $57,183 $ 897
------- ------ ------- ------
------- -------
NET INTEREST INCOME $1,214 $1,221
------ ------
------ ------
INTEREST RATE SPREAD 4.12% 4.19%
NET INTEREST INCOME TO AVERAGE EARNINGS ASSETS 4.48% 4.63%
<FN>
(1) Yield/Rate is annualized (2) Yield is tax equivalent
</TABLE>
63
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
SELECTED STATISTICAL INFORMATION
AVERAGE BALANCE SHEETS, AVERAGE YIELDS EARNED AND RATES PAID
The following table sets forth selected statistical information and should be
read in conjunction with the financial statements of Alexandria (dollars in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1993 Year Ended December 31, 1992
------------------------------------ ------------------------------------
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and leases $39,222 $3,431 8.75% $36,339 $3,408 9.38%
Securities 11,047 623 5.64% 11,336 785 6.92%
CVLI 1,365 96 7.03% 1,349 103 7.64%
Federal funds sold 3,165 77 2.43% 2,881 80 2.81%
------- ------ ------- ------
Total Earning Assets $54,799 $4,227 7.71% $51,905 $4,376 8.43%
Allowance for loan losses (452) (365)
Cash and due from banks 1,838 2,274
Other assets 1,398 2,042
------- ------ ------- ------
Total Assets $57,583 $4,227 $55,856 $4,376
------- ------ ------- ------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits $ 5,318 $ 105 1.97% $ 5,920 $ 169 2.85%
Savings deposits 13,655 313 2.29% 12,389 359 2.90%
Time deposits 25,657 1,317 5.13% 24,806 1,530 6.17%
Treasury tax and loan notes 260 14 5.38% 365 15 4.10%
Notes payable 482 30 6.01% 526 34 6.46%
------- ------ ------- ------
Total Interest-Bearing Liabilities $45,372 $1,779 3.91% $44,006 $2,107 4.79%
Non-interest bearing deposit 7,782 7,388
Other liabilities 346 678
Minority interest 535 499
Stockholders' equity 3,548 3,285
------- ------ ------- ------
Total Liabilities and
Stockholders' Equity $57,583 $1,779 $55,856 $2,107
------- ------ ------- ------
------- -------
NET INTEREST INCOME $2,448 $2,269
------ ------
------ ------
INTEREST RATE SPREAD 3.80% 3.64%
NET INTEREST INCOME TO AVERAGE EARNINGS ASSETS 4.52% 4.44%
<CAPTION>
Year Ended December 31, 1991
------------------------------------
Average Average
Balance Interest Yield/Rate
-------- -------- ----------
<S> <C> <C> <C>
ASSETS
Loans and leases $33,395 $3,554 10.64%
Securities 9,693 737 7.60%
CVLI 1,319 105 7.96%
Federal funds sold 2,994 153 5.11%
------- ------
Total Earning Assets $47,401 $4,549 9.60%
Allowance for loan losses (306)
Cash and due from banks 2,464
Other assets 2,088
------- ------
Total Assets $51,647 $4,549
------- ------
-------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits $ 4,889 $ 215 4.39%
Savings deposits 11,560 481 4.16%
Time deposits 24,124 1,795 7.44%
Treasury tax and loan notes 197 15 7.61%
Notes payable 230 20 8.69%
------- ------
Total Interest-Bearing Liabilities $41,000 $2,526 6.16%
Non-interest bearing deposit 6,337
Other liabilities 736
Minority interest 475
Stockholders' equity 3,099
------- ------
Total Liabilities and Stockholders'
Equity $51,647 $2,526
------- ------
-------
NET INTEREST INCOME $2,023
------
------
INTEREST RATE SPREAD 3.44%
NET INTEREST INCOME TO AVERAGE EARNINGS ASSETS 4.31%
</TABLE>
64
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
SELECTED STATISTICAL INFORMATION
SECURITIES
The following table is the carrying value (dollars in thousands) of securities:
<TABLE>
<CAPTION>
June 30, December 31,
--------- -----------------------------------
1994 1993 1992 1991
--------- -------- -------- --------
<S> <C> <C> <C> <C>
U.S. Treasury $ 1,660 $ 1,697 $ 901 $ 2,305
U.S. Government Agencies 5,797 5,003 7,338 4,560
Municipals 3,524 3,794 2,966 1,896
Corporate Securities 0 224 198 750
U.S. Government Mutual Funds 554 564 539 506
Other Equity Securities 174 162 0 0
Other Securities 0 0 100 1
------- ------- ------- -------
Total Securities $11,709 $11,444 $12,042 $10,018
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The following table reflects the maturity distribution of each security category
and the approximate weighted average annual yield at June 30, 1994 (dollars in
thousands):
<TABLE>
<CAPTION>
Maturing Within Maturing Within Maturing Within
--------------- --------------- ---------------
Less Weighted Weighted Weighted More Weighted Weighted
Than Average 1-5 Average 5-10 Average Than Average Average
1 Year Yield Years Yield Years Yield 10 Years Yield Total Yield
--------- ------- ----- ------- ----- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 599 5.06%(1) $1,061 4.48%(1) $ 1,660 4.69%(1)
U.S. Government Agencies 1,003 7.37%(1) 2,940 7.74%(1) $ 794 7.41%(1) $1,060 4.75%(1) 5,797 7.10%(1)
Municipals 95 5.05%(1) 1,082 7.65%(1) 2,347 8.13%(1) 3,524 7.90%(1)
Corporate Securities
U.S. Government
Mutual Funds 554 3.10%(1) 554 3.10%(1)
Other Equity Securities 174 3.10%(1) 174 3.10%(1)
Other Securities
------ ------ ------ ------ -------
Total Securities $1,697 6.42% $5,811 6.55% $3,141 7.95% $1,060 4.75% $11,709
------ ------ ------ ------ -------
------ ------ ------ ------ -------
<FN>
(1) Tax Equivalent
</TABLE>
65
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
SELECTED STATISTICAL INFORMATION
SECURITIES (CONTINUED)
The following table reflects the maturity distribution of each security category
and the approximate weighted average yield at December 31, 1993 (dollars in
thousands):
<TABLE>
<CAPTION>
Maturing Within Maturing Within Maturing Within
--------------- --------------- ---------------
Less Weighted Weighted Weighted More Weighted Weighted
Than Average 1-5 Average 5-10 Average Than Average Average
1 Year Yield Years Yield Years Yield 10 Years Yield Total Yield
--------- ------- ----- ------- ----- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $1,697 4.67% $ 1,697 4.67%
U.S. Government Agencies $601 7.05% 2,547 5.17% $ 583 8.02% $1,272 5.32% 5,003 5.77%
Municipals 206 8.80% 911 7.76% 2,577 8.37% 100 6.94% 3,794 7.08%
Corporate Securities 224 4.03% 224 4.03%
U.S. Government Mutual Funds 564 4.03% 564 4.03%
Other Equity Securities 162 4.03% 162 4.03%
Other Securities
---- ------ ------ ------ -------
Total Securities $807 7.50% $6,105 5.35% $3,160 $1,372 5.44% $11,444 6.28%
---- ------ ------ ------ -------
---- ------ ------ ------ -------
</TABLE>
66
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
SELECTED STATISTICAL INFORMATION
LOAN PORTFOLIO
The following table classifies loans by major category (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993 December 31, 1992 December 31, 1991
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Commercial/Business $11,545 $11,486 $ 9,246 $ 8,155
Real estate - commercial 6,144 6,082 5,633 6,521
Real estate - residential 11,337 11,748 12,143 10,243
Real estate - construction 742 759 794 631
Real estate - pending sale secondary market 703 925 546 0
Consumer 8,396 8,104 7,908 8,159
------- ------- ------- -------
Total Loans $38,867 $39,104 $36,270 $33,709
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The following tables present maturities and sensitivities of loans to changes in
interest rates as of June 30, 1994 (dollars in thousands):
<TABLE>
<CAPTION>
Less than 1 Year 1 - 5 Years More than 5 Years Total
---------------- ----------- ----------------- --------
<S> <C> <C> <C> <C>
MATURITIES
Commercial business $6,423 $ 5,122 $11,545
Real estate $8,020 $10,906 18,926
Consumer $ 868 $ 7,503 8,396
-------
$38,867
-------
-------
</TABLE>
Amount of loans due after five years which have -
Predetermined interest rates - N/A
Floating/adjustable rates - N/A
The following tables present maturities and sensitivities of loans to changes in
interest rates as of December 31, 1993 (dollars in thousands):
<TABLE>
<CAPTION>
Less than 1 Year 1 - 5 Years More than 5 Years Total
---------------- ----------- ----------------- --------
<S> <C> <C> <C> <C>
MATURITIES
Commercial business $7,113 $ 4,373 $11,486
Real estate $8,969 $10,545 19,514
Consumer $ 899 $ 7,205 8,104
-------
$39,104
-------
-------
</TABLE>
Amount of loans due after five years which have -
Predetermined interest rates - N/A
Floating/adjustable rates - N/A
67
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
SELECTED STATISTICAL INFORMATION
NON-ACCRUAL, RESTRUCTURED AND PAST DUE LOANS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993 December 31, 1992 December 31, 1991
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Non-accrual loans $ 10 $ 32 $ 20 $ 82
Restructured loans 0 0 0 0
Past due loans 704 786 690 427
---- ---- ---- ----
Total $714 $818 $710 $509
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
The impact on interest income for the three months ended June 30, 1994 and the
year ended December 31, 1993 for non-accrual loans was approximately $304 and
$4,000, respectively.
68
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
SELECTED STATISTICAL INFORMATION
ANALYSIS OF ALLOWANCE FOR LOAN LOSS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993 December 31, 1992 December 31, 1991
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Balance - beginning of period $446 $375 $321 $305
---- ---- ---- ----
Provision for loan losses $ 0 $ 90 $107 $ 39
---- ---- ---- ----
Charge-offs
Commercial $ 0 $ 10 $ 24 $ 12
Consumer 2 15 32 12
Real estate 0 0 0 0
---- ---- ---- ----
Total Loan Losses $ 2 $ 25 $ 56 $ 24
---- ---- ---- ----
Recoveries
Commercial $ 0 $ 2 $ 1 $ 0
Consumer 2 4 2 1
Real estate 0 0 0 0
---- ---- ---- ----
Total Recoveries $ 2 $ 6 $ 3 $ 1
---- ---- ---- ----
Net Charge-Offs $ 0 $ 19 $ 53 $ 23
---- ---- ---- ----
Balance - end of period $446 $446 $375 $321
---- ---- ---- ----
---- ---- ---- ----
Net charge-offs as a percent of average loans .00% .06% .15% .07%
Allowance for loan losses to:
Total loans at period end 1.14% 1.14% 1.03% .95%
Net charge-offs N/A 1.20% 1.19% 1.02%
Provision for loan losses to average loans 1.14% 1.14% 1.03% .96%
</TABLE>
69
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
SELECTED STATISTICAL INFORMATION
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993 December 31, 1992 December 31, 1991
------------------------- ----------------------- ----------------------- ----------------------------
Allowance Allowance Allowance Allowance
Loans for Loan Loans for Loan Loans for Loan Loans for Loan
Outstanding Losses Outstanding Losses Outstanding Losses Outstanding Losses
----------- -------- ----------- --------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $11,545 $ 178 $11,486 $ 178 $ 9,246 $ 150 $ 9,340 $ 128
Real Estate 18,926 45 19,514 45 19,116 38 16,797 32
Consumer 8,396 223 8,164 223 7,908 187 7,572 161
------- ------- ------- ------- ------- ------- ------- --------
Total $38,867 $ 446 $39,104 $ 446 $36,270 $ 375 $33,709 $ 321
------- ------- ------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- ------- ------- --------
</TABLE>
70
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
SELECTED STATISTICAL INFORMATION
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
AT JUNE 30, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Within 3-6 6-12 Over 12
3 Months Months Months Months Total
-------- ------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Certificates of Deposit $3,653 $1,983 $650 $437 $6,723
------ ------ ---- ---- ------
------ ------ ---- ---- ------
</TABLE>
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
AT DECEMBER 31, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
Within 3-6 6-12 Over 12
3 Months Months Months Months Total
-------- ------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Certificates of Deposit $1,417 $1,943 $2,661 $229 $6,250
------ ------ ------ ---- ------
------ ------ ------ ---- ------
</TABLE>
RATIOS
<TABLE>
<CAPTION>
Six Months Ended June 30, Years Ended December 31,
------------------------- ------------------------------------
1994 1993 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Return on average assets 2.18(1) 1.79(1) 1.40 1.31 1.00
Return on average equity 27.24(1) 22.87(1) 18.53 18.12 14.14
Average equity to average assets 8.53 7.75 7.58 7.22 7.03
Dividends paid per share 60.00 50.00 50.00 31.00 25.00
<FN>
(1) Annualized
</TABLE>
71
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE BANK
FINANCIAL REVIEW
GENERAL
The following is management's discussion and analysis of the significant factors
affecting the Bank's results of operations and the financial condition of the
Bank. This analysis should be read in conjunction with Bank financial
statements and accompanying footnotes and other selected financial data
presented elsewhere in this document.
FINANCIAL CONDITION
Total assets increased by $133,000 during the first half of 1994 to $58,199,000
following an increase of $1,980,000 during 1993 to $58,066,000 at December 31,
1993. The limited first half increase was primarily due to a decrease in
Federal Funds sold. The increase from 1992 to 1993 was the result of increases
in loans and leases and federal funds sold, partially offset by a decrease in
securities.
TOTAL ASSETS (in thousands)
---------------------------
<TABLE>
<S> <C>
December 31, 1992 $56,086
December 31, 1993 $58,066
June 30, 1994 $58,199
</TABLE>
Average Federal Funds sold decreased from $3,165,000 for the year ended December
31, 1993 to $2,120,000 for the six months ended June 30, 1994 caused by an
overall decrease of $472,000 in average interest bearing deposits as depositors
sought other investment opportunities due to lower deposit interest rates and
the general interest rate environment, plus the increase of $738,000 in
securities held by the Bank.
AVERAGE FEDERAL FUNDS SOLD (in thousands)
-----------------------------------------
<TABLE>
<S> <C>
December 31, 1992 $2,881
December 31, 1993 $3,165
June 30, 1994 $2,120
</TABLE>
72
<PAGE>
AVERAGE SECURITIES (in thousands)
---------------------------------
<TABLE>
<S> <C>
December 31, 1992 $11,336
December 31, 1993 $11,047
June 30, 1994 $11,785
</TABLE>
During 1993 average loans and leases increased $2,883,000 from $36,339,000 for
the year ended December 31, 1992 to $39,222,000 for the year ended December 31,
1993 due to increased loan demand which was funded partially by aggressive
pricing on certain deposit accounts which increased average interest bearing
deposits by $1,515,000. As loan demand decreased during the first half of 1994,
the pricing on deposits was eased.
AVERAGE LOANS AND LEASES (in thousands)
---------------------------------------
<TABLE>
<S> <C>
December 31, 1992 $36,339
December 31, 1993 $39,222
June 30, 1994 $38,934
</TABLE>
AVERAGE INTEREST BEARING DEPOSITS (in thousands)
------------------------------------------------
<TABLE>
<S> <C>
December 31, 1992 $43,115
December 31, 1993 $44,630
June 30, 1994 $44,158
</TABLE>
Total capital has shown a steady increase due to sustained earnings as
illustrated below:
AVERAGE CAPITAL (in thousands)
------------------------------
<TABLE>
<S> <C>
December 31, 1992 $4,296,000
December 31, 1993 $4,724,000
June 30, 1994 $4,693,000*
<FN>
* After payment of $391,000 dividend January 31, 1994.
</TABLE>
The changes in other balance sheet accounts over the past one and one-half year
period have been insignificant.
73
<PAGE>
COMPARISONS OF SIX MONTHS ENDED
JUNE 30, 1994 AND 1993
EARNINGS PERFORMANCE
The Bank earned net income after taxes of $544,000 and $424,000 for the six
months ended June 30, 1994 and 1993, respectively. The increase in net earnings
of $120,000 consists of a $137,000 decrease in expenses and a $77,000 decrease
in earnings. Provision for income taxes was up $29,000 in 1994, however there
was no provision for loan losses, as it was management's opinion that the
reserve was adequate. There was a $60,000 loan loss provision in 1993.
Interest received decreased $47,000 which was offset by a decrease of $40,000 in
interest expense due to a lower interest rate environment during the first six
months of 1994 versus first half of 1993.
Operating income decreased $30,000 which consisted primarily of a decrease in
service charge income of $17,000, decreased gain on sale of securities of
$4,500, and an insurance commission decrease of $4,700. In addition a gain of
$11,000 was realized during the first six months of 1993 on the sale of other
real estate owned and there was $2,700 of income from lock box services.
Neither of these sources of income were present for the six month period ended
June 30, 1994. The preceding decreases in operating income were partially
offset by increases of approximately $9,000 in other operating income accounts.
Operating expense decreased $125,000 from $991,000 for the six months ended June
30, 1993 to $866,000 on June 30, 1994. Salaries and employee benefits increased
$23,000 during the first six months of 1994 due primarily to increased salaries
and benefits for existing employees. However, this increase was offset by
decreases in other expense areas consisting primarily of a $68,611 decrease in
data processing fees due to a reduction and refund from the data processing
provider, $13,335 in investment center expenses due to vendor and contractual
change, $8,600 in mortality expenses, a $6,000 decrease in FDIC insurance
premiums and $4,257 less in foreclosure expenses.
The annualized return on average assets was 2.18% for the first six months of
1994 compared to 1.79% for the same period of 1993. Annualized return on
average stockholder's equity was 27.24% for the six month period ended June 30,
1994 versus 22.87% for the first six months of 1993. On a per share basis, net
income for the first six months of 1994 and 1993 were $47.30 and $36.84,
respectively.
74
<PAGE>
The following is a condensed summary of the consolidated statements of
operations (dollars in thousands):
<TABLE>
<CAPTION>
Six Months Ended
--------------------
June 30,
--------------------
1994 1993
---- ----
<S> <C> <C>
Net Interest Income $1,230 $1,236
Reserve for Loan Losses 0 60
Provision for Income Taxes 210 181
Operating Income 390 420
Operating Expense 866 991
Net Income After Taxes $ 544 $ 424
</TABLE>
NET INTEREST INCOME
Net interest income was affected by changes in interest rates and the volume of
average earning assets and interest-bearing liabilities in the two six month
periods being compared.
The following table is provided to show the percentage of change in interest
income and expense of significant interest-bearing assets and liabilities
(dollars in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
Percentage Increase
-------------------
1994 1993 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Interest Income:
Loans $1,677 $1,704 (1.6)%
Securities 310 343 (9.6)%
Federal Funds Sold 41 20 105.0%
Cash Value Life Insurance 43 51 (15.7)%
Total Interest Income $2,071 $2,118 (2.2)%
Interest Expense:
Deposits $ 834 $ 874 (4.8)%
TT & L 7 8 (12.5)%
Total Interest Expense $ 841 $ 882 (4.9)%
Net Interest Income $1,230 $1,236 (.5)%
</TABLE>
75
<PAGE>
The following table is provided to show changes in interest income and expense
attributable to changes in volume and interest rates of significant interest-
earning assets and interest-bearing liabilities:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1994-1993
-----------------------------------
Total Attributable to Change
----- ----------------------
Change In Volume In Rate
------ --------- -------
<S> <C> <C> <C>
Interest Earning Assets:
Loans and Leases $(27,000) $(12,851) $(14,149)
Securities (33,000) 27,790 (60,790)
CVLI (8,000) 177 (8,177)
Federal Funds Sold 21,000 3,460 17,540
Total Interest Income $(47,000) $ 18,576 $(65,576)
Interest Bearing Liabilities:
Deposits $(40,000) $ (8,748) $(31,252)
TT & L Notes (1,000) (1,000) 0
Total Interest Expense $(41,000) $ (9,748) $(31,252)
</TABLE>
The change in interest income/expense attributable to volume reflects the change
in volume times the prior period's rate and the change in interest
income/expense attributable to rate reflects the change in rates times the prior
period's volume.
76
<PAGE>
The following table presents average asset and liability balances (dollars in
thousands) and percentage changes:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
Percentage Increase
-------------------
1994 1993 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Loans and Leases $38,934 $39,788 (2.1)%
Securities 11,785 10,224 15.3%
CVLI 1,365 1,360 .4%
Federal Funds Sold 2,120 1,420 49.3%
Total Average Interest Earning Assets $54,204 $52,792 2.7%
Deposits
Non-Interest Bearing Demand $ 8,206 $ 7,879 4.2%
Interest Bearing Demand 5,259 5,366 (2.0)%
Savings 12,496 12,539 (.3)%
Time 26,403 25,818 2.3%
Total Average Interest Bearing Deposits $44,158 $43,723 1.0%
TT & L Notes 273 562 (51.4)%
Total Average Interest Bearing Liabilities $44,431 $44,285 .3%
</TABLE>
77
<PAGE>
The following table shows the annualized tax equivalent average interest yield
on interest-earning assets and the annualized average interest rate paid on
interest-bearing liabilities:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Average Yield Earned:
Loans and Leases 8.78 8.99
Securities 6.13 6.77
CVLI 6.41 7.06
Federal Funds Sold 3.54 2.86
Total Interest Earning Assets 7.93 8.19
Average Rates Paid:
Interest Bearing Deposits 3.78 4.00
TT & L Notes 3.31 2.87
Total Interest-Bearing Liabilities 3.79 3.98
Interest Rate Spread 4.14 4.21
</TABLE>
The following table shows the annualized net yield on interest-earning assets
for the six months ended June 30, 1994 and 1993:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Average Yield Earned 7.93 8.19
Interest Expense to Average Earnings Assets 3.39 3.51
Net Yield on Interest-Earning Assets 4.54 4.68
</TABLE>
Net interest income was $1,230,000 for the first six months of 1994, compared
with $1,236,000 for the same period of 1993; an insignificant decrease of
approximately one-half of one percent.
Total interest income decreased to $2,071,000 for the first half of 1994 as
compared to $2,118,000 for the first half of 1993. Average interest-earning
assets increased by 2.7% from $52,792,000 on June 30, 1993 to $54,204,000 on
June 30, 1994. Earning asset yields decreased to 7.93% in 1994 as compared to
8.19% in 1993.
Total interest expense for the first six months of 1994 decreased by 4.5% from
$881,000 on June 30, 1993 to $841,000 on June 30, 1994. The rate on interest-
bearing liabilities decreased from 4.21% to 4.14% because of aggressive deposit
rate pricing during a portion of the period.
78
<PAGE>
PROVISION FOR LOAN LOSSES
The Bank's provision for loan losses was $60,000 for the first six months of
1993, but management deemed the reserve for loan losses was adequate on June 30,
1994 and no additional provision was made. The first six months of 1994 showed
net recoveries of $375 and the same period of 1993 had net losses of $11,143.
The loan loss reserve as a percentage of loans was 1.15% and 1.08% at June 30,
1994 and 1993, respectively.
OPERATING INCOME (Non-Interest)
The following table presents a summary of operating income (dollars in
thousands) and percentage changes as of June 30, 1994 and 1993:
<TABLE>
<CAPTION>
Percentage Increase
-------------------
1994 1993 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Service Charge on Deposit Accounts $101 $112 (9.8)%
Other Loan Income 161 165 (2.4)%
Other 128 143 (10.5)%
Total $390 $420 7.1%
</TABLE>
The decrease in service charge income was due to one large retailer moving from
the area and closing its account and other commercial customers utilizing
compensating balances to offset service charges. The decrease in other income
was due to decreased insurance commissions, discontinuance of lock box services
and subsequent fee income loss and a decrease in investment center income.
OPERATING EXPENSES (Non-Interest)
The following table presents a summary of operating expenses (dollars in
thousands) and percentage changes as of June 30, 1994 and 1993:
<TABLE>
<CAPTION>
Percentage Increase
-------------------
1994 1993 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Salaries and Employee Benefits $452 $428 5.6%
Net Occupancy and Equipment Expense 129 121 6.6%
Other Expenses 285 443 (35.7)%
Total $866 $992 (12.7)%
</TABLE>
79
<PAGE>
Total operating expenses decreased 12.7% to $866,000 for the first six months of
1994 as compared to $992,000 for the same period in 1993. Three items accounted
for the majority of the decrease, including a $68,611 reduction in data
processing fees created by lower fees and a refund for fees previously charged,
a $13,335 decrease in investment center expenses due to contractual and vendor
changes and a $8,600 decrease in mortality expense due to the discontinuation of
the program. There were a few insignificant increases or decreases in various
other operating expenses.
80
<PAGE>
COMPARISONS OF YEARS ENDED
DECEMBER 31, 1993, 1992 AND 1991
EARNINGS PERFORMANCE
The Bank earned net income of $827,000 in 1993, $731,000 in 1992 and $578,000 in
1991. The increase of $153,000 from 1991 to 1992 consisted of a $261,000
increase in net interest income, a $256,000 increase in other operating income,
a $1,000 decrease in loan loss provision and a $179,000 increase in other
operating expenses. 1991 income reflects a $50,000 increase in income due to
the cumulative effect of the change in accounting standards for income taxes.
The $96,000 increase in net income from 1992 to 1993 resulted from a $174,000
increase in net interest income, a $122,000 increase in other operating income,
a $17,000 decrease in the loan loss provision, a $5,000 increase in tax benefits
from an accounting change, and a $185,000 increase in other operating expense.
The return on average assets was 1.40% in 1993 compared to 1.31% in 1992 and
1.00% in 1991. Return on average stockholder's equity was 18.53% in 1993
compared to 18.12% in 1992 and 14.14% in 1991. On a per share basis, net income
for the years 1993, 1992 and 1991 were $71.87, $63.52 and $50.22, respectively.
The following is a condensed summary of the statements of operation (dollars in
thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net Interest Income $2,478 $2,304 $2,043
Provision for Loan/Bond Losses 90 107 108
Operating Income 878 756 500
Operating Expense 2,087 1,902 1,723
Net Income Before Income Taxes 1,179 1,051 712
</TABLE>
NET INTEREST INCOME
Net interest income is affected by changes in both interest rates and the volume
of average earning assets and interest-bearing liabilities.
81
<PAGE>
The following table is provided to show the percentage of change in interest
income and expense of significant interest-bearing assets and liabilities:
<TABLE>
<CAPTION>
Dollars Percentage
------- ----------
(in thousands) Increase (Decrease)
-------------- -------------------
1993 1992 1991 1993/92 1992/91
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Interest Income:
Loans & Leases $3,431 $3,408 $3,554 .7% (4.1)%
Securities 623 785 737 (20.6)% 6.5%
CVLI 96 103 105 (6.8)% (2.0)%
Federal Funds Sold 77 80 153 (3.8)% (47.7)%
Total Interest Income $4,227 $4,376 $4,549 (3.4)% (3.8)%
Interest Expense:
Deposits $1,735 $2,058 $2,476 (15.7)% (16.8)%
TT & L Notes 14 15 30 (6.7)% (50.0)%
Total Interest Expense $1,749 $2,073 $2,506 (15.6)% (17.2)%
Net Interest Income $2,478 $2,303 $2,043 7.6% 12.7%
</TABLE>
The following table is provided to show changes in interest income and expense
attributable to changes in volume and interest rates of significant interest
earning assets and interest-bearing liabilities:
<TABLE>
<CAPTION>
1993-1992
---------
Attributable to Change
----------------------
Total Change In Volume In Rate
------------ --------- -------
<S> <C> <C> <C>
Interest Earning Assets:
Loans and Leases $ 23,000 $270,425 $(247,425)
Securities (162,000) (19,970) (142,030)
CVLI (7,000) 209 (7,209)
Federal Funds Sold (3,000) 7,980 (10,980)
Total Interest Income $(149,000) $258,644 $(407,644)
Interest Bearing Liabilities:
Deposits $(323,000) $ 41,356 $(364,356)
TT & L Notes (1,000) (4,305) 3,305
Total Interest Expense $(324,000) $ 37,051 $(361,051)
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
1992-1991
---------
Attributable to Change
----------------------
Total Change In Volume In Rate
------------ --------- -------
<S> <C> <C> <C>
Interest Earning Assets:
Loans and Leases $(146,000) $ 314,125 $(460,125)
Securities 48,000 123,225 (75,225)
CVLI (2,000) 2,388 (4,388)
Federal Funds Sold (73,000) (5,774) (67,226)
Total Interest Income $(173,000) $ 433,964 $(606,964)
Interest Bearing Liabilities:
Deposits $(418,000) $156,079 $(574,079)
TT & L Notes (15,000) 12,785 (27,785)
Total Interest Expense $(433,000) $168,864 $(601,864)
</TABLE>
The change in interest income/expense attributable to volume reflects the change
in volume times the prior years rate and the change in interest income/expense
attributable to rate reflects the change in rates times the current years
volume.
83
<PAGE>
The following table presents average asset and liability balances and percentage
changes:
<TABLE>
<CAPTION>
Dollars Percentage
------- ----------
(in thousands) Increase (Decrease)
-------------- -------------------
1993 1992 1991 1993/92 1992/91
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Loans & Leases $39,222 $36,339 $33,395 7.93% 8.81%
Securities 11,047 11,336 9,693 (2.55)% 16.95%
CVLI 1,365 1,349 1,319 1.19% 2.27%
Federal Funds Sold 3,165 2,881 2,994 9.86% (3.77)%
Total Average Interest
Earning Assets $54,799 $51,905 $47,401 5.58% 9.50%
Deposits
Non-Interest Bearing
Demand $ 7,782 $ 7,388 $ 6,337 5.33% 16.59%
Interest Bearing Demand 5,318 5,920 4,889 (10.17)% 21.08%
Savings 13,655 12,389 11,560 10.21% 7.17%
Time 25,657 24,806 24,124 3.43% 2.83%
Total Average Interest
Bearing Deposits $44,630 $43,115 $40,573 3.51% 6.27%
TT & L Notes 260 365 197 (28.77)% 85.28%
Total Average Interest
Bearing Liabilities $44,890 $43,480 $40,770 3.24% 6.65%
</TABLE>
84
<PAGE>
The following table shows the average interest yield on interest earning assets
and the average interest rate paid on interest bearing liabilities:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Average Yield Earned:
Loans & Leases 8.75 9.38 10.67
Securities 5.64 6.91 7.50
CVLI 7.03 7.64 7.96
Federal Funds Sold 2.43 2.81 5.11
Total Interest Earning Assets 7.71 8.43 9.60
Average Rates Paid:
Interest Bearing Deposits 3.89 4.77 6.14
TT & L Notes 5.38 4.10 7.61
Total Interest Bearing Liabilities 3.90 4.77 6.15
Interest Rate Spread 3.81 3.66 3.45
</TABLE>
The following table shows the net yield on interest earning assets:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Average Yield Earned 7.71 8.43 9.60
Interest Expense to Average Earning Assets 3.19 3.99 5.29
Net Yield on Interest Earning Assets 4.52 4.44 4.31
</TABLE>
Net interest income was $2,478,000 in 1993, compared with $2,303,000 in 1992 and
$2,043,000 in 1991; which is an increase each year despite the fact that total
interest income decreased from $4,549,000 in 1991 to $4,376,000 in 1992 and
$4,227,000 in 1993.
Average interest-earning assets increased to $54,799,000 in 1993 from
$51,905,000 in 1992 and $47,401,000 in 1991. Earning asset yield decreased to
7.71% in 1993 as compared to 8.43% and 9.60% in 1992 and 1991, respectively.
Total interest expense declined to $1,749,000 in 1993 compared to $2,073,000 in
1992 and $2,506,000 in 1991 even though interest-bearing liabilities increased
by 3.24% from 1992 to 1993 and 6.65% from 1991 to 1992.
The decreases in interest expense, interest income and net interest income in a
period of increasing interest earning assets and interest bearing liabilities
was caused by general economic market conditions which moved interest rates
lower in 1992.
85
<PAGE>
PROVISION FOR LOAN LOSSES
The allowance for loan losses is determined based on management's evaluation of
the loan portfolio, economic conditions, prior loss experience, review of
specific problem loans and other pertinent factors. Actual losses on loans are
charged against this allowance and recoveries on charged-off loans are credited
to this allowance.
In 1992, there were charge-offs of $56,028 and recoveries of $2,768 plus a
provision of $107,170 to bring the reserve for loan losses to $375,000. $24,578
was charged off in 1993, $5,541 was recovered and there was an additional
provision of $90,000 to end 1993 with a loan loss reserve of $445,963.
Based on the information from the 1993 Uniform Bank Performance Report, the
Bank's net loan loss to average loans and leases was .05% and .15% for years
1993 and 1992, respectively, while the Bank's peer group was .12% and .23%,
respectively.
OPERATING INCOME (Non-Interest)
The following table represents a summary of operating income and percentage
changes:
<TABLE>
<CAPTION>
Dollars Percentage
------- ----------
(in thousands) Increase (Decrease)
-------------- -------------------
1993 1992 1991 1993/92 1992/91
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Service Charge Deposit Accounts $221 $221 $168 0.0% 31.5%
Other Income Loans 373 266 81 40.2% 228.4%
Other Operating Income 284 269 251 5.6% 7.2%
Total Operating Income $878 $756 $500 16.1% 51.2%
</TABLE>
Fee income is a significant source of revenue for the Bank. Income increased
51.2% from 1991 to 1992 followed by a 16.1% increase from 1992 to 1993. One
factor in the increase was a revision of deposit service charges in early 1992.
Another factor was the creation of a real estate department in 1992 which
generated $190,445 and $288,065 in origination fees in 1992 and 1993,
respectively.
86
<PAGE>
OPERATING EXPENSES (Non-Interest)
The following table presents a summary of operating expenses and percentage
changes:
<TABLE>
<CAPTION>
Dollars Percentage
------- ----------
(in thousands) Increase (Decrease)
-------------- -------------------
1993 1992 1991 1993/92 1992/91
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Salaries and Benefits $995 $897 $780 11.0% 15.0%
Net Occupancy and Equipment
Expense 248 227 205 9.3% 10.7%
Other Expenses 844 778 738 8.5% 5.4%
Total Operating Expenses $2,087 $1,902 $1,723 9.7% 10.4%
</TABLE>
Total operating expenses increased to $2,087,000 in 1993 compared to $1,902,000
in 1992 and $1,723,000 in 1991. The increases in 1992 and 1993 are partially
attributable to increased staff and salary increases for existing staff. In
addition, discretionary payments in the form of a cash bonus and profit sharing
equal to 18.33% of annual salary were paid.
Other increases occurring from 1991 to 1992 were as follows: a $6,000 increase
in investment center expenses, a $13,000 increase in travel and convention
expense, increases of $12,000 each in employee training and miscellaneous
expenses which can be attributed to increased staffing and expanded services.
Other minimal increases or decreases were routine changes. There was an
increase of $26,000 in investment center expenses from 1992 to 1993 which was
created when a contract was bought out and a different brokerage firm was
utilized. Dues and memberships increased by $7,000 from 1992 to 1993.
Fees for accounting and auditing decreased by $26,000 from 1991 to 1992 and
increased by $20,000 from 1992 to 1993. These changes resulted from the method
in which the Bank was accruing for anticipated expenditures.
87
<PAGE>
ACCOUNTING AND REGULATORY GUIDELINES
INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME TAXES. The
Bank adopted SFAS No. 109 during 1993 and has elected to apply the provisions
retroactively beginning January 1, 1991. As a result, the financial statements
for 1992 and 1991 have been restated to apply the new method of accounting
retroactively.
SFAS No. 109 requires the use of the asset and liability method of accounting
for income taxes. Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
cumulative effect of the change in the method of accounting for income taxes as
of January 1, 1991 was a $50,000 tax asset, due to differences in the
deductibility of the allowance for loan losses.
STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In June 1993, the Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 114, ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN, which requires that certain impaired loans be measured to
reflect the time value of money. SFAS No. 114 is required to be adopted for
fiscal years beginning after December 15, 1994. The impact of adoption of the
new accounting standard on the Bank's financial statements has not yet been
determined.
In June 1993, the FASB issued SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS
IN DEBT AND EQUITY SECURITIES. This statement addressed the accounting and
reporting for investments by classifying them into three categories; securities
held to maturity, trading securities and available for sale. The Bank adopted
SFAS No. 115 effective December 31, 1993. The Bank has classified its
approximately $11,900,000 portfolio as follows:
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
------------ -----------------
<S> <C> <C>
Investments available for sale $7,382,265 $6,668,238
Trading Securities $ 0 $ 0
Securities held to maturity $4,475,370 $4,695,067
</TABLE>
As of December 31, 1993, investments available for sale had an unrealized gain
of $80,000 which decreased by $228,000, to an unrealized loss of $148,000 as of
June 30, 1994. The decrease in this portion of the portfolio was mainly due to
interest rate increases by the Federal Reserve during the first six months of
1994 which had a negative effect on the value of the securities. SFAS No. 115
has not been applied retroactive prior to December 31, 1993.
88
<PAGE>
FUNDING SOURCES AND LIQUIDITY MANAGEMENT
The assets of the Bank are funded primarily through the use of borrowings in the
form of deposits and treasury tax and loan notes. The maintenance of an
adequate level of liquidity is necessary to ensure that sufficient funds are
available to meet customers' loan demand and deposit withdrawals. The sources
of asset liquidity consist of federal funds sold, maturing loans and investment
securities.
The Bank's Funds Management Policy outlines minimum liquidity standards which
are reviewed monthly by the Funds Management Committee and quarterly by the
Board of Directors. The Funds Management Committee is charged with the
responsibility of maintaining an adequate level of liquidity and managing the
risks associated with interest rate changes while sustaining stable growth in
net interest income. The Bank's basic strategy is to minimize rate risk through
matching the repricing periods of earning assets and interest-bearing
liabilities.
CAPITAL MANAGEMENT OF COMMUNITY STATE BANK
Bank regulatory agencies measure capital adequacy through standardized risk-
based capital guidelines which compare different levels of capital (as defined
by such guidelines) to risk-weighted assets and off-balance sheet obligations.
Under the rules effective December 31, 1992, all financial institutions are
required to maintain a level of core capital (known as TIER 1 capital) which
must be at least 4.0% of risk weighted assets, and a minimum level of total
capital of at least 8.0% of risk-weighted assets. TIER 1 capital consists
principally of stockholders' equity less goodwill. Total capital is comprised
of TIER 1 capital, certain debt instruments and a portion of the allowance for
loan losses. The Bank's actual risk-based capital requirement and excess risk-
based capital at June 30, 1994, December 31, 1993 and 1992 (dollars in
thousands) are summarized below:
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1994 1993 1992
---- ---- ----
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(1) (1) (1)
--- --- ---
<S> <C> <C> <C> <C> <C> <C>
TIER 1 Capital $4,762 $4,800 $4,273
Allowable portion of reserve for loan losses $ 446 $ 446 $ 375
Total Risk-Based Capital $5,208 9.12% $5,246 10.36% $4,648 9.89%
Risk-Based Capital Requirements $4,568 8.10% $4,052 8.00% $3,760 8.00%
Excess Risk-Based Capital $ 640 1.12% $1,194 2.36% $ 888 1.89%
<FN>
(1) Percentage based on risk-weighted assets of $57,105,000, $50,654,000 and
$47,000,000 at June 30, 1994, December 31, 1993 and 1992, respectively.
</TABLE>
89
<PAGE>
As a supplement to the risk-based capital guidelines, the Federal Reserve Board
has also adopted a minimum ratio of TIER 1 capital to total assets known as the
TIER 1 leverage ratio. The principal objective of this measure is to place a
constraint on the maximum degree to which a banking organization can leverage
its equity capital base. This regulation has established a minimum level of
TIER 1 capital to total assets of 3.0%. The Bank's actual TIER 1 leverage ratio
was 7.98% and 7.53% as of December 31, 1993 and 1992, respectively.
90
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
SELECTED STATISTICAL INFORMATION
AVERAGE BALANCE SHEETS, AVERAGE YIELDS EARNED AND RATES PAID
The following table sets forth certain selected statistical information and
should be read in conjunction with the financial statements of the Bank (dollars
in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30, 1994 Six Months Ended June 30, 1993
---------------------------------------- ----------------------------------------
Average Average Average Average
Balance Interest Yield/Rate (1)(2) Balance Interest Yield/Rate (1)(2)
-------- -------- ----------------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and leases $38,934 $1,677 8.78% $39,788 $1,704 8.99%
Securities 11,785 310 6.13% 10,224 343 6.77%
CVLI 1,365 43 6.41% 1,360 51 7.06%
Federal funds sold 2,120 41 3.54% 1,420 20 2.86%
------- ------ ------- ------
Total Earning Assets $54,204 $2,071 7.93% $52,792 $2,118 8.19%
Allowance for loan losses (446) (422)
Cash and due from banks 2,168 2,550
Other assets 1,847 1,734
------- ------ ------- ------
Total Assets $57,773 $2,071 $56,654 $2,118
------- ------ ------- ------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits $ 5,259 $ 46 1.74% $ 5,366 $ 55 2.04%
Savings deposits 12,496 166 2.65% 12,539 176 2.80%
Time deposits 26,403 622 4.71% 25,818 643 4.98%
Treasury tax and loan notes 273 7 3.31% 562 7 2.87%
------- ------ ------- ------
Total Interest-Bearing Liabilities $44,431 $ 841 3.79% $44,285 $ 881 3.98%
Non-interest bearing deposit 8,206 7,879
Other liabilities 443 239
Stockholders' equity 4,693 4,251
------- ------ ------- ------
Total Liabilities and
Stockholders' Equity $57,773 $ 841 $56,654 $ 881
------- ------ ------- ------
------- -------
NET INTEREST INCOME $1,230 $1,237
------ ------
------ ------
INTEREST RATE SPREAD 4.14% 4.21%
NET INTEREST INCOME TO AVERAGE
EARNINGS ASSETS 4.54% 4.68%
<FN>
(1) Yield/Rate is annualized (2) Yield is tax equivalent
</TABLE>
91
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
SELECTED STATISTICAL INFORMATION
AVERAGE BALANCE SHEETS, AVERAGE YIELDS EARNED AND RATES PAID
The following table sets forth selected statistical information and should be
read in conjunction with the financial statements of the Bank (dollars in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1993 Year Ended December 31, 1992
------------------------------------ ------------------------------------
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and leases $39,222 $3,431 8.75% $36,339 $3,408 9.38%
Securities 11,047 623 5.64% 11,336 785 6.92%
CVLI 1,365 96 7.03% 1,349 103 7.64%
Federal funds sold 3,165 77 2.43% 2,881 80 2.78%
------- ------ ------- ------
Total Earning Assets $54,799 $4,227 7.71% $51,905 $4,376 8.43%
Allowance for loan losses (452) (365)
Cash and due from banks 1,838 2,274
Other assets 1,682 1,904
------- ------ ------- ------
Total Assets $57,867 $4,227 $55,718 $4,376
------- ------ ------- ------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits $ 5,318 $ 105 1.97% $ 5,920 $ 169 2.85%
Savings deposits 13,655 313 2.29% 12,389 359 2.90%
Time deposits 25,657 1,317 5.13% 24,806 1,530 6.17%
Treasury tax and loan notes 260 14 5.38% 365 15 4.10%
------- ------ ------- ------
Total Interest-Bearing Liabilities $44,890 $1,749 3.90% $43,480 $2,073 4.77%
Non-interest bearing deposit 7,782 7,388
Other liabilities 471 554
Stockholders' equity 4,724 4,296
------- ------ ------- ------
Total Liabilities and Stockholders'
Equity $57,867 $1,749 $55,718 $2,073
------- ------ ------- ------
------- -------
NET INTEREST INCOME $2,478 $2,303
------ ------
------ ------
INTEREST RATE SPREAD 3.81% 3.66%
NET INTEREST INCOME TO AVERAGE
EARNINGS ASSETS 4.52% 4.44%
<CAPTION>
Year Ended December 31, 1991
------------------------------------
Average Average
Balance Interest Yield/Rate
-------- -------- ----------
<S> <C> <C> <C>
ASSETS
Loans and leases $33,395 $3,554 10.64%
Securities 9,693 737 7.60%
CVLI 1,319 105 7.96%
Federal funds sold 2,994 153 5.11%
------- ------
Total Earning Assets $47,401 $4,549 9.60%
Allowance for loan losses (306)
Cash and due from banks 2,464
Other assets 1,772
------- ------
Total Assets $51,331 $4,549
------- ------
-------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits $ 4,889 $ 215 4.39%
Savings deposits 11,560 481 4.16%
Time deposits 24,124 1,795 7.44%
Treasury tax and loan notes 197 15 7.61%
------- ------
Total Interest-Bearing Liabilities $40,770 $2,506 6.15%
Non-interest bearing deposit 6,337
Other liabilities 455
Stockholders' equity 3,769
------- ------
Total Liabilities and Stockholders'
Equity $51,331 $2,506
------- ------
-------
NET INTEREST INCOME $2,043
------
------
INTEREST RATE SPREAD 3.45%
NET INTEREST INCOME TO AVERAGE
EARNINGS ASSETS 4.31%
</TABLE>
92
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
SELECTED STATISTICAL INFORMATION
SECURITIES
The following table is the carrying value (dollars in thousands) of securities:
<TABLE>
<CAPTION>
June 30, December 31,
--------- -----------------------------------
1994 1993 1992 1991
--------- -------- -------- --------
<S> <C> <C> <C> <C>
U.S. Treasury $ 1,660 $ 1,697 $ 901 $ 2,305
U.S. Government Agencies 5,797 5,003 7,338 4,560
Municipals 3,524 3,794 2,966 1,896
Corporate Securities 0 224 198 750
U.S. Government Mutual Funds 554 564 539 506
Other Equity Securities 174 162 0 0
Other Securities 0 0 100 1
------- ------- ------- ------
Total Securities $11,709 $11,444 $12,042 $10,018
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The following table reflects the maturity distribution of each security category
and the approximate weighted average annual yield at June 30, 1994 (dollars in
thousands):
<TABLE>
<CAPTION>
Maturing Within Maturing Within Maturing Within
--------------- --------------- ---------------
Less Weighted Weighted Weighted More Weighted Weighted
Than Average 1-5 Average 5-10 Average Than Average Average
1 Year Yield Years Yield Years Yield 10 Years Yield Total Yield
--------- ------- ----- ------- ----- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 599 5.06%(1) $1,061 4.48%(1) $ 1,660 4.69%(1)
U.S. Government Agencies 1,003 7.37%(1) 2,940 7.74%(1) $ 794 7.41%(1)$ 1,060 4.75%(1) 5,797 7.10%(1)
Municipals 95 5.05%(1) 1,082 7.65%(1) 2,347 8.13%(1) 3,524 7.90%(1)
Corporate Securities
U.S. Government Mutual
Funds 554 3.10%(1) 554 3.10%(1)
Other Equity Securities 174 3.10%(1) 174 3.10%(1)
Other Securities
------ ------ ------ ------ ------
Total Securities $1,697 6.42% $5,811 6.55% $3,141 7.95% $ 1,060 4.75% $11,709
----- ----- ----- ------ ------
----- ----- ---- ------ ------
<FN>
(1) Tax Equivalent
</TABLE>
93
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
SELECTED STATISTICAL INFORMATION
SECURITIES (CONTINUED)
The following table reflects the maturity distribution of each security category
and the approximate weighted average yield at December 31, 1993 (dollars in
thousands):
<TABLE>
<CAPTION>
Maturing Within Maturing Within Maturing Within
--------------- --------------- ---------------
Less Weighted Weighted Weighted More Weighted Weighted
Than Average 1-5 Average 5-10 Average Than Average Average
1 Year Yield Years Yield Years Yield 10 Years Yield Total Yield
--------- ------- ----- ------- ----- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $1,697 4.67% $ 1,697 4.67%
U.S. Government Agencies $601 7.05% 2,547 5.17% $ 583 8.02% $ 1,272 5.32% 5,003 5.77%
Municipals 206 8.80% 911 7.76% 2,577 8.37% 100 6.94% 3,797 7.08%
Corporate Securities 224 4.03% 224 4.03%
U.S. Government Mutual
Funds 564 4.03% 564 4.03%
Other Equity Securities 162 4.03% 162 4.03%
Other Securities
---- ------ ------ ------ -------
Total Securities $807 7.50% $6,105 5.35% $3,160 $ 1,372 5.44% $11,444 6.28%
---- ------ ------ ------ -------
---- ------ ------ ------ -------
</TABLE>
94
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
SELECTED STATISTICAL INFORMATION
LOAN PORTFOLIO
The following table classifies loans by major category (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993 December 31, 1992 December 31, 1991
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Commercial/Business $11,545 $11,486 $ 9,246 $ 8,155
Real estate - commercial 6,144 6,082 5,633 6,521
Real estate - residential 11,337 11,748 12,143 10,243
Real estate - construction 742 759 794 631
Real estate - pending sale secondary market 703 925 546 0
Consumer 8,371 8,104 7,908 8,159
------- ------- ------- -------
Total Loans $38,842 $39,104 $36,270 $33,709
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The following tables present maturities and sensitivities of loans to changes in
interest rates as of June 30, 1994 (dollars in thousands):
<TABLE>
<CAPTION>
Less than 1 Year 1 - 5 Years More than 5 Years Total
---------------- ----------- ----------------- --------
<S> <C> <C> <C> <C>
MATURITIES
Commercial business $6,423 $ 5,122 $11,545
Real estate $8,020 $10,906 18,926
Consumer $ 868 $ 7,503 8,371
-------
$38,842
-------
-------
</TABLE>
Amount of loans due after five years which have -
Predetermined interest rates - N/A
Floating/adjustable rates - N/A
The following tables present maturities and sensitivities of loans to changes in
interest rates as of December 31, 1993 (dollars in thousands):
<TABLE>
<CAPTION>
Less than 1 Year 1 - 5 Years More than 5 Years Total
---------------- ----------- ----------------- --------
<S> <C> <C> <C> <C>
MATURITIES
Commercial business $7,113 $ 4,373 $11,486
Real estate $8,969 $10,545 19,514
Consumer $ 899 $ 7,205 8,104
-------
$39,104
-------
-------
</TABLE>
Amount of loans due after five years which have -
Predetermined interest rates - N/A
Floating/adjustable rates - N/A
95
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
SELECTED STATISTICAL INFORMATION
NON-ACCRUAL, RESTRUCTURED AND PAST DUE LOANS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993 December 31, 1992 December 31, 1991
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Non-accrual loans $ 10 $ 32 $ 20 $ 82
Restructured loans 0 0 0 0
Past due loans 704 786 690 427
---- ---- ---- ----
Total $714 $818 $710 $509
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
The impact on interest income for the three months ended June 30, 1994 and the
year ended December 31, 1993 for non-accrual loans was approximately $304 and
$4,000, respectively.
96
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
SELECTED STATISTICAL INFORMATION
ANALYSIS OF ALLOWANCE FOR LOAN LOSS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993 December 31, 1992 December 31, 1991
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Balance - beginning of period $446 $375 $321 $305
---- ---- ---- ----
Provision for loan losses $ 0 $ 90 $107 $ 39
---- ---- ---- ----
Charge-offs
Commercial $ 0 $ 10 $ 24 $ 12
Consumer 2 15 32 12
Real estate 0 0 0 0
---- ---- ---- ----
Total Loan Losses $ 2 $ 25 $ 56 $ 24
---- ---- ---- ----
Recoveries
Commercial $ 0 $ 2 $ 1 $ 0
Consumer 2 4 2 1
Real estate 0 0 0 0
---- ---- ---- ----
Total Recoveries $ 2 $ 6 $ 3 $ 1
---- ---- ---- ----
Net Charge-Offs $ 0 $ 19 $ 53 $ 23
---- ---- ---- ----
Balance - end of period $446 $446 $375 $321
---- ---- ---- ----
---- ---- ---- ----
Net charge-offs as a percent of
average loans .00% .06% .15% .07%
Allowance for loan losses to:
Total loans at period end 1.14% 1.14% 1.03% .95%
Net charge-offs N/A 1.20% 1.19% 1.02%
Provision for loan losses to
average loans 1.14% 1.14% 1.03% .96%
</TABLE>
97
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
SELECTED STATISTICAL INFORMATION
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993 December 31, 1992 December 31, 1991
------------------------ ------------------------ ------------------------- ------------------------
Allowance Allowance Allowance Allowance
Loans for Loan Loans for Loan Loans for Loan Loans for Loan
Outstanding Losses Outstanding Losses Outstanding Losses Outstanding Losses
----------- ------ ----------- ------ ----------- ------ ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $11,545 $178 $11,486 $178 $ 9,246 $150 $ 9,340 $128
Real Estate 18,926 45 19,514 45 19,116 38 16,797 32
Consumer 8,371 223 8,104 223 7,908 187 7,572 161
------- ---- ------- ---- -------- ---- ------- ----
Total $38,842 $446 $39,104 $446 $ 36,270 $375 $33,709 $321
-------- -------- -------- -------- -------- -------- ------- ----
-------- -------- -------- -------- -------- -------- ------- ----
</TABLE>
98
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
SELECTED STATISTICAL INFORMATION
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
AT JUNE 30, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Within 3-6 6-12 Over 12
3 Months Months Months Months Total
-------- ------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Certificates of Deposit $3,653 $1,983 $650 $437 $6,723
------ ------ ---- ---- ------
------ ------ ---- ---- ------
</TABLE>
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
AT DECEMBER 31, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
Within 3-6 6-12 Over 12
3 Months Months Months Months Total
-------- ------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Certificates of Deposit $1,417 $1,943 $2,661 $229 $6,250
------ ------ ------ ---- ------
------ ------ ------ ---- ------
</TABLE>
RATIOS
<TABLE>
<CAPTION>
Six Months Ended June 30, Years Ended December 31,
------------------------- ------------------------------------
1994 1993 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Return on average assets 2.18(1) 1.79(1) 1.40 1.31 1.00
Return on average equity 27.24(1) 22.87(1) 18.53 18.12 14.14
Average equity to average assets 8.53 7.75 7.58 7.22 7.03
Dividends paid per share 34.00 30.00 30.00 20.00 20.00
<FN>
(1) Annualized
</TABLE>
99
<PAGE>
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
As a bank holding company, Norwest is subject to supervision and
examination by the Federal Reserve Board. Norwest's banking subsidiaries are
subject to supervision and examination by applicable federal and state banking
agencies. The deposits of Norwest's banking subsidiaries are insured by the
Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"), and
therefore such banking subsidiaries are subject to regulation by the FDIC. In
addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy.
DIVIDEND RESTRICTIONS
Various federal and state statutes and regulations limit the amount of
dividends the subsidiary banks can pay to Norwest without regulatory approval.
The approval of the OCC is required for any dividend by a national bank if the
total of all dividends declared by the bank in any calendar year would exceed
the total of its net profits, as defined by regulation, for that year combined
with its retained net profits for the preceding two years less any required
transfers to surplus or a fund for the retirement of any preferred stock. In
addition, a national bank may not pay a dividend in an amount greater than its
net profits then on hand after deducting its losses and bad debts. For this
purpose, bad debts are defined to include, generally, loans which have matured
and are in arrears with respect to interest by six months or more, other than
such loans which are well secured and in the process of collection. Under these
provisions Norwest's national bank subsidiaries could have declared, as of June
30, 1994, aggregate dividends of at least $384.2 million without obtaining prior
regulatory approval and without reducing the capital of the banks below their
respective minimum levels. Norwest also has several state bank subsidiaries
that are subject to state regulations limiting dividends; however, the amount of
dividends payable by Norwest's state bank subsidiaries, with or without state
regulatory approval, would represent an immaterial contribution to Norwest's
revenues.
If, in the opinion of the applicable regulatory authority, a bank under its
jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could include
the payment of dividends), such authority may require, after notice and hearing,
that such bank cease and desist from such practice. The Federal Reserve Board,
the OCC, and the FDIC have issued policy statements which provide that
FDIC-insured banks and bank holding companies should generally pay dividends
only out of current operating earnings.
HOLDING COMPANY STRUCTURE
Norwest is a legal entity separate and distinct from its banking and
nonbanking subsidiaries. Accordingly, the right of Norwest, and thus the rights
of Norwest's creditors, to participate in any distribution of the assets or
earnings of any subsidiary is necessarily subject to the prior claims of
creditors of such subsidiary, except to the extent that claims of Norwest in its
capacity as a creditor may be recognized. The principal sources of Norwest's
revenues are dividends and fees from its subsidiaries.
Norwest's banking subsidiaries are subject to restrictions under federal
law which limit the transfer of funds by the subsidiary banks to Norwest and its
nonbanking subsidiaries, whether in the form of loans, extensions of credit,
investments, or asset purchases. Such transfers by any
100
<PAGE>
subsidiary bank to Norwest or any nonbanking subsidiary are limited in amount to
10% of the bank's capital and surplus and, with respect to Norwest and all such
nonbanking subsidiaries, to an aggregate of 20% of such bank's capital and
surplus. Furthermore, such loans and extensions of credit are required to be
secured in specified amounts.
The Federal Reserve Board has a policy to the effect that a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to commit resources to support each such
subsidiary bank. This support may be required at times when Norwest may not
have the resources to provide it. Any capital loans by Norwest to any of the
subsidiary banks are subordinate in right of payment to deposits and to certain
other indebtedness of such subsidiary bank. In addition, the Crime Control Act
of 1990 provides that in the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
A depository institution insured by the FDIC can be held liable for any
loss incurred by, or reasonably expected to be incurred by, the FDIC after
August 9, 1989, in connection with (i) the default of a commonly controlled
FDIC-insured depository institution or (ii) any assistance provided by the FDIC
to a commonly controlled FDIC-insured depository institution in danger of
default. "Default" is defined generally as the appointment of a conservator or
receiver and "in danger of default" is defined generally as the existence of
certain conditions indicating that a "default" is likely to occur in the absence
of regulatory assistance.
Federal law (12 U.S.C. Section 55) permits the OCC to order the pro rata
assessment of shareholders of a national bank whose capital stock has become
impaired, by losses or otherwise, to relieve a deficiency in such national
bank's capital stock. This statute also provides for the enforcement of any
such pro rata assessment of shareholders of such national bank to cover such
impairment of capital stock by sale, to the extent necessary, of the capital
stock of any assessed shareholder failing to pay the assessment. Similarly, the
laws of certain states provide for such assessment and sale with respect to
banks chartered by such states. Norwest, as the sole shareholder of certain of
its subsidiary banks, is subject to such provisions.
CAPITAL REQUIREMENTS
Under the Federal Reserve Board's risk-based capital guidelines for bank
holding companies, the minimum ratio of total capital to risk-adjusted assets
(including certain off-balance sheet items, such as stand-by letters of credit)
is 8%. At least half of the total capital is to be comprised of common stock,
minority interests, and noncumulative perpetual preferred stock ("Tier 1
capital"). The remainder ("Tier 2 capital") may consist of hybrid capital
instruments, perpetual debt, mandatory convertible debt securities, a limited
amount of subordinated debt, other preferred stock, and a limited amount of loan
and lease loss reserves. In addition, the Federal Reserve Board's final minimum
"leverage ratio" (the ratio of Tier 1 capital to quarterly average total assets)
guidelines for bank holding companies provide for a minimum leverage ratio of 3%
for bank holding companies that meet certain specified criteria, including that
they have the highest regulatory rating. All other bank holding companies will
be required to maintain a leverage ratio of 3% plus an additional cushion of 100
to 200 basis points. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets. Furthermore, the guidelines
indicate that the Federal Reserve Board will continue to consider a "tangible
Tier 1 leverage ratio" in evaluating proposals for expansion or new activities.
The tangible Tier 1 leverage ratio is the ratio of a banking organization's Tier
1 capital, less all intangibles, to total assets, less all intangibles. Each
of Norwest's banking
101
<PAGE>
subsidiaries is also subject to capital requirements adopted by applicable
regulatory agencies which are substantially similar to the foregoing. At June
30, 1994, Norwest's Tier 1 and total capital (the sum of Tier 1 and Tier 2
capital) to risk-adjusted assets ratios were 10.00% and 12.40%, respectively,
and Norwest's leverage ratio for the quarter ended June 30, 1994, was 6.85%.
Neither Norwest nor any subsidiary bank has been advised by the appropriate
federal regulatory agency of any specific leverage ratio applicable to it.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
makes revisions to several other federal banking statutes. Among other things,
FDICIA requires the federal banking regulators to take "prompt corrective
action" in respect of FDIC-insured depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," significantly
undercapitalized," and "critically undercapitalized." Under applicable
regulations, an FDIC-insured depository institution is defined to be well
capitalized if it maintains a leverage ratio of at least 5%, a risk-adjusted
Tier 1 capital ratio of at least 6%, and a risk-adjusted total capital ratio of
at least 10%, and is not subject to a directive, order, or written agreement to
meet and maintain specific capital levels. An insured depository institution is
defined to be adequately capitalized if its meets all of its minimum capital
requirements as described above. An insured depository institution will be
considered undercapitalized if it fails to meet any minimum required measure,
significantly undercapitalized if it has a risk-adjusted total capital ratio of
less than 6%, risk-adjusted Tier 1 capital ratio of less than 3%, or a leverage
ratio of less than 3%, and critically undercapitalized if it fails to maintain a
level of tangible equity equal to at least 2% of total assets. An insured
depository institution may be deemed to be in a capitalization category that is
lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to a
wide range of limitations on operations and activities, including growth
limitations, and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent holding
company must guarantee that the institution will comply with such capital
restoration plan. The aggregate liability of the parent holding company is
limited to the lesser of (i) an amount equal to 5% of the depository
institution's total assets at the time it became undercapitalized and (ii) the
amount which is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with respect
to such institution as of the time it fails to comply with the plan. If a
depository institution fails to submit an acceptable plan, it is treated as if
it were significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.
102
<PAGE>
FDICIA directs that each federal banking agency prescribe standards for
depository institutions and depository institution holding companies relating to
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to book value for
publicly traded shares, and such other standards as the agency deems
appropriate. The FDIC, in consultation with the other federal banking agencies,
has adopted a final rule and guidelines with respect to external and internal
audit procedures and internal controls in order to implement those provisions of
FDICIA intended to facilitate the early identification of problems in financial
management of depository institutions. The FDIC has also issued proposed rules
prescribing standards relating to certain other of the management and
operational standards listed above. The full impact of such rule and guidelines
and proposed standards on Norwest cannot yet be ascertained.
FDICIA also contains a variety of other provisions that may affect the
operations of Norwest, including new reporting requirements, revised regulatory
standards for real estate lending, "truth in savings" provisions, and the
requirement that a depository institution give 90 days' notice to customers and
regulatory authorities before closing any branch.
Under other regulations promulgated under FDICIA a bank cannot accept
brokered deposits (that is, deposits obtained through a person engaged in the
business of placing deposits with insured depository institutions or with
interest rates significantly higher than prevailing market rates) unless (i) it
is "well capitalized" or (ii) it is "adequately capitalized" and receives a
waiver from the FDIC. A bank is defined to be "adequately capitalized" if it
meets all of its minimum capital requirements. A bank that cannot receive
brokered deposits also cannot offer "pass-through" insurance on certain employee
benefit accounts, unless it provides certain notices to affected depositors. In
addition, a bank that is "adequately capitalized" and that has not received a
waiver from the FDIC may not pay an interest rate on any deposits in excess of
75 basis points over certain prevailing market rates. There are no such
restrictions on a bank that is "well capitalized." At June 30, 1994, all of
Norwest's banking subsidiaries were well capitalized and therefore were not
subject to these restrictions.
FDIC INSURANCE
Effective January 1, 1993, the deposit insurance assessment rate for the
Bank Insurance Fund ("BIF") increased as part of the adoption by the FDIC of a
transitional risk-based assessment system. In June 1993, the FDIC published
final regulations making the transitional system permanent effective January 1,
1994, but left open the possibility that it may consider expanding the range
between the highest and lowest assessment rates at a later date. An
institution's risk category is based upon whether the institution is well
capitalized, adequately capitalized, or less than adequately capitalized. Each
insured depository institution is also to be assigned to one of the following
"supervisory subgroups": Subgroup A, B, or C. Subgroup A institutions are
financially sound institutions with few minor weaknesses; Subgroup B
institutions are institutions that demonstrate weaknesses which, if not
corrected, could result in significant deterioration; and Subgroup C
institutions are institutions for which there is a substantial probability that
the FDIC will suffer a loss in connection with the institution unless effective
action is taken to correct the areas of weakness. Based on its capital and
supervisory subgroups, each BIF member institution will be assigned an annual
FDIC assessment rate ranging from 0.23% per annum (for well capitalized Subgroup
A institutions) to 0.31% (for undercapitalized Subgroup C institutions).
Adequately capitalized institutions will be assigned assessment rates ranging
from 0.26% to 0.30%. Norwest incurred $72.4 million of FDIC insurance expense
in 1993.
103
<PAGE>
EXPERTS
The consolidated financial statements of Norwest and subsidiaries as of
December 31, 1993 and 1992, and for each of the years in the three-year period
ended December 31, 1993, incorporated by reference herein, have been
incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Alexandria and subsidiary as of
December 31, 1993, and for the year ended December 31, 1993, have been included
herein in reliance upon the report of Ness, Waller, Pearson & Co., Ltd.,
independent certified public accountants, included herein and upon the authority
of said firm as experts in accounting and auditing.
LEGAL OPINION
A legal opinion to the effect that the shares of Norwest Common Stock
offered hereby, when issued in accordance with the Reorganization Agreement,
will be validly issued and fully paid and nonassessable, has been rendered by
Stanley S. Stroup, Executive Vice President and General Counsel of Norwest
Corporation. At June 30, 1994, Mr. Stroup was the beneficial owner of 108,083
shares and held options to acquire 215,931 additional shares of Norwest Common
Stock.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, voting
securities and the principal holders thereof, certain relationships and related
transactions, and other related matters concerning Norwest is included or
incorporated by reference in its Annual Report on Form 10-K for the year ended
December 31, 1993, as amended by Form 10-K/A dated May 13, 1994, which are
incorporated in this Proxy Statement-Prospectus by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Shareholders of Alexandria
desiring copies of such documents may contact Norwest at its address or phone
number indicated under "AVAILABLE INFORMATION" above.
104
<PAGE>
INDEX TO FINANCIAL STATEMENTS
OF
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
AND COMMUNITY STATE BANK OF ALEXANDRIA
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY, CONSOLIDATED
FINANCIAL STATEMENTS
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Financial Condition as of
June 30, 1994 (unaudited) December 31, 1993 and
December 31, 1992 (unaudited). . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the three-month and
six-month periods ended June 30, 1994 (unaudited) and
1993 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Operations for the year ended
December 31, 1993 and the years ended December 31, 1992 (unaudited)
and 1991 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Changes in Stockholders' Equity for
the six-month period ended June 30,, 1994 (unaudited), the
year ended December 31, 1993 and the years ended December 31,
1992 (unaudited) and 1991 (unaudited). . . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 1994 (unaudited) and 1993 (unaudited) . . . . . . . . . . F-7
Consolidated Statements of Cash Flows for the year ended December 31,
1993 and the years ended December 31, 1992 (unaudited) and 1991
(unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . F-10
COMMUNITY STATE BANK OF ALEXANDRIA, FINANCIAL STATEMENTS
Verification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24
Statements of Financial Condition as of June 30, 1994 (unaudited),
December 31, 1993 (unaudited) and December 31, 1992 (unaudited). . . . . F-25
Statements of Operations for the three-month and six-month periods
ended June 30, 1994 (unaudited) and 1993 (unaudited) . . . . . . . . . . F-26
Statements of Operations for the years ended December 31, 1993
(unaudited), 1992 (unaudited) and 1991 (unaudited) . . . . . . . . . . . F-27
Statements of Changes in Stockholders' Equity for the six-month period
ended June 30, 1994 (unaudited), the years ended December 31, 1993
(unaudited), 1992 (unaudited) and 1991 (unaudited) . . . . . . . . . . . F-28
Statements of Cash Flows for the six-month periods ended June 30, 1994
(unaudited) and 1993 (unaudited) . . . . . . . . . . . . . . . . . . . . F-29
Statements of Cash Flows for the years ended December 31, 1993
(unaudited), 1992 (unaudited) and 1991 (unaudited) . . . . . . . . . . . F-30
Notes to Financial Statements (unaudited) . . . . . . . . . . . . . . . . F-32
F-1
<PAGE>
[NESS, WALLER, PEARSON & CO., LTD. Letterhead]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Alexandria Securities and Investment Company
Alexandria, Minnesota
We have audited the accompanying consolidated financial statement of
financial condition of Alexandria Securities and Investment Company and
subsidiary (the Company) as of December 31, 1993, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the year then ended. The consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1993 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Alexandria Securities and Investment Company and subsidiary as of December 31,
1993, and the results of their operations and cash flows for the year then ended
in conformity with generally accepted accounting principles.
/s/ Ness, Waller, Pearson & Co., Ltd.
June 10, 1994
F-2
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
-------------------------
1994 1993 1992
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 2,758,818 $ 1,915,315 $ 1,994,225
Federal funds sold 2,100,000 2,950,000 2,800,000
Securities available for sale, approximate
market value of $7,234,265 (unaudited),
$6,748,238, and $0 (unaudited), respectively 7,382,265 6,668,238
Unrealized holding gains (losses) (148,000) 80,000
Investment securities, approximate market
value of $4,397,921 (unaudited), $4,724,180,
and $12,139,380 (unaudited), respectively 4,475,370 4,695,067 12,041,928
Loans 38,866,853 39,104,140 36,270,143
Less allowance for loan losses (445,588) (445,963) (375,000)
Premises and equipment, net 1,188,830 1,242,613 1,303,548
Cash surrender value of life insurance, net 1,367,110 1,365,670 1,349,710
Accrued interest receivable 416,820 382,124 431,998
Other real estate owned 51,100 51,100 203,792
Deferred income taxes 185,000 90,000 95,000
Other assets 83,707 56,348 95,807
----------- ----------- -----------
Total Assets $58,282,285 $58,154,652 $56,211,151
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $ 8,807,014 $ 7,883,378 $ 7,377,575
Interest bearing 43,673,413 44,079,671 43,127,296
----------- ----------- -----------
Total Deposits $52,480,427 $51,963,049 $50,504,871
Short term borrowings 497,360 843,518 743,861
Notes payable 540,000 530,000 592,000
Accrued interest payable 320,649 326,024 353,657
Other liabilities 80,808 133,909 210,662
----------- ----------- -----------
Total Liabilities $ 1,438,817 $53,796,500 $52,405,051
----------- ----------- -----------
Minority interest $ 581,715 $ 563,582 $ 506,500
----------- ----------- -----------
Stockholders' Equity
Preferred stock
Par value - $1
Authorized - 200,000 shares
Issued and outstanding - None
Common stock
Par value - $25
Authorized - 10,000 shares
Issued - 5,423 shares
Outstanding - 4,878 shares $ 135,575 $ 135,575 $ 135,575
Paid-in capital 505,452 505,452 505,452
Unrealized gain (loss) on securities
available for sale (88,000) 45,000
Treasury stock (545 shares, at cost) (454,192) (454,192) (454,192)
Retained earnings 3,682,491 3,562,735 3,112,765
----------- ----------- -----------
Total Stockholders' Equity $ 3,781,326 $ 3,794,570 $ 3,299,600
----------- ----------- -----------
Total Liabilities and Stockholders'
Equity $58,282,285 $58,154,652 $56,211,151
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three-Month Periods Ended Six-Month Periods Ended
---------------------------- ----------------------------
June 30, June 30,
---------------------------- ----------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 848,239 $ 872,411 $1,676,593 $1,703,793
Securities
Taxable 111,150 111,833 214,441 256,284
Nontaxable 68,938 67,959 139,065 137,360
Federal funds sold 21,211 7,418 40,938 20,411
---------- ---------- ---------- ----------
Total Interest Income $1,049,538 $1,059,621 $2,071,037 $2,117,848
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits $ 418,461 $ 428,466 $ 833,040 $ 873,284
Notes payable 8,774 7,488 16,267 15,701
Short-term borrowings 3,561 3,686 7,032 7,744
---------- ---------- ---------- ----------
Total Interest Expense $ 430,796 $ 439,640 $ 856,339 $ 896,729
---------- ---------- ---------- ----------
NET INTEREST INCOME $ 618,742 $ 619,981 $1,214,698 $1,221,119
PROVISION FOR LOAN LOSSES 0 30,000 0 60,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES $ 618,742 $ 589,981 $1,214,698 $1,161,119
---------- ---------- ---------- ----------
OPERATING INCOME
Service charges and fees $ 161,966 $ 213,630 $ 338,513 $ 356,388
Other 16,112 23,429 51,573 63,965
---------- ---------- ---------- ----------
Total Operating Income $ 178,078 $ 237,059 $ 390,086 $ 420,353
---------- ---------- ---------- ----------
OPERATING EXPENSES
Salaries and employee
benefits $ 224,324 $ 215,276 $ 453,630 $ 430,246
Net occupancy expense 60,703 61,982 129,150 120,742
FDIC insurance assessment 27,300 30,000 54,600 60,000
Data processing 11,780 18,335 23,925 36,200
Insurance 6,552 12,299 15,631 24,485
Management advisory services 20,973 18,725 47,256 38,758
Postage and supplies 13,757 22,161 38,952 41,933
(Gains) losses on sales of
securities (14,115) (6,716) (14,115) (9,562)
Other 86,645 84,382 168,472 213,041
---------- ---------- ---------- ----------
Total Operating Expenses $ 437,919 $ 456,444 $ 917,501 $ 955,843
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST $ 358,901 $ 370,596 $ 687,283 $ 625,629
INCOME TAX EXPENSE 105,000 116,500 210,372 181,500
---------- ---------- ---------- ----------
INCOME BEFORE MINORITY
INTEREST $ 253,901 $ 254,096 $ 476,911 $ 444,129
Minority interest 37,109 29,653 64,475 52,218
---------- ---------- ---------- ----------
NET INCOME $ 216,792 $ 224,443 $ 412,436 $ 391,911
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET INCOME PER SHARE $44.44 $46.01 $84.55 $80.34
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
INTEREST INCOME
Loans $3,430,832 $3,407,902 $3,554,244
Securities
Taxable 442,687 625,205 602,362
Nontaxable 276,712 262,784 239,669
Federal funds sold 76,515 80,533 152,622
---------- ---------- ----------
Total Interest Income $4,226,746 $4,376,424 $4,548,897
---------- ---------- ----------
INTEREST EXPENSE
Deposits $1,735,040 $2,057,613 $2,476,055
Notes payable 29,679 34,464 19,505
Short-term borrowings 13,813 15,240 30,233
---------- ---------- ----------
Total Interest Expense $1,778,532 $2,107,317 $2,525,793
---------- ---------- ----------
NET INTEREST INCOME $2,448,214 $2,269,107 $2,023,104
PROVISION FOR LOAN LOSSES 90,000 107,170 108,448
---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES $2,358,214 $2,161,937 $1,914,656
---------- ---------- ----------
OPERATING INCOME
Service charges and fees $ 768,308 $ 652,931 $ 420,406
Other 109,824 117,393 86,853
---------- ---------- ----------
Total Operating Income $ 878,132 $ 770,324 $ 507,259
---------- ---------- ----------
OPERATING EXPENSES
Salaries and employee benefits $ 999,444 $ 902,686 $ 812,494
Net occupancy expense 247,972 226,702 205,126
FDIC insurance assessment 120,000 123,300 108,630
Data processing 1,122 1,024 500
Insurance 49,442 47,773 45,223
Management advisory services 76,100 65,537 92,240
Postage and supplies 88,197 86,328 84,044
(Gains) losses on sales of securities (22,794) (21,185) (4,042)
Other 488,288 446,861 385,744
---------- ---------- ----------
Total Operating Expenses $2,047,771 $1,879,026 $1,729,959
---------- ---------- ----------
INCOME BEFORE INCOME TAXES, CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING METHOD AND MINORITY
INTEREST $1,188,575 $1,053,235 $ 691,956
INCOME TAX EXPENSE 396,733 332,931 193,400
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD (50,000)
---------- ---------- ----------
INCOME BEFORE MINORITY INTEREST $ 791,842 $ 720,304 $ 548,556
Minority interest 97,972 86,583 68,456
---------- ---------- ----------
NET INCOME $ 693,870 $ 633,721 $ 480,100
---------- ---------- ----------
---------- ---------- ----------
NET INCOME PER SHARE $142.24 $129.91 $ 98.42
------- ------- -------
------- ------- -------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized Total
Common Paid-in Gain (Loss) Treasury Retained Stockholders'
Stock Capital on Securities Stock Earnings Equity
-------- -------- ------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - January 1, 1991 (unaudited) $135,575 $505,452 $ 0 $ 0 $2,285,737 $2,926,764
Dividends (unaudited) (135,575) (135,575)
Net income (unaudited) 480,100 480,100
-------- -------- --------- --------- ---------- ----------
BALANCE - December 31, 1991 (unaudited) $135,575 $505,452 $ 0 $ 0 $2,630,262 $3,271,289
Dividends (unaudited) (151,218) (151,218)
Repurchase of stock (unaudited) (454,192) (454,192)
Net income (unaudited) 633,721 633,721
-------- -------- --------- --------- ---------- ----------
BALANCE - December 31, 1992 (unaudited) $135,575 $505,452 $ 0 $(454,192) $3,112,765 $3,299,600
Dividends (243,900) (243,900)
Change in unrealized gain (loss) 45,000 45,000
Net income 693,870 693,870
-------- -------- --------- --------- ---------- ----------
BALANCE - December 31, 1993 $135,575 $505,452 $ 45,000 $(454,192) $3,562,735 $3,794,570
Dividends (unaudited) (292,680) (292,680)
Change in unrealized gain (loss)
(unaudited) (133,000) (133,000)
Net income (unaudited) 412,436 412,436
-------- -------- --------- --------- ---------- ----------
BALANCE - June 30, 1994 (unaudited) $135,575 $505,452 $ (88,000) $(454,192) $3,682,491 $3,781,326
-------- -------- --------- --------- ---------- ----------
-------- -------- --------- --------- ---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six-Month
Periods Ended
--------------------------
June 30,
--------------------------
1994 1993
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 412,436 $ 391,911
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation and amortization 64,406 73,912
Provision for loan losses 60,000
Earnings allocated to minority interest 64,475 35,352
(Gains) losses on sales of securities (14,115) (6,716)
Change in accrued interest receivable (34,467) 64,488
Change in accrued interest payable (5,375) (16,124)
Change in cash surrender value of life insurance (1,440) (10,765)
Change in other assets (30,870) 141,000
Change in other liabilities (53,101) (129,473)
----------- -----------
Total Adjustments $ (10,487) $ 211,674
----------- -----------
Net Cash Provided (Used) by Operating Activities $ 401,949 $ 603,585
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Change in federal funds sold $ 850,000 $ 1,380,000
Proceeds from maturities and sales of securities 814,114 4,070,005
Purchases of securities (1,294,329) (2,251,375)
Loan (origination) repayments, net 261,912 (3,530,741)
Purchase of premises and equipment, net (7,341) (47,320)
Change in loan participations (25,000)
----------- -----------
Net Cash Provided (Used) by Investing Activities $ 599,356 $ (379,431)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in deposits $ 517,378 $ 917,277
Change in short-term borrowings (346,158) (181,677)
Proceeds from notes payable 60,000
Repayments of notes payable (50,000) (112,000)
Dividends paid (292,680) (243,900)
Amounts paid to minority interest (46,342) (40,890)
----------- -----------
Net Cash Provided (Used) by Financing Activities $ (157,802) $ 338,810
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 843,503 $ 562,964
CASH AND CASH EQUIVALENTS - beginning of period 1,915,315 1,994,225
----------- -----------
CASH AND CASH EQUIVALENTS - end of period $ 2,758,818 $ 2,557,189
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest on deposits and borrowings $ 862,499 $ 913,178
----------- -----------
----------- -----------
Income taxes $ 272,547 $ 306,804
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-7
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 693,870 $ 633,721 $ 480,100
----------- ----------- -----------
Adjustments to Reconcile Net Income to Net
Cash Provided (Used) by Operating
Activities:
Depreciation and amortization $ 159,202 $ 160,269 $ 156,368
Provision for loan losses 90,000 107,170 108,448
Earnings allocated to minority interest 97,972 86,583 68,456
(Gains) losses on sales of securities (22,794) (21,185) (4,042)
Change in accrued interest receivable 49,874 (2,299) 39,768
Change in accrued interest payable (27,633) (23,523) (114,503)
Change in cash surrender value of life
insurance (15,960) (29,115) 12,639
Change in other assets 32,896 55,135 (54,445)
Deferred income taxes (30,000) (25,000) (20,000)
Change in other liabilities (76,753) 145,594 (155,545)
Cumulative effect of change in accounting
method (50,000)
----------- ----------- -----------
Total Adjustments $ 256,804 $ 453,629 $ (12,856)
----------- ----------- -----------
Net Cash Provided (Used) by Operating
Activities $ 950,674 $ 1,087,350 $ 467,244
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Change in federal funds sold $ (150,000) $(1,000,000) $ (300,000)
Proceeds from maturities and sales of
securities 3,938,722 4,683,237 2,936,025
Purchases of securities (3,237,304) (6,680,816) (5,329,967)
Loan (origination) repayments, net (2,864,238) (2,762,434) (2,176,838)
Proceeds from sale of other real estate
owned 163,896
Purchase of premises and equipment, net (91,705) (167,652) (45,312)
----------- ----------- -----------
Net Cash Provided (Used) by Investing
Activities $(2,240,629) $(5,927,665) $(4,916,092)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in deposits $ 1,458,178 $ 4,479,886 $ 3,352,380
Change in short-term borrowings 99,657 275,589 (101,208)
Repayments of notes payable (62,000) (72,153) (30,428)
Repurchase of stock (54,192)
Dividends paid (243,900) (151,218) (135,575)
Amounts paid to minority interest (40,890) (27,260) (27,360)
----------- ----------- -----------
Net Cash Provided (Used) by Financing
Activities $ 1,211,045 $ 4,450,652 $ 3,057,809
----------- ----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (78,910) $ (389,663) $(1,391,039)
CASH AND CASH EQUIVALENTS - beginning of year 1,994,225 2,383,888 3,774,927
----------- ----------- -----------
CASH AND CASH EQUIVALENTS - end of year $ 1,915,315 $ 1,994,225 $ 2,383,888
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-8
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for:
Interest on deposits and borrowings $ 1,806,705 $ 2,131,911 $ 2,640,740
----------- ----------- -----------
----------- ----------- -----------
Income taxes $ 501,510 $ 215,063 $ 344,302
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF NON CASH
INVESTING ACTIVITIES
Transfer of loans to other real estate
owned $ 0 $ 147,792 $ 0
----------- ----------- -----------
----------- ----------- -----------
During 1992, the Company acquired 545
shares of stock from a former stockholder
for $454,192. $54,192 was paid in cash
and the balance was financed with a note
payable. $ 0 $ 400,000 $ 0
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-9
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Alexandria Securities and Investment Company (the Company) is a one-bank
holding company organized in 1979. The Company owns 88% of the common stock
of Community State Bank of Alexandria (the Bank) which is consolidated in the
accompanying financial statements. The Bank provides traditional community
banking services.
The consolidated statements of financial condition as of June 30, 1994 and
December 31, 1992 and the related consolidated statements of operations,
stockholders' equity and cash flows for the six-month periods ended June 30,
1994 and 1993 and the years ended December 31, 1992 and 1991 are unaudited.
However, in the opinion of management, these financial statements include all
adjustments, which consist only of normal recurring adjustments, necessary for
fair presentation of the Company's financial position. The results of
operations for the unaudited six month period ended June 30, 1994, are not
necessarily indicative of the results which may be expected for the entire
fiscal year 1994.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and its subsidiary. All material intercompany
accounts and transactions have been eliminated in consolidation.
CHANGES IN METHOD OF ACCOUNTING FOR INCOME TAXES - In February 1992, the
Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME TAXES. The Company
adopted SFAS No. 109 during 1993 and has elected to apply the provisions
retroactively beginning January 1, 1991. As a result, the consolidated
financial statements for 1992 and 1991 have been restated to apply the new
method of accounting retroactively.
SFAS No. 109 requires the use of the asset and liability method of accounting
for income taxes. Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS No.
109, the effect on deferred tax assets and liabilities from a change in tax
rates is recognized in income in the period that includes the enactment date.
The cumulative effect of the change in the method of accounting for income
taxes as of January 1, 1991 is reported separately in the 1991 consolidated
statement of operations.
The effect of SFAS No. 109 on net income per share for 1992 and 1991 is as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1992 1991
-------- --------
<S> <C> <C>
Net income, before change in accounting method $608,721 $410,100
Cumulative effect of change in accounting method 0 50,000
Effect of SFAS No. 109 25,000 20,000
-------- --------
Net income, as restated $633,721 $480,100
-------- --------
-------- --------
Per Share Information:
Net income before change in accounting method $ 124.78 $ 84.07
Cumulative effect of change in accounting method 0.00 10.25
Effect of SFAS No. 109 5.13 4.10
-------- --------
Net income, as restated $ 129.91 $ 98.42
-------- --------
-------- --------
</TABLE>
F-10
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
CHANGES IN METHOD OF ACCOUNTING FOR INVESTMENTS - In June 1993, the FASB
issued SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. This statement addressed the accounting and reporting for
investments by classifying them into three categories: securities held to
maturity, trading securities and securities available for sale. The Company
adopted SFAS No. 115 effective December 31, 1993. The statement has not been
applied retroactively and accordingly financial statements for periods prior
to December 31, 1993 have not been restated.
BASIS OF PRESENTATION - The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles. In
preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as
of the date of the balance sheet and revenues and expenses for the period.
Actual results could differ from those estimates. Material estimates that are
particularly susceptible to change in the near-term relate to the
determination of the allowance for losses on loans and other real estate
owned.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE - Investment
securities are recorded at amortized cost because the Bank has the ability and
intent to hold these securities to maturity. These securities are stated at
cost adjusted for amortization of premium and accretion of discount, computed
by the interest method. Gains and losses on the sale of investment securities
are computed on the specific identification basis.
Securities available for sale include investments that management intends to
use as part of its asset/liability strategy or that may be sold in response to
changes in prepayment risk or other similar factors. Securities available for
sale are stated at market. Unrealized gains and losses on adjustments to
market values are included as a separate component of stockholders' equity in
the consolidated statement of financial condition until realized. Realized
gains and losses on sales of securities are determined using the specific
identification method and are reported in the consolidated statement of
operations.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is maintained at a
level adequate to absorb probable losses. Management determines the adequacy
of the allowance based upon reviews of individual loans, recent loss
experience, current economic conditions, the risk characteristics of the
various categories of loans and other pertinent factors. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the allowance for losses on loans and real estate. Such
agencies may require additions to the allowance based on their judgment about
information available to them at the time of their examination. Loans deemed
uncollectible are charged to the allowance. Provisions for loan losses and
recoveries on loans previously charged off are added to the allowance.
Management believes the allowance for loan losses is adequate.
INTEREST INCOME ON LOANS - Interest on loans is accrued and credited to income
based on the principal amount outstanding. The accrual of interest on loans
is discontinued when a loan has been past due for 90 days. Upon such
discontinuance, all unpaid accrued interest is reversed. Interest is
subsequently recognized as income to the extent cash is received when, in
management's judgment, principal is collectible.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed principally by the
straight-line method.
CASH SURRENDER VALUE OF LIFE INSURANCE - The Bank is the owner and beneficiary
of life insurance policies covering certain key employees and directors.
These policies are recorded at their cash surrender values.
F-11
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
OTHER REAL ESTATE OWNED - Real estate acquired through foreclose and in-
substance foreclosures are recorded at the lesser of the balance of the loan
at the date of acquisition plus costs of acquisition or fair value less
estimated costs to sell. Operating expenses of such properties, gains and
losses on their disposition or further reductions in the carrying value
resulting from a decline in fair value less estimated costs to sell are
charged against operating expenses as incurred. In-substance foreclosures
consist of loans accounted for as foreclosed property even though actual
foreclosure has not occurred. Although the collateral underlying these loans
has not been repossessed, the borrower has little or no equity in the
collateral at its current estimated fair market value, proceeds for repayment
are expected to come only from the operation or sale of the collateral, and
either the borrower has abandoned control of the property or it is doubtful
that the borrower will rebuild equity in the collateral or repay the loan by
other means in the foreseeable future.
INCOME TAXES - The Company and its wholly owned subsidiary file a consolidated
income tax return. Income taxes of the subsidiary are allocated on a separate
return basis with current taxes payable being accrued in the period they
arise.
NET INCOME PER SHARE - Net income per share is calculated as net income
divided by shares of common stock outstanding.
CASH AND CASH EQUIVALENTS - For the purpose of presentation in the statements
of cash flows, cash and cash equivalents include cash on hand, cash clearings,
and demand deposits with banks.
NOTE 2 - CASH AND CASH EQUIVALENTS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank or minimum levels of cash in its own vault. The Bank has elected
to hold adequate reserves of cash on hand. Cash on hand at June 30, 1994 and
December 31, 1993 was approximately $499,000 and $390,000, respectively.
NOTE 3 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES
The amortized cost and estimated market values of securities available for
sale and investment securities are as follows:
<TABLE>
<CAPTION>
June 30, 1994
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities Available for
Sale:
U.S. Treasury Securities
and U.S. Government
Agency Securities $ 5,596,701 $13,177 $ 98,406 $5,511,472
Obligations of state and
political subdivisions 255,000 5,619 249,381
Mortgage backed securities 781,906 36,194 745,712
Equity securities 748,658 20,958 727,700
----------- ------- -------- -----------
Securities Available
for Sale $ 7,382,265 $13,177 $161,177 $ 7,234,265
----------- ------- -------- -----------
</TABLE>
F-12
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 3 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
June 30, 1994
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Investment Securities:
U.S. Treasury Securities
and U.S. Government
Agency Securities $ 97,750 $ 719 $ 97,031
Obligations of state and
political subdivisions 3,328,459 $31,618 84,771 3,275,306
Mortgage backed securities 1,049,161 10,569 34,146 1,025,584
----------- ------- -------- -----------
Investment Securities $ 4,475,370 $42,187 $119,636 $ 4,397,921
----------- ------- -------- -----------
$11,857,635 $55,364 $280,813 $11,632,186
----------- ------- -------- -----------
----------- ------- -------- -----------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities Available for
Sale:
U.S Treasury Securities
and U.S. Government
Agency Securities $ 4,502,387 $ 48,496 $ 4,633 $ 4,546,250
Obligations of state and
political subdivisions 430,000 16,883 446,883
Mortgage backed securities 804,403 3,688 808,091
Corporate debt securities 198,281 26,461 224,742
Equity securities 733,167 10,895 722,272
----------- -------- -------- -----------
Securities Available
for Sale $ 6,668,238 $ 95,528 $ 15,528 $ 6,748,238
----------- -------- -------- -----------
Investment Securities:
U.S. Treasury Securities
and U.S. Government
Agency Securities $ 102,287 $ 1,587 $ 796 $ 103,078
Obligations of state and
political subdivisions 3,346,572 70,628 42,705 3,374,495
Mortgage backed securities 1,246,208 15,011 14,612 1,246,607
----------- -------- -------- -----------
Investment Securities $ 4,695,067 $ 87,226 $ 58,113 $ 4,724,180
----------- -------- -------- -----------
$11,363,305 $182,754 $ 73,641 $11,472,418
----------- -------- -------- -----------
----------- -------- -------- -----------
</TABLE>
F-13
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 3 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
December 31, 1992
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Investment Securities:
U.S. Treasury Securities
and U.S. Government
Agency Securities $ 3,206,300 $ 74,212 $ 3,280,512
Obligations of state and
political subdivisions 3,083,170 72,491 $ 93,829 3,061,832
Mortgage backed securities 5,016,770 51,774 22,966 5,045,578
Corporate debt securities 196,568 21,152 217,720
Equity securities 539,120 5,382 533,738
----------- -------- -------- -----------
Investment Securities $12,041,928 $219,629 $122,177 $12,139,380
----------- -------- -------- -----------
----------- -------- -------- -----------
</TABLE>
Proceeds from sales and gross gains and losses realized from sales of
investment securities and securities available for sale were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
------------------------------------------------------------
1994 1993 1993 1992 1991
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Proceeds from sales $814,114 $4,070,005 $3,938,722 $4,683,237 $2,936,025
Gross realized gains $ 16,615 $ 6,716 $ 29,397 $ 30,592 $ 12,029
Gross realized losses $ 2,500 $ 0 $ 6,602 $ 9,407 $ 7,986
</TABLE>
Investment securities and securities available for sale with a carrying amount
of $3,555,000, $4,205,000 and $3,545,000 at June 30, 1994 and December 31,
1993 and 1992, respectively, were pledged to secure public deposits or for
other purposes required or permitted by law.
The amortized cost and estimated market value of securities by contractual
maturity (including investment securities and securities available for sale)
are shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or repay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
----------------------- -----------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities Available for
Sale:
Due in one year or less $1,602,466 $1,611,121 $ 601,113 $ 612,469
Due after one year
through five years 4,019,235 3,925,412 4,146,446 4,208,924
Due after five years
through ten years 230,000 224,320 430,000 437,973
---------- ---------- ---------- ----------
$5,851,701 $5,760,853 $5,177,559 $5,259,366
Mortgage backed
securities 781,906 745,712 757,512 766,600
Equity securities 748,658 727,700 733,167 722,272
---------- ---------- ---------- ----------
$7,382,265 $7,234,265 $6,668,238 $6,748,238
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
F-14
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 3 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
----------------------- -----------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Securities:
Due in one year or less $ 61,098 $ 61,213 $ 206,000 $ 205,322
Due after one year
through five years 1,315,188 1,308,107 1,295,013 1,304,998
Due after five years
through ten years 2,949,316 2,886,208 3,033,483 3,052,293
---------- ---------- ---------- ----------
$4,325,602 $4,255,528 $4,534,496 $4,562,613
Mortgage backed
securities 149,768 142,393 160,571 161,567
---------- ---------- ---------- ----------
$4,475,370 $4,397,921 $4,695,067 $4,724,180
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Accrued interest receivable on securities aggregated $148,437, $131,982 and
$169,108 at June 30, 1994 and December 31, 1993 and 1992, respectively.
NOTE 4 - LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
----------- -------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Loans
Commercial $11,545,000 $11,486,000 $ 9,246,000
Real estate - construction 742,000 759,000 794,000
Real estate - mortgage 18,184,000 18,755,000 18,322,000
Installment 8,079,000 7,832,000 7,658,000
Lease financing 19,000 21,000 37,000
Other 298,000 251,000 213,000
----------- ----------- -----------
$38,867,000 $39,104,000 $36,270,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Included in the above are loans on non-accrual status of $9,882, $22,228 and
$7,302 at June 30, 1994 and December 31, 1993 and 1992, respectively. The
impact on interest income in 1993 for non-accrual and restructured loans was
approximately $3,249. There are no material commitments to lend additional
funds to customers whose loans are classified as non-accrual or restructured
at June 30, 1994 or December 31, 1993.
The Bank has sold loan participations to affiliated banks with aggregate
unpaid principal balances of $2,784,084, $2,951,138 and $3,316,431 at June 30,
1994 and December 31, 1993 and 1992, respectively.
Accrued interest receivable on loans aggregated $266,997, $250,142 and
$262,890 at June 30, 1994 and December 31, 1993 and 1992, respectively.
The Bank generally grants commercial business loans, residential and
commercial real estate loans, consumer loans and real estate construction
loans to customers throughout west-central Minnesota. A substantial portion
of the Bank's debtors' ability to honor their contracts is dependent upon the
general economic conditions in Minnesota.
F-15
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
--------------------- ------------------------------------
1994 1993 1993 1992 1991
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at beginning
of period $445,963 $375,000 $375,000 $321,090 $304,823
Provision for losses 60,000 90,000 107,170 38,448
Net charge-offs
Loans charged off (1,585) (15,624) (24,578) (56,028) (23,709)
Recoveries 1,210 4,481 5,541 2,768 1,528
-------- -------- -------- -------- --------
Balance at end of
period $445,588 $423,857 $445,963 $375,000 $321,090
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
NOTE 6 - PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
----------- -------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Land and improvements $ 309,478 $ 309,478 $ 309,478
Buildings 1,081,905 1,081,905 1,077,955
Furniture, fixtures and equipment 1,175,538 1,172,478 1,094,871
---------- ----------- -----------
$2,566,921 $ 2,563,861 $ 2,482,304
Less accumulated depreciation and
amortization 1,378,091 1,321,248 1,178,756
---------- ----------- -----------
Premises and equipment, net $1,188,830 $ 1,242,613 $ 1,303,548
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
Depreciation expense for the six-months ended June 30, 1994 and 1993 were
$61,124 and $70,632, respectively.
Depreciation expense for the years ended December 31, 1993, 1992 and 1991 were
$152,640, $153,707 and $149,806, respectively.
NOTE 7 - OTHER REAL ESTATE OWNED
Other real estate owned is summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
-------- ----------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Real estate acquired through
foreclosure $ 51,100 $ 51,100 $203,792
-------- -------- --------
-------- -------- --------
</TABLE>
NOTE 8 - DEPOSITS
The Company had certificates of deposit over $100,000 of approximately
$6,723,000, $4,637,724 and $4,062,830 at June 30, 1994 and December 31, 1993
and 1992, respectively.
Accrued interest payable on deposits aggregated $320,649, $326,024 and
$353,657 at June 30, 1994 and December 31, 1993 and 1992, respectively.
F-16
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 9 - SHORT-TERM BORROWINGS
Short-term borrowings consist of U.S. Government demand notes. Borrowings are
collateralized by U.S. Treasury and government agency securities aggregating
approximately $1,143,000, $1,153,000 and $978,000 at June 30, 1994 and
December 31, 1993 and 1992, respectively.
NOTE 10 - NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Norwest Bank Minnesota, National
Association, due on demand, interest
paid quarterly at the Norwest prime
rate of 6.25% as of June 30, 1994.
Secured by all property and stock of
the Company. $100,000 $ 50,000 $ 0
Various individuals, due on demand,
interest paid semi-annually at the
Bank's prime rate of 6.25% as of
June 30, 1994. There is no stated
security. 120,000 120,000 192,000
Former stockholder, note dated
March 1, 1992, due in $40,000 annual
payments through March 31, 2002.
Interest is variable at the bank
prime rate of 6.25% as of June 30,
1994. Secured by stock of the Company. 320,000 360,000 400,000
-------- -------- --------
$540,000 $530,000 $592,000
-------- -------- --------
-------- -------- --------
</TABLE>
Following is a schedule of maturities of notes payable:
<TABLE>
<CAPTION>
Twelve Month Period Ended June 30, Amount
---------------------------------- --------
<S> <C>
1995 $260,000
1996 40,000
1997 40,000
1998 40,000
1999 40,000
Thereafter 120,000
--------
$540,000
--------
--------
</TABLE>
NOTE 11 - INCOME TAXES
The Company adopted SFAS No. 109 in 1993 and has elected to apply the
provisions retroactively beginning January 1, 1991. The cumulative effect of
this change in accounting for income taxes is $50,000 determined as of January
1, 1991 and is reported separately in the consolidated statement of operations
for the year ended December 31, 1991 as a reduction of net income.
F-17
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 11 - INCOME TAXES (Continued)
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
-------------------- --------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Current
Federal $150,372 $127,000 $302,887 $251,659 $146,831
State 60,000 54,500 123,846 106,272 66,569
Deferred (30,000) (25,000) (20,000)
-------- -------- -------- -------- --------
Net Income Tax Expense $210,372 $181,500 $396,733 $332,931 $193,400
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
Income tax expense differs from the amounts computed by applying the federal
income tax rate of 34% to income before income taxes, cumulative effect of
change in accounting method and minority interest as a result of the
following:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
-------------------- --------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Computed "expected"
tax expense $256,400 $211,500 $404,115 $358,100 $235,265
Increase (reduction)
in income tax expense
resulting from:
Tax exempt income (32,300) (29,600) (86,360) (76,980) (57,900)
State income tax, net
of federal income
tax benefit 50,500 41,700 81,750 70,225 43,230
Other, net (64,228) (42,100) (2,772) (18,414) (27,195)
-------- -------- -------- -------- --------
Net Income Tax
Expense $210,372 $181,500 $396,733 $332,931 $193,400
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
-------- ---------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Deferred Tax Assets:
Allowance for loan losses $125,000 $125,000 $ 95,000
Unrealized loss on securities
available for sale 60,000
Deferred Tax Liabilities:
Unrealized Gain on Securities
available for sale 0 (35,000) 0
-------- -------- --------
Net Deferred Tax Assets
(Liabilities) $185,000 $ 90,000 $ 95,000
-------- -------- --------
-------- -------- --------
</TABLE>
There has been no valuation allowance for deferred tax assets.
F-18
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 12 - EMPLOYEE BENEFIT PLAN
The Bank has a profit sharing plan qualifying under Internal Revenue Service
Code Section 401(k) that covers all employees who have reached the age of 21
and worked at least 1,000 hours for the Bank. The Bank makes an annual
contribution to the plan, which is allocated to each participant based on
their compensation. Participants become vested from 20% to 100% in 20%
increments for each year of service from two to six years. The Bank's
contributions are charged to salaries and employee benefits and were $0 for
the six-month period ended June 30, 1994, $72,819, $56,309 and $54,385 for the
years ended December 31, 1993, 1992 and 1991, respectively.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. The instruments involve, to varying degrees, elements of
credit, interest rate and liquidity risk in excess of the amount recognized in
the accompanying statements of financial condition.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit written is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer provided
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since certain of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Bank had outstanding
commitments to extend credit of approximately $205,000, $279,500 and $250,500
at June 30, 1994 and December 31, 1993 and 1992, respectively.
Standby letters of credit are conditional commitments issued by the Bank
guaranteeing the performance of a customer to a third party. The standby
letters of credit are primarily issued to support private borrowing
arrangements, and expire during 1994. The credit risk involved in issuing
standby letters of credit is essentially the same as that involved in making
loans to customers. The amount of collateral the Bank obtains to support
standby letters of credit is based on management's credit evaluation of the
borrower. Since the conditions under which the Bank is required to fund
standby letters of credit may not materialize, the cash requirements are
expected to be less than the total outstanding commitments. The Bank had
outstanding standby letters of credit of approximately $17,000, $14,000 and
$9,000 at June 30, 1994 and December 31, 1993 and 1992, respectively.
NOTE 14 - RELATED PARTY TRANSACTIONS
The Bank has entered into transactions with its directors, officers,
significant stockholders and their affiliates. Such transactions were made in
the ordinary course of business on substantially the same terms and
conditions, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other customers and did not, in the
opinion of management, involve more than normal credit risk or present other
favorable or unfavorable features. Loans to directors, officers, significant
stockholders and their affiliates did not exceed five percent of stockholders'
equity.
F-19
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 14 - RELATED PARTY TRANSACTIONS (Continued)
The Bank obtains data processing services from the holding company. Fees for
these services are summarized below:
<TABLE>
<CAPTION>
Data
Processing Fees
---------------
<S> <C>
Six months ended June 30, 1994 $ 72,336
Six months ended June 30, 1993 $ 91,958
Year Ended December 31, 1993 $184,457
Year Ended December 31, 1992 $184,651
Year Ended December 31, 1991 $175,907
</TABLE>
NOTE 15 - SUBSEQUENT EVENT
On May 24, 1994, the Holding Company and Norwest Corporation entered into an
Agreement and Plan of Reorganization (the Agreement) whereby the Company would
be merged with Norwest. All of the Company's outstanding common stock will be
exchanged for Norwest common stock. The number of shares of Norwest common
stock received in the exchange for the Company's common stock will be equal to
297,290 shares. The outstanding common stock of the Bank that is not owned by
the Company will be exchanged for Norwest common stock equal to 39,965 shares.
NOTE 16 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
----------- --------------------------
1994 1993 1992
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 9,216 $ 40,707 $ 16,472
Investments in the Bank 4,201,892 4,081,314 3,683,229
Other assets 73,982 47,632 108,364
----------- ----------- -----------
Total Assets $ 4,285,090 $ 4,169,653 $ 3,808,065
----------- ----------- -----------
----------- ----------- -----------
Liabilities and Stockholders' Equity
Notes payable $ 540,000 $ 530,000 $ 592,000
Other liabilities 225 267 205
----------- ----------- -----------
Total Liabilities $ 540,225 $ 530,267 $ 592,205
----------- ----------- -----------
Stockholders' Equity
Common stock $ 135,575 $ 135,575 $ 135,575
Paid-in capital 505,452 505,452 505,452
Treasury stock (454,192) (454,192) (454,192)
Retained earnings 3,558,030 3,452,551 3,029,025
----------- ----------- -----------
Total Stockholders' Equity $ 3,744,865 $ 3,639,386 $ 3,215,860
----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $ 4,285,090 $ 4,169,653 $ 3,808,065
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-20
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 16 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six-Month Periods Ended
June 30,
----------------------------
1994 1993
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Income
Data processing $ 72,336 $ 91,958
Other income 785 325
----------- -----------
Total Income $ 73,121 $ 92,283
----------- -----------
Expenses
Interest expense $ 16,267 $ 15,701
Other expense 123,559 69,746
----------- -----------
Total Expenses $ 139,826 $ 85,447
----------- -----------
Income (loss) before income tax and equity
in undistributed earnings of subsidiary $ (66,705) $ 6,836
Income tax expense 372
----------- -----------
Income (loss) before equity in undistributed
earnings of subsidiary $ (67,077) $ 6,836
Equity in earnings of subsidiary 465,236 383,841
----------- -----------
Net Income $ 398,159 $ 390,677
----------- -----------
----------- -----------
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Income
Data processing $ 184,457 $ 189,101 $ 182,982
Other income 540 10,975 444
----------- ----------- -----------
Total Income $ 184,997 $ 200,076 $ 183,426
----------- ----------- -----------
Expenses
Interest expense $ 30,219 $ 35,535 $ 19,949
Other expense 145,122 161,827 183,102
----------- ----------- -----------
Total Expenses $ 175,341 $ 197,362 $ 203,051
----------- ----------- -----------
Income (loss) before income tax
and equity in undistributed earnings
of subsidiary $ 9,656 $ 2,714 $ (19,625)
Income tax expense 44,425 12,931 9,400
----------- ----------- -----------
Loss before equity in undistributed
earnings of subsidiary $ (34,769) $ (10,217) $ (29,025)
Equity in earnings of subsidiary 702,195 621,902 447,421
----------- ----------- -----------
Net Income $ 667,426 $ 611,685 $ 418,396
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-21
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 16 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six-Month Periods Ended
June 30,
----------------------------
1994 1993
----------- -----------
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 398,159 $ 387,397
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 6,771 18,508
Dividends received from subsidiary 344,659 304,110
Equity in earnings of subsidiary (465,236) (383,841)
Change in other assets (8,121) 20,136
Change in other liabilities (42) (25)
----------- -----------
Total Adjustments $ (121,969) $ (41,112)
----------- -----------
Net cash provided (used) by operating
activities $ 276,190 $ 346,285
----------- -----------
Cash flows from investing activities
Increase in loan participations $ (25,000) $ 0
----------- -----------
Net cash provided (used) by investing
activities $ (25,000) $ 0
----------- -----------
Cash flows from financing activities
Proceeds from notes payable $ 60,000
Repayments of notes payable (50,000) $ (112,000)
Dividends paid (292,680) (243,900)
----------- -----------
Net cash flows provided (used) by financing
activities $ (282,680) $ (355,900)
----------- -----------
Net decrease in cash and cash equivalents $ (31,490) $ (9,615)
Cash and cash equivalents - beginning of period 40,707 16,472
----------- -----------
Cash and cash equivalents - end of period $ 9,217 $ 6,857
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for:
Interest on deposits and borrowings $ 16,267 $ 15,701
----------- -----------
----------- -----------
Income taxes $ 372 $ 0
----------- -----------
----------- -----------
</TABLE>
F-22
<PAGE>
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data as of and for the six-month periods ended June 30, 1994 and 1993
and as of and for the years ended December 31, 1992 and 1991 is unaudited)
NOTE 16 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 667,426 $ 611,685 $ 418,396
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization 37,020 51,959 50,983
Dividends received from subsidiary 304,110 202,740 202,640
Equity in earnings of subsidiary (702,195) (621,902) (447,421)
Change in other assets 23,712 49,329 (66,688)
Change in other liabilities 62 (89) 105
----------- ----------- -----------
Total adjustments $ (337,291) $ (317,963) $ (442,761)
----------- ----------- -----------
Net cash provided (used) by
operating activities $ 330,135 $ 293,722 $ 158,015
----------- ----------- -----------
Cash flows from financing activities
Repurchase of stock $ (54,192)
Repayments of notes payable $ (62,000) (72,153) $ (30,428)
Dividends paid (243,900) (151,218) (135,575)
----------- ----------- -----------
Net cash provided (used) by
financing activities $ (305,900) $ (277,563) $ (166,003)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents $ 24,235 $ 16,159 $ (7,988)
Cash and cash equivalents - beginning
of year 16,472 313 8,301
----------- ----------- -----------
Cash and cash equivalents - end of
year $ 40,707 $ 16,472 $ 313
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosures of cash flow
information
Cash paid for:
Interest on deposits and borrowings $ 30,219 $ 35,535 $ 19,949
----------- ----------- -----------
----------- ----------- -----------
Income taxes $ 44,425 $ 12,931 $ 9,400
----------- ----------- -----------
----------- ----------- -----------
Supplemental schedule of non-cash
financing activities:
During 1992, the Company reacquired
545 shares of stock from a former
stockholder for $454,192. $54,192
was paid in cash and $400,000 was
financed with a note payable.
</TABLE>
F-23
<PAGE>
[COMMUNITY STATE BANK Letterhead]
VERIFICATION
August 22, 1994
The statement of financial condition of Community State Bank of Alexandria,
a 88.15% owned subsidiary of Alexandria Securities and Investment Company, as of
June 30, 1994 and December 31, 1993 and 1992, and the related statements of
operations, changes in stockholders' equity, and cash flows for each of the six-
month periods ended June 30, 1994 and 1993, and for each of the years in the
three-year period ended December 31, 1993, have been prepared under our control.
In our opinion, the aforementioned financial statements present fairly the
financial position of Community State Bank of Alexandria at June 30, 1994 and
December 31, 1993 and 1992, and the results of operations, changes in
stockholders' equity, and cash flows for each of the six-month periods ended
June 30, 1994 and 1993, and for each of the years in the three-year period ended
December 31, 1993, in conformity with generally accepted accounting principles
applied on a consistent basis.
/s/ Micheal L. Lillehaugen
- -------------------------------------
Micheal L. Lillehaugen
President
/s/ Carol Meyer
- -------------------------------------
Carol Meyer
Vice President/Cashier
F-24
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
June 30, --------------------------
1994 1993 1992
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 2,749,602 $ 1,874,608 $ 1,977,753
Federal funds sold 2,100,000 2,950,000 2,800,000
Securities available for sale, approximate
market value of $7,234,265 (unaudited),
$6,748,238 (unaudited), and $0 (unaudited),
respectively 7,382,265 6,668,238
Unrealized holding gains (losses) (148,000) 80,000
Investment securities, approximate market
value of $4,397,921 (unaudited), $4,724,180
(unaudited), and $12,139,380 (unaudited),
respectively 4,475,370 4,695,067 12,041,928
Loans 38,841,853 39,104,140 36,270,143
Less allowance for loan losses (445,588) (445,963) (375,000)
Premises and equipment, net 1,175,371 1,225,665 1,256,142
Cash surrender value of life insurance, net 1,367,110 1,365,670 1,349,710
Accrued interest receivable 416,591 382,124 431,998
Other real estate owned 51,100 51,100 203,792
Deferred income taxes 185,000 90,000 95,000
Other assets 48,413 25,664 34,849
----------- ----------- -----------
Total Assets $58,199,087 $58,066,313 $56,086,315
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $ 8,807,014 $ 7,883,378 $ 7,377,575
Interest bearing 43,673,413 44,079,671 43,127,296
----------- ----------- -----------
Total Deposits $52,480,427 $51,963,049 $50,504,871
Short term borrowings 497,360 843,518 743,861
Accrued interest payable 320,649 326,024 353,657
Other liabilities 80,583 133,642 210,457
----------- ----------- -----------
Total Liabilities $53,379,019 $53,266,233 $51,812,846
----------- ----------- -----------
Stockholders' Equity
Common stock
Par value - $25
Authorized - 11,500 shares
Issued and outstanding - 11,500 shares $ 287,500 $ 287,500 $ 287,500
Paid-in capital 2,712,500 2,712,500 2,712,500
Unrealized holding gains (losses) (88,000) 45,000
Retained earnings 1,908,068 1,755,080 1,273,469
----------- ----------- -----------
Total Stockholders' Equity $ 4,820,068 $ 4,800,080 $ 4,273,469
----------- ----------- -----------
Total Liabilities and Stockholders'
Equity $58,199,087 $58,066,313 $56,086,315
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying Notes to Financial Statements
F-25
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three-Month Period Ended Six-Month Periods Ended
June 30, June 30,
-------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 848,239 $ 872,411 $ 1,676,593 $ 1,703,793
Securities
Taxable 111,150 111,833 214,441 256,284
Nontaxable 68,938 67,959 139,065 137,360
Federal funds sold 21,211 7,418 40,938 20,411
----------- ----------- ----------- -----------
Total Interest Income $ 1,049,538 $ 1,059,621 $ 2,071,037 $ 2,117,848
----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits $ 419,013 $ 428,547 $ 833,825 $ 873,609
Short-term borrowings 3,561 3,686 7,032 7,744
----------- ----------- ----------- -----------
Total Interest Expense $ 422,574 $ 432,233 $ 840,857 $ 881,353
----------- ----------- ----------- -----------
NET INTEREST INCOME $ 626,964 $ 627,388 $ 1,230,180 $ 1,236,495
PROVISION FOR LOAN LOSSES 0 30,000 0 60,000
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES $ 626,964 $ 597,388 $ 1,230,180 $ 1,176,495
----------- ----------- ----------- -----------
OPERATING INCOME
Service charges and fees $ 161,966 $ 213,630 $ 338,513 $ 356,388
Other 16,112 23,429 51,573 63,965
----------- ----------- ----------- -----------
Total Operating Income $ 178,078 $ 237,059 $ 390,086 $ 420,353
----------- ----------- ----------- -----------
OPERATING EXPENSES
Salaries and employee
benefits $ 223,399 $ 214,010 $ 451,979 $ 427,855
Net occupancy expense 60,703 61,982 129,150 120,742
FDIC insurance assessment 27,300 30,000 54,600 60,000
Data processing (15,050) 47,535 23,751 92,361
Insurance 6,552 12,299 15,631 24,485
Management advisory services 20,400 18,000 41,240 35,700
Postage and supplies 13,757 22,161 38,952 41,933
(Gains) losses on sales of
securities (14,115) (6,716) (14,115) (9,562)
Other 64,004 85,358 125,090 198,127
----------- ----------- ----------- -----------
Total Operating Expenses $ 386,950 $ 484,629 $ 866,278 $ 991,641
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES $ 418,092 $ 349,818 $ 753,988 $ 605,207
INCOME TAX EXPENSE 105,000 116,500 210,000 181,500
----------- ----------- ----------- -----------
NET INCOME $ 313,092 $ 233,318 $ 543,988 $ 423,707
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET INCOME PER SHARE $27.23 $20.29 $47.30 $36.84
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
See accompanying Notes to Financial Statements
F-26
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
INTEREST INCOME
Loans $ 3,430,832 $ 3,407,902 $ 3,554,244
Securities
Taxable 442,687 625,205 602,362
Nontaxable 276,712 262,784 239,669
Federal funds sold 76,515 80,533 152,622
----------- ----------- -----------
Total Interest Income $ 4,226,746 $ 4,376,424 $ 4,548,897
----------- ----------- -----------
INTEREST EXPENSE
Deposits $ 1,735,040 $ 2,057,613 $ 2,476,055
Short-term borrowings 13,813 15,240 30,233
----------- ----------- ------------
Total Interest Expense $ 1,748,853 $ 2,072,853 $ 2,506,288
----------- ----------- -----------
NET INTEREST INCOME $ 2,477,893 $ 2,303,571 $ 2,042,609
PROVISION FOR LOAN LOSSES 90,000 107,170 108,448
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES $ 2,387,893 $ 2,196,401 $ 1,934,161
----------- ----------- -----------
OPERATING INCOME
Service charges and fees $ 768,308 $ 652,931 $ 420,406
Other 109,824 103,039 79,778
----------- ----------- -----------
Total Operating Income $ 878,132 $ 755,970 $ 500,184
----------- ----------- -----------
OPERATING EXPENSES
Salaries and employee benefits $ 995,475 $ 896,633 $ 779,683
Net occupancy expense 247,972 226,702 205,126
FDIC insurance assessment 120,000 123,300 108,630
Data processing 185,579 185,675 176,407
Insurance 49,442 47,773 45,223
Management advisory services 76,100 65,537 92,240
Postage and supplies 88,197 86,328 84,044
(Gains) losses on sales of securities (22,794) (21,185) (4,042)
Other 347,135 291,087 235,453
----------- ----------- -----------
Total Operating Expenses $ 2,087,106 $ 1,901,850 $ 1,722,764
----------- ----------- -----------
NET INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING METHOD $ 1,178,919 $ 1,050,521 $ 711,581
INCOME TAX EXPENSE 352,308 320,000 184,000
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD 50,000
----------- ----------- -----------
NET INCOME $ 826,611 $ 730,521 $ 577,581
----------- ----------- -----------
----------- ----------- -----------
NET INCOME PER SHARE $71.87 $63.52 $50.22
------ ------ ------
------ ------ ------
</TABLE>
See accompanying Notes to Financial Statements
F-27
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Unrealized Total
Common Paid-in Gain (Loss) Retained Stockholders'
Stock Capital on Securities Earnings Equity
-------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE - January 1, 1991 $287,500 $2,212,500 $ 0 $ 925,367 $3,425,367
Dividends (230,000) (230,000)
Net income 577,581 577,581
-------- ---------- --------- ---------- ----------
BALANCE - December 31, 1991 $287,500 $2,212,500 $ 0 $1,272,948 $3,772,948
Dividends (230,000) (230,000)
Transfer to paid-in capital 500,000 (500,000)
Net income 730,521 730,521
-------- ---------- --------- ---------- ----------
BALANCE - December 31, 1992 $287,500 $2,712,500 $ 0 $1,273,469 $4,273,469
Dividends (345,000) (345,000)
Change in unrealized gain (loss) 45,000 45,000
Net income 826,611 826,611
-------- ---------- --------- ---------- ----------
BALANCE - December 31, 1993 $287,500 $2,712,500 $ 45,000 $1,755,080 $4,800,080
Dividends (391,000) (391,000)
Change in unrealized gain (loss) (133,000) (133,000)
Net income 543,988 543,988
-------- ---------- --------- ---------- ----------
BALANCE - June 30, 1994 $287,500 $2,712,500 $ (88,000) $1,908,068 $4,820,068
-------- ---------- --------- ---------- ----------
-------- ---------- --------- ---------- ----------
</TABLE>
See accompanying Notes to Financial Statements
F-28
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six-Month
Periods Ended
June 30,
--------------------------
1994 1993
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 543,988 $ 423,707
----------- -----------
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation $ 57,635 $ 55,404
Provision for loan losses 60,000
(Gains) losses on sales of securities (14,115) (6,716)
Change in accrued interest receivable (34,467) 64,488
Change in accrued interest payable (5,375) (16,124)
Change in cash surrender value of life insurance (1,440) (10,765)
Change in other assets (22,749) 120,864
Change in other liabilities (53,059) (129,448)
----------- -----------
Total Adjustments $ (73,570) $ 137,703
----------- -----------
Net Cash Provided (Used) by Operating Activities $ 470,418 $ 561,410
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Change in federal funds sold $ 850,000 $ 1,380,000
Proceeds from maturities and sales of securities 814,114 4,070,005
Purchases of securities (1,294,329) (2,251,375)
Loan (origination) repayments, net 261,912 (3,530,741)
Purchase of premises and equipment, net (7,341) (47,320)
----------- -----------
Net Cash Provided (Used) by Investing Activities $ 624,356 $ (379,431)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in deposits $ 517,378 $ 917,277
Change in short-term borrowings (346,158) (181,677)
Dividends paid (391,000) (345,000)
----------- -----------
Net Cash Provided (Used) by Financing Activities $ (219,780) $ 390,600
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 874,994 $ 572,579
CASH AND CASH EQUIVALENTS - beginning of period 1,874,608 1,977,753
----------- -----------
CASH AND CASH EQUIVALENTS - end of period $ 2,749,602 $ 2,550,332
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest on deposits and borrowings $ 846,232 $ 897,477
----------- -----------
----------- -----------
Income taxes $ 272,175 $ 306,804
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Financial Statements
F-29
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 826,611 $ 730,521 $ 577,581
----------- ----------- -----------
Adjustments to Reconcile Net Income to Net
Cash Provided (Used) by Operating
Activities:
Depreciation and amortization $ 122,182 $ 108,310 $ 105,385
Provision for loan losses 90,000 107,170 108,448
(Gains) losses on sales of securities (22,794) (21,185) (4,042)
Change in accrued interest receivable 49,874 (2,299) 39,768
Change in accrued interest payable (27,633) (23,523) (114,503)
Change in cash surrender value of life
insurance (15,960) (29,115) 12,639
Change in other assets 9,184 5,806 12,243
Deferred income taxes (30,000) (25,000) (20,000)
Change in other liabilities (76,815) 145,683 (155,650)
Cumulative effect of change in accounting
method (50,000)
----------- ----------- -----------
Total Adjustments $ 98,038 $ 265,847 $ (65,712)
----------- ----------- -----------
Net Cash Provided (Used) by Operating
Activities $ 924,649 $ 996,368 $ 511,869
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Change in federal funds sold $ (150,000) $(1,000,000) $ (300,000)
Proceeds from maturities and sales of
securities 3,938,722 4,683,237 2,936,025
Purchases of securities (3,237,304) (6,680,816) (5,329,967)
Loan (origination) repayments, net (2,864,238) (2,762,434) (2,176,838)
Proceeds from sale of other real estate
owned 163,896
Purchase of premises and equipment, net (91,705) (167,652) (45,312)
----------- ----------- -----------
Net Cash Provided (Used) by Investing
Activities $(2,240,629) $(5,927,665) $(4,916,092)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in deposits $ 1,458,178 $ 4,479,886 $ 3,352,380
Change in short-term borrowings 99,657 275,589 (101,208)
Dividends paid (345,000) (230,000) (230,000)
----------- ----------- -----------
Net Cash Provided (Used) by Financing
Activities $ 1,212,835 $ 4,525,475 $ 3,021,172
----------- ----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (103,145) $ (405,822) $(1,383,051)
CASH AND CASH EQUIVALENTS - beginning of year 1,977,753 2,383,575 3,766,626
----------- ----------- -----------
CASH AND CASH EQUIVALENTS - end of year $ 1,874,608 $ 1,977,753 $ 2,383,575
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying Notes to Financial Statements
F-30
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for:
Interest on deposits and borrowings $ 1,776,486 $ 2,096,376 $ 2,620,791
----------- ----------- -----------
----------- ----------- -----------
Income taxes $ 457,085 $ 202,132 $ 334,902
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF NON CASH
INVESTING ACTIVITIES
Transfer of loans to other real estate
owned $ 0 $ 147,792 $ 0
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying Notes to Financial Statements
F-31
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Community State Bank of Alexandria (the Bank) provides traditional community
banking services. Alexandria Securities and Investment Company (the Holding
Company), a one-bank holding company, owns 88% of the Bank's common stock.
The statements of financial condition as of June 30, 1994 and December 31,
1993 and 1992 and the related statements of operations, stockholders' equity
and cash flows for the six-month periods ended June 30, 1994 and 1993, and the
years ended December 31, 1993, 1992 and 1991 are unaudited. However, in the
opinion of management, these financial statements include all adjustments,
which consist only of normal recurring adjustments, necessary for fair
presentation of the Company's financial position. The results of operations
for the unaudited six month period ended June 30, 1994, are not necessarily
indicative of the results which may be expected for the entire fiscal year
1994.
CHANGES IN METHOD OF ACCOUNTING FOR INCOME TAXES - In February 1992, the
Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME TAXES. The Company
adopted SFAS No. 109 during 1993 and has elected to apply the provisions
retroactively beginning January 1, 1991. As a result, the consolidated
financial statements for 1992 and 1991 have been restated to apply the new
method of accounting retroactively.
SFAS No. 109 requires the use of the asset and liability method of accounting
for income taxes. Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS No.
109, the effect on deferred tax assets and liabilities from a change in tax
rates is recognized in income in the period that includes the enactment date.
The cumulative effect of the change in the method of accounting for income
taxes as of January 1, 1991 is reported separately in the 1991 statement of
operations.
The effect of SFAS No. 109 on net income per share for 1992 and 1991 is as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1992 1991
-------- --------
<S> <C> <C>
Net income, before change in accounting method $705,521 $507,581
Cumulative effect of change in accounting method 0 50,000
Effect of SFAS No. 109 25,000 20,000
-------- --------
Net income, as restated $730,521 $577,581
-------- --------
-------- --------
Per Share Information:
Net income before change in accounting method $ 61.35 $ 44.14
Cumulative effect of change in accounting method 0.00 4.34
Effect of SFAS No. 109 2.17 1.74
-------- --------
Net income, as restated $ 63.52 $ 50.22
-------- --------
-------- --------
</TABLE>
CHANGES IN METHOD OF ACCOUNTING FOR INVESTMENTS - In June 1993, the FASB
issued SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. This statement addressed the accounting and reporting for
investments by classifying them into three categories: securities held to
maturity, trading securities and securities available for sale. The Company
adopted SFAS No. 115 effective December 31, 1993. The statement has not been
applied retroactively and accordingly financial statements for periods prior
to December 31, 1993 have not been restated.
F-32
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
BASIS OF PRESENTATION - The financial statements have been prepared in
conformity with generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of
the balance sheet and revenues and expenses for the period. Actual results
could differ from those estimates. Material estimates that are particularly
susceptible to change in the near-term relate to the determination of the
allowance for losses on loans and other real estate owned.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE - Investment
securities are recorded at amortized cost because the Bank has the ability and
intent to hold these securities to maturity. These securities are stated at
cost adjusted for amortization of premium and accretion of discount, computed
by the interest method. Unrealized gains and losses on the sale of investment
securities are computed on the specific identification basis.
Securities available for sale include investments that management intends to
use as part of its asset/liability strategy or that may be sold in response to
changes in prepayment risk or other similar factors. Securities available for
sale are stated at market. Unrealized gains and losses on adjustments to
market values are included as a separate component of stockholders' equity in
the statement of financial condition until realized. Realized gains and
losses on sales of securities are determined using the specific identification
method and are reported in the statement of operations.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is maintained at a
level adequate to absorb probable losses. Management determines the adequacy
of the allowance based upon reviews of individual loans, recent loss
experience, current economic conditions, the risk characteristics of the
various categories of loans and other pertinent factors. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the allowances for losses on loans and real estate. Such
agencies may require additions to the allowances based on their judgment about
information available to them at the time of their examination. Loans deemed
uncollectible are charged to the allowance. Provisions for loan losses and
recoveries on loans previously charged off are added to the allowance.
Management believes the allowance for loan losses is adequate.
INTEREST INCOME ON LOANS - Interest on loans is accrued and credited to income
based on the principal amount outstanding. The accrual of interest on loans
is discontinued when a loan has been past due for 90 days. Upon such
discontinuance, all unpaid accrued interest is reversed. Interest is
subsequently recognized as income to the extent cash is received when, in
management's judgment, principal is collectible.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed principally by the
straight-line method.
CASH SURRENDER VALUE OF LIFE INSURANCE - The Bank is owner and beneficiary of
life insurance policies covering certain key employees and directors. These
policies are recorded at their cash surrender values.
OTHER REAL ESTATE OWNED - Real estate acquired through foreclose and in-
substance foreclosures are recorded at the lesser of the balance of the loan
at the date of acquisition plus costs of acquisition or fair value less
estimated costs to sell. Operating expenses of such properties, gains and
losses on their disposition or further reductions in the carrying value
resulting from a decline in fair value less estimated costs to sell are
charged against operating expenses as incurred. In-substance foreclosures
consist of loans accounted for as foreclosed property even though actual
foreclosure has not occurred. Although the collateral underlying these loans
has not been repossessed, the borrower has little or no equity in the
collateral at its current estimated fair market value, proceeds for repayment
are expected to come only from the operation or sale of the collateral, and
either the borrower has abandoned control of the property or it is doubtful
that the borrower will rebuild equity in the collateral or repay the loan by
other means in the foreseeable future.
F-33
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES - The Bank and the Holding Company file a consolidated income tax
return. Income taxes of the Bank are allocated on a separate return basis
with current taxes payable being accrued in the period they arise.
NET INCOME PER SHARE - Net income per share is calculated as net income
divided by shares of common stock outstanding.
CASH AND CASH EQUIVALENTS - For the purpose of presentation in the statements
of cash flows, cash and cash equivalents include cash on hand, cash clearings,
and demand deposits with banks.
NOTE 2 - CASH AND CASH EQUIVALENTS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank or minimum levels of cash in its own vault. The Bank has elected
to hold adequate reserves of cash on hand. Cash on hand at June 30, 1994 and
December 31, 1993 was approximately $499,000 and $390,000, respectively.
NOTE 3 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES
The amortized cost and estimated market values of investment securities and
securities available for sale are as follows:
<TABLE>
<CAPTION>
June 30, 1994
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities Available for
Sale:
U.S. Treasury Securities
and U.S. Government
Agency Securities $ 5,596,701 $13,177 $ 98,406 $ 5,511,472
Obligations of state and
political subdivisions 255,000 5,619 249,381
Mortgage backed securities 781,906 36,194 745,712
Equity securities 748,658 20,958 727,700
----------- ------- -------- -----------
Securities Available
for Sale $ 7,382,265 $13,177 $161,177 $ 7,234,265
----------- ------- -------- -----------
Investment Securities:
U.S. Treasury Securities
and U.S. Government
Agency Securities $ 97,750 $ 719 $ 97,031
Obligations of state and
political subdivisions 3,328,459 $31,618 84,771 3,275,306
Mortgage backed securities 1,049,161 10,569 34,146 1,025,584
----------- ------- -------- -----------
Investment Securities $ 4,475,370 $42,187 $119,636 $ 4,397,921
----------- ------- -------- -----------
$11,857,635 $55,364 $280,813 $11,632,186
----------- ------- -------- -----------
----------- ------- -------- -----------
</TABLE>
F-34
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
December 31, 1993
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities Available for
Sale:
U.S Treasury Securities
and U.S. Government
Agency Securities $ 4,502,387 $ 48,496 $ 4,633 $ 4,546,250
Obligations of state and
political subdivisions 430,000 16,883 446,883
Mortgage backed securities 804,403 3,688 808,091
Corporate debt securities 198,281 26,461 224,742
Equity securities 733,167 10,895 722,272
----------- -------- -------- -----------
Securities Available
for Sale $ 6,668,238 $ 95,528 $ 15,528 $ 6,748,238
----------- -------- -------- -----------
Investment Securities:
U.S. Treasury Securities
and U.S. Government
Agency Securities $ 102,287 $ 1,587 $ 796 $ 103,078
Obligations of state and
political subdivisions 3,346,572 70,628 42,705 3,374,495
Mortgage backed securities 1,246,208 15,011 14,612 1,246,607
----------- -------- -------- -----------
Investment Securities $ 4,695,067 $ 87,226 $ 58,113 $ 4,724,180
----------- -------- -------- -----------
$11,363,305 $182,754 $ 73,641 $11,472,418
----------- -------- -------- -----------
----------- -------- -------- -----------
<CAPTION>
December 31, 1992
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Investment Securities:
U.S. Treasury Securities
and U.S. Government
Agency Securities $ 3,206,300 $ 74,212 $ 3,280,512
Obligations of state and
political subdivisions 3,083,170 72,491 $ 93,829 3,061,832
Mortgage backed securities 5,016,770 51,774 22,966 5,045,578
Corporate debt securities 196,568 21,152 217,720
Equity securities 539,120 5,382 533,738
----------- -------- -------- -----------
Investment Securities $12,041,928 $219,629 $122,177 $12,139,380
----------- -------- -------- -----------
----------- -------- -------- -----------
</TABLE>
Proceeds from sales and gross gains and losses realized from sales of
investment securities and securities available for sale were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
----------------------- ----------------------------------------
1994 1993 1993 1992 1991
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Proceeds from sales $814,114 $4,070,005 $3,938,722 $4,683,237 $2,936,025
Gross realized gains $ 16,615 $ 6,716 $ 29,397 $ 30,592 $ 12,029
Gross realized losses $ 2,500 $ 0 $ 6,602 $ 9,407 $ 7,986
</TABLE>
F-35
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES (Continued)
Investment securities and securities available for sale with a carrying amount
of $3,555,000, $4,205,000, and $3,545,000 at June 30, 1994 and December 31,
1993 and 1992, respectively, were pledged to secure public deposits or for
other purposes required or permitted by law.
The amortized cost and estimated market value of securities by contractual
maturity (including investment securities and securities available for sale)
are shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or repay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
------------------------- -------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities Available for
Sale:
Due in one year or less $1,602,466 $1,611,121 $ 601,113 $ 612,469
Due after one year
through five years 4,019,235 3,925,412 4,146,446 4,208,924
Due after five years
through ten years 230,000 224,320 430,000 437,973
---------- ---------- ---------- ----------
$5,851,701 $5,760,853 $5,177,559 $5,259,366
Mortgage backed
securities 781,906 745,712 757,512 766,600
Equity securities 748,658 727,700 733,167 722,272
---------- ---------- ---------- ----------
$7,382,265 $7,234,265 $6,668,238 $6,748,238
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Investment Securities:
Due in one year or less $ 61,098 $ 61,213 $ 206,000 $ 205,322
Due after one year
through five years 1,315,188 1,308,107 1,295,013 1,304,998
Due after five years
through ten years 2,949,316 2,886,208 3,033,483 3,052,293
---------- ---------- ---------- ----------
$4,325,602 $4,255,528 $4,534,496 $4,562,613
Mortgage backed
securities 149,768 142,393 160,571 161,567
---------- ---------- ---------- ----------
$4,475,370 $4,397,921 $4,695,067 $4,724,180
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Accrued interest receivable on securities aggregated $148,437, $131,982 and
$169,108 at June 30, 1994 and December 31, 1993 and 1992, respectively.
NOTE 4 - LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
----------- --------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Loans
Commercial $11,545,000 $11,486,000 $ 9,246,000
Real estate - construction 742,000 759,000 794,000
Real estate - mortgage 18,184,000 18,755,000 18,322,000
Installment 8,079,000 7,832,000 7,658,000
Lease financing 19,000 21,000 37,000
Other 273,000 251,000 213,000
----------- ----------- -----------
$38,842,000 $39,104,000 $36,270,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-36
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - LOANS (Continued)
Included are loans on non-accrual status of $9,882, $22,228 and $7,302 at June
30, 1994 and December 31, 1993 and 1992, respectively. The impact on interest
income in 1993 for non-accrual loans was approximately $3,429. There are no
material commitments to lend additional funds to customers whose loans are
classified as non-accrual at June 30, 1994 or December 31, 1993.
The Bank has sold loan participations to affiliated banks with aggregate
unpaid principal balances of $2,784,084, $2,951,138 and $3,316,431 at June 30,
1994 and December 31, 1993 and 1992, respectively.
Accrued interest receivable on loans aggregated $266,997, $250,142 and
$262,890 at June 30, 1994 and December 31, 1993 and 1992, respectively.
The Bank generally grants commercial business loans, residential and
commercial real estate loans, consumer loans and real estate construction
loans to customers throughout central Minnesota. A substantial portion of the
Bank's debtors' ability to honor their contracts is dependent upon the general
economic conditions in Minnesota.
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
--------------------- ----------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at beginning
of period $445,963 $375,000 $375,000 $321,090 $304,823
Provision for losses 60,000 90,000 107,170 38,448
Net charge-offs
Loans charged off (1,585) (15,624) (24,578) (56,028) (23,709)
Recoveries 1,210 4,481 5,541 2,768 1,528
-------- -------- -------- -------- --------
Balance at end of
period $445,588 $423,857 $445,963 $375,000 $321,090
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
NOTE 6 - PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
----------- --------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Land and improvements $ 309,478 $ 309,478 $ 309,478
Buildings 1,081,905 1,081,905 1,077,955
Furniture, fixtures and equipment 880,356 877,297 799,689
----------- ----------- -----------
$ 2,271,739 $ 2,268,680 $ 2,187,122
Less accumulated depreciation and
amortization 1,096,368 1,043,015 930,980
----------- ----------- -----------
Premises and equipment, net $ 1,175,371 $ 1,225,665 $ 1,256,142
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Depreciation expense for the six-months ended June 30, 1994 and 1993 were
$57,635 and $55,404, respectively.
Depreciation expense for the years ended December 31, 1993, 1992 and 1991 were
$122,182, $108,310 and $105,385, respectively.
F-37
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 - OTHER REAL ESTATE OWNED
Other real estate owned is summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
-------- -----------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Real estate acquired through
foreclosure $ 51,100 $ 51,100 $203,792
-------- -------- --------
-------- -------- --------
</TABLE>
NOTE 8 - DEPOSITS
The Company had certificates of deposit over $100,000 of approximately
$6,723,000, $4,637,724 and $4,062,830 at June 30, 1994 and December 31, 1993
and 1992, respectively.
Accrued interest payable on deposits aggregated $320,649, $326,024 and
$353,657 at June 30, 1994 and December 31, 1993 and 1992, respectively.
NOTE 9 - SHORT-TERM BORROWINGS
Short-term borrowings consist of U.S. Government demand notes. Borrowings are
collateralized by U.S. Treasury and government agency securities aggregating
approximately $1,143,000, $1,153,000 and $978,000 at June 30, 1994 and
December 31, 1993 and 1992, respectively.
NOTE 10 - INCOME TAXES
The Bank adopted SFAS No. 109 in 1993 and has elected to apply the provisions
retroactively beginning January 1, 1991. The cumulative effect of this change
in accounting for income taxes of $50,000 is determined as of January 1, 1991
and is reported separately in the consolidated statement of operations for the
year ended December 31, 1990 as a reduction of net income.
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
--------------------- ----------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Current
Federal $150,000 $127,000 $123,846 $106,272 $ 66,569
State 60,000 54,500 258,462 238,728 137,431
Deferred (30,000) (25,000) (20,000)
-------- -------- -------- -------- --------
Net Income Tax Expense $210,000 $181,500 $352,308 $320,000 $184,000
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
F-38
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 - INCOME TAXES (Continued)
Income tax expense differs from the amounts computed by applying the federal
income tax rate of 34% to income before income taxes, cumulative effect of
change in accounting method and minority interest as a result of the
following:
<TABLE>
<CAPTION>
Six-Months Ended
June 30, Years Ended December 31,
--------------------- ----------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Computed "expected"
tax expense $256,400 $211,500 $400,800 $357,200 $241,900
Increase (reduction)
in income tax expense
resulting from:
Tax exempt income (32,300) (29,600) (86,360) (76,980) (57,900)
State income tax,
net of federal
income tax benefit 50,500 41,700 80,200 71,400 48,400
Other, net (64,600) (42,100) (42,332) (31,620) (48,400)
-------- -------- -------- -------- --------
Net Income Tax
Expense $210,000 $181,500 $352,308 $320,000 $184,000
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
-------- -----------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Deferred Tax Assets:
Allowance for loan losses $125,000 $125,000 $ 95,000
Unrealized loss on securities
available for sale 60,000
Deferred Tax Liabilities:
Unrealized Gain on Securities
available for sale 0 (35,000) 0
-------- -------- --------
Net Deferred Tax Assets
(Liabilities) $185,000 $ 90,000 $ 95,000
-------- -------- --------
-------- -------- --------
</TABLE>
There has been no valuation allowance for deferred tax assets.
NOTE 11 - EMPLOYEE BENEFIT PLAN
The Bank has a profit sharing plan that covers all employees who have reached
the age of 21 and worked at least 1,000 hours for the Bank. The Bank makes an
annual contribution to the plan, which is allocated to each participant based
on their compensation. Participants become vested from 20% to 100% in 20%
increments for each year of service from two to six years. The Bank's
contributions are charged to salaries and employee benefits and were $0 for
the six-month period ended June 30, 1994, $72,819, $56,309 and $54,835 for the
years ended December 31, 1993, 1992 and 1991, respectively.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. The instruments involve, to varying degrees, elements of
credit, interest rate and liquidity risk in excess of the amount recognized in
the accompanying statements of financial condition.
F-39
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit written is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer provided
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since certain commitments are expected to
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank had outstanding
commitments to extend credit of approximately $205,000, $279,500 and $250,500
at June 30, 1994 and December 31, 1993 and 1992, respectively.
Standby letters of credit are conditional commitments issued by the Bank
guaranteeing the performance of a customer to a third party. The standby
letters of credit are primarily issued to support private borrowing
arrangements, and expire during 1993. The credit risk involved in issuing
standby letters of credit is essentially the same as that involved in making
loans to customers. The amount of collateral the Bank obtains to support
standby letters of credit is based on management's credit evaluation of the
borrower. Since the conditions under which the Bank is required to fund
standby letters of credit may not materialize, the cash requirements are
expected to be less than the total outstanding commitments. The Bank had
outstanding standby letters of credit of approximately $17,000, $14,000 and
$9,000 at June 30, 1994 and December 31, 1993 and 1992, respectively.
NOTE 13 - RELATED PARTY TRANSACTIONS
The Bank has entered into transactions with its directors, officers,
significant stockholders and their affiliates. Such transactions were made in
the ordinary course of business on substantially the same terms and
conditions, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other customers and did not, in the
opinion of management, involve more than normal credit risk or present other
favorable or unfavorable features. Loans to directors, officers, significant
stockholders and their affiliates did not exceed five percent of stockholders'
equity.
The Bank obtains data processing services from the Holding Company. Fees for
these services are summarized below:
<TABLE>
<CAPTION>
Data
Processing Fees
---------------
<S> <C>
Six months ended June 30, 1994 $ 72,336
Six months ended June 30, 1993 $ 91,958
Year Ended December 31, 1993 $184,457
Year Ended December 31, 1992 $184,651
Year Ended December 31, 1991 $175,907
</TABLE>
NOTE 15 - SUBSEQUENT EVENT
On May 24, 1994, the Holding Company and Norwest Corporation entered into an
Agreement and Plan of Reorganization (the Agreement) whereby the Company would
be merged with Norwest. All of the Company's outstanding common stock will be
exchanged for Norwest common stock. The number of shares of Norwest common
stock received in the exchange for the Company's common stock will be equal to
297,290 shares. The outstanding common stock of the Bank that is not owned by
the Company will be exchanged for Norwest common stock equal to 39,965 shares.
F-40
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 16 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
----------- --------------------------
1994 1993 1992
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 9,216 $ 40,707 $ 16,472
Investments in the Bank 4,201,892 4,081,314 3,683,229
Other assets 73,982 47,632 108,364
----------- ----------- -----------
Total Assets $ 4,285,090 $ 4,169,653 $ 3,808,065
----------- ----------- -----------
----------- ----------- -----------
Liabilities and Stockholders' Equity
Notes payable $ 540,000 $ 530,000 $ 592,000
Other liabilities 225 267 205
----------- ----------- -----------
Total Liabilities $ 540,225 $ 530,267 $ 592,205
----------- ----------- -----------
Stockholders' Equity
Common stock $ 135,575 $ 135,575 $ 135,575
Paid-in capital 505,452 505,452 505,452
Treasury stock (454,192) (454,192) (454,192)
Retained earnings 3,558,030 3,452,551 3,029,025
----------- ----------- -----------
Total Stockholders' Equity $ 3,744,865 $ 3,639,386 $ 3,215,860
----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $ 4,285,090 $ 4,169,653 $ 3,808,065
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Month Periods Ended
June 30,
--------------------------
1994 1993
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Income
Data processing $ 72,336 $ 91,958
Other income 785 325
----------- -----------
Total Income $ 73,121 $ 92,283
----------- -----------
Expenses
Interest expense $ 16,267 $ 15,701
Other expense 123,559 69,746
----------- -----------
Total Expenses $ 139,826 $ 85,447
----------- -----------
Income (loss) before income tax and equity
in undistributed earnings of subsidiary $ (66,705) $ 6,836
Income tax expense 372
----------- -----------
Income (loss) before equity in undistributed
earnings of subsidiary $ (67,077) $ 6,836
Equity in earnings of subsidiary 465,236 383,841
----------- -----------
Net Income $ 398,159 $ 390,677
----------- -----------
----------- -----------
</TABLE>
F-41
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 16 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Income
Data processing $ 184,457 $ 189,101 $ 182,982
Other income 540 10,975 444
----------- ----------- -----------
Total Income $ 184,997 $ 200,076 $ 183,426
----------- ----------- -----------
Expenses
Interest expense $ 30,219 $ 35,535 $ 19,949
Other expense 145,122 161,827 183,102
----------- ----------- -----------
Total Expenses $ 175,341 $ 197,362 $ 203,051
----------- ----------- -----------
Income (loss) before income tax
and equity in undistributed earnings
of subsidiary $ 9,656 $ 2,714 $ (19,625)
Income tax expense 44,425 12,931 9,400
----------- ----------- -----------
Loss before equity in undistributed
earnings of subsidiary $ (34,769) $ (10,217) $ (29,025)
Equity in earnings of subsidiary 702,195 621,902 447,421
----------- ----------- -----------
Net Income $ 667,426 $ 611,685 $ 418,396
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-42
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 16 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six-Month Periods Ended
June 30,
--------------------------
1994 1993
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 398,159 $ 387,397
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 6,771 18,508
Dividends received from subsidiary 344,659 304,110
Equity in earnings of subsidiary (465,236) (383,841)
Change in other assets (8,121) 20,136
Change in other liabilities (42) (25)
----------- -----------
Total adjustments $ (121,969) $ (41,112)
----------- -----------
Net cash provided (used) by operating
activities $ 276,190 $ 346,285
----------- -----------
Cash flows from investing activities
Increase in loan participations $ (25,000) $ 0
----------- -----------
Net cash provided (used) by investing
activities $ (25,000) $ 0
----------- -----------
Cash flows from financing activities
Proceeds from notes payable $ 60,000
Repayments of notes payable (50,000) $ (112,000)
Dividends paid (292,680) (243,900)
----------- -----------
Net cash flows provided (used) by financing
activities $ (282,680) $ (355,900)
----------- -----------
Net decrease in cash and cash equivalents $ (31,490) $ (9,615)
Cash and cash equivalents - beginning of period 40,707 16,472
----------- -----------
Cash and cash equivalents - end of period $ 9,217 $ 6,857
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for:
Interest on deposits and borrowings $ 16,267 $ 15,701
----------- -----------
----------- -----------
Income taxes $ 372 $ 0
----------- -----------
----------- -----------
</TABLE>
F-43
<PAGE>
COMMUNITY STATE BANK OF ALEXANDRIA
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 16 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 667,426 $ 611,685 $ 418,396
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization 37,020 51,959 50,983
Dividends received from subsidiary 304,110 202,740 202,640
Equity in earnings of subsidiary (702,195) (621,902) (447,421)
Change in other assets 23,712 49,329 (66,688)
Change in other liabilities 62 (89) 105
----------- ----------- -----------
Total adjustments $ (337,291) $ (317,963) $ (260,381)
----------- ----------- -----------
Net cash provided (used) by
operating activities $ 330,135 $ 293,722 $ 158,015
----------- ----------- -----------
Cash flows from financing activities
Repurchase of stock $ (54,192)
Repayments of notes payable $ (62,000) (72,153) $ (30,428)
Dividends paid (243,900) (151,218) (135,575)
----------- ----------- -----------
Net cash flows provided (used)
by financing activities $ (305,900) $ (277,563) $ (166,003)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents $ 24,235 $ 16,159 $ (7,988)
Cash and cash equivalents - beginning
of year 16,472 313 8,301
----------- ----------- -----------
Cash and cash equivalents - end of
year $ 40,707 $ 16,472 $ 313
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosures of cash flow
information
Cash paid for:
Interest on deposits and borrowings $ 30,219 $ 35,535 $ 19,949
----------- ----------- -----------
----------- ----------- -----------
Income taxes $ 44,425 $ 12,931 $ 9,400
----------- ----------- -----------
----------- ----------- -----------
Supplemental schedule of non-cash
financing activities:
During 1992, the Company reacquired
545 shares of stock from a former
stockholder for $454,192. $54,192
was paid in cash and $400,000 was
financed with a note payable.
</TABLE>
F-44
<PAGE>
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION,
AND
AGREEMENT AND PLAN OF MERGER
<PAGE>
AMENDED AND RESTATED
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as of
May 24, 1994, and amended as of July 21, 1994, by and between ALEXANDRIA
SECURITIES AND INVESTMENT COMPANY, a Minnesota corporation ("Alexandria"),
COMMUNITY STATE BANK OF ALEXANDRIA, a Minnesota state bank (the "Bank"), and
NORWEST CORPORATION, a Delaware corporation ("Norwest").
WHEREAS, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Norwest ("Merger Co.") will merge with and into
Alexandria (the "Merger") pursuant to an agreement of merger (the "Merger
Agreement") in substantially the form attached hereto as Exhibit A, which
provides, among other things, for the conversion and exchange of the shares of
common stock of Alexandria of the par value of $25.00 per share ("Alexandria
Common Stock") outstanding immediately prior to the time the Merger becomes
effective in accordance with the provisions of the Merger Agreement (the
"Effective Time of the Merger") into shares of voting common stock of Norwest of
the par value of $1-2/3 per share ("Norwest Common Stock"), and
WHEREAS, Norwest desires that, immediately following the Merger, the Bank
will merge with and into a wholly-owned subsidiary of Norwest ("Norwest Bank")
under the charter of Norwest Bank (the "Bank Merger") pursuant to an agreement
of merger (the "Bank Merger Agreement") in substantially the form attached
hereto as Exhibit B, which provides, among other things, for the conversion and
exchange of the shares of common stock of the Bank, of the par value of $25 per
share, outstanding immediately prior to the time the Bank Merger becomes
effective in accordance with the provisions of the Bank Merger Agreement and
owned by shareholders other than Alexandria ("Bank Common Stock") into shares of
Norwest Common Stock.
NOW, THEREFORE, to effect such reorganization and in consideration of the
premises and the mutual covenants and agreements contained herein, the parties
hereto do hereby represent, warrant, covenant and agree as follows:
1. BASIC PLAN OF REORGANIZATION
(a) MERGER. Subject to the terms and conditions contained herein, Merger
Co. will be merged by statutory merger with and into Alexandria pursuant to the
Merger Agreement, with Alexandria as the surviving corporation, in which merger
each share of Alexandria Common Stock outstanding immediately prior to the
Effective Time of the Merger (other than shares as to which statutory
dissenters' appraisal rights have been exercised) will be converted into and
exchanged for a number of shares of Norwest Common Stock determined by (i)
multiplying the Norwest Shares (as defined below) by 88.15%, and then (ii)
dividing the result thereof by the number of shares of Alexandria Common Stock
outstanding immediately prior to the Merger. The "Norwest Shares" shall be
337,255; provided, however, that if the Closing Date (as defined below) is after
the Target Closing Date (as defined below), the Norwest Shares shall be
increased by adding to 337,255 a sum equal to 98 times the number of days
between the Target Closing Date and the Closing Date. The "Target Closing Date"
shall be November 31, 1994 if Alexandria has delivered audited financial
statements which comply with the requirements of paragraph 4(d) hereof to
Norwest no later than July 1, 1994; provided, however, that if Alexandria
delivers such financial statements after July 1, 1994, the Target Closing Date
shall be extended beyond November 31, 1994 by a
A-1
<PAGE>
number of days equal to the number of days between July 1, 1994 and the date
such financial statements are delivered to Norwest.
(b) THE BANK MERGER. Following the Effective Time of the Merger and on the
terms and subject to the conditions set forth herein, the Bank will merge with
and into Norwest Bank under the charter of Norwest Bank pursuant to the Bank
Merger Agreement, in which merger each share of Bank Common Stock outstanding
immediately prior to the Effective Time of the Bank Merger owned by shareholders
other than Alexandria (other than shares as to which statutory dissenters'
appraisal rights have been exercised) will be converted into and exchanged for a
number of shares of Norwest Common Stock determined by (i) multiplying the
Norwest Shares by 11.85%, and then (ii) dividing the result thereof by the
number of shares of Bank Common Stock outstanding and owned by shareholders
other than Alexandria immediately prior to the Bank Merger.
(c) NORWEST COMMON STOCK ADJUSTMENTS. If between the date hereof and the
Effective Time of the Merger shares of Norwest Common Stock shall be changed
into a different number of shares or a different class of shares by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or if a stock dividend thereon shall be declared with a
record date within such period (a "Norwest Common Stock Adjustment"), then (i)
the number of shares of Norwest Common Stock into which a share of Alexandria
Common Stock shall be converted pursuant to subparagraph (a), above, (or into
which a share of Bank Common Stock will be converted pursuant to subparagraph
(b), above) will be appropriately and proportionately adjusted so that the
number of such shares of Norwest Common Stock into which a share of Alexandria
Common Stock (or Bank Common Stock) shall be converted will equal the number of
shares of Norwest Common Stock which holders of shares of Alexandria Common
Stock (or Bank Common Stock) would have received pursuant to such
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or stock dividend had the record date therefor been immediately
following the Effective Time of the Merger and (ii) if a Norwest Common Stock
Adjustment occurs between the date hereof and any date that the closing price of
a share of Norwest Common Stock is used for purposes of this Agreement, the
Merger Agreement or the Bank Merger Agreement, the closing price of a share of
Norwest Common Stock for such purposes shall be the sum of the closing prices on
the date of each such determination of the number of shares of Norwest Common
Stock and other securities, if any, (in each case as reported on the
consolidated tape of the New York Stock Exchange on such date) issued with
respect to one share of Norwest Common Stock as a result of the Norwest Common
Stock Adjustment.
(d) FRACTIONAL SHARES. No fractional shares of Norwest Common Stock and
no certificates or scrip certificates therefor shall be issued to represent any
such fractional interest, and any holder thereof shall be paid an amount of cash
equal to the product obtained by multiplying the fractional share interest to
which such holder is entitled by the average of the closing prices of a share of
Norwest Common Stock as reported by the consolidated tape of the New York Stock
Exchange for each of the five (5) trading days immediately preceding the
Effective Date of the Merger.
(e) MECHANICS OF CLOSING MERGER. Subject to the terms and conditions set
forth herein, the Merger Agreement shall be executed and it or Articles of
Merger or a Certificate of Merger shall be filed with the Secretary of State of
the State of Minnesota ten (10) business days following the satisfaction or
waiver of all conditions precedent set forth in Sections 6 and 7 of this
Agreement or on such other date as may be agreed to by the parties (the "Closing
Date"). Each of the parties agrees to use its best efforts to cause the Merger
to be completed as soon as practicable after the receipt of final regulatory
approval of the Merger and the expiration of all required waiting periods. The
time that the filing referred to in the first sentence of this paragraph is made
is herein referred to as the "Time of Filing". The day on which such filing is
made and accepted is herein
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referred to as the "Effective Date of the Merger". The Effective Time of the
Merger shall be 11:59 p.m. Minneapolis, Minnesota time on the Effective Date of
the Merger. At the Effective Time of the Merger on the Effective Date of the
Merger, the separate existence of Merger Co. shall cease and Merger Co. will be
merged with and into Alexandria pursuant to the Merger Agreement. The Effective
Time of the Bank Merger shall be the time set forth in the Bank Merger
Agreement.
The closing of the transactions contemplated by this Agreement and the
Merger Agreement (the "Closing") shall take place on the Closing Date at the
offices of Norwest, Norwest Center, Sixth and Marquette, Minneapolis, Minnesota.
2. REPRESENTATIONS AND WARRANTIES OF ALEXANDRIA. Alexandria represents
and warrants to Norwest as follows:
(a) ORGANIZATION AND AUTHORITY. Alexandria is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and failure to be so qualified would
have a material adverse effect on Alexandria and the Alexandria Subsidiaries
taken as a whole and has corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted. Alexandria is
registered as a bank holding company with the Federal Reserve Board under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"). Alexandria has
furnished Norwest true and correct copies of its articles of incorporation and
by-laws, as amended.
(b) ALEXANDRIA'S SUBSIDIARIES. Schedule 2(b) sets forth a complete and
correct list of all of Alexandria's subsidiaries as of the date hereof
(individually a "Alexandria Subsidiary" and collectively the "Alexandria
Subsidiaries"), all shares of the outstanding capital stock of each of which,
except as set forth on Schedule 2(b), are owned directly or indirectly by
Alexandria. No equity security of any Alexandria Subsidiary is or may be
required to be issued by reason of any option, warrant, scrip, right to
subscribe to, call or commitment of any character whatsoever relating to, or
security or right convertible into, shares of any capital stock of such
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Alexandria Subsidiary is bound to issue additional
shares of its capital stock, or any option, warrant or right to purchase or
acquire any additional shares of its capital stock. Subject to 12 U.S.C.
Section 55 (1982) and Minnesota Business Corporation Act, all of such shares
so owned by Alexandria are fully paid and nonassessable and are owned by it
free and clear of any lien, claim, charge, option, encumbrance or agreement
with respect thereto. Each Alexandria Subsidiary is a corporation or
national banking association duly organized, validly existing, duly qualified to
do business and in good standing under the laws of its jurisdiction of
incorporation, and has corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being conducted.
Except as set forth on Schedule 2(b), Alexandria does not own beneficially,
directly or indirectly, more than 5% of any class of equity securities or
similar interests of any corporation, bank, business trust, association or
similar organization, and is not, directly or indirectly, a partner in any
partnership or party to any joint venture.
(c) CAPITALIZATION. The authorized capital stock of Alexandria consists
of 200,000 shares of preferred stock, $25 par value ("Alexandria Preferred
Stock"), of which as of the close of business on March 31, 1994, no shares were
outstanding and 10,000 shares of common stock, $25 par value, of which as of the
close of business on March 31, 1994, 5,423 shares were issued, of which 4,878
shares were outstanding and 545 shares were held in the treasury. The maximum
number of shares of Alexandria Preferred Stock (assuming for this purpose that
phantom shares and other share-equivalents constitute Alexandria Preferred
Stock) that would be outstanding as of
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the Effective Date of the Merger if all options, warrants, conversion rights and
other rights with respect thereto were exercised is none. The maximum number of
shares of Alexandria Common Stock (assuming for this purpose that phantom shares
and other share-equivalents constitute Alexandria Common Stock) that would be
outstanding as of the Effective Date of the Merger if all options, warrants,
conversion rights and other rights with respect thereto were exercised is 4,878.
All of the outstanding shares of capital stock of Alexandria have been duly and
validly authorized and issued and are fully paid and nonassessable. Except as
set forth in Schedule 2(c), there are no outstanding subscriptions, contracts,
conversion privileges, options, warrants, calls or other rights obligating
Alexandria or any Alexandria Subsidiary to issue, sell or otherwise dispose of,
or to purchase, redeem or otherwise acquire, any shares of capital stock of
Alexandria or any Alexandria Subsidiary. Since March 31, 1994, no shares of
Alexandria capital stock have been purchased, redeemed or otherwise acquired,
directly or indirectly, by Alexandria or any Alexandria Subsidiary and no
dividends or other distributions have been declared, set aside, made or paid to
the shareholders of Alexandria.
(d) AUTHORIZATION. Alexandria and the Bank have the corporate power and
authority to enter into this Agreement and the Merger Agreement or Bank Merger
Agreement as the case may be and, subject to any required approvals of their
respective shareholders, to carry out their obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Merger Agreement or Bank Merger Agreement by Alexandria and the Bank and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Alexandria and the Bank. Subject to
such approvals of shareholders and of government agencies and other governing
boards having regulatory authority over Alexandria as may be required by statute
or regulation, this Agreement and the Merger Agreement or the Bank Merger
Agreement are valid and binding obligations of Alexandria and the Bank,
respectively, enforceable against Alexandria and the Bank in accordance with
their respective terms.
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by Alexandria or the Bank of this Agreement and the Merger Agreement
or the Bank Merger Agreement, nor the consummation of the transactions
contemplated hereby and thereby, nor compliance by Alexandria or the Bank with
any of the provisions hereof or thereof, will (i) violate, conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation
of, any lien, security interest, charge or encumbrance upon any of the
properties or assets of Alexandria or any Alexandria Subsidiary under any of the
terms, conditions or provisions of (x) its articles of incorporation or by-laws
or (y) any material note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Alexandria or any
Alexandria Subsidiary is a party or by which it may be bound, or to which
Alexandria or any Alexandria Subsidiary or any of the properties or assets of
Alexandria or any Alexandria Subsidiary may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in the next paragraph,
to the best knowledge of Alexandria, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Alexandria or any
Alexandria Subsidiary or any of their respective properties or assets.
Other than in connection or in compliance with the provisions of the
Securities Act of 1933 and the rules and regulations thereunder (the "Securities
Act"), the Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Exchange Act"), the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHC Act or the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 ("HSR Act"), and filings required to effect the Merger and the Bank
Merger under Minnesota law, no notice to, filing with, exemption or review by,
or authorization, consent or approval of, any public body or
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authority is necessary for the consummation by Alexandria or the Bank of the
transactions contemplated by this Agreement and the Merger Agreement or the Bank
Merger Agreement.
(e) ALEXANDRIA FINANCIAL STATEMENTS. The consolidated statements of
financial condition of Alexandria and Alexandria's Subsidiaries as of December
31, 1993 and 1992 and related consolidated statements of income, shareholders'
equity and cash flows for the three years ended December 31, 1993, together with
the notes thereto, and the unaudited consolidated statements of financial
condition of Alexandria and Alexandria's Subsidiaries as of March 31, 1994 and
the related unaudited consolidated statements of income, shareholders' equity
and cash flows for the three months then ended (collectively, the "Alexandria
Financial Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and present fairly (subject,
in the case of financial statements for interim periods, to normal recurring
adjustments) the consolidated financial position of Alexandria and Alexandria's
Subsidiaries at the dates and the consolidated results of operations and cash
flows of Alexandria and Alexandria's Subsidiaries for the periods stated
therein.
(f) REPORTS. Since December 31, 1988, Alexandria and each Alexandria
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the
Securities and Exchange Commission (the "SEC"), including, but not limited to,
Forms 10-K, Forms 10-Q and proxy statements, (ii) the Federal Reserve Board,
(iii) the Federal Deposit Insurance Corporation (the "FDIC"), (iv) the United
States Comptroller of the Currency (the "Comptroller") and (v) any applicable
state securities or banking authorities. All such reports and statements filed
with any such regulatory body or authority are collectively referred to herein
as the "Alexandria Reports". As of their respective dates, the Alexandria
Reports complied in all material respects with all the rules and regulations
promulgated by the SEC, the Federal Reserve Board, the FDIC, the Comptroller and
applicable state securities or banking authorities, as the case may be, and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Copies of all the Alexandria Reports have been made available to
Norwest by Alexandria.
(g) PROPERTIES AND LEASES. Except as may be reflected in the Alexandria
Financial Statements and except for any lien for current taxes not yet
delinquent, Alexandria and each Alexandria Subsidiary have good title free and
clear of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Alexandria's
consolidated balance sheet as of March 31, 1994, and all real and personal
property acquired since such date, except such real and personal property as has
been disposed of in the ordinary course of business. All leases of real
property and all other leases material to Alexandria or any Alexandria
Subsidiary pursuant to which Alexandria or such Alexandria Subsidiary, as
lessee, leases real or personal property, which leases are described on Schedule
2(g), are valid and effective in accordance with their respective terms, and
there is not, under any such lease, any material existing default by Alexandria
or such Alexandria Subsidiary or any event which, with notice or lapse of time
or both, would constitute such a material default. Substantially all
Alexandria's and each Alexandria Subsidiary's buildings and equipment in regular
use have been well maintained and are in good and serviceable condition,
reasonable wear and tear excepted.
(h) TAXES. Each of Alexandria and the Alexandria Subsidiaries has filed
all federal, state, county, local and foreign tax returns, including information
returns, required to be filed by it, and paid all taxes owed by it, including
those with respect to income, withholding, social security, unemployment,
workers compensation, franchise, ad valorem, premium, excise and sales taxes,
and no taxes shown on such returns to be owed by it or assessments received by
it are delinquent. The federal income tax returns of Alexandria and the
Alexandria Subsidiaries for the fiscal year ended
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December 31, 1990, and for all fiscal years prior thereto, are for the purposes
of routine audit by the Internal Revenue Service closed because of the statute
of limitations, and no claims for additional taxes for such fiscal years are
pending. Except only as set forth on Schedule 2(h), (i) neither Alexandria nor
any Alexandria Subsidiary is a party to any pending action or proceeding, nor is
any such action or proceeding threatened by any governmental authority, for the
assessment or collection of taxes, interest, penalties, assessments or
deficiencies and (ii) no issue has been raised by any federal, state, local or
foreign taxing authority in connection with an audit or examination of the tax
returns, business or properties of Alexandria or any Alexandria Subsidiary which
has not been settled, resolved and fully satisfied. Each of Alexandria and the
Alexandria Subsidiaries has paid all taxes owed or which it is required to
withhold from amounts owing to employees, creditors or other third parties. The
consolidated balance sheet as of March 31, 1994, referred to in paragraph 2(e)
hereof, includes adequate provision for all accrued but unpaid federal, state,
county, local and foreign taxes, interest, penalties, assessments or
deficiencies of Alexandria and the Alexandria Subsidiaries with respect to all
periods through the date thereof.
(i) ABSENCE OF CERTAIN CHANGES. Since March 31, 1994 there has been no
change in the business, financial condition or results of operations of
Alexandria or any Alexandria Subsidiary, which has had, or may reasonably be
expected to have, a material adverse effect on the business, financial condition
or results of operations of Alexandria and the Alexandria Subsidiaries taken as
a whole.
(j) COMMITMENTS AND CONTRACTS. Except as set forth on Schedule 2(j),
neither Alexandria nor any Alexandria Subsidiary is a party or subject to any of
the following (whether written or oral, express or implied):
(i) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination pay
liabilities or fringe benefits) with any present or former officer,
director, employee or consultant (other than those which are terminable at
will by Alexandria or such Alexandria Subsidiary);
(ii) any plan, contract or understanding providing for any bonus,
pension, option, deferred compensation, retirement payment, profit sharing
or similar arrangement with respect to any present or former officer,
director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
(iv) any contract not made in the ordinary course of business
containing covenants which limit the ability of Alexandria or any
Alexandria Subsidiary to compete in any line of business or with any person
or which involve any restriction of the geographical area in which, or
method by which, Alexandria or any Alexandria Subsidiary may carry on its
business (other than as may be required by law or applicable regulatory
authorities);
(v) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K; or
(vi) any lease with annual rental payments aggregating $10,000 or
more.
(k) LITIGATION AND OTHER PROCEEDINGS. Alexandria will furnish Norwest
copies of (i) all attorney responses to the request of the independent auditors
for Alexandria with respect to loss contingencies as of December 31, 1993 in
connection with the Alexandria financial statements as soon as such responses
become available, and has furnished (ii) a written list of legal and regulatory
proceedings filed against Alexandria or any Alexandria Subsidiary since said
date.
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Neither Alexandria nor any Alexandria Subsidiary is a party to any pending or,
to the best knowledge of Alexandria, threatened, claim, action, suit,
investigation or proceeding, or is subject to any order, judgment or decree,
except for matters which, in the aggregate, will not have, or cannot reasonably
be expected to have, a material adverse effect on the business, financial
condition or results of operations of Alexandria and the Alexandria Subsidiaries
taken as a whole.
(l) INSURANCE. Alexandria and each Alexandria Subsidiary is presently
insured, and during each of the past five calendar years (or during such lesser
period of time as Alexandria has owned such Alexandria Subsidiary) has been
insured, for reasonable amounts with financially sound and reputable insurance
companies against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable law and regulation.
(m) COMPLIANCE WITH LAWS. Alexandria and each Alexandria Subsidiary has
all permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties and assets and to carry on its business as presently
conducted and that are material to the business of Alexandria or such Alexandria
Subsidiary; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best knowledge of Alexandria,
no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current. The conduct by Alexandria
and each Alexandria Subsidiary of its business and the condition and use of its
properties does not violate or infringe, in any respect material to any such
business, any applicable domestic (federal, state or local) or foreign law,
statute, ordinance, license or regulation. Neither Alexandria nor any
Alexandria Subsidiary is in default under any order, license, regulation or
demand of any federal, state, municipal or other governmental agency or with
respect to any order, writ, injunction or decree of any court. Except for
statutory or regulatory restrictions of general application and except as set
forth on Schedule 2(m), no federal, state, municipal or other governmental
authority has placed any restriction on the business or properties of Alexandria
or any Alexandria Subsidiary which reasonably could be expected to have a
material adverse effect on the business or properties of Alexandria and the
Alexandria Subsidiaries taken as a whole.
(n) LABOR. No work stoppage involving Alexandria or any Alexandria
Subsidiary is pending or, to the best knowledge of Alexandria, threatened.
Neither Alexandria nor any Alexandria Subsidiary is involved in, or threatened
with or affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding which could materially and adversely affect the business of
Alexandria or such Alexandria Subsidiary. Employees of Alexandria and the
Alexandria Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees.
(o) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as set forth on
Schedule 2(o), to the best knowledge of Alexandria no officer or director of
Alexandria or any Alexandria Subsidiary, or any "associate" (as such term is
defined in Rule l4a-1 under the Exchange Act) of any such officer or director,
has any interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of Alexandria or
any Alexandria Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan from
Alexandria or any Alexandria Subsidiary to any present officer, director,
employee or any associate or related interest of any such person which was
required under Regulation O of the Federal Reserve Board to be approved by or
reported to Alexandria's or such Alexandria Subsidiary's Board of Directors.
(p) ALEXANDRIA BENEFIT PLANS.
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(i) The only "employee benefit plans" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for which Alexandria or any Alexandria Subsidiary acts as the
plan sponsor as defined in ERISA Section 3(16)(B), and with respect to
which any liability under ERISA or otherwise exists or may be incurred by
Alexandria or any Alexandria Subsidiary are those set forth on Schedule
2(p) (the "Plans"). No Plan is a "multi-employer plan" within the meaning
of Section 3(37) of ERISA.
(ii) Each Plan is and has been in all material respects operated and
administered in accordance with its provisions and applicable law. Except
as set forth on Schedule 2(p), Alexandria or the Alexandria subsidiaries
have received favorable determination letters from the Internal Revenue
Service under the provisions of the Tax Equity and Fiscal Responsibility
Act ("TEFRA"), the Deficit Reduction Act ("DEFRA") and the Retirement
Equity Act ("REA") for each of the Plans to which the qualification
requirements of Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), apply. Alexandria knows of no reason that any Plan
which is subject to the qualification provisions of Section 401(a) of the
Code is not "qualified" within the meaning of Section 401(a) of the Code
and that each related trust is not exempt from taxation under Section
501(a) of the Code, except that any such Plan may not have been amended to
comply with the Tax Reform Act of 1986 (the "TRA") and other recent
legislation and regulations, although each such Plan is within the remedial
amendment period during which retroactive amendment may be made.
(iii) The present value of all benefits vested and all benefits
accrued under each Plan which is subject to Title IV of ERISA did not, in
each case, as determined for purposes of reporting on Schedule B to the
Annual Report on Form 5500 of each such Plan for the plan year ending
December 31, 1992, exceed the value of the assets of the Plan allocable to
such vested or accrued benefits.
(iv) Except as disclosed in Schedule 2(p), and to the best knowledge
of Alexandria, no Plan or any trust created thereunder, nor any trustee,
fiduciary or administrator thereof, has engaged in a "prohibited
transaction", as such term is defined in Section 4975 of the Code or
Section 406 of ERISA or violated any of the fiduciary standards under Part
4 of Title I of ERISA which could subject, to the best knowledge of
Alexandria, such Plan or trust, or any trustee, fiduciary or administrator
thereof, or any party dealing with any such Plan or trust, to the tax or
penalty on prohibited transactions imposed by said Section 4975 or would
result in material liability to Alexandria and the Alexandria Subsidiaries
taken as a whole.
(v) No Plan which is subject to Title IV of ERISA or any trust
created thereunder has been terminated, nor have there been any "reportable
events" as that term is defined in Section 4043 of ERISA, with respect to
any Plan, other than those events which may result from the transactions
contemplated by this Agreement and the Merger Agreement or the Bank Merger
Agreement.
(vi) No Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section 412 of
the Code (whether or not waived), since the effective date of ERISA.
(vii) Except as disclosed in Schedule 2(p), neither the execution and
delivery of this Agreement and the Merger Agreement or the Bank Merger
Agreement nor the
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consummation of the transactions contemplated hereby and thereby will (i)
result in any material payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to
any director or employee or former employee of Alexandria or any Alexandria
Subsidiary under any Plan or otherwise, (ii) materially increase any
benefits otherwise payable under any Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits to any
material extent.
(q) PROXY STATEMENT, ETC. None of the information regarding Alexandria
and the Alexandria Subsidiaries supplied or to be supplied by Alexandria for
inclusion in (i) a Registration Statement on Form S-4 to be filed with the SEC
by Norwest for the purpose of registering the shares of Norwest Common Stock to
be exchanged for shares of Alexandria Common Stock pursuant to the provisions of
the Merger Agreement and shares of Bank Common Stock pursuant to the provisions
of the Bank Merger Agreement (the "Registration Statement"), (ii) the proxy
statement to be mailed to Alexandria's and the Bank's shareholders in connection
with the meetings to be called to consider the Merger and the Bank Merger (the
"Proxy Statement") and (iii) any other documents to be filed with the SEC or any
regulatory authority in connection with the transactions contemplated hereby or
by the Merger Agreement or the Bank Merger Agreement will, at the respective
times such documents are filed with the SEC or any regulatory authority and, in
the case of the Registration Statement, when it becomes effective and, with
respect to the Proxy Statement, when mailed, be false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements therein not misleading or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
meeting of shareholders referred to in paragraph 4(c), be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of any proxy for such meeting. All documents which Alexandria and
the Alexandria Subsidiaries are responsible for filing with the SEC and any
other regulatory authority in connection with the Merger and the Bank Merger
will comply as to form in all material respects with the provisions of
applicable law.
(r) REGISTRATION OBLIGATIONS. Except as set forth on Schedule 2(r),
neither Alexandria nor any Alexandria Subsidiary is under any obligation,
contingent or otherwise, which will survive the Merger by reason of any
agreement to register any of its securities under the Securities Act.
(s) BROKERS AND FINDERS. Neither Alexandria nor any Alexandria Subsidiary
nor any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for Alexandria or any Alexandria Subsidiary in connection
with this Agreement and the Merger Agreement or the Bank Merger Agreement or the
transactions contemplated hereby and thereby.
(t) ADMINISTRATION OF TRUST ACCOUNTS. Alexandria and each Alexandria
Subsidiary has properly administered in all respects material and which could
reasonably be expected to be material to the financial condition of Alexandria
and the Alexandria Subsidiaries taken as a whole all accounts for which it acts
as a fiduciary, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law. Neither
Alexandria, any Alexandria Subsidiary, nor any director, officer or employee of
Alexandria or any Alexandria Subsidiary has committed any breach of trust with
respect to any such fiduciary account which is material to or could reasonably
be expected to be material to the financial condition of Alexandria and the
Alexandria Subsidiaries taken as a whole, and the accountings for each such
fiduciary account are true and correct in all material respects and accurately
reflect the assets of such fiduciary account.
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(u) NO DEFAULTS. Neither Alexandria nor any Alexandria Subsidiary is in
default, nor has any event occurred which, with the passage of time or the
giving of notice, or both, would constitute a default, under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Alexandria and the Alexandria Subsidiaries, taken
as a whole. To the best of Alexandria's knowledge, all parties with whom
Alexandria or any Alexandria Subsidiary has material leases, agreements or
contracts or who owe to Alexandria or any Alexandria Subsidiary material
obligations other than with respect to those arising in the ordinary course of
the banking business of the Alexandria Subsidiaries are in compliance therewith
in all material respects.
(v) ENVIRONMENTAL LIABILITY. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
reasonably be expected to result in the imposition of, on Alexandria or any
Alexandria Subsidiary, any liability arising from the release of hazardous
substances 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, pending or to the
best of Alexandria's knowledge, threatened against Alexandria or any Alexandria
Subsidiary the result of which has had or could reasonably be expected to have a
material adverse effect upon Alexandria and Alexandria's Subsidiaries taken as a
whole; to the best of Alexandria's knowledge there is no reasonable basis for
any such proceeding, claim or action; and to the best of Alexandria's knowledge
neither Alexandria nor any Alexandria Subsidiary is subject to any agreement,
order, judgment, or decree by or with any court, governmental authority or third
party imposing any such environmental liability.
3. REPRESENTATIONS AND WARRANTIES OF NORWEST. Norwest represents and
warrants to Alexandria as follows:
(a) ORGANIZATION AND AUTHORITY. Norwest is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and failure to be so qualified would have a
material adverse effect on Norwest and its subsidiaries taken as a whole and has
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted. Norwest is registered as a bank
holding company with the Federal Reserve Board under the BHC Act.
(b) NORWEST SUBSIDIARIES. Schedule 3(b) sets forth a complete and correct
list as of December 31, 1993, of Norwest's Significant Subsidiaries (as defined
in Regulation S-X promulgated by the SEC) (individually a "Norwest Subsidiary"
and collectively the "Norwest Subsidiaries"), all shares of the outstanding
capital stock of each of which, except as set forth in Schedule 3(b), are owned
directly or indirectly by Norwest. No equity security of any Norwest Subsidiary
is or may be required to be issued to any person or entity other than Norwest by
reason of any option, warrant, scrip, right to subscribe to, call or commitment
of any character whatsoever relating to, or security or right convertible into,
shares of any capital stock of such subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any Norwest Subsidiary is
bound to issue additional shares of its capital stock, or options, warrants or
rights to purchase or acquire any additional shares of its capital stock.
Subject to 12 U.S.C. Section 55 (1982), all of such shares so owned by Norwest
are fully paid and nonassessable and are owned by it free and clear of any lien,
claim, charge, option, encumbrance or agreement with respect thereto. Each
Norwest Subsidiary is a corporation or national banking association duly
organized, validly
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existing, duly qualified to do business and in good standing under the laws of
its jurisdiction of incorporation, and has corporate power and authority to own
or lease its properties and assets and to carry on its business as it is now
being conducted.
(c) NORWEST CAPITALIZATION. The authorized capital stock of Norwest
consists of (i) 5,000,000 shares of Preferred Stock, without par value, of which
as of the close of business on December 31, 1993, 1,131,250 shares of 10.24%
Cumulative Preferred Stock at $100 stated value and 1,143,750 shares of
Cumulative Convertible Preferred Stock, Series B, at $200 stated value were
outstanding, and (ii) 500,000,000 shares of Common Stock, $1-2/3 par value, of
which as of the close of business on December 31, 1993, 294,131,670 shares
were outstanding and 1,956,803 shares were held in the treasury.
(d) AUTHORIZATION. Norwest has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by Norwest and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Norwest. No approval or consent by the stockholders of Norwest is
necessary for the execution and delivery of this Agreement and the Merger
Agreement or the Bank Merger Agreement and the consummation of the transactions
contemplated hereby and thereby. Subject to such approvals of government
agencies and other governing boards having regulatory authority over Norwest as
may be required by statute or regulation, this Agreement is a valid and binding
obligation of Norwest enforceable against Norwest in accordance with its terms.
Neither the execution, delivery and performance by Norwest of this
Agreement, the Merger Agreement and the Bank Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by Norwest with any of the provisions hereof or thereof, will (i) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of, any lien, security interest, charge or encumbrance
upon any of the properties or assets of Norwest or any Norwest Subsidiary under
any of the terms, conditions or provisions of (x) its certificate of
incorporation or by-laws or (y) any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which Norwest or any Norwest Subsidiary is a party or by which it may be bound,
or to which Norwest or any Norwest Subsidiary or any of the properties or assets
of Norwest or any Norwest Subsidiary may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in the next paragraph,
to the best knowledge of Norwest, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Norwest or any
Norwest Subsidiary or any of their respective properties or assets.
Other than in connection with or in compliance with the provisions of the
Securities Act, the Exchange Act, the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHC Act or the HSR Act, and filings required to effect the
Merger and the Bank Merger under Minnesota law, no notice to, filing with,
exemption or review by, or authorization, consent or approval of, any public
body or authority is necessary for the consummation by Norwest of the
transactions contemplated by this Agreement, the Merger Agreement and the Bank
Merger Agreement.
(e) NORWEST FINANCIAL STATEMENTS. The consolidated statements of
financial condition of Norwest and Norwest's subsidiaries as of December 31,
1993 and 1992 and related consolidated statements of income, stockholders'
equity and cash flows for the three years ended December 31, 1993, together with
the notes thereto, certified by KPMG Peat Marwick and included in Norwest's
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Annual Report on Form 10-K for the fiscal year ended December 31, 1993 as
amended by Form 10K/A filed May 13, 1994 (the "Norwest 10-K") as filed with the
SEC and the unaudited consolidated balance sheets of Norwest and its
subsidiaries as of March 31, 1994 and the related unaudited consolidated
statements of income and cash flows for the three months then ended included
in Norwest's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1994, as filed with the SEC (collectively, the "Norwest Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and present fairly
(subject, in the case of financial statements for interim periods, to normal
recurring adjustments) the consolidated financial position of Norwest and its
subsidiaries at the dates and the consolidated results of operations, changes
in financial position and cash flows of Norwest and its subsidiaries for the
periods stated therein.
(f) REPORTS. Since December 31, 1988, Norwest and each Norwest Subsidiary
has filed all reports, registrations and statements, together with any required
amendments thereto, that it was required to file with (i) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q and proxy statements, (ii) the
Federal Reserve Board, (iii) the FDIC, (iv) the Comptroller and (v) any
applicable state securities or banking authorities. All such reports and
statements filed with any such regulatory body or authority are collectively
referred to herein as the "Norwest Reports". As of their respective dates, the
Norwest Reports complied in all material respects with all the rules and
regulations promulgated by the SEC, the Federal Reserve Board, the FDIC, the
Comptroller and any applicable state securities or banking authorities, as the
case may be, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(g) PROPERTIES AND LEASES. Except as may be reflected in the Norwest
Financial Statements and except for any lien for current taxes not yet
delinquent, Norwest and each Norwest Subsidiary has good title free and clear of
any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Norwest's
consolidated balance sheet as of March 31, 1994 included in Norwest's Quarterly
Report on Form 10-Q for the period then ended, and all real and personal
property acquired since such date, except such real and personal property has
been disposed of in the ordinary course of business. All leases of real
property and all other leases material to Norwest or any Norwest Subsidiary
pursuant to which Norwest or such Norwest Subsidiary, as lessee, leases real or
personal property, are valid and effective in accordance with their respective
terms, and there is not, under any such lease, any material existing default by
Norwest or such Norwest Subsidiary or any event which, with notice or lapse of
time or both, would constitute such a material default. Substantially all
Norwest's and each Norwest Subsidiary's buildings and equipment in regular use
have been well maintained and are in good and serviceable condition, reasonable
wear and tear excepted.
(h) TAXES. Each of Norwest and the Norwest Subsidiaries has filed all
material federal, state, county, local and foreign tax returns, including
information returns, required to be filed by it, and paid or made adequate
provision for the payment of all taxes owed by it, including those with respect
to income, withholding, social security, unemployment, workers compensation,
franchise, ad valorem, premium, excise and sales taxes, and no taxes shown on
such returns to be owed by it or assessments received by it are delinquent. The
federal income tax returns of Norwest and the Norwest Subsidiaries for the
fiscal year ended December 31, 1979, and for all fiscal years prior thereto, are
for the purposes of routine audit by the Internal Revenue Service closed because
of the statute of limitations, and no claims for additional taxes for such
fiscal years are pending. Except only as set forth on Schedule 3(h), (i)
neither Norwest nor any Norwest Subsidiary is a party to any pending action or
proceeding, nor to Norwest's knowledge is any such action or proceeding
threatened by any governmental authority, for the assessment or collection of
taxes, interest,
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penalties, assessments or deficiencies which could reasonably be expected to
have any material adverse effect on Norwest and its subsidiaries taken as a
whole, and (ii) no issue has been raised by any federal, state, local or foreign
taxing authority in connection with an audit or examination of the tax returns,
business or properties of Norwest or any Norwest Subsidiary which has not been
settled, resolved and fully satisfied, or adequately reserved for. Each of
Norwest and the Norwest Subsidiaries has paid all taxes owed or which it is
required to withhold from amounts owing to employees, creditors or other third
parties.
(i) ABSENCE OF CERTAIN CHANGES. Since December 31, 1993, there has been
no change in the business, financial condition or results of operations of
Norwest or any Norwest Subsidiary which has had, or may reasonably be expected
to have, a material adverse effect on the business, financial condition or
results of operations of Norwest and its subsidiaries taken as a whole.
(j) COMMITMENTS AND CONTRACTS. Except as set forth on Schedule 3(j), as
of April 1, 1994 neither Norwest nor any Norwest Subsidiary is a party or
subject to any of the following (whether written or oral, express or implied):
(i) any labor contract or agreement with any labor union;
(ii) any contract not made in the ordinary course of business
containing covenants which materially limit the ability of Norwest or any
Norwest Subsidiary to compete in any line of business or with any person or
which involve any material restriction of the geographical area in which,
or method by which, Norwest or any Norwest Subsidiary may carry on its
business (other than as may be required by law or applicable regulatory
authorities);
(iii) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K.
(k) LITIGATION AND OTHER PROCEEDINGS. Neither Norwest nor any Norwest
Subsidiary is a party to any pending or, to the best knowledge of Norwest,
threatened, claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or decree, except for matters which, in the aggregate, will
not have, or cannot reasonably be expected to have, a material adverse effect on
the business, financial condition or results of operations of Norwest and its
subsidiaries taken as a whole.
(l) INSURANCE. Norwest and each Norwest Subsidiary is presently insured,
and during each of the past five calendar years (or during such lesser period of
time as Norwest has owned such Norwest Subsidiary) has been insured or
self-insured, for reasonable amounts with financially sound and reputable
insurance companies against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured and has maintained all insurance required by applicable law and
regulation.
(m) COMPLIANCE WITH LAWS. Norwest and each Norwest Subsidiary has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of Norwest or such Subsidiary;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect, and to the best knowledge of Norwest, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. The conduct by Norwest and each Norwest
Subsidiary of its business and the condition and use of its properties does not
violate or infringe, in
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any respect material to any such business, any applicable domestic (federal,
state or local) or foreign law, statute, ordinance, license or regulation.
Neither Norwest nor any Norwest Subsidiary is in default under any order,
license, regulation or demand of any federal, state, municipal or other
governmental agency or with respect to any order, writ, injunction or decree of
any court. Except for statutory or regulatory restrictions of general
application, no federal, state, municipal or other governmental authority has
placed any restrictions on the business or properties of Norwest or any Norwest
Subsidiary which reasonably could be expected to have a material adverse effect
on the business or properties of Norwest and its subsidiaries taken as a whole.
(n) LABOR. No work stoppage involving Norwest or any Norwest Subsidiary
is pending or, to the best knowledge of Norwest, threatened. Neither Norwest
nor any Norwest Subsidiary is involved in, or threatened with or affected by,
any labor dispute, arbitration, lawsuit or administrative proceeding which could
materially and adversely affect the business of Norwest or such Norwest
Subsidiary. Except as set forth on Schedule 3(j), employees of Norwest and the
Norwest Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees.
(o) NORWEST BENEFIT PLANS.
(i) As of the date hereof, the only "employee benefit plans" within
the meaning of Section 3(3) of ERISA for which Norwest or any Norwest
Subsidiary acts as plan sponsor as defined in ERISA Section 3(16)(B) with
respect to which any liability under ERISA or otherwise exists or may be
incurred by Norwest or any Norwest Subsidiary are those set forth on
Schedule 3(o) (the "Norwest Plans"). No Norwest Plan is a "multi-employer
plan" within the meaning of Section 3(37) of ERISA.
(ii) Each Norwest Plan is and has been in all material respects
operated and administered in accordance with its provisions and applicable
law. Except as set forth on Schedule 3(o), Norwest or the Norwest
Subsidiaries have received favorable determination letters from the
Internal Revenue Service under the provisions of the Tax Equity and Fiscal
Responsibility Act ("TEFRA"), the Deficit Reduction Act ("DEFRA") and the
Retirement Equity Act ("REA") for each of the Norwest Plans to which the
qualification requirements of Section 401(a) of the Code apply. Norwest
knows of no reason that any Norwest Plan which is subject to the
qualification provisions of Section 401(a) of the Code is not "qualified"
within the meaning of Section 401(a) of the Code and that each related
trust is not exempt from taxation under Section 501(a) of the Code, except
that any such Norwest Plan may not have been amended to comply with TRA and
other recent legislation and regulations, although each such Norwest Plan
is within the remedial amendment period during which retroactive amendment
may be made.
(iii) The present value of all benefits vested and all benefits
accrued under each Norwest Plan which is subject to Title IV of ERISA did
not, in each case, as determined for purposes of reporting on Schedule B to
the Annual Report on Form 5500 of each such Norwest Plan for the plan year
ending December 31, 1992, exceed the value of the assets of the Norwest
Plans allocable to such vested or accrued benefits.
(iv) Except as set forth on Schedule 3(o), and to the best knowledge
of Norwest, no Norwest Plan or any trust created thereunder, nor any
trustee, fiduciary or administrator thereof, has engaged in a "prohibited
transaction", as such term is defined in Section 4975 of the Code or
Section 406 of ERISA or violated fiduciary standards under Part 4 of
Title I of ERISA, which could subject, to the best knowledge of Norwest,
such Norwest Plan or trust, or any trustee, fiduciary or administrator
thereof, or any party
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dealing with any such Norwest Plan or trust, to the tax or penalty on
prohibited transactions imposed by said Section 4975 or would result in
material liability to Norwest and its subsidiaries taken as a whole.
(v) Except as set forth on Schedule 3(o), no Norwest Plan which is
subject to Title IV of ERISA or any trust created thereunder has been
terminated, nor have there been any "reportable events" as that term is
defined in Section 4043 of ERISA with respect to any Norwest Plan, other
than those events which may result from the transactions contemplated by
this Agreement, the Merger Agreement or the Bank Merger Agreement.
(vi) No Norwest Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section 412 of
the Code (whether or not waived), during the last five Norwest Plan years
which would result in a material liability.
(vii) Neither the execution and delivery of this Agreement, the Merger
Agreement and the Bank Merger Agreement nor the consummation of the
transactions contemplated hereby and thereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director
or employee or former employee of Norwest under any Norwest Plan or
otherwise, (ii) materially increase any benefits otherwise payable under
any Norwest Plan or (iii) result in the acceleration of the time of
payment or vesting of any such benefits to any material extent.
(p) REGISTRATION STATEMENT, ETC. None of the information regarding
Norwest and its subsidiaries supplied or to be supplied by Norwest for inclusion
in (i) the Registration Statement, (ii) the Proxy Statement, or (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Merger Agreement will, at
the respective times such documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading or, in the case
of the Proxy Statement or any amendment thereof or supplement thereto, at the
time of the meeting of shareholders referred to in paragraph 4(c), be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for such meeting. All documents which Norwest and
the Norwest Subsidiaries are responsible for filing with the SEC and any other
regulatory authority in connection with the Merger and the Bank Merger will
comply as to form in all material respects with the provisions of applicable
law.
(q) BROKERS AND FINDERS. Neither Norwest nor any Norwest Subsidiary nor
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted directly
or indirectly for Norwest or any Norwest Subsidiary in connection with this
Agreement and the Merger Agreement or the Bank Merger Agreement or the
transactions contemplated hereby and thereby.
(r) NO DEFAULTS. Neither Norwest nor any Norwest Subsidiary is in
default, nor has any event occurred which, with the passage of time or the
giving of notice, or both, would constitute a default under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Norwest
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and its subsidiaries taken as a whole. To the best of Norwest's knowledge, all
parties with whom Norwest or any Norwest Subsidiary has material leases,
agreements or contracts or who owe to Norwest or any Norwest Subsidiary material
obligations other than with respect to those arising in the ordinary course of
the banking business of the Norwest Subsidiaries are in compliance therewith in
all material respects.
(s) ENVIRONMENTAL LIABILITY. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
reasonably be expected to result in the imposition, on Norwest or any Norwest
Subsidiary of any liability arising from the release of hazardous substances
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, pending or to the best of
Norwest's knowledge, threatened against Norwest or any Norwest Subsidiary, the
result of which has had or could reasonably be expected to have a material
adverse effect upon Norwest and its subsidiaries taken as a whole; to the best
of Norwest's knowledge there is no reasonable basis for any such proceeding,
claim or action; and to the best of Norwest's knowledge neither Norwest nor any
Norwest Subsidiary is subject to any agreement, order, judgment, or decree by or
with any court, governmental authority or third party imposing any such
environmental liability.
(t) MERGER CO. As of the Closing Date, Merger Co. will be a corporation
duly organized, validly existing, duly qualified to do business and in good
standing under the laws of its jurisdiction of incorporation, and will have
corporate power and authority to own or lease its properties and assets and to
carry on its business.
(u) NORWEST BANK. As of the Closing Date, Norwest Bank will be a
corporation duly organized, validly existing, duly qualified to do business and
in good standing under the laws of its jurisdiction of incorporation, and will
have corporate power and authority to own or lease its properties and assets and
to carry on its business.
4. COVENANTS OF ALEXANDRIA. Alexandria covenants and agrees with Norwest
as follows:
(a) Except as otherwise permitted or required by this Agreement, from
thedate hereof until the Effective Time of the Merger, Alexandria, and each
Alexandria Subsidiary will: (i) maintain its corporate existence in good
standing; (ii) maintain the general character of its business and conduct its
business in its ordinary and usual manner; (iii) extend credit in accordance
with existing lending policies, except that it shall not, without the prior
written consent of Norwest, make any new loan or modify, restructure or renew
any existing loan (except pursuant to commitments made prior to the date of this
Agreement) to any borrower if the amount of the resulting loan, when aggregated
with all other loans or extensions of credit to such person, would be in excess
of $100,000, provided, that it may, without such prior written consent, renew
any existing loan on its existing terms for periods of up to 12 months if
interest on such loan is not in arrears; (iv) maintain proper business and
accounting records in accordance with generally accepted principles; (v)
maintain its properties in good repair and condition, ordinary wear and tear
excepted; (vi) maintain in all material respects presently existing insurance
coverage; (vii) use its best efforts to preserve its business organization
intact, to keep the services of its present principal employees and to preserve
its good will and the good will of its suppliers, customers and others having
business relationships with it; (viii) use its best efforts to obtain any
approvals or consents required to maintain existing leases and other contracts
in effect following the Merger; (ix) comply in all material respects with all
laws, regulations, ordinances, codes, orders, licenses and permits applicable to
the properties and operations of Alexandria and each Alexandria Subsidiary the
non-compliance with which reasonably could be expected to have a material
adverse effect on Alexandria and the Alexandria Subsidiaries taken as a whole;
and (x) permit Norwest and its
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representatives (including KPMG Peat Marwick) to examine its and its
subsidiaries books, records and properties and to interview officers, employees
and agents at all reasonable times when it is open for business. No such
examination by Norwest or its representatives either before or after the date of
this Agreement shall in any way affect, diminish or terminate any of the
representations, warranties or covenants of Alexandria herein expressed.
(b) Except as otherwise contemplated or required by this Agreement, from
the date hereof until the Effective Time of the Merger, Alexandria and each
Alexandria subsidiary will not (without the prior written consent of Norwest):
(i) amend or otherwise change its articles of incorporation or association or
by-laws; (ii) issue or sell or authorize for issuance or sale, or grant any
options or make other agreements with respect to the issuance or sale or
conversion of, any shares of its capital stock, phantom shares or other
share-equivalents, or any other of its securities; (iii) authorize or incur any
long-term debt (other than deposit liabilities); (iv) mortgage, pledge or
subject to lien or other encumbrance any of its properties, except in the
ordinary course of business; (v) enter into any material agreement, contract or
commitment in excess of $10,000 except banking transactions in the ordinary
course of business and in accordance with policies and procedures in effect on
the date hereof; (vi) make any investments except investments made by bank
subsidiaries in the ordinary course of business for terms of up to one (1) year
and in amounts of $100,000 or less; (vii) amend or terminate any Plan except as
required by law; (viii) make any contributions to any Plan except as required by
the terms of such Plan in effect as of the date hereof, provided, however, that
if the cumulative average consolidated earnings of Alexandria and Community
State Bank of Alexandria (the "Bank"), determined in accordance with generally
accepted accounting principles (without, for the purposes of such calculation
only, taking into account the adjustments required by paragraphs 4(m) and 7(o)
hereof), are at least $70,000 per month for the period from January 1, 1994
through the end of the month preceding the Closing Date, then the Bank (A) may
contribute up to $70,000 to its profit sharing plan, and (B) may pay up to an
amount not to exceed an aggregate of $50,000 for employee bonuses; (ix) declare,
set aside, make or pay any dividend or other distribution with respect to its
capital stock except any dividend declared by a subsidiary's Board of Directors
in accordance with applicable law and regulation; (x) redeem, purchase or
otherwise acquire, directly or indirectly, any of the capital stock of
Alexandria; (xi) increase the compensation of any officers, directors or
executive employees, except pursuant to existing compensation plans and
practices; (xii) sell or otherwise dispose of any shares of the capital stock of
any Alexandria Subsidiary; or (xiii) sell or otherwise dispose of any of its
assets or properties other than in the ordinary course of business.
(c) SHAREHOLDER ACTIONS.
(i) The Board of Directors of Alexandria will duly call, and will
cause to be held not later than forty-five (45) days following the
effective date of the Registration Statement referred to in paragraph 5(c)
hereof, a meeting of its shareholders and will direct that this Agreement
and the Merger Agreement be submitted to a vote at such meeting. The Board
of Directors of Alexandria will (A) cause proper notice of such meeting to
be given to its shareholders in compliance with the Minnesota Business
Corporation Act and other applicable law and regulation, (B) recommend by
the affirmative vote of the Board of Directors a vote in favor of approval
of this Agreement and the Merger Agreement, and (C) use its best efforts to
solicit from its shareholders proxies in favor thereof.
(ii) The Board of Directors of the Bank will duly call, and will
cause to be held not later than forty-five (45) days following the
effective date of the Registration Statement referred to in paragraph 5(c)
hereof, a meeting of its shareholders and will direct that this Agreement
and the Bank Merger Agreement be submitted to a vote at such meeting. The
Board of Directors of the Bank will (A) cause proper notice of such meeting
to be given to
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its shareholders in compliance with applicable law and regulation, (B)
recommend by the affirmative vote of the Board of Directors a vote in favor
of approval of this Agreement and the Bank Merger Agreement, and (C) use
its best efforts to solicit from its shareholders proxies in favor thereof.
(d) Alexandria will furnish or cause to be furnished to Norwest all the
information concerning Alexandria and its subsidiaries required for inclusion in
the Registration Statement referred to in paragraph 5(c) hereof (including but
not limited to audited consolidated financial statements for Alexandria, which
Alexandria agrees to have prepared at its sole expense after the date hereof,
which comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and the published rules and regulations
thereunder, and which otherwise are required or necessary to be filed or
included in the Registration Statement), or any statement or application made by
Norwest to any governmental body in connection with the transactions
contemplated by this Agreement. Any financial statement for any fiscal year
provided under this paragraph must include the audit opinion and the consent of
Ness, Waller, Pearson & Co., Ltd. to use such opinion in such Registration
Statement. Any interim quarterly financial information provided under this
paragraph must have been reviewed by Ness, Waller, Pearson & Co., Ltd. in
accordance with generally accepted auditing standards and Alexandria must
provide Norwest with a copy of such review report.
(e) Alexandria will take all necessary corporate and other action and use
its best efforts to obtain all approvals of regulatory authorities, consents and
other approvals required of Alexandria to carry out the transactions
contemplated by this Agreement and will cooperate with Norwest to obtain all
such approvals and consents required of Norwest.
(f) Alexandria will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at the
Closing.
(g) Alexandria will hold in confidence all documents and information
concerning Norwest and its subsidiaries furnished to Alexandria and its
representatives in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to any other person,
except as required by law and except to Alexandria's outside professional
advisers in connection with this Agreement, with the same undertaking from such
professional advisers. If the transactions contemplated by this Agreement shall
not be consummated, such confidence shall be maintained and such information
shall not be used in competition with Norwest (except to the extent that such
information can be shown to be previously known to Alexandria, in the public
domain, or later acquired by Alexandria from other legitimate sources) and, upon
request, all such documents, any copies thereof and extracts therefrom shall
immediately thereafter be returned to Norwest.
(h) Neither Alexandria, nor any Alexandria Subsidiary, nor any director,
officer, representative or agent thereof, will, directly or indirectly, solicit,
authorize the solicitation of or enter into any discussions with any
corporation, partnership, person or other entity or group (other than Norwest)
concerning any offer or possible offer (i) to purchase any shares of common
stock, any option or warrant to purchase any shares of common stock, any
securities convertible into any shares of such common stock, or any other equity
security of Alexandria or any Alexandria Subsidiary, (ii) to make a tender or
exchange offer for any shares of such common stock or other equity security,
(iii) to purchase, lease or otherwise acquire the assets of Alexandria or any
Alexandria Subsidiary except in the ordinary course of business, or (iv) to
merge, consolidate or otherwise combine with Alexandria or any Alexandria
Subsidiary. If any corporation, partnership, person or other entity or group
makes an offer to Alexandria or any Alexandria Subsidiary
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concerning any of the foregoing, Alexandria or such Alexandria Subsidiary will
promptly disclose such offer, including the terms thereof, to Norwest.
(i) Alexandria shall consult with Norwest as to the form and substance of
any proposed press release or other proposed public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby.
(j) Alexandria and each Alexandria Subsidiary will take all action
necessary or required (i) to terminate or amend, if requested by Norwest, all
qualified pension and welfare benefit plans and all non-qualified benefit plans
and compensation arrangements as of the Effective Date of the Merger, (ii) to
amend the Plans to comply with the provisions of the TRA and regulations
thereunder and other applicable law, and (iii) to submit application to the
Internal Revenue Service for a favorable determination letter for each of the
Plans which is subject to the qualification requirements of Section 401(a) of
the Code prior to the Effective Date of the Merger, provided that Alexandria and
each Alexandria Subsidiary will not be required to submit such application to
the Internal Revenue Service if the Internal Revenue Service does not accept
such applications prior to the Effective Date of the Merger.
(k) Neither Alexandria nor any Alexandria Subsidiary shall take any action
which with respect to Alexandria would disqualify the Merger as a "pooling of
interests" for accounting purposes; provided, however, that Norwest agrees to
use its best efforts to respond to timely written requests from Alexandria as to
whether certain actions contemplated by Alexandria or any Alexandria Subsidiary
would disqualify the Merger as a "pooling of interests" for accounting
purposes..
(l) Alexandria shall use its best efforts to obtain and deliver at least
32 days prior to the Effective Date of the Merger signed representations
substantially in the form attached hereto as Exhibit C to Norwest by each
executive officer, director or shareholder of Alexandria who may reasonably be
deemed an "affiliate" of Alexandria within the meaning of such term as used in
Rule 145 under the Securities Act.
(m) Alexandria and the Bank shall establish such additional accruals and
reserves as may be necessary to conform Alexandria's and the Bank's accounting
and credit loss reserve practices and methods to those of Norwest and Norwest's
plans with respect to the conduct of Alexandria's and the Bank's business
following the Merger and to provide for the costs and expenses relating to the
consummation by Alexandria of the Merger and the other transactions contemplated
by this Agreement.
(n) Alexandria and the Bank will cooperate with Norwest in obtaining Phase
I and Phase II environmental reports as Norwest may request for properties of
Alexandria and the Bank. The cost of the Phase I reports shall be the
responsibility of Alexandria.
5. COVENANTS OF NORWEST. Norwest covenants and agrees with Alexandria as
follows:
(a) From the date hereof until the Effective Time of the Merger, Norwest
will maintain its corporate existence in good standing; conduct, and cause the
Norwest Subsidiaries to conduct, their respective businesses in compliance with
all material obligations and duties imposed on them by all laws, governmental
regulations, rules and ordinances, and judicial orders, judgments and decrees
applicable to Norwest or the Norwest Subsidiaries, their businesses or their
properties; maintain all books and records of it and the Norwest Subsidiaries,
including all financial statements, in accordance with the accounting principles
and practices consistent with those used for the Norwest
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Financial Statements, except for changes in such principles and practices
required under generally accepted accounting principles.
(b) Norwest will furnish to Alexandria all the information concerning
Norwest required for inclusion in a proxy statement or statements to be sent to
the shareholders of Alexandria, or in any statement or application made by
Alexandria to any governmental body in connection with the transactions
contemplated by this Agreement.
(c) As promptly as practicable after the execution of this Agreement,
Norwest will file with the SEC a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act and any other applicable
documents, relating to the shares of Norwest Common Stock to be delivered to the
shareholders of Alexandria pursuant to the Merger Agreement, and will use its
best efforts to cause the Registration Statement to become effective. At the
time the Registration Statement becomes effective, the Registration Statement
will comply in all material respects with the provisions of the Securities Act
and the published rules and regulations thereunder, and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not false or
misleading, and at the time of mailing thereof to the Alexandria shareholders,
at the time of the Alexandria shareholders' meeting referred to in paragraph
4(c) hereof and at the Effective Time of the Merger the prospectus included as
part of the Registration Statement, as amended or supplemented by any amendment
or supplement filed by Norwest (hereinafter the "Prospectus"), will not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not false or misleading; PROVIDED,
HOWEVER, that none of the provisions of this subparagraph shall apply to
statements in or omissions from the Registration Statement or the Prospectus
made in reliance upon and in conformity with information furnished by Alexandria
or any Alexandria subsidiary for use in the Registration Statement or the
Prospectus.
(d)Norwest will file all documents required to be filed to list the Norwest
Common Stock to be issued pursuant to the Merger Agreement and the Bank Merger
Agreement on the New York Stock Exchange and the Chicago Stock Exchange and use
its best efforts to effect said listings.
(e) The shares of Norwest Common Stock to be issued by Norwest pursuant to
this Agreement and the Merger Agreement or the Bank Merger Agreement will, upon
such issuance and delivery to said shareholders pursuant to the Merger Agreement
and the Bank Merger Agreement, be duly authorized, validly issued, fully paid
and nonassessable. The shares of Norwest Common Stock to be delivered pursuant
to the Merger Agreement and the Bank Merger Agreement are and will be free of
any preemptive rights of the stockholders of Norwest.
(f) Norwest will file all documents required to obtain prior to the
Effective Time of the Merger all necessary Blue Sky permits and approvals, if
any, required to carry out the transactions contemplated by this Agreement, will
pay all expenses incident thereto and will use its best efforts to obtain such
permits and approvals.
(g) Norwest will take all necessary corporate and other action and file
all documents required to obtain and will use its best efforts to obtain all
approvals of regulatory authorities, consents and approvals required of it to
carry out the transactions contemplated by this Agreement and will cooperate
with Alexandria to obtain all such approvals and consents required by
Alexandria.
(h) Norwest will hold in confidence all documents and information
concerning Alexandria and Alexandria's Subsidiaries furnished to it and its
representatives in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to
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any other person, except as required by law and except to its outside
professional advisers in connection with this Agreement, with the same
undertaking from such professional advisers. If the transactions contemplated
by this Agreement shall not be consummated, such confidence shall be maintained
and such information shall not be used in competition with Alexandria (except to
the extent that such information can be shown to be previously known to Norwest,
in the public domain, or later acquired by Norwest from other legitimate
sources) and, upon request, all such documents, copies thereof or extracts
therefrom shall immediately thereafter be returned to Alexandria.
(i) Norwest will file any documents or agreements required to be filed in
connection with the Merger and the Bank Merger under the Minnesota Business
Corporation Act.
(j) Norwest will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at the
Closing.
(k) Norwest shall consult with Alexandria as to the form and substance of
any proposed press release or other proposed public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby.
(l) Norwest shall give Alexandria written notice of receipt of the
regulatory approvals referred to in paragraph 7(e).
(m) For a period not exceeding fifteen days prior to the Closing Date,
Norwest will permit Alexandria and its representatives to examine its books,
records and properties and interview officers, employees and agents of Norwest
at all reasonable times when it is open for business. No such examination by
Alexandria or its representatives shall in any way affect, diminish or terminate
any of the representations, warranties or covenants of Norwest herein expressed.
6. CONDITIONS PRECEDENT TO OBLIGATION OF ALEXANDRIA. The obligation of
Alexandria to effect the Merger shall be subject to the satisfaction at or
before the Time of Filing of the following further conditions, which may be
waived in writing by Alexandria:
(a) Except as they may be affected by transactions contemplated hereby and
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for activities or transactions
after the date of this Agreement made in the ordinary course of business and not
expressly prohibited by this Agreement, the representations and warranties
contained in paragraph 3 hereof shall be true and correct in all respects
material to Norwest and its subsidiaries taken as a whole as if made at the Time
of Filing.
(b) Norwest shall have, or shall have caused to be, performed and observed
in all material respects all covenants, agreements and conditions hereof to be
performed or observed by it at or before the Time of Filing.
(c) Alexandria shall have received a favorable certificate, dated as of
the Effective Date of the Merger, signed by the Chairman, the President or any
Executive Vice President or Senior Vice President and by the Secretary or
Assistant Secretary of Norwest, as to the matters set forth in subparagraphs (a)
and (b) of this paragraph 6.
(d) This Agreement and the Merger Agreement or the Bank Merger Agreement,
respectively, shall have been approved by the affirmative vote of the holders of
the percentage of the outstanding shares of each of Alexandria and the Bank
required for approval of a plan of
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merger in accordance with the provisions of Alexandria's and the Bank's
respective Articles of Incorporation and the Minnesota Business Corporation Act.
(e) Norwest shall have received approval by the Federal Reserve Board and
by such other governmental agencies as may be required by law of the
transactions contemplated by this Agreement, the Merger Agreement and the Bank
Merger Agreement and all waiting and appeal periods prescribed by applicable law
or regulation shall have expired.
(f) No court or governmental authority of competent jurisdiction shall
have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(g) The shares of Norwest Common Stock to be delivered to the stockholders
of Alexandria pursuant to this Agreement, the Merger Agreement and the Bank
Merger Agreement shall have been authorized for listing on the New York Stock
Exchange and the Chicago Stock Exchange upon official notice of issuance.
(h) Alexandria shall have received an opinion, dated the Closing Date, of
counsel to Alexandria, substantially to the effect that, for federal income tax
purposes: (i) the Merger will constitute a reorganization within the meaning of
Section 368(a)(2)(E) of the Code; (ii) no gain or loss will be recognized by the
holders of Alexandria Common Stock upon receipt of Norwest Common Stock except
for cash received in lieu of fractional shares; (iii) the basis of the Norwest
Common Stock received by the shareholders of Alexandria will be the same as the
basis of Alexandria Common Stock exchanged therefor; and (iv) the holding period
of the shares of Norwest Common Stock received by the shareholders of Alexandria
will include the holding period of the Alexandria Common Stock, provided such
shares of Alexandria Common Stock were held as a capital asset as of the
Effective Time of the Merger.
(i) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened and be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATION OF NORWEST. The obligation of
Norwest to effect the Merger shall be subject to the satisfaction at or before
the Time of Filing of the following conditions, which may be waived in writing
by Norwest:
(a) Except as they may be affected by transactions contemplated hereby and
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for activities or transactions
or events occurring after the date of this Agreement made in the ordinary course
of business and not expressly prohibited by this Agreement, the representations
and warranties contained in paragraph 2 hereof shall be true and correct in all
respects material to Alexandria and the Alexandria Subsidiaries taken as a whole
as if made at the Time of Filing.
(b) Alexandria shall have, or shall have caused to be, performed and
observed in all material respects all covenants, agreements and conditions
hereof to be performed or observed by it at or before the Time of Filing.
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(c) This Agreement, the Merger Agreement and the Bank Merger Agreement
shall have been approved by the affirmative vote of the holders of the
percentage of the outstanding shares of Alexandria and the Bank, respectively,
required for approval of a plan of merger in accordance with the provisions of
Alexandria's and the Bank's Articles of Incorporation and the Minnesota Business
Corporation Act.
(d) Norwest shall have received a favorable certificate dated as of the
Effective Date of the Merger signed by the Chairman or President and by the
Secretary or Assistant Secretary of Alexandria, as to the matters set forth in
subparagraphs (a) through (c) of this paragraph 7.
(e) Norwest shall have received approval by all governmental agencies as
may be required by law of the transactions contemplated by this Agreement, the
Merger Agreement and the Bank Merger Agreement and all waiting and appeal
periods prescribed by applicable law or regulation shall have expired. No
approvals, licenses or consents granted by any regulatory authority shall
contain any condition or requirement relating to Alexandria or any Alexandria
Subsidiary that, in the good faith judgment of Norwest, is unreasonably
burdensome to Norwest.
(f) Alexandria and each Alexandria Subsidiary shall have obtained any and
all material consents or waivers from other parties to loan agreements, leases
or other contracts material to Alexandria's or such subsidiary's business
required for the consummation of the Merger and the Bank Merger, and Alexandria
and each Alexandria Subsidiary shall have obtained any and all material permits,
authorizations, consents, waivers and approvals required for the lawful
consummation by it of the Merger and the Bank Merger.
(g) No court or governmental authority of competent jurisdiction shall
have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(h) At any time since the date hereof the total number of shares of
Alexandria Preferred Stock outstanding and subject to issuance upon exercise
(assuming for this purpose that phantom shares and other share-equivalents
constitute Alexandria Preferred Stock) of all warrants, options, conversion
rights, phantom shares or other share-equivalents shall not have exceeded none.
At any time since the date hereof the total number of shares of Alexandria
Common Stock outstanding and subject to issuance upon exercise (assuming for
this purpose that phantom shares and other share-equivalents constitute
Alexandria Common Stock) of all warrants, options, conversion rights, phantom
shares or other share-equivalents shall not have exceeded 4,878.
(i) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened or be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(j) Norwest shall have received from the Chief Executive Officer and Chief
Financial Officer of Alexandria a letter, dated as of the effective date of the
Registration Statement and updated through the date of Closing, in form and
substance satisfactory to Norwest, to the effect that:
(i) the interim quarterly financial statements of Alexandria
included or incorporated by reference in the Registration Statement are
prepared in accordance with
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generally accepted accounting principles applied on a basis consistent with
the audited financial statements of Alexandria;
(ii) the amounts reported in the interim quarterly financial
statements of Alexandria agree with the general ledger of Alexandria;
(iii) the annual and quarterly financial statements of Alexandria and
the Alexandria Subsidiaries included in, or incorporated by reference in,
the Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Securities Act and the
published rules and regulations thereunder;
(iv) from March 31, 1994 (or, if later, since the date of the most
recent unaudited consolidated financial statements of Alexandria and the
Alexandria Subsidiaries as may be included in the Registration Statement)
to a date 5 days prior to the effective date of the Registration Statement
or 5 days prior to the Closing, there are no increases in long-term debt,
changes in the capital stock or decreases in stockholders' equity of
Alexandria and the Alexandria Subsidiaries, except in each case for
changes, increases or decreases which the Registration Statement discloses
have occurred or may occur or which are described in such letters. For the
same period, there have been no decreases in consolidated net interest
income, consolidated net interest income after provision for credit losses,
consolidated income before income taxes, consolidated net income and net
income per share amounts of Alexandria and the Alexandria Subsidiaries, or
in income before equity in undistributed income of subsidiaries, in each
case as compared with the comparable period of the preceding year, except
in each case for changes, increases or decreases which the Registration
Statement discloses have occurred or may occur or which are described in
such letters;
(v) they have reviewed certain amounts, percentages, numbers of
shares and financial information which are derived from the general
accounting records of Alexandria and the Alexandria Subsidiaries, which
appear in the Registration Statement under the certain captions to be
specified by Norwest, and have compared certain of such amounts,
percentages, numbers and financial information with the accounting records
of Alexandria and the Alexandria Subsidiaries and have found them to be in
agreement with financial records and analyses prepared by Alexandria
included in the annual and quarterly financial statements, except as
disclosed in such letters.
(k) Alexandria and the Alexandria Subsidiaries considered as a whole shall
not have sustained since December 31, 1993 any material loss or interference
with their business from any civil disturbance or any fire, explosion, flood or
other calamity, whether or not covered by insurance.
(l) There shall be no reasonable basis for any proceeding, claim or action
of any nature seeking to impose, or that could reasonably be expected to result
in the imposition on Alexandria or any Alexandria Subsidiary of, any liability
arising from the release of hazardous substances 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, which has had or could reasonably be expected to have a
material adverse effect upon Alexandria and its subsidiaries taken as a whole.
(m) No change shall have occurred and no circumstances shall exist which
has had or might reasonably be expected to have a material adverse effect on the
financial condition, results of operations, business or prospects of Alexandria
and the Alexandria Subsidiaries taken as a whole
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(other than changes in banking laws or regulations, or interpretations thereof,
that affect the banking industry generally or changes in the general level of
interest rates).
(n) None of the shareholders of the Bank shall have exercised statutory
dissenters' appraisal rights with respect to the Bank Merger.
(o) Alexandria shall have established the accruals and reserves described
in paragraph 4(m) hereof.
(p) Alexandria and the Bank shall have corrected all of the regulatory
compliance problems identified by Norwest in its due diligence examination of
Alexandria and the Bank, including but not limited to (i) errors or deficiencies
in compliance with the currency transaction reporting and exemption requirements
of the Bank Secrecy Act, (ii) errors in calculating and disclosing adjustments
for adjustable rate mortgages and other variable rate loans, (iii) omissions of
or deficiencies in required appraisals, flood insurance documentation, title
insurance documentation and corporate resolutions, (iv) deficiences in
disclosures relating to Truth in Lending, RESPA, Fair Housing and escrows, and
(v) deficiencies in Truth in Savings disclosures. In addition, the
indemnification agreement, substantially in the form attached hereto as Exhibit
D (the "Indemnification Agreement"), shall have been executed and delivered to
Norwest and shall be in full force and effect on the Closing Date.
(q) The Bank shall have obtained from the Small Business Administration
(the "SBA"), with respect to each of the following loans, a certification or
other assurance satisfactory to Norwest that there is no default in the SBA
Authorization and Loan Agreement with respect to such loan:
(i) Vacationer's Inn Resort,
(ii) Curtis and Diane Dyrstad,
(iii) Johnson Tires of Alexandria,
(iv) Morical Brothers, Inc.,
(v) Daniel's Food Equipment, Inc.
8. EMPLOYEE BENEFIT PLANS. Each person who is an employee of Alexandria
or any Alexandria Subsidiary as of the Effective Date of the Merger ("Alexandria
Employees") shall be eligible for participation in the employee welfare and
pension plans of Norwest, as in effect from time to time, as follows:
(a) EMPLOYEE WELFARE BENEFIT PLANS. Each Alexandria employee shall be
eligible for participation in the employee welfare benefit plans of Norwest
listed below subject to any eligibility requirements applicable to such plans
and shall enter each plan not later than the first day of the calendar quarter
which begins at least 32 days after the Effective Date of the Merger:
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
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Flexible Benefits Plan
Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Severance Pay Plan
Vacation Program
For the purpose of determining each Alexandria Employee's benefit for the year
in which the Merger occurs under the Norwest vacation program, vacation taken by
an employee of Alexandria in the year in which the Merger occurs will be
deducted from the total Norwest benefit.
(b) EMPLOYEE PENSION BENEFIT PLANS.
Each Alexandria Employee shall be eligible for participation in the Norwest
Savings-Investment Plan (the "SIP"), subject to any eligibility requirements
applicable to the SIP (with full credit for years of past service to Alexandria
and the Alexandria Subsidiaries for the purpose of satisfying any eligibility
and vesting periods applicable to the SIP), and shall enter the SIP not later
than the first day of the calendar quarter which begins at least 32 days after
the Effective Date of the Merger.
Each Alexandria Employee shall be eligible for participation, as a new employee,
in the Norwest Pension Plan under the terms thereof.
9. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated at any time prior to the Time of
Filing:
(i) by mutual written consent of the parties hereto;
(ii) by either of the parties hereto upon written notice to the other
party if the Merger shall not have been consummated by January 31, 1995
unless such failure of consummation shall be due to the failure of the
party seeking to terminate to perform or observe in all material respects
the covenants and agreements hereof to be performed or observed by such
party; or
(iii) by Alexandria or Norwest upon written notice to the other party
if any court or governmental authority of competent jurisdiction shall have
issued a final order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement;
(b) Termination of this Agreement under this paragraph 9 shall not
release, or be construed as so releasing, either party hereto from any liability
or damage to the other party hereto arising out of the breaching party's wilful
and material breach of the warranties and representations made by it, or wilful
and material failure in performance of any of its covenants, agreements, duties
or obligations arising hereunder, and the obligations under paragraphs 4(g),
5(h) and 10 shall survive such termination.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by
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Alexandria and Alexandria subsidiaries shall be borne by Alexandria, and all
such expenses incurred by Norwest shall be borne by Norwest.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by either party hereto without the prior
written consent of the other party hereto.
12. THIRD PARTY BENEFICIARIES. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
13. NOTICES. Any notice or other communication provided for herein or
given hereunder to a party hereto shall be in writing and shall be delivered in
person or shall be mailed by first class registered or certified mail, postage
prepaid, addressed as follows:
If to Norwest:
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
If to Alexandria or the Bank:
Board of Directors
Alexandria Securities & Investment Company
908 Shoreview Drive
Alexandria, MN 56308
With a copy to:
J. Kevin Costley
Lindquist & Vennum
4200 IDS Center
Minneapolis, MN 55402
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
14. COMPLETE AGREEMENT. This Agreement and the Merger Agreement contain
the complete agreement between the parties hereto with respect to the Merger and
other transactions contemplated hereby and supersede all prior agreements and
understandings between the parties hereto with respect thereto.
15. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
16. WAIVER AND OTHER ACTION. Either party hereto may, by a signed
writing, give any consent, take any action pursuant to paragraph 9 hereof or
otherwise, or waive any inaccuracies in the representations and warranties by
the other party and compliance by the other party with any of the covenants and
conditions herein.
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17. AMENDMENT. At any time before the Time of Filing, the parties hereto,
by action taken by their respective Boards of Directors or pursuant to authority
delegated by their respective Boards of Directors, may amend this Agreement;
provided, however, that no amendment after approval by the shareholders of
Alexandria shall be made which changes in a manner adverse to such shareholders
the consideration to be provided to said shareholders pursuant to this
Agreement, the Merger Agreement and the Bank Merger Agreement.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
19. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representation or
warranty contained in the Agreement, the Merger Agreement or the Bank Merger
Agreement shall survive the Merger or the Bank Merger or except as set forth in
paragraph 9(b), the termination of this Agreement. Paragraph 10 shall survive
the Merger.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NORWEST CORPORATION ALEXANDRIA SECURITIES &
INVESTMENT COMPANY
By: ________________________ By: ________________________
Its: ________________________ Its: ________________________
COMMUNITY STATE BANK OF
ALEXANDRIA
By: ___________________________
Its: ___________________________
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
Between
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
a Minnesota corporation
(the surviving corporation)
AND
MERGER CO.
a Minnesota corporation
(the merged corporation)
This Agreement and Plan of Merger dated as of __________, 19__, between
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY, a Minnesota corporation
(hereinafter sometimes called "Alexandria" and sometimes called the "surviving
corporation") and MERGER CO., a Minnesota corporation ("Merger Co.")(said
corporations being hereinafter sometimes referred to as the "constituent
corporations"),
WHEREAS, Merger Co., a wholly-owned subsidiary of Norwest Corporation
("Norwest"), was incorporated by Articles of Incorporation filed in the office
of the Secretary of State of the State of Minnesota on _________, and said
corporation is now a corporation subject to and governed by the provisions of
the Minnesota Business Corporation Act. Merger Co. has authorized capital stock
of _________ shares of common stock, par value of $___ per share ("Merger Co.
Common Stock"). As of _______, 19___, there were _____ shares of Merger Co.
Common Stock outstanding and _____ shares were held in the treasury; and
WHEREAS, Alexandria was incorporated by Articles of Incorporation filed in
the office of the Secretary of State of the State of Minnesota on January 8,
1979 and said corporation is now a corporation subject to and governed by the
provisions of the Minnesota Business Corporation Law, with an authorized capital
stock of 200,000 shares of Preferred Stock, par value $25 per share ("Alexandria
Preferred Stock") of which ____________ shares were outstanding and _________
shares were held in the treasury as of ___________ , 19__ and 10,000 shares of
common stock, par value $25 per share ("Alexandria Common Stock") of which
____________ shares were outstanding and _________ shares were held in the
treasury as of ___________ , 19__; and
WHEREAS, Norwest and Alexandria are parties to an Agreement and Plan of
Reorganization dated as of May ___ , 1994, and amended as of July __, 1994 (the
"Reorganization Agreement"), setting forth certain representations, warranties
and covenants in connection with the merger provided for herein; and
WHEREAS, the directors, or a majority of them, of each of the constituent
corporations respectively deem it advisable for the welfare and advantage of
said corporation and for the best interests of the respective shareholders of
said corporations that said corporations merge and that Merger Co. be merged
with and into Alexandria, with Alexandria continuing as the surviving
corporation, on the terms and conditions hereinafter set forth in accordance
with the provisions of the Minnesota Business Corporation Act, which statute
permits such merger; and
WHEREAS, it is the intent of the parties to effect a merger which qualifies
as a tax-free reorganization pursuant to Section 368(a)(2)(E) of the Internal
Revenue Code;
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<PAGE>
NOW, THEREFORE, the parties hereto, subject to the approval of the
shareholders of Merger Co. and Alexandria, in consideration of the premises and
of the mutual covenants and agreements contained herein and of the benefits to
accrue to the parties hereto, have agreed and do hereby agree that Merger Co.
shall be merged with and into Alexandria pursuant to the laws of the State of
Minnesota, and do hereby agree upon, prescribe and set forth the terms and
conditions of the merger of Merger Co. with and into Alexandria, the mode of
carrying said merger into effect, the manner and basis of converting the shares
of Alexandria Common Stock into shares of common stock of Norwest, par value
$1-2/3 per share ("Norwest Common Stock"), and such other provisions with
respect to said merger as are deemed necessary or desirable, as follows:
FIRST: At the time of merger Merger Co. shall be merged with and into
Alexandria, one of the constituent corporations, which shall be the surviving
corporation, and the separate existence of Merger Co. shall cease and the name
of the surviving corporation shall be changed to _____________________.
SECOND: The Articles of Incorporation of Alexandria at the time of merger
shall be amended as set forth below and, as so amended, shall be the Articles of
Incorporation of the surviving corporation until amended according to law:
[Amend to change name, number of directors, etc.]
THIRD: The By-Laws of Alexandria at the time of merger shall be and remain
the By-Laws of the surviving corporation until amended according to the
provisions of the Articles of Incorporation of the surviving corporation or of
said By-Laws.
FOURTH: At the time of merger, the following-named persons shall be the
directors of the surviving corporation and shall hold office from the time of
merger until their respective successors are elected and qualify:
________________________
________________________
________________________
FIFTH: The officers of Merger Co. at the time of merger shall be and
remain the officers of the surviving corporation and shall hold office from the
time of merger until their respective successors are elected or appointed and
qualify.
SIXTH: The manner and basis of converting the shares of Alexandria Common
Stock into shares of Norwest Common Stock shall be as follows:
1. Each of the shares of Alexandria Common Stock outstanding immediately
prior to the time of merger (other than shares as to which statutory
dissenters' rights have been exercised) shall at the time of merger, by
virtue of the merger and without any action on the part of the holder or
holders thereof, be converted into and exchanged for a number of shares of
Norwest Common Stock determined by (i) multiplying the Norwest Shares (as
defined below) by 88.15%, and then (ii) dividing the result thereof by the
total number of shares of Alexandria Common Stock then outstanding. The
"Norwest Shares" shall be 337,255; provided, however, that if the Closing
Date (as defined in the Reorganization Agreement) is after the Target
Closing Date (as defined in the Reorganization Agreement), the Norwest
Shares shall be increased by adding to 337,255 a sum equal to 98 times the
number of days between the Target Closing Date and the Closing Date.
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<PAGE>
2. As soon as practicable after the merger becomes effective, each holder
of a certificate for shares of Alexandria Common Stock outstanding
immediately prior to the time of merger shall be entitled, upon surrender
of such certificate for cancellation to the surviving corporation or to
Norwest Bank Minnesota, National Association, as the designated agent of
the surviving corporation (the "Agent"), to receive a new certificate for
the number of whole shares of Norwest Common Stock to which such holder
shall be entitled on the basis above set forth. Until so surrendered each
certificate which, immediately prior to the time of merger, represented
shares of Alexandria Common Stock shall not be transferable on the books of
the surviving corporation but shall be deemed (except for the payment of
dividends as provided below) to evidence ownership of the number of whole
shares of Norwest Common Stock into which such shares of Alexandria Common
Stock have been converted on the basis above set forth; provided, however,
that, until the holder of such certificate shall have surrendered the same
for exchange as above set forth, no dividend payable to holders of record
of Norwest Common Stock as of any date subsequent to the effective date of
merger shall be paid to such holder with respect to the Norwest Common
Stock represented by such certificate, but, upon surrender and exchange
thereof as herein provided, there shall be paid by the surviving
corporation or the Agent to the record holder of such certificate for
Norwest Common Stock issued in exchange therefor an amount with respect to
such shares of Norwest Common Stock equal to all dividends that shall have
been paid or become payable to holders of record of Norwest Common Stock
between the effective date of merger and the date of such exchange.
3. If between the date of the Reorganization Agreement and the time of
merger, shares of Norwest Common Stock shall be changed into a different
number of shares or a different class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares, readjustment or similar corporate event, or if a stock dividend
thereon shall be declared with a record date within such period (a "Norwest
Common Stock Adjustment"), then (i) the number of shares of Norwest Common
Stock into which a share of Alexandria Common Stock shall be converted on
the basis above set forth, will be appropriately and proportionately
adjusted so that the number of such shares of Norwest Common Stock into
which a share of Alexandria Common Stock shall be converted will equal the
number of shares of Norwest Common Stock which the holder of a share of
Alexandria Common Stock would have received pursuant to such
reclassification, recapitalization, split-up, combination, exchange of
shares, readjustment or similar corporate event, or stock dividend had the
record date for the Norwest Common Stock Adjustment been immediately
following the time of merger and (ii) if a Norwest Common Stock Adjustment
occurs between the date hereof and any date that the closing price of a
share of Norwest Common Stock is used for purposes of this Agreement, the
closing price of a share of Norwest Common Stock for such purposes shall be
the sum of the closing prices on the date of each such determination of the
number of shares of Norwest Common Stock and other securities, if any, (in
each case as reported on the consolidated tape of the New York Stock
Exchange on such date) issued with respect to one share of Norwest Common
Stock as a result of the Norwest Common Stock Adjustment.
4. No fractional shares of Norwest Common Stock and no certificates or
scrip certificates therefor shall be issued to represent any such
fractional interest, and any holder of a fractional interest shall be paid
an amount of cash equal to the product obtained by multiplying the
fractional share interest to which such holder is entitled by the average
of the closing prices of a share of Norwest Common Stock as reported by the
consolidated
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<PAGE>
tape of the New York Stock Exchange for each of the five (5) trading days
immediately preceding the time of merger.
5. Each share of Merger Co. Common Stock issued and outstanding at the
time of merger shall be converted into and exchanged for shares of the
surviving corporation after the time of merger.
SEVENTH: The merger provided for by this Agreement shall be effective as
follows:
1. The effective date of merger shall be the date on which the Articles
of Merger (as described in subparagraph 1(b) of this Article Seventh) shall
be delivered to and filed by the Secretary of State of the State of
Minnesota; provided, however, that all of the following actions shall have
been taken in the following order:
a. This Agreement shall be approved and adopted on behalf of Merger
Co. and Alexandria in accordance with the Minnesota Business
Corporation Act; and
b. Articles of merger (with this Agreement attached as part thereof)
with respect to the merger, setting forth the information required by
the Minnesota Business Corporation Act, shall be executed by the
President or a Vice President of Merger Co. and by the Secretary or an
Assistant Secretary of Merger Co., and by the President or a Vice
President of Alexandria and by the Secretary or an Assistant Secretary
of Alexandria, and shall be filed in the office of the Secretary of
State of the State of Minnesota in accordance with the Minnesota
Business Corporation Act; and
2. The merger shall become effective as of 11:59 p.m. (the "time of
merger") on the effective date of merger.
EIGHTH: At the time of merger:
1. The separate existence of Merger Co. shall cease, and the corporate
existence and identity of Alexandria shall continue as the surviving
corporation.
2. The merger shall have the other effects prescribed by Section 302A.641
of the Minnesota Business Corporation Act.
NINTH: The following provisions shall apply with respect to the merger
provided for by this Agreement:
1. The registered office of Alexandria in the State of Minnesota shall be
_____________________, and the name of the registered agent of Alexandria
at such address is The Corporation Trust Company.
2. If at any time Alexandria shall consider or be advised that any
further assignment or assurance in law or other action is necessary or
desirable to vest, perfect or confirm in Alexandria the title to any
property or rights of Merger Co. acquired or to be acquired as a result of
the merger provided for herein, the proper officers and directors of
Alexandria and Merger Co. may execute and deliver such deeds, assignments
and assurances in law and take such other action as may be necessary or
proper to vest, perfect or confirm title to such property or right in
Alexandria and otherwise carry out the purposes of this Agreement.
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<PAGE>
3. For the convenience of the parties and to facilitate the filing of
this Agreement, any number of counterparts hereof may be executed and each
such counterpart shall be deemed to be an original instrument.
4. This Agreement and the legal relations among the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Minnesota.
5. This Agreement cannot be altered or amended except pursuant to an
instrument in writing signed by both of the parties hereto.
6. At any time prior to the filing of Articles of Merger with the
Secretary of State of the State of Minnesota, this Agreement may be
terminated in accordance with the terms of the Reorganization Agreement
upon approval by the Board of Directors of either of the constituent
corporations notwithstanding the approval of the shareholders of either
constituent corporation.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement and Plan
of Merger to be signed in their respective corporate names by the undersigned
officers and their respective corporate seals to be affixed hereto, pursuant to
authority duly given by their respective Boards of Directors, all as of the day
and year first above written.
MERGER CO.
By: ________________________
Its: _______________________
Attest:
__________________________
Secretary
ALEXANDRIA SECURITIES AND
INVESTMENT COMPANY
By: _________________________
Its: ________________________
Attest:
___________________________
Secretary
A-33
<PAGE>
EXHIBIT B
SEE APPENDIX B TO THE
PROXY STATEMENT-PROSPECTUS
A-34
<PAGE>
EXHIBIT C
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-1026
Attn: Secretary
Gentlemen:
I have been advised that I might be considered to be an "affiliate," as
that term is defined for purposes of paragraphs (c) and (d) of Rule 145 ("Rule
145") promulgated by the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act") of
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY, a Minnesota corporation
("Alexandria").
Pursuant to an Agreement and Plan of Reorganization, dated as of May 24,
1994, as amended as of July __, 1994 (the "Reorganization Agreement"), between
Alexandria, Community State Bank of Alexandria, a Minnesota state bank
("Community") and Norwest Corporation, a Delaware corporation ("Norwest") it is
contemplated that a wholly-owned subsidiary of Norwest will merge with and into
Alexandria (the "Merger") and as a result, I will receive in exchange for each
share of common stock, par value $25 per share, of Alexandria ("Alexandria
Common Stock") owned by me immediately prior to the Effective Time of the Merger
(as defined in the Reorganization Agreement), a number of shares of Common
Stock, par value $1 2/3 per share, of Norwest ("Norwest Common Stock"), as more
specifically set forth in the Reorganization Agreement.
I hereby agree as follows:
I will not offer to sell, transfer or otherwise dispose of any of the
shares of Alexandria Common Stock or Norwest Common Stock held by me during the
30 days prior to the Effective Time of the Merger.
I will not offer to sell, transfer or otherwise dispose of any of the
shares of Norwest Common Stock issued to me pursuant to the Merger (the "Stock")
except (a) in compliance with the applicable provisions of Rule 145, (b) in a
transaction that is otherwise exempt from the registration requirements of the
Securities Act, or (c) in an offering registered under the Securities Act.
I will not sell, transfer or otherwise dispose of the Stock or in any way
reduce my risk relative to any shares of the Stock issued to me pursuant to the
Merger until such time as financial results covering at least 30 days of
post-Merger combined operations of Alexandria and Norwest have been published.
I consent to the endorsement of the Stock issued to me pursuant to the
Merger with a restrictive legend which will read substantially as follows:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of 1933,
as amended (the "Act"), applies,
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<PAGE>
and may be sold or otherwise transferred only in compliance with the
limitations of such Rule 145, or upon receipt by Norwest Corporation of an
opinion of counsel reasonably satisfactory to it that some other exemption
from registration under the Act is available, or pursuant to a registration
statement under the Act."
Norwest's transfer agent shall be given an appropriate stop transfer order
and shall not be required to register any attempted transfer of the shares of
the Stock, unless the transfer has been effected in compliance with the terms of
this letter agreement.
It is understood and agreed that this letter agreement shall terminate and
be of no further force and effect and the restrictive legend set forth above
shall be removed by delivery of substitute certificates without such legend, and
the related stop transfer restrictions shall be lifted forthwith, if (a) (i) any
such shares of Stock shall have been registered under the Securities Act for
sale, transfer or other disposition by me or on my behalf and are sold,
transferred or otherwise disposed of, or (ii) any such shares of Stock are sold
in accordance with the provisions of paragraphs (c), (e), (f) and (g) of Rule
144 promulgated under the Securities Act, or (iii) I am not at the time an
affiliate of Norwest and have been the beneficial owner of the Stock for at
least two years (or such other period as may be prescribed thereunder) and
Norwest has filed with the Commission all of the reports it is required to file
under the Securities Exchange Act of 1934, as amended, during the preceding
twelve months, or (iv) I am not and have not been for at least three months an
affiliate of Norwest and have been the beneficial owner of the Stock for at
least three years (or such other period as may be prescribed by the Securities
Act, and the rules and regulations promulgated thereunder), or (v) Norwest shall
have received an opinion of counsel acceptable to Norwest to the effect that the
stock transfer restrictions and the legend are not required, and (b) financial
results covering at least 30 days of post-Merger combined operations have been
published.
I have carefully read this letter agreement and the Reorganization
Agreement and have discussed their requirements and other applicable limitations
upon my ability to offer to sell, transfer or otherwise dispose of shares of the
Stock, to the extent I felt necessary, with my counsel or counsel for
Alexandria.
Sincerely,
_______________________
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<PAGE>
EXHIBIT D
INDEMNIFICATION AGREEMENT
AGREEMENT, dated as of this ___ day of _________, 19__, between the
undersigned shareholders (collectively, the "Shareholders") of ALEXANDRIA
SECURITIES AND INVESTMENT COMPANY, a Minnesota corporation ("Alexandria") and
NORWEST CORPORATION, a Delaware corporation ("Norwest").
WHEREAS, Alexandria and Norwest are parties to that certain Agreement and
Plan of Reorganization dated as of May 24, 1994, as amended as of July __, 1994
(the "Agreement") under which it is contemplated that a wholly-owned subsidiary
of Norwest will merge with and into Alexandria (the "Merger") and as a result
the Shareholders will receive in exchange for each share of common stock of
Alexandria, par value $25 per share ("Alexandria Common Stock") owned by such
Shareholder immediately prior to the Effective Time of the Merger (as defined in
the Agreement), a number of shares of common stock of Norwest, par value $1-2/3
per share ("Norwest Common Stock") as more specifically set forth in the
Agreement, and
WHEREAS, the Shareholders will derive substantial benefit from the
transactions contemplated by the Agreement, and
WHEREAS, certain regulatory compliance problems (the "Compliance Issues")
have been identified by Norwest in its due diligence examination of Alexandria
and Community State Bank of Alexandria (the "Bank"), including but not limited
to (i) errors or deficiencies in compliance with the currency transaction
reporting and exemption requirements of the Bank Secrecy Act, (ii) errors in
calculating and disclosing adjustments for adjustable rate mortgages and other
variable rate loans, (iii) omissions of or deficiencies in required appaisals,
flood insurance documentation, title insurance documentation and corporate
resolutions, (iv) deficiences in disclosures relating to Truth in Lending,
RESPA, Fair Housing and escrows, and (v) deficiencies in Truth in Savings
disclosures., and
WHEREAS, Norwest desires to protect itself in the event that such
compliance problems are not corrected before the Effective Time of the Merger.
NOW, THEREFORE, to induce Norwest to enter into the Agreement, the
Shareholders agree as follows:
1. The Shareholders hereby jointly and severally indemnify and hold
harmless Norwest, the subsidiaries of Norwest and the directors, officers,
employees, agents, successors, attorneys and assigns of Norwest and its
subsidiaries against any loss, damage, cost, expense, penalty or liability
arising out of or attributable to any Compliance Issue; provided that such
Compliance Issue was one of the circumstances or activities cited as technical
exceptions or violations of law in any examinations of Alexandria or the Bank by
the Federal Reserve Bank, the Federal Deposit Insurance Corporation and the
Banking Division of the Minnesota Department of Commerce during the six-year
period preceding the Effective Time of the Merger.
2. The Shareholders agree that they will not seek to recover any payments
from Norwest arising out of or attributable to such compliance problems.
3. The terms of this Indemnification Agreement shall bind and inure to
the benefit of Norwest and the Shareholders and their respective successors,
assigns, heirs and legal representatives.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date shown above.
NORWEST CORPORATION SHAREHOLDERS
________________________
By:________________________ ________________________
Its: ______________________ ________________________
________________________
________________________
________________________
________________________
A-38
<PAGE>
APPENDIX B
AGREEMENT
AND PLAN OF MERGER
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Bank Merger Agreement") is dated as
of ___________ , 19___, between COMMUNITY STATE BANK OF ALEXANDRIA
("Community") and NORWEST STATE BANK ("Norwest Bank").
PREAMBLE
Community and Norwest Bank acknowledge and confirm the following:
(a) Community is a Minnesota state bank having its principal office and
place of business at 304 Maple, P. O. Box 519, Alexandria, Minnesota 56308.
(b) As of __________ , 19__, Community had a capital of $________, divided
into _______ shares of common stock, par value $25 per share ("Community Common
Stock"), and surplus of $_____________ and retained earnings of $______________
.
(c) Norwest Bank is a Minnesota state bank having its principal office and
place of business at 304 Maple, P. O. Box 519, Alexandria, Minnesota 56308.
(d) As of ___________ , 19__, Norwest Bank had a capital of $_________,
divided into __________ shares of common stock, par value $___ per share
("Norwest Bank Common Stock"), surplus of $_____________ and retained earnings
of $__________.
(e) Alexandria Securities and Investment Company ("Alexandria"), Community
and Norwest Corporation ("Norwest") have entered into an Agreement dated as of
May 24, 1994, and amended as of July __, 1994 (the "Reorganization Agreement"),
which Reorganization Agreement contemplates the transactions to be effected by
this Bank Merger Agreement.
(f) A majority of the Board of Directors of Community and a majority of
the Board of Directors of Norwest Bank have duly approved this Bank Merger
Agreement and authorized its execution.
(g) It is the intent of the parties hereto to effect a corporate
reorganization which qualifies as a tax-free reorganization pursuant to Sections
368 (a)(1)(a) 368(a)(2)(D) of the Internal Revenue Code.
AGREEMENTS
IN CONSIDERATION OF THE PREMISES, Community and Norwest Bank make this Bank
Merger Agreement and fix the terms and conditions of the merger of Community and
Norwest Bank as follows:
B-1
<PAGE>
SECTION 1
1.1 Pursuant to the authority of and in accordance with the provisions of
Minnesota Statutes, Chapter ___, Community shall be merged with and into Norwest
Bank, under the charter of Norwest Bank (the "Surviving Bank"). Community and
Norwest Bank are hereinafter collectively called "Merging Banks".
1.2 The name of the Surviving Bank shall be "__________________."
1.3 The merger shall be effective as of 12:01 a.m. on ____________ (the
"Effective Date").
1.4 The business of the Surviving Bank shall be that of a Minnesota state
bank and shall be conducted at the main office of the Surviving Bank, which
shall be located at 304 Maple, P. O. Box 519, Alexandria, Douglas County,
Minnesota 56308 Minnesota, and at its legally established branches.
1.5 As of the Effective Date, the Articles of Incorporation of the
Surviving Bank shall read in their entirety as set forth in Appendix B attached
hereto, and the Surviving Bank shall be authorized under such Articles of
Incorporation to issue ________ shares of common stock, par value $____ per
share.
SECTION 2
As of the Effective Date:
2.1 The corporate existence of Norwest Bank and Community shall be merged,
and the Surviving Bank shall be deemed to be the same corporation as each of the
Merging Banks.
2.2 All rights, franchises, and interests of the Merging Banks in and to
every type of property (real, personal and mixed) and choses in action shall be
transferred to and vested in the Surviving Bank by virtue of the merger without
any deed or other transfer. The Surviving Bank, upon the merger and without any
order or other action on the part of any court or otherwise, shall hold and
enjoy all rights of property, franchises, and interests, including appointments,
designations, and nominations, and all other rights and interests as trustee,
executor, administrator, registrar of stocks and bonds, guardian of estates,
assignee, receiver, and in every other fiduciary capacity, in the same manner
and to the same extent as such rights, franchises, and interests were held or
enjoyed by either of the Merging Banks at the time of merger.
2.3 The Surviving Bank shall be liable for all liabilities of every kind
and description, including liabilities arising out of the operation of a trust
department, of each of the Merging Banks existing as of the Effective Date.
2.4 The amount of capital stock of the Surviving Bank shall be
$__________, divided into ___________ shares of common stock, each of $_____ par
value, and at the time the merger shall become effective, the Surviving Bank
shall have a surplus of $______________ and retained earnings which, when
combined with the capital and surplus, will be equal to the combined capital
structures of the Merging Banks as stated in the preamble of this Bank Merger
Agreement, adjusted, however, for the results of operations, and the payment of
dividends, if any, between ______________ , and the Effective Date.
B-2
<PAGE>
SECTION 3
As of the Effective Date:
3.1 Each of the shares of Community Common Stock outstanding immediately
prior to the time of merger (other than shares as to which statutory dissenters'
appraisal rights have been exercised) shall at the time of merger, by virtue of
the merger and without any action on the part of the holder or holders thereof,
be converted as follows:
(a) The shares of Community Common Stock outstanding immediately prior to
the time of merger and then owned by Alexandria shall at the time of merger
be converted and exchanged for ________ shares of common stock of the
Surviving Bank, each of $____ par value, which shares shall constitute the
entire number of shares of common stock of the Surviving Bank authorized,
issued and outstanding after the merger; and, upon surrender of the
certificates evidencing the shares of the Community Common Stock owned by
Alexandria, the Surviving Bank shall issue to Alexandria a certificate for
______ shares of common stock of the Surviving Bank, which shares shall be
fully-paid and nonassessable.
(b) Each share of Community Common Stock outstanding immediately prior to
the time of merger and owned by a shareholder other than Alexandria shall
at the time of merger, by virtue of the merger and without any action on
the part of the holder or holders thereof, be converted into a number of
shares of common stock of Norwest of the par value of $1 2/3 per share
("Norwest Common Stock") determined (i) multiplying the Norwest Shares (as
defined in the Reorganization Agreement) by 11.85%, and then (ii) dividing
the result thereof by the number of shares of Bank Common Stock held by
shareholders other than Alexandria immediately prior to the Effective Time
of the Bank Merger.
(c) As soon as practicable after the merger becomes effective, each holder
of a certificate for shares of Community Common Stock outstanding
immediately prior to the time of merger shall be entitled, upon surrender
of such certificate for cancellation to Norwest Bank Minnesota, National
Association, as the designated agent of the Surviving Bank (the "Agent"),
to receive a new certificate for the number of whole shares of Norwest
Common Stock to which such holder shall be entitled on the basis above set
forth. Until so surrendered each certificate which, immediately prior to
the time of merger, represented shares of Community Common Stock shall not
be transferable on the books of the Surviving Bank but shall be deemed
(except for the payment of dividends as provided below) to evidence
ownership of the number of whole shares of Norwest Common Stock into which
such shares of Community Common Stock have been converted on the basis
above set forth; provided, however, that, until the holder of such
certificate shall have surrendered the same for exchange as above set
forth, no dividend payable to holders of record of Norwest Common Stock as
of any date subsequent to the effective date of merger shall be paid to
such holder with respect to the Norwest Common Stock represented by such
certificate, but, upon surrender and exchange thereof as herein provided,
there shall be paid by the Surviving Bank or the Agent to the record holder
of such certificate for Norwest Common Stock issued in exchange therefor an
amount with respect to such shares of Norwest Common Stock equal to all
dividends that shall have been paid or become payable to holders of record
of Norwest Common Stock between the effective date of merger and the date
of such exchange.
(d) If between the date of the Reorganization Agreement and the Effective
Time of the Merger (as defined in the Reorganization Agreement), shares of
Norwest Common Stock
B-3
<PAGE>
shall be changed into a different number of shares or a different class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or if a stock dividend
thereon shall be declared with a record date within such period, then (i)
the number of shares of Norwest Common Stock into which a share of
Community Common Stock shall be converted on the basis above set forth,
will be appropriately and proportionately adjusted so that the number of
such shares of Norwest Common Stock into which a share of Community Common
Stock shall be converted will equal the number of shares of Norwest Common
Stock which the holders of shares of Community Common Stock would have
received pursuant to such reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or stock dividend had the
record date therefor been immediately following the Effective Time of the
Merger and (ii) if a Norwest Common Stock Adjustment occurs between the
date hereof and any date that the closing price of a share of Norwest
Common Stock is used for purposes of this Agreement, the closing price of a
share of Norwest Common Stock for such purposes shall be the sum of the
closing prices on the date of each such determination of the number of
shares of Norwest Common Stock and other securities, if any, (in each case
as reported on the consolidated tape of the New York Stock Exchange on such
date) issued with respect to one share of Norwest Common Stock as a result
of the Norwest Common Stock Adjustment.
(e) No fractional shares of Norwest Common Stock and no certificates or
scrip certificates therefor shall be issued to represent any such
fractional interest, and any holder of a fractional interest shall be paid
an amount of cash equal to the product obtained by multiplying the
fractional share interest to which such holder is entitled by the average
of the closing prices of a share of Norwest Common Stock as reported by the
consolidated tape of the New York Stock Exchange for each of the five (5)
trading days immediately preceding the Effective Date of the Merger (as
defined in the Reorganization Agreement).
3.2 The shares of Norwest Bank outstanding immediately prior to the time
of merger and held by Norwest shall be exchanged for $___________.
3.3 From and after the Effective Date, there shall be no transfers on the
stock transfer books of Merging Banks of the shares of Community Common Stock or
Norwest Bank Common Stock which were issued and outstanding immediately prior to
the Effective Date.
SECTION 4
4.1 The by-laws of Norwest Bank as they exist at the Effective Date shall
continue in full force as the by-laws of the Surviving Bank until altered,
amended, or repealed as provided therein or as provided by law.
4.2 As of the Effective Date, the following named persons shall serve as
the Board of Directors of the Surviving Bank until the next annual meeting of
the shareholders or until such time as their successors have been elected and
have qualified:
_______________________
_______________________
_______________________
4.3 The officers of Norwest Bank holding office at the Effective Date
shall continue as the officers of the Surviving Bank for the term prescribed in
the by-laws or until the Board of Directors otherwise shall determine.
B-4
<PAGE>
SECTION 5
5.1 This Bank Merger Agreement shall be submitted to the shareholders of
Community and Norwest Bank, respectively, for approval at meetings to be called
and held in accordance with the articles of incorporation of Community and the
articles of incorporation of Norwest Bank and in accordance with applicable
provisions of law. Such approval by the shareholders shall require the
affirmative vote of the shareholders of each of the Merging Banks owning at
least two-thirds of its capital stock outstanding.
SECTION 6
6.1 The merger shall be subject to and conditioned upon the following:
(a) approval of this Bank Merger Agreement by the shareholders of
Community and Norwest Bank as required by law;
(b) approval of the merger by all appropriate banking and regulatory
authorities and the satisfaction of all other requirements prescribed by
law necessary for consummation of the merger; and
(c) consummation of the merger of Alexandria and Merger Co. as defined in
and contemplated by the Reorganization Agreement.
6.2 At any time before the Effective Date, if any of the following
circumstances obtain, this Bank Merger Agreement may be terminated, at the
election of Community or Norwest Bank, by written notice from the party so
electing to the other, or the consummation of the merger may be postponed for
such period, and subject to such further rights of Community and Norwest Bank,
or either of them, to terminate this Bank Merger Agreement as Community and
Norwest Bank may agree in writing:
(a) by mutual consent of the Boards of Directors of the Merging Banks if
consummation of the merger would be inadvisable in the opinion of said
Boards; or
(b) by action of the Board of Directors of any party hereto if the
Reorganization Agreement is terminated.
SECTION 7
7.1 Community and Norwest Bank, by mutual consent of their respective
Boards of Directors, may amend this Bank Merger Agreement before the Effective
Date; provided, however, that after this Bank Merger Agreement has been
approved by the shareholders of Community, no such amendment shall affect the
rights of such shareholders of Community in a manner which is materially adverse
to such shareholders.
7.2 This Bank Merger Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
B-5
<PAGE>
IN WITNESS WHEREOF, Community and Norwest Bank have caused this Bank Merger
Agreement to be executed by their respective duly authorized officers and their
corporate seals to be hereunto affixed as of the date first above written,
pursuant to a resolution of each Merging Bank's Board of Directors, acting by a
majority thereof.
(SEAL) COMMUNITY STATE BANK
OF ALEXANDRIA
ATTEST:
By:
-------------------------------
Its:
- ----------------------- ------------------------------
Secretary
STATE OF MINNESOTA )
) ss
COUNTY OF _________)
On this _____ day of __________, 1992, before me, a Notary Public for the
State and County aforesaid, personally came ____________________ , as
_________________ , and ____________________ , as __________________ , of
COMMUNITY STATE BANK OF ALEXANDRIA, and each in his or her said capacity
acknowledged the foregoing instrument to be the act and deed of said bank and
the seal affixed thereto to be its seal.
WITNESS my official seal and signature this day and year aforesaid.
--------------------------------
(Seal of Notary) Notary Public, __________ County
My Commission Expires ________
(SEAL) NORWEST STATE BANK
ATTEST:
By:
--------------------------------
Its:
- ----------------------- -------------------------------
Secretary
B-6
<PAGE>
STATE OF MINNESOTA )
) ss
COUNTY OF _________)
On this _____ day of __________, 1992, before me, a Notary Public for the
State and County aforesaid, personally came ____________________ , as
_________________ , and ____________________ , as __________________ , of
NORWEST STATE BANK, and each in his or her said capacity acknowledged the
foregoing instrument to be the act and deed of said bank and the seal affixed
thereto to be its seal.
WITNESS my official seal and signature this day and year aforesaid.
--------------------------------
(Seal of Notary) Notary Public, __________ County
My Commission Expires ________
B-7
<PAGE>
APPENDIX C
MINNESOTA STATUTES
SECTIONS 302A.471 AND 302A.473
<PAGE>
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.--Subdivision 1. Actions
creating rights. A shareholder of a corporation may dissent from, and obtain
payment for the fair value of the shareholder's shares in the event of, any of
the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption of
the shares, including a provision respecting a sinking fund for the redemption
or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares to
acquire shares, securities other than shares, or rights to purchase shares or
securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter, or
to cumulate votes, except as the right may be excluded or limited through the
authorization or issuance of securities of an existing or new class or series
with similar or different voting rights; except that an amendment to the
articles of an issuing public corporation that provides that section 302A.671
does not apply to a control share acquisition does not give rise to the right to
obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation not made in the usual or
regular course of its business, but not including a disposition in dissolution
described in section 302A.725, subdivision 2, or a disposition pursuant to an
order of a court, or a disposition for cash on terms requiring that all or
substantially all of the net proceeds of disposition be distributed to the
shareholders in accordance with their respective interests within one year after
the date of disposition;
(c) A plan of reorganization, whether under this chapter or under chapter
322B, to which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholders may obtain payment for their shares.
Subd. 2. Beneficial owners. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter
shall be determined as if the shares as to which the shareholder has dissented
and the other shares were registered in the names of different shareholders.
(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
Subd. 3. Rights not to apply. The right to obtain payment under this
section does not apply to a shareholder of the surviving corporation in a
reorganization, if the shares of the shareholder are not entitled to be voted on
the reorganization.
C-1
<PAGE>
Subd. 4. Other rights. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at law
or in equity to have a corporate action described in subdivision 1 set aside or
rescinded, except when the corporate action is fraudulent with regard to the
complaining shareholder or the corporation.
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.--Subdivision 1.
Definitions. (a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1 or
the successor by reorganization of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision 1 up
to and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
Subd. 2. Notice of action. If a corporation calls a shareholder meeting
at which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subd. 3. Notice of dissent. If a proposed action must be approved by the
shareholders, a shareholder who wishes to exercise dissenters' rights must file
with the corporation before the vote on the proposed action a written notice of
intent to demand the fair value of the shares owned by the shareholder and must
not vote the shares in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was required,
a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired the shares
or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description of
the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice was given, but the dissenter retains all other rights of a shareholder
until the proposed action takes effect.
Subd. 5. Payment; return of shares. (a) After the corporate action takes
effect, or after the corporation receives a valid demand for payment, whichever
is later, the corporation shall remit to each dissenting shareholder who has
complied with subdivisions 3 and 4 the amount the corporation estimates to be
the fair value of the shares, plus interest, accompanied by:
C-2
<PAGE>
(1) The corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date of the
corporate action, together with the latest available interim financial
statements;
(2) An estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) A copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and cancel all
transfer restrictions. However, the corporation may again give notice under
subdivision 4 and require deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to
the amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The jurisdiction of the court is
plenary and exclusive. The court may appoint appraisers, with powers and
authorities the court deems proper, to receive evidence on and recommend the
amount of the fair value of the shares. The court shall determine whether the
shareholder or shareholders in question have fully complied with the
requirements of this section, and shall determine the fair value of the shares,
taking into account any and all factors the court finds relevant, computed by
any method or combination of methods that the court, in its discretion, sees fit
to use, whether or not used by the corporation or by a dissenter. The fair
value of the shares as determined by the court is binding on all shareholders,
wherever located. A dissenter is entitled to judgment for the amount by which
the fair value of the shares as determined by the court, plus interest, exceeds
the amount, if any, remitted under subdivision 5, but shall not be liable to the
corporation for the amount, if any, by which the amount, if any, remitted to the
dissenter under subdivision 5 exceeds the fair value of the shares as determined
by the court, plus interest.
C-3
<PAGE>
Subd. 8. Cost; fees; expenses. (a) The court shall determine the costs
and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
C-4
<PAGE>
APPENDIX D
MINNESOTA STATUTES
SECTION 49.41
<PAGE>
49.41 RIGHTS OF DISSENTING STOCKHOLDERS
Any stockholder not voting in favor of the agreement of consolidation or
merger at the meeting prescribed in section 49.37 may, at that meeting, or
within 20 days thereafter, object to the object to the consolidation or merger
and demand payment for that person's stock. If the consolidation or merger
takes effect at any time after this demand, the stockholder may, at any time
within 60 days thereafter, apply to the district court in the county wherein is
situated the principal place of business of the corporation with which the other
or others are consolidated or merged, for the appointment of three persons to
appraise the value of that person's stock. The court shall thereupon appoint
these appraisers and designate the time and place of their first meeting, with
such directions in regard to their proceedings as shall be deemed proper, and
also direct the time and manner in which payment shall be made of the value of
that person's stock to the stockholder. The appraisers shall meet at the time
and place designated, after being duly sworn to discharge their duties honestly
and faithfully, make and certify a written estimate of the value of the stock at
the time of the appraisal, and deliver one copy to the corporation and another
to the stockholder, if demanded. The charges and expenses of the appraisers
shall be paid one-half by the stockholder and one-half by the corporation. When
the corporation shall have paid the appraised value of this stock, the stock
shall be canceled and this stockholder shall cease to be a member of the
corporation or to have any interest in this stock or in the corporation or in
the corporate property, and this stock may be held and disposed of by the
corporation for its own benefit.
D-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes indemnification
of directors and officers of a Delaware corporation under certain circumstances
against expenses, judgments, and the like in connection with an action, suit, or
proceeding. Article Fourteenth of the Certificate of Incorporation of the
registrant provides for broad indemnification of directors and officers of the
registrant.
Item 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits:
- --------
2(a) -- Amended and Restated Agreement and Plan of Reorganization, dated
as of July 21, 1994, among Alexandria Securities and Investment
Company, Community State Bank of Alexandria, and Norwest
Corporation, and form of Agreement and Plan of Merger between
Alexandria Securities and Investment Company and Merger Co.
(included in Proxy Statement-Prospectus as Appendix A).
2(b) -- Form of Agreement and Plan of Merger between Community State Bank
of Alexandria and Norwest State Bank (included in Proxy
Statement-Prospectus as Appendix B).
4(a) -- Restated Certificate of Incorporation, as amended (incorporated
by reference to Exhibit 3(b) to the Registrant's Current Report
on Form 8-K dated June 28, 1993 (File No. 1-2979)).
4(b) -- Certificate of Designations of Powers, Preferences, and Rights
relating to the Registrant's 10.24% Cumulative Preferred Stock
(incorporated by reference to Exhibit 4(a) to the Registrant's
Registration Statement No. 33-38806).
4(c) -- Certificate of Designations of Powers, Preferences, and Rights
relating to the Registrant's Cumulative Convertible Preferred
Stock, Series B (incorporated by reference to Exhibit 2 to the
Registrant's Form 8-A dated August 8, 1991 (File No. 1-2979)).
4(d) -- Certificate of Designations of Powers, Preferences, and Rights
relating to the Registrant's ESOP Cumulative Convertible
Preferred Stock (incorporated by reference to Exhibit 4 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994 (File No. 1-2979)).
4(e) -- By-Laws of the Norwest Corporation, as amended (incorporated
herein by reference to Exhibit 4(c) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1991 (File
No. 1-2979)).
4(f) -- Rights Agreement, dated as of November 22, 1988, between Norwest
Corporation and Citibank, N.A., including as Exhibit A the form
of Certificate of Designation
II-1
<PAGE>
of Powers, Preferences and Rights setting forth the terms of the
Series A Junior Participating Preferred Stock, without par value,
(incorporated herein by reference to Exhibit 1 to the
Registrant's Form 8-A dated December 6, 1988 (File No. 1-2979))
and Certificates of Adjustment pursuant to Section 12 of the
Rights Agreement (incorporated herein by reference to Exhibit 3
to the Registrant's Form 8 dated July 21, 1989, and to Exhibit 4
to the Registrant's Form 8-A/A dated June 28, 1993 (File No.
1-2979)).
5 -- Opinion of General Counsel of the Registrant.
8 -- Opinion of Lindquist & Vennum P.L.L.P.
23(a) -- Consent of General Counsel of the Registrant (included as part of
Exhibit 5 filed herewith).
23(b) -- Consent of Lindquist & Vennum P.L.L.P. (included as part of
Exhibit 8 filed herewith).
23(c) -- Consent of KPMG Peat Marwick LLP.
23(d) -- Consent of Ness, Waller, Pearson & Co., Ltd.
24 -- Powers of Attorney.
99 -- Form of proxy for Special Meeting of Shareholders of Alexandria
Securities and Investment Company
Item 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period, in which offers or sales are being
made, a posteffective amendment to this registration statement
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, (ii) to reflect in the prospectus any
facts or events arising after the effective date of the
registration statement (or the most recent posteffective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in
the registration statement, and (iii) to include any material
information with respect to the plan of distribution not
previously disclosed in the registration statement or any
material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a posteffective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
posteffective amendment all information concerning a Reorganization, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on the 27th day of October, 1994.
NORWEST CORPORATION
By: /s Richard M. Kovacevich
--------------------------------------------
Richard M. Kovacevich
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 27th day of October, 1994, by the
following persons in the capacities indicated:
/s Richard M. Kovacevich President and Chief Executive Officer
- ------------------------------ (Principal Executive Officer)
Richard M. Kovacevich
/s/ John T. Thornton Executive Vice President and Chief
- ------------------------------ Financial Officer
John T. Thornton (Principal Financial Officer)
/s/ Michael A. Graf Senior Vice President and Controller
- ------------------------------ (Principal Accounting Officer)
Michael A. Graf
DAVID A. CHRISTENSEN )
GERALD J. FORD )
PIERSON M. GRIEVE )
N. BERNE HART )
WILLIAM A. HODDER )
GEORGE C. HOWE )
LLOYD P. JOHNSON ) A majority of the
REATHA CLARK KING ) Board of Directors*
RICHARD M. KOVACEVICH )
RICHARD S. LEVITT )
RICHARD D. McCORMICK )
CYNTHIA H. MILLIGAN )
JOHN E. PEARSON )
STEPHEN E. WATSON )
MICHAEL W. WRIGHT )
- -------------------------
*Richard M. Kovacevich, by signing his name hereto, does hereby sign this
document on behalf of each of the directors named above pursuant to powers of
attorney duly executed by such persons.
/s/ Richard M. Kovacevich
------------------------------------
Richard M. Kovacevich
Attorney-in-Fact
II-4
<PAGE>
INDEX TO EXHIBITS
Exhibit Form
Number Description of Filing
- ------- ----------- ---------
2(a) Amended and Restated Agreement and Plan of
Reorganization, dated as of July 21, 1994, among
Alexandria Securities and Investment Company,
Community State Bank of Alexandria, and Norwest
Corporation, and form of Agreement and Plan of
Merger between Alexandria Securities and
Investment Company and Merger Co. (included in
Proxy Statement-Prospectus as Appendix A)
2(b) Form of Agreement and Plan of Merger between
Community State Bank of Alexandria and Norwest
State Bank (included in Proxy Statement-Prospectus
as Appendix B).
4(a) Restated Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3(b) to the
Registrant's Current Report on Form 8-K dated June
28, 1993 (File No. 1-2979)).
4(b) Certificate of Designations of Powers,
Preferences, and Rights relating to the
Registrant's 10.24% Cumulative Preferred Stock
(incorporated by reference to Exhibit 4(a) to the
Registrant's Registration Statement No. 33-38806).
4(c) Certificate of Designations of Powers,
Preferences, and Rights relating to the
Registrant's Cumulative Convertible Preferred
Stock, Series B (incorporated by reference to
Exhibit 2 to the Registrant's Form 8-A dated
August 8, 1991 (File No. 1-2979)).
4(d) Certificate of Designations of Powers,
Preferences, and Rights relating to the
Registrant's ESOP Cumulative Convertible Preferred
Stock (incorporated by reference to Exhibit 4 to
the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994 (File No.
1-2979)).
4(e) By-Laws, as amended (incorporated by reference to
Exhibit 4(c) to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1991
(File No. 1-2979)).
<PAGE>
Exhibit Form
Number Description of Filing
- ------- ----------- ---------
4(f) Rights Agreement, dated as of November 22, 1988,
between Norwest Corporation and Citibank, N.A.,
including as Exhibit A the form of Certificate of
Designation of Powers, Preferences and Rights
setting forth the terms of the Series A Junior
Participating Preferred Stock, without par value,
(incorporated by reference to Exhibit 1 to the
Registrant's Form 8-A dated December 6, 1988 (File
No. 1-2979)) and Certificates of Adjustment
pursuant to Section 12 of the Rights Agreement
(incorporated by reference to Exhibit 3 to the
Registrant's Form 8 dated July 21, 1989, and to
Exhibit 4 to the Registrant's Form 8-A/A dated
June 28, 1993 (File No. 1-2979)).
5 Opinion of General Counsel of the Registrant. Electronic
Transmission
8 Opinion of Lindquist & Vennum P.L.L.P. Electronic
Transmission
23(a) Consent of General Counsel of Norwest Corporation
(included as part of Exhibit 5 filed herewith).
23(b) Consent of Lindquist & Vennum P.L.L.P. (included
as part of Exhibit 8 filed herewith).
23(c) Consent of KPMG Peat Marwick LLP. Electronic
Transmission
23(d) Consent of Ness, Waller, Pearson & Co., Ltd. Electronic
Transmission
24 Powers of Attorney. Electronic
Transmission
99 Form of proxy for Special Meeting of Shareholders Electronic
of Alexandria Securities and Investment Company Transmission
<PAGE>
EXHIBIT 5
[LETTERHEAD OF STANLEY S. STROUP]
October 26, 1994
Board of Directors
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1000
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act of
1933, as amended, of 400,000 shares of the common stock (the "Shares"), par
value $1 2/3 per share, of Norwest Corporation (the "Corporation"), a Delaware
corporation, which are proposed to be issued by the Corporation in connection
with the merger of a wholly owned subsidiary of the Corporation with Alexandria
Securities and Investment Company, a Minnesota corporation, (the "Merger") and
the related merger of Community State Bank of Alexandria, a Minnesota state
bank, with a wholly owned subsidiary of the Corporation (the "Bank Merger"), I
have examined such corporate records and other documents, including the
Registration Statement on Form S-4 relating to the Shares and have reviewed such
matters of law as I have deemed necessary for this opinion, and I advise you
that in my opinion:
1. The Corporation is a corporation duly organized and existing under the
laws of the State of Delaware.
2. All necessary corporate action on the part of the Corporation has been
taken to authorize the issuance of the Shares in connection with the Merger and
the Bank Merger, and, when issued as described in the Registration Statement,
the Shares will be legally and validly issued, fully paid, and nonassessable.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Stanley S. Stroup
<PAGE>
EXHIBIT 8
December __, 1994
Board of Directors
Alexandria Securities and
Investment Company PERSONAL AND CONFIDENTIAL
304 Maple Street
Alexandria, MN 56308
Re: Federal Income Tax Consequences of the Merger
Gentlemen:
You have requested that we render an opinion with respect to the material
United States federal income tax considerations related to the merger (the
"Merger") of a wholly owned subsidiary of Norwest Corporation ("Norwest") with
Alexandria Securities and Investment Company ("Alexandria").
We have examined the Amended and Restated Agreement and Plan of
Reorganization dated July 21, 1994 and the related Agreement and Plan of Merger
(together, the "Reorganization Agreement"), the Form S-4 Registration Statement
(the "Registration Statement") filed with the Securities and Exchange Commission
(the "SEC") on October 27, 1994 under the Securities Act of 1933, as amended
(the "Securities Act"), which Registration Statement includes a Proxy Statement
(the "Proxy Statement"), and a Prospectus (the "Prospectus") (collectively, the
"Proxy Statement-Prospectus"). Pursuant to the terms of the Reorganization
Agreement, following the Merger, Community State Bank of Alexandria (the
"Bank"), a partially-owned subsidiary of Alexandria, will be merged with a
wholly owned banking subsidiary of Norwest (the "Bank Merger"). You did not
request our opinion with respect to the material United States federal income
tax considerations related to the Bank Merger, and this letter should not be
interpreted in any way as providing such an opinion.
The Prospectus relates to the registration under the Securities Act of up
to 400,000 shares of Norwest common stock which are issuable to the shareholders
of Alexandria upon consummation of the proposed Merger. The Proxy Statement
relates to a special meeting of Alexandria shareholders to be held December __,
1994, for the purpose of considering and voting upon approval of the
Reorganization Agreement between Alexandria and Norwest. Unless otherwise
defined in this letter, terms defined in the Proxy Statement-Prospectus are used
herein as defined therein.
We also have examined such matters of law, including the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), proposed and finalized
Treasury regulations promulgated thereunder (the "Regulations"), and judicial
and administrative
<PAGE>
December ___, 1994
Page 2
decisions, rulings and interpretations thereof currently in effect, as we have
deemed appropriate as a basis for our opinions set forth below. All section
references herein are to the Code unless stated otherwise.
In rendering this opinion, we have relied upon the current and continued
accuracy of the factual matters we have considered, including the recitals,
agreements, representations and warranties contained in or made pursuant to the
documents cited above, as well as the representations and warranties we have
received from certain executive officers of Alexandria and Norwest related to
various factual matters relevant to the opinions expressed herein. We have not
independently verified the factual matters set forth such representations of
officers.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code. Alexandria, Norwest and the
Norwest subsidiary will each be "a party to a reorganization" within the meaning
of Section 368(b).
2. No gain or loss will be recognized by the Norwest subsidiary on the
transfer of its assets to Alexandria in exchange for Alexandria Common Stock,
(Section 361(a)).
3. No gain or loss will be recognized by Alexandria upon the receipt of
the assets of the Norwest subsidiary in exchange for Alexandria Common Stock.
4. The basis of the assets of the Norwest subsidiary acquired by
Alexandria will be the same as the basis of such assets in the hands of the
Norwest subsidiary immediately prior to the exchange (Section 362(b)).
5. The holding period of the assets of the Norwest subsidiary in the
hands of Alexandria, in each instance, will include the period during which such
assets were held by the Norwest subsidiary (Section 1223(2)).
6. No gain or loss will be recognized by Norwest upon the receipt of
Alexandria Common Stock solely in exchange for Norwest Common Stock
(Section 1032(a)).
7. No gain or loss will be recognized by the shareholders of Alexandria
upon the exchange of their Alexandria Common Stock (including any fractional
share interests) solely for Norwest Common Stock (Section 354(a)(1)).
<PAGE>
December ___, 1994
Page 3
8. The basis of the Norwest Common Stock (including any fractional share
interests) to be received by Alexandria shareholders will be the same as the
basis of Alexandria Common Stock surrendered in exchange therefor
(Section 358(a)(1)).
9. The holding period of the Norwest Common Stock (including any
fractional share interests) received by Alexandria shareholders will include the
period during which Alexandria Common Stock surrendered therefor was held,
provided Alexandria Common Stock was held as a capital asset in the hands of the
shareholders on the date of the exchange (Section 1223(1)).
10. As provided by Section 381(a) of the Code and Section 1.381(a)-1 of
the Regulations, Alexandria will succeed to and take into account the items of
the Norwest subsidiary described in Section 381(c) of the Code. These items
will be taken into account by Alexandria subject to the provisions and
limitations specified in Section 381, 382, 383, and 384 of the Code and the
Regulations thereunder.
11. As provided by Section 381(c)(2) of the Code and Section 1.381(c)(2)-1
of the Regulations, Alexandria will succeed to and take into account immediately
after the transaction, the earnings and profits, or deficit in earnings and
profits of the Norwest subsidiary as of the date of transfer. Any deficit in
earnings and profits will be used only to offset the earnings and profits
accumulated after the date of transfer.
12. The payment of cash in lieu of fractional share interests of Norwest
Common Stock will be treated as if the fractional shares were distributed as
part of the exchange and then were redeemed by Norwest. These cash payments
will be treated as having been received as distributions in full payment in
exchange for the stock redeemed as provided in Section 302(a) of the Code (Rev.
Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1971-2 C.B. 574).
This opinion is for the sole use of the Board of Directors of Alexandria in
connection with the Registration Statement and the related Proxy Statement-
Prospectus and may not be relied upon by any other entity or individual.
Sincerely,
LINDQUIST & VENNUM
<PAGE>
EXHIBIT 23(c)
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Norwest Corporation:
We consent to the use of our report dated January 19, 1994 incorporated herein
by reference and to the reference to our firm under the heading "EXPERTS" in the
prospectus. Our report refers to the Corporation's adoption of Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
/s/ KPMG Peat Marwick LLP
October 27, 1994
<PAGE>
EXHIBIT 23(d)
[INSERT CONSENT OF NESS, WALLER, PEARSON & CO., LTD. ON
LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Alexandria Securities and Investment Company
Alexandria, Minnesota
We consent to the use of our report dated June 10, 1994, included herein and to
the reference to our firm under the heading "EXPERTS" in the proxy
statement-prospectus.
/s/ Ness, Waller, Pearson & Co., Ltd.
October 21, 1994
<PAGE>
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ David A. Christensen
----------------------------------------
David A. Christensen
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ Gerald J. Ford
----------------------------------------
Gerald J. Ford
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ Pierson M. Grieve
----------------------------------------
Pierson M. Grieve
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ N. Berne Hart
----------------------------------------
N. Berne Hart
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ William A. Hodder
----------------------------------------
William A. Hodder
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ George C. Howe
----------------------------------------
George C. Howe
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ Lloyd P. Johnson
----------------------------------------
Lloyd P. Johnson
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ Reatha Clark King
----------------------------------------
Reatha Clark King
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ Richard M. Kovacevich
----------------------------------------
Richard M. Kovacevich
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ Richard S. Levitt
----------------------------------------
Richard S. Levitt
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ Richard D. McCormick
----------------------------------------
Richard D. McCormick
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ Cynthia H. Milligan
----------------------------------------
Cynthia H. Milligan
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ John E. Pearson
----------------------------------------
John E. Pearson
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ Stephen E. Watson
----------------------------------------
Stephen E. Watson
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 400,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Alexandria Securities
and Investment Company and its subsidiary, and to file the same, with all
exhibits thereto and other supporting documents, with said Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform any and all acts necessary or incidental to the performance and
execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of April, 1994.
/s/ Michael W. Wright
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Michael W. Wright
<PAGE>
EXHIBIT 99
ALEXANDRIA SECURITIES AND INVESTMENT COMPANY
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints _______________, _______________, and
_______________, and each of them, proxies, with full power of substitution, to
vote all shares of Common Stock the undersigned is entitled to vote at the
Special Meeting of Shareholders of Alexandria Securities and Investment Company
("Alexandria") to be held at _______________, _______________, Alexandria,
Minnesota, at __:__ _.m. on _________, December 7, 1994, or at any adjournment
thereof, as follows, hereby revoking any proxy previously given:
(1) The adoption of the Amended and Restated Agreement and Plan of
Reorganization among Alexandria, Community State Bank of Alexandria (the
"Bank"), and Norwest Corporation ("Norwest"), dated as of July 21, 1994,
pursuant to which (i) a wholly owned subsidiary of Norwest will be merged with
Alexandria, with Alexandria as the surviving entity, and each outstanding share
of the common stock of Alexandria will be exchanged for shares of the common
stock, par value $1 2/3 per share, of Norwest, and (ii) the Bank will be merged
with a wholly owned subsidiary of Norwest, as more fully described in the Proxy
Statement-Prospectus accompanying this Proxy.
FOR / / AGAINST / / ABSTAIN / /
(2) In their discretion on such matters as may properly come before the
meeting or any adjournment thereof; all as set out in the Notice and Proxy
Statement-Prospectus relating to the meeting, receipt of which are hereby
acknowledged.
Shares represented by this proxy will be voted as directed by the
shareholder. The Board of Directors recommends a vote "FOR" proposal 1. If no
direction is supplied, the proxy will be voted "FOR" proposal 1.
Dated: , 1994.
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(Please sign exactly as name appears at left.)
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(If stock is owned by more than one person, all
owners should sign. Persons signing as
executors, administrators, trustees, or in
similar capacities should so indicate.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
